Think Twice Before Going All-In on Team Bonuses
Team bonuses can simplify incentive plans but often create unintended consequences. Learn why team, individual, and hybrid bonus structures each fall short and how to design incentive plans that drive the right behaviors.Team bonuses sound great on paper. Everyone's rowing in the same direction, collaboration improves, managers aren't drowning in individual goal-setting. What's not to like?
A lot, actually — depending on who you ask.
Team-based bonuses are one of the trickiest things to get right. You start with individual goals — clear quotas, clear ownership - but that creates silos and "not my problem" attitudes fast. So you pivot to team goals. Managers love the simplicity (and honestly, the relief of not having to craft unique goals for every single employee). But then the cracks start to show:
High performers feel the payouts are unfair. Low performers don’t really improve. And the moment someone goes on leave or has a special circumstance, tensions creep in.
So you swing back to individual plans. Then try a hybrid. Then adjust the hybrid. It becomes a vicious cycle.
There is no perfect incentive plan. Every structure has something it does well and something it gets wrong.
- Individual plans reward effort and ownership, but they invite complexity and can turn teammates into competitors.
- Team plans scale nicely and simplify management, but accountability gets blurry fast.
- Hybrids feel like the obvious answer until you realize they often leave people on both ends feeling shortchanged.
The goal isn't to find a perfect plan. It's to be honest about what your current plan prioritizes and what it costs you.
It means:
- Picking one main priority for the plan each year rather than trying to solve everything at once.
- Phasing features in and out thoughtfully as your team evolves, not just reacting when someone complains.
- Accepting upfront that you're balancing fairness, scalability, and motivation — and you won't nail all three at the same time.
The most important move is closing the gap between what you intend the plan to do and what it actually causes people to do. Pay attention to the behaviors the plan is driving, not just the numbers it's producing.
If you're seeing coasting, resentment from top performers, or managers just hoping nobody notices the low performers — those are signals worth taking seriously before the next cycle.
