Incentive strategies for construction project manager: a common agency perspective

Abstract

According to the principal-agent theory, the agent should be motivated to behave in a manner consistent with the principal’s requirements. By expanding the focus from the bilateral principal-agent relationship within the firm to the triangular relationship between the client, the construction company and its project manager, this study seeks to explore a new way in which construction firms determining incentive strategies for their construction project managers (CPMs). A common agency model of ‘one servant of two masters’ is established while some negative/positive factors are identified, including rent-seeking effect, collusion effect and check-and-balance effect between the three parties. An autonomy-incentive grid is developed in which one can distinguish four alternative strategies. Implementation costs of each strategy in different scenarios are qualitatively assessed and a set of incentive strategies suitable for different scenarios are determined according to the complicatedness of the project and the type of the client. The model of ‘one servant of two masters’ may provide conceptual insights into incentive strategies for CPMs, and provide practical guidelines for construction firms, but at the same time, it needs testing, verifying and improving in the future practice.

Keywords:

• Project manager
• incentive
• client
• principal-agent theory
• common agency

Acknowledgement

The author is grateful for the constructive comments given by the anonymous referees and the editor in chief, Dr Roine Leiringer, on previous versions of this paper. Of course, the responsibility for any errors is solely with the author.

Disclosure statement

No potential conflict of interest was reported by the author.