Compensation Plan Guidelines

To make the process of increasing financial incentives for increased IT project delivery quality a practical approach, a specific set of criteria must be tied to the process. In addition, the administration of the process must be seen as being fair and consistent. Items that must be in place prior to beginning the implementation plan include:

1. A method that can be used to objectively and consistently measure the results of the particular project compared to the original project specifications. Where an incentive plan is to be used, there will have to be a high level of precision in the development of the project budget and corresponding time frames. The goal here has to be to come away with realistic estimates. As the compensation incentive plan gains favor, there could be a tendency to "pad" project estimates and time frames. What is likely to occur is an attempt to enhance the probability of project success and, as a result, increase the chance for additional income, by building in longer time estimates than would be considered reasonable.

One way to counter the padding of estimates is to have them reviewed by a competent, uninvolved third party. Understanding that such a person is going to review the project estimates will help reduce the tendency to pad the estimates. In any event, the use of a third party will provide sound benefits in coming to reasonable project time estimates.

The idea relative to project estimates is that they should be realistic, yet they should, in order to be met, require the project team members to increase their effort. A part of the process is going to be evolutionary, in that as projects are developed under the system, empirical data can be gathered to assist in developing a more precise set of estimating guidelines in the future. Care will need to be taken to make certain not to allow an environment to be built where anyone — employees or management — feels that the other group comes away with an unfair advantage.

One of the ancillary benefits to be found in the project development compensation approach will be that, because an increased emphasis is going to have to be placed on the development of project estimates, over time that process is going to become much more precise. When people understand the relationship between sound project estimates and their additional compensation, they are going to be very careful about the estimates they develop. In addition, they are going to look for tools and techniques that will strengthen the estimating processes. As a result, confidence in the ability of IT to accurately size projects early in the development cycle is going to grow.

2. The development of a scale for additional compensation, based on agreed-upon performance for each project. At the onset, one of the criteria with regard to the topic of compensation should be to recognize the importance of flexibility. Until some experience has been gained, whatever is decided about compensation should be seen as being subject to change.

A key issue is that the compensation plan should be sufficiently generous (within the framework of a high level of performance) to make the plan attractive to the participants. The purpose of the plan is to drive for improvement in reducing the time required to deliver IT projects and, at the same time, to improve the quality of those projects. In reality, that goal would no doubt be seen as all but impossible in many organizations. When significant rewards can be obtained for meeting those goals, the probability of realizing those goals is going to greatly increase.

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Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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