September 28 & 29, 2020 | Virtual
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The organization I left based their incentives for Project Management personnel on their overall portfolio through KPI's (% overrun, personnel utilization, etc.), but we also had a leadership component where we used 360 reviews to evaluate their leadership as the view was that the Project Manager's career path was in Directorships, or Operations Management.
This blended score was very beneficial in that the PM's had to support each other and hold each other accountable. This balance of scores, rather a blended ratio gave a principle case for the PM's to continue their growth strategies in resource management and leadership, instead of consistently reaching for metrics.
Project bonuses based on anything other than successfully meeting the objectives of the project after closing can cause potential conflicts of interest. I’ve been on the receiving end of a couple of projects structured properly through an MBO (Management by Objectives) program. These projects were highly compressed, and the knowledge of the "carrot at the end of the stick" absolutely contributed to the success of the projects. However, I’ve also seen variations of MBO’s that required me to rename the acronym to:
However, with no statistics to back me, I believe that many companies dropped those types of programs during the 2007-2008 financial crisis and never resurrected them for those who reside outside the C-Suites and Senior Management designations.
So no bonus linked to the project expected profit! I like that.
I agree with the carrot at the "end" of the stick kind of approach. The stick needs to be as long as the project, not one stick for each year of the project duration.
The problem with a long duration is PM are not ready to wait for the end.
I've seen budget with performance bonuses when the project has a positive cashflow during its duration. For example, if you have regular paid milestones throughout your project, you can use some of the margin to give out bonuses.
Some of my projects had paid milestones on a monthly basis. We built in quaterly bonuses into the budget and we still managed to return a profit margin within the company's acceptable range.
Projects will not give profit to organizations. That is a big mistake, mainly if you are project manager and you are negotiating a bonus. Product/service/result create by the project will create profit. So, bonus must be tied to things that are in the scope of work of project manager (project scope/cost/time/quality) considering the risk level for the organization (10% in time, 20% in cost for example) and adding that the alignement to organizational objectives (stability, environment care, etc).
On short duration project, I can see that positively. On many years duration, I have seen that too, but the impact is not positive. Some people will not put clear information, avoiding to show what potential profits truly are. Getting a better bonus.
I have to disagree when doing a project for an external client, projects are the source of revenue and profits. What you describe is an internal project context.
If an external company was making a system for you, they would build profit in the quotes.
In a multi-year internal project, could the project manager get bonus yearly and not deliver the project on the key parameters (cost, time, quality....)?
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