Setting Realistic Performance Bonuses

for Program & Project[1] implementation Personnel



By Dr. Kenneth Smith, PMP

Honolulu, Hawaii



The objective of a systematic project evaluation system is to be able to measure performance of different types of projects (or programs) periodically[2] in a consistent manner ¾ in terms of Effectiveness (i.e. results) and Efficiency(i.e. timeliness &/or within budgetary constraints).  Once indicators have been selected to quantitatively measure Effective Program and Project performance, target setting is the next step.[3]

The Executive Management (EM) level sponsoring the Program or Project is responsible for – and usually actively involved in — authorizing resources, establishing production target levels and setting delivery deadlines.  But for most effective management, rather than simply having targets imposed from above, it is also essential that the Project Implementing Team (PIT)[4]buy-in’ to those targets and schedules.  Otherwise, while the project manager may exhort the team to try to achieve them, the rest of the team may remain indifferent, or regard such targets as simply another bureaucratic – and all too often unrealistic – hurdle to try to comply with.  Furthermore, in unionized organizations, there may even be active resistance against targets and achievement quotas.

A common Executive Management buy-in approach is to establish — or negotiate — performance incentive bonuses.  Incentive bonusesnot unlike uniforms for identifying team membership — are a cohesive means for fostering team spirit and furthering their performance.  Such incentives may be a percentage of the Project’s planned cost, PIT members individual annual salary levels, or whatever else might be considered appropriate recognition for the group effort.

But what is a reasonable or ‘fair’ bonus, and how can it best be established?

At the outset in devising a performance bonus system, it should be remembered that whatever the outcome, PIT employees are entitled to fair compensation for their labor.  Thus, the system should be “fail/safe[5]i.e. ‘topping up’ compensation for achievement, but not penalizing implementors for shortfalls — especially since so many factors inherent in the project implementing process are beyond the implementing team’s control.

Whatever the nature of the Project or Program – a performance incentive system should strive to accommodate eight key objectives, as follows:



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How to cite this article: Smith, K. (2020).  Setting Realistic Performance Bonuses for Program & Project implementation Personnel, PM World Journal, Vol. IX, Issue VI, June. Available online at https://pmworldlibrary.net/wp-content/uploads/2020/05/pmwj94-Jun2020-Smith-Setting-Realistic-Performance-Bonuses-for-project-implementation-personnel.pdf



About the Author


Dr. Kenneth Smith

Honolulu, Hawaii



 Dr. Kenneth F. Smith has been a project management consultant for ADB, the World Bank, and USAID for decades. He earned his DPA (Doctor of Public Administration) from the George Mason University (GMU) in Virginia and his MS from Massachusetts Institute of Technology (MIT Systems Analysis Fellow, Center for Advanced Engineering Study). A long-time member of the Project Management Institute (PMI) and IPMA-USA, Dr. Smith is a Certified Project Management Professional (PMP®) and a member of the PMI®-Honolulu Chapter.

Ken’s book — Project Management PRAXIS (available from Amazon) — includes many other innovative project management tools & techniques; and describes a “Toolkit” of related templates available directly from him at kenfsmith@aol.com.


[1] This tool applies to both the management of individual Projects and Programs — which comprise several Projects with a common objective.  Thus, throughout the article, whenever ‘Project’ is mentioned, it applies equally to Programs.

[2] At least Annually.

[3] The ‘Critical Path’ and ‘Earned Value’ methodologies address the Efficiency aspects, so will not be covered here.

[4] Employees, or their Representatives in a Unionized workplace.

[5] In this regard a frequent EM error is to establish a ‘carrot & stick’ plan which, while rewarding teams for reaching or exceeding targets, also penalizes them for shortfalls.