Financial Compensation And Rewards

Proper financial compensation and rewards are important to the morale and motivation of people in any organization. However, there are several issues that often make it necessary to treat compensation practices of project personnel separately from the rest of the organization:

• Job classification and job descriptions for project personnel are usually not compatible with those existing for other professional jobs. It is often difficult to pick an existing classification and adapt it to project personnel. Without proper adjustment, the small amount of formal authority of the project and the small number of direct reports may distort the position level of project personnel in spite of their broad range of business responsibilities.

• Dual accountability and dual reporting relationships of project personnel raise the question of who should assess performance and control the rewards.

• Bases for financial rewards are often difficult to establish, quantify, and administer. The criteria for "doing a good job" are difficult to quantify.

• Special compensations for overtime, extensive travel, or living away from home should be considered in addition to bonus pay for preestablished results. Bonus pay is a particularly difficult and delicate issue because often many people contribute to the results of such incentives. Discretionary bonus practices can be demoralizing to the project team.

Some specific guidelines are provided here to help managers establish compensation systems for their project organizations. The foundations of these compensation practices are based on four systems: (1) job classification, (2) base pay, (3) performance appraisals, and (4) merit increases.

Job Classifications Every effort should be made to fit the new classifications for project and Job Descriptions personnel into the existing standard classification that has already been established for the organization. The first step is to define job titles for various project personnel and their corresponding responsibilities. Titles are noteworthy because they imply certain responsibilities, position power, organizational status, and pay level. Furthermore, titles may indicate certain functional responsibilities, as does, for example, the title of task manager.1 Therefore, titles should be carefully selected and each of them supported by a formal job description.

The job description provides the basic charter for the job and the individual in charge of it. A good job description is brief and concise, not exceeding one page. Typically, it is broken down into three sections: (1) overall responsibilities, (2) specific duties, and (3) qualifications. A sample job description is given in Table 8-1.

Base-Pay Classifications After the job descriptions have been developed, one can delineate pay and Incentives classes consistent with the responsibilities and accountabilities for business results. If left to the personnel specialist, these pay scales may slip toward the lower end of an equitable compensation. This is understandable because, on the surface, project positions look less senior than their functional counterparts, as formal authority over resources and direct reports are often less necessary for project positions than for traditional functional positions. The impact of such a skewed compensation system is that the project organization will attract less qualified personnel and may be seen as an inferior career path.

Many companies that have struggled with this problem have solved it by (1) working out compensation schemes as a team of senior managers and personnel specialists, and (2) applying criteria of responsibility and business/profit accountability to setting pay scales for project personnel in accord with other jobs in their organization. Managers who are hiring can choose a salary from the established range based on their judgment of actual position responsibilities, the candidate's qualifications, the available budget, and other considerations.

Performance Appraisals Traditionally, the purpose of the performance appraisal is to:

• Assess the employee's work performance, preferably against preestablished objectives

• Provide a justification for salary actions

• Establish new goals and objectives for the next review period

• Identify and deal with work-related problems

• Serve as a basis for career discussions

In reality, however, the first two objectives are in conflict. As a result, traditional performance appraisals essentially become a salary discussion with the objective to justify sub-

1. In most organizations the title of task manager indicates being responsible for managing the technical content of a project subsystem within a functional unit, having dual accountabilities to the functional superior and the project office.

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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