Motivation and incentives in relational contracts

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.