Team Gift Exchange

When it comes to teams, the core principle is that the team is greater than the sum of its parts. That is to say, the team as unit can produce outcomes more effectively, efficiently, and generally perform its designated function better than if the individual team members were to do so independently. This axiom must be true in order for a team to be beneficial to an organization, and it is important to examine the structure of the team to see how members are motivated and how they are rewarded for their effort and performance.

In class, we discussed Akerlof's gift exchange model of compensation in which he outlines the positives and negatives of pay for performance as opposed to gifts (i.e. promotions) in different organizational structures. As an alternative to the traditional wisdom of pay for performance, Akerlof argues that in many cases individuals and team members are better motivated to put forth their best work for an organization when their performance is detached from their direct compensation. The article "How to Get the Rich to Share the Marbles" expands upon this idea by examining how the initial conditions and division of labor within a team affect people's decision to share the rewards of their effort. The article discusses the surprising results of an experiment conducted to see whether children would be willing to self-redistribute marbles given different conditions but always with the same work for each person.

By framing the examination of an effective team in these theories, some interesting observations arise. For example, I spend my summers working as a waiter in a high-end restaurant in my home town. This restaurant, which from my personal experience was a poster child of proper team work, followed many of the teachings that Akerlof and the marble experiment showed are relevant. To begin, each functional group within the restaurant had a place within the overall hierarchy and each division gave all of its members equal base pay. The lowest pay grades were the bus boys and dish staff, who received a fixed time-based income for their work regardless of how many tables they bussed or dishes they washed. Above them were the hostesses, who received a higher fixed wage but also kept any tips received from takeout orders, which they were in charge of processing. Then came my team, the servers and bartenders, who received a fixed wage lower than the hostesses and bus boys but were also paid in tips from their own tables. Then finally were the chefs and kitchen staff, who received the highest base pay as well as a small fraction of the tips earned from their individual tables. While each team needed to work with other teams in order for the restaurant to provide full and effective service, each team also functioned within itself to accomplish its aspect of service. Based on the nature of the work each team had to do, the managers decided that different combinations of pay for performance and gifts in the form of additional hours and promotions to higher paying teams were necessary to keep everyone properly motivated. This way, people who shared the burden of work equally with their team members would be paid a fixed wage and rewarded with gifts for their effort while people who functioned autonomously but ultimately fulfilled the same function would be compensated with base pay as well as pay for performance in the form of tips. Also, depending upon how busy a dinner service was, servers sometimes pooled their tips and received an equal cut thus equalizing the pay for performance. This restaurant as an organization follows many of the patterns that Akerlof outlined, and working there taught me a great deal regarding what people consider to be fair payment and what it takes to keep people within an organization continuously motivated to put forth their best effort for the team.