Team effectiveness. Bonus calculation

If you are a project manager and are working with a professional, well-coordinated team, consider yourself lucky.

Another thing, if you got a mixed team, of medium or low qualification. Of course, it can be overclocked and replaced by professionals, but we must understand that their salaries are usually very big.



Another option is to try to train the team on your own. The most important thing for the team to quickly upgrade is motivation. Take the case when the company is not ready to pay very much to performers and their qualifications are low. It was decided to introduce bonuses on the project, in the hope of increasing the motivation and skills of the team - that is, to make it effective. How you can distribute bonuses described under the cut.



And here, for example:

• You took a wad of money allocated for bonuses and divided it at your discretion. People took some money, but did not understand what they received the money for. Well, they say, well done. Did bonuses motivate? And what if Olga did twice as much work as Petya (permanently walking on a smoking-room), while receiving a smaller amount? Will Olya continue to try so well, knowing that the amount of bonuses taken at random? Will Petya try harder, understanding this? (All the characters are fictional. I ask you to consider real similarities as a coincidence.) As you understood, the goal was not achieved.
• You calculate bonuses based on your time spent. That is, the more time spent on the project, the greater the amount of bonuses. And if the team does not effectively spend time to increase the amount of bonuses? Well, or just inefficiently spending time? Again, the goal is not achieved
• you have been tormented for a long time, have implemented various KPI indicators, 360 assessment and similar things, and you live motivated and happy - then, perhaps, you will give a couple of practical tips on this article.

A successful bonus system should have a number of criteria:

1. Reflect the amount of work done by each team member. That is, if Olya did more work than Petya, the amount of her bonus should be more
2. Reflect the effectiveness of time spent. That is, if Olya completed the task quickly and efficiently, this should be reflected in the bonus amount.
3. Reflect the level of professional skills of each team member. If Olya’s range of useful skills is much wider than Petit’s - this allows her to be attracted to various projects (it is possible to appoint her as Tim Lead) - which should be reflected in the bonus amount.

I did not find a complete solution for how to distribute bonuses in the team, so I offer my system for calculating bonuses. If the same solution has already been proposed in any publications, then I will simply state the essence of my vision.

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For the following bonus calculation system to work, you need the following:

• Initial assessment of the problem by time. Although the assessment is quite subjective, it is necessary to evaluate the tasks before they are started. This will help the most competent team member, Tim Lid and experience in such projects / tasks.
• One task must be assigned to one person. If you need to involve more than one person - divide the task into several and evaluate each

Bonus calculation system.

For example, take table 1.



Table 1 Calculation of team bonuses



* TM-team member



From Table 1 it can be seen that 6 people worked on the project who did the amount of work initially estimated at 804 hours. They spent 768 hours, i.e. invested in the plan, plus - there was some time left. Tasks that have been rated in column B must be fully completed. Of course, it is not necessary to wait for the end of the project - you can calculate bonuses, for example, for a sprint.



This system is designed to take into account two parameters - work efficiency and level of professional skills.



The employee’s performance is determined by the share of work that he performed in the total project work. The amount of useful work is effectively spent time, ensuring the creation of new functionality, and not the time spent on the smoking room or in the kitchen over a cup of coffee.



In this way:

1. Knowing the employee's rate per hour (H1 ... 6) and multiplying its estimated time (B1 ... 6), you can calculate the planned costs (D7). By multiplying the employee's rate per hour (H1 ... 6) by the time spent (C1 ... 6), you can calculate the real costs (C7).
2. The volume of the planned work is measured by the total estimated time (B7), and the volume of the work performed is the total time spent (C7). Further, we count the ORD (share in the team’s estimated time) (F1 ... 6) - the share of work that each employee performed in the total amount of planned work. To do this, we divide the planned assessment for each employee (B1 ... 6) by the total amount of estimated time (B7).
3. To transfer in proportion to the amount of useful work for the actual time spent, ORD (F1 ... 6) must be multiplied by the time spent (C7), we obtain the Effectively spent time (G1 ... 6).
4. What total amount in this case to allocate for bonuses to the team is decided, of course, by the company, based on the project conditions and its financial position.
   
   
   • You can take the difference between the planned and actual project costs as the total bonus amount.
   • You can highlight a percentage of the contract amount for bonuses. And, if the team invested in the plan, pay it bonuses, if not invested - do not pay. In general, there are many options ...
   Suppose in our case for bonuses for a specific project allocated 16,000 of some. (see Table 2) Thus, the total amount of the team’s bonus is known and we need to fairly distribute it among the project participants.
   
   Tab. 2
   
   
   
   To find out the average bonus rate per hour of one team member (M9), the total bonus amount (M8) is divided by the total number of effectively spent hours (G7). Ie, if all employees did the same amount of work and had the same pay rate, then each employee would receive the same bonus amount (M9). Since there are 6 people in a team, we multiply the average bonus rate (M9) by 6 and get the bonus rate per hour for the whole team (M10)
5. In order to calculate what share in the team’s salary rate each employee receives, the employee’s rate (H1 ... 6) is divided by the team’s rate (H7), we get the DZ (share in the team’s salary) (I1 ... 6)
6. Next, we find out what rate of bonus per hour each employee will receive based on his level of professionalism (i.e. the level of salary rate per hour). To do this, DZ (share in the salary in the team) (I1 ... 6) multiply by the bonus rate per hour of the whole team (M10) and get the bonus rate per hour (J1 ... 6) for each employee
7. And finally, we will calculate a fair amount of bonus for each employee (K1 ... 6), for this we multiply the bonus rate per hour by the number of effectively spent hours (G1 ... 6).
   
   
   
   But this is not the end. As we see, the amount of the distributed bonus (K7) turned out to be less than the allocated $ 16,000. This was due to the fact that the bonus rates are now aligned with the share of the salary of each employee in the total team wage. In theory, now we have to take the missing / excess amount and distribute among people in the same way and add / subtract it to the bonus amounts already received. If again the total amount of the distributed bonus is less / more, you need to repeat the operation again until the total amount of bonuses (K7) is equal to the allocated amount of bonuses (M8).
   
   But since we are concerned only with the fair distribution of this amount within the team, we can not waste time on many iterations to get closer to the initial amount of the bonus and manually adjust the amount of the bonus rate per hour of the whole team. Namely, increase or decrease it in order to obtain in the cell K7 the exact amount of the bonus allocated to the team (see Table 2.1 (M10) and Table 1.1 (K7))
   
   
   
   Thus we get the final table 1.1
   
   
   
   
   
   and Table 2.1
   
   

From the distribution of Table 1.1 it can be seen that:

• TM1, TM2 and TM3 have the same rate of payment, and therefore the level and number of skills they are about the same. They did the same estimated amount of work, while TM1 spent exactly as much time as was allocated in the assessment, TM2 spent less time than was allocated in the assessment, and TM3 spent more time than in the assessment. Nevertheless, they all received the same amount of bonuses. “But what about the effectiveness of the work influenced the amount of the bonus?” - you ask.
  
  Now let's compare the results: TM1 clearly invested in the assessment, compare the remaining TM2 and TM3 with it. TM2 spent only 100 hours from an estimated 168, which means he had free time, which he devoted to another project and did some work on it, for which bonuses are also relied. This means that he will receive bonuses on both projects and the total bonus will be more than that of TM1, because TM2 did its work faster and since the work was done qualitatively (the time for rework was not spent).
• Let's look at TM3. Probably, in order to do the same estimated amount of work as TM1 and TM2, he had to work on weekends (or he spent a lot of time in the smoking room and loaded time into reports, although he really did not work much) and notice that the hours spent on walking / walking did not increase his bonus. He received only the amount corresponding to the work actually done, but if he really worked on the weekend, and did not drink coffee, he was punished for not being sufficiently experienced and did his job slowly, although his pay rate (level of professionalism) is the same like his comrades TM1 and TM2. If TM3 really could not physically do the job faster, his skills would be considered lower than those of TM1 and TM2 and his salary should be lower. If he simply did not do his job conscientiously, then this was reflected in his sum of bonuses, he does not receive bonuses during idleness. In addition, at your discretion for a strong excess of the spent hours over the planned, you can generally deprive the bonuses of this team member.
• Now consider TM6, it has the same rate of payment as TM1 and as clearly invested in the estimated time, but he did a smaller estimated amount of work, so his bonus amount is less than that of TM1. He will most likely devote the remaining time to another project and if it also clearly invests in the assessment, then the total bonus amount for both projects will be close to TM1 (provided that the second project has the same complexity, that is, the same bonus amount is allocated to it ). In any case, if a team member has time to do his job faster, he has time to do some more tasks of this or another project and increase the bonus amount due to more work done. That is, whoever does his job faster, he will do more work in the same period and thus increase his bonus.
• Consider now TM4 TM5 and TM6, all three have done the same amount of work and all clearly invested in the assigned assessment. But the payment rate of TM4 is higher than that of TM5, and the rate of TM5 is higher than the rate of TM6. Perhaps TM4 is Tim Lid of the team, which has many skills, thus fits the requirements of many projects and is also responsible for the quality. TM5 has a little less skills, and TM6 can only do one thing and is therefore difficult to use on other projects, it is very narrowly focused, although it does its job well. Thus, TM4 as Tim Lead gets the highest bonus, TM5 is average and TM6 is the lowest . This means that the level and range of professional skills is also taken into account in this system for calculating bonuses.

Narrow moments of this bonus calculation system:

• The initial assessment of the task should correspond to its real level of complexity. It is usually quite difficult to immediately assess the task at once, but this must be pursued. In addition, if in the course of the work new unforeseen details were found out, Tim Lead should report this and, if for objective reasons it is not possible to solve the problem in the estimated time, you can increase the estimate. In this matter, the competence of the project manager and Tim Lida and their mutual trust are important.
• Another caveat is that, if necessary, amendments of a task, correct the defects should be the same person to whom the task is assigned. And time to edit should go to the spent time on the task, the one who made a mistake. It is important to distinguish the insufficient quality of work performed and the additional functionality; for additional functionality, a separate task should be created with a separate assessment. In case changes to a task have to be given to someone else, not to the one who originally worked on the task, then for the new performer it should be considered as new and an assessment should be assigned. At the same time, the estimate of the amendments is subtracted from the initial assessment of the problem for the one who made the mistake. Thus, the task is divided into two, and the one who did not cope with gets a reduced assessment, if he also spent a lot of time on it and did not reach the desired quality, this will negatively affect his bonuses. But the project manager also has to keep track of such moments and assign to the tasks those people who have enough skills to cope with them.
• This system is generally suitable for calculating the bonuses of those employees who are directly involved in the development and creation of the product and is not suitable for those who are not involved in the development (HR, accountants, office managers, marketers). For the project manager, it is also worth using a different approach. As an option, to give bonuses, if the team invested in the plan and in the risk reserve.

Here is a math.