3. In this example, if the project meets the incentive standards set for the project, the total bonus expense will be 18 x $7500.00, which equals $135,000.00. Success with this project will mean that the project will be delivered on time, on budget, and in accord with the established quality standards. Although paying the incentives will increase the expense of the project by $135,000 that can be considered to be a small price to pay for a project of that size delivered on time, on budget, and at a high level of quality.
4. There are two other aspects to the example that should be recognized. One is that the total expense of the project, even with the incentive payments, is going to be less than that estimated if the project had run over and the contingency fund had to be used to complete the project. The other is that when completed, the project will have been fully completed. It is by no means uncommon to see IT projects, as they move through the development cycle, and begin to fall behind schedule, broken into “phases.” What happens is that some portion of the work in the original project is shifted to phase two, or perhaps phase three, in order that some aspects of the original project can be moved to production.
In developing the incentive plan, every full-time member of the project team, whether from the IT or the internal customer areas, should participate in the plan.
The incentive shares should be exactly the same for everyone on the project.
Providing equal shares to everyone involved will build a strong sense of teamwork.
In addition, as the project moves forward, the team should have the option to remove any member of the team (through a vote by team members) deemed not to be ma king an adequate contribution to the project.
One of the pluses of the inclusion of all team members in the incentive plan is, obviously, to ensure a strong focus on the project. Another plus is that it will be clear that, in order to share in the incentive plan, everyone is going to have to make a strong commitment to the success of the project and to work hard to meet the project goals. When the team focuses on the incentive to do the work well and on time, peer pressure is going to correct any difficulties associated with a lack of commitment on the part of an individual team member.
That increased project focus, particularly on the part of people in the business areas is bound to have a positive effect. One of the problems with IT project development is that of involvement in the project of those who request the project. Too often, the feeling outside IT is that the project is an IT project and those who requested the project have limited responsibility with the work or, with the results of the project.
Moving to a clear financial incentive for everyone involved to pay appropriate attention and to help push the project can only be good for everyone.
It should be made clear that the installation and use of the IT project incentive plan is to reward people for going beyond the normal effort to make projects succeed.
That being the case, people should understand that if they do not meet the standards established for the incentive plan, they will not be faced with the prospect of having their regular salaries or benefits reduced. Moving to the incentive plan should be based on the positive position of encouraging people to raise the performance bar, not as a potential club to change behavior. Indeed, if the incentive plan works as proposed, then over time, behavior is going to change; but those changes will come voluntarily — from the employees — rather than being forced on them by management.
The process must be clearly understood by the organization’
s senior management
and must be supported by that group. In order to gain the required approval, it is going to be mandatory that the senior management group be fully informed of the plan, why it is being recommended, how it will work, and the potential pitfalls associated with changing the way IT projects are funded.
MOVING TO A NEW APPROACH
When the criteria for the IT project development project incentive plan have been identified, documented, and approved by senior management, the next step is to begin to install the process. Moving to the process should be done in a careful, controlled manner. To begin, a project should be selected as the pilot for initiating the plan. As with any pilot, the goal is to prove the feasibility of the process with a successful implementation. Whoever assumes responsibility for the project must do everything possible to ensure that the pilot will be a success.
As with any pilot approach, the first project under the new compensation incentive plan must be very carefully managed and controlled. Two goals should be considered in developing the pilot. First, it will be important to have the pilot succeed in order to convince those with doubts that the process has merit. The reality here is that this is going to be a plan to sell the concept, and whatever needs to be done to strengthen
the probable success of the sale should be done. Toward that end, the project selected should be small enough so that it can be easily managed. Another advantage to starting with a small project is that it will not require an excessive amount of time to come to conclusions about the value of the process.
Second, the employees who take part in the pilot must be convinced of the merit of the plan. They must also be enthusiastic about the potential value of the approach and be willing to work hard to make the pilot succeed. Obviously, the selection of the people to participate in the pilot should be very carefully managed.
Although this will be the first attempt to use the incentive plan, it is going to be critical that as much work as possible is completed on the details of the approach to be used prior to beginning the pilot. Given that this is going to be the first time the incentive plan is used, it will be impossible to cover every detail. However, taking the time to think through the issues associated with the process, and addressing as many of those issues as possible at the onset, represents the correct approach.
There will be items to be adjusted, added, or corrected at the conclusion of the pilot.
That adjusting process will no doubt continue through other projects as more is understood about what works and what does not work; but the more that can be addressed prior to the introduction of the pilot, the better for everyone.
THE BENEFITS OF THE APPROACH
A number of benefits are going to accrue from the use of the incentive plan. Some of those benefits are going to be easy to quantify — hard benefits. Some of the benefits are going to be more difficult to quantify — soft benefits, but they are also going to be important and should be recognized. It will help to identify benefits in both categories.
Hard Benefits
§ A reduction in the expense and time associated with the development of IT
projects, and the ability to move IT projects through the development cycles at an increased pace
§ The ability, as the result of the process, to produce more IT project work without a concomitant increase in the size of the IT staff
§ Increased, measurable levels of IT project quality, including an improved understanding of the project in those areas that have requested the work
§ Over time, an improved willingness on the part of the organization’
s senior
managers to support new IT initiatives
Soft Benefits
§ An increase in the overall level of the work, and the quality of that work, produced by the IT department
§ Improved morale within the IT department (This is will occur for two reasons; of course, the opportunity to obtain additional income is going to be a positive factor. Also, as the process gains acceptance, the performance bar is going to
be raised. As people see that by properly focusing on the project, they are able to accomplish more and they can take more satisfaction in their work, they will be motivated to reach higher levels of performance.)
§ A probable lowering of IT personnel turnover as the benefits of the process come to be understood (People like to do good work, and to gain a feeling of satisfaction from the work they do, as the level of IT performance rises, people who might have left are going to be encouraged to remain.)
§ Increased teamwork and communication between the IT department and those for whom the department does development work
§ Improved levels of IT service throughout the organization
§ An increase in the levels of IT service to the customers of the organization