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Personnel Review

Interdependence and fit in team performance management


Harm van Vijfeijken Ad Kleingeld Harrie van Tuijl Jen A. Algera Henk Thierry

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Harm van Vijfeijken Ad Kleingeld Harrie van Tuijl Jen A. Algera Henk Thierry, (2006),"Interdependence and
fit in team performance management", Personnel Review, Vol. 35 Iss 1 pp. 98 - 117
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Interdependence and fit in team


performance management

98

CPS, Amersfoort, The Netherlands

Harm van Vijfeijken


Ad Kleingeld, Harrie van Tuijl and Jen A. Algera
Received December 2003
Accepted July 2004

Technische Universiteit Eindhoven, Department of Technology Management,


Eindhoven, The Netherlands

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Henk Thierry
University of Tilburg, The Netherlands
Abstract
Purpose To evaluate a proposed prescriptive model for the design of effective combinations of
performance goals and pay-for-performance plans for the performance management of teams.
Design/methodology/approach The idea underlying the model in which task, goal, and
reward interdependence and their fit play a dominant role is that a pay-for-performance plan
should support the team goals and the goals of individual team members as well as support the way
in which team members need to cooperate. To obtain a first notion on the models validity, it was
applied to evaluate a pay-for-performance plan for management teams at a large IT company. This
evaluation consisted of an in-depth study of three management teams, using a case study
methodology.
Findings Combinations of fit among type of team, performance goals, and pay-for-performance
plan (established by a fit between the interdependence constructs and/or by an overlap in the content
of the goal and pay indicators) are more effective than combinations of misfit.
Research limitations/implications The case study was limited to intra-team interdependence
relationships and did allow for a analysis of the separate effects of a fit between the interdependence
constructs versus content fit.
Practical implications This study shows that pay-for-performance plans should not be designed
in isolation, but rather in alignment with performance goals and existing task interdependencies.
Originality/value This is the first study to investigate the three inter-dependence constructs in
conjunction in a field setting.
Keywords Team performance, Team management, Performance-related pay, Performance measures
Paper type Research paper

Personnel Review
Vol. 35 No. 1, 2006
pp. 98-117
q Emerald Group Publishing Limited
0048-3486
DOI 10.1108/00483480610636812

Introduction
Teams and pay-for-performance are two possibly conflicting phenomena that are
increasingly present in modern organizations (Kozlowski and Bell, 2003; Prendergast,
1999). The possible conflict lies in the fact that teams are generally associated with
cooperation among the team members (West, 1996), whereas pay-for-performance
plans can easily result in individualistic or competitive behaviour (Ilgen and Sheppard,
2001). The difficulty of designing a pay-for-performance plan for teams can be inferred
from the reviews of Thierry (2002a, b) and Prendergast (1999), who both found mixed
results for the effectiveness of pay-for-performance plans for teams. In this
contribution we propose and evaluate a prescriptive model for the design of

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pay-for-performance plans that overcome the above conflict and support teamwork.
Teams, in this context, are defined as three or more people who operate in an
organizational context, see themselves as a team, are seen by others in the organization
as a team, and have one or more tasks to perform resulting in team products (Hackman,
1987; Shea and Guzzo, 1987).
The idea underlying this model is that a pay-for-performance plan should support
the goals of a team and those of its individual members, as well as support the way in
which team members need to cooperate for the completion of their work. These ideas of
fit between the team task, the performance goals and the pay-for-performance plan are
operationalized via the interdependence constructs that stem from each of these
elements, i.e. task, goal and reward interdependence, and via the content of goal and
pay indicators (see Figure 1).
In this model, interdependence relationships are dominant because we expect that
they play a crucial role in the design of effective combinations of pay-for-performance
and performance goals for teams. Earlier research showed, for example, that
combinations of:
(1) task and reward interdependence (e.g. Miller and Hamblin, 1963;
Rosenbaum et al., 1980; Wageman, 1995; Wageman and Baker, 1997;
(2) task and goal interdependence (Van der Vegt et al., 2000; Saavedra et al., 1993;
Mitchell and Silver, 1990; Gowen, 1987; Weldon and Weingart, 1993); and
(3) reward and goal interdependence impact (elements of) team effectiveness (Lew
et al., 1986a, b; Mesch Johnson and Johnson, 1989).

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To date, however, these three constructs have not been studied in conjunction, even
though the importance of doing so has been acknowledged (Hollensbe and Guthrie,
2000). Further, most of these studies were conducted in laboratory settings, while the
existing field studies were mostly conducted via surveys, resulting in rather abstract
knowledge. The aim of the present study is to apply this knowledge in practical
settings and evaluate its practical applicability.
In this paper, the following topics will be addressed. We will start with a further
elaboration on the prescriptive model, which will be followed by a description of the
case-study setting. Subsequently we will discuss the case-study method for the
in-depth study of three top management teams. Then we will report on the
interdependence analysis, and evaluate the prescriptive model. The paper will be
concluded with a discussion.
Figure 1.
Proposed prescriptive
model on effective
combinations of task, goal
and reward
interdependence and the
content of goal and pay
indicators

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A prescriptive model
The general idea behind the model as depicted in Figure 1 is that if (a) the goal and pay
indicators fit together in terms of content, and if (b) the levels of goal and reward
interdependence fit together in terms of signals they give on desired behaviour, and if
(c) the levels of goal and reward interdependence fit with the level of task
interdependence, this combination is more effective than combinations in which one or
more of these fit requirements are not satisfied. Thus, the extent of fit or misfit between
the elements as depicted in Figure 1 constitutes the independent variables in this
model, whereas the dependent variable refers to effects of variation on these
independent variables, i.e. the effectiveness of the combination of the three elements.
This combination may impact many elements of effectiveness, such as team outcomes
(e.g. performance) and team interaction processes (e.g. cooperation and competition)
(Hackman, 1987; McGrath, 1964). In this study we are primarily interested in
cooperation as a team interaction process and motivation as an outcome. We expect the
two different types of fit to be associated with different elements of effectiveness, hence
our specific interest in these variables.
First, we expect content fit the fit that is concerned with a clear linkage between goal
and reward attainment to be specifically associated with motivation. The theoretical
background for this idea can be found in the expectancy theory (Vroom, 1964). According
to this theory, content fit is the situation in which the attainment of a performance goal is
instrumental for the attainment of a (valued) reward. This, together with the expectancy
that a persons efforts will lead to goal attainment, will positively impact motivation.
Second, we expect a fit between the interdependence relationships to be specifically
associated with cooperation. In line with Deutsch theory of cooperation and competition
(Deutsch, 1949a, b), the underlying idea is that teamwork is always associated with
interaction patterns (e.g. cooperation, competition), and that performance goals and a
pay-for-performance plan should give signals as to the desired interaction pattern
(cooperation). In situations of a fit between the interdependence constructs, both the
performance goals and pay-for-performance plan stimulate cooperation by creating positive
interdependence. In situations of misfit, the performance goals and pay-for-performance
plan give mixed signals or consistently stimulate competition, which in turn negatively
impacts cooperation. Thus, we expect that both types of fit positively influence elements of
effectiveness, and that their effects are cumulative, i.e. the more fit, the better. In the
remainder of this section, the various elements of the model will be further specified.
Task interdependence reflects the extent to which team members have to exchange
information and/or means for the completion of their contribution to the team task (e.g.,
Thompson, 1967). Task interdependence can be classified as low or high. In situations of
high task interdependence, team members critically depend on information and/or means
from each other for the completion of (their part of) the team task, i.e. absence of this
information and/or means hampers the achievement of satisfying levels of task
completion or renders task completion impossible. Think, for instance, of the members of
a surgical team where the surgeon cannot complete his/her task without information on
the patients condition and the anaesthesia administered by the anaesthetist. In situations
of low task interdependence, team members hardly depend on information or means from
each other for the completion of (their part of) the team task. While team members may
exchange information or means within the scope of task completion, the dependence on
this information and/or means is not critical: even without this information and means
satisfying levels of task performance can be achieved. For instance, telemarketers

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exchange information about specific advice or tricks on how to deal with customers,
although they can also complete their task without this information.
Goal interdependence is the interdependence created by the way in which the
attainment of performance goals of a team member is related to the attainment of
performance goals by other team members. Goal interdependence can vary from
negative to positive. In the case of positive goal interdependence, the attainment of
ones individual goals is positively influenced by the attainment of goals by other team
members. Logically, team goals create positive goal interdependence as well, because
individual team members are positively interdependent on one another for the
attainment of this goal. In the case of negative goal interdependence, the attainment of
ones individual goals is negatively influenced by the attainment of goals by other team
members. An example of neutral interdependence is a team of organizational trainers,
where all team members are assigned the goal of giving a pre-specified number of
(hours) of reference courses per year. In this case, attainment of the pre-specified
number of hours by one team member does not influence the attainment of the same
goal by other team members.
Reward interdependence is the interdependence created by the way in which the pay
indicators of a team member are related to the pay indicators of other team members.
The type of reward interdependence is determined by the type of pay-for-performance
plan, which means that changes in the level of reward interdependence can be realized by
changing the pay-for-performance plan. Reward interdependence can vary from negative
to positive. An example of negative reward interdependence is a ranking system, in
which a reward is based on the relative performance of the team members: high
performance by other team members reduces ones own possibilities to earn a reward.
An example of positive reward interdependence is a case in which a reward is based
upon team performance: if my co-team members receive a reward, I will receive a reward
as well. However, positive reward interdependence can also result from individual pay
indicators that are positively related. An example is a management team where the HR
manager is assigned the goal of recruiting more and better-equipped sales personnel.
The sales manager on the other hand, is assigned the goal to increase market share and
customer satisfaction. In this situation, the indicators of the HR and sales manager are
positively related: if the HR manager attains his/her goals, it will positively impact the
attainment of the sales managers goals, because better sales personnel facilitates an
increase in market share and customer satisfaction. Finally, neutral reward
interdependence can be created via individual level pay indicators in a similar way as
described in the example under goal interdependence.
From the above discussion it appears that the actual type of goal or reward
interdependence that is created depends on the combination and type of individual
and/or team level indicators.
Figure 2 shows the different types of goal and reward interdependence that can
result from individual and/or team level indicators goal and pay indicators[1]. First,
team level indicators result in positive interdependence, for reasons mentioned earlier.
Second, individual level indicators can result in different types of interdependence,
depending on the relation between the goal or pay indicators of individual team
members. Examples of neutrally and positively related indicators have been given
above. An example of individual indicators that create negative interdependence is a
management team where the financial manager is assigned the goal to cut down the
overhead costs, while the marketing manager is assigned the goal to increase brand

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Figure 2.
Causes of different types
of goal and reward
interdependence

recognition by expanding the marketing activities. The latter goal conflicts with the
former: expanding marketing activities brings along overhead costs, thereby
negatively influencing the financial managers goal attainment. Thus, depending on
the way in which different individual indicators are related, they create different types
of interdependence.
The third possibility is that indicators exist both at the individual and the team
level, which can result in combinations of the above-mentioned forms of
interdependence, i.e. positive interdependence created via the team level indicator,
and neutral, positive or negative interdependence created via the individual level
indicators. We will classify these combinations later on.
Content fit is the extent to which goal and pay indicators are related in terms of
content, where content is defined as the attribute to which the indicators refer. An
example of goal and pay indicators that refer to different attributes is a situation in which
the performance goal is to increase production quality and where the pay indicators focus
on decreasing production costs and increasing output. In this situation, the performance
goal refers to quality whereas the pay indicators refer to costs and quantity.
Fit between task, goal and reward interdependence is the situation where performance
goals and a create the same type of interdependence (i.e. the same direction), thereby
giving consistent signals with respect to the desired behaviour (cooperation, competition,
or individualistic). In this situation, the signals are consistent with the level of task
interdependence and the need to cooperate resulting from this: high task interdependence
requires cooperative behaviour, while low task interdependence requires a mixture of
cooperative and individualistic behaviour. Thus, the situation in which goal and reward
interdependence are both negative is not considered as fit, since it conflicts with a basic
premise of a team, namely the presence of a minimum of task interdependence. Because
the present study was conducted with top management teams of an IT company that
were characterized by high levels of task interdependence, the evaluation of the proposed
model was limited to high task interdependent settings.

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Case description
Setting
The setting of this study is a global IT-services company, which we will call Itech. The
organization is structured around 32 country organizations that are headed by a
management team. In situations where local market sizes are small, which is particularly
the case in countries only recently entered by Itech, one management team (MT) heads
several country organizations. The board of Itech consists of three members, who are
also member of a local MT. An additional division is the Global Clients division, which is
responsible for all global clients of Itech. Most global clients are multinationals with
offices across the world that cannot be served effectively by the country organizations.
Teams
Three management teams participated in the first part of the case study: The Global
Clients MT (n 7; located in Brussels, Belgium), which headed the Global Clients service
division (about 350 employees); the Netherlands MT (n 7), which headed the single
largest country organization (about 9,000 employees); and the UK MT (n 8), which
headed a medium-sized country organization (about 2,000 employees).
Performance goals and pay-for-performance plan
Team-level performance goals were formulated annually by the board of directors and
communicated to the MTs before the beginning of a new year. The performance goals
were specific and differed substantially per team. Examples of the sort of performance
goals that were formulated are: 1. successfully complete merger; 2. create strong business
relationships with Latin-America; and 3. recruitment (515 new hires in 2001). After this
top-down communication of the performance goals, teams were free to implement, further
specify or cascade the performance goals in accordance with their own view.
The pay-for-performance plan of Itech, which applied to all members of the
management teams as described above (n 168, divided over 20 teams), was divided into
three organisational levels. At the organizational level (25 per cent), one indicator was
formulated: earnings per share. At the team level (50 per cent), approximately three
financial indicators were set, generally with equal weights, like cash flow, net income,
budget attainment, and revenue. The exact set of indicators and their relative weight
related indicators applied to team members responsible for sales or delivery, whereas
cost-related indicators applied to team members in a support function. The individual
level indicators (25 per cent) generally were non-financial, for instance set-up an effective
marketing and communication organization and execute a restructuring program.
The average bonus amounted to approximately 40 per cent of an annual salary; the
maximum bonus attainable was approximately 80 per cent of an annual salary. The
MTs were free to fill in the individual level indicators at their own discretion.
Method
Selection criteria
The three teams that participated in this study were selected on theoretical grounds.
According to Yin (1994) and Eisenhardt (1989) such a theoretical selection approach is
preferable over random sampling (which fits better in a sampling logic approach),
since this allows researchers to choose cases that are likely to replicate or extend the

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emergent theory. As such, a theoretical sampling approach is in line with the


replication logic that underlies case-study research (Yin, 1994).
The first criterion was that there should be differences between the types of
organizations an MT is heading. Second, the teams were selected such that differences
in interpretation (e.g. filling-in of the individual level indicators) of the
pay-for-performance plan could be expected. The rationale for the first criterion was
to acquire a broader picture of the MTs within the organization and to explore possible
differences across these types of teams. The rationale for the second criterion was to
find differences in the types of reward interdependence.
Information on these two criteria was collected via the organizations key informant,
who was also closely involved in the final selection of the teams. Practical criteria, such
as willingness of MTs to participate and geographical proximity, played a role as well.
Data collection
The data for this study were collected via interviews (n 21), documents describing the
organization, the performance goals and the pay-for-performance plan (such as annual
reports and internal publications), and discussions with the Vice President of Corporate
Human Resources and with the Director of Compensation and Benefits who acted as key
informants. The interviews were the main data source for this case study. The
information collected via documents and discussions mainly provided background
information and were primarily used to verify information collected via interviews.
The interviews followed the structure of the prescriptive model, discussing the work,
the performance goals and pay-for-performance plan, the fit between performance goals
and pay-for-performance plan, and effectiveness. The interview schemes were sent to the
interviewees a couple of days before the interview, with the request to go through the
scheme in advance. The interviews took one or two hours and the response rate was 86
per cent for The Netherlands MT, and 100 per cent for the other two MTs.
Measurement of the constructs
Task interdependence was measured by asking respondents to indicate their key
individual tasks and the extent and cruciality to which completion of these tasks
depended on information and/or means from other team members.
To measure goal and reward interdependence, we first developed a classification
framework for the different combinations of team and/or individual level goal and pay
indicators as depicted in Figure 2. This framework is shown in Table I. As can be seen,
combinations 1-4 have in common that a team level indicator is present, while in
combinations 5-8 a team level indicator is absent. Combination 3 is special in the sense
that in this situation the team and individual level indicators create opposing types of
interdependence. Although one could argue that these two interdependence
relationships cancel each other out, resulting in neutral interdependence, we classify
this combination as slightly negative. The reason for doing so is that we expect the
negatively related individual level indicators to be more dominant than the positive
interdependent team level indicator, which is also in line with earlier studies. For
instance, in line with Miller and Hamblin (1963), Rosenbaum et al. (1980) evaluated the
impact of different mixtures of negatively and positively interdependent rewards on
group productivity and processes. They concluded that even a modicum of a
competitive (negatively interdependent, HvV et al.) reward led to lowered efficiency
and productivity.

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Starting point for the measurement of goal interdependence were the team-level
performance goals. First, interviewees were asked whether these performance goals were
cascaded to the individual level, or whether other individual performance goals were
formulated. Second, they were asked to indicate how the attainment of the individual
performance goals was influenced by the different goals of colleagues within the team
(positively, neutrally, or negatively). This yielded rather complex information, because
some individual performance goals were positively related, while others were negatively
or unrelated. Thus, for one team member, various types of goal interdependence existed.
To incorporate this information, the response of each interviewee on how the individual
level performance goals were related to each other was placed in one of three categories,
i.e. (predominantly) positive, neutral or negative, by two of the authors. The raters made
their assessments independently of each other. In this rating process more weight was
attached to negatively related indicators, since we expected these relationships to be
more dominant than neutral or positive relationships (Rosenbaum et al., 1980). The
inter-rater reliability was computed using Cohens k (Cohen, 1960), and was 0.57. In line
with the benchmark ratings of Landis and Koch (1977), we interpreted this as moderate
agreement on the goal interdependence measure. Subsequently, the raters discussed the
cases on which they initially disagreed, until full agreement was achieved. This
information, in combination with the knowledge that explicit team level performance
goals were present, facilitated a classification of goal interdependence following the
framework as presented in Table I.
A similar approach was used for the measurement of reward interdependence.
As team level indicators were present, the question was how the individual level
indicators were related (to each another). Interviewees were asked to indicate how
their individual level pay indicators were related to the pay indicators of other
team members (positively, neutrally, or negatively). Again, this yielded rather
complex information, because some individual pay indicators were positively
related, while others were negatively or not related, i.e. a single team member was
confronted with different types of reward interdependence. The response of each
interviewee was placed in one of three categories, i.e. (predominantly) positive,
neutral or negative, by two independent raters. Again, more weight was attached
to negatively related indicators, since we expected these relationships to be more
dominant. The inter-rater reliability coefficient k was 0.76, which is interpreted as
substantial agreement among the raters (Landis and Koch, 1977). After this, the

Combination

Team level goal or


pay indicator

Relationship between individual


level goal or pay indicators

Classification of goal
or reward interdependence

1
2
3
4
5
6
7
8

Yes
Yes
Yes
Yes
No
No
No
No

Positive
Neutral
Negative
Absent
Positive
Neutral
Negative
Absent

0 (no interdependence)

Notes: positive; slightly positive; 0 neutral; - slightly negative; negative

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Table I.
Combinations of team
and individual level goal
or pay indicators and a
classification of the type
of goal or reward
interdependence they
create

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106

raters discussed the cases on which they initially disagreed, until full agreement
was achieved. This information, in turn, facilitated a classification of the type of
reward interdependence following the framework described in Table I.
To measure the content fit, respondents were asked to indicate the influence of the
attainment of individual performance goals on the attainment of their pay indicators.
Again, the responses did not always allow for a univocal interpretation, because of
different relationships between the various goal and pay indicators. Therefore, the
response of each interviewee was placed in one of three categories, i.e. (predominantly)
high, modest or low, by two independent raters. The k of 0.67 indicated a substantial
agreement among the raters (Landis and Koch, 1977). Again, the raters discussed the
cases they initially disagreed on, until full agreement was achieved.
The effect variables were determined and formulated by the organization in which
the case study was carried out, with the objective to evaluate their intervention in the
pay-for-performance plan. Nine effect variables were included in this study, which
were measured via nine single-item questions on a five-point Likert scale. These nine
items included the variables that were of particular interest to us (i.e. cooperation and
motivation). Cooperation, for example, was covered by the question To what extent
does the pay-for-performance plan drive individual contributions into team play?. An
example of a question that was included but falls outside our primary field of interest is
To what extent does the pay-for-performance plan increase the attractiveness of Itech
in the marketplace?. We consider these items to be a valid operationalization of the
effectiveness of the combination of task, goal and reward interdependence and the
content of goal and pay indicators, because the scores on these effectiveness criteria
will not be determined by the pay-for-performance plan in isolation, but by the way in
which it interacts with the performance goals and type of team work, i.e. by the extent
of fit or misfit.
An interdependence analysis
This section reports on the results of an interdependence analysis as conducted in the
three MTs we studied.
Team A: Global Clients MT
Task interdependence. Team members within the Global Clients MT[2] needed to
exchange information for the satisfactory completion of their individual contribution to
the team task, but the intensity of information exchange differed per team member. On
the one hand, the general manager and managers in the support functions (finance and
HR) indicated that the information exchange with other team members was intense and
critical to task completion. For instance, the financial manager needed (financial)
information from other team members, and especially from the line managers (delivery,
technology support and competencies and alliances) for the completion of his/her work.
On the other hand, the line managers, who were responsible for the actual delivery and
sale of products or services, indicated that the information exchange was less intensive
but usually critical for the cases in which it took place. An example would be the
manager of technology support, who was responsible for delivery of support services
on products delivered by the Global Clients MT. One of his/her tasks was to establish a
competence centre on a specific software application. To realize this, information and
means (human capacity) was needed from among others the delivery managers
within the team. Based on the above discussion, from which it appeared that team

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members were critically dependent on information to complete their task, we conclude


that the task interdependence within team A is high.
Goal interdependence. The types of goal interdependence in this team are depicted in
Table II. The results are based on a combination of the knowledge that team level goal
indicators were present (verified in the interviews) with the rating results on the
relationship between the individual level goal indicators. For example, the column
positive results from a combination of team level indicators and (predominantly)
positively related individual level indicators[3].It can be gathered from the Table that
there was a mixture of positive and slightly positive goal interdependence within team
A, which can be traced back to different types of relationships among individual level
indicators. Some respondents indicated that the individual level goal indicators were
unrelated, for instance: [individual, HvV] performance goals relate to each other like
1 1 2; results are merely cumulative and do not reinforce each another. This
respondent, for example, was classified as slightly positively goal interdependent,
resulting from the combination of neutrally related individual level goal indicators and
team goals (see Table I). Others indicated that goal attainment of colleagues positively
influenced their own goal indicators, although direct relationships were absent.
Reward interdependence. The types of reward interdependence present in this team
are depicted in Table II and were established analogously to the classification of goal
interdependence, i.e. by relating the information on the presence of team level pay
indicators and the relationship among individual level pay indicators to the
classification framework. For example, the column slightly negative is based on the
finding that team level indicators were present and that the individual level indicators
were (predominantly) negatively related. From the Table it appears that the levels of
reward interdependence were mixed and varied between slightly positive and slightly
negative. An important source of the slightly negative interdependence was the conflict

Team A
Goal interdependence
Reward interdependence
Content fit
Team B
Goal interdependence
Reward interdependence
Content fit
Team C
Goal interdependence
Reward interdependence
Content fit

Positivea

Slightly positiveb

Slightly negativec

7
7
n
7

3
0
High
2

3
4
Modest
2

1
3
Low
3

4
5
n
4

1
0
High
1

2
3
Modest
2

1
2
Low
1

7
7
n
7

4
4
High
4

2
2
Modest
3

1
1
Low
0

Notes: aCreated via a team level indicator in combination with positively related individual level
indicators; bcreated via a team level indicator in combination with unrelated individual level
indicators; ccreated via a team level indicator in combination with negatively related individual level
indicators

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management
107

Table II.
Goal and reward
interdependence and
content fit

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108

Figure 3.
Fit between the
interdependence
constructs for Team A

between the individual level indicators of the manager alliances and the individual
level indicators of the two delivery managers and the technology support manager.
Among other things, all four managers had to Attain the business plan for the period
2001-2003 as an individual level indicator. This applied to each individual managers
business. For the alliance manager, it boiled down to setting up alliances and
partnerships with other companies. Such partnerships negatively influenced the
businesses of the other team members with the Global Clients MT, since it stimulated
the outsourcing of services that were supposed to be delivered by the delivery
managers. In a sense, it undermined their day-to-day activities by bringing in
competitors products that competed with their own products.
The team members that were classified as slightly negatively reward
interdependent were the delivery managers and the technology support manager.
Interestingly, the manager of alliances was not classified in this category, as he
indicated not to be negatively interdependent on other team members for the
attainment of his/her individual level pay indicators. The team member who was
classified as slightly negative goal interdependent was one of the three
above-mentioned managers.
Fit between the interdependence constructs. The types of interdependence as present
in this team are depicted in Figure 3. Relating these findings to the definition of fit, we
conclude that there is a misfit between the three constructs. First, goal and reward
interdependence have partly conflicting directions. Furthermore, we see that the
slightly negative reward interdependence relationships in particular conflict with the
level of task interdependence.
Content fit. Table II also shows the rating results for the responses on the level of
content fit. The findings are mixed, running from high to low. As a result, the level of
content fit cannot be univocally classified. In addition, no clear pattern could be found
between the type of content fit and, for example, the type of function a team member holds.
A possible reason for the five cases of modest and low content fit (2 3), is the low
effort that was put into the development of individual level pay indicators, which was
illustrated by the fact that there was hardly any differentiation between the individual
pay indicators of the various team members. As a result, the opportunity was not
utilized to establish a link between the performance goals and the pay-for-performance
plan via the individual level pay indicators.
Propositions on the effects of fit and misfit. Comparing the observed pattern with the
definition of fit, leads us to the following expectations. Concerning the interdependence
constructs, it was the negative reward interdependence in particular that conflicted
with the (slightly) positive goal interdependence and the high task interdependence.
Where the last two types of interdependence required and stimulated cooperation, in

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half of the cases the pay-for-performance plan created a type of interdependence that
stimulated competition among team members. Following the model, we expect this
combination to be ineffective: it will not stimulate cooperation among team members
nor motivate team members. In addition, the mixed levels of content fit will not
contribute to the effectiveness of the combination either.

Team
performance
management

Team B: The Netherlands MT


The findings for Team B are highly similar to the findings of Team A (see Table II). As
a result, the propositions concerning the effectiveness of the constellation of
interdependence constructs and content fit are similar to the propositions for Team
A. To avoid redundancy, the discussion of Team B will be confined to an example of
how the reward interdependence was actually created in this team.
Reward interdependence. None of the interviewees indicated that the individual level
pay indicators of team members were positively related, resulting in the absence of
positive reward interdependence (see Table II). The set of individual level pay
indicators of the legal manager provides a good example of a situation in which the
individual level pay indicators were unrelated. This manager had two individual pay
indicators: improve contract management within Itech; and align the legal processes
within two specific divisions of Itech. The manager indicated that the individual level
pay indicators of the other team members (13 in total) were mostly unrelated to his/her
own indicators: ten out of 13 indicators were unrelated to the attainment of his/her first
pay indicator (contract management), the other three were positively related. Only one
out of the 13 other individual level indicators was positively related to the attainment
of his/her second pay indicator (align legal processes), while the scores on the other 12
individual level pay indicators did not affect his/her second indicator.
A possible reason for the presence of unrelated individual level indicators is that
they were formulated irrespective of each other, leaving not much room to gear the
individual indicators of team members. During the interviews, it became apparent that
team members did not know one anothers individual level indicators. Being
confronted with the individual level indicators of colleagues sometimes resulted in
amazement on the conflicting nature of these indicators with their own indicators.

109

Team C: UK MT
Task interdependence. The patterns of information exchange among team members in
the UK MT were highly similar to the ones described for the Global Clients MT, both in
terms of the intensity and cruciality, and in terms of the type of information that was
exchanged. The fact that the UK MT was split into two parts that operated from
different geographical locations (about 200 km apart), did not significantly affect the
information exchange, nor did it result in two sub-teams. We therefore classify the task
interdependence in this team as high.
Goal interdependence. Table II shows that the goal interdependence was (slightly)
positive. An example of positively related individual level goal indicators are the
performance goals in the customer quadrant of the balanced score cards (BSCs) of the
HR and legal manager. Among other things, the HR manager was assigned the
performance goals to: improve and align HR processes to the needs of the business; and
rationalise the HR systems (e.g. improve transparency by removing old systems and
procedures). The legal manager, on the other hand, was assigned the goals to: prepare a

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110

Figure 4.
Fit between the
interdependence
constructs for Team C

new contract of employment within the timescale agreed with the HR manager; and
liaise with the HR manager to ensure that new starters attending introduction courses
are made aware of HR policies and procedures. Thus the legal aspects of the
performance goals of the HR manager were reflected in the goals of the legal manager,
resulting in positive interdependence among these managers: attainment of the
performance goals by the legal manager positively influenced the performance goals of
the HR manager and vice versa.
One of the reasons for these rather univocal findings is that UK MT developed a
BSC (Kaplan and Norton, 1996) for the team as a whole, based on the performance
goals as assigned by the board, and additionally developed a BSC for each individual
team member. These BSCs were developed on a participative basis in several team
sessions. A direct result from these sessions was that inconsistencies among individual
performance goals came to light and could be resolved. Or, as one interviewee put it:
The reason why there are no conflicting goals is that the BSCs are made on a
participative basis (i.e. via team decision making, HvV et al.), so eventually conflicting
objectives are immediately detected.
Other interviewees downplayed this somewhat by stating that there was always
some conflict between individual performance goals. However, team members were
aware that full consistency was hard to achieve, as appeared from the fact that the
performance goals formulated in the individual BSCs were agreed upon via consensus
among all team members.
Reward interdependence. As can be gathered from Table II, the type of reward
interdependence is similar to the type of goal interdependence, i.e. predominantly
(slightly) positive. This is a direct result of the fact that the non-financial elements of
the BSC of each individual team member were translated one-to-one into individual
level pay indicators. Thus, the individual performance goals and individual pay
indicators were highly similar. The only difference was that the financial component of
the BSC (accounting for 25 per cent) was not used as an individual level pay indicator,
because the pay plan already contained a considerable financial component via the
(financial) team level pay indicators. However, this difference did not result in different
types of reward interdependence.
Fit between interdependence constructs. Figure 4 gives the predominant types of
interdependence present in team C. Relating these to the definition of fit, we classify
this situation as fit. First, the performance goals and pay-for-performance plan created
the same types (i.e. direction) of interdependence. Furthermore, the types of goal and
reward interdependence were in line with the level of task interdependence.
Content fit. The findings in Table II indicate that the content fit between
performance goals and pay indicators was modest to high. Team members indicated
that the content fit was mainly established by the presence of the (non-financial)

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individual performance goals in the pay-for-performance plan. In addition, they


indicated that the team level performance goals were positively related to the team
level pay indicators. Other team members subscribed to the above viewpoint, with the
remark that there was some imbalance between the performance goals and the
pay-for-performance plan, i.e. the BSCs consisted of 25 per cent financial indicators,
while the pay-for-performance plan consisted of 75 per cent financial indicators. In
these cases, the content fit was classified as modest.
Propositions on the effects of fit and misfit. It is expected that the combination of task,
goal and reward interdependence, and the goal and pay indicators will be effective in this
situation. First, the levels of task, goal and reward interdependence fit together: high task
interdependence required cooperation among team members, which was supported by
performance goals and a pay-for-performance plan that created positive
interdependence, thereby stimulating cooperation as well. In addition, the performance
goals and pay-for-performance plan fit in terms of content, thus establishing a link
between goal attainment and the attainment of a pay-for-performance bonus.

Team
performance
management
111

Evaluation of the prescriptive model


From the discussion above, it appears that only team C satisfied the models
propositions on fit between the interdependence constructs and content fit, while team
A and B did not satisfy all propositions. Therefore we expect team C to be more
effective than the other two teams.
Table III shows the effects of fit and misfit on the nine dependent variables.
Non-parametric statistical tests were used to evaluate the differences between the teams.
First, the Kruskal-Wallis Chi-square was computed for each variable to test whether there
were significant differences among teams. If this was the case, a Mann-Whitney U test was
conducted to investigate which pairs of teams had significantly different mean scores.
Concerning the effect variables in which we were primarily interested in from a theoretical
point of view (i.e. cooperation (covered by item 1) and motivation (covered by item 3)),
significant differences among teams were found on cooperation while no significant results

The pay-for-performance plan:


1. Drives individual contributions into team playb, c
2. Enhances attainment of financial resultsb, c
3. Increases shareholder value
4. Motivates people
5. Retains people
6. Rewards in a fair way
7. Increases attraction of IT in the marketplace
8. Facilitates IT to become a world class player with
excellent customer satisfaction
9. Facilitates IT to become a world class player with
excellent employee satisfaction
a

Aa
(n 8)

B
(n 6)

C
(n 7)

Kruskal-Wallis
x2

2.75
3.63
3.43
3.00
2.88
2.86
2.50

Mean score
3.50
3.83
4.00
3.00
2.17
2.83
2.67

4.14
4.57
4.43
3.86
3.14
3.57
3.14

5.94 *
4.88 *
3.01
3.59
3.75
2.81
1.19

2.38

2.67

2.86

1.17

2.38

2.80

3.14

2.37

Notes: n 7 for variables 3, 7 and 8; Mann-Whitney U test yielded statistically significant


differences ( p , 0.05) for teams A and C; cMann-Whitney U test yielded statistically significant
differences ( p , 0.10) for teams B and C; *p , 0.10

Table III.
Effects of fit and misfit on
nine dependent variables

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112

were found on motivation. With regard to cooperation, team C scored significantly higher
than team A (U (n 15 10:00, p , 0:05) and team B (U n 13 10:50, p , 0:10).
This finding, indicating that the combination of fit as present in team C enhanced cooperation
more than the combinations of misfit of the other two teams, is in line with the proposition.
With regard to motivation, we notice that the findings point in the hypothesized
direction (Team C scores 0.86 scale point higher than teams A and B). A possible reason
for not finding statistical differences may be a lack of statistical power. All in all, we
interpret these findings as some first support for the proposition that combinations of fit
(Team C) are more effective than combinations of misfit (Teams A and B).
Concerning the other variables that were not explicitly addressed in the
propositions, significant differences were found on the variable financial
performance (covered by item 2). Again, team C scored significantly higher than
team A (U (n 15 12:50, p , 0:10) and team B (U (n 13 9:50, p , 0:10).
Although no explicit propositions were made concerning the extent to which financial
performance was enhanced, this finding fits to the general idea that a situation of fit is
more effective than a situations of misfit. This idea is further supported by the fact that
Team C scores higher on all dependent variables than Teams A and B even though
these differences are not statistically significant. Two simple sign tests comparing
Teams A and C, and Teams B and C tell us that the probability of finding nine
differences in the same direction by chance is p , 0:01, i.e. the hypothesis that the
mean scores of Teams A and B are equal to Team C is rejected.
In addition to the findings presented in Table III, the interviews provided some
anecdotal evidence for the notion that the above findings are especially related to fit
and misfit between different types of interdependence.
In the Netherlands MT (team B), for example, one respondent noted that the current
pay plan did not reflect the interdependence relationships that were present within the
team. The respondents suggestion was to first analyse these relationships and then
formulate pay indicators for the different sets of team members that depend on one
another for the completion of a specific job. An example would be the managers of
sales, marketing and HR, who together were responsible for the development of a
marketing strategy (i.e. sales for market information and HR for the new hires to set up
a marketing department). According to the interviewee, an important reason for the
low effectiveness was that these sets of interdependent team members were not
recognized by the current pay-for-performance plan, while they should be the basis on
which pay indicators should be formulated.
In contrast, the respondents in team C indicated that one of the main reasons why
their situation was effective was that the pay-for-performance plan reflected these
interdependence relationships between team members. For example, the Legal
manager had to work together with the financial manager in restructuring the systems
for monthly reporting to headquarters. This task interdependence relationship was
reflected in the BSC by assigning both team members the performance goal (and
thereby automatically the pay indicator) to complete this restructuring within one year.
Discussion
The aim of this study was to apply existing knowledge on effective combinations of
interdependence constructs mainly generated via laboratory experiments and
surveys to the practical issue of designing effective pay-for-performance plans for

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teams. To this end, we integrated this knowledge into a prescriptive model, which was
evaluated in three top management teams. The key proposition that underlies this
model is that situations in which a pay-for-performance plan fits with the performance
goals as well as with the team task are more effective than situations of misfit. These
fit relationships are operationalized by means of the interdependencies that result from
these three elements, i.e. task, goal and reward interdependence, and by the content of
the goal and pay indicators. This study yielded at least three interesting findings.
First, some preliminary support is found for the proposition that situations of fit are
more effective than situations of misfit. Significant differences were found between
Team C (fit) and Teams A and B (misfit) on the effectiveness criteria cooperation and
financial performance. Most differences were found at p , 0:10, which we consider a
defendable significance level given the small sample size. However, these findings
should be interpreted with some reservation for at least two reasons. Contrary to what
we expected, no significant differences were found on the effectiveness criterion of
motivation. Also, the effectiveness criteria were measured with single items thereby
lowering the reliability of these measures.
Second, this study showed that negative reward interdependence relationships
played a dominant role in the combinations of misfit, i.e. the misfits of Teams A and B
were both associated with negative reward interdependence. Therefore, we conclude
that negative reward interdependence relationships should be avoided in
pay-for-performance plans for teams, which is in line with earlier findings from
experimental studies (e.g. Miller and Hamblin;, 1963; Rosenbaum et al., 1980; Thurkow
et al., 2000). An important and robust contribution of this study lies in the fact that it is
the first study to investigate specific sources of reward interdependence relationships
in practical settings. It shows that negative reward interdependence not only stems
from the distribution method that is used, which has been the traditional vehicle
through which reward interdependence was manipulated in former studies, but also
from the individual level pay indicators. For instance, we found that the negative
reward interdependence was not created on purpose (e.g. via a ranking system), but
that it was a result of a negligent design process, i.e. the individual level pay indicators
were developed irrespective of each other, without checking for the presence of
conflicting indicators (see, for example, Team B), which resulted in negative reward
interdependence. On the other hand, Team C provided a good example of how
individual indicators can be developed such that they do not result in negative reward
interdependence. In this team, the individual level pay indicators were developed
cooperatively (i.e. via the development of individual performance goals that served as
an input for the pay-for-performance plan) to make sure that the indicators did not
conflict and reflected, where possible, the task interdependence relationships within
the team. Thus, awareness is needed in designing individual level pay indicators for
team members. Managerial influence can play an important role here, by coordinating
an integral design via, for instance, team decision making.
Third, this study provided insight into the complexity of interdependence relationships
in real-life settings and demonstrated the difficulty of applying existing knowledge
one-on-one in practice. Van der Vegt et al. (2000) and Van der Vegt and Van der Vliert
(2002) have already demonstrated that the levels of task interdependence can vary across
team members. The present study shows that not only task interdependence may vary
across team members, but that the type of goal and reward interdependence may vary
across team members as well. Moreover, this study shows that even a single team

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member may be confronted with different types of goal and/or reward interdependence at
the same time. These findings, in turn, have implications for the applicability of the design
rules as incorporated in the prescriptive model, as it makes it more difficult to univocally
determine goal and reward interdependence of a single team member, let alone of a team
as a whole. The practical implication is that in heterogonous situations the prescriptive
model may not be applicable, and that a univocal team-level solution for the design of
performance goals and pay-for-performance is not something to aim for.
In line with most existing research on interdependence relationships, this study was
confined to internal interdependence relationships. However, in contrast to laboratory
settings, real-life settings are not limited to internal interdependence relationships (McCann
and Ferry, 1979). External interdependencies may impact the effectiveness of combinations
of task, goal and reward interdependence as well. To date, these external interdependence
relationships have been left largely unaddressed. Further research is needed here to
improve our understanding of effective combinations of interdependence relationships.
An issue that was left unresolved in this study is how the two types of fit (i.e. fit
between the interdependence constructs and content fit) contribute to the effectiveness
of combinations of task, goal and reward interdependence and goal and pay indicators.
This study provided some anecdotal evidence for the notion that it was especially the
fit between the interdependence constructs that influenced the effectiveness criteria.
However, it did not allow for an exact analysis of the separate effects, because of the
limited number of teams in this study and because of the case study design. A
larger-scale field-experimental design, as applied by Wageman (1995) to evaluate the
effectiveness of different combinations of task and reward interdependence, would be
more appropriate here. Such a design would allow us to evaluate the proposition as put
forward in this study was that the effects of the two types of fit are additive, which is
interesting to do as one can imagine other relationships as well. For instance, one may
expect a moderating effect of content fit on the relationship between a fit between the
interdependence constructs and effectiveness. That is, the effects of a fit or misfit
between the interdependence constructs may become stronger with increasing levels of
content fit, because with increasing levels of content fit the link between performance
goals and pay indicators is more clear, thereby accentuating the fit or misfit between
the interdependence constructs. We consider this an interesting direction for future
research to disentangle the separate effects of different types of fit, with both
theoretical and practical relevance.
Finally, despite the drawbacks that are associated with the design of the present
study as regards the generalizability and causal inferences that can be made, this
research approach facilitated a very detailed analysis of interdependence relationships
in practical settings.
Notes
1. We realize that performance goal indicators and pay-for-performance indicators can be defined
at many other organizational levels as well. However, in this study we are primarily interested
in goal and pay indicators at the team and individual level, because these indicators have a
direct impact on the type of goal and reward interdependence among team members.
2. In the discussion of Team A we will talk about the classification procedure of the
interdependence constructs in greater detail. This procedure which was also used for the
other teams will not be repeated in the discussions of team B and C.

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3. Please note that the absence of neutral and negative forms of goal and reward
interdependence is due to the presence of team level goal and pay indicators, which make
these forms of interdependence inapplicable here (see Table I).
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About the authors
Harm van Vijfeijken has a PhD in Industrial Engineering and Management Science from
Technische Universiteit Eindhoven in the Netherlands. He is currently employed as an
educational consultant at CPS, Amersfoort. His current research interests are team performance
management, team development, and pay-for-performance plans.
Ad Kleingeld has a PhD in Industrial Engineering and Management Science from Technische
Universiteit Eindhoven in The Netherlands. He is Assistant Professor at the Department of
Technology Management, a subdepartment of Human Performance Management, of this
university. His current research interests are performance management of interdependent
individuals and groups, task strategies, and the relationship between individuals goal
orientation and their use of feedback. Ad Kleingeld is the corresponding author and can be
contacted at: P.A.M.Kleingeld@tm.tue.nl
Harrie van Tuijl has a PhD in experimental psychology from Nijmegen University. He is
Associate Professor of personnel management at Technische Universiteit Eindhoven,

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Department of Technology Management, subdepartment of Human Performance Management.


His main research interests are productivity enhancement, organizational learning, group
problem solving, task strategies, and cooperation and competition.
Jen A. Algera has a PhD in social sciences from Leiden University. He is Professor of
Personnel Management at Technische Universiteit Eindhoven, the Netherlands. His current
work is on goal setting and feedback in combination with self-management of individuals and
groups to arrive at high organizational productivity, especially in new technology environments.
Henk Thierry has a PhD in psychology from the Free University, Amsterdam. He is Emeritus
Professor in work and organizational psychology at Tilburg University, The Netherlands. His
research domain covers pay and compensation at work, work time arrangements and behavioral
effects, work motivation, and strategic human resource management.

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