Personnel ReviewInterdependence and fit in team performance managementHarm van Vijfeijken Ad Kleingeld Harrie van Tuijl Jen A. Algera Henk Thierry

Article information:To cite this document:Harm van Vijfeijken Ad Kleingeld Harrie van Tuijl Jen A. Algera Henk Thierry, (2006),"Interdependence andfit in team performance management", Personnel Review, Vol. 35 Iss 1 pp. 98 - 117Permanent link to this document:http://dx.doi.org/10.1108/00483480610636812

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Interdependence and fit in teamperformance management

Harm van VijfeijkenCPS, Amersfoort, The Netherlands

Ad Kleingeld, Harrie van Tuijl and Jen A. AlgeraTechnische Universiteit Eindhoven, Department of Technology Management,

Eindhoven, The Netherlands

Henk ThierryUniversity of Tilburg, The Netherlands

Abstract

Purpose To evaluate a proposed prescriptive model for the design of effective combinations ofperformance goals and pay-for-performance plans for the performance management of teams.

Design/methodology/approach The idea underlying the model in which task, goal, andreward interdependence and their fit play a dominant role is that a pay-for-performance planshould support the team goals and the goals of individual team members as well as support the wayin which team members need to cooperate. To obtain a first notion on the models validity, it wasapplied to evaluate a pay-for-performance plan for management teams at a large IT company. Thisevaluation consisted of an in-depth study of three management teams, using a case studymethodology.

Findings Combinations of fit among type of team, performance goals, and pay-for-performanceplan (established by a fit between the interdependence constructs and/or by an overlap in the contentof the goal and pay indicators) are more effective than combinations of misfit.

Research limitations/implications The case study was limited to intra-team interdependencerelationships and did allow for a analysis of the separate effects of a fit between the interdependenceconstructs versus content fit.

Practical implications This study shows that pay-for-performance plans should not be designedin 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 inconjunction in a field setting.

Keywords Team performance, Team management, Performance-related pay, Performance measures

Paper type Research paper

IntroductionTeams and pay-for-performance are two possibly conflicting phenomena that areincreasingly present in modern organizations (Kozlowski and Bell, 2003; Prendergast,1999). The possible conflict lies in the fact that teams are generally associated withcooperation among the team members (West, 1996), whereas pay-for-performanceplans 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 inferredfrom the reviews of Thierry (2002a, b) and Prendergast (1999), who both found mixedresults for the effectiveness of pay-for-performance plans for teams. In thiscontribution we propose and evaluate a prescriptive model for the design of

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Received December 2003Accepted July 2004

Personnel ReviewVol. 35 No. 1, 2006pp. 98-117q Emerald Group Publishing Limited0048-3486DOI 10.1108/00483480610636812

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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 anorganizational context, see themselves as a team, are seen by others in the organizationas 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 supportthe goals of a team and those of its individual members, as well as support the way inwhich team members need to cooperate for the completion of their work. These ideas offit between the team task, the performance goals and the pay-for-performance plan areoperationalized via the interdependence constructs that stem from each of theseelements, i.e. task, goal and reward interdependence, and via the content of goal andpay indicators (see Figure 1).

In this model, interdependence relationships are dominant because we expect thatthey play a crucial role in the design of effective combinations of pay-for-performanceand performance goals for teams. Earlier research showed, for example, thatcombinations 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 (Lewet al., 1986a, b; Mesch Johnson and Johnson, 1989).

To date, however, these three constructs have not been studied in conjunction, eventhough the importance of doing so has been acknowledged (Hollensbe and Guthrie,2000). Further, most of these studies were conducted in laboratory settings, while theexisting field studies were mostly conducted via surveys, resulting in rather abstractknowledge. The aim of the present study is to apply this knowledge in practicalsettings and evaluate its practical applicability.

In this paper, the following topics will be addressed. We will start with a furtherelaboration on the prescriptive model, which will be followed by a description of thecase-study setting. Subsequently we will discuss the case-study method for thein-depth study of three top management teams. Then we will report on theinterdependence analysis, and evaluate the prescriptive model. The paper will beconcluded with a discussion.

Figure 1.Proposed prescriptive

model on effectivecombinations of task, goal

and rewardinterdependence and thecontent of goal and pay

indicators

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A prescriptive modelThe general idea behind the model as depicted in Figure 1 is that if (a) the goal and payindicators fit together in terms of content, and if (b) the levels of goal and rewardinterdependence 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 taskinterdependence, this combination is more effective than combinations in which one ormore of these fit requirements are not satisfied. Thus, the extent of fit or misfit betweenthe elements as depicted in Figure 1 constitutes the independent variables in thismodel, whereas the dependent variable refers to effects of variation on theseindependent 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 incooperation as a team interaction process and motivation as an outcome. We expect thetwo different types of fit to be associated with different elements of effectiveness, henceour specific interest in these variables.

First, we expect content fit the fit that is concerned with a clear linkage between goaland reward attainment to be specifically associated with motivation. The theoreticalbackground for this idea can be found in the expectancy theory (Vroom, 1964). Accordingto this theory, content fit is the situation in which the attainment of a performance goal isinstrumental for the attainment of a (valued) reward. This, together with the expectancythat a persons efforts will lead to goal attainment, will positively impact motivation.Second, we expect a fit between the interdependence relationships to be specificallyassociated with cooperation. In line with Deutsch theory of cooperation and competition(Deutsch, 1949a, b), the underlying idea is that teamwork is always associated withinteraction patterns (e.g. cooperation, competition), and that performance goals and apay-for-performance plan should give signals as to the desired interaction pattern(cooperation). In situations of a fit between the interdependence constructs, both theperformance goals and pay-for-performance plan stimulate cooperation by creating positiveinterdependence. In situations of misfit, the performance goals and pay-for-performanceplan give mixed signals or consistently stimulate competition, which in turn negativelyimpacts cooperation. Thus, we expect that both types of fit positively influence elements ofeffectiveness, and that their effects are cumulative, i.e. the more fit, the better. In theremainder of this section, the various elements of the model will be further specified.

Task interdependence reflects the extent to which team members have to exchangeinformation 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 ofhigh task interdependence, team members critically depend on information and/or meansfrom each other for the completion of (their part of) the team task, i.e. absence of thisinformation and/or means hampers the achievement of satisfying levels of taskcompletion or renders task completion impossible. Think, for instance, of the members ofa surgical team where the surgeon cannot complete his/her task without information onthe patients condition and the anaesthesia administered by the anaesthetist. In situationsof low task interdependence, team members hardly depend on information or means fromeach other for the completion of (their part of) the team task. While team members mayexchange information or means within the scope of task completion, the dependence onthis information and/or means is not critical: even without this information and meanssatisfying 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 theattainment of performance goals of a team member is related to the attainment ofperformance goals by other team members. Goal interdependence can vary fromnegative to positive. In the case of positive goal interdependence, the attainment ofones individual goals is positively influenced by the attainment of goals by other teammembers. Logically, team goals create positive goal interdependence as well, becauseindividual team members are positively interdependent on one another for theattainment of this goal. In the case of negative goal interdependence, the attainment ofones individual goals is negatively influenced by the attainment of goals by other teammembers. 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-specifiednumber of hours by one team member does not influence the attainment of the samegoal by other team members.

Reward interdependence is the interdependence created by the way in which the payindicators 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-performanceplan, which means that changes in the level of reward interdependence can be realized bychanging the pay-for-performance plan. Reward interdependence can vary from negativeto positive. An example of negative reward interdependence is a ranking system, inwhich a reward is based on the relative performance of the team members: highperformance 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 basedupon team performance: if my co-team members receive a reward, I will receive a rewardas well. However, positive reward interdependence can also result from individual payindicators that are positively related. An example is a management team where the HRmanager 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 andcustomer satisfaction. In this situation, the indicators of the HR and sales manager arepositively related: if the HR manager attains his/her goals, it will positively impact theattainment of the sales managers goals, because better sales personnel facilitates anincrease in market share and customer satisfaction. Finally, neutral rewardinterdependence can be created via individual level pay indicators in a similar way asdescribed in the example under goal interdependence.

From the above discussion it appears that the actual type of goal or rewardinterdependence that is created depends on the combination and type of individualand/or team level indicators.

Figure 2 shows the different types of goal and reward interdependence that canresult 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 teammembers. Examples of neutrally and positively related indicators have been givenabove. An example of individual indicators that create negative interdependence is amanagement team where the financial manager is assigned the goal to cut down theoverhead costs, while the marketing manager is assigned the goal to increase brand

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recognition by expanding the marketing activities. The latter goal conflicts with theformer: expanding marketing activities brings along overhead costs, therebynegatively influencing the financial managers goal attainment. Thus, depending onthe way in which different individual indicators are related, they create different typesof interdependence.

The third possibility is that indicators exist both at the individual and the teamlevel, which can result in combinations of the above-mentioned forms ofinterdependence, i.e. positive interdependence created via the team level indicator,and neutral, positive or negative interdependence created via the individual levelindicators. We will classify these combinations later on.

Content fit is the extent to which goal and pay indicators are related in terms ofcontent, where content is defined as the attribute to which the indicators refer. Anexample of goal and pay indicators that refer to different attributes is a situation in whichthe performance goal is to increase production quality and where the pay indicators focuson decreasing production costs and increasing output. In this situation, the performancegoal refers to quality whereas the pay indicators refer to costs and quantity.

Fit between task, goal and reward interdependence is the situation where performancegoals and a create the same type of interdependence (i.e. the same direction), therebygiving consistent signals with respect to the desired behaviour (cooperation, competition,or individualistic). In this situation, the signals are consistent with the level of taskinterdependence and the need to cooperate resulting from this: high task interdependencerequires cooperative behaviour, while low task interdependence requires a mixture ofcooperative and individualistic behaviour. Thus, the situation in which goal and rewardinterdependence are both negative is not considered as fit, since it conflicts with a basicpremise of a team, namely the presence of a minimum of task interdependence. Becausethe present study was conducted with top management teams of an IT company thatwere characterized by high levels of task interdependence, the evaluation of the proposedmodel was limited to high task interdependent settings.

Figure 2.Causes of different typesof goal and rewardinterdependence

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Case descriptionSettingThe setting of this study is a global IT-services company, which we will call Itech. Theorganization is structured around 32 country organizations that are headed by amanagement team. In situations where local market sizes are small, which is particularlythe case in countries only recently entered by Itech, one management team (MT) headsseveral country organizations. The board of Itech consists of three members, who arealso member of a local MT. An additional division is the Global Clients division, which isresponsible for all global clients of Itech. Most global clients are multinationals withoffices across the world that cannot be served effectively by the country organizations.

TeamsThree management teams participated in the first part of the case study: The GlobalClients MT (n 7; located in Brussels, Belgium), which headed the Global Clients servicedivision (about 350 employees); the Netherlands MT (n 7), which headed the singlelargest country organization (about 9,000 employees); and the UK MT (n 8), whichheaded a medium-sized country organization (about 2,000 employees).

Performance goals and pay-for-performance planTeam-level performance goals were formulated annually by the board of directors andcommunicated to the MTs before the beginning of a new year. The performance goalswere specific and differed substantially per team. Examples of the sort of performancegoals that were formulated are: 1. successfully complete merger; 2. create strong businessrelationships with Latin-America; and 3. recruitment (515 new hires in 2001). After thistop-down communication of the performance goals, teams were free to implement, furtherspecify or cascade the performance goals in accordance with their own view.

The pay-for-performance plan of Itech, which applied to all members of themanagement teams as described above (n 168, divided over 20 teams), was divided intothree organisational levels. At the organizational level (25 per cent), one indicator wasformulated: earnings per share. At the team level (50 per cent), approximately threefinancial indicators were set, generally with equal weights, like cash flow, net income,budget attainment, and revenue. The exact set of indicators and their relative weightrelated indicators applied to team members responsible for sales or delivery, whereascost-related indicators applied to team members in a support function. The individuallevel indicators (25 per cent) generally were non-financial, for instance set-up an effectivemarketing and communication organization and execute a restructuring program.

The average bonus amounted to approximately 40 per cent of an annual salary; themaximum bonus attainable was approximately 80 per cent of an annual salary. TheMTs were free to fill in the individual level indicators at their own discretion.

MethodSelection criteriaThe three teams that participated in this study were selected on theoretical grounds.According to Yin (1994) and Eisenhardt (1989) such a theoretical selection approach ispreferable 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 thereplication logic that underlies case-study research (Yin, 1994).

The first criterion was that there should be differences between the types oforganizations an MT is heading. Second, the teams were selected such that differencesin interpretation (e.g. filling-in of the individual level indicators) of thepay-for-performance plan could be expected. The rationale for the first criterion wasto acquire a broader picture of the MTs within the organization and to explore possibledifferences across these types of teams. The rationale for the second criterion was tofind 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, suchas willingness of MTs to participate and geographical proximity, played a role as well.

Data collectionThe data for this study were collected via interviews (n 21), documents describing theorganization, the performance goals and the pay-for-performance plan (such as annualreports and internal publications), and discussions with the Vice President of CorporateHuman Resources and with the Director of Compensation and Benefits who acted as keyinformants. The interviews were the main data source for this case study. Theinformation collected via documents and discussions mainly provided backgroundinformation 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 goalsand pay-for-performance plan, and effectiveness. The interview schemes were sent to theinterviewees a couple of days before the interview, with the request to go through thescheme in advance. The interviews took one or two hours and the response rate was 86per cent for The Netherlands MT, and 100 per cent for the other two MTs.

Measurement of the constructsTask interdependence was measured by asking respondents to indicate their keyindividual tasks and the extent and cruciality to which completion of these tasksdepended on information and/or means from other team members.

To measure goal and reward interdependence, we first developed a classificationframework for the different combinations of team and/or individual level goal and payindicators 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 incombinations 5-8 a team level indicator is absent. Combination 3 is special in the sensethat in this situation the team and individual level indicators create opposing types ofinterdependence. Although one could argue that these two interdependencerelationships cancel each other out, resulting in neutral interdependence, we classifythis combination as slightly negative. The reason for doing so is that we expect thenegatively related individual level indicators to be more dominant than the positiveinterdependent team level indicator, which is also in line with earlier studies. Forinstance, in line with Miller and Hamblin (1963), Rosenbaum et al. (1980) evaluated theimpact of different mixtures of negatively and positively interdependent rewards ongroup productivity and processes. They concluded that even a modicum of acompetitive (negatively interdependent, HvV et al.) reward led to lowered efficiencyand productivity.

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Starting point for the measurement of goal interdependence were the team-levelperformance goals. First, interviewees were asked whether these performance goals werecascaded to the individual level, or whether other individual performance goals wereformulated. Second, they were asked to indicate how the attainment of the individualperformance goals was influenced by the different goals of colleagues within the team(positively, neutrally, or negatively). This yielded rather complex information, becausesome individual performance goals were positively related, while others were negativelyor unrelated. Thus, for one team member, various types of goal interdependence existed.To incorporate this information, the response of each interviewee on how the individuallevel 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 madetheir assessments independently of each other. In this rating process more weight wasattached to negatively related indicators, since we expected these relationships to bemore dominant than neutral or positive relationships (Rosenbaum et al., 1980). Theinter-rater reliability was computed using Cohens k (Cohen, 1960), and was 0.57. In linewith the benchmark ratings of Landis and Koch (1977), we interpreted this as moderateagreement on the goal interdependence measure. Subsequently, the raters discussed thecases on which they initially disagreed, until full agreement was achieved. Thisinformation, in combination with the knowledge that explicit team level performancegoals were present, facilitated a classification of goal interdependence following theframework 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 levelindicators were related (to each another). Interviewees were asked to indicate howtheir individual level pay indicators were related to the pay indicators of otherteam members (positively, neutrally, or negatively). Again, this yielded rathercomplex information, because some individual pay indicators were positivelyrelated, while others were negatively or not related, i.e. a single team member wasconfronted with different types of reward interdependence. The response of eachinterviewee was placed in one of three categories, i.e. (predominantly) positive,neutral or negative, by two independent raters. Again, more weight was attachedto negatively related indicators, since we expected these relationships to be moredominant. The inter-rater reliability coefficient k was 0.76, which is interpreted assubstantial agreement among the raters (Landis and Koch, 1977). After this, the

CombinationTeam level goal orpay indicator

Relationship between individuallevel goal or pay indicators

Classification of goalor reward interdependence

1 Yes Positive 2 Yes Neutral 3 Yes Negative 4 Yes Absent 5 No Positive 6 No Neutral 07 No Negative 8 No Absent 0 (no interdependence)

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

Table I.Combinations of team

and individual level goalor pay indicators and a

classification of the typeof goal or reward

interdependence theycreate

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raters discussed the cases on which they initially disagreed, until full agreementwas achieved. This information, in turn, facilitated a classification of the type ofreward interdependence following the framework described in Table I.

To measure the content fit, respondents were asked to indicate the influence of theattainment of individual performance goals on the attainment of their pay indicators.Again, the responses did not always allow for a univocal interpretation, because ofdifferent relationships between the various goal and pay indicators. Therefore, theresponse 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 substantialagreement among the raters (Landis and Koch, 1977). Again, the raters discussed thecases they initially disagreed on, until full agreement was achieved.

The effect variables were determined and formulated by the organization in whichthe case study was carried out, with the objective to evaluate their intervention in thepay-for-performance plan. Nine effect variables were included in this study, whichwere measured via nine single-item questions on a five-point Likert scale. These nineitems included the variables that were of particular interest to us (i.e. cooperation andmotivation). Cooperation, for example, was covered by the question To what extentdoes the pay-for-performance plan drive individual contributions into team play?. Anexample of a question that was included but falls outside our primary field of interest isTo what extent does the pay-for-performance plan increase the attractiveness of Itechin the marketplace?. We consider these items to be a valid operationalization of theeffectiveness of the combination of task, goal and reward interdependence and thecontent of goal and pay indicators, because the scores on these effectiveness criteriawill not be determined by the pay-for-performance plan in isolation, but by the way inwhich it interacts with the performance goals and type of team work, i.e. by the extentof fit or misfit.

An interdependence analysisThis section reports on the results of an interdependence analysis as conducted in thethree MTs we studied.

Team A: Global Clients MTTask interdependence. Team members within the Global Clients MT[2] needed toexchange information for the satisfactory completion of their individual contribution tothe team task, but the intensity of information exchange differed per team member. Onthe one hand, the general manager and managers in the support functions (finance andHR) indicated that the information exchange with other team members was intense andcritical 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 andsale of products or services, indicated that the information exchange was less intensivebut usually critical for the cases in which it took place. An example would be themanager of technology support, who was responsible for delivery of support serviceson products delivered by the Global Clients MT. One of his/her tasks was to establish acompetence centre on a specific software application. To realize this, information andmeans (human capacity) was needed from among others the delivery managerswithin 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 concludethat the task interdependence within team A is high.

Goal interdependence. The types of goal interdependence in this team are depicted inTable II. The results are based on a combination of the knowledge that team level goalindicators were present (verified in the interviews) with the rating results on therelationship between the individual level goal indicators. For example, the columnpositive results from a combination of team level indicators and (predominantly)positively related individual level indicators[3].It can be gathered from the Table thatthere was a mixture of positive and slightly positive goal interdependence within teamA, which can be traced back to different types of relationships among individual levelindicators. Some respondents indicated that the individual level goal indicators wereunrelated, for instance: [individual, HvV] performance goals relate to each other like1 1 2; results are merely cumulative and do not reinforce each another. Thisrespondent, for example, was classified as slightly positively goal interdependent,resulting from the combination of neutrally related individual level goal indicators andteam goals (see Table I). Others indicated that goal attainment of colleagues positivelyinfluenced their own goal indicators, although direct relationships were absent.

Reward interdependence. The types of reward interdependence present in this teamare depicted in Table II and were established analogously to the classification of goalinterdependence, i.e. by relating the information on the presence of team level payindicators and the relationship among individual level pay indicators to theclassification framework. For example, the column slightly negative is based on thefinding that team level indicators were present and that the individual level indicatorswere (predominantly) negatively related. From the Table it appears that the levels ofreward interdependence were mixed and varied between slightly positive and slightlynegative. An important source of the slightly negative interdependence was the conflict

n Positivea Slightly positiveb Slightly negativec

Team AGoal interdependence 7 3 3 1Reward interdependence 7 0 4 3

n High Modest LowContent fit 7 2 2 3Team BGoal interdependence 4 1 2 1Reward interdependence 5 0 3 2

n High Modest LowContent fit 4 1 2 1Team CGoal interdependence 7 4 2 1Reward interdependence 7 4 2 1

n High Modest LowContent fit 7 4 3 0

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

Table II.Goal and reward

interdependence andcontent fit

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between the individual level indicators of the manager alliances and the individuallevel 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 period2001-2003 as an individual level indicator. This applied to each individual managersbusiness. For the alliance manager, it boiled down to setting up alliances andpartnerships with other companies. Such partnerships negatively influenced thebusinesses of the other team members with the Global Clients MT, since it stimulatedthe outsourcing of services that were supposed to be delivered by the deliverymanagers. In a sense, it undermined their day-to-day activities by bringing incompetitors products that competed with their own products.

The team members that were classified as slightly negatively rewardinterdependent were the delivery managers and the technology support manager.Interestingly, the manager of alliances was not classified in this category, as heindicated not to be negatively interdependent on other team members for theattainment of his/her individual level pay indicators. The team member who wasclassified as slightly negative goal interdependent was one of the threeabove-mentioned managers.

Fit between the interdependence constructs. The types of interdependence as presentin this team are depicted in Figure 3. Relating these findings to the definition of fit, weconclude that there is a misfit between the three constructs. First, goal and rewardinterdependence have partly conflicting directions. Furthermore, we see that theslightly negative reward interdependence relationships in particular conflict with thelevel of task interdependence.

Content fit. Table II also shows the rating results for the responses on the level ofcontent fit. The findings are mixed, running from high to low. As a result, the level ofcontent fit cannot be univocally classified. In addition, no clear pattern could be foundbetween 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 loweffort that was put into the development of individual level pay indicators, which wasillustrated by the fact that there was hardly any differentiation between the individualpay indicators of the various team members. As a result, the opportunity was notutilized to establish a link between the performance goals and the pay-for-performanceplan via the individual level pay indicators.

Propositions on the effects of fit and misfit. Comparing the observed pattern with thedefinition of fit, leads us to the following expectations. Concerning the interdependenceconstructs, it was the negative reward interdependence in particular that conflictedwith the (slightly) positive goal interdependence and the high task interdependence.Where the last two types of interdependence required and stimulated cooperation, in

Figure 3.Fit between theinterdependenceconstructs for Team A

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half of the cases the pay-for-performance plan created a type of interdependence thatstimulated competition among team members. Following the model, we expect thiscombination to be ineffective: it will not stimulate cooperation among team membersnor motivate team members. In addition, the mixed levels of content fit will notcontribute to the effectiveness of the combination either.

Team B: The Netherlands MTThe findings for Team B are highly similar to the findings of Team A (see Table II). Asa result, the propositions concerning the effectiveness of the constellation ofinterdependence constructs and content fit are similar to the propositions for TeamA. To avoid redundancy, the discussion of Team B will be confined to an example ofhow the reward interdependence was actually created in this team.

Reward interdependence. None of the interviewees indicated that the individual levelpay indicators of team members were positively related, resulting in the absence ofpositive reward interdependence (see Table II). The set of individual level payindicators of the legal manager provides a good example of a situation in which theindividual level pay indicators were unrelated. This manager had two individual payindicators: improve contract management within Itech; and align the legal processeswithin two specific divisions of Itech. The manager indicated that the individual levelpay indicators of the other team members (13 in total) were mostly unrelated to his/herown indicators: ten out of 13 indicators were unrelated to the attainment of his/her firstpay indicator (contract management), the other three were positively related. Only oneout of the 13 other individual level indicators was positively related to the attainmentof his/her second pay indicator (align legal processes), while the scores on the other 12individual level pay indicators did not affect his/her second indicator.

A possible reason for the presence of unrelated individual level indicators is thatthey were formulated irrespective of each other, leaving not much room to gear theindividual indicators of team members. During the interviews, it became apparent thatteam members did not know one anothers individual level indicators. Beingconfronted with the individual level indicators of colleagues sometimes resulted inamazement on the conflicting nature of these indicators with their own indicators.

Team C: UK MTTask interdependence. The patterns of information exchange among team members inthe UK MT were highly similar to the ones described for the Global Clients MT, both interms of the intensity and cruciality, and in terms of the type of information that wasexchanged. The fact that the UK MT was split into two parts that operated fromdifferent geographical locations (about 200 km apart), did not significantly affect theinformation exchange, nor did it result in two sub-teams. We therefore classify the taskinterdependence 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 theperformance goals in the customer quadrant of the balanced score cards (BSCs) of theHR and legal manager. Among other things, the HR manager was assigned theperformance goals to: improve and align HR processes to the needs of the business; andrationalise the HR systems (e.g. improve transparency by removing old systems andprocedures). The legal manager, on the other hand, was assigned the goals to: prepare a

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new contract of employment within the timescale agreed with the HR manager; andliaise with the HR manager to ensure that new starters attending introduction coursesare made aware of HR policies and procedures. Thus the legal aspects of theperformance goals of the HR manager were reflected in the goals of the legal manager,resulting in positive interdependence among these managers: attainment of theperformance goals by the legal manager positively influenced the performance goals ofthe HR manager and vice versa.

One of the reasons for these rather univocal findings is that UK MT developed aBSC (Kaplan and Norton, 1996) for the team as a whole, based on the performancegoals as assigned by the board, and additionally developed a BSC for each individualteam member. These BSCs were developed on a participative basis in several teamsessions. A direct result from these sessions was that inconsistencies among individualperformance 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 aparticipative basis (i.e. via team decision making, HvV et al.), so eventually conflictingobjectives are immediately detected.

Other interviewees downplayed this somewhat by stating that there was alwayssome conflict between individual performance goals. However, team members wereaware that full consistency was hard to achieve, as appeared from the fact that theperformance goals formulated in the individual BSCs were agreed upon via consensusamong all team members.

Reward interdependence. As can be gathered from Table II, the type of rewardinterdependence 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 ofthe BSC of each individual team member were translated one-to-one into individuallevel pay indicators. Thus, the individual performance goals and individual payindicators were highly similar. The only difference was that the financial component ofthe 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 differenttypes of reward interdependence.

Fit between interdependence constructs. Figure 4 gives the predominant types ofinterdependence present in team C. Relating these to the definition of fit, we classifythis situation as fit. First, the performance goals and pay-for-performance plan createdthe same types (i.e. direction) of interdependence. Furthermore, the types of goal andreward interdependence were in line with the level of task interdependence.

Content fit. The findings in Table II indicate that the content fit betweenperformance goals and pay indicators was modest to high. Team members indicatedthat the content fit was mainly established by the presence of the (non-financial)

Figure 4.Fit between theinterdependenceconstructs for Team C

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individual performance goals in the pay-for-performance plan. In addition, theyindicated that the team level performance goals were positively related to the teamlevel pay indicators. Other team members subscribed to the above viewpoint, with theremark that there was some imbalance between the performance goals and thepay-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. Inthese 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 thissituation. First, the levels of task, goal and reward interdependence fit together: high taskinterdependence required cooperation among team members, which was supported byperformance goals and a pay-for-performance plan that created positiveinterdependence, thereby stimulating cooperation as well. In addition, the performancegoals and pay-for-performance plan fit in terms of content, thus establishing a linkbetween goal attainment and the attainment of a pay-for-performance bonus.

Evaluation of the prescriptive modelFrom the discussion above, it appears that only team C satisfied the modelspropositions on fit between the interdependence constructs and content fit, while teamA and B did not satisfy all propositions. Therefore we expect team C to be moreeffective 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 therewere significant differences among teams. If this was the case, a Mann-Whitney U test wasconducted to investigate which pairs of teams had significantly different mean scores.Concerning the effect variables in which we were primarily interested in from a theoreticalpoint 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

Aa

(n 8)B

(n 6)C

(n 7)Kruskal-Wallis

x2

The pay-for-performance plan: Mean score1. Drives individual contributions into team playb, c 2.75 3.50 4.14 5.94 *

2. Enhances attainment of financial resultsb, c 3.63 3.83 4.57 4.88 *

3. Increases shareholder value 3.43 4.00 4.43 3.014. Motivates people 3.00 3.00 3.86 3.595. Retains people 2.88 2.17 3.14 3.756. Rewards in a fair way 2.86 2.83 3.57 2.817. Increases attraction of IT in the marketplace 2.50 2.67 3.14 1.198. Facilitates IT to become a world class player with

excellent customer satisfaction 2.38 2.67 2.86 1.179. Facilitates IT to become a world class player withexcellent employee satisfaction 2.38 2.80 3.14 2.37

Notes: an 7 for variables 3, 7 and 8; bMann-Whitney U test yielded statistically significantdifferences ( p , 0.05) for teams A and C; cMann-Whitney U test yielded statistically significantdifferences ( p , 0.10) for teams B and C; *p , 0.10

Table III.Effects of fit and misfit onnine dependent variables

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were found on motivation. With regard to cooperation, team C scored significantly higherthan 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 cooperationmore 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 hypothesizeddirection (Team C scores 0.86 scale point higher than teams A and B). A possible reasonfor not finding statistical differences may be a lack of statistical power. All in all, weinterpret 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 thepropositions, significant differences were found on the variable financialperformance (covered by item 2). Again, team C scored significantly higher thanteam 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 financialperformance was enhanced, this finding fits to the general idea that a situation of fit ismore effective than a situations of misfit. This idea is further supported by the fact thatTeam C scores higher on all dependent variables than Teams A and B even thoughthese differences are not statistically significant. Two simple sign tests comparingTeams A and C, and Teams B and C tell us that the probability of finding ninedifferences in the same direction by chance is p , 0:01, i.e. the hypothesis that themean 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 someanecdotal evidence for the notion that the above findings are especially related to fitand misfit between different types of interdependence.

In the Netherlands MT (team B), for example, one respondent noted that the currentpay plan did not reflect the interdependence relationships that were present within theteam. The respondents suggestion was to first analyse these relationships and thenformulate pay indicators for the different sets of team members that depend on oneanother for the completion of a specific job. An example would be the managers ofsales, marketing and HR, who together were responsible for the development of amarketing strategy (i.e. sales for market information and HR for the new hires to set upa marketing department). According to the interviewee, an important reason for thelow effectiveness was that these sets of interdependent team members were notrecognized by the current pay-for-performance plan, while they should be the basis onwhich pay indicators should be formulated.

In contrast, the respondents in team C indicated that one of the main reasons whytheir situation was effective was that the pay-for-performance plan reflected theseinterdependence relationships between team members. For example, the Legalmanager had to work together with the financial manager in restructuring the systemsfor monthly reporting to headquarters. This task interdependence relationship wasreflected in the BSC by assigning both team members the performance goal (andthereby automatically the pay indicator) to complete this restructuring within one year.

DiscussionThe aim of this study was to apply existing knowledge on effective combinations ofinterdependence constructs mainly generated via laboratory experiments andsurveys 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 wasevaluated in three top management teams. The key proposition that underlies thismodel is that situations in which a pay-for-performance plan fits with the performancegoals as well as with the team task are more effective than situations of misfit. Thesefit relationships are operationalized by means of the interdependencies that result fromthese three elements, i.e. task, goal and reward interdependence, and by the content ofthe 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 aremore effective than situations of misfit. Significant differences were found betweenTeam C (fit) and Teams A and B (misfit) on the effectiveness criteria cooperation andfinancial performance. Most differences were found at p , 0:10, which we consider adefendable significance level given the small sample size. However, these findingsshould be interpreted with some reservation for at least two reasons. Contrary to whatwe expected, no significant differences were found on the effectiveness criterion ofmotivation. Also, the effectiveness criteria were measured with single items therebylowering the reliability of these measures.

Second, this study showed that negative reward interdependence relationshipsplayed a dominant role in the combinations of misfit, i.e. the misfits of Teams A and Bwere both associated with negative reward interdependence. Therefore, we concludethat negative reward interdependence relationships should be avoided inpay-for-performance plans for teams, which is in line with earlier findings fromexperimental studies (e.g. Miller and Hamblin;, 1963; Rosenbaum et al., 1980; Thurkowet al., 2000). An important and robust contribution of this study lies in the fact that it isthe first study to investigate specific sources of reward interdependence relationshipsin practical settings. It shows that negative reward interdependence not only stemsfrom the distribution method that is used, which has been the traditional vehiclethrough which reward interdependence was manipulated in former studies, but alsofrom the individual level pay indicators. For instance, we found that the negativereward interdependence was not created on purpose (e.g. via a ranking system), butthat it was a result of a negligent design process, i.e. the individual level pay indicatorswere developed irrespective of each other, without checking for the presence ofconflicting indicators (see, for example, Team B), which resulted in negative rewardinterdependence. On the other hand, Team C provided a good example of howindividual indicators can be developed such that they do not result in negative rewardinterdependence. In this team, the individual level pay indicators were developedcooperatively (i.e. via the development of individual performance goals that served asan input for the pay-for-performance plan) to make sure that the indicators did notconflict and reflected, where possible, the task interdependence relationships withinthe team. Thus, awareness is needed in designing individual level pay indicators forteam members. Managerial influence can play an important role here, by coordinatingan integral design via, for instance, team decision making.

Third, this study provided insight into the complexity of interdependence relationshipsin real-life settings and demonstrated the difficulty of applying existing knowledgeone-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 acrossteam members. The present study shows that not only task interdependence may varyacross team members, but that the type of goal and reward interdependence may varyacross 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 atthe same time. These findings, in turn, have implications for the applicability of the designrules as incorporated in the prescriptive model, as it makes it more difficult to univocallydetermine goal and reward interdependence of a single team member, let alone of a teamas a whole. The practical implication is that in heterogonous situations the prescriptivemodel may not be applicable, and that a univocal team-level solution for the design ofperformance goals and pay-for-performance is not something to aim for.

In line with most existing research on interdependence relationships, this study wasconfined to internal interdependence relationships. However, in contrast to laboratorysettings, real-life settings are not limited to internal interdependence relationships (McCannand Ferry, 1979). External interdependencies may impact the effectiveness of combinationsof task, goal and reward interdependence as well. To date, these external interdependencerelationships have been left largely unaddressed. Further research is needed here toimprove 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. fitbetween the interdependence constructs and content fit) contribute to the effectivenessof 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 thefit between the interdependence constructs that influenced the effectiveness criteria.However, it did not allow for an exact analysis of the separate effects, because of thelimited number of teams in this study and because of the case study design. Alarger-scale field-experimental design, as applied by Wageman (1995) to evaluate theeffectiveness of different combinations of task and reward interdependence, would bemore appropriate here. Such a design would allow us to evaluate the proposition as putforward in this study was that the effects of the two types of fit are additive, which isinteresting to do as one can imagine other relationships as well. For instance, one mayexpect a moderating effect of content fit on the relationship between a fit between theinterdependence constructs and effectiveness. That is, the effects of a fit or misfitbetween the interdependence constructs may become stronger with increasing levels ofcontent fit, because with increasing levels of content fit the link between performancegoals and pay indicators is more clear, thereby accentuating the fit or misfit betweenthe interdependence constructs. We consider this an interesting direction for futureresearch to disentangle the separate effects of different types of fit, with boththeoretical and practical relevance.

Finally, despite the drawbacks that are associated with the design of the presentstudy as regards the generalizability and causal inferences that can be made, thisresearch approach facilitated a very detailed analysis of interdependence relationshipsin practical settings.

Notes

1. We realize that performance goal indicators and pay-for-performance indicators can be definedat many other organizational levels as well. However, in this study we are primarily interestedin goal and pay indicators at the team and individual level, because these indicators have adirect 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 theinterdependence constructs in greater detail. This procedure which was also used for theother 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 rewardinterdependence is due to the presence of team level goal and pay indicators, which makethese forms of interdependence inapplicable here (see Table I).

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About the authorsHarm van Vijfeijken has a PhD in Industrial Engineering and Management Science fromTechnische Universiteit Eindhoven in the Netherlands. He is currently employed as aneducational consultant at CPS, Amersfoort. His current research interests are team performancemanagement, team development, and pay-for-performance plans.

Ad Kleingeld has a PhD in Industrial Engineering and Management Science from TechnischeUniversiteit Eindhoven in The Netherlands. He is Assistant Professor at the Department ofTechnology Management, a subdepartment of Human Performance Management, of thisuniversity. His current research interests are performance management of interdependentindividuals and groups, task strategies, and the relationship between individuals goalorientation and their use of feedback. Ad Kleingeld is the corresponding author and can becontacted at: P.A.M.Kleingeld@tm.tue.nl

Harrie van Tuijl has a PhD in experimental psychology from Nijmegen University. He isAssociate 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, groupproblem solving, task strategies, and cooperation and competition.

Jen A. Algera has a PhD in social sciences from Leiden University. He is Professor ofPersonnel Management at Technische Universiteit Eindhoven, the Netherlands. His currentwork is on goal setting and feedback in combination with self-management of individuals andgroups 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 EmeritusProfessor in work and organizational psychology at Tilburg University, The Netherlands. Hisresearch domain covers pay and compensation at work, work time arrangements and behavioraleffects, work motivation, and strategic human resource management.

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This article has been cited by:

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3. David J. Glew. 2012. Effects of Interdependence and Social Interaction-Based Person-Team Fit.Administrative Sciences 2:4, 26-46. [CrossRef]

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