by James M. Suehiro, FAIA, LEED-AP

Summary: As the design and construction industry moves toward a transformed future based on highly collaborative project teams and the expanded use of sophisticated technology, the “fit” of traditional compensation models for stakeholders comes into question. These new methodologies and tools not only require different allocations of resources and effort, but also involve changes in the nature of what we do and the time required to accomplish necessary tasks. In general, project success depends upon providing appropriate project compensation models for all stakeholders. Given the radical changes underway with respect to project delivery, it stands to reason that project stakeholders should explore new compensation approaches to appropriately implement and nurture these new project-delivery models. A new resource created by the AIA’s Integrated Practice Discussion Group is intended to help stakeholders do exactly that.

On Compensation: Considerations For Teams in a Changing Industry is a resource for owners and other team members to use when considering appropriate compensation structures for projects involving new methodologies and tools. It is based on two fundamental principles: that to be effective, any form of compensation must 1) be fair to all; and 2) must motivate appropriate behaviors. The whitepaper looks at new value propositions, basic stakeholder motivations, ingredients of compensation structures, and concludes with a suggested checklist to serve as a point of departure for consideration, negotiation, and development of value propositions and project compensation paradigms. If this document is considered holistically and its concluding checklist is used openly and with an attitude of respect for all team members, it is likely that a model for compensation will emerge that is fair, beneficial for all and an appropriate solution for the situation at hand.

While every project should end up with the right compensation model, there’s no need to start from scratch: many successful models already exist and simply can be modified to better accommodate some of the considerations outlined in this document. “Best for project” thinking is a fundamental principle of collaborative models; wherever possible, compensation should be structured in ways that acknowledge the value contributed by the different team members, compensates each member appropriately for the value delivered while also encouraging and supporting collaborative behaviors. Teams are encouraged to be creative in their solutions—no single model will fit all instances, and the rate of change in the industry suggests that new approaches will continue to emerge.

While this document may be applicable to compensation conversations for all delivery models, many may read this document looking specifically for solutions for Integrated Project Delivery (IPD). Readers of On Compensation should reflect on the idea that a prescriptive compensation approach for IPD cannot—and probably should not—be the objective of a resource like this document. Indeed, creativity and experimentation is encouraged. While commonalities may exist among IPD projects, sufficient variability will exist in team composition, project characteristics, owner objectives, etc. as to make a customized, or tailored, approach both necessary and desirable in almost every case. While On Compensation lays out important principles and concepts related to compensation in an IPD environment, each team—and each team member—will need to adapt those principles and concepts to the specific realities, and the opportunities, inherent in their own individual situation.

As we move toward a new era for design and construction, successful project delivery will depend upon open communication and mutual respect among the team members. The key values underlying integrated, collaborative models can serve teams well as discussions about team structure begin and unfold (see “Integrated Project Delivery: A Guide” and “Integrated Project Delivery: First Principles for Owners and Teams,” both available at www.aia.org/ipd). In general I encourage readers of On Compensation to approach this topic in the broadest possible context of IPD, regardless of delivery model.

Last Words
Make no assumptions; come to the table without preconceived outcomes. Understand—and respect—the base motivations of everyone at the table. Tailor goals and outcomes for the specific project type and scope. Clarify and appreciate the range of factors that drive stakeholder businesses. Establish incentives that motivate “best for project” behaviors. Consider project context and examine influencing forces. Then, in light of all of these things, shape an appropriate proposition that is fair to all concerned.

Remember: no single model fits all situations. The rate of change in the industry suggests that new influences and new models will continue to emerge.

Listen. Consider. Collaborate.

And innovate.

I wish you success in your endeavors and hope this resource adds value and richness to your enterprise.