Following on from my post on how team members might be rewarded (see Team Members), how should a professional services organisation reward:

• Team Leaders
• Project Managers

Bonuses for Team Leaders

‘Team Leader’ may mean any number of things in a PSO, but here we assume that:

• A Team Leader is responsible for deploying his or her staff and for maximising their utilisation at fee rates that maximise profitability
• A Team Leader is responsible for hiring and firing members of his or her team
• A Team Leader is responsible for ‘selling’ his or her staff internally to increase utilisation
• A Team Leader is responsible for the career development and ‘pastoral care’ of his or her staff
• A Team Leader is usually responsible for authorising the timesheets of his or her team members

But,

• A Team Leader may not be directly responsible for setting salary costs, since these may be determined organisation-wide.
• A Team Leader may not necessarily be responsible for projects and their profitability if some or all projects are managed by members of other teams.

A ‘Project Manager’ has a narrower field of interest. He or she wants to maximise the profitability of a project, regardless of the utilisation of the staff who work on his or her project. Clearly a project manager has an obligation (under the terms of his or her employment of staff from the team he belongs to or from other teams) to deploy staff with some regard for optimising the use of their time but that is not a primary concern

In summary, a team leader works at a management level where there is limited control over absolute profit and loss or gross margin, but considerable control over utilisation (even chargeable utilisation). Bonuses should therefore be formed around utilisation or related to variance from forecast gross margin. A successful team leader is one who keeps his team busy at external or internal rates.

Bonuses for Project Managers

• A Project Manager is responsible for estimating the number of days required for a project, the skills needed and the timing of the project, assuming access to the staff he or she needs.
• A Project Manager will advise on when and how a project can be invoiced.
• A Project Manager is responsible for the realisation of a project (assuming he or she is also involved in project estimates and scoping at the time of sale and agreement with the customer)
• A Project Manager is responsible for invoicing, or, at the very least, taking action to minimise Work in Progress
• A Project Manager, together with an Account Manager, is usually involved in commercial negotiations as to what can be invoiced and when
• A Project Manager will be involved , together with an Account Manager, in resolving issues of overdue debt

But,

• A Project Manager may not be responsible for setting the fee rates or the costs of the staff he or she deploys

Bonuses for Project Managers should be based on variances, on realisation and gross margin, from the realisation and gross margin implied by the project forecasts he or she agrees to be reasonable. He or she should be protected from the consequences of a sales decision to sell a project at a dangerously low value.

A Project Manager should be involved in estimating a Project and a Project should not be sold to a customer until sales staff, account managers and senior managers have reviewed the estimates that an experienced Project Manager has put forward. Whilst sales and commercial staff should be measured against the contracts they make with customers (and rewarded on the project’s actual gross margin), Project Managers should be measured against the contracts they make with their own ‘company’, against the plan and the implied gross margin they believe is real.