We are planning to introduce variable pay concept in our organisation for upper layers like Team Leads, Dept. Heads & PMs. Can anyone help me to find out some parameters for PMs? I mean what will be the best parameters to consider them for release variable pay. We are happy with a fixed salary + variable pay concept where PMs can earn extra based on their performance or the parameters. Kindly share your thoughts so that I can plan accordingly.

From India, Mumbai
Dinesh Divekar
Business Mentor, Consultant And Trainer
Business Process

Dinesh Divekar

Dear Jit,

You would like to link the variable to the performance. Following are the challenges in doing that:

a) First and foremost you need to identify the ratios associated with your business. These ratios need to be assigned to the respective Project Manager. Though it appears easy but it it not that easy.

b) Very accurately defining the performance standards. Do you capable people to do this? Even though persons spend 20-25 years in the particular field, yet they do not acquire capability to devise the KPIs for their organisation. Therefore, you need to hire external consultant for this.

c) Defining measures apart, you need to have IT systems or CRMs, to measure the performance. There should be no scope for manual records in the form of MS Excel. All the performance measures should get calculated automatically. These should be system generated.

d) In support of (c), let me give you example. In big retail stores or hypermarkets, the bar codes of the merchandise is scanned three times. Once while receiving the shipments to the warehouse of the retail store. Many times warehouse could be at the ground floor or basement of the hypermarket. Second when the merchandise is transferred to the retail store for sale and third when customer buys the goods or merchandise. With every scan, the MIS at the back end gets generated automatically and software spews the various reports, ratios etc. Therefore, there are no manual reports or data entry work. Scanning is also done when the merchandise is returned or damaged but I am not considering that as it is of minuscule percentage. Of course these scans are also part of the MIS.

Final Comments: - It is wish of the every business to pay his employees as per their performance. However, lot of groundwork is required to capture the performance. Else people start manipulating which results in frustration of few. Therefore, performance pay which was aimed to motivate becomes cause of demotivation. Therefore, consider risks associated with the incomplete work or half job also. My comments are based on my experience of providing my consulting services on Performance Management System (PMS). For further details, feel free to contact me.


Dinesh Divekar

From India, Bangalore

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