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- 2. Motivating for Results – three proven tracks V T Chandra Sekhar Rao– Project Management Director, Foster Wheeler India Pvt Limited
- 3. Contents 1. Abstract ........................................................................................................................................... 4 2. Introduction...................................................................................................................................... 4 3. Theoretical basis behind the three tracks ....................................................................................... 5 3.1 Maslow’s hierarchy of needs ..................................................................................................... 5 3.2 Herzberg's two-factor theory ..................................................................................................... 7 4. Three proven tracks ........................................................................................................................ 7 4.1 Value creation ........................................................................................................................... 7 4.1.1 Value Engineering (VE) ......................................................................................................... 8 4.1.2 Value Improvement Plan......................................................................................................... 9 4.2 Leadership Opportunity ........................................................................................................... 10 4.2.1 Leadership Opportunity in a specific project assignment .....................................................10 4.2.2 Leadership Opportunity in Volunteering assignments ..........................................................11 4.3 Gain Share .............................................................................................................................. 11 5. Preparatory work for value creation and Gain share .................................................................... 12 6. Leadership qualities and Motivating for Results ........................................................................... 13 7. Other Aspects of Motivating for Results ........................................................................................ 13 8. Conclusions ................................................................................................................................... 14 9. References .................................................................................................................................... 14 10. Author’s Profile ............................................................................................................................ 15 3 Page
- 4. 1. Abstract Projects provide opportunities where the team members can deliver outstanding results and recognising and rewarding such contributions is key for ensuring excellence in project performance. Three proven tracks implemented in select large EPC (m) projects are explained. These are Value Creation, Leadership Opportunity and Gain-share. The basis for designing these plans is explained in light of established motivation theories. The process of implementation is also explained along with examples of implementation on large projects. Value creation is a process where individual team member is encouraged to contribute with innovative solutions or ideas which can provide cost savings or schedule gains. The core principle here is recognition of implementable idea. Leadership Opportunity is assigning a higher responsibility to a team member as recognition of his potential and consistently exceeding high expectations in his current role. The principle here is a reward for good performance. Gain-share is a process where the team contributions of entire project task force in exceeding project profitability targets are rewarded at the end (close-out) of the project. While these schemes or motivation tracks are good, it also requires some key leadership behaviours for effective implementation. These essential leadership traits are also discussed in the concluding sections of this paper 2. Introduction Motivation is a key factor for an individual as well as project team for delivering a successful project. Project Manager, who has the total accountability on project results, should know how to influence it. To motivate for results, project manager must have the knowledge and ability to instil confidence and channelize efforts leading to a successful outcome that is something worth having and has enhanced visibility in the organisation, Fig 1 shows the process of motivating for results. Fig 1: Process of Motivating for Results. 4 Page
- 5. The primary objective of the paper is to address the above requirement. There is no doubt that working on projects is often demanding and deadlines/ delivery expectations of client put the project teams as well as the project leader under noticeable duress. But this feeling of pressure disappears when their actions beget a successful project result which is appreciated by the client and when their individual/ team contribution is recognised and rewarded. The three proven tracks (elaborated later) are based on actual implementation on major complex hydrocarbon projects whose total installed cost varied from several hundred million dollars to few billion dollars. The projects delivered successful results and the team members were rewarded well at the end of project. These three proven tracks are 1. Value Creation 2. Leadership Opportunity 3. Gain Share These are further addressed in detail later. 3. Theoretical basis behind the three tracks It is important to recognise that motivation ultimately comes from within a person. In this context, Maslow’s hierarchy of needs is still a valid basis for a project manager to understand what motivates the individual team member. While it is a fact that individual decides his behaviour, it is often possible that a positive behaviour is also stimulated by external factors such as work environment, opportunities for advancement, co-workers’ collaboration etc. Herzberg’s theory address this aspect. Both these theories are detailed below at summary level. 3.1 Maslow’s hierarchy of needs Abraham Maslow developed the Hierarchy of Needs model in 1940/50s and the Hierarchy of Needs theory remains valid today for understanding human motivation, management training, and personal development. Maslow's ideas surrounding the Hierarchy of Needs concerning the responsibility of leader/ manager to provide a workplace environment that encourages and enables employees to fulfil their own unique potential (self-actualization) are today more relevant than ever.. 5 Page
- 6. Fig 2: Maslow’s original Five stage model of Hierarchy of needs. While all the managers including project manager have the responsibility to understand the aspects of human motivation, it is also equally important that there needs to be a frame-work and process where the theory could be put in practice where an individual member Clearly sees and feels proud that his/ her contribution has a tangible result which is recognised by the peers, management and in some cases, the client Is aware that management does recognise the individual potential and provides opportunity for career enhancement Gets excited to show/ share with the family and friends, a reward which is a direct result of his/ her contribution and commitment. The basic needs of Maslow’s model are fulfilled by the employer by providing a reasonably stable job with right compensation and providing a good working environment. In general the background or profile of team members working in IT/ ITES companies or Large EPC organisation, indicates that they had transcended the basic two levels when they joined such a company. The reference to basic needs is probably appropriate for companies that deal with direct field labour. The second level – Safety needs may sometimes be relevant while managing the teams while the organisation has a challenging business situation and this aspect is beyond the intent of coverage of this paper. The social needs are taken care because of peer level interaction and being a team member in large project. The good companies become great companies and projects become great projects by ensuring/ establishing a frame work that addresses the top two levels of human needs. Esteem needs and Self Actualisation needs are the key for performance on large EPC or IT/ ITES project. Esteem needs come out of individual’s urge to attain a degree of importance emerges. Esteem needs can be categorized as external motivators and internal motivators. Internally motivating esteem needs are those such as self-esteem, accomplishment, and self respect. External esteem needs are those such as reputation and recognition. 6 Page
- 7. (Maslow later improved his model to add a layer in between self-actualization and esteem needs: the need for aesthetics and knowledge. These are the factors that are embedded in the value creation theme mentioned later) The three proven tracks mentioned earlier operate on the fact that an employee or project team member operates at esteem need level in a large IT/ ITES or EPC company. 3.2 Herzberg's two-factor theory Frederick Herzberg's two-factor theory, a.k.a. intrinsic/extrinsic motivation, concludes that presence of certain factors in the workplace result in job satisfaction and some factors if absent lead to dissatisfaction. The factors that motivate people can change over their lifetime, but "respect for me as a person" is one of the top motivating factors at any stage of life. The theory is sometimes called the "Motivator-Hygiene Theory" and/or "The Dual Structure Theory." Herzberg distinguished between: Motivators; (e.g. challenging work, recognition, responsibility) which give positive satisfaction, and Hygiene factors; (e.g. status, job security, salary and fringe benefits) that do not motivate if present, but, if absent, result in de-motivation. The name Hygiene factors is used because, like hygiene, the presence will not make you healthier, but absence can cause health deterioration. Generally in reputed companies, Hygiene factors are taken care by the employment and working theory. Value Creation and Leadership Opportunity offer the merits of Motivator in terms of challenging work and responsibility, while the Gain Share offers the recognition and reward frame-work in a project environment. 4. Three proven tracks 4.1 Value creation Core principle for Value Creation is recognition and rewarding of implementable idea. While Value Creation should be the principle aim of any business entity, projects provide a platform for seeing immediate results. Creating value for customers helps sell products and services, while creating value for shareholders. In a project, the value-creation effort during execution will win customer confidence and more often can result in repeat business. In a project context, author would like to define Value Creation as “Innovation in execution that has direct positive impact on cost, schedule or quality of the product or service.” However promoting Value Creation in projects is possible when 7 Page
- 8. In rate reimbursable projects, there is client buy-in in recognising and rewarding the value creation efforts by the project team Company’s senior management support Value Creation initiatives that are implemented by project manager and appreciation of the long-term positive impact of such initiatives in the company. People are the key for Value Creation. The initiative in the company should be inspiring enough for employee to be excited to contribute ideas and solutions and rewards should be treated as means to thank the employee for the contribution than making it as a part of the age-old misused ―Carrot-Stick‖ approach. Organisation need for Value Creation in Projects: In a world where nearly everyone faces abundant choices, the challenge for all businesses is to develop and sustain a uniquely attractive proposition for both customers and employees. But the hardest challenge is to do this in a way that also creates value. In a project, holding the functional leads/ managers to this standard means continually asking, "What exactly do we do that's different from the competition, and how will this enable us to create value?" By instilling this discipline, any project organisation can make their project people better managers and create an environment that attracts only people who adhere to the highest standards for business performance and personal achievement. When a team member delivers a value added service or product to the client, it reinforces his/ her confidence in tested professional skills and instills a sense of professional achievement. Implementation of Value Creation initiatives in a company thus addresses the esteem needs of the employee/ project team members. Value Creation advantage: It is observed in large capital projects that the cost optimization is achieved through Value Engineering (VE) during early stages of the project such as Front End Engineering Design (FEED) where upto10 % reduction in TIC is achievable. VE however needs specialist skills. Value Improvement Plans (VIPs) at EPC phase, where cost effective measures and designs are implemented in project to further extract 3-5% saving in TIC. In a Lumpsum services contract, a tool or a program that saves both time and effort required to produce a deliverable is Value Creation. In a EPCm reimbursable contract, an equipment engineer agrees with client to remove some redundant or dated requirements, thus resulting in cost and schedule, is Value Creation. Fig 3 shows how relative capitals costs vary with implementation of Value Creation efforts. Both VE and VIPs are elaborated below. 4.1.1 Value Engineering (VE) Value engineering (VE) is a specialist systematic method to improve the "value" of goods or products and services by using an examination of function. In EPC/ EPCm project context, VE is a disciplined method used during Front End design, often involving the use of an internal or external VE consultant, aimed at eliminating or modifying items that do not contribute to meeting business needs. VE is a creative and organized method for optimizing the cost and performance of a facility. It is a function- 8 Page
- 9. oriented, systematic approach to eliminate and prevent unnecessary costs. The purpose of a VE study is to improve decision making and obtain lowest life-cycle cost without reducing quality. 4.1.2 Value Improvement Plan This is structured process to promote, recognise and reward small savings during the detailed engineering/ EPC phase of project. The project team members are encouraged to think creatively to optimise the design solutions to deliver a positive cost advantage to the client. The fundamental requirements to implement Value Improvement Plan are: Cost awareness among team members on the equipment/ product or tools they specify on projects No Silo approach: The net positive impact considering the influence of value improvement suggestion on other functions. For example a less costly rotating equipment actually needs higher electrical load requirement, thus nullifying the cost advantage, is NOT a value improvement suggestion Recognition and reward for suggestions and persons/ teams that go extra-mile on suggesting Value Improvement solutions in the project. Fig 3. Relative Capital Costs with Value Creation Efforts As mentioned earlier Value Engineering is a specialist activity performed in front end engineering stage of the project, but Value Implementation is practicable in any EPC or EPCm project. Author has seen motivational levels of the team members at high when the VIP suggestions and solutions are recognised, rewarded and implement in large capital projects, especially when such recognition or appreciation is directly from the client or senior management. 9 Page
- 10. 4.2 Leadership Opportunity Key principle in providing leadership opportunity is recognising the talent and rewarding the high performance. The Leadership Opportunity concept is an extension to The Job Characteristics Model (JCM), as designed by Hackman and Oldham which attempts to use job design to improve employee motivation. They have identified that any job can be described in terms of five key job characteristics: Skill Variety: the degree to which a job requires different skills and talents to complete a number of different activities. Task Identity: this dimension refers to the completion of a whole and identifiable piece of work versus a partial task as part of a larger piece of work Task Significance: is the impact of the task upon the lives or work of others Autonomy - is the degree of independence or freedom allowed to complete a job Task Feedback - individually obtaining direct and clear feedback about the effectiveness of the individual carrying out the work activities Jobs or assignments that are high in motivating potential must be high on at least one of the first three factors that lead to experienced meaningfulness, and also must be high on both Autonomy and Feedback. 1. Leadership Opportunity with specific project roles 2. Leadership Opportunity with volunteering assignments. 4.2.1 Leadership Opportunity in a specific project assignment Many companies have leadership development programs which focus on providing necessary knowledge and skills for future leaders. What is further needed is a follow through, by providing specific leadership assignments. Though it is recognized that training in itself is not sufficient to develop leaders, this follow through effort is often missing in some companies. Author has mentored few employees in the companies he worked for. The potential leaders were recognized and provided visibility in the senior management circle. This helped in getting support in providing specific project assignment opportunities. For example, a young engineer with 3 to 4 years experience was given a responsibility as lead engineer though senior persons could be chosen for it. Safety net was provided through continuous guidance. This engineer later got a project management assignment in US and has established himself as a dependable project manager. In another case leadership potential was seen in a Lead engineer and he was given a Engineering Manager responsibility in a project which he did superbly well. Author himself was trained in risk management by a Vice President in the company he worked for, before being given a concurrent responsibility as risk manager. The key aspects in providing a Leadership opportunity in a project are Identify the right talent Provide the necessary training and support Provide safety net in terms mentoring, coaching and feedback And let the results speak themselves. Never force -fit 10 Page
- 11. 4.2.2 Leadership Opportunity in Volunteering assignments As many of us know, PMI also recognized volunteering as a leadership opportunity. Volunteering opportunities do exist in most of the EPC(m) projects. Author sees the Volunteering Opportunities in a project context should be based on the following principles: 1. Employees/ Project Team members as a group would decide which non-profit activities to support. 2. Employees would manage the effort. 3. Project provides support in terms of funding logistic and other support For many of our employees, managing a volunteer event gives them first level leadership experience without risking company revenue or profits. It’s a wonderful opportunity for these employees to learn important management skills, gain experience talking to a group and grow in confidence. A post-event feedback loop, in which we discuss what we learned from the event and what we could have done better, helps the event manager further hone leadership skills. Author is generally inspired to see how many natural leaders the company has and the number of employees interested in learning how to manage. A recent example is the volunteering activity taken up in a mega project in Orissa, where the few members of the project construction team extended a helping hand to flood victims in Paradip area. This effort was well recognized by client as well as senior management in the company. 4.3 Gain Share Gain Share is an employee motivational technique where compensation is given for measurable performance gains in such areas as sales, customer satisfaction, and cost reductions. The compensation is often given to employee teams for achieving specified goals. Applying this concept to a project should be based on the following fundamentals: There is buy-in from senior management. Because of the project team’s contribution, the project has potential to perform commercially and professionally well. That is, the actual profit in the project can be higher than the as-sold basis, without compromising the good-will of image of the company which is necessary for repeat business The individual has contributed positively, without leaving the project or the company at crucial time. (reward basis) Author actually implemented successfully Profit-Share on couple of projects, one was one rate reimbursable contract and other on Lumpsum Engineering-Procurement services contract with an EPC Contractor. Profit-share amount was disbursed at the end of the contract. The amounts were significant with the team members in the project. The key was of course, that top management in the company had seen the merit of the Gain-share (Profit-share) scheme and approved the proposals. Based on the positive experience on the projects, author would like to recommend the following process for Project-Profit-Share scheme, hence forth referred as GS Scheme 11 Page
- 12. A committee is formed early in the project with a team consisting of the senior members of project team Generally Project Manager, Project Procurement Manager, Project Business manager and Project engineering manager and at least one person from the operation management such as Director – projects or his delegate. Common unit (generally man-hours) is used for measurement of individual efforts Effectiveness of Individuals contribution is formally assessed by his supervisor and the functional group leaders’ performance is formally assessed by the project manager and project manager’s performance by the sponsor. This factor will be the pay-out to the employee. As company takes care of several employee related costs such as space, computers, facilities, an agreed percentage (normally 50%) is accounted into profit at completion. Employee is not penalized for any profit under-realized in a project, i,e negative profit-share is not encouraged, as an employee will see it unfair treatment because of several factors beyond his/her control So if P(b) is the profit baseline or as-sold profit and P(a) is actual profit realized at the end of the project. Then an amount P(a) – P(b) is the amount qualified for Gain Share between the employee and the company. GS amount can be any amount between 30-50% of this qualified amount. Some part of the GS money can be allocated towards celebrating the extra-ordinary project success, giving mementos to the project team members and contribution to recognizing special extra-ordinary efforts. It is also important to recognize and reward other stake holders who contributed to the project indirectly though their efforts are not directly billed to the project or client. Some Persons or functions or departments contribute more significantly in terms of positive impact on the project and man-hours spent on the project are not in proportion. Part of the GS amount needs to be kept aside to recognize specific contributions which otherwise are not rewarded earlier. For example, a procurement specialist could have negotiated a significant reduction in price of major equipment, but he would have spent less number of man-hours or it could be a case of HR specialist who supported finding a quick replacement for critical position in the project. The remaining amount can be distributed to the employees in proportion of the GS factor, which as an example can be as follows: GS factor = (Efforts hours by Team member/ Total effort hours on the project) x Performance rating of the person <= 1.0). Reward Amount = GS Factor x GS Amount. It is important that the entire GS program is a result of well thought-out and deliberated strategy to ensure that the positive result is the objective, not the reward in itself. Tools like DeepDive can be implemented to ensure that right amount (of) brainstorming and discussion is done prior to announcing a GS scheme on any project. 5. Preparatory work for value creation and Gain share The three tracks mentioned above are definite tools to motivate teams for results. Value Creation and Gain Share need some ground work or terms of reference, to be created early in the project. The 12 Page
- 13. actual implementation plans for the above strategies can effectively found by using the tools like the DeepDive. Here is the brief summary of the above tool for the benefit of reader. The DeepDive™ is a combination of brainstorming, prototyping and feedback loops merged into an approach that executives can use with teams to help develop solutions for specific business challenges or in case of projects specific project challenges. The DeepDive™ can be done in as little as half a day, or to help achieve results over a longer period. The typical project challenges to be considered for such exercise will be How to deliver the project well on schedule given the current challenges How to demonstrate to client that the choice of contractor/ consultant is the best and they are able to see the value-add such as reduction in Total Installed Cost (TIC) or schedule. How to enhance the profitability of the project, given the fact the bid was aggressive and highly competitive. TM The DeepDive consists of a professionally produced team toolkit, including facilitators’ guides, participants’ guides, wall-charts, quick-reference cards, PowerPoint templates and DVDs — everything required to facilitate the DeepDive™ methodology. 6. Leadership qualities and Motivating for Results Leadership literature is abundant in the market place. However the following are the minimum leadership qualities that are needed to implement such strategies on project. Visionary Leadership: Ability to see the whole picture and articulate the broad perspective to other stake holders. By doing so, Leader should be able to create a common purpose that mobilises people and coordinates their efforts to single, coherent and agile project team. Trust: Vision becomes empty slogan, unless Project leader builds mutual trust through predictable behaviour, candour, sharing information and power. Trust binds the people together to build a strong and resilient project organisation. Creativity: To promote smart solutions that outpace excessive hard work. Integrity: Leaders working with a moral compass, earn trust and confidence of the team. 7. Other Aspects of Motivating for Results There are several other means to motivate teams to deliver results such as team building sessions, Tool Box Meetings, small rewards/ tokens of appreciation. Introducing stress relieving exercises was also seen to help productivity in projects involving a high degree of CAD design. Understanding, empathising and if possible counselling of project team members when they have personal problems, is another positive quality project manager of project leader should possess. Such attitude commands respect and commitment from team members. 13 Page
- 14. Specific Training which can be immediately implemented in a project is another great source of motivation. As an example, a project manager or Project controls manager can be given a risk management training prior to performing a role of risk manager on a project. 8. Conclusions Project is a best platform for an employee to contribute effectively and see tangible results with in duration of a project. Also, for management it is easier to measure performance in context of project delivery. The three proven tracks described in this paper are implementable tracks in any project to deliver superior project results by the project teams motivated to do so. The three tracks provide source of motivation at individual level as well as project team level. Major multi-national clients and hence their contracts recognise the value of these tracks and successfully implement them in projects. It will be great to see more companies in India, implement such concepts, thus derive benefit and build excited teams that deliver outstanding results. 9. References 1. Maslow, Abraham (1954). Motivation and Personality. New York: Harper. 2. Herzberg, Frederick (1959), The Motivation to Work, New York: John Wiley and Sons 3. R. Pritchard & E. Ashwood (2008). Managing Motivation. New York: Taylor & Francis Group. 4. J.R. Hackman and G.R. Oldham. Work Redesign. Upper Saddle River, N.J.: Pearson Education, Inc, 1980; pp 78-80. 5. Rich Horwath. Deep Dive: The Proven Method for Building Strategy, Focusing Your Resources, and Taking Smart Action. Greenleaf Book Group Press. 14 Page
- 15. 10. Author’s Profile V T Chandrasekhar Rao is a project management professional with nearly 30 years of experience in execution of EPC(m) projects in refineries, petrochemicals, power plants and steel plants. Mr Rao has worked on large complex projects in India, North America and UK and gathered extensive experience of international best practices in project management. He is certified PMP and PMI-RMP. In addition to executing projects, Mr. Rao has conducted training on project execution and risk management for project managers and lead engineers. His project execution experience includes entire project cycle in Engineering and Construction Industry starting from Feasibility studies to Front End Design to detailed engineering and construction completion. Email: vtchandrasekhar_rao@fwuk.fwc.com 15 Page