Paying teams right

Project teams in IT have been around for years and are seen by managers as a critical way to develop applications for internal users or even to build new products for sale to the public.

Despite the widespread use of IT project teams, managers take different approaches to evaluating and motivating individual team members, especially when it comes to performance bonuses. Four experts in team evaluation and compensation give their opinions on how managers should reward IT team members.

Reward Handsomely

David Foote

Managing partner, Foote Partners LLC, New Canaan, Conn.

Individual team members should be given annual performance awards by their regular managers and also receive healthy bonuses for their team’s performance on a given task, Foote said.

For example, a worker named Jane might be eligible for her annual performance review, with a possible raise of 5 to 15 per cent. If Jane is also on a team with a two-year project, the managers involved might agree up front to give her and each of the other team members 20 per cent of each of their base salaries as a bonus at the end of the first year. At the end of the second year, they’d receive another 30 per cent of their base, assuming project goals are met.

While that amount of bonus may sound extraordinarily high, it could be justified if the project dramatically affects the company’s performance, or if the project team is building a product that launches the company into a new and important business.

Foote said he believes that milestones in the project should be set perhaps as often as every three months, and “if you miss a milestone, you don’t get a portion of your bonus.”

Foote said four phases – the work, design, building and implementation phases – need to be defined as points at which bonuses could be paid.

Part of the rationale for large bonuses is to keep key team members from leaving midway through a project, especially in such a fluid IT job market, Foote said. If a bonus isn’t fair, team members will say so up front.

Big bucks for big projects

Robert Zawacki

Professor emeritus, University of Colorado, Boulder, Colo.

Big bonuses should be reserved for the biggest projects, which will sometimes have a major revenue or cost-savings impact on a corporation, Zawacki said.

For example, if a senior systems analyst who’s making US$80,000 per year got a 20 per cent bonus, it would be US$16,000.

“That bonus might work if the reward is not held off too long, or it might lose its effectiveness,” he said.

But Zawacki said he’s concerned about how large project bonuses might sit with CEOs who don’t want to get locked into major financial incentives.

“Setting project bonuses is an area where IT managers have to wing it with CEOs,” Zawacki said. In a competitive world where IT workers are willing to leave to take new jobs, managers may need to convince CEOs that a project bonus might be one way to keep top workers.

Zawacki said team members need to be evaluated by managers outside of teams as well as those on the project. But could that result in a team that protects a non-performing member?

That isn’t likely, Zawacki said. “Everybody knows when a worker on a team is a poor performer,” he said, using as an example a team he worked with at the former Digital Equipment Corp.

One worker said he was being picked on by his team members. The supervisor learned the worker wasn’t sharing the workload, including carrying a beeper on the weekends. The worker was told to start carrying the beeper; when he didn’t, he was fired.

“Don’t apologize for high standards,” even when subordinates are working on teams, Zawacki urged managers.

Giving the star treatment

Allen Ditchfield

Systems consultant, former CIO, The Progressive Corp., former vice-president of IT, MCI Corp.

Bonuses for team members need to be variable to reward the top performers, those whom Ditchfield calls the “10X” performers who bring 10 times the creativity and quality to the work.

“Usually, you have to take care of the 10X guy,” Ditchfield said. “With project stuff, it’s not a Communistic process where everybody is trying to get the same shoes.”

Still, 10 per cent of a person’s base pay for a bonus might be enough. “I’d say that 20 per cent to 40 per cent of base pay sounds high,” he said. But Ditchfield said he believes in psychic gratification as much as bonuses as a motivation for being on a team. “Team projects can be a status symbol,” he said. “Everybody wants to be on the hot one, although, sure, you do have some who come to work and can’t be motivated on a team. Still, there are people who gravitate toward the high-risk area.”

Ditchfield said he also believes that managers outside of teams need to be in regular contact with their direct reports, even if they’re on team duty. “If you are walking around and are involved, you’ll pick up signals.”

Avoiding the greed factor

Mark Endry

CIO at J.D. Edwards & Co., Denver

Managers could put too much emphasis on team bonuses, Endry said, which can lead to jealousy among team members. For example, if a global project involves 20 people worldwide but only eight people on the core team get milestone-based project bonuses, “people on the global team will start to talk.”

Non-cash rewards could help with such disparities, Endry said. Such perks could include inviting top management to dinner with team members to help remind them how important the project is to the overall business.

Non-cash incentives that work are more team-oriented, and “the quiet reward won’t work as well as the visible ones that involve the team,” Endry said.

Such non-cash rewards depend on the scope of a project and “can start with cake and cookies and certificates of recognition or sometimes sending the team to a baseball game, either with the family or alone,” he said.

“One year we provided key members of a project an overnight in the mountains and a dinner with management” that reinforced how vital the project was to the company.”