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Incentives by jigordon
April 9, 2008, 9:32 am
Filed under: fees, pricing

I’ve written before about the use of Service Level Agreements and my general feeling is that if you have an agreement to perform, you perform per the terms of the agreement.  In other words, if you buy an hour of my time, I give you an hour for my hourly fee.  Within that hour, I should be fully engaged to providing you what it is we’ve agreed that I’m going to do for you (while I personally consult on contracts, negotiation and licensing… this could be for anything – painting, yard maintenance, skydiving, etc).

As a service provider, I expect that you want 60 minutes of time.  Not 59 and not 61 – otherwise you’d ask it of me.  On the flip side, I expect to be paid my hourly rate for those 60 minutes.  Not one penny more or less.  I also believe that if I give you consistently sub-standard service (there’s always some level of fluctuation you give on individual performances and average out over time), you shouldn’t owe me my full rate.  And perhaps, if I really over-perform – somehow give you WAY more than you were expecting – that you’d perhaps give me some kind of “tip” or bonus for the over-performance.

But do you want to give me a bonus for only doing what I said I was going to do?

This is known as an incentive payment.  Over at 360° Vendor Management, Tony started the conversation by talking about how to use incentives.  Except for some specific things like requirements contracts, though, I don’t believe in them.  Contract for what you want and what you can deliver.  If you can’t deliver (or want more), discuss the situation up-front and create a tiered performance structure.  But don’t pay (or expect) extra for just meeting the terms of the agreement.

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