In part 1 we talked about base pay, in part 2 about incentive pay. Now we'll go into the specific example of how a consulting company, such as this Austin software partnership consultancy, might approach this problem of creating a vision, a strategy, and key performance indicators (KPIs) and then how to automate the measurement of them.

The AllianceValue.com example:

ADV Group's vision is to "help software product and service companies increase their market share and value through partnerships and alliances."

Sounds moral to me. So that's good. What's their strategy for achieving that?

Let's assume that at least part of their strategy is to keep their consultants billable much of the time. A KPI for that would be % billability. I.e. # hours billed/#hours worked.

So configuring their automated web timesheet system to track that metric should be easy.

Another KPI might be % of projects which are profitable. This KPI can really increase the profitability of consulting businesses. Due to an inadequate understanding of costs, unprofitable projects often go unnoticed. If our example company, ADV Group, set a strategic goal of "no unprofitable projects", then getting per-project cost data from their time and expense tracking system becomes paramount. Applying indirect data (such as office space cost) to the direct costs increases complexity.

For any particular consultant in the company then we can calculate a per-project profitability value (# profitable projects/#projects), and apply that percentage to his quarterly or annual maximum bonus amount to calculate his actual bonus. Now you've tied Joe consultant's pay through a KPI to the company's strategy in an automated way.

Next time we'll talk about automated duty separation for KPI based bonus awards.

Curt Finch is the author of a book about time tracking, KPIs and project accounting.