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Scrum problem – when the team dynamics out-weigh the need to cooperate with each other

We ran into an interesting issue with some of the Scrum teams in a part of our organization. The organization had seen many lectures and concepts around the need to ensure that performers were rewarded, which meant that top performers would get a very good rating, people slightly below them would get a decent score, while around 40% of the group would get an average score. The idea is always to ensure that people see that it makes a career wide good decision to perform at the highest level since that would get them promotion and career rise faster.
However, in the recent 2-3 years, the rewards that were doled out based on this rating were increased, with many of the common rewards being phased out and many more of the rewards being based on individual performance. This was also emphasized to the team members who learnt that a lot of their pay (in terms of bonuses, raises, etc) were going to be based on their individual performance even when they were a part of the team. This makes sense when you think about it logically, but it caused a huge amount of issues when applied to individuals.
Individuals started focusing on their individual performance rather than team performance, which meant earlier situations where a team member would cover for the other team member (if the person was on sudden leave or falling behind), or even situations where a team member would spend time explaining some issues to the other team member were lesser in number. This in turn did have an impact on the performance of the team (for example, if a person was behind, the manager had to now seriously work in the background to re-allocate work, whereas earlier a lot of this would happen based on individual associations). Managers were not able to resolve this situation, and for Scrum teams, the dynamics of the team were reduced to the level where the performance of the team was now at an average level rather than at a much improved level.
We really did not have a solution for this. Talking to individual team members brought out the individual drive of team members but not a solution that would have made the team work together like they did previously. Changing the organizational focus on individual team members was not practical either, since there was a lot of push towards moving the organization towards a situation where the company would have people who were great, and who believed that they were rewarded for being great.

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