In a nutshell, should I reward everyone in the team equally or should rewards be based on individual performance? Below I list the pros and cons of rewarding everyone equally that come to my mind:

Pros:

• encourages selfless teamwork
• people don’t try to outsmart each other to gain promotions and higher rewards
• the entire team wins or loses as a whole

Cons:

• some people will get complacent
• accepted norm is to reward disproportionately and in fairness to what one contributed. the problem arises when we start to evaluate one’s contribution.
• in fact, some companies go as far as to reward the top performers up to 10x more than average
• 20% of the people do 80% of the work. See the Myth of the Bell Curve

Additional Notes

In my opinion, the thing about hyper-performers is that if you reward them less (I am not saying you should do this; everyone deserves their fair share), they will still perform the same. They are in it for the game (and recognition), not for money. What hurts a hyper-performer is if their credit is taken away.

What do you think? Has there ever been an experiment done to objectively evaluate the two approaches?