Agency theory has the initial position to distrust. Distrust in this theory originates from the concept of opportunistic behaviour. The steward tries to eliminate this basis of distrust through the use of incentives, monitoring and control mechanisms to ensure goal compliance of the agent. These aspects lead to what in the calculus-based form of trust is described as a mechanism for trust.
Stewardship theory embraces the concept of personal power and trust in general which are in this theory established through shared culture and norms, and by giving the steward responsibility and autonomy. These kinds of mechanisms align better with the characteristics of the description of Kaderfors’ relational trust.
4.7 CONCLUSION
This chapter saw the development of the theoretical framework. This framework is a basis for further analysis of the application of the clarification phase of the Best Value approach and a basis for developing an understanding of the process of the clarification phase. The second research question was central in the development of the theoretical framework for this study.
2. What selection of relevant theoretical perspectives could be used for the theoretical framework underlying the clarification phase of the Best Value approach?
Central in the selection of the theories for the theoretical framework is the understanding of the clarification phase as developed in previous chapters. The clarification phase is concerned with the development of the proposal of the vendor to the client and is by van Duren considered as one of the filters and safeguards of the Best Value approach. Through the process of the clarification phase a selection of products is delivered. The interaction between client and vendor and the process of developing the envisioned products during a project are central in the agency and stewardship theory. These theories have been selected because they fit the characteristics of the implementation of the clarification phase as introduced in the previous chapter (agency theory) as well as comply with the Best Value approach from a theoretical perspective (stewardship theory).
Agency theory is often used as a theoretical framework for the structuring and managing of contractual relationships. It is concerned with the relationship between one party (the principal) which delegates work towards another party (the agent) which performs the work. Central concepts in the agency theory are moral hazard, information asymmetry, and contractual opportunism. Transfer of risk, monitoring and control mechanisms, reward systems, and reputation are introduced as mechanisms to reduce opportunistic behavior and create goal alignment
between principal and agent.
Agency theory has some important misalignments with the Best Value approach when considering both from a theoretical perspective. An important difference is the focus on control-oriented management styles by the agency theory and the efforts Best Value makes to eliminate control based mechanisms between client and vendor. Considering the implementation of the Best Value approach, one can state that some agency theory elements can be recognized, such as a (temporary) relapse into controlling management attitude of the client and a more controlled position of the vendor.
Stewardship theory is often seen as a theoretical counterweight for the more economic based agency theory. Comparable to the agency theory, the stewardship theory is centered on the relationship between one party (the principal) that delegates work towards another party (the steward) which performs the work. Stewardship theory has been introduced as a means to define relationships based on behavioral premises. Stewardship theory is concerned with the relationships and behaviors that are often discounted in organizational theories. It emphasizes the collective, is pro-organizational, and envisions contractual behavior in which a focus exists on goal convergence, unlike the agency theory, which focuses on self-interest. Important assumptions of the stewardship theory are that long-term (contractual) relations are developed based on trust, reputation, collective goals, and involvement, where alignment is an outcome from mutual relations.
The stewardship theory shares many commonalities with the Best Value approach when considering them both from a theoretical perspective. Alignment of goals, a more involvement-oriented management style, and the long term focus predicted by the stewardship theory are examples of important elements on which this theory displays alignment with the Best Value approach. Considering the implementation of the Best Value approach at Rijkswaterstaat it is concluded that there are also elements or moments during the clarification phase in which certain theoretical concepts do align more with the agency theory (i.e. the control-oriented management style the client and vendor sometimes relapse to). This can be a result of the notion presented in Figure 4.5 that promotes a certain level of control and management during the clarification phase. This can also contribute to the difficulty of maintaining certain roles (the vendor is officially in the lead) and an important reason why agency characteristics are observed during the clarification phase.
Compared to the principal-agent relationship where personal interest comes first, the principal-steward relationship is concerned with being accountable for something larger than the individual gain. The ‘model of man’ underlying the stewardship theory is therefore also different from agency theory. The focus shifts towards a steward whose behavior is ordered in such a manner that pro-organizational, collective behavior with higher utility than individualistic and self-serving behavior is created and sustained. The agency theory is embedded in the theories that underlie the New Institutional Economics which offer more embeddedness and a toolbox to ensure aspects such as alignment of goals between client and vendor (e.g. assignment of risk, reward systems, and emphasis on contractual arrangements). In the stewardship theory, this toolbox is less present or developed and based more on notions such as responsibility and accountability.
In sum, from a theoretical perspective the Best Value approach aligns to a large extend with the stewardship theory in the approach of the client-vendor relationship. Furthermore, it is found that what is introduced as a ‘true stewardship relationship’ is a relationship that is located in the Best Value quadrant of Figure 4.4, in which Best Value tries to establish a vendor controlled environment. Considering the initial insights in the implementation of the clarification phase there are also some coherences with the agency theory in the implementation of this theory (i.e. lacking information exchange during the clarification phase, reversion back into control-oriented management styles, and lacking trust regarding the performance of the vendor). Due to their theoretical and practical applicability, these theories have been selected to analyze the documented case studies, as well as to help understand the actual use of the Best Value approach.