How to reward project managers?

Abstract

The search for a widely accepted solution on how to recognize and reward project managers in a way acceptable and of benefit to both a company and its employees may result in a difficult endeavour with many unexpected issues being raised. Companies find difficult implementing a rewarding system that would be objective and would reflect true exceptional performance of individual project managers. This paper describes the importance of implementing such system from various perspectives, together with common situations challenging the process. The second part of the paper offers a way to implement such a system, based on several criteria ranging from objective or measurable criteria, to those of more subjective or ‘soft' nature.

Introduction

People make the difference. Such a doctrine has become widely accepted by most companies competing at the global market, not related to any specific industry. However, there are still companies that see their main value in their fixed assets, processes or, for example, patents owned, but none of these achievements would be possible without someone putting effort into it. Companies too focused at their assets and not paying enough attention to their employees are likely to face problems. They are dependant of results achieved in the past, and are not giving enough attention to the drivers taking the business further. It is all about the people, but not just about any people – only the best and motivated people drive the business beyond the horizon.

Project management approach has been accepted by many industries as the leading force for introducing changes, delivering new products or services, or improving customer satisfaction. It is enabling companies to remain on the leading edge, always in pursuit of being a step in front of competition. However, even if the best project management methodologies get implemented with full support of senior management, project managers lacking motivation will not deliver expected results. Common reasons for missing some of project goals emerge from project manager's attitude to his everyday work activities. Negative attitude is such contagious that soon whole project team will start showing signs of bad performance jeopardizing company's business goals. Unfortunately, such situation is quite common in the field, and has various causes, that are often quite subtle. Has the company recognized a need to reward its project managers? Is a rewarding system implemented? Who is being rewarded? Based on which criteria is project manager's performance evaluated? Are rewards being fair? These are only some questions that will be considered in the paper.

Rewarding systems

Companies are aware that only well motivated employees are going to steer the way until reaching expected overall business goals. Due to this reason, human resources departments should be one of the most influential entities within the organizational structure. The sooner it gets realized by company senior managers that human resources department has similar importance for reaching strategic company goals as other units, traditionally considered to be more closely connected to primary activities, the company's perspective will be brighter. Human resources should be responsible for implementing well designed rewarding system that must appreciate and foster individuality and creativity of each employee, thus succeeding to motivate employees in an optimal way, but at the same time to meet standards defined by the company.

Motivational drivers

The term motive could be defined as:

  • Something that makes us move, drives us to act based on a particular behaviour, reaction, act or a choice (Tudor, 1998, p.85)

Many motivational theories have been developed, but it is not the intention of this paper to describe them in detail.

One of the most commonly accepted theories was developed in 1954 by Abraham Maslow - Maslow's Hierarchy of Needs. Maslow's theory distinguishes five levels of motives that are impacting our activities and decision making process. It starts with psychological needs and climbs over the needs for security and safety, social and esteem needs and ends with the ultimate need for self actualization, or joy in every task that we perform. (NetMBA.com, 2007)

Once fulfilled, each of our needs stops being our motivator, because we find it normal, something that is already present and achieved, and we are eager to start searching for something new and improved. Although Maslow's theory outlines our drivers in a very simplified and transparent way, it should still be noted that each person is an individual with unique thresholds between described levels.

Definition

Rewarding system could be understood as a transparently defined set of rules with accompanying process that produces particular project manager's performance evaluation, at appropriate time, based on various inputs. After evaluation is finished, project manager could be rewarded with an actual reward, following the rewarding standards set by a company. As mentioned, rewording system is more than just a set of definitions; there must be also a process behind it.

The main idea of such process is quite compliant with modern approaches of being iterative rather than sequential. Evaluating someone's performance should not be a one time event. In such case extremely important dimension would be missed – focus on quality. If performance evaluation process is performed only after project closure, than opportunity to recognize problems on time will be missed. Well implemented audit process must be established (Gumz, J., 2006). Identified problems must be stored within knowledge base and be used during historical information gathering process within future projects. Project manager's performance should continually be monitored by the competent body with deep understanding of project management issues. In this case quality of project management and project content will be increased, and project managers will on time be informed about facts and perception of their performance, giving them space for improvement.

When confronted with transparent criteria most of the people have fewer problems accepting decisions about their performance. When standards are set, communicated well and at appropriate time, and agreed by all involved parties, element of surprise can be almost eliminated. In such situation one can easily know before approaching his superior if he delivered as expected, over or under delivered, and there is less room for emotions during the process.

After being recognized, exceptional performance must be well communicated to spread the message within the company and to increase the competitive spirit. Various communication channels like magazines, corporate intranet, email distributions, TV or radio shows could be used to publish and promote project results to both internal and external stakeholders.

Fairness

It can be said that fairness is the necessary ingredient in all everyday business situations, where atmosphere is expected to be motivational.

The common problem when trying to define term ‘fairness' is that different people understand it in different ways. On the abstract level maybe agreement can be even reached for any of the following definitions provided by the Merriam-Webster's Online Dictionary (© 2006–2007 Merriam-Webster, Incorporated):

  • marked by impartiality and honesty; free from self-interest, prejudice, or favouritism
  • consonant with merit or importance
  • favourable to a ship's course

However, at the implementation level, when an action is being taken with the intention of being fair, differences start emerging.

Metrics

For a rewarding system to be fair some metrics must be present. When rewarding any performance or results, what an assessor is actually doing is not much more than a comparison. For something to be properly rewarded, first it must be compared to expectations. It must be given a number or a position on some scale. When such number or relative position is known, rewarding process that follows can be quite simple, especially if rewarding standards have been set.

As just described, traditional rewarding systems are based on timely definition, communication and appraisal of mutually agreed and accepted SMART goals.

Goal is considered to be SMART if it is:

  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Timely

For an employee working in traditional industries, it could be quite simple to define a goal that is SMART, with emphasis of importance of the ‘Measurable' dimension – number of units produced, for example. Not dependant of its industry, each company should thoroughly evaluate metrics to be used as a part of appraisal process for each of its employees, at all hierarchical levels. Defining a SMART goal for a project manager, though, is difficult due to many recognized challenges that project management faces as a profession.

Even if there are no company or unit standards set for describing what a reward should look like, the process can be very pleasant for both sides if metrics have been defined, thus eliminating the element of surprise. But if performance appraisal process is about to start and there are still various understandings of expected goals or achieved outcomes, than the process is likely to be very tedious for both an employee and his assessor and it is not likely to expect that the idea of performance appraisal will be achieved – stimulation for better performance in the future.

Maturity in project management

It is my deep belief that if a company is not mature enough to define a clear and transparent metrics to be used for evaluating project manager's performance, it is better not to setup a standardized rewarding system. Otherwise, personal influence will have too strong impact and dissatisfaction among the team of project managers will emerge. There will be individuals who will consider that their performance was not rated appropriately - they will think that the process is not being fair to them.

Without reaching a certain level in the project management maturity ladder, project management metrics will be hard to define since project management philosophy is not likely to be well implemented. There will be a lot of space for improvement. Even in case some project metrics are defined, it is probable that they are going to be modified for each project since projects are likely to be managed in different ways. This will make comparison of project managers very difficult. In such situations, where functional management has the power, but does not have deep understanding and support for project management, project managers will have difficulties being fairly and adequately rewarded for their performance.

During their performance assessment sessions, project managers are going to start asking questions. This process could eventually diverge from initial focus of performance assessment to various, but related topics:

  • project management methodology lacks
  • undefined responsibility split between project and functional managers
  • unclear strategy understanding - fully accept the project approach, or implement it partially
  • organization structure problems
  • poor communication of project approach, leaving project managers with not enough authority

All project management related issues that are not well defined or are left in the ‘grey area' are going to surface. It should be welcomed that problems get isolated, but this should have happened much before formal performance appraisal session, not during it.

PMI defined Organizational Project Management Maturity Model Knowledge Foundation (OPM3®) standard for assessing maturity of a company in the project management domain. Each company should make a decision about position in the maturity ladder they have to reach before implementing standardized rewarding system.

Some companies try to apply the same performance appraisal system for their employees who are involved in operational tasks, and also for their project managers. Sometimes, such approach triggered with the noble idea of motivating project managers to perform better could evolve into an omission with long-term negative consequences. The severity level of making such omission is implicitly determined with importance of project management approach for reaching strategic corporate goals.

Rewarding projects or rewarding project managers?

It should not be difficult to recognize if a project should be considered successful. After project closedown, an appraisal process should start that must compare project goals to actual project achievements. Key project stakeholders are usually involved in the process – project sponsor, project manager and most influential line managers. Emphasis during the process of comparing project goals with project achievements is on the persons that influenced project to be started in the first place. Depending of results achieved, project could be rated using various ordinal or cardinal scales - successful, unsuccessful, partially successful, or A, B, C or 1 out of 5 etc.

However, the focus of this paper is on rewarding performance of project managers, not rewarding project success. Whether the difference between rewarding project success and project manager's success is considered to be huge, as I believe it is, or just subtle, depends on the level of project management maturity level the company has reached. Huge emotional discussions could be triggered around these questions because there are two confronting perspectives involved.

Functional management understands that project was initiated with the idea of reaching defined goals. Management defines the goals and the only reason project manager is employed is to assure implementation of those goals. If project misses the goals, project manager is the one to bear the responsibility for a failure. Project manager can not be successful without delivering expected results related to content of the project.

On the other side, project manager is performing project manager's job – he is managing the project according to some project management methodology. Indeed, some of initial project goals can be missed in the end, but this could happen due to reasons that were out of domain of project manager's influence.

Until the gap between mentioned expectations is not eliminated, or at least well defined, motivation of project managers will be downgraded and future endeavours jeopardized by sending unwanted message to the environment. Eventually, this is the road to mediocrity and not the environment that would foster creativity and risks taking that are necessary ingredients of most prospering companies.

Root causes of such confronted perspectives can sometimes be found in the company organization structure, since it usually resembles level of determination and trust that senior management puts into project management.

Organization structures

In functional organizations, project manager has more coordination than managerial role. His authority is limited, and the power lies with functional managers. Project manager's skills and actual performance do have enormous influence on project results, but his attention must primarily reside on key stakeholder management. That will usually mean that his focus will most of the time be somewhere in the project environment, not within the project boundaries. Project environment in functional organizations will influence project results significantly. Most of skilled project managers will be aware of this, but often in functional organizations they will not have the support they need. Often, dynamics of receiving official acceptance confirmations of project changes by functional managers, which will result in updated project plan, are going to be quite slower than dynamics of occurrences of new changes with which project manager is going to be left with no official support. Project plan could eventually be quite distant from the real life situation. If rewarding system in such situation would be focused on evaluating project manager's performance by evaluating project results only, project manager will be motivated only to leave the company in search of a company with deeper understanding of project management.

On the other hand, in strong matrix or projectized structures, project manager is the main driver and has the authority needed to manage the project and achieve defined goals. Functional management, if any, will be aware that company's strategic focus is on reaching business goals utilizing the project approach, and project managers will be given the support needed. In such situations it is likely to expect that well defined and accepted project management methodologies will be in place, together with some form of project management office (PMO) that will enable project managers to fully utilize their professional skills. Rewarding system is expected to be implemented in such organizations, based on transparently defined metrics, which will have the possibility to recognize and accept influences of factors out of project manager's domain of power. Project management profession an its challenges will be well understood, and even in case of project failures exceptional performance of individual project managers will be rewarded to keep them motivated to embark future complex projects.

Project management rewarding model

Project management rewarding system should use well defined metrics. The system itself could be considered as a black box with many inputs, business logic inside the box, and an evaluation rate as the output. Opening the black box, designing and understanding it is, though, difficult. I'm going to propose one approach.

Inputs into the system could be divided in three main groups. Two groups of parameters are describing the project itself, with the third group of parameters being more related to actual performance of project manager, not directly related to project outcome.

Triple constraints parameter (TSC)

Projects are being started to deliver results. Main factor that will influence final project and project manager's success rate is fulfilment of project scope in planned time and within planned costs. After project finishes, project achievements are compared with approved project triple constraints.

Each of constraints measured in achieved percentage compared to goals set, are given a weighting factor, which is based on data provided by senior management at project initiation:

Triple constraints parameter calculation

Formula 1. Triple constraints parameter calculation

Project complexity parameter (CMPLX)

By definition, each project is unique. It is extremely difficult to define what makes specific project complex, compared to projects with less complexity. Following is the list of parameters that could have influence on rate of project complexity:

  • overall project risk rating (RR) – during Risk management processes (PMI, 2004, p.237) risks will be identified, qualified and quantified
  • stakeholders structure (SS) – after key stakeholders are identified, it will be possible to predict complexity of stakeholders management, based on their position in the organization structure and specific interests
  • virtual teams (VT) – virtual teams add another level of complexity into communication process and require additional levels of effort and expertise from project managers
  • complexity and influence of project environment on project progress (PE)
  • project dependencies to other projects (PD)
  • project type (PT) – research and development (R&D) projects tend to have less strictly defined project constraints than product orientated projects
  • organizational support for project management (OS)
  • project duration (PD)
Project complexity parameter calculation

Formula 2. Project complexity parameter calculation

It is crucial to note that project complexity factor for a particular project can not be defined by project manager himself. Existence of Project management office with available data about past projects is essential to calculating this parameter. However, project manager must be actively involved during calculation of project complexity factor, since calculation is based on comparison with past projects. This should help project managers to get informed about existing historical data, what should be the source of valuable information.

Project management performance parameter (PMPP)

Project management performance parameter is calculated based on several criteria that are collected after project ends. It is focused on quality of managing the project, not exclusively on meeting project goals. It is based on the premises that humans are not machines and rewarding system should always, to some extent, be based on positive relationship between project manager and superiors, not on automated systems only. Projects vary too much in nature to enable automated systems alone to calculate success of particular project manager, so parameters like the following could be used to provide human, soft dimension to rewarding model:

  • 360° feedback (360F)
    • After project ends project stakeholders are asked to provide feedback about performance of project manager, using standardized questionnaire. Feedback can be provided by project team members, project sponsor, project management office, functional managers, customers, and other project stakeholders. Collected information will provide insight about stakeholder's perception of project manager's performance in various disciplines:
      • Scope management
      • Human resources management
      • Conflict management
      • Communications management and soft skills
      • Time management
      • Risk management
      • Quality management
  • Customer satisfaction (CS)
    • Customer satisfaction survey should be performed with main idea of receiving information from customers about deliverables and quality of relationship during the project duration
  • Best practices identified (BP)
    • Project managers and project teams should be stimulated to continually search for improvements in existing project methodology, organizational processes and overall company's intellectual property. Number of lessons learned collected during project lifetime that will be recognized by PMO as best practices should be honoured
  • Conformance to methodology (CM)
    • After project completion, quality of project documents should be reviewed and conformance to project methodology should be evaluated
Project management performance parameter calculation

Formula 3. Project management performance parameter calculation

Evaluation result

Output of the project manager's performance appraisal process could be calculated in the following way:

Project manager's performance calculation

Formula 4. Project manager's performance calculation

In the essence, such model allows project manager to receive 100% rewarding possibilities even in situations where project TSC parameter is less than 100%. Degree of impact that CMPLX and PMPP parameters will have at final performance calculation can be modified with their weighting factors (ε, ρ).

It should be noted that presented system for rating project manager's performance should be continually improved. During time, quality of produced results is expected to increase due to richer database with data about projects in the past. Influence of particular parameters in the described model will have to be modified based on lessons learned of each evaluated project. System should be continually improved based on quality of information provided at its output. Neural networks could be used as theoretical mathematical model for implementation of described business logic. Weighting parameters, together with best practices recognized during projects, could eventually be considered as an essential corporate intellectual property, which will present useful information to project managers during initial project phases, and also during later rewarding process.

Conclusion

If company senior management decides to utilize benefits of project management approach, there should be no space for hesitation, since this will become like a cancer inside company structure, resulting in continuous conflicts between functional and project managers in a not well defined terrain.

Project managers must be well motivated for their performance and main motivator should be based on quality of their performance. Performance of particular project manager should be closely linked to project results, but it must be recognized that in some cases even exceptional project management performance might not be sufficient for reaching expected goals. Project managers should be encouraged to accept management of high complexity projects. Project management office should be in place to support project managers and collect intellectual data about projects, before structured rewarding systems should be established.

Rewarding system must be based on data and experience collected on past projects, and it must be continually improved. Performance of project managers should be evaluated based on the weighting parameters adjusted after every new finished project. This will motivate them to focus on continuous improvement of their personal performance, but at the same time they will be improving operational excellence of their companies in general, fulfilling the very essential purpose of each rewarding system – improve personal motivation to improve company performance.

References

Gumz, J. (2006, May) Help! Your project has been Selected for an Audit – What Now?. PMI Global Congress 2006, Europe, Madrid, Spain.

NetMBA.com (no date) Maslow's Hierarchy of Needs Management Retrieved on February 24, 2007 from http://www.netmba.com/mgmt/ob/motivation/maslow/

Project Management Institute. (2004) A guide to the project management body of knowledge (PMBOK®) (3rd ed.). Newtown Square, PA: Project Management Institute.

Tudor, G., Srića, V. (1998) Menedžer i pobjednički tim. Zagreb: MEP Consult

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2007, Berislav Crkvenac
Originally published as a part of 2007 PMI Global Congress Proceedings – Budapest

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