Incentives are mechanisms used to create genuine opportunity for contracting parties to work together to achieve good results, rational returns and bear appropriate risks. The question of how to motivate the construction workforce rightly so as to achieve best performance has remained paramount to project owners. This paper investigates on how to model for incentive payoffs in the Nigerian construction industry in order to effectively utilise the benefits of incentive mechanisms. The collected data are analysed using descriptive and inferential statistics, such as frequency counts, charts and principal component analysis. The findings reveal the metrics for measuring organisational incentive payoff and the scaling factor for each metric. The study further develops the employee incentive payoff models for both operational workers and management staff in the construction sector. This study provides a practical solution to the application of incentive mechanisms in construction projects. The paper recommends the need for restructuring of incentive mechanisms to significantly impact on other performance criteria therefore contributing to best performance in project delivery.Keywords: incentive payoffs, performance improvement, partnering, alliance contracting and Nigerian construction industry
IntroductionContracting has become an important avenue for service delivery. Researchers and project practitioners have sought for various ways to outsource goods and services in order to improve project performance. The use of performance-based contracting systems has been overwhelming whereby contractors are rewarded for good performance and penalised for failing to achieve project outcomes (Smith and Grinker, 2003;Martin, 2007). Regardless of this practice, clients are often concerned with obtaining best performance from contractors within reasonable prices by stating the objectives and specifying the scope and metrics for achieving the project goals with less emphasis on how they are to be achieved. Most limitations associated with project delivery are centered on improper alignment of contractors' objectives with clients' expectations. Partnering was introduced in the late 1980's to facilitate an environment of trust where contracting parties can share a lot of objectives (Tang et al., 2006). The priorities of contracting parties are different; therefore the use of partnering alone cannot promote good performance but might create a platform that is prone to recurring disputes (Hosie, 2001).Researchers have advocated the need of a formal agreement which can promote mutual understanding, effective knowledge sharing and good working relationships amongst contracting parties (Popp and Zenger, 2002;Vlaar et al., 2006). The use of incentives in contracts has allowed for effective sharing of resources, risks and profits/losses measured against the performance indicators amongst contracting parties based on the contract agreement. Incentives encourage contracting parties to work together in a mutual agreement in order t...