Wednesday 16 March 2022

motivation programs in a project-oriented company

In software development projects, as well as in a number of other IT projects, the main type of resource is personnel, whose effectiveness largely depends on motivation. The article tells about the experience of using some motivation mechanisms in a project-oriented company and structuring them in the form of special projects - motivation programs.

Unlike other types of resources that can be purchased with the necessary finances, it is more difficult to select and effectively use personnel. Existing methods of personnel selection when hiring make it possible to establish quite accurately what knowledge, skills and experience the candidate has. At the same time, it is almost impossible to determine whether a candidate will effectively apply them when performing work. In this regard, the role of motivating staff to increase the efficiency of solving tasks is increasing.

A lot has been said and written about various tools to stimulate personnel, there are a number of theories and many practical developments.

The article discusses some techniques and mechanisms of motivation, as well as the experience of their application in the development and implementation of motivation programs in a project-oriented company.

The concept and structure of the motivation program
Motivation is the process of encouraging employees to a certain behavior.

This is just one possible definition of motivation. Let's dwell on it, because it is convenient for further presentation. From this definition it follows that in order to motivate employees, it is necessary to determine:

desirable behaviour of employees;
the process of stimulation, i.e. a system of rules, procedures, incentive mechanisms.
Under the motivation program we will understand the system of activities performed for a certain period of time, aimed at stimulating certain employees to a certain behavior.

Building a program allows you to manage motivational activities as projects. Indeed, the motivation program for each period defines goals, stakeholders (management and employees of the organization), time is limited, activities are defined, which allows you to develop calendar plans and budgets, evaluate results. Since the company may have a number of motivation programs aimed at different groups of employees, managing them as projects allows you to coordinate them in terms of financing, time, and content.

The motivation program includes:

objectives (what employees should be encouraged to achieve);
coverage (categories of staff and projects to which it applies);
validity period (for example, six months or a year);
criteria, evaluation procedures and responsibilities for assessing behaviour for different categories of staff;
a system of incentives and penalties;
schedule of activities;
responsibility for their implementation;
motivation program budget.
Most often, the goal of the motivation program is to increase efficiency while maintaining the required level of quality. At the same time, for each category of employees, efficiency and quality are determined and evaluated differently (see Table 1).

Motivation programs in a project-oriented company

Table 1. Objectives of the incentive program for different categories of employees

Similarly, the concepts of quality and efficiency are deciphered for all categories of employees covered by the motivation program.

We will consider the mechanisms of motivation for two categories of employees: ordinary, i.e. those on whom only the work entrusted to them depends, and the key ones - project managers and technical leaders on whom the success of the project as a whole depends. Highlighting these two categories in no way contradicts the fact that in the project team the success of the project depends on each participant (about which much is said and written). Most employees have local tasks, and their contribution to the success of the project is determined by the performance of their work, and the project as a whole is the responsibility of the project manager and one or more specialists who make key technical decisions (for example, on the architecture of the system being developed).

Let's distinguish the following roles in a project-oriented organization (or an enterprise IT service considered in this key):

an employee who is responsible only for his task assigned to him by the project manager;
technical leader responsible for key technical solutions in the project;
the project manager responsible for the implementation of the project;
a project manager who is responsible for the entire portfolio of projects and manages resources.
For each of these categories, consider the evaluation criteria and some of the material incentive mechanisms used.

Motivation of project managers and technical leaders
The basic principle of motivation is that incentives or penalties should be imposed on the employee only for the results of work entrusted directly to him. Therefore, project managers and technical leaders should be rewarded for the implementation of the project as a whole.

The most commonly used mechanisms of material incentives provide for the calculation of the premium based on the following indicators:

profit (the difference between the revenue of the project and the cost price calculated by the method of full cost distribution) or marginal profit (the difference between the revenue of the project and the cost price calculated by variable costs);
cost savings.
The choice of one method or another depends on the role and contribution of project managers. If they participate in sales, i.e. the revenue of the project depends on them, then the bonus is carried out on the basis of profit. If the project manager and technical leaders are responsible only for the implementation of the project, and the profit depends on the result of their work only indirectly (since they are responsible for the costs of the project), then the bonus should be based on cost savings. Since the profit on projects is different, bonuses based on it can lead to competition for more "profitable" projects. In some cases, this plays a positive role, but not always a less profitable project is less important. In enterprise IT, cost-saving bonuses are the only way because IT does not profit from the sale of its services.

Formation of a bonus fund for the project

The bonus fund for the project is formed on the basis of the achieved cost savings, so first consider the process of their planning.

When planning a project, the estimated cost of the work performed (cost estimate) is calculated and the risks are determined. To cover them, a reserve is calculated, also called the "reserve for known unknowns" (reserve). Next, the project cost estimate and reserve are agreed with the project director. Based on the type of project, the history of relations with the customer and other parameters, the project director determines the "reserve for unknown unknowns" (management reserve). Based on the cost estimate, reserve and management reserve, the project budget (budget) is formed, which is the distribution of costs by time periods.

Revision of the estimated cost, budget and reserves is made only in case of significant changes in the project. The review criterion is established when the project is opened (for example, a change in planned costs by more than 50% of the management reserve).

The amount of the bonus fund (PF) can be calculated as follows:

PF = (cost estimate + reserve + management reserve – actual costs) * (1 – delay * coefficientdelay).

Here, the actual costs are the costs actually incurred on the project;
Delay – delay in the completion of the project in periods (for example, in days or weeks);
coefficientdelay – the proportion by which the bonus fund is reduced for one period of delay (for example, 0.1).

Project accounting can be organized both in value and in kind, for example, in man-hours. The scheme of accounting in physical terms is permissible in cases where:

the company's overhead costs are significantly higher than the direct production costs, and therefore the total cost of a resource unit is weakly dependent on the cost of its acquisition, for example, the salary rate;
the cost of units of resources used in the project is about the same.
When taken into account in physical terms, the premium fund must be converted into value at a certain rate.

Distribution of the project's bonus fund

Depending on the project and the situation in the company, the bonus fund is distributed between the project manager and technical leaders by decision of the project manager or project director. At the same time, part of the fund can be used to reward employees who have distinguished themselves during the implementation of the project and are not technical leaders. This part is recorded either by the project director or the project manager in consultation with the technical leaders.

In Fig. Figure 1 shows who is directly or indirectly involved in making decisions that lead to costs and redistribution.

Evaluation of employee contributions

If the goal of the motivation program is to increase efficiency while maintaining quality, then it is necessary to define rules for assessing these indicators.

Performance measurement involves the calculation of the ratio of result and costs. The costs controlled by the employee are usually expressed in the form of labor.

The complexity of creating software products is often measured in the number of lines of code, for example, as part of the Personal Software Process and Team Software Process methods. (By the way, the very definition of what counts as a line of code is not trivial.) At the same time, it is necessary to clearly define the code quality criteria and coding rules, to introduce inspection mechanisms, since practice shows that programmers very quickly learn to unjustifiably overestimate the number of lines. In addition, the lines of code themselves are not a measure of the result - it is not the size of the software product that is important, but its functionality and quality characteristics.

How to evaluate these indicators for the software product as a whole is more or less known. There is a method of function points (described in the Function Point Counting Practices Manual, published by the International Function Point Users Group) and methods for assessing quality characteristics (for example, ISO 9126). We will not discuss their advantages and disadvantages here, we will only note that it is much more difficult (if not impossible) to evaluate the contribution of each programmer with their help than to measure the software product as a whole.

It is even more difficult to measure the complexity of obtaining the remaining results of software development (models, requirements, design and operational documentation). When it comes to more complex projects, such as the development of AN IT strategy, the implementation of management systems or the implementation of research and development, it is almost impossible to offer adequate metrics of employee contribution.

Since it is impossible to measure the effectiveness quantitatively, it is necessary to evaluate it qualitatively. This can be done as follows:

  • enter an efficiency scale (e.g. "low", "normal", "high" or in scores from 1 to 5);
  • define a list of characteristics that detail the concept of efficiency;
  • for each of the characteristics, form scales of several values, specifying for each the conditions for its achievement;
  • specify a rule for calculating performance based on performance evaluations.

This method can be implemented by introducing weights of characteristics, for example from 0 to 1. In this case, the performance score in points will be calculated by the formula:

efficiency = Σ (weight of characteristic) * (performance estimate)

The above estimate is similar to quality models, detailing this concept in the form of characteristics. The most famous of these models is the ISO 9126 standard, which defines the quality characteristics of the software.

However, if formalization is not required, then the evaluation criteria can be formed in the form of a table, the root column of which contains performance ratings, the root row - the names of the characteristics, and their possible assessments are put in the cells (see Table 2).

Table 2. Criteria for assessing the achievement of the goal of improving efficiency while maintaining quality.

Such tables, although they do not define a formal evaluation procedure, will be useful both to staff, who will have a clearer idea of what is required of them, and to evaluating managers who will be able to give assessments in a more reasoned manner.

Usually, characteristics are grouped in pairs that need compromise. For example, the characteristics "performance" and "quality" are in conflict – the higher the quality, the lower the productivity, and vice versa. Similarly, the characteristic "work with deviations" provides for the timely escalation of problems, and the characteristic "independence" - their independent resolution. On the one hand, the formation of such pairs does not give unambiguous guidelines for employees, on the other hand, it does not allow them to adapt to formal criteria, which in most cases are flawed and can often be brought to the point of absurdity. It should be noted that in any methodology for assessing personnel there is an element of subjectivity, and the degree of its formalization is determined by what framework this subjectivism is limited by.

The assessment of the achievement of the goals of the motivation program is carried out by the project manager, who, in agreement with the technical leaders, justifies it before the project director.

Incentives and penalties for employees

Based on the evaluation of performance in accordance with the incentive program, each of the employees is awarded a bonus for each of the projects, reflecting the contribution to its implementation. The premium can be determined based on two factors:

the amount of participation in the project (can be expressed in labor costs);
the effectiveness of participation in the project (expressed by assessing the results of activities determined in accordance with the motivation program).
The project bonus for an employee can be calculated according to the formula:

premium = hh * coefficientots * bet.

In here
hh – the number of man-hours spent by the employee to perform his tasks on the project;
coefficientots – the coefficient assigned to each value for assessing the results of the motivation program (for example, for a "low" score - 0; for a "normal" - 1, for a "high" - 2);
rate – the rate of bonus for an effectively worked man-hour.

Note that a negative coefficient can be established for a "low" assessment, which will correspond to the recovery.

Such a calculation scheme can lead to the fact that employees will overestimate the labor costs of projects. However, there are factors that prevent this:

high labor costs may indicate insufficient efficiency of the employee;
performance evaluation is carried out by project managers and technical leaders who are motivated to reduce project costs.
For employees, bonuses can be accrued upon completion of projects/stages. Such a mechanism allows:

  • reduce the risks associated with the departure of employees before the completion of the project (stage);
  • encourage employees not to demonstrate the required behavior in short periods, but to contribute to the implementation of the project (stage) as a whole.
  • Implementation of the motivation program
  • Motivation programs can be developed for a certain period, for example, in the following order.
  • Evaluation. A survey of employees is conducted to determine satisfaction with the current motivation program and to identify which mechanisms work best. Proposals are collected, other sources of information are analyzed, the direction of further development of the motivation program is determined.
  • Development. The duration and budget of the new motivation program are determined. On the basis of available funds, incentive mechanisms are determined.
  • Presentation. The motivation program is presented to employees, comments are collected. If necessary, it is finalized and re-submitted.
  • Execution. A motivation program is being implemented. At the end of the validity period, the assessment is performed again.


It should be noted that the proposed motivation mechanisms require high-quality planning and accounting for all project costs. On the other hand, they encourage more careful use of project management techniques. The amount of bonuses depends on the accuracy of planning and accounting. If the project manager is "re-mortgaged" during planning, the estimated cost and reserves will be revised during the implementation of the project and, accordingly, the bonus fund will decrease. If the project manager has not foreseen all the costs, the reserves will be used to cover unforeseen expenses, which will also lead to a decrease in the bonus fund. It is not profitable for the project manager with such a motivation program to allow the write-off of non-project costs or costs for other projects to his project - this will reduce his premium. Employees are also placed within certain limits: both overestimation of labor costs, leading to a decrease in the evaluation of effectiveness, and their understatement, leading to a decrease in the volume of participation in the project, contribute to a decrease in the premium.

Since the profit of a project-oriented company consists of profits on individual projects, and that in turn depends on the costs of them, the proposed motivation mechanisms make project bonuses dependent on the contribution of their managers, technical leaders and employees to the overall financial results of the company.

This article does not purport to be complete or methodical; however, the author hopes that the described methods, worked out in practice, can be useful for other companies and IT services of enterprises. The proposed approach was born in a project-oriented company (which is UNIS Lab, where the author works), but can also be applied in other types of companies that carry out projects. The proposed incentive mechanisms are closely related to project management methods, and the motivation programs themselves can be managed as projects.

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