The Effect of Reward Structures on the Performance of Cross-Functional Product Development Teams

Abstract

This study examines the effect of reward structures on the performance of cross-functional product development teams. Results suggest that when it is easy to evaluate individual performances, position-based differential rewards lead to greater satisfaction. For long and complex projects, process-based rewards have a negative effect and outcome-based rewards have a positive effect on performance. For risky projects and highly competitive or relatively stable industries, a nonlinear and monotonically decreasing relationship exists between outcome-based rewards and product quality.