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ACCA Strategic Professional · Advanced Performance Management · Performance and reward

Orlin Co operates a team-based bonus for its production cell of 10 operators. Output has risen, but the most productive operators complain that low performers share equally in the bonus. Which is the most likely problem with team-based rewards illustrated here?

This illustrates the free-rider problem in team-based rewards. Because the bonus is shared equally, weaker operators gain from others' effort, which demotivates high performers. Combining team and individual elements, or peer assessment, can mitigate this weakness.

  1. AGoal incongruence between the company and the team
  2. BThe controllability principle has been breached by head office
  3. CFree-rider effects reducing motivation of high performersCorrect
  4. DExcessive use of non-financial measures

Explanation

In group schemes, individuals receive the same reward regardless of personal effort, so weaker performers benefit from others' efforts (free-riding) and strong performers become demotivated. The complaint is about equal sharing, not goal congruence or controllability.

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