Technical Project Management - Incentives

Incentive plans are, by definition, designed to motivate employees to behave in ways that align with business goals.  The obvious case is a product sales professional working towards a revenue based incentive.  The business goal is to sell, and it motivates to that end.  In order to generate a laser focus for your project delivery team, similar to a sales team trying to hit their numbers, requires an incentive plan directly tied to desired outcomes. 

An easy solution taken by consulting firms, for example, is to compensate based on the number of hours worked.  This may be a mistake, depending on the goals of the organization.  It may be helpful to look at the mission statement of the project team.

For example, desired business outcomes may be:

• Accelerate adoption of a technology - An employee is not focused on accelerating adoption if they are working under the incentive to work more hours.  Their incentive is actually to work slower.  To get someone to work towards getting a job done faster requires metrics aligned with something other than number of hours worked.  A counter to this is if someone is working more hours by helping more customers, or if they compress months of activity into weeks or days.  But, if that is the goal, the incentive plan should align specifically to that end.  There is precedent for project teams to be compensated for finishing fixed price contracts early, for example.  That aligns closer to the desired business outcome.
• Drive customer loyalty - Whether it is the life of a project or the support afterwards, here again, the mission is not to spend more time with customers.  No CxO would judge their own customer satisfaction by a measure of how much time they spend in meetings.  Rather, looks at the primary measure of customer satisfaction, whether that be survey results, or a similar measure.
• Prepare for future growth - Focusing on hours billed is counter to this goal.  Preparing for future growth can only be done with activities such as generating IP, mentoring others, and attending training.

Advanced incentive plans include components such as "accelerators" and "caps".  See the following, which is an incentive graph for a project, but could carry over to employees as well.

This type of incentive mix can drive an employee to work towards X hours per week, within a tolerance, or any variation thereof.  The accelerator (curve) drives this motivation.  A cap can be used to limited bonus to Y% attainment unless they meet other gates, such as pre-sales activity.  Accelerators and caps are important components of incentive structure that drive behavior.  Variations of the concept include:

• An accelerator for deploying X seats of a product.  That is sure to have project managers, consultants, and architects focused on accelerating the adoption of the technology.
• A cap set if average customer satisfaction survey results drop below top box by Z%.  That would ensure people were focused on customer satisfaction, driving customer loyalty.

With respect to the issue of perceived total compensation, the potential for increased compensation is provided by pay bonus.  This might be coupled with the explanation that, "We don't want employees 'working to work'.  We want employees working towards the goals of the business."  Optimally, there would be a way to structure it so that the potential for total compensation is greater than it would be otherwise.  If all projects go perfectly, there should be additional budget available for compensation, for example.  That would not be the case, per se, if staff all worked 80 hours per week, without net impact to revenue-generating activities.  Of course, if a customer is paying for hours, that generates revenue; but that has to be the core mission of the project.  The mission may be to get seats deployed, keep customers happy, and/or drive future growth.

So, in sum, it seems that compensation models can be aligned with business goals.  And while there are some negatives associated with this, there are ways to modify the incentive structure to counter those negatives.