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Topics: Career Development, Organizational Culture, Risk Management
How can bonus be organise for project success?
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I have encountered like some of you I suspect People that would have bonus base on the expected profit of a project.

I see that has counterproductive since on long project (many years) the bonus are paid a few time (yearly).

For many, this could prevent identifying some risk and putting a potential cost that is realistic. This process increases potential risk, so increase bonus.

Have your organization found a better way to give a bonus? What was put in place to ensure effective risk identification?
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Vincent,

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.
...
1 reply by Vincent Guerard
May 21, 2019 4:03 PM
Vincent Guerard
...
Thanks, Joshua,

So no bonus linked to the project expected profit! I like that.
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Vincent,

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:

- (M)anagement
- (B)y
- (O)bfuscation.

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.
...
1 reply by Vincent Guerard
May 21, 2019 4:08 PM
Vincent Guerard
...
Thanks, Georg,

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.
Network:114853



May 21, 2019 2:40 PM
Replying to Joshua Bosell
...
Vincent,

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.
Thanks, Joshua,

So no bonus linked to the project expected profit! I like that.
Network:114853



May 21, 2019 3:09 PM
Replying to George Freeman
...
Vincent,

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:

- (M)anagement
- (B)y
- (O)bfuscation.

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.
Thanks, Georg,

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.
Network:103893



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.
...
1 reply by Vincent Guerard
May 29, 2019 9:58 AM
Vincent Guerard
...
Stephane,

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.
Network:1897



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).
...
1 reply by Vincent Guerard
May 29, 2019 10:04 AM
Vincent Guerard
...
Sergio,

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....)?
Network:114853



May 21, 2019 7:54 PM
Replying to Stéphane Parent
...
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.
Stephane,

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.
...
1 reply by Stéphane Parent
May 29, 2019 4:47 PM
Stéphane Parent
...
In my case, it was a three-year project and it the bonuses would have gotten in the way of the profit margin, they would have been the first to go.
Network:114853



May 22, 2019 5:41 AM
Replying to Sergio Luis Conte
...
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).
Sergio,

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....)?
...
1 reply by Sergio Luis Conte
May 29, 2019 10:14 AM
Sergio Luis Conte
...
Sorry but if you accept that you are lost. That is one of the big mistakes people done when accept and assignement as project manager. Benefit/revenue/profit is not because the project. It is because the solution the project is creating. Business Analyst is in charge of the solution. Project contributes to benefit creation in indirect way. For example, if a project manager accept a project objective or goal (the meassure of project success) like this "growth in market share 5% in the next year" is the first step to accept the project will fail. As project manager the only thing you can "assure" is the project will contribute to that because the project will create the product/service/result as defined (scope/quality) in the time frame needed (time, perhpas less one year in this case) and with the expected cost (cost is a component inside value definition which is a component inside benefits definition).
Network:1897



May 29, 2019 10:04 AM
Replying to Vincent Guerard
...
Sergio,

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....)?
Sorry but if you accept that you are lost. That is one of the big mistakes people done when accept and assignement as project manager. Benefit/revenue/profit is not because the project. It is because the solution the project is creating. Business Analyst is in charge of the solution. Project contributes to benefit creation in indirect way. For example, if a project manager accept a project objective or goal (the meassure of project success) like this "growth in market share 5% in the next year" is the first step to accept the project will fail. As project manager the only thing you can "assure" is the project will contribute to that because the project will create the product/service/result as defined (scope/quality) in the time frame needed (time, perhpas less one year in this case) and with the expected cost (cost is a component inside value definition which is a component inside benefits definition).
...
1 reply by Vincent Guerard
May 30, 2019 5:44 PM
Vincent Guerard
...
I understand what is the benefit of the project. And I agree that it would be for the owner after project delivery. For the executing company, the revenues and profit are within the project execution (till completed).

All depend on the side your in. Private company executing project for other need to make the revenue in the project. The client/owner should expect the benefits in the following years (increase in sales, or reduction in cost....)

In both case, how can you organize a bonus to the PM so to maximize project success?
Network:103893



May 29, 2019 9:58 AM
Replying to Vincent Guerard
...
Stephane,

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.
In my case, it was a three-year project and it the bonuses would have gotten in the way of the profit margin, they would have been the first to go.
...
1 reply by Vincent Guerard
May 30, 2019 5:45 PM
Vincent Guerard
...
Would the PM have quit if they had cut a bonus?
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