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Wednesday, March 7, 2012

Incentives and Disincentives

I've been thinking about incentives.  As Project Managers, we need to be aware of the incentives and disincentives we are providing to our teams.  As PMOs we need to be aware of the incentives we provide for our Project Managers.

We need to be aware, but it is clear to me that we are not always aware.

Consider the case of the traffic light metaphor.  Many PMOs and management teams use the traffic light metaphor to track various projects by their relative risk.  If a project is Green, no worries.  If Amber, some management or executive attention required.  If Red, more attention required. 

So, how does the traffic light stuff fit into a chat about incentives?  Here is my experience with two organizations.  In one organization, management encouraged project managers to change the project's light from green to amber, or from amber to red.  This first organization went so far as to add a traffic light with no specific criteria - that the project maanger could change because the project "Felt" amber or red.  While the amber or red projects did receive additional executive management oversight, that was not perceived as a bad thing (disincentive) - it just opened up a needed dialog.

In a second organization, a change from green to amber or red is perceived as an issue - requiring a "Recovery Plan" and frequent appearances in fromt of a management committee to explain progress.  My concern is that in this second organization there is a significant disincentive to changing traffic light colors.  Teams promoting this policy are like the traffic lights in front of emergency vehicles.  THEY ALL TURN GREEN!

Regarding traffic lights, in my experience some projects are, and remain amber or red for months at a time.  This is OK and should be embraced as a way for project managers and project teams to communicate a continuing high risk situation to executive management.  Any assumption that projects should or must return to green in a week or a month may be an oversimplification.

Given this example of a disincentive caused by the way organization two uses traffic lights, the important point is that PMOs and PMs need to understand the incentive and the disincentive effect of their policies.  In the case of the traffic light disincentive I described above - I suspect that the executive management group does not understand the strong incentive that they provide for PMs to stay green.  The potential cost of this incentive can be great - that is, executive management staying ignorant of a high risk situation on a key project.

Your homework is to think about the policies you have in place in your PMO or Project, and what you are incentivising.  I would love to hear your thoughts on this in the comments section.


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