Motivation and incentives in relational contracts

Abstract

Purpose

Lean projects seek to optimise the project rather than its parts and to maximize value to the customer. To better align the behaviour of project participants with a Lean project delivery model, the purpose of this paper is to argue for compensation structures that better address the economic and non‐economic motives that impact project performance.

Design/methodology/approach

Social science research increasingly shows that non‐economic human motives play a key role in job performance and that they interact in complicated ways with economic incentives. By reviewing and extrapolating from relevant literature, this paper explores certain key non‐economic human motives and their impact on project performance, how these non‐economic motives interact with economic incentives, and strategies for structuring effective incentives.

Findings

The paper identifies certain contract incentive principles that the authors believe should promote non‐economic motivation.

Research limitations/implications

The paper provides a starting point for further research regarding compatibility of incentives with non‐economic motives on Lean projects. In particular, more research is needed on the applicability of the social science findings to corporate entities.

Practical implications

The paper suggests that traditional compensation systems are ill‐suited to project‐optimised behaviour.

Originality/value

This paper provides important insight into the problems of traditional compensation systems for construction projects and offers both concepts and strategies that could better align economic incentives with project‐optimised behaviour.

Citation

Darrington, J.W. and Howell, G.A. (2011), "Motivation and incentives in relational contracts", Journal of Financial Management of Property and Construction, Vol. 16 No. 1, pp. 42-51. https://doi.org/10.1108/13664381111116070