The Organization and

Management of Construction
SHAPING THEORY AND PRACTICE

VOLUME ONE

Managing the
Construction Enterprise
 CIB W65

International Symposium for

The Organization and

Management of Construction
SHAPING THEORY AND PRACTICE

VOLUME ONE
Managing the
Construction Enterprise
Edited by
D.A. Langford and A. Retik

GLASGOW

200 YEARS OF CALEDONIAN

USEFUL LEARNING
UNIVERSITY

E &. FN SPON
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CONTENTS

Foreword ix
Introduction to Volume One xiii

PART I THE FIRM AND ITS BUSINESS ENVIRONMENT

1 The firm and strategic change 3

A framework for managing strategic change in the

construction industry
Ben Obinero Uwakweh 4

Explosive management: destruction or propulsion?

P. Barrett and M.G. Sexton 13

Long-term success or failure of contractors' strategies

of diversification
P.M. Hillebrandt 23

Analysing construction contractors' strategic intent

from mission statements
F. T. Edum-Fotwe, AD.F. Price and A Thorpe 33

UK national technology foresight: the construction

industry perspective
B.A Young 44

Structural adjustment for a competitive environment:

survival strategies for medium sized construction
firms in Zambia
Peter M. Mukalula 55

Eco-management and construction

George Dunlop 64

2 The firms and strategic planning 75

Construction firms' strategic planning

P. Venegas and L.F. Alarcon 76
vi Contents

Survival strategies for small professional firms in a

volatile market
John Boon 86

Construction firms' strategies and their financial

performance
M.A.H. Mohammed, Z.M. Yusof and V.B. Torrance 97

Contractors' strategies in Hong Kong's competitive

construction market
A. Walker 107

Development of construction management based

on regional culture
K. Baba 119

The development of an industry futures bulletin

J.R. Brightman, C. Eden, K. van der Heidjia
and D.A. Langford 129

Organisational structure, corporate strategy and

survivability in the Scottish construction industry
J. Docherty and D.A. Langford 139

PART II THE FIRM, ITS MARKET AND COMPETITORS 155

1 The firm and its markets 157

Market share of contractors according to type and

size of contract
D.S. Drew and K. T. Cheung 158

Mar~eting plan for introducing a construction management service

G. Saric, V. Luketa and M. Katavic 168

Implementing community policies in the construction

industry
K. Moodleyand G.N. Preece 178

Refocusing construction to meet customers'

requirements
M.F. Dulami, A. T. Baxendale and M.R. Jewell 187

Marketing in building services engineeringconsultancy

firms in South Africa: the way forward
P. D. Rwelamila, T. Lethola and A. Ngowi 197
 Contents vii

Competence-based contracting business

P. Huovinen 208

2 The firm and its competitive partners 219

Adversaries or partners? Developing best practice

for construction industry relationships
AJ. Hinks, S. Allen and R.D. Cooper 220

Improving the materials supply system in small sized

building firms
C. T. Formoso and V.H. Revelo 229

Benefits of long-term relationships: UK contractors'

experience
A.M. Haksever, H.S. Kim and G. Pickering 239

Organizational effectiveness of the construction firm:

a framework for assessment
V.K. Handa and A Adas 247

Architects' need strengths and satisfaction levels,

and architectural organisations' climates
P.J. Rutland 257

Multi-character model of the construction project

initiation process
Kalle Kahkonen 268

PART III THE FIRM AND ITS RESOURCES 279

1 The firm and the human resource 281

Understanding and affecting change

Gary R. Smith 282

Enhancing learning in construction projects

D. Boyd and A Robson 293

The management of public relations as a business

process in construction
C. N. Preece and K. Moodley 303

Human resource development in large construction

companies
M.R. Hancock, C.K. Yap and D.S. Root 312
viii Contents

Characteristics of winning construction management

teams
D.H. T. Walker 322

Organisation behaviour in a transitional economy -

Romania
C. Oltean-Dumbrava 335

Building on fair footings: improving equal opportunities

in the construction industry for women
S. RhysJones, A.R.J. Dainty, R.H. Neale and B.M. Bagilhole 343

Industry and university in a mutual project of

evaluation: a Swedish example
Jan Borgbrant and Fredrik Hansson 353

2 The firm turning money Into quality 363

Are quality management systems possible?

D. W. Cheetham 364

Financial failure models: hypothesis testing for UK

construction companies
L. Ruddock 379

Costs of management and maintenance:

the Italian case
V. Manfron 388

A pilot survey of the supplier/sub-contractor

payment system
R. Kenley and B.M. Wood 398

Managing project quality

J.M. Mars 406

Evaluation of the quality assurance scheme

implemented in public housing projects of Hong Kong
C.M. Tam and A.P.G. Chan 419

Index 429
FOREWORD

What makes top performing companies different ... ?

They are better organized to meet the needs of customers so that they are
either more innovative in anticipating customer needs, more reliable in
meeting customer expectations, better able to deliver their product or
service more cheaply, or some combination of the above.
Robert Waterman, from Frontiers of Excellence
The 1990s has seen the construction industry in many parts of the world subject
to the worst effects of global recession. Demand for its products has fallen
dramatically, nowhere more so than in the UK. Not only has the industry had to
cope with this collapse of its market, it has also been beset by internal strife;
the fragmented structure and self-protectionist attitude of individual groups
being reminiscent of many western manufacturing industries of the 1960s and
1970s. During the boom construction period of the 1980s, there was strife
between professions: architects belittling surveyors, surveyors criticizing
engineers; and also, disputes between contractors; management contractors
criticizing performance from trade contractors and they, in turn, complaining of
late, or non-payment. In such circumstances in time of growth, it comes as no
surprise to see that matters could only get worse in times of recession.
In the period of intense competition for a drastically reduced workload, in the
past 5-7 years, internal strife has increased. Internal competition has also
intensified, to the point of professionals and contractors submitting uneconomic,
or even suicidal, bids for available work. Whilst this internal conflict has grown
more intense and may seem to be 'life-threatening' to the construction sector,
the industry has, by and large, ignored the greatest threat to its existence: the
changing nature and demands of its customers. The lessons which may be
learned from other industries which have, in the past, made the same
fundamental error, appear to have been missed by the construction industry.
For example, whilst internal strife in the UK automotive industry of the 1960s
and 1970s may appear to have been the main cause of its 'terminal illness', the
true cause of its ultimate failure lay, not in internal conflict, but in parallel failure
to see the changes which were taking place in society and in competitive
markets, at a global level. The industry failed to see the underlying strengths
behind the superficial weaknesses of the early products of its new global
competitors, in addressing the growth of consumer choice, and customer-
based product development. It failed, also, to address the emergence of the
'informed client'; the consumer with more choice of products, a more enquiring
and discerning mind in selection of products, and with more power to influence
the development of the product to meet his/her particular needs.
There have been some attempts to address areas of perceived conflict and
x Foreword

problems within the construction sector, as in the Latham Report, a critical

study of internal politics, interdisciplinary and contractual relationships in the
UK. In attempting to reduce internal conflict, Sir Michael Latham proposes that
there should be fundamental change to the nature of the construction contract,
moving from a predisposition for adversarial relationships to support for team
building and negotiation. The Latham proposals appear bold and innovative in
the context of the construction industry, stating that customers should expect
to see savings of up to 30 per cent in construction costs by the year 2000.
Such 'ambitious' targets are, however, decried by some, who state that
such ridiculously high levels of saving are unachievable. If, however, such
'miserably small' levels of improvement were to have been proposed to
Motorola's management in the 1980s, when they were introducing their 'Six-
Sigma' programme of quality improvement, the proposers would have been
sent back to the drawing board. In quality improvement, Motorola set initial
targets of a tenfold improvement over 5 years, to be followed by a further
tenfold improvement on the level achieved within the following period! Cynics
said that these targets could not be met - yet they were, and were surpassed.
The difference in target levels for improvement may be traced to their
origins, in addressing either an internal, industry-based, or external, market-
based agenda. It is the difference between continuing to adopt a 'supply-side'
dominated approach and moving to a 'demand-led' approach to construction.
Setting ambitious targets for improvement in the construction industry cannot
be based solely upon study of the internal market, even if the study is of the
best performance in the world in the field. Many of the customers will be basing
their appraisal of construction sector quality and productivity, not upon other
construction providers but, upon other suppliers of major capital equipment.
Whilst the Latham Report on the UK construction sector acknowledges the
importance of clients, it is still primarily concerned with the internal problems of
the industry, rather than the changing nature of the market into which the
products are delivered.
If an airline board is to assess the success, or otherwise, of the building
procurement process, why should they not compare it with aircraft procure-
ment? If they do, how will the product stand up in terms of quality of
manufacture, predictability of capital and revenue cost, performance and
reliability etc.? How will the members of the board assess its 'added value' to
the company? If these board members are making their annual round of
decisions on areas of capital investment, will they be judging their investment
in buildings, one against the other, or in terms of likely return to the business-
building versus aircraft? It is in this scenario, of looking outward to the global
market for products and services, seeking out the best performers in both
areas and benchmarking current internal performance against these, that the
construction industry will find the real measure of its current level of
performance. Only when this has been done can the industry determine the
targets which it must meet, in terms of increased productivity, quality and
performance, in order to meet the expectations of its customers.
Such change will require revolutionary, not evolutionary, change to the
 Foreword xi

management structure and systems of the construction sector, and fun-

damental change to the relationships of the internal players. If comparison is
made with 'best practice' in aeronautical or marine construction, one might
predict that the future for building construction lies in the delivery of 'one-stop
shopping' products, constructed at lower cost, to tighter timescales and to far
higher standards of quality than are currently dreamt of.
George M. Cairns
University of Strathclyde
April 1996
INTRODUCTION TO VOLUME ONE

Managing the Construction Enterprise contains papers concerned with three

major sub-themes:
• The firm and its business environment
• The firm, its markets and competitors
• The firm and its resources
The papers collected together in 'The firm and its business environment',
have been grouped into two sets, those dealing with strategic change in the
construction environment and those dealing with strategic management. The
first set consider long-term issues influencing managerial activity at the apex
of construction firms. Issues such as managing change, industry-based
scenario plans and the relationship between firms and environmental move-
ments are placed together to give a forward look to the issues and
controversies of the future. In the second part of this sub-theme papers which
address the theme of contractors' strategic response to their business
environment are presented. International companies are included in this
sub-theme.
'The firm, its markets and competitors' is again broken into two sets of
papers. One set is contained in an area which deals with marketing in the
construction industry. The second explores research in the relatively recent
area of partnering.
The third sub-theme focuses upon the resources that firms use to achieve
strategic plans and market ambitions. One set of papers uncovers research in
the field of human resource management and how the energies of people in
construction enterprises can be engaged to realise corporate plans. These
papers speak of developing people, equal opportunities, creating learning
organizations. The second set tackles the question of building in and
managing quality.

The structure of the volumes

To organize the range of topics covered by the W65 Commission the papers
have been structured into three volumes. Each volume focuses upon a
particular theme. These themes are:
• Managing the Construction Enterprise
• Managing the Project
• Managing Information
Within each theme there are sub-themes which collect together papers around
xiv Introduction

a specialist area of interest and then within each sub-theme there is a iurther
selection to collect together papers on similar topics.
This approach is intended to assist the reader in identifying and consolidat-
ing areas of special interest and to link together subjects appearing in each
volume.

Maintaining standards

In line with the growing confidence and maturity of the discipline, the papers
contained within the volumes have been subjected to exacting standards of
refereeing. Of the 241 abstracts received, 183 were selected for development
into full papers. All of the full papers received were then refereed and authors
invited to incorporate the referees' comments into their papers. At the time of
sending the material to the publishers 161 papers had been accepted. The
standards achieved ensure that the papers presented in the volumes are of a
standard expected in refereed journal articles.

Acknowledgments

We would like to record our special thanks to members of the organizing

committee, the scientific committee and the conference organizers, Meeting
Makers, especially Susan Miller and Elaine Bone. Particular thanks are due to
Edith Henry of E & FN Spon for the painstaking attention to the detail
associated with presenting the papers for the 8th International Symposium of
the W65 Commission on Organization and Management of Construction.
Dave Langford
Arkady Retik
Glasgow, June 1996
Part I
The firm and its
business environment
1 The firm and
strategic change
A FRAMEWORK FOR MANAGING
STRATEGIC CHANGE IN THE
CONSTRUCTION INDUSTRY
Ben Obinero Uwakweh
Construction Innovation Center, University of Cincinnati,
Cincinnati, Ohio, USA

Abstract

The management of change is a dynamic and on-going process. Organizations undergo

changes but there is no one defined approach in the management of change. What is
proposed in this paper is a model that may be used in the managerial process. This
model is based on Technology, Political and Cultural factors. It is suggested that all
these factors must be managed for the change process to be effective. The concept of
Performing Arts is also used to illustrate that the management process must be continu-
ous and any change in one factor will trigger a response in another area.
Keywords: Change, Political, Technical, Cultural, Organization, Strategic.
Sommaire

La gestion du changement est un processus dynamique et permanent. Toute

organisation est soumise a des changements; or, il n'existe pas une fa~on
unique de faire face a ces changements. Le present papier propose un modele
applicable au processus de gestion du changement Ce modele est construit
sur des facteurs technologiques, politiques et culturels, dont il est suggere ici
que seule la gestion tryptique aboutit a un processus de changement efficace.
Le concept dlllarts perform ants" est utilise pour illustrer la necessaire
continuite du processus de gestion et la repercussion immediate de tout
changement survenant dans un facteur d'un domaine donne sur un autre
facteur d'un autre domaine.

1 Introduction

In the light of the technological innovations in the world today, organizations will also
need to undergo changes to remain competitive and profitable in the market place. For
example, with advancements in technology, it is possible for firms in Europe to respond
to an invitation to bid for a project in the United States or Africa within a day. The
implication is that organizations which are not responsive to changes in the environ-
ment will miss business opportunities. In recent times, the Construction Industry is un-
dergoing changes in the way it conducts business. In the past, the relationship between
Constructors and Designers was very adversarial thus resulting in disputes. However,
the emphasis in the industry now is on teams because owners of construction are now

The Organization and Management of Construction: Shaping theory and practice (Volume One).
Edited by D.A. Langford and A. Retik. Published in 1996 by E & FN Spon. ISBN 0 419 22230 8.
 Framework for managing strategic change 5

taking active role in the project delivery process. Owners are now concerned with not
only completing their project on time, but are also concerned with the constructors
safety records, quality of projects and the companies management capabilities. This
demand by owners are t:ncouraging the various parties involved in the construction
process to examine their business practices and management styles.
The objective of this paper is therefore to present a framework for managing change
in the industry. This framework is based on the literature in organizational development
and research and would be used to illustrate how a midwestern firm in the United States
is managing its change.

2 The Need For A Model For Managing Change

There are three dominant views that have guided thinking about organizations and the
practice of change. The first tradition views organization and change from a technical
perspective and hence prescribe change strategies based on empiricism and self interest
(Arygris & Schon, 1978). The focus is upon the acquisition and application of knowl-
edge useful for effective performance of organizational tasks. The technical view is in-
strumental and rational and the focus is upon the acquisition and application of the
knowledge useful for effective performance of organizational tasks.
A second tradition views organizations as political entities which can only be
changed by the exercise of power by the dominant group over those with less power or
by bargaining among powerful groups. The third tradition, however, views organiza-
tions as cultural systems of values with shared symbols and shared cognitive schemes
which tie people together and form a common organizational culture. Change comes
about by altering the norms and cognitive schemes of the members of the organization.
Practicing managers, students of organizations, and experts on change tend to think
in terms of only one of the above traditions. The result of this thinking often leads to
unanticipated negative consequences. For example, management scientists and field
engineers frequently view work and organization design as an engineering or technical
problem. This can lead to problems because the tendency in this approach is to design
work such that it will no longer be challenging to workers and hence lead to such unan-
ticipated behaviors as absenteeisms and low motivation. On the other hand, a purely
political orientation to organization change is likely to be dysfunctional. It can lead to
low levels of trust, cynicism, and a view that all interactions are either win or lose
situation. The cultural orientation when overemphasized is also not effective. This is
because when based solely on trust, and collaboration, it avoids the problem of power
politics of change.
Because the use of anyone of these traditions provides results or effects that tend to
be dysfunctional, a more comprehensive view is needed. This view acknowledges all
three approaches and also recognizes that organizations must make continuous adjust-
ment in order to manage change. Further, this comprehensive view of managing change
likens the process to performing arts because there are characteristics exhibited in the
6 Obinero Uwakweh

management of perfonning arts that managers perfonn. These three properties are; par-
ticularity, variety and contextuality (Vaill, 1989).
Particularity aims at explaining the uniqueness of any organization. This quality
makes it particularly difficult to generalize any situation. The tenn, variety, refers to
the basic heterogeneity of human systems. Each personnel will respond differently to a
given stimulus. Thus, the manager must constantly aim at having all the personnel to
work as a system and consider how they will respond to each situation. Contextuality,
on the other hand, focuses on the culture of the organization. Hence in contextuality we
emphasize the fact that individuals have the potential to perfonn at a much greater po-
tential provided they get adequate support from the environment.

3 The Proposed Model: Technical-Political-Cultural (TPC) Model.

The model that is proposed acknowledges that technical, political and cultural issues
facing organizations change continuously and as a result organizations make adjust-
ments in order to resolve these conflicts as they arise.

3.1 Technical problem

All organizations have production problem. This is in the context of environmental
threats and opportunities, social, financial and technical resources that must be arranged
to produce some desired output. In order to solve this problem, Construction finns are
constantly seeking for competitive edge as they try to acquire projects. The leverage
may be in financial engineering or their past experience in the engineering of the proj-
ect. Construction firms may also resort to goal setting, strategy fonnulation, or design-
ing management systems.

3.2 Political problem

All organizations face the problem of allocating power and resources. The uses to
which the organization will be put as well as who will reap the benefits of the organiza-
tion must be detennined. Discussion around these issues are reflected in compensation
programs, career decisions, budget decisions, and internal power structure of the or-
ganization. Unlike the technical problem where we have the fonnal tools such as stra-
tegic planning and organizational design, the concepts of political allocation problem
are less fonnal and less obvious. In construction finns, as in most firms, there are con-
stant discussions among employees on who gets what position, or who is the next in
line to the President or Chief Executive Officer.

3.3 Cultural Problem

Organizations are held together by their culture. This consists of values, beliefs, objec-
tives and the interpretation shared by organizational members. Some of the important
issues facing management in cultural problems is to detennine what values should be
 Framework for managing strategic change 7

shared, what objectives are worth striving for, what beliefs should the employees be
committed to and what interpretations of past events would be most beneficial to the
firm. Once these decisions are made, then the top leadership must communicate these
in a memorable and believable fashion. The idea is to ensure that this will not be in-
stantly forgotten and be discussed as an organizational propaganda.
The model that is being proposed draws heavily from the work done by Noel Tichy
(1982). In describing these three factors that must be managed, he describes it as a
strategic rope with three strands. Figure 1. presents the strategic rope.

Fig. 1. The strategic rope.

8 Obinero Uwakweh

The metaphor of a rope is used for two major reasons. First, from a distance, the
individual strands are not distinguishable. This is very true in organizations. It is vir-
tually not clear for a casual observer, what is technical, political or cultural. Second,
ropes can become unraveled, and when they do, they become weakened. Similarly, or-
ganizations can also become unraveled because the technical, political, and cultural
strands can work at cross-purposes. As an illustration, a construction firm that is based
in a particular region, and later decides to expand its business into other regions, must
change its organizational structure and design so as to be more responsive to the new
regional demands. It must therefore make fundamental changes in its political, cultural
and technological areas so as to reinforce this regional expansion.
Strategic change management that is proposed in this paper is the task of keeping
the rope from being unraveled in the face of these technical, political, and cultural
problems. Organizations are perpetually in flux, undergoing shifts and changes and
none of these three problems is ever resolved. Strategic change refers to non routine,
non incremental, and discontinuous change which alters the overall orientation of the
organization. The process of strategic change is started when problems, crises or oppor-
tunities are recognized by means of a threshold phenomenon. Wieland and Ullrich,
(1976) have determined five areas which may be compared to determine if a certain
piece or cluster of information exceeds threshold. These are, historical, planning, extra
organizational, expectations and scientific. The determination that a threshold has been
exceeded is essentially made by comparing the current data with past.

4 When Strategic change is necessary

Strategic change becomes necessary when problems, crises or opportunities emerge in

the environment, diversification, technology and personnel.

4.1 Environment
Increasing competitive pressures can be the trigger for strategic change especially in
high-technology industry such as computer industry. However, in the construction in-
dustry changes in legislation, inflation and interest rates may easily trigger change.

4.2 Diversification
The diversification of an organization into new areas of business generally requires a
strategic change. This may include a shift from its present structure to a divisional
structure. For example, a construction firm which is planning to expand its operation
from one geographic location to another, may find it necessary to have a small office so
as to maintain its presence in that market. It may chose to develop a specific know-how
for that particular market.
 Framework for managing strategic change 9

4.3 Technology
Changes in technology will give rise to new data and behavior requirements on organi-
zations. As an illustration, with increase in use of computers, it is now common to have
project managers work with laptop computers on site and personal computers are now
available in many site offices.

4.4 Personnel
Another important trigger for strategic change is change in personnel. That is, the types
of personnel entering the organization may change in terms of education, expectations,
or status, such as previously excluded minorities. Also, the people already in the or-
ganization may change as a result of retirements.

5 A Case Study with a midwestern firm:

The company used in this illustration is a midwestern firm which was founded in the
1930s. Approximately seven years after its formation, the founder died. At the time of
his death, there were no offsprings to take over the management of the firm. Conse-
quently, the firm was put on trust for the family, under an outside leadership. The firm
operates mostly in the midwest and maintain substantial management staff in the major
cities where it has operations. It does sometimes do projects in the South Eastern
states.
In the sixty plus years that the firm has been in business, it developed and built a
strong reputation of quality, excellence and leadership in the industry. They have won
numerous awards for excellence in construction. Some of their awards include, Build
America Award (this is the highest honor given nationally to construction firms that
perform to the highest standards of excellence in construction), Build Kentucky Award
for innovation and Build Ohio Award for new construction. The firm's volume in sales
is about one hundred and eighty million. It is in the top 40 in volume for Construction
Management and in the top 120 in volume for General Contracting. All rankings are by
Engineering News Record (ENR).
The firm defines its business as Construction Management and General Building
Construction. This includes Hospitals, Institutional Buildings, Office buildings, Shop-
ping Centers, Industrial plants and Air and Transit terminals. A major asset for the firm
is the loyalty of its personnel. The firm has a policy of developing its management staff
from "within." The total employment including first level supervisory and tradesman
regularly reaches over three hundred.
10 Obinero Uwakweh

6 Analysis of change

The last surviving son of the founder passed away almost ten years ago. During this
period approximately 50 plus years, the finn was under outside leadership. The surviv-
ing family members were ready for a change and a group of senior executives in the
firm decided to explore the possibility for change in ownership and leadership. After
months of meetings and deliberation the employees decided to buy the firm from the
family under 100% Employee Stock Ownership Plan.
Employees Stock Ownership Plan (ESOP) is a unique form of passing along some
measure of ownership to employees. Hence, it can be used as a financing vehicle for
transferring ownership of a privately held company to employees. This provides em-
ployees with both retirement benefits and the added incentives inherent in holding an
ownership interest in the business. The implication is that it may improve employee
motivation, through increased financial incentives and a new set of attitudes and team
work. Research indicates that ESOP also have beneficial effects on other measures of
success. According to a study, sales and employment grew at a significantly greater
rate at ESOP companies that offered participation opportunities to their employees than
at ESOP companies with no participation plans. In essence, the purpose of ESOP is to
form a partnership among share holders, management and employees by creating a trust
vehicle through which employees can purchase meaningful equity stake in the firm.
Although, the firm did not use the proposed TPC model as a guiding principle for its
change management, the process it went through, however, can best be described using
the proposed TPC model. What follows is a brief illustration.

6.1 Technical
This firm, because of their proposed employee stock ownership (ESOP), had to seri-
ously review and articulate its mission such that it will be consistent with their goals
and objectives. To accomplish this, the firm had to reaffirm its mission of leading the
building construction process for sustained growth and profitability. The firm hopes to
accomplish its mission through professional performance for its clients, ethical business
practices and loyalty to its important asset-personnel. Another important action taken
by the firm is its organizational design. Rather than maintain a top-down management
approach, it created twenty six senior managers who are actively involved in strategic
leadership. These "partners" as they are referred to share in all information on the com-
pany and meet regularly to set goals and define the overall strategies to accomplish
those goals. Consistent with its organizational redesign, it developed "point of attack
decision making" where its employ\.!es are ·empowered to make decisions once they ob-
serve any problems or concerns.

6.2 Political
Prior to its change of ownership, the firm was no different than any other construction
firm because only a few of the top executives and the family members were responsible
 Framework for managing strategic change 11

for allocating power and resources of the firm. This small group also decided who will
keep the benefits of the organization. The approach the top management used to solve
the political issues was to use Employee Stock Ownership Plan (ESOP). After several
months of education, discussions, clarifications and meetings, the firm accepted a 100%
employee ownership without long term preference based on the status at the purchase
date, broad detailed communication with all the share holders, and its strategic planning
and decision making based upon a professional partnership model.

6.3 Cultural
Culture consists of the values, objectives and beliefs and interpretations shared by or-
ganizational members. The firm has managed the cultural problem by developing ten
elements that it defines as its value system. These ten points are posted on all sites and
in all premises where this firm has an operation or project. This serves as a constant
reminder to its employees and clients of their shared beliefs. These values are built
around people, loyalty, commitment, ethics, professionalism, forward thinking, growth
from within, team work, point of attack dec!sion making and quality. This value sys-
tem has helped the firm immensely in its business pursuit and earned the respect of
other firms because of the commitment and excellence exhibited by their personnel in
their various projects. They have had to implement employee lead initiatives at every
level of their operations for the sole purpose of growth, leadership and excellence.
In reviewing the firm strategy, it can be observed that the change is dynamic and not
static. The organization is constantly fine tuning each of the three systems, technical,
political and cultural. The process may be summarized in Figure-2, strategic manage-
ment matrix.

Assessing and defin- Defining reporting relation-

ing what business we ships, and groupings ofpeo-
are in and determining pIe and departments to meet
the business strategy business needs

Who gets to influence Distribution of power in your Managing the politics

the mission and strat- organization, both across the of succession, reward
egy of your organiza- organization, up and down the system and appraisal
tion organization

Developing a culture, Developing managerial strat- Selection, develop-

or set of values to sup- egy and culture to fit your or- ment and rewards to
port business strategy ganization support your organi-
zations values and
culture

Fig. 2 Strategic Management matrix.

12 Obinero Uwakweh

The matrix represents the managerial areas on the vertical axis, and the management
tools on the horizontal axis. Thus for cultural system, you will have to read across to
identify how much change is needed to solve the cultural problem strategically.

7 Conclusion

This paper has presented an illustration of change management based on the TPC
model. This is an ongoing study in the Construction Industry. It is hoped that this
framework will be used in developing some of the innovations involved in the man-
agement of change in the industry.

8 References

1. Argyris, C. and Schon, D., 1978, Organizational learning: A theory of Action per-
spective, Addison-Wesley, Reading, MA.
2. Beer, Michael, Eisenstat A. Russel, and Spector Bert, (1990) "Why change pro-
grams don't produce change", Harvard Business Review, Nov-Dec.
3. Huber P. George & Glick H. William (1993), Organizational Change and Redesign,
Oxford University Press, New York, NY.
4. Martin, Donald, D. (1994), "How small business can gain advantages from
ESOPS", National Public Accountant, Volume 39, No.2, Feb.
5. Schein, E.H., 1970, Organizational Psychology, 2 nd Ed., Prentice Hall, Englewood
Cliffs, N.J.
6. Smith, William (1990) "Employee Stock Ownership Plans: Motivation and Morale
Issues", Compensation & Benefits Review, Volume 22, No.5, Sept/Oct.
7. Tichy M. Noel (1982) Managing Strategic Change Technical, Political and Cultural
Dynamics, John Willey and Sons, Newy York, NY.
8. Vaill B. Peter, (1989) Managing as a performing arts, Jossey-Bass Publishers, San-
Francisco, CA.
9. Wieland, G.F. and Ullrich, R.A. (1976) Organizations: Behavior, design and
change. Richard D. Irwin, Homewood, IL.
10. Wilmont, W. Robb, (1987), "Change in Management and the Management of
Change", Long Range Planning, Vol. 20. No.6, pp. 23-26.
EXPLOSIVE MANAGEMENT:
DESTRUCTION OR PROPULSION?
P. Barrett and M.G. Sexton
Research Centre for the Built and Human Environment,
University of Salford, Salford, UK

Abstract
At a recent international conference on quality management, the similarities with
environmental management and health and safety management were noted. The
negative impact on managerial effectiveness of these multiple pressures was articulated
as follows "If you are in a minefield what do you do? - Stand Still!" or risk destruction.
This paper views these different pressures as managing against different criteria, but
using generally similar mechanisms such that managers are given a clear view and
comprehensive technical support to propel them and their companies forward.
Keywords: Quality, health and safety, environment, supple systems.

Resume
Lors d'une conference recente au suject du 'quality management' (gestion de qualite),
on ales similarires entre ce sujet et al gestion de l'environnement et de la sante et
securite au travail. L'impact negatif sur l'efficacire de gestion de ces tensions etait
articule comme suit: "Si vous vous trouvez dans un champs de mines, que faites vous?
- Ne bougez pas!" ou risquez la destruction.
eet article considere ces tensions differentes comme la gestion selon criteres
differentes, mais en utlilisant des mecanismes generalement similaires avec Ie resultat
que les directeurs rec;oivent une impression claire et un soutien technique comprehensif
pour les faire avancer avec leurs entreprises.
Mots cles: Qualite, sante et securite, environnement, 'supple systems' (systemes
souples).

The Organization and Management of Construction: Shaping theory and practice (Volume One).
Edited by D.A. Langford and A. Retik. Published in 1996 by E & FN Spon. ISBN 0419222308.
14 Barrett and Sexton

1. Introduction

Construction finns are increasingly being bombarded by a stream of business

requirements which have the potential to fundamentally affect their current and future
competitiveness. These requirements constitute increasingly pervasive and rapid drivers
of change which, unless due managerial vigilance is taken, may render finns' past
modes of organisational design and behaviour inappropriate for their prevailing
competitive contexts. If the firm does create a discrete reaction to each pressure it risks
fragmentation as the pressures push in different directions resulting in conflicting
systems. This relentless onslaught of obsolescence or fragmented action prescribes that
firms need to create and manage mechanisms which effectively and efficiently scan and
fIlter the business environment for requirements which impact upon the finn and to
interpret, translate and internalise their implications in order to direct and generate
congruent organisational responses. This paper seeks to address how construction
firms can work towards this idealised state of organisational sensitivity, flexibility and
renewal through the use of integrated, developmental management systems.

2. Developing pressures

2.1. Context
Organisations can be fruitfully conceptualised as open systems which must effectively
interact with their external environment over time if they are to avoid myopia-driven
decay in the face of an increasing dynamic and turbulent business environment The
external environment can be viewed as a swirling mass of ever changing and often
intangible forces; be they cultural, political, economic, competitive and so forth; which
periodically crystallise into transitory dominant configurations which shape
organisational contexts and the nature of competition. At present, the issues of quality,
health and safety and the environment have emerged as particularly important areas for
construction firms to address if they are to survive and prosper, and will be discussed
briefly below in the U.K. context.

2.2. Quality
Quality has taken a high profile, especially since 1987 when BS 5750 was first widely
publicised. Since then the pressure on fmns has grown enormously based on a
perception that there is strong client demand. Questionnaire-based research has
indicated that around 15% of construction professional fmns are third-party certified to
BS 5750 so far [1]. A Delphi study led to an estimate that in around five years the
percentage will rise to 38% and at around 50% in ten years [2].
There is a preponderance of larger fmns involved. The disproportionate cost, and the
need for fonnality has caused problems for small fmns. These fmns, however,
predominate in the industry with around 98% of such firms having less than 20 staff.

2.3. Health and safety

Health and safety has theoretically been on the agenda for years and certainly since the
1974 Health and Safety at Work Act. This gained a further boost in 1991 with the
publication of management guidance by the HSE [3] which then set a standard for the
 Explosive management 15

management response required as an answer to the 1974 Act. The stakes have risen
more recently in the eyes of most fInns with the passing of the Managing of Health and
Safety at Work Regulations, 1992 and the Construction (Design and Management)
Regulations 1994. The UK legislative in this area is now principally putting into effect
European legislative requirements.
The major pressure on fInns is created through criminal liability which impacts on
individuals as well. This exposure has been clearly extended to clients in the CDM
Regulations and this is certain to lead to extra pressure.

2.4. Environment
Construction fInns are increasingly faced with environment-based requirements which
are influencing many facets of their activities, ranging from proactive environmentally-
conscious design and construction, through to green marketing and asset portfolio
management. These requirements are generated by a diverse range of stakeholders who
have an interest in fInns' overall environmental perfonnance; be it the ever increasing
amount of tougher environmental legislation from the European Community or the
growing public alarm about environmental depletion and degradation.

3. Variety of mechanisms

3.1. Context
There are a variety of mechanisms at work in these different areas within the U.K ..

3.2. Quality
In the quality assurance area the emphasis, in the UK at least, has been on third party
certification against BS 5750 (now ISO 9000) which is orientated towards achieving
consistency in the process. Because of the emphasis on fonnal systems and tangible
evidence there has been a tendency for paper systems, and in particular the Quality
Manual, to take centre stage. Research suggests that, subject to exceptions,
professional fInns perceive strong client demand for QA-certification, not unreasonably,
given that many clients ask whether fInns are certified at pre-tender stage [4].
However, it would appear that despite asking this question most clients ignore the
answer in favour of fIrst hand knowledge of the fInn or person, or the recommendation
of a trusted person who has had fIrst hand experience. It would appear that fInns and
certifying bodies place quite considerable effort into creating paper systems which at
best ensure consistency in the process, but are in fact largely ignored by clients who are
more interested in evidence of actual perfonnance.

3.3. Health and safety

In contrast, in the Health and Safety area, despite, or perhaps because it is driven by
heavy legal sanctions the fonnal emphasis of the requirements is very much on ensuring
management systems exist that really make a difference in practice.

"It has to be said that a concern for Safety which is sincerely held and
repeatedly expressed but, nevertheless, is not carried through into action,
is as much protectionfrom danger as no concern at all" [5]
16 Barrett and Sexton

The systems in question, and the way the requirements are policed, are both very
much developmental. Risk assessments are the fulcrum of the requirements, so that
people get to think health and safety. The HSE have also supported research to create
accessible measures so that a site can be rated for how hazardous or safe it is relatively
easily and a proactive improvement approach achieved [6]. There is still a tendency for
companies to create paper systems, but they know this is the means not the end and, in
fact, fIrms of under five people do not have to have documented systems at all!
A clear problem with Health and Safety enforcement is the attendant cost and the
HSE has to target its effort. This appears to involve dealing with flagrant breaches and
then concentrating on high profile cases. Thus, in pmctice it is impossible to fully
police the various regulations. The CDM Regulations attempt to address this by
injecting client pressure and getting the participants to check each other.

3.4. Environment
A variety of mechanisms have been developed to enable firms to improve their
environmental performance. The British Standards Institution's standard on
environmental management systems [7], the European Eco-management and Audit
Scheme [8] and the European Community-driven ecolabelling of building materials and
building products (e.g. see [9]) are arguably the most important.
The uptake of these mechanisms by firms is being hindered by their lack of universally
agreed managerial systems or objective measures of what constitutes good
environmental performance. Furthermore, these (and other similar) prescriptions,
although a positive move in the right direction, tend to prescribe desired change
outcomes, and do not take due account of the required change processes to achieve
them [to]. In unison, these constraints tend to render these mechanisms as 'facades',
laid on predominantly unchanged and fmgmented systems, generating reactive and
'end-of-pipe' organisational responses to environmental requirements.

3.5. Summary
In summary, it can be seen that quality requirements tend to be client-driven and are
being addressed through the promotion of service or product consistency, rather than
trying to cultivate continuous improvements. In contrast, health and safety
requirements are predominantly legislation-driven and are historically accommodated
within firms through mechanistic systems, rather than culture-based systems which can
integmte other, non legislation-based, requirements. In both of the above small firms
are not effectively addressed. Finally, environmental requirements are stakeholder-
driven, a dimension which requires finns to create multiple perspective goals; a skill
which many finns are failing to get to grips with.
With this seemingly insunnountable mish-mash of requirements and organisational
responses, it is temptingly easy to suggest that finns are doomed to be saddled with
expensive and adversely fragmented management systems.

4. Implications for firms

Generally, the fewer the business requirements being placed on finns, the easier it is to
stabilise activities in support of finns' core product and service offerings and to
 Explosive management 17

maintain continuity of core business focus across organisational functions and levels.
However, it can be seen that the prevailing waves of requirements being injected into
organisational domains are characterised by diverse, and often debilitating, complexity.
Adopting the law of requisite variety, fInns can only adequately manage this level of
externally-induced complexity by creating a corresponding level of internal complexity
[11].
In reality though, fInns tend to try and simplify their internal environment and protect
their core activities from such environmental complexity through the setting up of
systems which, in effect, seal the fInn off [12]. This 'buffering' manifests itself in a
range of responses: imperviousness, selective imperviousness, adaptation and action-
adaptation systems [13]. First, fInns which adopt impervious systems attempt to seal
the organisation completely off from the effects of business requirements. Second,
fInns employing selective impervious systems tend to concentrate only on those specifIc
requirements which have an immediate impact on fInns' core businesses. Third, fInns
creating adaptation systems aim to change themselves through adapting to the
contingencies in the requirements emanating from the business environment Finally,
fInns which embody action-adaptation systems strive to not only adapt to the
requirements, but shape the requirements in their own image to change them from
burdens to opportunities.
The prevailing response of construction fIrms to business requirements tends to be
towards the impervious end of the above continuum. This proposition is supported by a
recent RICS Workshop where practitioners expressed the view that the best they could
to do is to react to the present deluge of requirements being placed upon them. No
one really seemed to feel they were in control or that they could do more than the
absolute minimum [14]. Moreover, when a similar issue was discussed at an
international conference two years ago a delegate posed the question "What do you do
if you fInd yourself in a minefIeld?" The answer was "stand very still!" or, again, do the
absolute minimum [15].
Firms which adopt this minimalist strategy, in the short term, may very well be able to
concentrate all their resources on providing a strong technical orientation. However,
over time, this preponderance of front-stage activity will disengage the fInn from
business requirements, leading to strategic drift, stagnation, myopia and eventual crisis
and demise. Moreover, those fInns which try to become more action-adaptation
orientated tend to so through channelling requirements through existing and new, often
fragmented, systems. Firms undertaking this approach of responding to each pressure
by engaging fully in the disparate mechanisms are going to be confronted with huge
overhead costs. The balance between the effort to do work and the effort to
demonstrate management control will shift dramatically towards the latter, potentially
creating goal displacement [16], as tinns elevate the goal of compliance with
requirements above their primary goal of providing client-orientated service and
product offerings.
This leads to the central question in this paper. How can a fInn provide a high level
of service by effIciently and effectively addressing the issues of quality, health and safety
and environmental matters - rather than despite them?!
18 Barrett and Sexton

s. Formal responses and their limitations

On the quality front there have been developments which start to address some of the
limitations of the QA-certification approach. Building on decades of development
through the Japanese Deming Award, to the US Malcolm Baldridge Award, to the
European EFQM Award [17] and now the British QUality Award, a model has emerged
which takes a very broad view together with a self-auditing scheme and an annual
competition. This model is drawn from the quality domain, but really is about a
particular view of what constitutes good management. In the area of standards a
proposal has emerged in Canada for a general management standard which is
underpinned by the assumption that it is desirable for firms to have ..... a simple set of
management principles which can be used to support the management of any function,
for any objectives, in any size of organization, and at any level of an organization"
[18].
The positive aspect about these approaches is the wider view they take. The danger,
however, is that they claim too much. Rather than presenting a way of managing, they
propose the way and if adopted across the board they will inevitably lead to
inappropriate emphases in many situations, especially if they become audit documents.
Quite simply they present a simplistic view of management, not a bad view, but a
limited perspective when you think of the mass of management debate on so many
topics. Here the danger is that you would get what you measure - and very little else !
It is our view that it is more fruitful to create contingency-based approaches that reject
the all-purpose principles and constructs embodied within the above models, and adopt
a more behavioural, adaptive and flexible view of organisational activities.
The Vision 2000 strategy for quality standards [19] is interesting in this context. It
would be possible to argue for many standards tuned to various sectors, however, the
Vision 2000 document argues strongly against such proliferation and calls for core
generic quality management and assurance standards, supplemented by interpretative
documents in more specific industries, such as services. This approach seems to keep
standards focused on the control functions within organisations in a flexible way, but
without straying into the general management area.
The idea of general management initiatives and core generic standards with
interpretative guidance could, in principle, be extended to health and safety and
environmental issues. Indeed in the health and safety area the idea of core requirements
and then guidance material becoming, at the same time, more detailed and less
prescriptive is the generally accepted approach. The problems in the quality area
identified above indicate that although the ideas could translate to other organisational
activities, the actual mechanisms being pursued so far do not seem to have sufficient
capability or capacity to appropriately address the broad range of issues emanating from
the business environment.

6. An integrated, developmental way forward

6.1. Context
It can be seen that the complexity confronting firms provides a huge challenge and that
the current approaches, or more recent developments, all carry problems.
 Explosive management 19

The following section endeavours to effectively and efficiently 'nest' the management
of business requirements within an approach which focuses on the improvement cycle
within firms. Thus, it can complement steady-state quality management / assurance, or
be a viable option in the absence of such activity. It addresses an area where systems
can contribute - the hinterland between individual action and corporate strategy - but
does not pretend to address the whole of management activity.
Relating the discussion to earlier parts of this paper, it will be seen that the emphasis
on key measures of tangible achievement fits well with the health and safety approach,
at least as it appears in theory. In terms of quality there is increasing pressure to
achieve improvements as well as consistency. In the environmental field an approach
which allows incremental progress to be made could break the stalemate between
facade management and meaningful action which encompasses stakeholders' views.
It is suggested that the key to achieving improved organisation responses to a range
of business requirements is to introduce balanced cybernetic-based feedback
mechanisms so that construction finns actually learn from occasions where it could
have done better or from opportunities / ideas from other sources. In simple terms, the
construction fmn collects feedback extemally, as well as internally, then analyses the
information and integrates it into future service provision in order to improve
performance levels. It should be stressed that the process is iterative and thus
encourages continuous improvement.
Based on this sort of thinking and aiming for systems which are client-responsive and
facilitate a continuing cycle of improvements, an approach has been developed, through
debate and observation, which endeavours to meet these criteria. The approach has
been styled "supple systems" and is discussed next.

6.2. Supple systems

The supple system approach originated from the quality management domain [20], but
can be fruitfully enlarged and refocused towards the continuous improvement of how
organisations address multiple requirements generated from the business environment.
The key features of supple systems are given in Table 1. There is not space here to
describe the approach in detail, however, in summary, the approach advocates that a
strong, but flexible audit system is developed which ensures that improvements in the
quality of the service are being achieved. The audit system identifies sources of
feedback, assesses if action is required, and at what level, prioritises between
alternatives, allocates responsibility, checks later that action was taken, tries to
objectively assess the impact of the actions and finally feeds these findings back to those
involved. It should be noted that the above facets of supple systems should be
embedded within a strategic framework that directs fmns' inputs and processes towards
improved output performance (see [21]).

It is the authors' view, argued in more detail elsewhere [22] that this is a fruitful way
forward, with the "supple systems" approach having the potential to assist firms:
• faced with a constant stream of requirements, to sort out those which are relevant,
from those which are not;
• identify those requirements which can be absorbed by existing operating systems,
and which requirements need to be addressed from a more strategic perspective;
20 Barrett and Sexton

• to not only reconcile often disparate and conflicting requirements, but synergistically
integrate them; and,
• to create generic systems which have the capacity to manage multiple demands
against different criteria.

Table 1 - Key features of supple systems

Feature Comment
Client / Stakeholder Above all the systems are tested against stakeholder, and especially client
orientated reQuirements by actively seekin~ feedback through both hard and soft data.
Minimalist / holistic "As much as you must, as little as you may", that is, not having systems for their
own sake, but rather targeting high risk / gain areas. Better to have made some
pro~ress on all important fronts than to have a patchy provision.
Loose-jointed The systems operate at an audit level: clarifying objectives, checking performance
and integrating efforts. At an operational level different styles and approaches
can be accommodated, especially when they have proved themselves over time.
Evolutionary Allow incremental and continuing progress to be made from whatever base.
Symbiotic with social Build on the norms and culture of the organisation, for instance allowing self-
systems control or group pressure to operate where appropriate.

7. Research Agenda

There are many areas demanding further study, but a key cluster of related issues has
become clear:
• Finns should conceptualise that the addressing of a requirement-driven problem is
" .. .in fact a whole series of 'nested' problems, each alternative solution leading to a
new set of problems at the next level" [23]. The holistic sensing and interpretation
of these requirements is therefore crucial if fIrms are to formulate and implement
performance-orientated actions (for example see [24]).
• Towards this aim, it is suggested that systems should synergistically interact with,
and integrate, other external and internal subsystems. Adapting and synthesising the
notion of boundary-spanning units and lateral relations ([25] and [26] respectively),
it is proposed that supple systems should be energised and supported by cross-
functional teams which scan and assess the external environment for current and
anticipated requirements.
• Furthermore, these requirements should be decomposed into issue content and issue
process dimensions (see [27]). In this way, injecting the language of
integration/differentiation [28], the function-specifIc issue content (for example,
measures for health and safety) can be identifIed and directed towards the relevant
function in order to create optimal differentiation.
• Likewise, the generic issue process elements of incoming requirements (for example,
the actual measurement process which will be used to operationalise the health and
safety measures) can be abstracted to form a core of enabling skills which can be
drawn upon to more effectively manage future requirements, thereby optimising the
integration of otherwise disparate requirements.
 Explosive management 21

8. Conclusions

It has been seen that fInns are confronted with a bewildering array of demands and that
taking each as a discrete problem with an isolated solution is not really a feasible
approach. This is especially so when it is put in a wider context of a continuous stream
of new demands of which we have addressed prominent examples.
An approach is needed which develops the fInn's capacity to adapt to changing
demands, or better still to anticipate and mould those demands.
Drawing upon the metaphor presented by Lewis, fInns will not be able to capture the
organisational meaning of business requirements if they have no net to catch them in
[29]. Supple systems are proposed as an integrated, developmental net which can
provide positive benefIt to construction fIrms, however small, to do something, start
somewhere, in what will become a continuous development in the capability to identify
and satisfy business requirements. As time goes on a robust, but flexible framework of
systems and processes will be created. At the same time staff should develop an
understanding of their stakeholders and the requirements from them and of the key
inter-relationships within the organisation, leading to a successful service-orientated
culture pervading the fInn and ensuring the effective and effIcient delivery of product or
service offerings.
Ultimately, the "supple systems" approach has the potential to create a synergistic and
symbiotic nexus between business requirements and organisational activities through the
nurturing of systemic thinking that views requirements as being fluidly embedded within
dynamic contexts which require correspondingly holistic, flexible and ever progressive
solutions. To take this forward will require the further research identified.
In practical tenns professional fInns are under pressure to address key issues that are
congruent with their professional status. As leading practitioners in construction they
must aspire to produce high quality work which is achieved with due regard to the
health and safety of those involved and which also exhibits a responsible attitude
towards the environment. A supple systems approach is proposed as a way in which
fInns can grow into a role where they react, adapt, but also generate positive change.
This is to be achieved through integrated, developmental management systems that
propel them forward rather than tear them apart!

9. References

[I] Barrett, P. & Holling, J., (1994a). Survey of QA-certified Professional Finns in UK
Construction Delphi Study of Longer Tenn Developments with UK Quality Management
Experts, SERC Project Report No.1, University of Salford: UK.
[2] Barrett. P. & Holling. J.• (1994b). Delphi Study of Longer Tenn Developments with UK
Quality Management Experts. SERC Project Report No.5. University of Salford: UK.
[3] HSE. (1991). Successful Health and Safety Management. HMSO. London.
[4] Barrett. P. & Grover. R., (1995), A Quality Strategy for Chartered Surveyors. to be
published Autumn 1995.
[5] Hidden. A.. (1989). Clapton Junction Railway Accident Report, Report of Anthony
Hidden QC, Tribunal Chainnan, 27 September.
22 Barrett and Sexton

[6] Duff. A.R.; Robertson. I.T.; Cooper. M.D. & Phillips. R.A .• (1993). Improving Safety on
Construction Sites by Changing Personnel Behaviour. HSE Contract Research Report No.
51.
[7] British Standards Institution.. BS7750: Specification for Envirorunental Management
Systems. British Standards Institute. UK.
[8] Council of European Communities. (1993). Council Regulation (EEC) for a Community
Eco-Management and Audit Scheme. Brussels.
[9] Atkinson. c.J. & Butlin. R.N .• (1993). Ecolabelling of Building Materials and Products.
BRE Information Paper 11193. Building Research Establishment: Watford. UK.
[10] Sexton. M.G. (1995). The Prajna Approach to Sustainable Construction;. in Proceedings
of the Intemational Workshop on 'Environmental Impact Evaluation of Buildings and
Citiesfor Sustaillability; Florence. 13-15th September.
[II] Ashby. R.. (1963). Introduction to Cybernetics. John Wiley. New York.
[12] Thompson. l. (1967). Organizations in Action. McGraw-Hill. New York. pp.18-21.
[13] Leavitt. H.J.; Dill. W.R. & Eyring. H.B.. (1973). The Organizational World. Harcourt.
Brace. Javanovich. New York. pp. 306-310.
[14] RICS. (1995). QA Research Project Workshop. RICS: London. 6th June.
[15] Vision Eureka Conference. (1994). Quality Management in Building and Construction.
Lillehammer. Norway. 13-16 June.
[16] Etzioni. A.. (1964). Modern Organizations. Prentice-Hall: Englewood Cliffs. N.J.
[17] EFQM. (1992). The European Quality Award. EFQM: Brussels.
[18] Canadian Standards Association / Deloitte & Touche. (1993). General Principles of
Management Systems. Canadian Standards Association / Deloitte & Touche: Canada. P.3.
[19] ISO. (1992). Vision 2000: A Strategy for Internatiollal Standards' Implementation in the
Quality Arena During the 1990' s. ISO. Geneva
[20] Barrett, P. (1994). Supple Systems for Quality Management. RICS Research Paper Series.
RICS. London
[21] Barrett. P.; Sexton. M.G. & Stanley. C .• (1995). Cultivating Continuous Improvements in
Facilities Management. Paper presented at the COBRA '95 RICS Construction Research
Conference. 8-9 September.
[22] Barrett. P. & Sexton. M.G .• (1995). Integrated. Developmental. Management Systems.
Paper presented at the COBRA '95 RICS Construction Research Conferellce. 8-9
September.
[23] Cyert. R.M.; Simon. H.A. & Trow. D.B .• (1956). Observation of a Business Decision,
Journal of Business. 29: 247.
[24] Thomas. J.B.; Oark. S.M. & Gioia. D.A.. (1993). Strategic Sensemaking and
Organizational Performance: Linkages Among Scanning. Interpretation. Action. and
Outcomes, Academy of Management Journal. 36: 2: 239-270.
[25] Thompson. l. (1967). Organizations in Action. McGraw-Hill. New York. pp. 66-67.
[26] Galbraith. 1973). Designing Complex Organizations. Addison-Wesley. Reading. Mass.
Pp.46-64.
[27] Dutton. lE.; Walton, E.J. & Abrahamson. E .• (1989). Important Dimensions of Strategic
Issues: Separating the Wheat from the Chaff. Journal of Management Studies. 26: 4: 381.
[28] Lawrence. P.R. & Lorsch. J.W .• (1967). Organization and Environment. Harvard
Business School. Boston.
[29] Lewis. C.I.. (1956). Mind and the World Order. Dover. New York.
LONG-TERM SUCCESS OR FAILURE OF
CONTRACTORS' STRATEGIES OF
DIVERSIFICATION
P.M. Hillebrandt
Department of Construction Management and Engineering,
University of Reading, Reading, UK

Summary

This paper considers time series data and evidence from two studies· of large
contractors which examined the market strategies adopted by large contractors in the
boom of the second half of the 1980s and those of the recession in the first half of the
1990s.
The general findings are that;
contractors did not by their diversification policies avoid construction
cycles;
contractors benefitted from housing activity but not from property
development;
• contractors could have better anticipated the change in the housing and
property markets;
material producers and contracting businesses were less volatile than
housing, property and other businesses;
• external market factors were very important in success or failure but
internal processes also played a part;
in retreating to core businesses in the recession contractors often had
no choice but in many cases were right to do so;
contractors should not totally exclude diversification in the future.

The Organization and Management of Construction: Shaping theory and practice (Volume One).
Edited by D.A. Langford and A. Retik. Published in 1996 by E & FN Spon. ISBN 0 419 22230 8.
24 Hillebrandt

Sommaire

Base sur les donnes de "temps senel" et deux etudes de grandes entreprises du
biitiment cet expose examine les strategies de marche adoptees par les grandes
entreprises du biitiment pendant la prosperite de la deuxieme moitie des annees quatre-
vingts et la recession de la premiere moitie des annees quatre-vingt-dix.
Les conclusions generales sont que:
les entreprises du biitiment n' ont pas evite par leur politique de
diversification les cycles de construction;
les entreprises ont beneficie de l'activite du logement, et non pas du
developement des biens immobiliers;
les entreprises auraient pu mieux anticiper les changements des
marches du logement et de 1'immobilier;
Ie commerce des mareriaux et de la construction etaient moins
changeants que Ie logement, l'immobilier et les autres commerces;
les facteurs de marche exterieurs etaient tres importants pour les succes
et les echecs mais les procedes internes ont egalement joue un rOle;
les entreprises du biitiment n'avaient pas d'autre choix que de se replier
sur Ie commerce debase pendant la recession mais dans beaucoup de
cas, elles ont eu raison de Ie faire;
A l' avenir les entreprises ne devraient pas exclure totalement la
diversification.

Keywords: Strategy, diversification, contracting housing, property, materials,

fluctuations, cycles.

1 Introduction

In the period from the early 1980s to the early 1990s large construction companies
changed their market strategies considerably.
A study undertaken in 1986 by Hillebrandt and Cannon [1] of twenty large UK
contractors. It is estimated that they accounted for 60% of the contracting work of
the top 35 UK contractors UK contractors. The study found that market strategies
were dominated by growth and diversification and construction companies invested
heavily in property, housing, building materials, mining, plant, marketing and a whole
range of miscellaneous activities. The reasons are well documented in the study.
A later study undertaken in 1994 by Hillebrandt, Cannon and Lansley [2] of
eighteen similar companies, supported by published data on seventy of the top eighty
companies found a dramatic retreat to core businesses brought on by the recession.
Were the contractors making wrong judgements of their markets in the 1980s
or were other factors. responsible for their change of strategy? This paper attempts to
assess how far the strategies, particularly those of diversification, when formulated
made sense in relation to market conditions and to see how far they succeeded or
failed because of external market conditions or because of factors internal to
construction companies.
 Success of strategies of diversification 25

The 1986 study identified five main reasons for diversification: 1) to avoid
dependence on the cyclical nature of construction and particular clients and markets
2) to increase profitable growth 3) to increase activity or enhance security by
controlling supplies 4) to make good use of positive cash flow and 5) to increase fixed
assets.
Large contractors diversified into a whole range of activities but the most
important were construction related: housing development, property development and
material production, especially aggregates and sand and gravel. When the housing and
property markets collapsed and the general recession developed, they retreated to their
core business of contracting. To a large extent this retreat was not voluntary. In
order to grow and to diversify companies had borrowed large amounts of money so
that their gearing was very high. This had to be reduced and one way of doing this
was to sell assets. Construction companies tended to sell those of their peripheral
businesses which had a good market value. However in spite of the reduction in
diversity of activities being somewhat imposed, contractors generally are now reacting
against any idea of future diversification.

2 A voidance of fluctuations

There is sense in diversifying out of construction to avoid the fluctuations of the

construction cycle but housing, property and material production have shown
themselves to be as cyclical as construction itself and this was to be expected.
Contractors have in the past diversified into some totally different businesses such as
deep mining for minerals, boat building and, in one case many years ago, meat
processing. Generally these diversifications have not been a success in the long run.
What evidence did the contractors have before they diversified and, if they had
a choice would de-diversification be sensible in terms of the objective of reducing the
vulnerability of the businesses to fluctuations? Table 1 shows indices of output of
contracting, proxied by new construction output minus new private housing; private
housing, which is nearly all speculative; private commercial building which is some
indicator of the ups and downs of new property development; crushed rock aggregate
production and sand and gravel production for the main materials production.
Studying this table it can be seen what view the contractors could have taken
of the fluctuations in contracting compared with housing or property development.
Looking back in 1986 - which was the date of most of the first study - contracting
was seen to have fallen considerably from the high levels of the early 1970s and
recovered only slightly by 1986. The fall from 1971 to 1981 was 37% and still 29%
by 1986. Housing in 1986 was down by 31 % on 1973 but it had shown more extreme
ups and downs than contracting. By contrast property development was relatively
stable with a long steady almost uninterrupted growth from 1976 to 1986 and by 1986
was above the 1973 level. On this basis, if contractors wanted to avoid fluctuations
they should have concentrated on commercial development and contracting and left
housing alone. Indeed to some extent they did do this. Figure 1 shows that in current
prices from 1987 to 1990 contracting turnover of 70 of the top 80 companies nearly
doubled, housing increased by just over a third to a half and property development
increased by approaching a half.
26 Hillebrandt

Table 1. Indices of output for Contracting, Private Housing, Commercial Building and
Aggregates, Sand and Gravel 1971-1994. 1989 = 100

New
Construction Private Commercial Crushed Sand and
Year Minus Private Housing Building Rock Gravel
Housing Aggregates
1971 104 126 48 na 85
1972 99 133 47 59 89
1973 96 144 48 75 98
1974 88 104 44 70 86
1975 86 93 40 65 89
1976 85 100 35 58 84
1977 83 94 35 56 76
1978 85 107 40 58 78
1979 80 99 37 61 78
1980 74 78 37 61 75
1981 66 71 40 54 68
1982 67 81 45 61 70
1983 67 97 46 66 77
1984 71 94 48 66 76
1985 73 89 52 68 77
1986 74 99 58 73 80
1987 80 110 69 84 85
1988 87 123 79 95 99
1989 100 100 100 100 100
1990 109 78 111 96 89
1991 107 68 97 88 75
1992 104 68 79 85 68
1993 100 75 65 na 66
1991 101 80 68 na 68

Notes
1973 was the peak of the previous boom in all work by contractors including new
private housing and new commercial though new work as a whole peaked earlier.
1989 was chosen as the base year as it was the beginning of the downturn.
na not available

Sources:
Figures for construction, private housing and commercial building are based on DOE's
constant price series of value of output all corrected to 1990 price levels. Figures for
aggregates and sand and gravel are based on production or sales. All original data
came from various issues of DoE Housing and Construction Statistics.
 Success of strategies of diversification 27

Profits from housing, however (see Figure 2) increased more than profits from
property development and were in absolute terms very high.
Suppose contractors in 1986 were looking ahead, as they should have been, to
determine their strategy, how much of the changes could they have foreseen? They
were on the up-and-up in all types of work. All three types of work were buoyant and
from 1986 to the peak of output contracting increased by 47%, private housing by
24% and commercial work by 91 %. In 1986 i.t must have seemed that they couldn't
go wrong. The profit figures also showed that they were right to be in all three
businesses. But could they have foreseen the fall? To some extent they should have
done. The NED a forecasts first talked of the danger of an oversupply of office
accommodation in December 1986 and made a negative output forecast for 1989 in
December 1987 years before the fall in orders or output and in time to avoid some
new developments. However the gestation period of the large property schemes was
long and so also was the construction period. This warning would have come too late
for the very large schemes.

£000 million current prices

20

16

12

~ ~~ ~ 7-
7.:
~
4

o
~~
~
~

1987
~~ ~II
1988 1989
~~~ ~ ~
~ffi ; ~Wl
~
1992
%

~Wl
~
1993
'990 199'

_ Contracting ~ Housing (IRIJ Prop. Dev't.

~ Materials rrrrn Other g Foreign

Fig. 1. Turnover by activity of 70 of the top 80 UK construction companies 1987-93

Source: Construction Forecasting and Research Ltd based on company accounts for
and quoted in Hillebrandt, P. M., Cannon, J., and Lansley, P. R. (1995) The
Construction Company In and Out of Recession, Macmillan; London.
28 Hillebrandt

£ million current prices

1200.----------------------------------------------.

800~-------V~----~A--------------------------------~

400~~----~~-----L~--~.-------------------------~

-400~----------------------------------~~------~

-800L-~------~----~~----~------~----~------~~

1987 1988 1989 ,990 '99' '992 '998

_ Contracting ~ Housing mm Prop. Dev't.

~ Materials g Other

Fig. 2. Pre-tax profits by activity of 70 of the top 80 UK construction companies

1987-93

Source: Construction Forecasting and Research Ltd based on company accounts for
and quoted in Hillebrandt, P. M., Cannon, J., and Lansley, P. R. (1995) The
Construction Company In and Out of Recession, Macmillan; London.

In the case of housing, the writing was on the wall in March 1988 with the
announcement of the abolition of joint mortgage tax relief to take place in August.
However, the NEDO forecasting panel did not comment and contractors continued to
buy land at very high prices for the first eight months of 1988. Some companies did
not recognise the recession even in 1990. In the case of contracting the reasons for
the fall in output were general recession exacerbated by the specific factors of the
housing and property market collapses. Public sector expenditure had a moderating
influence on the downward trend with spending on health, education, infrastructure
and even housing being relatively steady. The demand for aggregate, sand and gravel
follows that for construction. Road building is an especially large consumer of
aggregates. Unfortunately very recent data for crushed rock aggregates are not
available but fluctuations in demand for them have been greater than for construction
though for sand and gravel they have been about the same.
 Success of strategies of diversification 29

3 Sector by sector consideration of diversification

3.1 Contracting
Contracting companies do not of course diversify into contracting but contracting must
be the benchmark by which other sectors are judged. It has already been seen in
Table 1 that contracting suffered from fluctuations, although they were not as violent
as in housing or commercial building. However, Figure 1 shows a very different
picture for large contractors in that, at constant prices, turnover in contracting rose
steadily to 1991 and remained at about that level in 1992 and 1993. As prices fell
during the recession in real terms turnover probably increased. Profits did not do so
well as seen in Figure 2 and were, in any case, not high compared with housing or
property profits on turnover, but they were at least still positive in 1993. However,
the cash situation became tighter during this period, partly because of the element of
cash flow in profit which was falling, but also because the more difficult trading
conditions brought squeezes wherever the client or suppliers could achieve it. This
affected the business as a whole and the capital intensive businesses in particular.

3.2 Housing
Diversification into housing certainly, in the short run, achieved the objective of
increasing profitable growth. Figures 1 and 2 show that in 1988 the profit from
housing was about level with the profit from contracting, though the turnover was only
about 60% of that in contracting. Thereafter profit fell and became negative in 1991
and 1992 while turnover fell back only to 1987 levels. But over the period 1987 to
1993 as a whole large contractors benefitted from a large net housing profit.
A major reason for diversification into housing was to make good use of
positive cash flows. Housing does this well by investing the surplus cash in land.
However, the contractors considered the matter wrongly. They thought about the cash
but not that it was only a flow going through their hands which did not belong to
them. Moreover, flows dry up, and when contracting became more difficult cash flow
diminished. It is possible that it will be reduced permanently as different forms of
financing for projects and contractual arrangements become more prevalent.
The reason for diversification to avoid cyclical fluctuations has not worked and
could not have been expected to work in housing. If, in 1986, the contractors looked
at the past fluctuations in housing and said that it was worth putting up with
fluctuations in order not to miss out on the vast profits which could be made, they
were acting logically. In fact it is doubtful whether they did look at past fluctuations.
They were concerned with day to day operations and these were going well. They
were not acting logically in failing to realise in March 1988 that the boom would end.
Internal factors then took over in the companies. The main boards could not curb the
housing arms of their companies while they were making such large profits even if
they realised that it could not last. When the market collapsed it was too late. They
had bought land at high prices and had difficulty in selling houses. Some realised
relatively early, but others went around with blinkers on till 1990.
Were they right to reduce and in some cases to get out of housing in 1990 to
19951 Many of those who sold early had to do so. But even in 1995 companies were
selling their housing businesses. Probably they are right. It has been seen that
housing fluctuations are very great over a long period and the outlook for housing in
30 Hillebrandt

1995 looks bleak, with less security of employment for house buyers, a key long term
factor in confidence. Many observers consider that house prices will never boom
again as in the past. I am less certain. People have very short memories and at least
in some segments of the market a substantial rise in prices over and above the rate of
inflation cannot be ruled out. Contractors should probably withdraw from housing
now, but a move back into it might be appropriate in some years or decades ahead.
They wouldn't want to, and shouldn't, miss out on any future profits bonanza.
There is however another factor to consider. In the last few years specialist
housebuilders have performed rather better than contractors in their housing activities.
It may be that in order to follow and react to the market situation single minded
attention must be devoted to housing. It has also been suggested that a first class
housing development manager will not wish to work for contractors as opposed to
housing specialists. Contractors' housing managers are often building specialists who
happen to work on housing.

3.3 Property
Again growth and profits were major incentives to develop in property. However,
while neither the contribution to turnover nor the absolute profit were as great as in
housing, the rate of profit related to turnover was about the same in the good years
and proportionately much greater than in contracting. Unlike the situation in housing
over the years 1987 to 1993 the losses from property of the large contractors were
nearly as great as the profits so neither long term growth nor profits were achieved,
while contracting profits continued to be positive throughout. A second reason to go
into property was to make good use of positive cash flow and, in so far as the
property was being retained, to increase fixed assets. This it did until the fall when
property which had not been let became unsaleable. The evidence from past years is
that property, as shown by commercial building, was a stable area of activity relatively
free from cyclical factors. That idea was demolished as the boom collapsed.
So the contractors would have been better off not to have gone into property.
However, it is difficult in 1986 to see how they were to know that although by 1987
or 1988 when it was clear that an over supply of offices was building up, they should
have pulled out. Some contractors are still trying to rectify the results of their
property exploits. But to say that they should keep out of property development in
the future is too sweeping. The period to about 1987 was one of good solid
development Only later did it get out of hand.

3.4 Materials
The move to material production often had very different reasons from the
development of other businesses. A major aim was to control supplies and in 1986
this was important, as the increase in activity was seen to be jeopardising supplies.
To own and operate your own material supply gave greater security. At the same time
it increased fixed assets. Although Table 1 shows that aggregate output fluctuated,
output by the large contractors of materials did not fall greatly from 1989 to 1993.
Production of materials did not, however, directly make much impact on growth and
was only reasonably profitable until 1991. On the other hand, overall losses were not
made and in some cases profits for materials are in 1995 better than from any other
source.
 Success of strategies of diversification 31

Contractors made a logical decision to have control over sources of supply

while that was a problem but thereafter each operation had to be considered on its
merits.

3.5 Other activities

Other activities increased considerably in the period 1987 to 1990 and then fell back
again. Their contribution to profit was small and the losses incurred in 1991 to 1993
were greater than the profits made in the previous four years. Why was this? The
reasons for going into these other activities may have been partly to have some contra-
cyclical activities, but if so it did not work. In some cases the activities were acquired
"by mistake", with another acquisition, or were the cherished idea of a respected staff
member. In some cases they were deliberate board policy.
Some companies made very substantial investments in other non-contracting
activities. Mining is a case in point and one company had around a third of its
business in mining. There had been connections with contracting in the beginning and
each successive change in the type of business had some links with the previous
business. First the company was in the business of opencast coal production where,
in the post war years the machinery for removing the overburden was normal large
contracting earth moving equipment, although now it is specialised. However, that
link and experience in opencast coal brought knowledge of the coal industry and the
next step was deep coal mining. The know-how of deep mining facilitated an entry
into the mining of other minerals.
It seems it is necessary either to have some know-how which is transferable
from one business to another or to be so large in each business that the company can
attract top specialist managers for each business. This is what conglomerates such as
Trafalgar House do and it is also the policy of Bouygues, the French contracting and
television group.
Many of the adventures by contractors with other products were small scale.
The reasons for their fall may have been that they were peripheral to the activities of
the company as a whole and did not get enough attention or even investment or that
they, and the related market, were not properly understood even by their managers.
All these are internal factors.

4 Summary of overall conclusions

The conclusions may be summarised as follows:

Enhanced activity in housing increased turnover and profits in the short
run and over the period 1987-93 as a whole.
Enhanced activity in property increased turnover and profits but, over
the period 1987-93 as a whole, the net benefit was negligible in terms
of profit.
Both housing and property development adversely affected companies'
balance sheets and forced sales of assets.
Materials businesses were not especially profitable but have been more
stable than other businesses. They fulfilled for the boom period the
objective of increasing control over supply.
32 Hillebrandt

Other activities were never very profitable as a group and were loss
making over the period 1987-93 as a whole. The reasons are probably
internal to the companies.
None of the activities discussed fulfilled the requirement of off-setting
the contracting cycle. Contracting turnover and profits of large
contractors were less volatile than those of any of the other businesses ..
Contractors could have used past data to support their diversification
to property and aggregates and sand and gravel for contra-cyclical
reasons but not to housing.
Contractors could have foreseen earlier the fall in the office property
market and the fall in the housing market.
Preoccupation with internal factors and a lack of attention to the market
as a whole was probably the reason why contractors did not anticipate
the decline in property and housing.
Housing and property development were good uses for positive cash
flow only while the cash flow continued at a high level. Thereafter it
was disastrous.
Property development was theoretically a way of increasing fixed assets
held by contractors but it went badly wrong, because of the amount of
unlettable and hence unsaleable property.

Contractors must accept that not only contracting, but also housing
development and property development are subject to wide fluctuations, largely
because all of them are investment goods which are required irregularly. Materials
are so closely connected to construction that demand for those too is unstable. The
skill in diversification policy probably lies in anticipating the market changes and
being prepared to increase or decrease activities in various markets in advance of the
market changing. Nearly all the problems of the diversification policy arose from
external market factors but the effects of many could have been minimised by internal
vigilance on how the market was likely to change and by placing less reliance on
current profitability as an indicator.
Diversification into other products has not been very successful. Contractors
are perhaps not good at other businesses and unless the operation is a large one it is
difficult to attract the best managers in the business.
Overall, therefore, contractors should diversify or expand where there are
opportunities in a business they know well and be prepared to shrink again as
necessary. Future diversifications or expansions in housing development, property
development or material production, should not be permanently ruled out, whatever
the expedient actions of the present time.

5 References

1. Hillebrandt, P.M. and Cannon, J. (1990) The Modern Construction Firm,

Macmillan; London.
2. Hillebrandt, P.M., Cannon, J. and Lansley, P. (1995) The Construction
Company In and Out of Recession, Macmillan; London.
ANALYSING CONSTRUCTION
CONTRACTORS' STRATEGIC INTENT
FROM MISSION STATEMENTS
F.T. Edum-Fotwe, A.D.F. Price and A. Thorpe
Department of Civil and Building Engineering,
Loughborough University of Technology, Loughborough, UK

Abstract

A construction company's strategy formulation usually culminates in action

progranunes that are presented in mission statements which form an integral part of the
company's annual report to its shareholders. Mission statements of construction
companies express not only the intended strategies of these organisations, but also
present an assessment of previous performance upon which the long-tenn vision of the
company's executives, in terms of what it aspires to be, who it wants to serve, and
how it wants to compete in its chosen markets, is based. Analysis of mission
statements highlight how construction contractors respond to changing conditions in
order to ensure their survival within their perceived future business environment
Detailed analysis of the mission statements present a view from within the company of
the strategic intent arising from their planning, which is aimed at addressing the future
of the company. This paper presents an analysis of the mission statements of twelve
large construction contracting companies. The analysis draws on nine principal factors
that characterise the missions of large corporate bodies to evaluate the mission
statements of the selected contracting companies with a view to identifying variations in
the nature of strategies that were 'intended' to be pursued. The analysis shows that
construction contractors' strategies embody five main factors.
Keywords: Mission statement, construction contractor, content analysis, content
factors, strategy.

Sommaire

La formulation de strategy d'une entreprise s'exprime par des programmes d'actions

qui sont presentees comme declaration de mission et qui forme une partie integrale du
rapport annuel de l'entreprise. La declaration de mission des entreprises de
construction presente non seulement les strategies projetees de ces organisations mais
aussi une evaluation de la performance anterieure sur laqueUe sont bases les visions
futures des executives, a voir, les aspirations, les services offers et les termes de
competitions dans les marches. Une analyse des plans de mission demontre comment
les entreprises repondent aux changements de conditions dans Ie but d' assurer leur
survies dans l'environnement d'affaires. Une analyse detaillee des declarations de
mission presente une vision interne des strategies dans les entreprises, qui resultent de
leurs planification qui a pour but d'adresser Ie futur de l'entreprise. eet article presente
une analyse des declarations de mission de douze grandes entreprises. L'analyse deduit
de neuf facteurs pricipaux qui caracterisent les missions de grands conseil d'entreprises
en vue d'evaluer les declarations de mission des entreprises choisis, et d'identifier les
changements dans la nature des strategies projetees. L'analyse montre que les strategies
des entreprises sont basees sur cinq facteurs principaux.
The Organization and Management of Construction: Shaping theory and practice (Volume One).
Edited by D.A. Langford and A. Retik. Published in 1996 by E & FN Spon. ISBN 0419222308.
34 Edum-Fotwe, Price and Thorpe

1 Introduction
The focus of a construction contractor's strategy is usually reflected in its mission
statement. The outcome of its past strategy and the future direction for the contractor's
business is usually presented as executive summaries contained in the annual report.
There was great enthusiasm for developing organisational mission statements in the
1980's. Piercy and Morgan [1] attributed this interest to the fundamental work of
Drucker [2] on the importance of business mission to efficient management. Brabet
and Klemm [3] equally recognised the importance of business mission for attaining
profitability. The statements were considered as valuable tools whereby managers can
motive, focus and provide leadership for their staff towards the objectives of the
company, as well as presenting a coherent programme of strategy for the consumption
of shareholders and third party interests.

This paper examines the mission statements of construction companies to identify their
content and variation over time. A carefully prepared mission statement was
recognised by Drucker [2] as the first step in strategic management. Analysis of such
statements therefore should provide information on what is addressed by construction
contractors in their strategic planning, and the changing patterns of how construction
businesses have been perceiving and functioning within their business environment in
order to ensure their survival. Considerable diversity exists in the composition and
application of their mission statements among companies in different business sectors.
Analysis of the mission content of manufacturing and service companies has been
undertaken by David [4]. There is, as yet, no similar analysis undertaken for
companies in the construction industry. Such an analysis should therefore establish the
focus for construction companies, in their strategic planning from a perspective internal
to the construction business. Mission statements are almost universally presented
qualitatively in a descriptive format, and therefore, to effectively analyse together these
disparate mission statements from different organisations, a method that ensures the
effective translation of qualitative and textual data into quantitative format is employed.

1.1 Definitions for mission statement

A company's mission statement has been defined by David [4] as that enduring
statement of purpose which distinguishes one organisation from other similar
enterprises. It is considered as a declaration of the company's 'reason for being'.
Other forms of phraseology which have been employed for mission statement include
creed statement, statement of purpose, statement of philosophy, statement of beliefs,
and statement of business principles. All the above phrases connote a long-term
perspective, a basic requirement for formulating effective strategies. These various
definitions put forward for the mission statement of organisations can therefore be
summarised as a common management tool that addresses an organisation's 'theory of
business', antiforms the basis of its corporate strategy. The use of the terminology in
this chapter therefore adopts this explanation.

1.2 Components of mission statements

Broadly speaking, all organisations have a mission or 'reason for being', even if
corporate planners and senior executives have not consciously put it into writing.
Results of recent research suggest that a key aspect of strategic planning - getting
senior executives to agree on, and putting into writing a definition of the purpose and
scope of the company can actually translate into profits [5]. However, what a mission
statement should contain is still open to debate. In his earlier work Drucker [2]
outlined the components of missions statement as involving a company addressing
 Analysing intent from mission statements 35

itself to three key questions; 'who is our customer?', 'where is our customer?', and
'what is the value of our customer?'. The three key questions of Drucker were viewed
by Pearce [6] to be less comprehensive for providing a balanced and effective mission
for corporate entities. Pearce [6] subsequently put forward six factors that
characterised missions of high performing companies, and suggested that mission
statements of organisations should comprise six factors. The factors were presented
as:

product or service, market and technology;

survival goals outlining growth and profitability;
company philosophy;
company self-concept;
public image; and
responsibility to stakeholders.

The factors of Pearce [6] were empirically determined from mission statements
surveyed from the Fortune 500 firms. David [4] also undertook a comparative analysis
of the mission statements of manufacturing and service firms. Both Pearce and David
[4,6] achieved their objectives by applying a content analysis methodology.

According to McGinnis [7], a mission statement, in addition to defining what the

organisation is, and aspires to be, should be limited enough to exclude some ventures
and broad enough to allow for creative growth, distinguish a given organisation from
all others, and serve as a framework for evaluating both current and prospective
activities. In line with this, Want [8] considered the primary components of a mission
statement to be of five categories. These were outlined as purpose, ultimate business
aims, corporate identity, policies of the company, and values. The various categories
employed by Want [8] are explained below.

The purpose includes the primary justification for the organisation's existence, which
translates as the primary lines of business for the company, the products and services
provided or markets to be served, and manner in which they are to be served.

Ultimate business aims address the market share, profitability or size, strategies for
achieving growth and optimal productivity, and impact on competition.

Corporate identity embodies how the company wants to be recognised in the markets in
which it undertakes its business by clients, competitor companies, other interested
corporate entities like the financial institutions, the social community, and the its
employees so that all these interested parties can develop a sense of identity and
commitment with the company.

Policies of the company refer to the philosophy and style of leadership of its senior
executives, the relationship between top management and the company's board of
directors, owners and shareholders, and the company's overall decision making
structure.

Values include consideration for customers, competitors, employees, regulatory

agencies, and the general public.

The various submissions on content of mission statements by different analysts

overlap. In essence, they contain many of the same issues, with Pearce [6] favouring
greater detail and specificity, while Drucker [2] showed a preference for a more general
coverage. The most comprehensive list of categories for the content of mission
36 Edum-Fotwe, Price and Thorpe

statements was outlined by David [4], who put forward a preliminary list of nine
categories in his comparative analysis of the mission statements of ftrms in two
business sectors, which is presented in Figure l. The nine mission content categories
brought together the most comprehensive content list, and embodied all the different
factors presented by Drucker, Pearce and Want [2, 6, 8].

1. Clients/Customers
2. Services/Markets/Products
3. Location/Geographical spread
4. Technology
5. Economic survival/Profitability
6. PhiIosophylValues/ Aspirations
7. Self.concept/Strengths and weaknesses
8. Concern for public image
9. Concern for employees
Figure 1: List of mission content categories [take" from David 1989J

2 The content analysis method

Content analysis has been employed for the successful examination of historical
artefacts. Easterby-Smith et al. [9] recount examples where this method was
employed in analysing historical accounts. The method basically involves the counting
of certain key phrases or words or ideas embodied in written materials, and the
frequencies are then analysed. This is achieved by selecting the written statements,
developing categories, and measuring the frequencies of appearance for the categories
in the various statements. By applying appropriate statistical assessments, conclusions
can be drawn on the various content factors. The method is commonly employed to
analyse qualitative and unstructured data, and leads to an appreciation of the concepts
involved in managerial activities which are set down as written documents [10]. This
can be established by identifying non-random variations in their textual data. The
information presented in corporate literature is considered as corresponding to an
objective reality that reflects the strategic intentions of construction contractors.

This method was employed in this research to analyse the mission statements of
construction contractors because of its suitability for the purpose. Construction
contractors' mission statements are presented as qualitative information, which are all
too often unstructured. To be able to capture the scope and coverage of its content, the
method provides a means of isolating the important issues addressed in the statements
for a number of contractors, in order to arrive at a unanimity on construction contractor
mission statements. This research analysed annual mission statements of twelve
construction contractors over a ftve-year period using the content analysis method.
The annual examination identifted the main mission factors that featured in their
executive summaries. Each of the identifted mission contents was then analysed over a
ftve year period to identify any variability. The results of the analysis have been
presented in section 4.
 Analysing intent from mission statements 37

3 Nature of contractors' mission statements

The mission statements of construction contractors are usually emlx><lied in their annual
reports. These are presented as part of the executive statement of the Chainnan, and
the in some cases of the Chief Executive Officer. The executive statements usually
review the past perfonnance and then define a mission for the future. The mission
statements of contractors vary in content, and address different factors which can be
identified with the content categories presented by David [4]. Excerpts from the
mission statement of one of the major organisations in the construction industry, which
is referred to in this paper as Company A, is provided to exemplify how construction
companies include the categories identified by David [4] in their mission statements.
This is based on the executive statement which fonns part of their 1992 annual report.

Clients and customer

No reference

Services, Products and Markets

The Company A Group includes the United Kingdom's largest construction materials
supplier, the largest private house builder and the largest building and civil engineering
contractor. A balanced range of other construction materials and services complete the
group's portfolio, which all lies in the construction industry.

Location
... to take advantage of the good market conditions in the UK.
... our confidence in the long tenn prospects of the North American markets.

Technology
No reference.

Concern/or Survival
One certainty is that the organisation and commitment which have made our Housing
Division such an effective and profitable competitor will not fail in the new conditions.

Philosophy
The group operates on a rigorously decentralised basis in seven autonomous divisions.

Self-concept
... mount a large-scale, keen and effective response to the opportunities that exist.
Concern/or Public image
Company A is the biggest UK controlled building materials and construction group.

Concern/or employees
Individual success is at the heart of our corporate philosophy and our corporate
success.

The excerpts from Company A's 1992 mission statement presents a comprehensive
approach in their mission. This broad scope allows for devising and considering a
wide range of feasible alternative objectives and strategies that does not limit
managerial innovation. The Company A Group comprises several business units in
different sectors of the industry. Such a broad approach to their mission statement also
enables the corporate centre to reconcile differences among the various units of the
company that have to confront diverse stakeholders in their various business sectors.
38 Edum-Fotwe, Price and Thorpe

To illustrate the presentation and scope of construction contractors' mission, two such
statements for leading companies in the industry. referred to in this paper as Company
B and Company C. are hereby reproduced.

Company B
The built environment is essential to our daily life, providing shelter and the means to
create economic activity. Company B supplies a wide range of products and services
to meet these needs- from the building of homes to the construction of major
infrastructure projects. The group endeavours to undertake these activities responsibly
and in the best interests of its shareholders'.

Company C
'Company C pic is a major force in the construction, housing, mechanical engineering
and technology related markets in the UK, with operations in a growing number of
overseas markets and an increasing involvement in investment-led projects. The
Group's successful and flexible blend of services, skills and products is tailored to
meet the needs of clients, and is complemented by its continuing caring concern for the
community, the environment and its own employees and pensioners. The Group's
strategy remains to build on its strength. It continues to focus on the core businesses
of Construction and Homes, developing its ancillary skills and activities to support
them. In parallel there is a continued drive to increase the productivity, efficiency and
cost-consciousness of all parts of the Group, and to maintain the proven high standards
of quality, safety, and reliability to the benefit of customers, shareholders and
employees'.

4 Analysis of the mission statements

The nine elements that featured in the work of David [4] were adopted as a basis for
analysing the content of the contractors mission statements. Each mission statement
was judged as including a particular factor if reference was made to that factor either
directly or implied by a phrase contained in the executive statement of the annual
report. A value of one (1) was assigned to that particular factor for the company in the
year considered. Where no reference is made to a content factor in the mission
statement, either directly or by implication, a value of zero (0) was assigned that
particular factor. The analysis was performed utilising the mission statements of
twelve major construction contractors. The basis for selecting the twelve companies
was primarily the ready availability of their annual reports. The statements from the
selected companies covered the period 1987 to 1991, and 1993. The selected period
offered different conditions of business environment ranging from recovery, through
an economic boom, to a recession. This way it ensured that the contents resulting from
the analysis, will reflect the changes in the focus of strategic responses for contracting
companies in the industry in different phases of the economic cycle.

4.1 Content of contractors' mission statements

The analysis began with the composition of matrices that summarised the annual
content categories in the statements of the twelve companies. For each factor, a mean
annual value was determined. The mean values ranged from: 0.00, in which case no
company within the sample included that factor in their mission statement; to 1.00, for
which aU the companies included that particular factor in their mission statement. A
factor is rated as forming part of the content of contractors' mission statements if it
exhibits a consistent mean value closer to the value of one (1). Consistency here was
 Analysing intent from mission statements 39

established by the value of the t-statistic with zero as the control mean value. Table 1
outlines summary statistics of the overall content factors derived from the matrices. A
low value for the statistic indicated a consistent non-inclusion, with the converse
holding true. Figure 2 shows the plot of the corresponding histogram of content
factors to ascertain the factors that reflected consistent inclusion or non-inclusion in the
mission statements.

4.2 Analysing annual variation in content of mission statements

The variation in content of mission statements was assessed by pairings of the
distributions for the annual means, and evaluated by paired t-test. The pairings were
performed by matching a particular year's content factors with all the rest in
succession. This way it was ensured that gradual annual changes which result in a
major long-term variation is not overlooked. Table 2 presents the result of the paired t-
test for the data from 1987 to 1991.
Subsequently, the five-year mean for the period from 1987 to 1991 was paired with the
mean value factors for 1993. Table 3 presents the results of the paired t-test to evaluate
variation in mission content between the two distributions.

Table 1: Summary statistics of overall content factors

Content factor S-yr. mean 1987-91 S.d. t-statistic Comment

Clients/Customers 0.066 0.071 2.091 O.OOt
Services/Markets 0.932 0.093 22.382 1.00'"

Location 0.667 0.131 11.345 1.00'"

Technology 0.032 0.044 1.633 O.OOt

Economic survival 0.900 0.109 18.410 1.00'"

Philosophy 0.867 0.175 11.092 1.00'"

Self-concept 0.868 0.126 15.407 1.00'"

Public image 0.200 0.094 4.740 O.OOt

Employees 0.300 0.075 8.885 O.OOt
J.00·· strong evidence of COflSlstenl InclllSlon O.oot· strong eVidence of non-lnclllslOn
 El5-yr mean C 1993

1.000
0.900
CI>
=
CQ
0.800
> 0.700

-
'-
0
CJ
~
0.600
0.500

--
c
CI>
c
0.400
0.300
0
0.200
U 0.100
0.000
Clients/ Services/ Location Technology Economic Philosophy Self~t Public image Employees
Customers Mukets survival

Figure 2: Degree of inclusion/non-inclusion of content factors in contractors' mission

 Analysing intent from mission statements 41

Table 2: Summary statistics for mission variation 1987-1991

Annual pairings Mean for annual values t-statistic for

Year 1 Year 2 Mean Yrl Mean Yr2 paired means
1987 1988 0.537 0.583 1.049
1987 1989 0.537 0.537 0.000'"
1987 1990 0.537 0.592 1.264
1987 1991 0.537 0.434 2.330+
1988 1989 0.583 0.537 l.l14
1988 1990 0.583 0.592 0.286
1988 1991 0.583 0.434 3.410'"
1989 1990 0.537 0.592 1.400
1989 1991 0.537 0.434 2.053
1990 1991 0.592 0.434 3.878'"
• -p<O.OI. + -p<O.05

Table 3: Summary statistics for mission variation between 5-year mean

(87-91) and 1993

5-year mean Mean value t-statistic for

(1987-1991) factors- 1993 paired means
A verage of mean
value factors 0.537 0.647 2.868

Standard deviation 0.382 0.388

5 Discussion

This section addresses the outcome of the content analysis for the sample contractors.
Although it will be inappropriate to generalise with the sample for an industry-wide
perspective of the focus of contractors' strategic planning, the analysis still provides an
insight into the issues that receive the long-tenn attention of the companies in the
sample, from which other companies can learn.

5.1 Strategic content of contractors' mission statements

From the results of the analysis it can be observed that, for the sample contracting
companies, five factors dominate their mission statements and hence the focus of their
strategic survival. These are:
42 Edum-Fotwe, Price and Thorpe

services and markets;

location and geographical spread;
economic survival and profitability;
philosophy and values, or aspirations; and
self-concept, or strengths and weaknesses.

The dominant factor of location and geographical spread in the strategy of construction
contractors is only logical, as the products of their business operations are not
transportable. By defining market sectors for their business operations, contractors
attempt to achieve a balanced corporate portfolio. All the companies in the sample
could be classified as industry leaders, and were therefore aware of their position
within the industry, and clearly articulated business philosophy to exploit their position
of strength.
The general absence of four major factors in the strategic focus of construction
contractors present a case for an improvement in the scope of their strategic concerns.
The factor concern for employees featured in some of the mission statements of the
contracting companies in the sample, nevertheless, the level of its mean value and t-
statistic indicated a general non-inclusion in the missions of the whole sample. No
meaningful inference could therefore be drawn on this factor. It can be inferred that for
the sample of companies, the focus of their strategic planning does not cover the three
factors clients and customers, technology, and concern for public image. The non-
inclusion of the factor of technology in the mission of contractors is perhaps consistent
with the general view of an industry which is still labour intensive. However, the non-
inclusion of the factor clients and customers in the mission of the sample companies
does not reflect the project oriented nature of the industry, where long-term
relationships with clients can significantly influence levels of turnover and minimise
business risks. It would have been expected that contractors' strategies would focus
on the employers who generate the majority of the industry's workload. However
evidence from the analysis point to the absence of such relationships. Exploiting the
development of such relationships as a strategic option, should provide opportunities
for construction contractors to minimise their business risks. There has been an
increasing awareness in recent times, of the influence exerted by the built environment
on nature by the general public. This has prompted some construction contractors to
include environmental concerns in their strategic focus. However, the low mean value
for the factor concern for public image, could be interpreted as indicating that a
significant proportion of construction contracting organisations are lacking in this area.

5.2 Variation in the focus of contractors' strategies

The paired annual mission contents revealed that between 1987 and 1991, the focus of
contractors' strategic planning did not undergo any appreciable change. This is
evidenced by the values returned from the t-test of the paired data. The low values of
the resulting t-statistic was consistent for all the paired data making up the sample. In
The business environment in which contractors operate is characterised by cycles of
change, influenced by several economic factors, such as funding shifts, deregulation,
and foreign competition through globalisation of the industry's markets. Construction
contractors' mission statements, however, indicate a stability in the focus of their
strategic orientation. This perhaps should be the case, as strategy, should denote an
enduring character. However, the consistent non-inclusion of the factors of clients,
technology, public image and employees, over the five year period offers some insight
into areas for which could be addressed to provide greater scope for competitive
advantage. Analysis of the statements for 1993 did not reveal any change in the
number of factors that played a dominant role in the strategic focus of construction
 Analysing intent from mission statements 43

contractors. However, there was a modest change in the mean factor values for the
five dominant factors, suggesting a wider appreciation of these factors for their
strategic survival by construction contractors.

6 Summary
The chapter has employed a content analysis method to evaluate the strategic focus of
construction contractors' mission. The analysis revealed that five factors dominated the
mission of construction contractors. These were services and markets, location and
geographical spread, economic survival and profitability, philosophy and values
{aspirations}, and self-concept {strengths and weaknesses}. The evidence from the
analysis shows that contractors give little or no consideration to the other factors of
clients/customers, technology, concern/or public image, and concern/or employees,
normally associated with mission statement.

One of two inferences could be drawn from the outcome of the analysis. First, that
construction contractors give consideration to the factors of clients (customers),
technology, concern/or public image, and concern/or employees, in their search for
corporate objectives, however, no strategic advantage is seen in these factors and so
they do not feature in their strategic options. Second, and the most obvious, is that
these less dominant mission factors do not receive any attention from construction
contractors in their search for strategic options.

7 References

1. Piercy, N.F. and Morgan, N.A., 1994. Mission analysis: an operational

approach. Journal o/General Management, 19(3), pp. 1-19.
2. Drucker, P.F., 1973. Management: Tasks, Responsibilities, and Practices.
New York: Harper & Row.
3. Brabet, J. and Klemm, M., 1994. Sharing the vision: company mission
statements in Britain and France. Long Range Planning, 27(1), pp. 84-94.
4. David, F.R. 1989. How companies define their mission. Long Range
Planning, 22(1), pp. 90-97.
5. Rarick, C.A., and Vitton, J. 1995. Mission statements make cents. Journal 0/
Business Strategy, 16(1), pp. 11-12.
6. Pearce, J.A. II, 1982. The company mission as a strategic tool. Sloan
Management Review, Spring, pp. 15-24.
7. McGinnis, V.J. 1981. The mission statement: a key step in strategic planning.
Business, NovemberlDecember, pp. 39-43.
8. Want, J.H., 1986. Corporate mission. Management Review, August, pp. 46-
50.
9. Easterby-Smith, M., Thorpe, R. and Lowe, A., 1991. Mangement Research:
An Introduction, London: Sage Publications.
10. Lacity, M.C. and Janson, M.A., 1994. Understanding qualitative data: a
framework of text analysis methods. Journal 0/ Management Information
Systems, 11(2), pp. 137-155.
UK NATIONAL TECHNOLOGY
FORESIGHT: THE CONSTRUCTION
INDUSTRY PERSPECTIVE
B.A. Young
Bartlett School, University College London, London, UK

Abstract
The first UK National Technology Foresight Programme was conducted in 1994/95.
The construction industry was one of fifteen sectors taking part in the exercise. The
objectives of National Technology Foresight are presented along with the methodology
and criteria for selecting the key priorities. The Construction Industry Panel identified
four engines of change and five key opportunities. The paper discusses each of these
priorities in detail. A summary of the major tasks and organisations needed to
implement them is included in the paper. The conclusion focuses on the extent by
which the Technology Foresight Process meets its objectives and, in so doing, the
lessons to be learned for the future.
Keywords: Technology Foresight, Construction Industry.

L'Abrege
Le premier programme nationale de technologie de prevision de la Grande Bretagne a
eu lieu en 1994-1995. L'industrie de la construction a ete l'un des quinze secteurs qui ont
participe a cet exercise. Les objectifs du programme sont presente en meme temps que
la methodologie et les criteres choisis pour indiquer les priorites clefs. Le jury de
l'industrie de la construction a identifie quatre voies de changement et cinq opportunites
principales. Le document etudie chacune de ces priorites en detail. Un resume des
taches majeures et de l'organisation requises pour la mise en place de ce programme est
inclus dans ce document. La conclusion se concentre sur la mesure dans laquelle la
technologie de prevision atteint ses objectifs et, par consequent, les le~ons qu'on peut en
tirer pour Ie futur.

1 Introduction

The central thesis of "Realising our Potential", the government White Paper published
in May 1993 was that the UK science and engineering base has the capacity for being
more aware of and responsible to the needs of industry and other research users. Equally,
firms and other organisations should be aware of and receptive to the research being done
by the science and engineering community. The Government conceded that it would
take steps to encourage a greater level of communication and raise the level of mutual
understanding.

The Organization and Management of Construction: Shaping theory and practice (Volume One).
Edited by D.A. Langford and A. Retik. Published in 1996 by E & FN Spon. ISBN 0419222308.
 UK national technology foresight 45

Many decisions were being taken about the relative merits of strategic research,
without the benefit of any systematic and comprehensive assessment of the match
between potential research outputs and take-up by firms. Research programmes which
may be successful in the quality of the research may not necessarily offer economic
reward to the potential recipients, the end users. Such a waste in resources must
therefore be minimised by producing a better match between publicly funded strategic
research and the needs of industry and other end users.
Having considered the experience of other advanced nations and assessed best practice
in the UK, the Government decided that the establishment of a UK Technology Foresight
Programme (TFP) was essential. ..... "This country (UK) could and should benefit from
the application of Technology Foresight, not only as a means of gaining early notice of
emerging key technologies but also as a process which will forge a new working
partnership" (pI7). The idea that partnerships and networks which would emerge from
the TFP was perceived as a vital mechanism for encouraging a greater common
understanding of the trends and uncertainties surrounding further technological
developments.
It is the purpose of this paper to describe, in some detail, the process by which the
Technology Foresight Programme took place and how the construction industry
participated in the process. The results from the construction sector survey will also be
reported. The final part of this paper addresses the question as to whether the process
was a success and the way forward.

2 Principal Objectives of Technology Foresight Programme

Following in the footsteps of Japan, Germany, the Netherlands, USA and Australia's
experience ofa national TFP, the Office of Science and Technology (OST) (1994), who
is responsible for achieving the successful completion of the Programme, deliberated the
objectives of the Programme which are as follows:-
That the process can be designed to

• break down barriers and create contacts across organisational boundaries between
small and large firms and across industrial sectors;
• develop a consensus of future technological scenarios, their likelihood and
importance;
• raise and stimulate awareness among the science and technology community of
the long-term potential vis-a-vis technology and market opportunities.

A number of secondary objectives have been identified as:

• forging a consensus on national goals;

• purchaser/supplier chain link involvement
• assisting government departments in clarifying their role in wealth creation and
enhancing quality oflife.
46 Young

The outputs or results can be used to:

• identify particular generic technologies which society recognises as important

goals over the next decade;
• identify fields and targets which will be important in the long-term(30 years)
• set priorities between broad fields of science and technology
• identify fields of technological fusion which cut across disciplinary boundaries.

The objectives considered by each of the national approaches are described in

Table 1, together with their strengths in actually realising those objectives.
How do the OST's objectives compare with the overseas commitments? Firstly, the
Government was of the opinion that the exercise should provide a systematic means of
identifying and assessing generic technologies and their long-term economic and social
benefits. Secondly, priority setting both within and between fields of science and
engineering must also feature strongly. Thirdly, other government departments should
be informed ofthe priorities set for applied science and technology. Lastly, industrial
exploitation of science and technology will be strengthened by contacts and networks
between industry and the science and engineering research community. When
comparisons are made with Table 1, it can be seen that the OST objectives are broadly
similar to those of the overseas experience.

3 Technology foresight process

The task of overseeing the Foresight Programme was devolved to a Steering Group
chaired by the Government's Chief Scientific Advisor. The organisation structure for the
Programme is shown in Figure 1 (IPRA 1994).
Consultants were appointed to work closely with OST. Fifteen expert panels were
established to represent the sectors taking part in the programme. The Construction
Panel was not included in the original selection of sector groups. Only after the
Construction Sponsorship Directorate, argued successfully for its inclusion did approval
take place in February 1994. Each of the fifteen sector groups are listed in table 2.
The composition of the expert panel was devised from an initial survey conducted by
PREST consultants requesting respondents to identify their level of expertise in a given
area. In addition, each individual was asked to nominate others who met the criteria in
question. Using this mapping tool, a database of experts was constructed and the process
of co-nomination was adopted for generating the pool of experts.
Table 1. Principal objectives of overseas technology foresight
Source: OST January 1994

Country UK Germany Neths USA Japan AustINZ

Project or organisation ACOST OTI PRISM Tech for CUe Delphi Ministry Critical STA Basic
ET CUee (OSO) 21 st Century Basic Economic Technolo· 30-year Research
Science Affairs gies Forecast Priorities

I'ROCESS
Raises awareness widely of It ./ ./ ./ It ~ ./ It ~ It
dilfcrent vision of future

Encourages networks and It ~ ./ ./ It It ~ It It It

contacts

Develops broad consensus It ./ ~ ./ ./ ~ ~ ./ ~ ./

on ways forward

OUTPUT
Detailed priorities within ~ ~ ~ ./ ./ ~ ~ ./ ~ ./
fields

Broad priorities between It It It ./ ~ ./ It It ./ ~

lields

Priorities for Technology ./ ./ ./ ~ It )C ./ ~ )C )C

I'oliey (generic technologies)

Identify fields with long- )C )C ./ )C ./ ~ )C )C ~ ./

term (up to 30 yenrs)
putential

Identify lields of )C )C )C ~ ~ ~ ./ ./ ~ ~
technological fusion

Key: ~: Primary effect ./: Secondary effect )C: Little impact

48 Young

Technology Foresight
Programme
Steering Group

Expert Pool

government

EJ
Office of Science &
consultancy advice
Technology

Fig. 1. Technology foresight programme: organisation chart

Source: IPRA Ltd March 1994

Table 2. List of sector groups participating in technology foresight programme

Sector Groups

Agriculture Construction

Food and Drink Materials

Energy Chemicals

Defense Leisure

Manufacturing Finance

Communications Retail and Distribution

IT!Electronics Transport
 UK national technology foresight 49

Over 3,000 forms were sent out to all sectors. A 40% response rate was recorded. Just
less than 40% of the respondents reported that they were engaged in academic research,
whereas the remaining categories are dominated by industrialists.
(Figure 2)

Main Activities

Other (9.69%)

Market strategy (4.08%)

Academic research
Corporate strategy (10.42 %)
(38.60% )

Research management
(13.91 %)

Industrial research (23.31 %)

Fig. 2. Main activity of respondents

Source: Georghiou et al University of Manchester 1994

When the numbers are categorised according to 'Expert' by Field, only 131 individuals
responded from the construction industry claiming to be knowledgeable or expert in a
particular field (see Table 3).
Georghiou et al (1994) advanced a hypothesis to explain these phenomena. They
claim that well organised research communities with a clear stake in the future
distribution of research resources are more likely to respond. It is widely understood
that because the construction industry is highly fragmented, forming a cohesive
research community is difficult to achieve (Young 1995). However, another
explanation may be that the generic nature of some sectors is reflected by the
broadening of the skill base. This would imply that the construction industry skill
expertise is highly specific.
50 Young

Table 3. Numbers 'knowledgeable' or 'expert' by field

Source: Georghiou et aI, University of Manchester 1994

Field No. knowledgeable or

expert

IT and/or electronics 515

Materials 441

Environment and safety 381

Manufacturing and production 370

Business processes 341

Chemicals 324
Energy 308

Life sciences 306

Communications 253

Aerospace 215

Defense 199

Food and drink 193

Natural resources 180

Health 175
Transport 141

Construction I31

Retail and distribution 63

Lifestyle and culture 53

Financial services 51

From the 131 construction experts the OST selected 18 members for the
Construction Panel and an assessor who represented the construction industry on the
Steering Group. Once in place, the Panel nominated further members from the expert
pool to extend the breadth of coverage.
The Construction Panel met for the first time in May 1994 and over the following
ten months, nine Panel meetings took place, an extensive literature review was
conducted and the methodology included eleven workshops and a two-stage Delphi
survey. In all, over two hundred people attended the workshops. Five hundred and
fifty experts were consulted during the two-stage Delphi survey and one hundred and
fifty one people replied. A twenty eight per cent response rate was recorded. A
detailed breakdown of all the results are given in the Construction Panel Report
(1995). The key findings and priorities are presented below.
The Construction Panel, through its literature review, workshops and the Delphi
process were able to identify and prioritise the key opportunities and engines of
 UK national technology foresight 51

change against the criteria set by the Steering Group. These criteria include;

economic and social benefits arising from market opportunities - wealth

creation and quality of life;
the ability of the UK industry to capitalise on specific opportunities - UK
capabilities;
the ability of the UK science base to contribute to specific science and
technology opportunities - UK capabilities.

By analysing the data, using this selection process, nine main priorities comprising
four engines of change and five key opportunities were arrived at. Tables 4 & 5 list
the headings. These nine key priorities are then classified according to main tasks and
the organisations needed to implement them (see Table 6).

Table 4. Engines of change

I. Promoting learning and learning networks through improved, and more appropriate
education and training

2. Setting up mechanisms to ensure that all players in the construction process are kept well
informed and their activities fully coordinated by means of advanced information and
communication technology (lCT).

3. Introducing a national fiscal policy that encourages and fosters long term investment and
economic growth.

4. Creating a culture of innovation through the joint efforts of government, education,

industry and institutions.

Table 5. Key opportunities

I. Using standard components to achieve customised solutions.

2. Applying advanced business processes to construction (working together efficiently).

3. Adopting a 'constructing for life' approach.

4. Benefiting society and the environment through construction developments.

5. Creating nationally competitive infrastructures.

52 Young
Table 6. Major tasks and implementing organisations
Source: OST, Key Points 1995

Task Lead organisations

EducationlLearning networks
Establishment of a forum charged with the development of education Education departments
policies and curricula designed to produce world class constructors
EPSRC,DoE
Promotion of learning networks

Reaping the benefits of the information revolution

construction industries EPSRC, ESRC, DoE, DTI

Establishment of a virtual reality centre for construction and EPSRC

development of a managed programme

Fiscal changes
Research into realtionships between changes in fiscal policy and EPSRC, ESRC, DoE, DTI
effects on construction investment

Innovation culture
Promotion of innovation, for example by appointing directors and Industry, EPSRC,
professors of innovation in construction Universities

Fiscal policy/legislation in construction central Government

Customised solutions from standard components

A managed programme aimed at developing a world leading Industry, DoE, EPSRC
competence in design, application and supply of customised solutions

Components of lightweight materials

Business processes in construction

Multidisciplinary research into development and application of
improved processes in construction

Constructing for Life

Research and establish relationships between performance, expected EPSRC, ESRC
life and costs of materials and components

Environmental and social consequences of development

New managed programme on holistic approach to social and
environmental benefit analysis EPSRC,ESRC,NERC,DoE

Competitive infrastructure
Study group to identify UK strengths in the engineering and research EPSRC
base

Competitive infrastructure working group on research required for Construction Industry Board,
improvements in UK and export markets DoE, EPSRC
 UK national technology foresight 53

4 Conclusion

Did the UK National Technology Foresight Programme meet its objectives? As far
as the actual process is concerned, the Construction Panel achieved all its objectives.
The other fourteen panels are still deliberating the outcome. The breakdown of
barriers and the networking across organisational boundaries were actively pursued.
A consensus of technological scenarios were developed and priority setting supported
four Engines of Change and five Key Opportunities. In order to increase awareness
and for momentum to gather pace amongst participants of the UK construction
industry, the Construction Panel findings cannot be ignored. It is evidently clear that
the construction industry relies on other industrial sectors to provide technological
inputs into products and processes. Where technological fusion cuts across industrial
boundaries the construction industry must grasp the opportunity for joint ventures,
sharing the risk and gains with its industrial and academic partners.
Notwithstanding the government's important role during the implementation
process, it must ensure that the next UK National Technology Foresight Programme
considers the lessons which have been learned from the 1994/95 exercise. For
example, from start to finish, the process was by far too demanding in such a short
time frame. If it had not been for the commitment and enthusiasm shared by the
panel members, the positive response from the expert pool and the enormous effort
the OST exercised, the Programme would have faltered in the early stages. It,
therefore, seems reasonable to suggest that given this concerted effort, the very first
National Technology Foresight Programme conducted in the UK, from aconstruction
industry perspective albeit a late entrant, was a resounding success.
54 Young

Acknowledgements: Construction Panel, OST Staff

References

1. CMM 2250. (1993) Realizing our Potential, HMSO, London.

2. OST (January 1994) UK Technology Foresight Report.

3. IPRA Ltd. (March 1994) A briefing paper to inform discussions at two

industry workshops, 13 & 14 April 1994.

4. Georghiou L. and Loveridge D. and Nedeva M. Co-nomination in Foresight

(1994) A report on the use of co-nomination to identify participants for the
UK Technology Foresight Programme, University of Manchester.

5. Young B.A. (1995), Technology Foresight No.5: Research and Development

- Interfirm Collaboration, HMSO, London.

6. OST (1995), Progress Through Partnership, Construction No 2, HMSO,

London,

7. OST(1995), Key Points. Construction No 2, HMSO, London,

STRUCTURAL ADJUSTMENT FOR A
COMPETITIVE ENVIRONMENT:
SURVIVAL STRATEGIES FOR MEDIUM
SIZED CONSTRUCTION FIRMS IN
ZAMBIA
Peter M. Mukalula
School of Environmental Studies, Copperbelt University, Kitwe,
Zambia
ABSTRACT

The institution of the Structural Adjustment Programme in Zambia has had serious
repercussions on the construction industry. There has been a dramatic drop in the
volume of work in recent times. Competition for the few jobs available has been
fierce by both local and foreign companies.

Survival has therefore been an issue to contend with. Medium sized construction
firms (MSCF) have felt the impact most during this process of adjustment. The study
examines organisation structures before and after the advent of economic liberalisation.
It further unravels tangible soiutions to problems of management in having to face
emerged complexities in terms of formalisation, centralisation and decentralisation,
power factors etc, and the business strategy that firms adopted.

KEYWORDS
Organisation structure, strategy, Structural Adjustment Programme

SOMMAIRE

Le calendrier de travaux, ainsi que tout autre outil cree au cours de la phase
de planification et de programmation, constitue une carte routiere pour la
gestion des travaux dans sa phase de mise en oeuvre. Ces outils forment un
systeme de controle visant a aider les chefs de projet a anticiper les problemes
suffisamment tOt et ales traiter au mieux. L'avancement-meme du projet se
traduit en termes physiques et de coilts, qui permettent de mettre a jour Ie
calendrier des travaux et du budget, et de definir Ie pourcentage de
realisation effectivement effectue et d'en deduire les affects sur la partie des
travaux restant a realiser. Ce procede permet d'identifier les problemes qui
pourraient entraver la bonne marche des travaux et en consequence de penser
des solutions pour les resoudre ou les amoindrir. Une fois les solutions
choisies, les outils de programmation des travaux communiquent et
controlent les changements apportes. La planification, Ie contrOle et Ie suivi
des travaux dans Ie contexte socio-economique particulier de la bande de
Gaza posent Ie probleme d'une gestion speciale pour atteindre les objectifs
definis pour Ie projet. Le present papier tente, en un premier temps,
d'apporter une vue d'ensemble des procedes de controle et de suivi et. en un
deuxieme temps, d'analyser les systemes de controle et de suivi des projets
d'infrastructure dans la bande de Gaza.

The Organization and Management of Construction: Shaping theory and practice (Volume One).
Edited by D.A. Langford and A. Retik. Published in 1996 by E & FN Spon. ISBN 0 419 22230 8.
56 Mukalula

INTRODUCTION
Since the last decade, the Zambian economy was characterised by high inflation,
currency devaluation, and low levels of investment (Times Of Zambia, 1994). Zambia
was among ten other countries in sub-Saharan Africa whose change in macro-
economic policies during the adjustment period 1987/91 was described as
'deteriorated' with index scores between 0.0% and -0.2%. The construction industry
also declined during this period registering a growth rate of 5.2% in 1986, -4.1% in
1987 and -13% in 1988 (Development Plan, 1989).

The Structural Adjustment Programme was instituted to try to improve the

performance of the national economy. In trying to reduce inflation and therefore
improve productivity, the government has:-

(i) reduced spending on capital projects.

(ii) reduced grants to local authorities.
(iii) triggered cost saving measures taking place in Zambia's copper conglomerate,
ZCCM.

The above measures have substantially reduced the level of construction activity and
consequently increased the level of competition. This has forced MSCF's to employ
survival strategies in a bid to survive. Owing to their small medium capital bases, these
firms have responded, in the main, by scaling down their operations that have led to
substantial alterations in their organisational structures.

The challenges brought about by the so called 'enabling environment' on the

operational responses ofMSCFs, are the subject of this paper.

SAP EFFECTS ON THE CONSTRUCTION INDUSTRY

The inevitable result has been one of aggressive competition and the following aspects
can be singled out as the observed effects of the existing situation:-

(i) Liquidation and foreign competition

Free market policies have brought both a reduction and an emergence of new building
firms in Zambia. Some building firms have gone in to liquidation due to the high
competition. The lack of construction activity has only left the tough going. The
emergence of foreign companies who seem to be given favourable conditions (such as
tax free benefits) over the local ones, has not seemed to help the situation much but
has 'cowered' local potential (Turner, 1995; Mashamba, 1996).
(ii) Changed procurement strategies
Free market policies have led some building firms to change their strategies by
adopting better approaches to job procurement. With reduced government funding to
both government departments and parastatal bodies, these institutions have had to
adopt alternative methods of procurement to the traditional RIBA Plan of Work
system such as target cost and prime cost, etc., in order to rationalise their resources in
the changed environment (Mukalula, 1996).

(ii) Unemployment
Free market policies have accelerated the rate of the employment retrenchment process
as they are very few jobs to occupy all contractors. Employment levels are at their
 Structural adjustment for a competitive environment 57

lowest for the construction industry. Statistics available for the construction formal
sector employment for the years 1990 to 1994, show a significant reduction of those
employed.

1990 1991 1992 1993 1994

33.4 33.1 27.8 22.1 18.5

Source: Employment Trends, Construction Industry, Central Statistical Office,

p17,1994

Unofficial figures for the year 1995 stand well below 15.0. In the period between
March 1992 and December 1993, both the parastatal and private sectors lost 7,600
employees coming third after the manufacturing and agricultural sectors who lost
9,900 and 7,800, respectively (CSO, 1994). This is because firms have been constantly
trimming their staff by scrapping off certain job positions and through the elimination
of departments or divisions. Such changes have led to alterations in spans of control,
levels of formalisation, sizes and arrangements of departments, authority relationships
etc.

(iii) Expansion projects

Exploring new areas by opening branches and offering new construction products so as
to increase their market locally, nationally and internationally, although Turner (1995)
says that this has taken place at a very small scale. Diversification in terms of product
mix, has increased the complexity of the organisation structure as expansion entails
spatial or geographic differentiation which have in turn changed formalisation and
power distribution in the firms. Opportunities to expand have been made possible in
that money that once was utilised as security for foreign currency bidding purposes is
now having to be reinvested in improving the operations of the company.
Construction companies who are finishing their projects early are making huge savings
in overheads unlike before. As most major building materials have always been
imported, stringent foreign currency purchasing measures introduced during the mid
'80's contributed to their delayed delivery and therefore late completion of contracts.
Laid down procedures required huge amounts of money to be deposited in support of
currency bids that only tied up the contractor's capital. Hefty advance payments were
a common feature in contract documentation which were consequently 'frontloaded'
when priced so as to offset such payments. Careful management was therefore
ensured which made most firms adopt highly centralised type of organisation
structures.

(v) Information Technology in workplaces

Mechanise their operations so as to promote higher productivity and remain viable.
Information technology is fast being adopted by most firms to cater for various tasks
such as payroll preparations, interim valuations and other administrative
documentation whose formatting is easily standardised by available word processing
packages. Workplace structures, following after revolutionised, innovative
organisation structures, have been adopted.
58 Mukalula

Turbulent times
The 'turbulent' (Bums in Pugh and Hickson, 1989) construction environment has
affected the operations of existing firms in that their business spheres and processes
have changed and brought about the need to alter their organisational structures. This
has been done in a bid to have their operations become "more resourceful and
productive" as contained in the following comment in one of our country's tabloids
which stated that:

"... These are certainly tough times for Zambia as employment shrinks and
belts are tightened even further. We are all finding it tough going. But to
abandon market forces is no solution. Whether we like them or not, they are
an inescapable fact of life. Realism requires that we acknowledge this by
becoming more resourceful and productive. By making ourselves competitive
we can use market forces to our advantage instead of mourning and
groaning"(Times Of Zambia, 1994).

ORGANISATION STRUCTURES BEFORE AND AFTER LmERALISATION

Almost 80% of the work coming on to the construction was provided by state owned
enterprises in the first fifteen years of Zambia's independence (Development Plans,
1964 - 1980). Government jobs were distributed to building firms following a rota that
was kept at the Buildings Branch of the Ministry of Works and Supply. At the time,
the number of large and medium sized contractors was almost limited and jobs were
guaranteed as foreign firms were not allowed to operate on the same basis unless they
were attached to a donor funded project (Golson, 1995). There was therefore less
competition and firms tended to develop and maintain formal, rigid organisation
structures.

With the changed business environment, the firms studied were eager to become
knowledgeable of opportunities available to them. The effectiveness of how these
firms have responded has been seen in the way they have altered their structures for
specific tasks or functions that they would want to achieve in order to survive.
Beishon et. al., (1976) argues that,

"If fa] system is to survive, maintenance substructures must be elaborate to

hold the walls of the social maze in place. Even these would not suffice to
ensure organisational survival, however. The organisation exists in a
changing and demanding environment and it must adapt constantly to the
changing environmental needs. Adaptive structures develop in organisations
to generate appropriate responses to external conditions. "

This is what Bums' (Pugh and Hickson, 1989) 'organismic' type of organisation
advocates for an unstable environment ; the flexibility of having to understand it is
absolutely essential for there to be effective organisation of the internal structures to
suit such.

Study Criteria
The change in organisation structures before and after the institution of the SAP is of
interest. In order to study the changes occurring before and after the institution of the
 Structural adjustment for a competitive environment 59

IMF-monitored economic measures, a number of distinct organisational features were

singled out that consisted of the following:-

(a) Organisational size

(b) Organisational complexity
(c) Formalisation of Work procedures; and
(d) Centralisation and decentralisation of authority.

These features are a part of extensive studies done by researchers such as those of the
Aston group and found in works by Weber and Henry Fayol (pugh and Hickson,
1989). The survey was conducted in the two major towns ofK.itwe and Lusaka where
, by virtue of the location of these cities, construction works are going on all the time.
A total of 15 major MSCF's were studied and the responses received revealed features
(b) to (d), above, as the most common factors that were crucial considerations to what
firms understood to be an 'organisation's structure'. As the size of an organisation
depends on the number of people, there was great disparity in the number of people
employed in the firms studied that the basis of comparison was substantially eroded for
the purpose needed.

(i)Organisational Complexity
As a structural condition, organisational complexity is exhibited through a number of
factors i.e. what separate parts there are of an organisation. This is shown by the
division of labour existing, the number of hierarchical levels, and the spatial dispersion
of the organisation.

The most commonly used form of structuring in MSCF before the economy was
liberalised was the traditional functional approach consisting of departments that made
them and were based strictly on the achievement of the firms' objectives. Departments
encompassing staff support and techno-structure were very rare and though,
specialisation of labour existed, this was loosely defined. Most firms preferred
employing "jacks of all trades" which they saw as positively contributing to their
urgent need for restructuring in this post economic era as it obviated the recruitment of
specialised staff The most likely departments one could find MSCFs before economic
liberalisation were:-

(i) Constructing Division

(ii) Purchasing and Stores
(iii) Estimating and Quantity Surveying; and
(iv) Accounts.

Within the existing divisions of the MSCF's, alterations done have reduced or
increased the degree of internal segmentation of the firms studied. The following are
the results of the survey on how the changed economic environment affected the firm's
organisational complexity for survival:-

Altering departmental arrangements/composition 34%

Laying off workers thus reducing the sizes of departments 46%

or units.
60 Mukalula

Creating more departments 20%

Source: Field Survey

The results indicate that much change in organisation complexity has occurred through
the reduction of staff with departmentation alterations following on. Such changes
have affected organisation structures in the following ways:-

(i) The shedding-off of staff and changed size and compositions of departments has
brought about lean vertical differentiation in the organisation hierarchies; reducing the
spans of control. Reasons for laying off workers were:-

(a) to reduce costs

(b) to avoid paying idle workers as there was little to do; and
(c) to maintain a small but motivated labour force

(ii) The creation and elimination of departments either increased or reduced the
horizontal differentiation. It was revealed that although some firms introduced some
departments, the vertical differentiation did not tally with that of the horizontal. This
means that one head of department would have been heading two to three departments
which further widens the span of control thus weakening organisational efficiency.

(ii) Formalisation
By definition, formalisation includes statements or procedures, rules, roles and
operation of procedures dealing with decision seeking, the communication of those
decisions and instructions, together with the conveying of that information. In other
words, increased organisational formalisation is a means of controlling the behaviour
of the members of the organisation by limiting individual discretion.

The survey revealed the following:-

Rules used to apply strictly and even with the changed situation 14%

Rules used to be applied strictly and still do 43%

Rules used to apply fairly and still do 43%

Source: Field Survey

These results indicate that only 14% of the respondents changed organisational rules.
It is therefore recognised that while structures have changed, a commensurate change
in rules to govern the effectiveness of these structures, has not occurred in the majority
of the organisations. The following observations consist of the reasons why the
situation is as it is:

(i) Standardisation of the work process - Work standardisation processes depended on

the departments that felt the need to re-organise themselves. Evidence of this was seen
in standard formulations of data sheets and submitted reports.
 Structural adjustment for a competitive environment 61

(ii) Standardisation of Skills - Although firms stipulate the type of qualified manpower
they need from job seekers, they have not strictly adhered to the rules set. The
majority of MSCF's favoured personnel who were multi-disciplinarians as they could
perform the work of the civil engineer, quantity surveyor or estimator.

(iii) Codification of rules - Rules did not seem to be a major way of ensuring
conformity to organisational requirements because top executives had direct
supervision over the operatives in most cases.

It appears that although there does exist some forms of formalisation in the
organisations studied, it is most of the time by-passed and in its place, a 'dictatorial'
approach to managerial leadership adopted.

(iii) Centralisation and Decentralisation of authority

Although being a formalisation component, its considerable attention during the period
of 'adjustment' is of significant interest. The survey results were as follows:-

Highly centralised authority system 42%

Highly decentralised authority system 35%

Both at play 23%

Source: Field Survey

The survey revealed that decision making authority was vested in the highest man
which made delegation of authority, a rare phenomenon and where it existed, it
involved non-financial matters.

However, the study also showed that the current trend seems to have favoured the
adoption of highly centralised systems since the 'hostile' business environment has
forced top most executives to involve themselves in making all important decisions
concerning the running of their firms. This has been a negative response to the
prevailing situation as high levels of centralisation prove to be detrimental to a firm's
survival through unjustifiable delays. Decentralisation, therefore, would prove to be
the only viable alternative in a competitive environment. Delegation of authority is a
must to speed up the decision making process. As construction works normally occur
away from head offices, delegation of authority can definitely speed up operations.

STRATEGIC IMPLICATIONS OF STRUCTURAL CHANGE

Chandan (1991) cites Guelick's (1972) four types of strategies:

(i) The Stability strategy - one that a satisfied organisation in its business sphere
would embark on and "... may not be motivated and adventurous to try new strategies
to change the status quo. "(lbid)
62 Mukalula

(ii) The Growth strategy - as one that seeks to expand as well as diversify the
organisation's activities. Owing to the volatility of the business environment, growth
is reflective of effective management of the organisation.

(iii) The Retrenchment strategy - simply stated, this is the reduction in product,
services, and personnel It is mainly aimed at stemming wastefulness in the face of
adverse competition by re-organising the company.

(iv) The Combination strategy - is a merger of various strategies mainly used by

large complex organisations.

The study has shown that strategies (i) to (iii) have been utilised by MSCF's for
surviving the competitive environment. All these strategies affect the structure of
organisations. Fellows et. al.,(1983) states that;

"strategy and strategic management do not occur in a vacuum: they occur

within a specific business which has a unique organisation structure. The
organisation structure is the facilitating framework through which strategy is
implemented, and will therefore influence strategic decisions and be affected
by those decisions. "

As the study has shown, the basic problem for any organisation is how to strategically
cope with uncertainties. The answer is in how these MSCFs have co-ordinated
activities within their organisation structures while adjusting to their outside business
environments.

As strategy is clearly geared towards the firm's external environment, other factors
have evolved by virtue of the competition existing in the industry. There is now, as a
result, greater focus on the personal needs of members in the organisation as well as
their having to adopt work cultures existing in other companies as means of gaining a
competitive edge. Such power factors (in that they enforce their presence from the
outside) have become crucial factors of consideration during any structural changes
made to MSCFs especially as they are associated to individuals working in those firms.

CONCLUSION AND RECOMMENDATION

In conclusion, construction work consists largely of an unstable volume and product
mix and at times involves the geographical distribution of that work, which must be
managed through a congenial administrative apparatus. Adopting rigid administrative
structures proves to be very uneconomical to maintain. Changes in the economic
environment must therefore be followed by changes in the overall strategic approach of
firms, more especially the assessment of the impact of the changes on the people in the
organisations. Widening the involvement of individuals and groups during the strategic
choice processes, will help ensure easier implementation of change.

In further recommending the way forward, it is clear that the idea of 'strategy' in the
MSCF's studied, seems to be at variance with the actual 'structural changes' that have
taken place. There is therefore greater need for these firms to understand their
changed environment and that in tum, to effectively shape their internal organisation
structures in order to remain viable in a competitive environment.
 Structural adjustment for a competitive environment 63

REFERENCES

Beishon, J and Peters, G (1976) Systems Behaviour (London: Harper and Row)

Central Statistical
Office (1994) Employment Trends, Government Printers, Lusaka.

Chandan, J S (1991) Management Theory and Practice, Vikas Publishing

House Ltd

Development Plans (1964-80) Government of the Republic of Zambia, Government

printers, Lusaka.

Fellows, Richard,
Langford David, Construction Management (part 1), New York:
Newcombe Robert and Longman Inc
Urry Sydney (1983)

Golson, Paul (1995) Construction As An Industry In Zambia, The

Construction Industry In A Changing
EnvironmentConference Proceedings, University
Of Zambia, School Of Engineering, Lusaka.

Guelick, W F (1972) Business Policy: Strategy formulation and Action,

McGraw Hill

Mashamba, S (1996) "Construction - An Industry Under Siege" in Profit

Magazine, No. 4/8 January

Mukalula, P M (1996) The Effects Of The Structural Adjustment

Programme On Maintenance Procurement
Contracts, crn W92 Procurement Symposium
proceedings, Durban, South Africa.

Pugh, D Sand
Hickson, D (1989) Writers On Organisations, Penguin Books

Times of Zambia (1994) "The Tough Economic Environment", June 2.

Turner, P (1995) Opportunities in the sub region, The

Construction Industry In A Changing Environment
Conference Proceedings, University Of Zambia,
School Of Engineering, Lusaka.
ECO-MANAGEMENT AND
CONSTRUCTION
George Dunlop
Bell College of Technology, Hamilton, UK

Abstract

Eco-management is widely accepted as essential for the well bieng of the

earth. Development through construction leads all human expansion and as
such contraction will require to incorporate the concepts of eco-
management.

The paper proposes a model for this incorporation, examines legislative,

conomic and social drivers of change. Presents the conclusions of an
environemntal survey of house builders in Scotland and reaches a number
of general conclusions for the future.

Sommaire

On accepte partout que I'ecomanagement est essential au bien-etra general

du monde. Le developpement, par Ie construction, mere toute I'expansion
humaine et par consequent Ie biWment devra incorporer les eco-
management.

Le papier propose un modele par cette incorporation et examine Ie elements

lE~gislatifs, economiques et socious par Ie changement. On presente aussi
les resultats d' une enquiHe par rapport, a I' environnement parmi les
constructeurs des maisons en Ecosse et arrive a plusiers conclusions par
I'avenir.

Eco-management: the concept

The concept of eco-management has been derived from the resolution by

the Council of European Communities Regulation (EEC) No 1836/93(1). It is
a wider concept than is implied by the majority of current thinking on
environmental issues. The concept subsumes most of this thinking with the
addition of promotion of continuous improvement, audit and publication of
performance.

The Organization and Management of Construction: Shaping theory and practice (Volume One).
Edited by D.A. Langford and A. Retik. Published in 1996 by E & FN Spon. ISBN 0419222308.
 Eco-management and construction 65

Under the Regulation all industrial activities were covered.

This is clearly stated in Article 1 point 2 of the Regulation.

"2 The objective of the scheme (eco-management and audit scheme) shall
be to promote continuous improvements in the environmental performance
of industrial activities by:

(a) the establishment of and implementation of environmental policies,

programmes and management systems by companies in relation to
their sites;

(b) the systematic, objective and periodic evaluation of such elements;

(c) the provision of information of environmental performance to the

public. "

The introduction of such a wide ranging set of objectives to the construction

industry would seem to be fraught with problems. These being of sufficient
magnitude to delay further development. The United Kingdom government
are one of the few member states who have complied with Article 6 by
establishing a "system for the accreditation of independent environmental
verifiers and for the supervision of their activities". The UK competent
bodies was established in April 1995, within the required 21 month period
in Article 6.2. The remit of this body indicates a range of industrial areas
specifically covered by EMAS(21 which does not contain construction,
possibly in recognition of the problems associated with construction.

The EMAS proposals do however cover "woodworking industries" which

appears to include timber-frame house producers who are part of the
construction industry.

The paper will endeavour to define terms within which the construction
industry can and should adopt the practice of eco-management.

A brief review of published literature on environmental issues will indicate

a dearth of material directly relevant to construction. Exceptions are
"Environmental Management in Construction" by Alan Griffith(31 and
"Guidelines on Environmental Issues" by the Engineering Council(41 both of
which were published in 1994 which is post Regulation 1836/93 but pre
date the implementation date of April 1995. With this lack of academic
analysis it might seem reasonable to assume that the practice would lag
behind even further. This is not, as the paper will show, the case in fact.
The construction industry has for a number of years been actively involved
in environmental performance improvement. This has been in large part to
66 Dunlop

comply with legislative requirements and reaction to consumer pressure.

Examples which have been reasonably well recorded are the environmental
impact assessment for major civil projects such as the Eurotunnel route from
London to the Tunnel, various motorway projects including the M74
southern extension in Glasgow. At a different level house builders in the UK
have been continuously improving the energy efficiency of their product
partly in response to changes in regulation, partly in response to client
demands but almost all these changes have resulted in significant
environmental benefit.

In the absence of a suitable scheme for eco-management measuring,

monitoring, recording and publication these positive steps have not been
recognised.

The above concept of eco-management in construction will be driven by

three underpinning factors -legislation, economic and social which will result
in consequential environmental achievements. To think that significant
changes in practice will be driven by ecological or environmental
considerations would seem unrealistic in a commercial free enterprise world
and it is also at odds with previous experience. It is the authors contention
that eco-management practice in construction will become a major aspect
of the industry by a similar mechanism as public health engineering evolved
in the last hundred years. The analogy can be argued using the Maslow
hierarchy of Physiological needs as the structural model. Figure' 1 ' shows
graphically the relationship on the right of the development of Public Health
engineering to Maslow's hierarchy. On the left of the diagram is a
representation for the future global incorporation of eco-management in
construction projecting the recent steps towards a future global built
environment.

The Maslow type analogy has some support in recent published works
which underline the growing legislative and economic material. The systems
for development of environmental management exist in the developed world
through structures such as BS 7750(5) and its new ISO partner. Other
aspects of industry are recognlsmg the need to become
ecological/environmentally friendly. The economics of sustainability have
been developed by authors such as Peter Bartelmus(6), David Pearce and
Kerry Turner(7) and Michael Common(S). Such texts argue the economic case
for environmental improvement which if successful will no doubt percolate
through to primary industries such as construction. Richard Welford(9) has
his text Environmental Strategy and Sustainable Development subtitled The
Corporate Challenge for the 21 st century which reflects the need for
industry to adopt business ethics which recognise environmental
requirements on a global manner.
 Eco-management and construction 67

ECO-MANAGEMENT
(AJier Maslow)

Global/International Local/UK
(Towards 2()()()) (J 9th/2()th Century)

Self
Global Ideals Western Ideals

Group/Multi-national
respect Nation States

Groups Accepta ce of others

Sustainable strategies Affection te 20th Century Society
Communication Acceptance of Rules

Earth Summits, Ozone Protection Water, Sewage

Reduction Housing
Environmental Construction
Management in
Construction

Engineering Knowledge Food, Shelter Engineering knowledge

Legislation Physiological Freedom from Pai Legislation
Technology Survival

THE ENVIRONMENT MASLOW'S TRIANGLE PUBLIC

HEALTH

Figure 1

Public Health (19/20th Century) and The Environment

(Towards 21 st Century) by Dunlop After Maslow
Maslow: AH (1968) Towards a Psychology of Being
Van Nostrand Reinhold, New York
68 Dunlop

Legislative Economic and Social Framework

In the first section it has been stated that the legislative process will drive
eco-management in construction. It has also been claimed that as
environmental impacts are global such legislation will be developed at
International European and National level.

Unlike the development of public health engineering where practice in many

cases preceded national legislation the environmental issues practice has
been in many cases preceded by international statements. The Bruntland
Report of 1987 1101 popularised the concept of "sustainable development" and
highlighted the global conflict between conservation of the environment and
continued global development on the "western" pattern. It was apparent
that a balance was necessary between the quality of human development
and the consequential degradation of the natural environment. This concern
prompted the Earth Summit in Rio 19921111. The United Nations Conference
of Environment and Development (UNCED or Earth Summit) which met in
Rio de Janiero in June 1992 was the largest diplomatic event in history with
172 governments represented and 118 of them by heads of state. The
summit propagated Agenda 21 a huge, wide ranging Programme of Action
on Environment and Development to be monitored by a Commission for
Sustainable Development.

Whilst many of the delegates at the conference left disappointed with the
outcome it provided a major foundation stone for the various regional and
national legislative bodies to build credible environmental policies. It also
required the signatories to set in process procedures to achieve a number of
environmental improvement targets.

In the European context the European Union have since its inception in 1972
incorporated legislative measures designed to improve environmental policy
and practice. There are three types of legislation which are binding,
Regulations, Directives and Decisions. Regulations lay down the same law
throughout the EU and apply directly to all Member States, they do not have
to be translated into national laws but apply in the same way as national
laws. Directives set out aims to be achieved, but unlike Regulations, these
require the Member States to translate these requirements into their national
laws within a stated period of time. Decisions, like Regulations, are directly
applicable in law but can be addressed specifically to named individuals,
companies or Member States.

In the area of eco-management and environmental issues pertinent to

construction the following are examples of EU legislation.

Regulation 880/92, which introduced a voluntary eco-Iabel award scheme

for consumer products across the Member States.

Regulation 1836/93, which introduced a voluntary eco-management and

audit scheme for industrial sites across Member States.
 Eco-management and construction 69

Directive 85/337 on the assessment of the effects of certain public and

private projects on the environment, which sets out the (largely procedural)
requirements for developments such as large scale industrial and
infrastructure projects.

With this raft of legislative material many areas of the construction industry
and its supplier industries will require to implement eco-management
principles.

At a national level the UK, as a Member State, has to comply with all the EU
Regulations, Directives and Decisions. It does however raise its own
legislation and a key section of environmental legislation is the
Environmental Protection Act 1990 (EPA90)!121. This tackles a wide range
of environmental problems which impact on the construction industry.

The economic drivers will continue to influence environmental policy.

Personal, company, national and even international economic decisions will
always have an impact. In construction the client bodies whether they be
individuals, businesses or national agencies have historically always opted
for the cheapest offer for the same specification. This philosophy will
always tend to mitigate against the environmental option which has
historically been more expensive.

Social attitudes influence the behaviour of industries towards more

environmental conscious procedures. Examples are the use of CFC's and
halons. Public attitudes towards the ozone deplete properties of these gases
have resulted in construction moving towards considerable reduction and
use of alternatives. It is factually correct that in 1991 EU Regulation
594/91 addressed a phasing out of the production of such gases however
the perception within the industry is that the change was a consequence of
social pressure in other related applications. Social pressure does however
create problems for the construction industry which can be exemplified in
the following ways. One problem is the differentiation between the social
impact of the vocal, active minority of protest groups and the silent majority
of beneficiaries in cases such as motorway projects. Direct action groups
can have a major impact on a project however in the event if the project
proceeds the vast silent majority reap the personal benefits of improved
transportation facility in silence.

Similarly house builders are under social pressure to produce the 'green'
house which is energy and environmentally friendly. However given the
choice between extra insulation to produce energy efficient house or the
money spent on "white goods" the latter option is the more marketable
choice. This personal economics of a short-term nature mitigates against
environmental attitudes.
70 Dunlop

These three drivers legislation, social and economic frequently act in a co-
ordinated way to influence environmental design. The increased energy
efficiency achieved in housing due to improved insulation levels provides a
good example of which has the greater effect. In the Guidelines on
Environmental Issues on page 6 four key principles of environmental
protection are identified as.

• the Prevention Principle

• the Precautionary Principle
• the Polluter-pays Principle
• the Principle of Integration

All four of these principles are achieved by improved insulation.

By improving energy efficiency the owner "prevents" the release of wasted

energy, it also meets the "precautionary principle" by decreasing the release
of CO 2 , the "polluter-pays principle" is achieved by having the owner pay
only for the minimum energy use, in many ways it provides an "integrated"
solution as it provides social and economic benefits with no complex trade-
off effects in other areas. However as previously stated the highly insulated
house is not necessarily the preferred option amongst buyers. It is however
a reality through government legislation to improve the insulation levels
through changes in Building Regulations. In this way the producers will
improve insulation, pass the economic initial cost to buyers who will in the
long term reap both the economic and environmental benefits.

It is by this complex inter-relationship of drivers that the construction

industry will become more eco-management conscious.

Local Research

As part of the research undertaken for production of this paper and in partial
completion of a European Project a number of housebuilding companies were
surveyed on their environmental attitudes. This survey was by requesting
the companies to complete a fairly substantial questionnaire.

The questionnaire was designed in four sections. Section one required a

yes/no response to fourteen questions on elements of environmental/energy
efficiency improvement in housing provision. Section two contained two
questions on the use of environmental assessment techniques. Section
three consisted of four questions assessing the use of specific procedures
within the organisations which may be seen as indicative of companies
actively pursuing improved performance in terms of quality and
environmental practice. The final section was five questions relating to
specific general environmental issues.
 Eco-management and construction 71

Section one of the survey tested if Scottish Housing was implementing

environmentally beneficial strategies. The results indicated levels of well in
excess of 75 % support for the majority of aspects. The second section on
implementation of standard procedures showed a lower support with
generally only half the companies giving support. Similarly section three
which dealt with national standards was only supported by fifty per cent
with the following specific issues being raised.

The use of Environmental Impact Assessment (EIA) methods on site was

supported by six out of the twelve who were in the main large volume
builders. This seems a reasonable response as it is highly unlikely that
builders with less than 300 units per annum are liable to develop estates
where EIA is appropriate.

The use of BS 5750 Quality Management Systems was again only

supported by four companies with none of the large volume builders
supporting this type of initiative. The use of BS 5750 may be seen by many
builders as not being appropriate to their existing control systems, also as
being an unnecessary extra endorsement when they already subscribe to the
National House Builders Registration Council scheme which is a recognised
quality standard with marketing potential. The BS 5750 standard may be
more appropriate for companies targeting corporate clients as opposed to
the normal individual client which is the prime customer for speculative
builders.

BS 7750 Environmental Management which is the environmental clone of

BS 5750 suffered even less support with only one company indicating that
they would consider adoption of BS 7750 and the other eleven showing no
support for the standard. This type of high negative response could be
rooted in a number of factors such as: little perceived economic benefit;
previous experience of application of BS 5750; perception that it is just
another bureaucratic system; little or no knowledge of possible advantage
or some other reason. Irrespective of the actual reasons for the high
negative response this particular standard appears to be of little perceived
value.

The final question on the considerations of having environmental issues as

part of a purchasing policy was only supported by five out of the twelve.
These five were a mixture of three large volume producers and two relatively
small producers both of whom have quite distinctive local markets. The
rationale behind these decisions is obviously much more complex than with
the simpler issues in the previous three questions and probably warrants
further investigation.

The final section on green issues and training confirmed the tenor of the full
response in that companies recognised that" green issues" were and would
in the future be very important. They also recognised the need to eng lighten
staff and provide staff training in such issues. This would seem to agree
with the earlier discussions in this paper.
72 Dunlop

Conclusion

Incorporation of Concept and Legislation

In section one the concept of eco-management was developed, a rationale

for its incorporation was put forward by way of an analogy with public
health engineering. In section two the existence of fairly extensive
legislative, social and economic drivers were developed. The impact of such
forces was tested in the Scottish Environmental Research survey of house
builders which by implication indicated a degree of substance in the working
of the analogy. In this final section the future potential for eco-management
in construction will be further developed.

The Maslow type analogy appears to hold in terms of public health

engineering. In almost every developed or developing country the "Western
Ideal" for construction in terms of public health is accepted practice. Few
construction companies or developers of built environment would proceed
without including items such as adequate sewage and water supply
systems. It is considered inappropriate to design developments without
such considerations the good practice first developed late in the nineteenth
century in UK and other western societies is now accepted globally. In
terms of eco-management there has been an extensive development of
essential foundation legislation which has stared out from a global
perspective as opposed to the local and national aspect in public health.

International legislation, national directives and the associated published

literature, as previously identified, would appear to confirm that the
construction industry will adopt business ethics which recognise the
environmental requirements in a global way.

Undoubtedly the construction industry is moving rapidly in the direction of

becoming more eco-friendly. The evidence is apparent in the contents of the
paper. As electronic communication and computer applications grow the
potential for rapid transfer of knowledge will increase the speed of
development of eco-management.

Designers will use IT to make ecological design decisions in the near future
with the same enthusiasm as they use the technology in architecture or
structural design.

Despite the optimism of this text real environmental/ecological benefit will

only develop when individuals apply such principles to all their decisions.
 Eco-management and construction 73

Bibliography

Official Journal of the European Communities, 10.7.93 No L 168/1 -

18 Council Regulations (EEC) No 1836/93 of 29 June 1993

2 EMAS Regulations - Eco Management and Audit Scheme Department

of Environment, London 1995

3 Environmental Management in Construction - Alan Griffiths MacMillan

1994

4 Guidelines on Environmental Issues - The Engineering Council -

September 1994

5 BS 5750 Quality Management Systems - BSI London - 1990

6 Environmental Growth and Development - Peter Bartelmus -

Routledge, London - 1994

7 Economics of Natural Resources and the Environment - David Pearce

& Kerry Turner - Harvester Wheatsheaf - Hemel Hempstead - 1990

8 Environmental and Resource Economics - Michael Common -

Longman, London - 1988

9 Environmental Strategy and Sustainable Development - Richard

Welford - Routledge - 1995

10 Bruntland Report - United Nations - 1987

11 Rio Summit - United Nations Conference of Environment and

Development - Rio de Janiero - 1992

12 Environmental Protection Act 1990 (EPA 90)

References

1 1. The Firm and Strategic Change

1. Argyris, C. and Schon, D., 1978, Organizational

learning: A theory of Action perspective, Addison-Wesley,
Reading, MA.

2. Beer, Michael, Eisenstat A. Russel, and Spector Bert,

(1990) "Why change programs don't produce change", Harvard
Business Review, Nov-Dec.

3. Huber P. George & Glick H. William (1993),

Organizational Change and Redesign, Oxford University
Press, New York, NY.

4. Martin, Donald, D. (1994), "How small business can gain

advantages from ESOPS", National Public Accountant, Volume
39, No.2, Feb.

5. Schein, E.H., 1970, Organizational Psychology, 2 nd Ed.,

Prentice Hall, Englewood Cliffs, N.J.

6. Smith, William (1990) "Employee Stock Ownership Plans:

Motivation and Morale Issues", Compensation & Benefits
Review, Volume 22, No.5, Sept/Oct.

7. Tichy M. Noel (1982) Managing Strategic Change

Technical, Political and Cultural Dynamics, John Willey
and Sons, Newy York, NY.

8. Vaill B. Peter, (1989) Managing as a performing arts,

Jossey-Bass Publishers, SanFrancisco, CA.

9. Wieland, G.F. and Ullrich, R.A. (1976) Organizations:

Behavior, design and change. Richard D. Irwin, Homewood,
IL.

10. Wilmont, W. Robb, (1987), "Change in Management and the

Management of Change", Long Range Planning, Vol. 20. No.6,
pp. 23-26.

EXPLOSIVE MANAGEMENT:

DESTRUCTION OR PROPULSION?

P. Barrett and M.G. Sexton

Research Centre for the Built and Human Environment,

University of Salford, Salford, UK

Abstract

At a recent international conference on quality management,

the similarities with

environmental management and health and safety management

were noted. The

negative impact on managerial effectiveness of these

multiple pressures was articulated

as follows "If you are in a minefield what do you do? Stand

Still!" or risk destruction.

This paper views these different pressures as managing

against different criteria, but

using generally similar mechanisms such that managers are

given a clear view and

comprehensive technical support to propel them and their

companies forward.

Keywords: Quality, health and safety, environment, supple

systems.

Resume

Lors d'une conference recente au suject du 'quality

management' (gestion de qualite),

on ales similarires entre ce sujet et al gestion de

l'environnement et de la sante et

securite au travail. L'impact negatif sur l'efficacire de

gestion de ces tensions etait

articule comme suit: "Si vous vous trouvez dans un champs

de mines, que faites vous?

Ne bougez pas!" ou risquez la destruction. eet article

considere ces tensions differentes comme la gestion selon
criteres

differentes, mais en utlilisant des mecanismes generalement

similaires avec Ie resultat

que les directeurs rec;oivent une impression claire et un

soutien technique comprehensif

pour les faire avancer avec leurs entreprises.

Mots cles: Qualite, sante et securite, environnement,

'supple systems' (systemes

souples).

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

1. Introduction

Construction finns are increasingly being bombarded by a

stream of business

requirements which have the potential to fundamentally

affect their current and future

competitiveness. These requirements constitute increasingly

pervasive and rapid drivers

of change which, unless due managerial vigilance is taken,

may render finns' past

modes of organisational design and behaviour inappropriate

for their prevailing

competitive contexts. If the firm does create a discrete

reaction to each pressure it risks

fragmentation as the pressures push in different directions

resulting in conflicting

systems. This relentless onslaught of obsolescence or

fragmented action prescribes that

firms need to create and manage mechanisms which

effectively and efficiently scan and

fIlter the business environment for requirements which

impact upon the finn and to

interpret, translate and internalise their implications in

order to direct and generate
congruent organisational responses. This paper seeks to
address how construction

firms can work towards this idealised state of

organisational sensitivity, flexibility and

renewal through the use of integrated, developmental

management systems.

2. Developing pressures

2.1. Context

Organisations can be fruitfully conceptualised as open

systems which must effectively

interact with their external environment over time if they

are to avoid myopia-driven

decay in the face of an increasing dynamic and turbulent

business environment The

external environment can be viewed as a swirling mass of

ever changing and often

intangible forces; be they cultural, political, economic,

competitive and so forth; which

periodically crystallise into transitory dominant

configurations which shape

organisational contexts and the nature of competition. At

present, the issues of quality,

health and safety and the environment have emerged as

particularly important areas for

construction firms to address if they are to survive and

prosper, and will be discussed

briefly below in the U.K. context.

2.2. Quality

Quality has taken a high profile, especially since 1987

when BS 5750 was first widely

publicised. Since then the pressure on fmns has grown

enormously based on a
perception that there is strong client demand.
Questionnaire-based research has

indicated that around 15% of construction professional fmns

are third-party certified to

BS 5750 so far [1]. A Delphi study led to an estimate that

in around five years the

percentage will rise to 38% and at around 50% in ten years

[2].

There is a preponderance of larger fmns involved. The

disproportionate cost, and the

need for fonnality has caused problems for small fmns.

These fmns, however,

predominate in the industry with around 98% of such firms

having less than 20 staff.

2.3. Health and safety

Health and safety has theoretically been on the agenda for

years and certainly since the

1974 Health and Safety at Work Act. This gained a further

boost in 1991 with the

publication of management guidance by the HSE [3] which

then set a standard for the

management response required as an answer to the 1974 Act.

The stakes have risen

more recently in the eyes of most fInns with the passing

of the Managing of Health and

Safety at Work Regulations, 1992 and the Construction

(Design and Management)

Regulations 1994. The UK legislative in this area is now

principally putting into effect

European legislative requirements.

The major pressure on fInns is created through criminal

liability which impacts on

individuals as well. This exposure has been clearly

extended to clients in the CDM

Regulations and this is certain to lead to extra pressure.

2.4. Environment

Construction fInns are increasingly faced with

environment-based requirements which

are influencing many facets of their activities, ranging

from proactive environmentally

conscious design and construction, through to green

marketing and asset portfolio

management. These requirements are generated by a diverse

range of stakeholders who

have an interest in fInns' overall environmental

perfonnance; be it the ever increasing

amount of tougher environmental legislation from the

European Community or the

growing public alarm about environmental depletion and

degradation.

3. Variety of mechanisms

3.1. Context

There are a variety of mechanisms at work in these

different areas within the U.K ..

3.2. Quality

In the quality assurance area the emphasis, in the UK at

least, has been on third party

certification against BS 5750 (now ISO 9000) which is

orientated towards achieving

consistency in the process. Because of the emphasis on

fonnal systems and tangible

evidence there has been a tendency for paper systems, and

in particular the Quality

Manual, to take centre stage. Research suggests that,

subject to exceptions,
professional fInns perceive strong client demand for
QA-certification, not unreasonably,

given that many clients ask whether fInns are certified at

pre-tender stage [4].

However, it would appear that despite asking this question

most clients ignore the

answer in favour of fIrst hand knowledge of the fInn or

person, or the recommendation

of a trusted person who has had fIrst hand experience. It

would appear that fInns and

certifying bodies place quite considerable effort into

creating paper systems which at

best ensure consistency in the process, but are in fact

largely ignored by clients who are

more interested in evidence of actual perfonnance.

3.3. Health and safety

In contrast, in the Health and Safety area, despite, or

perhaps because it is driven by

heavy legal sanctions the fonnal emphasis of the

requirements is very much on ensuring

management systems exist that really make a difference in

practice. "It has to be said that a concern for Safety
which is sincerely held and repeatedly expressed but,
nevertheless, is not carried through into action, is as
much protectionfrom danger as no concern at all" [5]

The systems in question, and the way the requirements are

policed, are both very

much developmental. Risk assessments are the fulcrum of

the requirements, so that

people get to think health and safety. The HSE have also
supported research to create

accessible measures so that a site can be rated for how

hazardous or safe it is relatively
easily and a proactive improvement approach achieved [6].
There is still a tendency for

companies to create paper systems, but they know this is

the means not the end and, in

fact, fIrms of under five people do not have to have

documented systems at all!

A clear problem with Health and Safety enforcement is the

attendant cost and the

HSE has to target its effort. This appears to involve

dealing with flagrant breaches and

then concentrating on high profile cases. Thus, in pmctice

it is impossible to fully

police the various regulations. The CDM Regulations attempt

to address this by

injecting client pressure and getting the participants to

check each other.

3.4. Environment

A variety of mechanisms have been developed to enable firms

to improve their

environmental performance. The British Standards

Institution's standard on

environmental management systems [7], the European

Eco-management and Audit

Scheme [8] and the European Community-driven ecolabelling

of building materials and

building products (e.g. see [9]) are arguably the most

important.

The uptake of these mechanisms by firms is being hindered

by their lack of universally

agreed managerial systems or objective measures of what

constitutes good

environmental performance. Furthermore, these (and other

similar) prescriptions,
although a positive move in the right direction, tend to
prescribe desired change

outcomes, and do not take due account of the required

change processes to achieve

them [to]. In unison, these constraints tend to render

these mechanisms as 'facades',

laid on predominantly unchanged and fmgmented systems,

generating reactive and

'end-of-pipe' organisational responses to environmental

requirements.

3.5. Summary

In summary, it can be seen that quality requirements tend

to be client-driven and are

being addressed through the promotion of service or product

consistency, rather than

trying to cultivate continuous improvements. In contrast,

health and safety

requirements are predominantly legislation-driven and are

historically accommodated

within firms through mechanistic systems, rather than

culture-based systems which can

integmte other, non legislation-based, requirements. In

both of the above small firms

are not effectively addressed. Finally, environmental

requirements are stakeholder

driven, a dimension which requires finns to create multiple

perspective goals; a skill

which many finns are failing to get to grips with.

With this seemingly insunnountable mish-mash of

requirements and organisational

responses, it is temptingly easy to suggest that finns are

doomed to be saddled with

expensive and adversely fragmented management systems.

4. Implications for firms

Generally, the fewer the business requirements being placed

on finns, the easier it is to

stabilise activities in support of finns' core product and

service offerings and to

maintain continuity of core business focus across

organisational functions and levels.

However, it can be seen that the prevailing waves of

requirements being injected into

organisational domains are characterised by diverse, and

often debilitating, complexity.

Adopting the law of requisite variety, fInns can only

adequately manage this level of

externally-induced complexity by creating a corresponding

level of internal complexity

[11].

In reality though, fInns tend to try and simplify their

internal environment and protect

their core activities from such environmental complexity

through the setting up of

systems which, in effect, seal the fInn off [12]. This

'buffering' manifests itself in a

range of responses: imperviousness, selective

imperviousness, adaptation and action

adaptation systems [13]. First, fInns which adopt

impervious systems attempt to seal

the organisation completely off from the effects of

business requirements. Second,

fInns employing selective impervious systems tend to

concentrate only on those specifIc

requirements which have an immediate impact on fInns' core

businesses. Third, fInns
creating adaptation systems aim to change themselves
through adapting to the

contingencies in the requirements emanating from the

business environment Finally,

fInns which embody action-adaptation systems strive to not

only adapt to the

requirements, but shape the requirements in their own

image to change them from

burdens to opportunities.

The prevailing response of construction fIrms to business

requirements tends to be

towards the impervious end of the above continuum. This

proposition is supported by a

recent RICS Workshop where practitioners expressed the view

that the best they could

to do is to react to the present deluge of requirements

being placed upon them. No

one really seemed to feel they were in control or that

they could do more than the

absolute minimum [14]. Moreover, when a similar issue was

discussed at an

international conference two years ago a delegate posed the

question "What do you do

if you fInd yourself in a minefIeld?" The answer was "stand

very still!" or, again, do the

absolute minimum [15].

Firms which adopt this minimalist strategy, in the short

term, may very well be able to

concentrate all their resources on providing a strong

technical orientation. However,

over time, this preponderance of front-stage activity will

disengage the fInn from

business requirements, leading to strategic drift,

stagnation, myopia and eventual crisis

and demise. Moreover, those fInns which try to become more

action-adaptation

orientated tend to so through channelling requirements

through existing and new, often

fragmented, systems. Firms undertaking this approach of

responding to each pressure

by engaging fully in the disparate mechanisms are going to

be confronted with huge

overhead costs. The balance between the effort to do work

and the effort to

demonstrate management control will shift dramatically

towards the latter, potentially

creating goal displacement [16], as tinns elevate the goal

of compliance with

requirements above their primary goal of providing

client-orientated service and

product offerings.

This leads to the central question in this paper. How can

a fInn provide a high level

of service by effIciently and effectively addressing the

issues of quality, health and safety

and environmental matters rather than despite them?!

18 Barrett and Sexton

s. Formal responses and their limitations

On the quality front there have been developments which

start to address some of the

limitations of the QA-certification approach. Building on

decades of development

through the Japanese Deming Award, to the US Malcolm

Baldridge Award, to the

European EFQM Award [17] and now the British QUality

Award, a model has emerged

which takes a very broad view together with a self-auditing

scheme and an annual

competition. This model is drawn from the quality domain,

but really is about a

particular view of what constitutes good management. In

the area of standards a

proposal has emerged in Canada for a general management

standard which is

underpinned by the assumption that it is desirable for

firms to have ..... a simple set of

management principles which can be used to support the

management of any function,

for any objectives, in any size of organization, and at

any level of an organization"

[18].

The positive aspect about these approaches is the wider

view they take. The danger,

however, is that they claim too much. Rather than

presenting a way of managing, they

propose the way and if adopted across the board they will
inevitably lead to

inappropriate emphases in many situations, especially if

they become audit documents.

Quite simply they present a simplistic view of management,

not a bad view, but a

limited perspective when you think of the mass of

management debate on so many

topics. Here the danger is that you would get what you
measure and very little else !

It is our view that it is more fruitful to create

contingency-based approaches that reject

the all-purpose principles and constructs embodied within

the above models, and adopt

a more behavioural, adaptive and flexible view of

organisational activities.

The Vision 2000 strategy for quality standards [19] is

interesting in this context. It

would be possible to argue for many standards tuned to

various sectors, however, the

Vision 2000 document argues strongly against such

proliferation and calls for core

generic quality management and assurance standards,

supplemented by interpretative

documents in more specific industries, such as services.

This approach seems to keep

standards focused on the control functions within

organisations in a flexible way, but

without straying into the general management area. The

idea of general management initiatives and core generic
standards with

interpretative guidance could, in principle, be extended

to health and safety and

environmental issues. Indeed in the health and safety area

the idea of core requirements

and then guidance material becoming, at the same time, more

detailed and less

prescriptive is the generally accepted approach. The

problems in the quality area

identified above indicate that although the ideas could

translate to other organisational

activities, the actual mechanisms being pursued so far do

not seem to have sufficient

capability or capacity to appropriately address the broad

range of issues emanating from

the business environment.

6. An integrated, developmental way forward

6.1. Context

It can be seen that the complexity confronting firms

provides a huge challenge and that

the current approaches, or more recent developments, all

carry problems.

The following section endeavours to effectively and

efficiently 'nest' the management

of business requirements within an approach which focuses

on the improvement cycle

within firms. Thus, it can complement steady-state quality

management / assurance, or

be a viable option in the absence of such activity. It

addresses an area where systems

can contribute the hinterland between individual action and

corporate strategy but

does not pretend to address the whole of management

activity.

Relating the discussion to earlier parts of this paper, it

will be seen that the emphasis

on key measures of tangible achievement fits well with the

health and safety approach,

at least as it appears in theory. In terms of quality

there is increasing pressure to

achieve improvements as well as consistency. In the

environmental field an approach

which allows incremental progress to be made could break

the stalemate between

facade management and meaningful action which encompasses

stakeholders' views.

It is suggested that the key to achieving improved

organisation responses to a range

of business requirements is to introduce balanced

cybernetic-based feedback

mechanisms so that construction finns actually learn from

occasions where it could

have done better or from opportunities / ideas from other

sources. In simple terms, the

construction fmn collects feedback extemally, as well as

internally, then analyses the

information and integrates it into future service provision

in order to improve

performance levels. It should be stressed that the process

is iterative and thus

encourages continuous improvement.

Based on this sort of thinking and aiming for systems which

are client-responsive and

facilitate a continuing cycle of improvements, an approach

has been developed, through

debate and observation, which endeavours to meet these

criteria. The approach has

been styled "supple systems" and is discussed next.

6.2. Supple systems

The supple system approach originated from the quality

management domain [20], but

can be fruitfully enlarged and refocused towards the

continuous improvement of how

organisations address multiple requirements generated from

the business environment.

The key features of supple systems are given in Table 1.

There is not space here to

describe the approach in detail, however, in summary, the

approach advocates that a

strong, but flexible audit system is developed which

ensures that improvements in the
quality of the service are being achieved. The audit
system identifies sources of

feedback, assesses if action is required, and at what

level, prioritises between

alternatives, allocates responsibility, checks later that

action was taken, tries to

objectively assess the impact of the actions and finally

feeds these findings back to those

involved. It should be noted that the above facets of

supple systems should be

embedded within a strategic framework that directs fmns'

inputs and processes towards

improved output performance (see [21]).

It is the authors' view, argued in more detail elsewhere

[22] that this is a fruitful way

forward, with the "supple systems" approach having the

potential to assist firms:

• faced with a constant stream of requirements, to sort out

those which are relevant,

from those which are not;

• identify those requirements which can be absorbed by

existing operating systems,

and which requirements need to be addressed from a more

strategic perspective;

• to not only reconcile often disparate and conflicting

requirements, but synergistically

integrate them; and,

• to create generic systems which have the capacity to

manage multiple demands

against different criteria.

Table 1 Key features of supple systems

Feature Comment
Client / Stakeholder Above all the systems are tested
against stakeholder, and especially client

orientated reQuirements by actively seekin~ feedback

through both hard and soft data.

Minimalist / holistic "As much as you must, as little as

you may", that is, not having systems for their own sake,
but rather targeting high risk / gain areas. Better to
have made some pro~ress on all important fronts than to
have a patchy provision.

Loose-jointed The systems operate at an audit level:

clarifying objectives, checking performance and
integrating efforts. At an operational level different
styles and approaches can be accommodated, especially
when they have proved themselves over time.

Evolutionary Allow incremental and continuing progress to

be made from whatever base.

Symbiotic with social Build on the norms and culture of

the organisation, for instance allowing self

systems control or group pressure to operate where

appropriate.

7. Research Agenda

There are many areas demanding further study, but a key

cluster of related issues has

become clear:

• Finns should conceptualise that the addressing of a

requirement-driven problem is

" .. .in fact a whole series of 'nested' problems, each

alternative solution leading to a

new set of problems at the next level" [23]. The holistic

sensing and interpretation

of these requirements is therefore crucial if fIrms are to

formulate and implement

performance-orientated actions (for example see [24]).

• Towards this aim, it is suggested that systems should

synergistically interact with,

and integrate, other external and internal subsystems.

Adapting and synthesising the

notion of boundary-spanning units and lateral relations

([25] and [26] respectively),

it is proposed that supple systems should be energised and

supported by cross

functional teams which scan and assess the external

environment for current and

anticipated requirements.

• Furthermore, these requirements should be decomposed into

issue content and issue

process dimensions (see [27]). In this way, injecting the

language of

integration/differentiation [28], the function-specifIc

issue content (for example,

measures for health and safety) can be identifIed and

directed towards the relevant

function in order to create optimal differentiation.

• Likewise, the generic issue process elements of incoming

requirements (for example,

the actual measurement process which will be used to

operationalise the health and

safety measures) can be abstracted to form a core of

enabling skills which can be

drawn upon to more effectively manage future requirements,

thereby optimising the

integration of otherwise disparate requirements.

8. Conclusions

It has been seen that fInns are confronted with a

bewildering array of demands and that

taking each as a discrete problem with an isolated

solution is not really a feasible

approach. This is especially so when it is put in a wider

context of a continuous stream

of new demands of which we have addressed prominent

examples.

An approach is needed which develops the fInn's capacity to

adapt to changing

demands, or better still to anticipate and mould those

demands.

Drawing upon the metaphor presented by Lewis, fInns will

not be able to capture the

organisational meaning of business requirements if they

have no net to catch them in

[29]. Supple systems are proposed as an integrated,

developmental net which can

provide positive benefIt to construction fIrms, however

small, to do something, start

somewhere, in what will become a continuous development in

the capability to identify

and satisfy business requirements. As time goes on a

robust, but flexible framework of

systems and processes will be created. At the same time

staff should develop an

understanding of their stakeholders and the requirements

from them and of the key

inter-relationships within the organisation, leading to a

successful service-orientated

culture pervading the fInn and ensuring the effective and

effIcient delivery of product or

service offerings.

Ultimately, the "supple systems" approach has the potential

to create a synergistic and

symbiotic nexus between business requirements and

organisational activities through the

nurturing of systemic thinking that views requirements as

being fluidly embedded within

dynamic contexts which require correspondingly holistic,

flexible and ever progressive

solutions. To take this forward will require the further

research identified.

In practical tenns professional fInns are under pressure to

address key issues that are

congruent with their professional status. As leading

practitioners in construction they

must aspire to produce high quality work which is achieved

with due regard to the

health and safety of those involved and which also

exhibits a responsible attitude

towards the environment. A supple systems approach is

proposed as a way in which

fInns can grow into a role where they react, adapt, but
also generate positive change.

This is to be achieved through integrated, developmental

management systems that

propel them forward rather than tear them apart!

[I] Barrett, P. & Holling, J., (1994a). Survey of

QA-certified Professional Finns in UK Construction Delphi
Study of Longer Tenn Developments with UK Quality
Management Experts, SERC Project Report No.1, University
of Salford: UK.

[2] Barrett. P. & Holling. J .• (1994b). Delphi Study of

Longer Tenn Developments with UK Quality Management
Experts. SERC Project Report No.5. University of Salford:
UK.

[3] HSE. (1991). Successful Health and Safety Management.

HMSO. London.

[4] Barrett. P. & Grover. R., (1995), A Quality Strategy

for Chartered Surveyors. to be published Autumn 1995.
[5] Hidden. A.. (1989). Clapton Junction Railway Accident
Report, Report of Anthony Hidden QC, Tribunal Chainnan, 27
September.

[6] Duff. A.R.; Robertson. I.T.; Cooper. M.D. & Phillips.

R.A .• (1993). Improving Safety on Construction Sites by
Changing Personnel Behaviour. HSE Contract Research Report
No. 51.

[7] British Standards Institution.. BS7750: Specification

for Envirorunental Management Systems. British Standards
Institute. UK.

[8] Council of European Communities. (1993). Council

Regulation (EEC) for a Community Eco-Management and Audit
Scheme. Brussels.

[9] Atkinson. c.J. & Butlin. R.N .• (1993). Ecolabelling of

Building Materials and Products. BRE Information Paper
11193. Building Research Establishment: Watford. UK.

[10] Sexton. M.G. (1995). The Prajna Approach to

Sustainable Construction;. in Proceedings of the
Intemational Workshop on 'Environmental Impact Evaluation
of Buildings and Citiesfor Sustaillability; Florence.
13-15th September.

[II] Ashby. R.. (1963). Introduction to Cybernetics. John

Wiley. New York.

[12] Thompson. l. (1967). Organizations in Action.

McGraw-Hill. New York. pp.18-21.

[13] Leavitt. H.J.; Dill. W.R. & Eyring. H.B.. (1973). The
Organizational World. Harcourt. Brace. Javanovich. New
York. pp. 306-310.

[14] RICS. (1995). QA Research Project Workshop. RICS:

London. 6th June.

[15] Vision Eureka Conference. (1994). Quality Management

in Building and Construction. Lillehammer. Norway. 13-16
June.

[16] Etzioni. A.. (1964). Modern Organizations.

Prentice-Hall: Englewood Cliffs. N.J.

[17] EFQM. (1992). The European Quality Award. EFQM:

Brussels.
[18] Canadian Standards Association / Deloitte & Touche.
(1993). General Principles of Management Systems. Canadian
Standards Association / Deloitte & Touche: Canada. P.3.

[19] ISO. (1992). Vision 2000: A Strategy for

Internatiollal Standards' Implementation in the Quality
Arena During the 1990' s. ISO. Geneva

[20] Barrett, P. (1994). Supple Systems for Quality

Management. RICS Research Paper Series. RICS. London

[21] Barrett. P.; Sexton. M.G. & Stanley. C .• (1995).

Cultivating Continuous Improvements in Facilities
Management. Paper presented at the COBRA '95 RICS
Construction Research Conference. 8-9 September.

[22] Barrett. P. & Sexton. M.G .• (1995). Integrated.

Developmental. Management Systems. Paper presented at the
COBRA '95 RICS Construction Research Conferellce. 8-9
September.

[23] Cyert. R.M.; Simon. H.A. & Trow. D.B .• (1956).

Observation of a Business Decision, Journal of Business.
29: 247.

[24] Thomas. J.B.; Oark. S.M. & Gioia. D.A.. (1993).

Strategic Sensemaking and Organizational Performance:
Linkages Among Scanning. Interpretation. Action. and
Outcomes, Academy of Management Journal. 36: 2: 239-270.

[25] Thompson. l. (1967). Organizations in Action.

McGraw-Hill. New York. pp. 66-67.

[26] Galbraith. 1973). Designing Complex Organizations.

Addison-Wesley. Reading. Mass. Pp.46-64.

[27] Dutton. lE.; Walton, E.J. & Abrahamson. E .• (1989).

Important Dimensions of Strategic Issues: Separating the
Wheat from the Chaff. Journal of Management Studies. 26: 4:
381.

[28] Lawrence. P.R. & Lorsch. J.W .• (1967). Organization

and Environment. Harvard Business School. Boston.

[29] Lewis. C.I.. (1956). Mind and the World Order. Dover.
New York.

LONG-TERM SUCCESS OR FAILURE OF

CONTRACTORS' STRATEGIES OF

DIVERSIFICATION

P.M. Hillebrandt

Department of Construction Management and Engineering,

University of Reading, Reading, UK

Summary

This paper considers time series data and evidence from two
studies· of large

contractors which examined the market strategies adopted by

large contractors in the

boom of the second half of the 1980s and those of the

recession in the first half of the

1990s. The general findings are that; contractors did not

by their diversification policies avoid construction
cycles; contractors benefitted from housing activity but
not from property development; • contractors could have
better anticipated the change in the housing and property
markets; material producers and contracting businesses
were less volatile than housing, property and other
businesses; • external market factors were very important
in success or failure but internal processes also played a
part; in retreating to core businesses in the recession
contractors often had no choice but in many cases were
right to do so; contractors should not totally exclude
diversification in the future.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

Sommaire

Base sur les donnes de "temps senel" et deux etudes de

grandes entreprises du

biitiment cet expose examine les strategies de marche

adoptees par les grandes

entreprises du biitiment pendant la prosperite de la

deuxieme moitie des annees quatre

vingts et la recession de la premiere moitie des annees

quatre-vingt-dix. Les conclusions generales sont que:
les entreprises du biitiment n' ont pas evite par leur
politique de diversification les cycles de construction;
les entreprises ont beneficie de l'activite du logement,
et non pas du developement des biens immobiliers; les
entreprises auraient pu mieux anticiper les changements des
marches du logement et de 1'immobilier; Ie commerce des
mareriaux et de la construction etaient moins changeants
que Ie logement, l'immobilier et les autres commerces;
les facteurs de marche exterieurs etaient tres importants
pour les succes et les echecs mais les procedes internes
ont egalement joue un rOle; les entreprises du biitiment
n'avaient pas d'autre choix que de se replier sur Ie
commerce debase pendant la recession mais dans beaucoup de
cas, elles ont eu raison de Ie faire; A l' avenir les
entreprises ne devraient pas exclure totalement la
diversification.

Keywords: Strategy, diversification, contracting housing,

property, materials,

fluctuations, cycles.

1 Introduction

In the period from the early 1980s to the early 1990s large
construction companies

changed their market strategies considerably. A study

undertaken in 1986 by Hillebrandt and Cannon [1] of twenty
large UK

contractors. It is estimated that they accounted for 60% of

the contracting work of

the top 35 UK contractors UK contractors. The study found

that market strategies

were dominated by growth and diversification and

construction companies invested

heavily in property, housing, building materials, mining,

plant, marketing and a whole

range of miscellaneous activities. The reasons are well

documented in the study. A later study undertaken in 1994
by Hillebrandt, Cannon and Lansley [2] of
eighteen similar companies, supported by published data on
seventy of the top eighty

companies found a dramatic retreat to core businesses

brought on by the recession. Were the contractors making
wrong judgements of their markets in the 1980s

or were other factors. responsible for their change of

strategy? This paper attempts to

assess how far the strategies, particularly those of

diversification, when formulated

made sense in relation to market conditions and to see how

far they succeeded or

failed because of external market conditions or because of

factors internal to

construction companies. The 1986 study identified five

main reasons for diversification: 1) to avoid

dependence on the cyclical nature of construction and

particular clients and markets

2) to increase profitable growth 3) to increase activity or

enhance security by

controlling supplies 4) to make good use of positive cash

flow and 5) to increase fixed

assets. Large contractors diversified into a whole range

of activities but the most

important were construction related: housing development,

property development and

material production, especially aggregates and sand and

gravel. When the housing and

property markets collapsed and the general recession

developed, they retreated to their

core business of contracting. To a large extent this

retreat was not voluntary. In

order to grow and to diversify companies had borrowed large

amounts of money so
that their gearing was very high. This had to be reduced
and one way of doing this

was to sell assets. Construction companies tended to sell

those of their peripheral

businesses which had a good market value. However in spite

of the reduction in

diversity of activities being somewhat imposed,

contractors generally are now reacting

against any idea of future diversification.

2 A voidance of fluctuations

There is sense in diversifying out of construction to avoid

the fluctuations of the

construction cycle but housing, property and material

production have shown

themselves to be as cyclical as construction itself and

this was to be expected.

Contractors have in the past diversified into some totally

different businesses such as

deep mining for minerals, boat building and, in one case

many years ago, meat

processing. Generally these diversifications have not been

a success in the long run. What evidence did the
contractors have before they diversified and, if they had

a choice would de-diversification be sensible in terms of

the objective of reducing the

vulnerability of the businesses to fluctuations? Table 1

shows indices of output of

contracting, proxied by new construction output minus new

private housing; private

housing, which is nearly all speculative; private

commercial building which is some

indicator of the ups and downs of new property development;

crushed rock aggregate
production and sand and gravel production for the main
materials production. Studying this table it can be seen
what view the contractors could have taken

of the fluctuations in contracting compared with housing or

property development.

Looking back in 1986 which was the date of most of the

first study contracting

was seen to have fallen considerably from the high levels

of the early 1970s and

recovered only slightly by 1986. The fall from 1971 to

1981 was 37% and still 29%

by 1986. Housing in 1986 was down by 31 % on 1973 but it

had shown more extreme

ups and downs than contracting. By contrast property

development was relatively

stable with a long steady almost uninterrupted growth from

1976 to 1986 and by 1986

was above the 1973 level. On this basis, if contractors

wanted to avoid fluctuations

they should have concentrated on commercial development and

contracting and left

housing alone. Indeed to some extent they did do this.

Figure 1 shows that in current

prices from 1987 to 1990 contracting turnover of 70 of the

top 80 companies nearly

doubled, housing increased by just over a third to a half

and property development

increased by approaching a half.

Table 1. Indices of output for Contracting, Private

Housing, Commercial Building and

Aggregates, Sand and Gravel 1971-1994. 1989 = 100 New

Construction Private Commercial Crushed Sand and Year
Minus Private Housing Building Rock Gravel Housing
Aggregates 1971 104 126 48 na 85 1972 99 133 47 59
89 1973 96 144 48 75 98 1974 88 104 44 70 86 1975
86 93 40 65 89 1976 85 100 35 58 84 1977 83 94 35
56 76 1978 85 107 40 58 78 1979 80 99 37 61 78
1980 74 78 37 61 75 1981 66 71 40 54 68 1982 67 81
45 61 70 1983 67 97 46 66 77 1984 71 94 48 66 76
1985 73 89 52 68 77 1986 74 99 58 73 80 1987 80
110 69 84 85 1988 87 123 79 95 99 1989 100 100 100
100 100 1990 109 78 111 96 89 1991 107 68 97 88 75
1992 104 68 79 85 68 1993 100 75 65 na 66 1991
101 80 68 na 68

Notes

1973 was the peak of the previous boom in all work by

contractors including new

private housing and new commercial though new work as a

whole peaked earlier.

1989 was chosen as the base year as it was the beginning

of the downturn.

na not available

Sources:

Figures for construction, private housing and commercial

building are based on DOE's

constant price series of value of output all corrected to

1990 price levels. Figures for

aggregates and sand and gravel are based on production or

sales. All original data

came from various issues of DoE Housing and Construction

Statistics.

Profits from housing, however (see Figure 2) increased more

than profits from

property development and were in absolute terms very high.

Suppose contractors in 1986 were looking ahead, as they
should have been, to

determine their strategy, how much of the changes could

they have foreseen? They

were on the up-and-up in all types of work. All three types

of work were buoyant and
from 1986 to the peak of output contracting increased by
47%, private housing by

24% and commercial work by 91 %. In 1986 i.t must have

seemed that they couldn't

go wrong. The profit figures also showed that they were

right to be in all three

businesses. But could they have foreseen the fall? To some

extent they should have

done. The NED a forecasts first talked of the danger of an

oversupply of office

accommodation in December 1986 and made a negative output

forecast for 1989 in

December 1987 years before the fall in orders or output and

in time to avoid some

new developments. However the gestation period of the large

property schemes was

long and so also was the construction period. This warning

would have come too late

for the very large schemes.

20

16

12

o £000 million current prices ~ ~ ~~ ~~ ~ ~ 1987

1988 _ Contracting ~ Materials ~ ~ ~ ~II ~ ~ ~~
1989 '990 ~ Housing rrrrn Other 7.: 7~ ; % ~Wl ~Wl
~ffi ~ ~ 199' 1992 1993 (IRIJ Prop. Dev't. g Foreign

Fig. 1. Turnover by activity of 70 of the top 80 UK

construction companies 1987-93

Source: Construction Forecasting and Research Ltd based on

company accounts for and quoted in Hillebrandt, P. M.,
Cannon, J., and Lansley, P. R. (1995) The Construction
Company In and Out of Recession, Macmillan; London. £
million current prices

1200.----------------------------------------------.

800~-------V~----~A--------------------------------~

400~~----~~-----L~--~.-------------------------~

-400~----------------------------------~~------~

-800L-~------~----~~----~------~----~------~~

Fig. 2.

Source: 1987 1988 _ Contracting ~ Materials 1989 ,990

~ Housing g Other '99' '992 '998 mm Prop. Dev't.
Pre-tax profits by activity of 70 of the top 80 UK
construction companies 1987-93 Construction Forecasting
and Research Ltd based on company accounts for and quoted
in Hillebrandt, P. M., Cannon, J., and Lansley, P. R.
(1995) The Construction Company In and Out of Recession,
Macmillan; London. In the case of housing, the writing was
on the wall in March 1988 with the

announcement of the abolition of joint mortgage tax relief

to take place in August.

However, the NEDO forecasting panel did not comment and

contractors continued to

buy land at very high prices for the first eight months of
1988. Some companies did

not recognise the recession even in 1990. In the case of

contracting the reasons for

the fall in output were general recession exacerbated by

the specific factors of the

housing and property market collapses. Public sector

expenditure had a moderating

influence on the downward trend with spending on health,

education, infrastructure

and even housing being relatively steady. The demand for

aggregate, sand and gravel

follows that for construction. Road building is an

especially large consumer of

aggregates. Unfortunately very recent data for crushed

rock aggregates are not

available but fluctuations in demand for them have been

greater than for construction

though for sand and gravel they have been about the same.

3 Sector by sector consideration of diversification

3.1 Contracting

Contracting companies do not of course diversify into

contracting but contracting must

be the benchmark by which other sectors are judged. It has

already been seen in

Table 1 that contracting suffered from fluctuations,

although they were not as violent

as in housing or commercial building. However, Figure 1

shows a very different

picture for large contractors in that, at constant prices,

turnover in contracting rose

steadily to 1991 and remained at about that level in 1992

and 1993. As prices fell

during the recession in real terms turnover probably

increased. Profits did not do so

well as seen in Figure 2 and were, in any case, not high

compared with housing or

property profits on turnover, but they were at least still

positive in 1993. However,

the cash situation became tighter during this period,

partly because of the element of

cash flow in profit which was falling, but also because the
more difficult trading

conditions brought squeezes wherever the client or

suppliers could achieve it. This
affected the business as a whole and the capital intensive
businesses in particular.

3.2 Housing

Diversification into housing certainly, in the short run,

achieved the objective of

increasing profitable growth. Figures 1 and 2 show that in

1988 the profit from

housing was about level with the profit from contracting,

though the turnover was only

about 60% of that in contracting. Thereafter profit fell

and became negative in 1991

and 1992 while turnover fell back only to 1987 levels. But
over the period 1987 to

1993 as a whole large contractors benefitted from a large

net housing profit. A major reason for diversification
into housing was to make good use of

positive cash flows. Housing does this well by investing

the surplus cash in land.

However, the contractors considered the matter wrongly.

They thought about the cash

but not that it was only a flow going through their hands
which did not belong to

them. Moreover, flows dry up, and when contracting became

more difficult cash flow

diminished. It is possible that it will be reduced

permanently as different forms of

financing for projects and contractual arrangements become

more prevalent. The reason for diversification to avoid
cyclical fluctuations has not worked and

could not have been expected to work in housing. If, in

1986, the contractors looked

at the past fluctuations in housing and said that it was

worth putting up with

fluctuations in order not to miss out on the vast profits

which could be made, they

were acting logically. In fact it is doubtful whether they

did look at past fluctuations.

They were concerned with day to day operations and these

were going well. They

were not acting logically in failing to realise in March

1988 that the boom would end.

Internal factors then took over in the companies. The main

boards could not curb the

housing arms of their companies while they were making

such large profits even if

they realised that it could not last. When the market

collapsed it was too late. They

had bought land at high prices and had difficulty in

selling houses. Some realised

relatively early, but others went around with blinkers on

till 1990. Were they right to reduce and in some cases to
get out of housing in 1990 to

19951 Many of those who sold early had to do so. But even
in 1995 companies were

selling their housing businesses. Probably they are right.

It has been seen that

housing fluctuations are very great over a long period and

the outlook for housing in

1995 looks bleak, with less security of employment for

house buyers, a key long term

factor in confidence. Many observers consider that house

prices will never boom

again as in the past. I am less certain. People have very

short memories and at least

in some segments of the market a substantial rise in prices

over and above the rate of

inflation cannot be ruled out. Contractors should probably

withdraw from housing
now, but a move back into it might be appropriate in some
years or decades ahead.

They wouldn't want to, and shouldn't, miss out on any

future profits bonanza. There is however another factor
to consider. In the last few years specialist

housebuilders have performed rather better than contractors

in their housing activities.

It may be that in order to follow and react to the market

situation single minded

attention must be devoted to housing. It has also been

suggested that a first class

housing development manager will not wish to work for

contractors as opposed to

housing specialists. Contractors' housing managers are

often building specialists who

happen to work on housing.

3.3 Property

Again growth and profits were major incentives to develop

in property. However,

while neither the contribution to turnover nor the

absolute profit were as great as in

housing, the rate of profit related to turnover was about

the same in the good years

and proportionately much greater than in contracting.

Unlike the situation in housing

over the years 1987 to 1993 the losses from property of

the large contractors were

nearly as great as the profits so neither long term growth

nor profits were achieved,

while contracting profits continued to be positive

throughout. A second reason to go

into property was to make good use of positive cash flow

and, in so far as the
property was being retained, to increase fixed assets.
This it did until the fall when

property which had not been let became unsaleable. The

evidence from past years is

that property, as shown by commercial building, was a

stable area of activity relatively

free from cyclical factors. That idea was demolished as

the boom collapsed. So the contractors would have been
better off not to have gone into property.

However, it is difficult in 1986 to see how they were to

know that although by 1987

or 1988 when it was clear that an over supply of offices

was building up, they should

have pulled out. Some contractors are still trying to

rectify the results of their

property exploits. But to say that they should keep out of

property development in

the future is too sweeping. The period to about 1987 was

one of good solid

development Only later did it get out of hand.

3.4 Materials

The move to material production often had very different

reasons from the

development of other businesses. A major aim was to

control supplies and in 1986

this was important, as the increase in activity was seen to

be jeopardising supplies.

To own and operate your own material supply gave greater

security. At the same time

it increased fixed assets. Although Table 1 shows that

aggregate output fluctuated,

output by the large contractors of materials did not fall

greatly from 1989 to 1993.
Production of materials did not, however, directly make
much impact on growth and

was only reasonably profitable until 1991. On the other

hand, overall losses were not

made and in some cases profits for materials are in 1995

better than from any other

source. Contractors made a logical decision to have

control over sources of supply

while that was a problem but thereafter each operation had

to be considered on its

merits.

3.5 Other activities

Other activities increased considerably in the period 1987

to 1990 and then fell back

again. Their contribution to profit was small and the

losses incurred in 1991 to 1993

were greater than the profits made in the previous four

years. Why was this? The

reasons for going into these other activities may have been
partly to have some contra

cyclical activities, but if so it did not work. In some

cases the activities were acquired

"by mistake", with another acquisition, or were the

cherished idea of a respected staff

member. In some cases they were deliberate board policy.

Some companies made very substantial investments in other
non-contracting

activities. Mining is a case in point and one company had

around a third of its

business in mining. There had been connections with

contracting in the beginning and

each successive change in the type of business had some

links with the previous
business. First the company was in the business of opencast
coal production where,

in the post war years the machinery for removing the

overburden was normal large

contracting earth moving equipment, although now it is

specialised. However, that

link and experience in opencast coal brought knowledge of

the coal industry and the

next step was deep coal mining. The know-how of deep mining
facilitated an entry

into the mining of other minerals. It seems it is

necessary either to have some know-how which is
transferable

from one business to another or to be so large in each

business that the company can

attract top specialist managers for each business. This is

what conglomerates such as

Trafalgar House do and it is also the policy of Bouygues,

the French contracting and

television group. Many of the adventures by contractors

with other products were small scale.

The reasons for their fall may have been that they were
peripheral to the activities of

the company as a whole and did not get enough attention or

even investment or that

they, and the related market, were not properly understood

even by their managers.

All these are internal factors.

4 Summary of overall conclusions

The conclusions may be summarised as follows: Enhanced

activity in housing increased turnover and profits in the
short run and over the period 1987-93 as a whole.
Enhanced activity in property increased turnover and
profits but, over the period 1987-93 as a whole, the net
benefit was negligible in terms of profit. Both housing
and property development adversely affected companies'
balance sheets and forced sales of assets. Materials
businesses were not especially profitable but have been
more stable than other businesses. They fulfilled for the
boom period the objective of increasing control over
supply. Other activities were never very profitable as a
group and were loss making over the period 1987-93 as a
whole. The reasons are probably internal to the
companies. None of the activities discussed fulfilled the
requirement of off-setting the contracting cycle.
Contracting turnover and profits of large contractors were
less volatile than those of any of the other businesses ..
Contractors could have used past data to support their
diversification to property and aggregates and sand and
gravel for contra-cyclical reasons but not to housing.
Contractors could have foreseen earlier the fall in the
office property market and the fall in the housing market.
Preoccupation with internal factors and a lack of attention
to the market as a whole was probably the reason why
contractors did not anticipate the decline in property and
housing. Housing and property development were good uses
for positive cash flow only while the cash flow continued
at a high level. Thereafter it was disastrous. Property
development was theoretically a way of increasing fixed
assets held by contractors but it went badly wrong,
because of the amount of unlettable and hence unsaleable
property. Contractors must accept that not only
contracting, but also housing

development and property development are subject to wide

fluctuations, largely

because all of them are investment goods which are

required irregularly. Materials

are so closely connected to construction that demand for

those too is unstable. The

skill in diversification policy probably lies in

anticipating the market changes and

being prepared to increase or decrease activities in

various markets in advance of the

market changing. Nearly all the problems of the

diversification policy arose from

external market factors but the effects of many could have

been minimised by internal
vigilance on how the market was likely to change and by
placing less reliance on

current profitability as an indicator. Diversification

into other products has not been very successful.
Contractors

are perhaps not good at other businesses and unless the

operation is a large one it is

difficult to attract the best managers in the business.

Overall, therefore, contractors should diversify or expand
where there are

opportunities in a business they know well and be prepared

to shrink again as

necessary. Future diversifications or expansions in housing

development, property

development or material production, should not be

permanently ruled out, whatever

the expedient actions of the present time.

1. Hillebrandt, P.M. and Cannon, J. (1990) The Modern

Construction Firm, Macmillan; London.

2. Hillebrandt, P.M., Cannon, J. and Lansley, P. (1995) The

Construction Company In and Out of Recession, Macmillan;
London.

ANALYSING CONSTRUCTION

CONTRACTORS' STRATEGIC INTENT

FROM MISSION STATEMENTS

F.T. Edum-Fotwe, A.D.F. Price and A. Thorpe

Department of Civil and Building Engineering,

Loughborough University of Technology, Loughborough, UK

Abstract

A construction company's strategy formulation usually

culminates in action
progranunes that are presented in mission statements which
form an integral part of the

company's annual report to its shareholders. Mission

statements of construction

companies express not only the intended strategies of

these organisations, but also

present an assessment of previous performance upon which

the long-tenn vision of the

company's executives, in terms of what it aspires to be,

who it wants to serve, and

how it wants to compete in its chosen markets, is based.

Analysis of mission

statements highlight how construction contractors respond

to changing conditions in

order to ensure their survival within their perceived

future business environment

Detailed analysis of the mission statements present a view

from within the company of

the strategic intent arising from their planning, which is

aimed at addressing the future

of the company. This paper presents an analysis of the

mission statements of twelve

large construction contracting companies. The analysis

draws on nine principal factors

that characterise the missions of large corporate bodies

to evaluate the mission

statements of the selected contracting companies with a

view to identifying variations in

the nature of strategies that were 'intended' to be

pursued. The analysis shows that

construction contractors' strategies embody five main

factors.

Keywords: Mission statement, construction contractor,

content analysis, content
factors, strategy.

Sommaire

La formulation de strategy d'une entreprise s'exprime par

des programmes d'actions

qui sont presentees comme declaration de mission et qui

forme une partie integrale du

rapport annuel de l'entreprise. La declaration de mission

des entreprises de

construction presente non seulement les strategies

projetees de ces organisations mais

aussi une evaluation de la performance anterieure sur

laqueUe sont bases les visions

futures des executives, a voir, les aspirations, les

services offers et les termes de

competitions dans les marches. Une analyse des plans de

mission demontre comment

les entreprises repondent aux changements de conditions

dans Ie but d' assurer leur

survies dans l'environnement d'affaires. Une analyse

detaillee des declarations de

mission presente une vision interne des strategies dans les

entreprises, qui resultent de

leurs planification qui a pour but d'adresser Ie futur de

l'entreprise. eet article presente

une analyse des declarations de mission de douze grandes

entreprises. L'analyse deduit

de neuf facteurs pricipaux qui caracterisent les missions

de grands conseil d'entreprises

en vue d'evaluer les declarations de mission des

entreprises choisis, et d'identifier les

changements dans la nature des strategies projetees.

L'analyse montre que les strategies
des entreprises sont basees sur cinq facteurs principaux.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

1 Introduction

The focus of a construction contractor's strategy is

usually reflected in its mission

statement. The outcome of its past strategy and the future

direction for the contractor's

business is usually presented as executive summaries

contained in the annual report.

There was great enthusiasm for developing organisational

mission statements in the

1980's. Piercy and Morgan [1] attributed this interest to

the fundamental work of

Drucker [2] on the importance of business mission to

efficient management. Brabet

and Klemm [3] equally recognised the importance of

business mission for attaining

profitability. The statements were considered as valuable

tools whereby managers can

motive, focus and provide leadership for their staff

towards the objectives of the

company, as well as presenting a coherent programme of

strategy for the consumption

of shareholders and third party interests.

This paper examines the mission statements of construction

companies to identify their

content and variation over time. A carefully prepared

mission statement was

recognised by Drucker [2] as the first step in strategic

management. Analysis of such
statements therefore should provide information on what is
addressed by construction

contractors in their strategic planning, and the changing

patterns of how construction

businesses have been perceiving and functioning within

their business environment in

order to ensure their survival. Considerable diversity

exists in the composition and

application of their mission statements among companies in

different business sectors.

Analysis of the mission content of manufacturing and

service companies has been

undertaken by David [4]. There is, as yet, no similar

analysis undertaken for

companies in the construction industry. Such an analysis

should therefore establish the

focus for construction companies, in their strategic

planning from a perspective internal

to the construction business. Mission statements are almost

universally presented

qualitatively in a descriptive format, and therefore, to

effectively analyse together these

disparate mission statements from different organisations,

a method that ensures the

effective translation of qualitative and textual data into

quantitative format is employed.

1.1 Definitions for mission statement

A company's mission statement has been defined by David [4]

as that enduring

statement of purpose which distinguishes one organisation

from other similar

enterprises. It is considered as a declaration of the

company's 'reason for being'.
Other forms of phraseology which have been employed for
mission statement include

creed statement, statement of purpose, statement of

philosophy, statement of beliefs,

and statement of business principles. All the above phrases

connote a long-term

perspective, a basic requirement for formulating effective

strategies. These various

definitions put forward for the mission statement of

organisations can therefore be

summarised as a common management tool that addresses an

organisation's 'theory of

business', antiforms the basis of its corporate strategy.

The use of the terminology in

this chapter therefore adopts this explanation.

1.2 Components of mission statements

Broadly speaking, all organisations have a mission or

'reason for being', even if

corporate planners and senior executives have not

consciously put it into writing.

Results of recent research suggest that a key aspect of

strategic planning getting

senior executives to agree on, and putting into writing a

definition of the purpose and

scope of the company can actually translate into profits

[5]. However, what a mission

statement should contain is still open to debate. In his

earlier work Drucker [2]

outlined the components of missions statement as involving

a company addressing

itself to three key questions; 'who is our customer?',

'where is our customer?', and
'what is the value of our customer?'. The three key
questions of Drucker were viewed

by Pearce [6] to be less comprehensive for providing a

balanced and effective mission

for corporate entities. Pearce [6] subsequently put

forward six factors that

characterised missions of high performing companies, and

suggested that mission

statements of organisations should comprise six factors.

The factors were presented

as:

product or service, market and technology;

survival goals outlining growth and profitability;

company philosophy;

company self-concept;

public image; and

responsibility to stakeholders.

The factors of Pearce [6] were empirically determined from

mission statements

surveyed from the Fortune 500 firms. David [4] also

undertook a comparative analysis

of the mission statements of manufacturing and service

firms. Both Pearce and David

[4,6] achieved their objectives by applying a content

analysis methodology.

According to McGinnis [7], a mission statement, in

addition to defining what the

organisation is, and aspires to be, should be limited

enough to exclude some ventures

and broad enough to allow for creative growth, distinguish

a given organisation from
all others, and serve as a framework for evaluating both
current and prospective

activities. In line with this, Want [8] considered the

primary components of a mission

statement to be of five categories. These were outlined as

purpose, ultimate business

aims, corporate identity, policies of the company, and

values. The various categories

employed by Want [8] are explained below.

The purpose includes the primary justification for the

organisation's existence, which

translates as the primary lines of business for the

company, the products and services

provided or markets to be served, and manner in which they

are to be served.

Ultimate business aims address the market share,

profitability or size, strategies for

achieving growth and optimal productivity, and impact on

competition.

Corporate identity embodies how the company wants to be

recognised in the markets in

which it undertakes its business by clients, competitor

companies, other interested

corporate entities like the financial institutions, the

social community, and the its

employees so that all these interested parties can develop

a sense of identity and

commitment with the company.

Policies of the company refer to the philosophy and style

of leadership of its senior

executives, the relationship between top management and the

company's board of

directors, owners and shareholders, and the company's

overall decision making

structure.

Values include consideration for customers, competitors,

employees, regulatory

agencies, and the general public.

The various submissions on content of mission statements

by different analysts

overlap. In essence, they contain many of the same issues,

with Pearce [6] favouring

greater detail and specificity, while Drucker [2] showed a

preference for a more general

coverage. The most comprehensive list of categories for

the content of mission

statements was outlined by David [4], who put forward a

preliminary list of nine

categories in his comparative analysis of the mission

statements of ftrms in two

business sectors, which is presented in Figure l. The nine

mission content categories

brought together the most comprehensive content list, and

embodied all the different

factors presented by Drucker, Pearce and Want [2, 6, 8].

1. Clients/Customers 2. Services/Markets/Products 3.
Location/Geographical spread 4. Technology 5. Economic
survival/Profitability 6. PhiIosophylValues/ Aspirations
7. Self.concept/Strengths and weaknesses 8. Concern for
public image 9. Concern for employees Figure 1: List of
mission content categories [take" from David 1989J

2 The content analysis method

Content analysis has been employed for the successful

examination of historical

artefacts. Easterby-Smith et al. [9] recount examples

where this method was

employed in analysing historical accounts. The method

basically involves the counting

of certain key phrases or words or ideas embodied in

written materials, and the

frequencies are then analysed. This is achieved by

selecting the written statements,

developing categories, and measuring the frequencies of

appearance for the categories

in the various statements. By applying appropriate

statistical assessments, conclusions

can be drawn on the various content factors. The method is

commonly employed to

analyse qualitative and unstructured data, and leads to an

appreciation of the concepts

involved in managerial activities which are set down as

written documents [10]. This

can be established by identifying non-random variations in

their textual data. The

information presented in corporate literature is considered

as corresponding to an

objective reality that reflects the strategic intentions

of construction contractors.

This method was employed in this research to analyse the

mission statements of

construction contractors because of its suitability for the

purpose. Construction

contractors' mission statements are presented as

qualitative information, which are all

too often unstructured. To be able to capture the scope

and coverage of its content, the

method provides a means of isolating the important issues

addressed in the statements

for a number of contractors, in order to arrive at a

unanimity on construction contractor
mission statements. This research analysed annual mission
statements of twelve

construction contractors over a ftve-year period using the

content analysis method.

The annual examination identifted the main mission factors

that featured in their

executive summaries. Each of the identifted mission

contents was then analysed over a

ftve year period to identify any variability. The results

of the analysis have been

presented in section 4.

3 Nature of contractors' mission statements

The mission statements of construction contractors are

usually emlx><lied in their annual

reports. These are presented as part of the executive

statement of the Chainnan, and

the in some cases of the Chief Executive Officer. The

executive statements usually

review the past perfonnance and then define a mission for

the future. The mission

statements of contractors vary in content, and address

different factors which can be

identified with the content categories presented by David

[4]. Excerpts from the

mission statement of one of the major organisations in the

construction industry, which

is referred to in this paper as Company A, is provided to

exemplify how construction

companies include the categories identified by David [4]

in their mission statements.

This is based on the executive statement which fonns part

of their 1992 annual report.

Clients and customer

No reference

Services, Products and Markets

The Company A Group includes the United Kingdom's largest

construction materials

supplier, the largest private house builder and the largest

building and civil engineering

contractor. A balanced range of other construction

materials and services complete the

group's portfolio, which all lies in the construction

industry.

Location

... to take advantage of the good market conditions in the

UK.

... our confidence in the long tenn prospects of the North

American markets.

Technology

No reference.

Concern/or Survival

One certainty is that the organisation and commitment which

have made our Housing

Division such an effective and profitable competitor will

not fail in the new conditions.

Philosophy

The group operates on a rigorously decentralised basis in

seven autonomous divisions.

Self-concept

... mount a large-scale, keen and effective response to

the opportunities that exist.

Concern/or Public image

Company A is the biggest UK controlled building materials

and construction group.

Concern/or employees

Individual success is at the heart of our corporate

philosophy and our corporate

success.

The excerpts from Company A's 1992 mission statement

presents a comprehensive

approach in their mission. This broad scope allows for

devising and considering a

wide range of feasible alternative objectives and

strategies that does not limit

managerial innovation. The Company A Group comprises

several business units in

different sectors of the industry. Such a broad approach to

their mission statement also

enables the corporate centre to reconcile differences among

the various units of the

company that have to confront diverse stakeholders in their

various business sectors.

To illustrate the presentation and scope of construction

contractors' mission, two such

statements for leading companies in the industry. referred

to in this paper as Company

B and Company C. are hereby reproduced.

Company B

The built environment is essential to our daily life,

providing shelter and the means to

create economic activity. Company B supplies a wide range

of products and services

to meet these needsfrom the building of homes to the

construction of major

infrastructure projects. The group endeavours to undertake

these activities responsibly

and in the best interests of its shareholders'.

Company C

'Company C pic is a major force in the construction,

housing, mechanical engineering

and technology related markets in the UK, with operations

in a growing number of

overseas markets and an increasing involvement in

investment-led projects. The

Group's successful and flexible blend of services, skills

and products is tailored to

meet the needs of clients, and is complemented by its

continuing caring concern for the

community, the environment and its own employees and

pensioners. The Group's

strategy remains to build on its strength. It continues to

focus on the core businesses

of Construction and Homes, developing its ancillary skills

and activities to support

them. In parallel there is a continued drive to increase

the productivity, efficiency and

cost-consciousness of all parts of the Group, and to

maintain the proven high standards

of quality, safety, and reliability to the benefit of

customers, shareholders and

employees'.

4 Analysis of the mission statements

The nine elements that featured in the work of David [4]

were adopted as a basis for

analysing the content of the contractors mission

statements. Each mission statement

was judged as including a particular factor if reference

was made to that factor either

directly or implied by a phrase contained in the executive

statement of the annual

report. A value of one (1) was assigned to that particular

factor for the company in the

year considered. Where no reference is made to a content

factor in the mission

statement, either directly or by implication, a value of

zero (0) was assigned that

particular factor. The analysis was performed utilising the

mission statements of

twelve major construction contractors. The basis for

selecting the twelve companies

was primarily the ready availability of their annual

reports. The statements from the

selected companies covered the period 1987 to 1991, and

1993. The selected period

offered different conditions of business environment

ranging from recovery, through

an economic boom, to a recession. This way it ensured that

the contents resulting from

the analysis, will reflect the changes in the focus of

strategic responses for contracting

companies in the industry in different phases of the

economic cycle.

4.1 Content of contractors' mission statements

The analysis began with the composition of matrices that

summarised the annual

content categories in the statements of the twelve

companies. For each factor, a mean

annual value was determined. The mean values ranged from:

0.00, in which case no

company within the sample included that factor in their

mission statement; to 1.00, for

which aU the companies included that particular factor in

their mission statement. A

factor is rated as forming part of the content of

contractors' mission statements if it

exhibits a consistent mean value closer to the value of

one (1). Consistency here was

established by the value of the t-statistic with zero as

the control mean value. Table 1

outlines summary statistics of the overall content factors

derived from the matrices. A

low value for the statistic indicated a consistent

non-inclusion, with the converse

holding true. Figure 2 shows the plot of the corresponding

histogram of content

factors to ascertain the factors that reflected consistent

inclusion or non-inclusion in the

mission statements.

4.2 Analysing annual variation in content of mission

statements

The variation in content of mission statements was assessed

by pairings of the

distributions for the annual means, and evaluated by paired

t-test. The pairings were

performed by matching a particular year's content factors

with all the rest in

succession. This way it was ensured that gradual annual

changes which result in a

major long-term variation is not overlooked. Table 2

presents the result of the paired t

test for the data from 1987 to 1991.

Subsequently, the five-year mean for the period from 1987

to 1991 was paired with the
mean value factors for 1993. Table 3 presents the results
of the paired t-test to evaluate

variation in mission content between the two distributions.

Table 1: Summary statistics of overall content factors

Content factor S-yr. mean 1987-91 S.d. t-statistic

Comment

Clients/Customers 0.066 0.071 2.091 O.OOt

Services/Markets 0.932 0.093 22.382 1.00'"

Location 0.667 0.131 11.345 1.00'"

Technology 0.032 0.044 1.633 O.OOt

Economic survival 0.900 0.109 18.410 1.00'"

Philosophy 0.867 0.175 11.092 1.00'"

Self-concept 0.868 0.126 15.407 1.00'"

Public image 0.200 0.094 4.740 O.OOt

Employees 0.300 0.075 8.885 O.OOt

J .00·· strong evidence of COflSlstenl InclllSlon O.oot·

strong eVidence of non-lnclllslOn CI> = CQ > '0 CJ ~
c CI> c 0 U 1.000 0.900 0.800 0.700 0.600 0.500
0.400 0.300 0.200 0.100 0.000 Clients/ Customers
Services/ Mukets El5-yr mean C 1993 Location Technology
Economic Philosophy Self~t Public image Employees survival
Figure 2: Degree of inclusion/non-inclusion of content
factors in contractors' mission Table 2: Summary
statistics for mission variation 1987-1991 Annual pairings
Mean for annual values t-statistic for Year 1 Year 2 Mean
Yrl Mean Yr2 paired means 1987 1988 0.537 0.583 1.049
1987 1989 0.537 0.537 0.000'" 1987 1990 0.537 0.592
1.264 1987 1991 0.537 0.434 2.330+ 1988 1989 0.583
0.537 l.l14 1988 1990 0.583 0.592 0.286 1988 1991
0.583 0.434 3.410'" 1989 1990 0.537 0.592 1.400 1989
1991 0.537 0.434 2.053 1990 1991 0.592 0.434 3.878'"
• -p<O.OI. + -p<O.05

Table 3: Summary statistics for mission variation between

5-year mean (87-91) and 1993 5-year mean Mean value
t-statistic for (1987-1991) factors1993 paired means
A verage of mean

value factors 0.537 0.647 2.868

Standard deviation 0.382 0.388

5 Discussion

This section addresses the outcome of the content analysis

for the sample contractors.

Although it will be inappropriate to generalise with the

sample for an industry-wide

perspective of the focus of contractors' strategic

planning, the analysis still provides an

insight into the issues that receive the long-tenn

attention of the companies in the

sample, from which other companies can learn.

5.1 Strategic content of contractors' mission statements

From the results of the analysis it can be observed that,

for the sample contracting

companies, five factors dominate their mission statements

and hence the focus of their

strategic survival. These are:

services and markets;

location and geographical spread;

economic survival and profitability;

philosophy and values, or aspirations; and

self-concept, or strengths and weaknesses.

The dominant factor of location and geographical spread in

the strategy of construction

contractors is only logical, as the products of their

business operations are not

transportable. By defining market sectors for their

business operations, contractors
attempt to achieve a balanced corporate portfolio. All the
companies in the sample

could be classified as industry leaders, and were therefore

aware of their position

within the industry, and clearly articulated business

philosophy to exploit their position

of strength.

The general absence of four major factors in the strategic

focus of construction

contractors present a case for an improvement in the scope

of their strategic concerns.

The factor concern for employees featured in some of the

mission statements of the

contracting companies in the sample, nevertheless, the

level of its mean value and t

statistic indicated a general non-inclusion in the missions

of the whole sample. No

meaningful inference could therefore be drawn on this

factor. It can be inferred that for

the sample of companies, the focus of their strategic

planning does not cover the three

factors clients and customers, technology, and concern for

public image. The non

inclusion of the factor of technology in the mission of

contractors is perhaps consistent

with the general view of an industry which is still labour

intensive. However, the non

inclusion of the factor clients and customers in the

mission of the sample companies

does not reflect the project oriented nature of the

industry, where long-term

relationships with clients can significantly influence

levels of turnover and minimise
business risks. It would have been expected that
contractors' strategies would focus

on the employers who generate the majority of the

industry's workload. However

evidence from the analysis point to the absence of such

relationships. Exploiting the

development of such relationships as a strategic option,

should provide opportunities

for construction contractors to minimise their business

risks. There has been an

increasing awareness in recent times, of the influence

exerted by the built environment

on nature by the general public. This has prompted some

construction contractors to

include environmental concerns in their strategic focus.

However, the low mean value

for the factor concern for public image, could be

interpreted as indicating that a

significant proportion of construction contracting

organisations are lacking in this area.

5.2 Variation in the focus of contractors' strategies

The paired annual mission contents revealed that between

1987 and 1991, the focus of

contractors' strategic planning did not undergo any

appreciable change. This is

evidenced by the values returned from the t-test of the

paired data. The low values of

the resulting t-statistic was consistent for all the paired

data making up the sample. In

The business environment in which contractors operate is

characterised by cycles of

change, influenced by several economic factors, such as

funding shifts, deregulation,
and foreign competition through globalisation of the
industry's markets. Construction

contractors' mission statements, however, indicate a

stability in the focus of their

strategic orientation. This perhaps should be the case, as

strategy, should denote an

enduring character. However, the consistent non-inclusion

of the factors of clients,

technology, public image and employees, over the five year

period offers some insight

into areas for which could be addressed to provide greater

scope for competitive

advantage. Analysis of the statements for 1993 did not

reveal any change in the

number of factors that played a dominant role in the

strategic focus of construction

contractors. However, there was a modest change in the mean

factor values for the

five dominant factors, suggesting a wider appreciation of

these factors for their

strategic survival by construction contractors.

6 Summary

The chapter has employed a content analysis method to

evaluate the strategic focus of

construction contractors' mission. The analysis revealed

that five factors dominated the

mission of construction contractors. These were services

and markets, location and

geographical spread, economic survival and profitability,

philosophy and values

{aspirations}, and self-concept {strengths and

weaknesses}. The evidence from the
analysis shows that contractors give little or no
consideration to the other factors of

clients/customers, technology, concern/or public image, and

concern/or employees,

normally associated with mission statement.

One of two inferences could be drawn from the outcome of

the analysis. First, that

construction contractors give consideration to the factors

of clients (customers),

technology, concern/or public image, and concern/or

employees, in their search for

corporate objectives, however, no strategic advantage is

seen in these factors and so

they do not feature in their strategic options. Second, and

the most obvious, is that

these less dominant mission factors do not receive any

attention from construction

contractors in their search for strategic options.

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10. Lacity, M.C. and Janson, M.A., 1994. Understanding

qualitative data: a framework of text analysis methods.
Journal 0/ Management Information Systems, 11(2), pp.
137-155.

UK NATIONAL TECHNOLOGY

FORESIGHT: THE CONSTRUCTION

INDUSTRY PERSPECTIVE

B.A. Young

Bartlett School, University College London, London, UK

Abstract

The first UK National Technology Foresight Programme was

conducted in 1994/95.

The construction industry was one of fifteen sectors

taking part in the exercise. The

objectives of National Technology Foresight are presented

along with the methodology

and criteria for selecting the key priorities. The

Construction Industry Panel identified

four engines of change and five key opportunities. The

paper discusses each of these

priorities in detail. A summary of the major tasks and

organisations needed to

implement them is included in the paper. The conclusion

focuses on the extent by

which the Technology Foresight Process meets its objectives

and, in so doing, the

lessons to be learned for the future.

Keywords: Technology Foresight, Construction Industry.

L'Abrege

Le premier programme nationale de technologie de prevision

de la Grande Bretagne a

eu lieu en 1994-1995. L'industrie de la construction a ete

l'un des quinze secteurs qui ont

participe a cet exercise. Les objectifs du programme sont

presente en meme temps que

la methodologie et les criteres choisis pour indiquer les

priorites clefs. Le jury de

l'industrie de la construction a identifie quatre voies de

changement et cinq opportunites

principales. Le document etudie chacune de ces priorites en

detail. Un resume des

taches majeures et de l'organisation requises pour la mise

en place de ce programme est

inclus dans ce document. La conclusion se concentre sur la

mesure dans laquelle la

technologie de prevision atteint ses objectifs et, par

consequent, les le~ons qu'on peut en

tirer pour Ie futur.

1 Introduction

The central thesis of "Realising our Potential", the

government White Paper published

in May 1993 was that the UK science and engineering base

has the capacity for being

more aware of and responsible to the needs of industry and

other research users. Equally,

firms and other organisations should be aware of and

receptive to the research being done
by the science and engineering community. The Government
conceded that it would

take steps to encourage a greater level of communication

and raise the level of mutual

understanding.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

Many decisions were being taken about the relative merits

of strategic research,

without the benefit of any systematic and comprehensive

assessment of the match

between potential research outputs and take-up by firms.

Research programmes which

may be successful in the quality of the research may not

necessarily offer economic

reward to the potential recipients, the end users. Such a

waste in resources must

therefore be minimised by producing a better match between

publicly funded strategic

research and the needs of industry and other end users.

Having considered the experience of other advanced nations

and assessed best practice

in the UK, the Government decided that the establishment of

a UK Technology Foresight

Programme (TFP) was essential. . .... "This country (UK)

could and should benefit from

the application of Technology Foresight, not only as a

means of gaining early notice of

emerging key technologies but also as a process which will

forge a new working
partnership" (pI7). The idea that partnerships and networks
which would emerge from

the TFP was perceived as a vital mechanism for encouraging

a greater common

understanding of the trends and uncertainties surrounding

further technological

developments.

It is the purpose of this paper to describe, in some

detail, the process by which the

Technology Foresight Programme took place and how the

construction industry

participated in the process. The results from the

construction sector survey will also be

reported. The final part of this paper addresses the

question as to whether the process

was a success and the way forward.

2 Principal Objectives of Technology Foresight Programme

Following in the footsteps of Japan, Germany, the

Netherlands, USA and Australia's

experience ofa national TFP, the Office of Science and

Technology (OST) (1994), who

is responsible for achieving the successful completion of

the Programme, deliberated the

objectives of the Programme which are as follows:

That the process can be designed to

• break down barriers and create contacts across

organisational boundaries between small and large firms
and across industrial sectors;

• develop a consensus of future technological scenarios,

their likelihood and importance;

• raise and stimulate awareness among the science and

technology community of the long-term potential vis-a-vis
technology and market opportunities.
A number of secondary objectives have been identified as:

• forging a consensus on national goals;

• purchaser/supplier chain link involvement

• assisting government departments in clarifying their role

in wealth creation and enhancing quality oflife.

46 Young

The outputs or results can be used to:

• identify particular generic technologies which society

recognises as important goals over the next decade;

• identify fields and targets which will be important in

the long-term(30 years)

• set priorities between broad fields of science and

technology

• identify fields of technological fusion which cut across

disciplinary boundaries.

The objectives considered by each of the national

approaches are described in

Table 1, together with their strengths in actually

realising those objectives.

How do the OST's objectives compare with the overseas

commitments? Firstly, the

Government was of the opinion that the exercise should

provide a systematic means of

identifying and assessing generic technologies and their

long-term economic and social

benefits. Secondly, priority setting both within and

between fields of science and

engineering must also feature strongly. Thirdly, other

government departments should

be informed ofthe priorities set for applied science and

technology. Lastly, industrial
exploitation of science and technology will be
strengthened by contacts and networks

between industry and the science and engineering research

community. When

comparisons are made with Table 1, it can be seen that the

OST objectives are broadly

similar to those of the overseas experience.

3 Technology foresight process

The task of overseeing the Foresight Programme was devolved

to a Steering Group

chaired by the Government's Chief Scientific Advisor. The

organisation structure for the

Programme is shown in Figure 1 (IPRA 1994).

Consultants were appointed to work closely with OST.

Fifteen expert panels were

established to represent the sectors taking part in the

programme. The Construction

Panel was not included in the original selection of sector

groups. Only after the

Construction Sponsorship Directorate, argued successfully

for its inclusion did approval

take place in February 1994. Each of the fifteen sector

groups are listed in table 2.

The composition of the expert panel was devised from an

initial survey conducted by

PREST consultants requesting respondents to identify their

level of expertise in a given

area. In addition, each individual was asked to nominate

others who met the criteria in

question. Using this mapping tool, a database of experts

was constructed and the process

of co-nomination was adopted for generating the pool of

experts. Table 1. Principal objectives of overseas
technology foresight Source: OST January 1994 Country UK
Germany Neths USA Japan AustINZ Project or organisation
ACOST OTI PRISM Tech for CUe Delphi Ministry Critical STA
Basic ET CUee (OSO) 21 st Century Basic Economic
Technolo· 30-year Research Science Affairs gies
Forecast Priorities I'ROCESS Raises awareness widely of
It ./ ./ ./ It ~ ./ It ~ It dilfcrent vision of future
Encourages networks and It ~ ./ ./ It It ~ It It It
contacts Develops broad consensus It ./ ~ ./ ./ ~ ~ ./ ~
./ on ways forward OUTPUT Detailed priorities within ~
~ ~ ./ ./ ~ ~ ./ ~ ./ fields Broad priorities
between It It It ./ ~ ./ It It ./ ~ lields Priorities
for Technology ./ ./ ./ ~ It )C ./ ~ )C )C I'oliey
(generic technologies) Identify fields with long)C )C ./
)C ./ ~ )C )C ~ ./ term (up to 30 yenrs) putential
Identify lields of )C )C )C ~ ~ ~ ./ ./ ~ ~
technological fusion Key: ~: Primary effect ./: Secondary
effect )C: Little impact

48 Young

government Technology Foresight Programme Steering Group

Expert Pool EJ Office of Science & Technology
consultancy advice

Fig. 1. Technology foresight programme: organisation chart

Source: IPRA Ltd March 1994

Table 2. List of sector groups participating in technology

foresight programme

Sector Groups

Agriculture Construction

Food and Drink Materials

Energy Chemicals

Defense Leisure

Manufacturing Finance

Communications Retail and Distribution

IT !Electronics Transport

Over 3,000 forms were sent out to all sectors. A 40%

response rate was recorded. Just
less than 40% of the respondents reported that they were
engaged in academic research,

whereas the remaining categories are dominated by

industrialists.

(Figure 2) Other (9.69%) Market strategy (4.08%)

Corporate strategy (10.42 %) Research management (13.91

%) Main Activities Industrial research (23.31 %)

Fig. 2. Main activity of respondents

Source: Georghiou et al University of Manchester 1994

Academic research (38.60% )

When the numbers are categorised according to 'Expert' by

Field, only 131 individuals

responded from the construction industry claiming to be

knowledgeable or expert in a

particular field (see Table 3).

Georghiou et al (1994) advanced a hypothesis to explain

these phenomena. They

claim that well organised research communities with a clear

stake in the future

distribution of research resources are more likely to

respond. It is widely understood

that because the construction industry is highly

fragmented, forming a cohesive

research community is difficult to achieve (Young 1995).

However, another

explanation may be that the generic nature of some sectors

is reflected by the

broadening of the skill base. This would imply that the

construction industry skill

expertise is highly specific.

50 Young
Table 3. Numbers 'knowledgeable' or 'expert' by field

Source: Georghiou et aI, University of Manchester 1994

Field

IT and/or electronics

Materials

Environment and safety

Manufacturing and production

Business processes

Chemicals

Energy

Life sciences

Communications

Aerospace

Defense

Food and drink

Natural resources

Health

Transport

Construction

Retail and distribution

Lifestyle and culture

Financial services No. knowledgeable or expert 515 441

381 370 341 324 308 306 253 215 199 193 180 175
141 I31 63 53 51

From the 131 construction experts the OST selected 18

members for the

Construction Panel and an assessor who represented the

construction industry on the

Steering Group. Once in place, the Panel nominated further

members from the expert

pool to extend the breadth of coverage.

The Construction Panel met for the first time in May 1994
and over the following

ten months, nine Panel meetings took place, an extensive

literature review was

conducted and the methodology included eleven workshops and

a two-stage Delphi

survey. In all, over two hundred people attended the

workshops. Five hundred and

fifty experts were consulted during the two-stage Delphi

survey and one hundred and

fifty one people replied. A twenty eight per cent response

rate was recorded. A

detailed breakdown of all the results are given in the

Construction Panel Report

(1995). The key findings and priorities are presented below.

The Construction Panel, through its literature review,

workshops and the Delphi

process were able to identify and prioritise the key

opportunities and engines of

change against the criteria set by the Steering Group.

These criteria include; economic and social benefits
arising from market opportunities wealth creation and
quality of life; the ability of the UK industry to
capitalise on specific opportunities UK capabilities; the
ability of the UK science base to contribute to specific
science and technology opportunities UK capabilities.

By analysing the data, using this selection process, nine

main priorities comprising

four engines of change and five key opportunities were

arrived at. Tables 4 & 5 list
the headings. These nine key priorities are then classified
according to main tasks and

the organisations needed to implement them (see Table 6).

Table 4. Engines of change

I. Promoting learning and learning networks through

improved, and more appropriate education and training

2. Setting up mechanisms to ensure that all players in the

construction process are kept well informed and their
activities fully coordinated by means of advanced
information and communication technology (lCT).

3. Introducing a national fiscal policy that encourages and

fosters long term investment and economic growth.

4. Creating a culture of innovation through the joint

efforts of government, education, industry and
institutions.

Table 5. Key opportunities

I. Using standard components to achieve customised

solutions.

2. Applying advanced business processes to construction

(working together efficiently).

3. Adopting a 'constructing for life' approach.

4. Benefiting society and the environment through

construction developments.

5. Creating nationally competitive infrastructures.

52 Young

Table 6. Major tasks and implementing organisations

Source: OST, Key Points 1995

Task Lead organisations

EducationlLearning networks

Establishment of a forum charged with the development of

education Education departments
policies and curricula designed to produce world class
constructors

Promotion of learning networks

Reaping the benefits of the information revolution

construction industries

Establishment of a virtual reality centre for construction

and

development of a managed programme

Fiscal changes

Research into realtionships between changes in fiscal

policy and

effects on construction investment

Innovation culture EPSRC,DoE EPSRC, ESRC, DoE, DTI

EPSRC EPSRC, ESRC, DoE, DTI

Promotion of innovation, for example by appointing

directors and Industry, EPSRC,

professors of innovation in construction Universities

Fiscal policy/legislation in construction central

Government

Customised solutions from standard components

A managed programme aimed at developing a world leading

Industry, DoE, EPSRC

competence in design, application and supply of customised

solutions

Components of lightweight materials

Business processes in construction

Multidisciplinary research into development and application

of

improved processes in construction

Constructing for Life

Research and establish relationships between performance,
expected

life and costs of materials and components

Environmental and social consequences of development

New managed programme on holistic approach to social and

environmental benefit analysis

Competitive infrastructure

Study group to identify UK strengths in the engineering

and research

base

Competitive infrastructure working group on research

required for

improvements in UK and export markets EPSRC, ESRC

EPSRC,ESRC,NERC,DoE EPSRC Construction Industry Board,
DoE, EPSRC

4 Conclusion

Did the UK National Technology Foresight Programme meet its

objectives? As far

as the actual process is concerned, the Construction Panel

achieved all its objectives.

The other fourteen panels are still deliberating the

outcome. The breakdown of

barriers and the networking across organisational

boundaries were actively pursued.

A consensus of technological scenarios were developed and

priority setting supported

four Engines of Change and five Key Opportunities. In

order to increase awareness

and for momentum to gather pace amongst participants of the

UK construction

industry, the Construction Panel findings cannot be

ignored. It is evidently clear that

the construction industry relies on other industrial

sectors to provide technological

inputs into products and processes. Where technological

fusion cuts across industrial

boundaries the construction industry must grasp the

opportunity for joint ventures,

sharing the risk and gains with its industrial and academic
partners.

Notwithstanding the government's important role during the

implementation

process, it must ensure that the next UK National

Technology Foresight Programme

considers the lessons which have been learned from the

1994/95 exercise. For

example, from start to finish, the process was by far too

demanding in such a short

time frame. If it had not been for the commitment and

enthusiasm shared by the

panel members, the positive response from the expert pool

and the enormous effort

the OST exercised, the Programme would have faltered in the

early stages. It,

therefore, seems reasonable to suggest that given this

concerted effort, the very first

National Technology Foresight Programme conducted in the

UK, from aconstruction

industry perspective albeit a late entrant, was a

resounding success.

Acknowledgements: Construction Panel, OST Staff

1. CMM 2250. (1993) Realizing our Potential, HMSO, London.

2. OST (January 1994) UK Technology Foresight Report.

3. IPRA Ltd. (March 1994) A briefing paper to inform
discussions at two industry workshops, 13 & 14 April
1994.

4. Georghiou L. and Loveridge D. and Nedeva M.

Co-nomination in Foresight (1994) A report on the use of
co-nomination to identify participants for the UK
Technology Foresight Programme, University of Manchester.

5. Young B.A. (1995), Technology Foresight No.5: Research

and Development Interfirm Collaboration, HMSO, London.

6. OST (1995), Progress Through Partnership, Construction

No 2, HMSO, London,

7. OST(1995), Key Points. Construction No 2, HMSO, London,

STRUCTURAL ADJUSTMENT FOR A

COMPETITIVE ENVIRONMENT:

SURVIVAL STRATEGIES FOR MEDIUM

SIZED CONSTRUCTION FIRMS IN

ZAMBIA

Peter M. Mukalula

School of Environmental Studies, Copperbelt University,

Kitwe,

Zambia

ABSTRACT

The institution of the Structural Adjustment Programme in

Zambia has had serious

repercussions on the construction industry. There has been

a dramatic drop in the

volume of work in recent times. Competition for the few

jobs available has been

fierce by both local and foreign companies.

Survival has therefore been an issue to contend with.

Medium sized construction
firms (MSCF) have felt the impact most during this process
of adjustment. The study

examines organisation structures before and after the

advent of economic liberalisation.

It further unravels tangible soiutions to problems of

management in having to face

emerged complexities in terms of formalisation,

centralisation and decentralisation,

power factors etc, and the business strategy that firms

adopted.

KEYWORDS

Organisation structure, strategy, Structural Adjustment

Programme

SOMMAIRE

Le calendrier de travaux, ainsi que tout autre outil cree

au cours de la phase

de planification et de programmation, constitue une carte

routiere pour la

gestion des travaux dans sa phase de mise en oeuvre. Ces

outils forment un

systeme de controle visant a aider les chefs de projet a

anticiper les problemes

suffisamment tOt et ales traiter au mieux.

L'avancement-meme du projet se

traduit en termes physiques et de coilts, qui permettent de

mettre a jour Ie

calendrier des travaux et du budget, et de definir Ie

pourcentage de

realisation effectivement effectue et d'en deduire les

affects sur la partie des

travaux restant a realiser. Ce procede permet d'identifier

les problemes qui

pourraient entraver la bonne marche des travaux et en

consequence de penser

des solutions pour les resoudre ou les amoindrir. Une fois

les solutions

choisies, les outils de programmation des travaux

communiquent et

controlent les changements apportes. La planification, Ie

contrOle et Ie suivi

des travaux dans Ie contexte socio-economique particulier

de la bande de

Gaza posent Ie probleme d'une gestion speciale pour

atteindre les objectifs

definis pour Ie projet. Le present papier tente, en un

premier temps,

d'apporter une vue d'ensemble des procedes de controle et

de suivi et. en un

deuxieme temps, d'analyser les systemes de controle et de

suivi des projets

d'infrastructure dans la bande de Gaza.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

INTRODUCTION

Since the last decade, the Zambian economy was

characterised by high inflation,

currency devaluation, and low levels of investment (Times

Of Zambia, 1994). Zambia

was among ten other countries in sub-Saharan Africa whose

change in macro

economic policies during the adjustment period 1987/91 was

described as

'deteriorated' with index scores between 0.0% and -0.2%.

The construction industry
also declined during this period registering a growth rate
of 5.2% in 1986, -4.1% in

1987 and -13% in 1988 (Development Plan, 1989).

The Structural Adjustment Programme was instituted to try

to improve the

performance of the national economy. In trying to reduce

inflation and therefore

improve productivity, the government has:

(i) reduced spending on capital projects.

(ii) reduced grants to local authorities.

(iii) triggered cost saving measures taking place in

Zambia's copper conglomerate,

ZCCM.

The above measures have substantially reduced the level of

construction activity and

consequently increased the level of competition. This has

forced MSCF's to employ

survival strategies in a bid to survive. Owing to their

small medium capital bases, these

firms have responded, in the main, by scaling down their

operations that have led to

substantial alterations in their organisational structures.

The challenges brought about by the so called 'enabling

environment' on the

operational responses ofMSCFs, are the subject of this

paper.

SAP EFFECTS ON THE CONSTRUCTION INDUSTRY

The inevitable result has been one of aggressive

competition and the following aspects

can be singled out as the observed effects of the existing

situation:
(i) Liquidation and foreign competition

Free market policies have brought both a reduction and an

emergence of new building

firms in Zambia. Some building firms have gone in to

liquidation due to the high

competition. The lack of construction activity has only

left the tough going. The

emergence of foreign companies who seem to be given

favourable conditions (such as

tax free benefits) over the local ones, has not seemed to
help the situation much but

has 'cowered' local potential (Turner, 1995; Mashamba,

1996).

(ii) Changed procurement strategies

Free market policies have led some building firms to change

their strategies by

adopting better approaches to job procurement. With

reduced government funding to

both government departments and parastatal bodies, these

institutions have had to

adopt alternative methods of procurement to the traditional

RIBA Plan of Work

system such as target cost and prime cost, etc., in order

to rationalise their resources in

the changed environment (Mukalula, 1996).

(ii) Unemployment

Free market policies have accelerated the rate of the

employment retrenchment process

as they are very few jobs to occupy all contractors.

Employment levels are at their Structural adjustment for a
competitive environment 57

lowest for the construction industry. Statistics available

for the construction formal

sector employment for the years 1990 to 1994, show a

significant reduction of those

employed. 1990 1991 1992 1993 1994 33.4 33.1 27.8 22.1
18.5

Source: Employment Trends, Construction Industry, Central

Statistical Office, p17,1994

Unofficial figures for the year 1995 stand well below

15.0. In the period between

March 1992 and December 1993, both the parastatal and

private sectors lost 7,600

employees coming third after the manufacturing and

agricultural sectors who lost

9,900 and 7,800, respectively (CSO, 1994). This is because

firms have been constantly

trimming their staff by scrapping off certain job positions

and through the elimination

of departments or divisions. Such changes have led to

alterations in spans of control,

levels of formalisation, sizes and arrangements of

departments, authority relationships

etc.

(iii) Expansion projects

Exploring new areas by opening branches and offering new

construction products so as

to increase their market locally, nationally and

internationally, although Turner (1995)

says that this has taken place at a very small scale.

Diversification in terms of product

mix, has increased the complexity of the organisation

structure as expansion entails

spatial or geographic differentiation which have in turn

changed formalisation and
power distribution in the firms. Opportunities to expand
have been made possible in

that money that once was utilised as security for foreign

currency bidding purposes is

now having to be reinvested in improving the operations of

the company.

Construction companies who are finishing their projects

early are making huge savings

in overheads unlike before. As most major building

materials have always been

imported, stringent foreign currency purchasing measures

introduced during the mid

'80's contributed to their delayed delivery and therefore

late completion of contracts.

Laid down procedures required huge amounts of money to be

deposited in support of

currency bids that only tied up the contractor's capital.

Hefty advance payments were

a common feature in contract documentation which were

consequently 'frontloaded'

when priced so as to offset such payments. Careful

management was therefore

ensured which made most firms adopt highly centralised

type of organisation

structures.

(v) Information Technology in workplaces

Mechanise their operations so as to promote higher

productivity and remain viable.

Information technology is fast being adopted by most firms

to cater for various tasks

such as payroll preparations, interim valuations and other

administrative
documentation whose formatting is easily standardised by
available word processing

packages. Workplace structures, following after

revolutionised, innovative

organisation structures, have been adopted.

Turbulent times

The 'turbulent' (Bums in Pugh and Hickson, 1989)

construction environment has

affected the operations of existing firms in that their

business spheres and processes

have changed and brought about the need to alter their

organisational structures. This

has been done in a bid to have their operations become

"more resourceful and

productive" as contained in the following comment in one of

our country's tabloids

which stated that: " ... These are certainly tough times
for Zambia as employment shrinks and belts are tightened
even further. We are all finding it tough going. But to
abandon market forces is no solution. Whether we like them
or not, they are an inescapable fact of life. Realism
requires that we acknowledge this by becoming more
resourceful and productive. By making ourselves
competitive we can use market forces to our advantage
instead of mourning and groaning"(Times Of Zambia, 1994).

ORGANISATION STRUCTURES BEFORE AND AFTER LmERALISATION

Almost 80% of the work coming on to the construction was

provided by state owned

enterprises in the first fifteen years of Zambia's

independence (Development Plans,

1964 1980). Government jobs were distributed to building

firms following a rota that

was kept at the Buildings Branch of the Ministry of Works

and Supply. At the time,

the number of large and medium sized contractors was

almost limited and jobs were

guaranteed as foreign firms were not allowed to operate on

the same basis unless they

were attached to a donor funded project (Golson, 1995).

There was therefore less

competition and firms tended to develop and maintain

formal, rigid organisation

structures.

With the changed business environment, the firms studied

were eager to become

knowledgeable of opportunities available to them. The

effectiveness of how these

firms have responded has been seen in the way they have
altered their structures for

specific tasks or functions that they would want to achieve

in order to survive.

Beishon et. al., (1976) argues that, "If fa] system is to

survive, maintenance substructures must be elaborate to
hold the walls of the social maze in place. Even these
would not suffice to ensure organisational survival,
however. The organisation exists in a changing and
demanding environment and it must adapt constantly to the
changing environmental needs. Adaptive structures develop
in organisations to generate appropriate responses to
external conditions. "

This is what Bums' (Pugh and Hickson, 1989) 'organismic'

type of organisation

advocates for an unstable environment ; the flexibility of

having to understand it is

absolutely essential for there to be effective organisation

of the internal structures to

suit such.

Study Criteria

The change in organisation structures before and after the

institution of the SAP is of
interest. In order to study the changes occurring before
and after the institution of the Structural adjustment for
a competitive environment 59

IMF-monitored economic measures, a number of distinct

organisational features were

singled out that consisted of the following:

(a) Organisational size

(b) Organisational complexity

(c) Formalisation of Work procedures; and

(d) Centralisation and decentralisation of authority.

These features are a part of extensive studies done by

researchers such as those of the

Aston group and found in works by Weber and Henry Fayol

(pugh and Hickson,

1989). The survey was conducted in the two major towns

ofK.itwe and Lusaka where

, by virtue of the location of these cities, construction

works are going on all the time.

A total of 15 major MSCF's were studied and the responses

received revealed features

(b) to (d), above, as the most common factors that were

crucial considerations to what

firms understood to be an 'organisation's structure'. As

the size of an organisation

depends on the number of people, there was great disparity

in the number of people

employed in the firms studied that the basis of comparison

was substantially eroded for

the purpose needed.

(i) Organisational Complexity

As a structural condition, organisational complexity is

exhibited through a number of

factors i.e. what separate parts there are of an

organisation. This is shown by the

division of labour existing, the number of hierarchical

levels, and the spatial dispersion

of the organisation.

The most commonly used form of structuring in MSCF before

the economy was

liberalised was the traditional functional approach

consisting of departments that made

them and were based strictly on the achievement of the

firms' objectives. Departments

encompassing staff support and techno-structure were very

rare and though,

specialisation of labour existed, this was loosely

defined. Most firms preferred

employing "jacks of all trades" which they saw as

positively contributing to their

urgent need for restructuring in this post economic era as

it obviated the recruitment of

specialised staff The most likely departments one could

find MSCFs before economic

liberalisation were:

(i) Constructing Division

(ii) Purchasing and Stores

(iii) Estimating and Quantity Surveying; and

(iv) Accounts.

Within the existing divisions of the MSCF's, alterations

done have reduced or

increased the degree of internal segmentation of the firms

studied. The following are
the results of the survey on how the changed economic
environment affected the firm's

organisational complexity for survival:Altering

departmental arrangements/composition 34% Laying off
workers thus reducing the sizes of departments 46% or
units. Creating more departments 20% Source: Field
Survey

The results indicate that much change in organisation

complexity has occurred through

the reduction of staff with departmentation alterations

following on. Such changes

have affected organisation structures in the following ways:

(i) The shedding-off of staff and changed size and

compositions of departments has

brought about lean vertical differentiation in the

organisation hierarchies; reducing the

spans of control. Reasons for laying off workers were:

(a) to reduce costs

(b) to avoid paying idle workers as there was little to do;

and

(c) to maintain a small but motivated labour force

(ii) The creation and elimination of departments either

increased or reduced the

horizontal differentiation. It was revealed that although

some firms introduced some

departments, the vertical differentiation did not tally

with that of the horizontal. This

means that one head of department would have been heading

two to three departments

which further widens the span of control thus weakening

organisational efficiency.

(ii) Formalisation

By definition, formalisation includes statements or

procedures, rules, roles and

operation of procedures dealing with decision seeking, the

communication of those

decisions and instructions, together with the conveying of

that information. In other

words, increased organisational formalisation is a means

of controlling the behaviour

of the members of the organisation by limiting individual

discretion.

The survey revealed the following:Rules used to apply

strictly and even with the changed situation 14% Rules
used to be applied strictly and still do 43% Rules used
to apply fairly and still do 43% Source: Field Survey

These results indicate that only 14% of the respondents

changed organisational rules.

It is therefore recognised that while structures have

changed, a commensurate change

in rules to govern the effectiveness of these structures,

has not occurred in the majority

of the organisations. The following observations consist of

the reasons why the

situation is as it is:

(i) Standardisation of the work process Work

standardisation processes depended on

the departments that felt the need to re-organise

themselves. Evidence of this was seen

in standard formulations of data sheets and submitted

reports. Structural adjustment for a competitive
environment 61

(ii) Standardisation of Skills Although firms stipulate the

type of qualified manpower

they need from job seekers, they have not strictly adhered
to the rules set. The

majority of MSCF's favoured personnel who were

multi-disciplinarians as they could

perform the work of the civil engineer, quantity surveyor

or estimator.

(iii) Codification of rules Rules did not seem to be a

major way of ensuring

conformity to organisational requirements because top

executives had direct

supervision over the operatives in most cases.

It appears that although there does exist some forms of

formalisation in the

organisations studied, it is most of the time by-passed

and in its place, a 'dictatorial'

approach to managerial leadership adopted.

(iii) Centralisation and Decentralisation of authority

Although being a formalisation component, its considerable

attention during the period

of 'adjustment' is of significant interest. The survey

results were as follows:Highly centralised authority system
42% Highly decentralised authority system 35% Both at
play 23% Source: Field Survey

The survey revealed that decision making authority was

vested in the highest man

which made delegation of authority, a rare phenomenon and

where it existed, it

involved non-financial matters.

However, the study also showed that the current trend seems
to have favoured the

adoption of highly centralised systems since the 'hostile'

business environment has

forced top most executives to involve themselves in making

all important decisions

concerning the running of their firms. This has been a

negative response to the
prevailing situation as high levels of centralisation
prove to be detrimental to a firm's

survival through unjustifiable delays. Decentralisation,

therefore, would prove to be

the only viable alternative in a competitive environment.

Delegation of authority is a

must to speed up the decision making process. As

construction works normally occur

away from head offices, delegation of authority can

definitely speed up operations.

STRATEGIC IMPLICATIONS OF STRUCTURAL CHANGE

Chandan (1991) cites Guelick's (1972) four types of

strategies:

(i) The Stability strategy one that a satisfied

organisation in its business sphere

would embark on and " ... may not be motivated and

adventurous to try new strategies

to change the status quo. "(lbid)

(ii) The Growth strategy as one that seeks to expand as

well as diversify the

organisation's activities. Owing to the volatility of the

business environment, growth

is reflective of effective management of the organisation.

(iii) The Retrenchment strategy simply stated, this is the

reduction in product,

services, and personnel It is mainly aimed at stemming

wastefulness in the face of

adverse competition by re-organising the company.

(iv) The Combination strategy is a merger of various

strategies mainly used by

large complex organisations.

The study has shown that strategies (i) to (iii) have been
utilised by MSCF's for

surviving the competitive environment. All these

strategies affect the structure of

organisations. Fellows et. al.,(1983) states that;

"strategy and strategic management do not occur in a
vacuum: they occur within a specific business which has a
unique organisation structure. The organisation structure
is the facilitating framework through which strategy is
implemented, and will therefore influence strategic
decisions and be affected by those decisions. "

As the study has shown, the basic problem for any

organisation is how to strategically

cope with uncertainties. The answer is in how these MSCFs

have co-ordinated

activities within their organisation structures while

adjusting to their outside business

environments.

As strategy is clearly geared towards the firm's external

environment, other factors

have evolved by virtue of the competition existing in the

industry. There is now, as a

result, greater focus on the personal needs of members in

the organisation as well as

their having to adopt work cultures existing in other

companies as means of gaining a

competitive edge. Such power factors (in that they enforce

their presence from the

outside) have become crucial factors of consideration

during any structural changes

made to MSCFs especially as they are associated to

individuals working in those firms.

CONCLUSION AND RECOMMENDATION

In conclusion, construction work consists largely of an

unstable volume and product
mix and at times involves the geographical distribution of
that work, which must be

managed through a congenial administrative apparatus.

Adopting rigid administrative

structures proves to be very uneconomical to maintain.

Changes in the economic

environment must therefore be followed by changes in the

overall strategic approach of

firms, more especially the assessment of the impact of the

changes on the people in the

organisations. Widening the involvement of individuals and

groups during the strategic

choice processes, will help ensure easier implementation

of change.

In further recommending the way forward, it is clear that

the idea of 'strategy' in the

MSCF's studied, seems to be at variance with the actual

'structural changes' that have

taken place. There is therefore greater need for these

firms to understand their

changed environment and that in tum, to effectively shape

their internal organisation

structures in order to remain viable in a competitive

environment. Structural adjustment for a competitive
environment 63

Beishon, J and Peters, G (1976) Systems Behaviour (London:

Harper and Row)

Central Statistical

Office (1994)

Chandan, J S (1991)

Development Plans (1964-80)

Fellows, Richard,
Langford David,

Newcombe Robert and

Urry Sydney (1983)

Golson, Paul (1995)

Guelick, W F (1972)

Mashamba, S (1996)

Mukalula, P M (1996)

Pugh, D Sand

Hickson, D (1989)

Times of Zambia (1994)

Turner, P (1995) Employment Trends, Government Printers,

Lusaka. Management Theory and Practice, Vikas Publishing
House Ltd Government of the Republic of Zambia, Government
printers, Lusaka. Construction Management (part 1), New
York: Longman Inc Construction As An Industry In Zambia,
The Construction Industry In A Changing
EnvironmentConference Proceedings, University Of Zambia,
School Of Engineering, Lusaka. Business Policy: Strategy
formulation and Action, McGraw Hill "Construction An
Industry Under Siege" in Profit Magazine, No. 4/8 January
The Effects Of The Structural Adjustment Programme On
Maintenance Procurement Contracts, crn W92 Procurement
Symposium proceedings, Durban, South Africa. Writers On
Organisations, Penguin Books "The Tough Economic
Environment", June 2. Opportunities in the sub region, The
Construction Industry In A Changing Environment Conference
Proceedings, University Of Zambia, School Of Engineering,
Lusaka.

ECO-MANAGEMENT AND

CONSTRUCTION

George Dunlop

Bell College of Technology, Hamilton, UK

Abstract
Eco-management is widely accepted as essential for the well
bieng of the

earth. Development through construction leads all human

expansion and as

such contraction will require to incorporate the concepts

of eco

management.

The paper proposes a model for this incorporation, examines

legislative,

conomic and social drivers of change. Presents the

conclusions of an

environemntal survey of house builders in Scotland and

reaches a number

of general conclusions for the future.

Sommaire

On accepte partout que I'ecomanagement est essential au

bien-etra general

du monde. Le developpement, par Ie construction, mere toute

I'expansion

humaine et par consequent Ie biWment devra incorporer les

eco

management.

Le papier propose un modele par cette incorporation et

examine Ie elements

lE~gislatifs, economiques et socious par Ie changement. On

presente aussi

les resultats d' une enquiHe par rapport, a I'

environnement parmi les

constructeurs des maisons en Ecosse et arrive a plusiers

conclusions par

I'avenir.

Eco-management: the concept

The concept of eco-management has been derived from the
resolution by

the Council of European Communities Regulation (EEC) No

1836/93(1). It is

a wider concept than is implied by the majority of current

thinking on

environmental issues. The concept subsumes most of this

thinking with the

addition of promotion of continuous improvement, audit and

publication of

performance.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308. Eco-management and
construction 65

Under the Regulation all industrial activities were covered.

This is clearly stated in Article 1 point 2 of the

Regulation.

"2 The objective of the scheme (eco-management and audit

scheme) shall

be to promote continuous improvements in the environmental

performance

of industrial activities by:

(a) the establishment of and implementation of

environmental policies, programmes and management systems
by companies in relation to their sites;

(b) the systematic, objective and periodic evaluation of

such elements;

(c) the provision of information of environmental

performance to the public. "

The introduction of such a wide ranging set of objectives

to the construction
industry would seem to be fraught with problems. These
being of sufficient

magnitude to delay further development. The United Kingdom

government

are one of the few member states who have complied with
Article 6 by

establishing a "system for the accreditation of independent

environmental

verifiers and for the supervision of their activities". The

UK competent

bodies was established in April 1995, within the required

21 month period

in Article 6.2. The remit of this body indicates a range of

industrial areas

specifically covered by EMAS(21 which does not contain

construction,

possibly in recognition of the problems associated with

construction.

The EMAS proposals do however cover "woodworking

industries" which

appears to include timber-frame house producers who are

part of the

construction industry.

The paper will endeavour to define terms within which the

construction

industry can and should adopt the practice of

eco-management.

A brief review of published literature on environmental

issues will indicate

a dearth of material directly relevant to construction.

Exceptions are

"Environmental Management in Construction" by Alan

Griffith(31 and
"Guidelines on Environmental Issues" by the Engineering
Council(41 both of

which were published in 1994 which is post Regulation

1836/93 but pre

date the implementation date of April 1995. With this lack

of academic

analysis it might seem reasonable to assume that the

practice would lag

behind even further. This is not, as the paper will show,

the case in fact.

The construction industry has for a number of years been

actively involved

in environmental performance improvement. This has been in

large part to

comply with legislative requirements and reaction to

consumer pressure.

Examples which have been reasonably well recorded are the

environmental

impact assessment for major civil projects such as the

Eurotunnel route from

London to the Tunnel, various motorway projects including

the M74

southern extension in Glasgow. At a different level house

builders in the UK

have been continuously improving the energy efficiency of

their product

partly in response to changes in regulation, partly in

response to client

demands but almost all these changes have resulted in

significant

environmental benefit.

In the absence of a suitable scheme for eco-management

measuring,
monitoring, recording and publication these positive steps
have not been

recognised.

The above concept of eco-management in construction will be

driven by

three underpinning factors -legislation, economic and

social which will result

in consequential environmental achievements. To think that

significant

changes in practice will be driven by ecological or

environmental

considerations would seem unrealistic in a commercial free

enterprise world

and it is also at odds with previous experience. It is the

authors contention

that eco-management practice in construction will become a

major aspect

of the industry by a similar mechanism as public health

engineering evolved

in the last hundred years. The analogy can be argued using

the Maslow

hierarchy of Physiological needs as the structural model.

Figure' 1 ' shows

graphically the relationship on the right of the

development of Public Health

engineering to Maslow's hierarchy. On the left of the

diagram is a

representation for the future global incorporation of

eco-management in

construction projecting the recent steps towards a future

global built

environment.
The Maslow type analogy has some support in recent
published works

which underline the growing legislative and economic

material. The systems

for development of environmental management exist in the

developed world

through structures such as BS 7750(5) and its new ISO

partner. Other

aspects of industry are recognlsmg the need to become

ecological/environmentally friendly. The economics of

sustainability have

been developed by authors such as Peter Bartelmus(6), David

Pearce and

Kerry Turner(7) and Michael Common(S). Such texts argue the

economic case

for environmental improvement which if successful will no

doubt percolate

through to primary industries such as construction. Richard

Welford(9) has

his text Environmental Strategy and Sustainable Development

subtitled The

Corporate Challenge for the 21 st century which reflects

the need for

industry to adopt business ethics which recognise

environmental

requirements on a global manner.

Global/International

(Towards 2()()())

Global Ideals

Group/Multi-national

respect
Groups

Sustainable strategies

Communication

Earth Summits, Ozone

Reduction

Environmental

Management in

Construction

Engineering Knowledge

Legislation

Technology

THE ENVIRONMENT

HEALTH ECO-MANAGEMENT (AJier Maslow) Self Accepta ce of

others Local/UK (J 9th/2()th Century) Western Ideals
Nation States Affection te 20th Century Society
Protection Acceptance of Rules Water, Sewage Housing
Construction Food, Shelter Engineering knowledge
Physiological Freedom from Pai Legislation Survival
MASLOW'S TRIANGLE PUBLIC Figure 1

Public Health (19/20th Century) and The Environment

(Towards 21 st Century) by Dunlop After Maslow

Maslow: AH (1968) Towards a Psychology of Being

Van Nostrand Reinhold, New York

Legislative Economic and Social Framework

In the first section it has been stated that the

legislative process will drive

eco-management in construction. It has also been claimed

that as

environmental impacts are global such legislation will be

developed at
International European and National level.

Unlike the development of public health engineering where

practice in many

cases preceded national legislation the environmental

issues practice has

been in many cases preceded by international statements.

The Bruntland

Report of 1987 1101 popularised the concept of

"sustainable development" and

highlighted the global conflict between conservation of the

environment and

continued global development on the "western" pattern. It

was apparent

that a balance was necessary between the quality of human

development

and the consequential degradation of the natural

environment. This concern

prompted the Earth Summit in Rio 19921111. The United

Nations Conference

of Environment and Development (UNCED or Earth Summit)

which met in

Rio de Janiero in June 1992 was the largest diplomatic

event in history with

172 governments represented and 118 of them by heads of

state. The

summit propagated Agenda 21 a huge, wide ranging Programme

of Action

on Environment and Development to be monitored by a

Commission for

Sustainable Development.

Whilst many of the delegates at the conference left

disappointed with the
outcome it provided a major foundation stone for the
various regional and

national legislative bodies to build credible environmental

policies. It also

required the signatories to set in process procedures to

achieve a number of

environmental improvement targets.

In the European context the European Union have since its

inception in 1972

incorporated legislative measures designed to improve

environmental policy

and practice. There are three types of legislation which

are binding,

Regulations, Directives and Decisions. Regulations lay down

the same law

throughout the EU and apply directly to all Member States,

they do not have

to be translated into national laws but apply in the same

way as national

laws. Directives set out aims to be achieved, but unlike

Regulations, these

require the Member States to translate these requirements

into their national

laws within a stated period of time. Decisions, like

Regulations, are directly

applicable in law but can be addressed specifically to

named individuals,

companies or Member States.

In the area of eco-management and environmental issues

pertinent to

construction the following are examples of EU legislation.

Regulation 880/92, which introduced a voluntary eco-Iabel

award scheme
for consumer products across the Member States.

Regulation 1836/93, which introduced a voluntary

eco-management and

audit scheme for industrial sites across Member States.

Directive 85/337 on the assessment of the effects of

certain public and

private projects on the environment, which sets out the

(largely procedural)

requirements for developments such as large scale

industrial and

infrastructure projects.

With this raft of legislative material many areas of the

construction industry

and its supplier industries will require to implement

eco-management

principles.

At a national level the UK, as a Member State, has to

comply with all the EU

Regulations, Directives and Decisions. It does however

raise its own

legislation and a key section of environmental legislation

is the

Environmental Protection Act 1990 (EPA90)!121. This tackles

a wide range

of environmental problems which impact on the construction

industry.

The economic drivers will continue to influence

environmental policy.

Personal, company, national and even international economic

decisions will

always have an impact. In construction the client bodies

whether they be
individuals, businesses or national agencies have
historically always opted

for the cheapest offer for the same specification. This

philosophy will

always tend to mitigate against the environmental option

which has

historically been more expensive.

Social attitudes influence the behaviour of industries

towards more

environmental conscious procedures. Examples are the use of

CFC's and

halons. Public attitudes towards the ozone deplete

properties of these gases

have resulted in construction moving towards considerable

reduction and

use of alternatives. It is factually correct that in 1991

EU Regulation

594/91 addressed a phasing out of the production of such

gases however

the perception within the industry is that the change was a

consequence of

social pressure in other related applications. Social

pressure does however

create problems for the construction industry which can be

exemplified in

the following ways. One problem is the differentiation

between the social

impact of the vocal, active minority of protest groups and

the silent majority

of beneficiaries in cases such as motorway projects. Direct

action groups

can have a major impact on a project however in the event

if the project
proceeds the vast silent majority reap the personal
benefits of improved

transportation facility in silence.

Similarly house builders are under social pressure to

produce the 'green'

house which is energy and environmentally friendly. However

given the

choice between extra insulation to produce energy efficient

house or the

money spent on "white goods" the latter option is the more

marketable

choice. This personal economics of a short-term nature

mitigates against

environmental attitudes.

These three drivers legislation, social and economic

frequently act in a co

ordinated way to influence environmental design. The

increased energy

efficiency achieved in housing due to improved insulation

levels provides a

good example of which has the greater effect. In the

Guidelines on

Environmental Issues on page 6 four key principles of

environmental

protection are identified as.

• the Prevention Principle

• the Precautionary Principle

• the Polluter-pays Principle

• the Principle of Integration

All four of these principles are achieved by improved

insulation.
By improving energy efficiency the owner "prevents" the
release of wasted

energy, it also meets the "precautionary principle" by

decreasing the release

of CO 2 , the "polluter-pays principle" is achieved by

having the owner pay

only for the minimum energy use, in many ways it provides

an "integrated"

solution as it provides social and economic benefits with

no complex trade

off effects in other areas. However as previously stated

the highly insulated

house is not necessarily the preferred option amongst

buyers. It is however

a reality through government legislation to improve the

insulation levels

through changes in Building Regulations. In this way the

producers will

improve insulation, pass the economic initial cost to

buyers who will in the

long term reap both the economic and environmental benefits.

It is by this complex inter-relationship of drivers that

the construction

industry will become more eco-management conscious.

Local Research

As part of the research undertaken for production of this

paper and in partial

completion of a European Project a number of housebuilding

companies were

surveyed on their environmental attitudes. This survey was

by requesting

the companies to complete a fairly substantial

questionnaire.

The questionnaire was designed in four sections. Section

one required a

yes/no response to fourteen questions on elements of

environmental/energy

efficiency improvement in housing provision. Section two

contained two

questions on the use of environmental assessment

techniques. Section

three consisted of four questions assessing the use of

specific procedures

within the organisations which may be seen as indicative of

companies

actively pursuing improved performance in terms of quality

and

environmental practice. The final section was five

questions relating to

specific general environmental issues.

Section one of the survey tested if Scottish Housing was

implementing

environmentally beneficial strategies. The results

indicated levels of well in

excess of 75 % support for the majority of aspects. The

second section on

implementation of standard procedures showed a lower

support with

generally only half the companies giving support. Similarly

section three

which dealt with national standards was only supported by

fifty per cent

with the following specific issues being raised.

The use of Environmental Impact Assessment (EIA) methods on

site was
supported by six out of the twelve who were in the main
large volume

builders. This seems a reasonable response as it is highly

unlikely that

builders with less than 300 units per annum are liable to
develop estates

where EIA is appropriate.

The use of BS 5750 Quality Management Systems was again only

supported by four companies with none of the large volume

builders

supporting this type of initiative. The use of BS 5750 may

be seen by many

builders as not being appropriate to their existing control

systems, also as

being an unnecessary extra endorsement when they already

subscribe to the

National House Builders Registration Council scheme which

is a recognised

quality standard with marketing potential. The BS 5750

standard may be

more appropriate for companies targeting corporate clients

as opposed to

the normal individual client which is the prime customer

for speculative

builders.

BS 7750 Environmental Management which is the environmental

clone of

BS 5750 suffered even less support with only one company

indicating that

they would consider adoption of BS 7750 and the other

eleven showing no

support for the standard. This type of high negative

response could be

rooted in a number of factors such as: little perceived

economic benefit;

previous experience of application of BS 5750; perception

that it is just

another bureaucratic system; little or no knowledge of

possible advantage

or some other reason. Irrespective of the actual reasons

for the high

negative response this particular standard appears to be of

little perceived

value.

The final question on the considerations of having

environmental issues as

part of a purchasing policy was only supported by five out

of the twelve.

These five were a mixture of three large volume producers

and two relatively

small producers both of whom have quite distinctive local

markets. The

rationale behind these decisions is obviously much more

complex than with

the simpler issues in the previous three questions and

probably warrants

further investigation.

The final section on green issues and training confirmed

the tenor of the full

response in that companies recognised that" green issues"

were and would

in the future be very important. They also recognised the

need to eng lighten

staff and provide staff training in such issues. This would

seem to agree
with the earlier discussions in this paper.

Conclusion

Incorporation of Concept and Legislation

In section one the concept of eco-management was developed,

a rationale

for its incorporation was put forward by way of an analogy

with public

health engineering. In section two the existence of fairly

extensive

legislative, social and economic drivers were developed.

The impact of such

forces was tested in the Scottish Environmental Research

survey of house

builders which by implication indicated a degree of

substance in the working

of the analogy. In this final section the future potential

for eco-management

in construction will be further developed.

The Maslow type analogy appears to hold in terms of public

health

engineering. In almost every developed or developing

country the "Western

Ideal" for construction in terms of public health is

accepted practice. Few

construction companies or developers of built environment

would proceed

without including items such as adequate sewage and water

supply

systems. It is considered inappropriate to design

developments without

such considerations the good practice first developed late

in the nineteenth
century in UK and other western societies is now accepted
globally. In

terms of eco-management there has been an extensive

development of

essential foundation legislation which has stared out from

a global

perspective as opposed to the local and national aspect in

public health.

International legislation, national directives and the

associated published

literature, as previously identified, would appear to

confirm that the

construction industry will adopt business ethics which

recognise the

environmental requirements in a global way.

Undoubtedly the construction industry is moving rapidly in

the direction of

becoming more eco-friendly. The evidence is apparent in the

contents of the

paper. As electronic communication and computer

applications grow the

potential for rapid transfer of knowledge will increase the

speed of

development of eco-management.

Designers will use IT to make ecological design decisions

in the near future

with the same enthusiasm as they use the technology in

architecture or

structural design.

Despite the optimism of this text real

environmental/ecological benefit will

only develop when individuals apply such principles to all

their decisions.

2 EMAS Regulations Eco Management and Audit Scheme

Department of Environment, London 1995

3 Environmental Management in Construction Alan Griffiths

MacMillan 1994

4 Guidelines on Environmental Issues The Engineering

Council September 1994

5 BS 5750 Quality Management Systems BSI London 1990

6 Environmental Growth and Development Peter Bartelmus

Routledge, London 1994

7 Economics of Natural Resources and the Environment David

Pearce & Kerry Turner Harvester Wheatsheaf Hemel Hempstead
1990

8 Environmental and Resource Economics Michael Common

Longman, London 1988

9 Environmental Strategy and Sustainable Development

Richard Welford Routledge 1995

10 Bruntland Report United Nations 1987

11 Rio Summit United Nations Conference of Environment and

Development Rio de Janiero 1992

12 Environmental Protection Act 1990 (EPA 90)

2 2. The Firms and Strategic Planning

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modeling: a methodology for evaluating project execution
strategies, Source Document 80, A Report to the
COllstructiolllndustry IlIStitufe, The University of Texas
at Austin, EE.UU.

2. Alarcon, L. and O'Ryan, R. (1994) Environmental policy

impacts. Project Management Institute 25th Seminar
Symposium, Vancouver, Canada, Vol. 1. pp. 995-1000.

3. Alarcon. L., Ashley, D. and Venegas, P., (1995)

Evaluation of strategic decisions in construction projects
(in spanish), Boletfn de Informacion Tecnol6gica, Vol. 2,
No.1, pp. 32-36.

4. Ashley, D. and Teicholz, P. (1994) Prediction of

integration impacts on
engineering-procurement-construction (EPC) processes and
industrial facility quality, A Proposal to the National
Sciellce Foundation. Department of Civil Engineering,
University of California at Berkeley, EEUU.

5. Gordon, T. and Hayward, H., (1968) Initial experiments

with the Cross-Impact Method of forescasting. Futures.
Vol.l, No.2, pp. 100-116.

6. Male, S., and Stocks, R., (1991) Competitive Advalltage

ill COllstructioll. Butterworth-Heinemann Ltd, UK.

7. Seydel, J., and Olson, D. (1990) Bids considering

multiple criteria. Journal ot' Construction Engineering
and Management ASCE. Vol. 116, No.4, pp. 609623.

8. Singh, G. and Das. B., (1995) To enginner is to

venture: be a FRONTIERVENTURER. Second COllgress of
Complltiflg ill Civil Eflgifleeriflg ASCE. Vol. 2, pp.
1220-1227. Atlanta, 1995.

SURVIVAL STRATEGIES FOR SMALL

PROFESSIONAL FIRMS IN A VOLATILE

MARKET

John Boon

UNITEC Institute of Technology, Auckland, New Zealand

Abstract

This paper reports a pilot study to investigate how small

professional firms survive in a

volatile market. It concludes that survival is dependent on

management of the key factors

of, market orientation, flexibility in size and productive

capacity, efficiency and price

competitiveness and financial resources. It then considers

how the firm can best structure

itself to manage these key factors.

Keywords: professional firm, survival, marketing,

structure, networking, temporary

employees.

Sommaire

Cette communication rende compte d'une etude pilote menee

afin d'examiner les

moyennes de survie des petites entreprises professionelle

sur un marche instable. Elle

demontre que la survie depend des facteurs-c1efs suivant :

orientation du marche,

possibilite de varier I'importance de I'entreprise et ca

capacite de production, eficacite,

prix concurrentiels et resources financiel. Cette

communication etudie eOOn les meilleurs

moyennes, pour I'entreprise, de ce structurer afin de

gerer ces facteurs-c1efs.

1 Introduction

During the period 1987 to 1995 the construction market in

Auckland New Zealand has

been through a particularly volatile boom bust boom cycle.

Some professional firms

have survived this period whilst others have not. This

paper is a summary of a preliminary

study carried out at UNITEC. The objective of the study is

to determine how small

professional firms survive in a volatile market. Because of

the limited nature of the study

(four firms were studied) it is acknowledged that the

conclusions must be regarded as

tentative, however it is felt that a framework has been

successfully developed that will

enable further examination of the problem.

1.2 Research Methodology

The study was carried out using loosely structured

interviews. The initial intention was to

examine how firms used temporary employees to adjust their

size to match a varying

workload. However during the course of the study it became

clear that survival was a

more complicated process than this and the ideas set out
in sections 4 -7 were developed.

1.2 Definitions

Small professional firm the study is focussed on firms that

provide professional services

to the property development industry, such as project

managers, architects, engineers and

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

quantity surveyors. Because of the volatility of the

market defining "small" precisely is

difficult as firms varied in size considerably during the

period of study. The study is
focussed on firms generally comprising between 5 and 20
people.

Survival the measure of survival adopted is that the firms

have remained in business

throughout the period of the study.

2 The Market

All firms studied are based in Auckland, New Zealand. New

Zealand has a population of

3 Am Auckland is the principal commercial city and has a

population of l.2m. The market

within which the firms studied operate varies considerably.

One firm's business is confined

to the Auckland area, two operate nationally whilst the

fourth has derived work from

within New Zealand and from Australia and Asia during the
period of study. In order to

illustrate the extent of volatility in the market national

figures are presented here. SM~~on __________________ ,
500 f 1~.~"'o.J ......... __ I 400 ~ I F..aunes = t ~
Hmo. I 300 ~ /\/ I Fon'''"i 200~ . ..t' \ I ~ ["",,', \
A_-' r' \I' • • "'y,y, . , 100 [~' __ fig 1 Real
Non-residential Building Activity 1982 96 (source Rider
Hunt Forecast)

3 Case Studies

3.1 Firm A

This is a firm of Architects that was established in New

Zealand during the mid 80s as a

subsidiary of an overseas firm. It specialises in a

certain area of commercial development

and most of its work has come from that area. Initially it
enjoyed considerable success and

built its staff up to about twenty seven people but in 1990

it experienced a major fall off in

its work load. Since then it has varied in size

considerably as is shown in the table 1: Year No of
employees Total Technical Admin Permanent Temporary 1990
27 20 4 3 1992 4 11 4 0-7 1 1994 26 14 10 2 1995 15
11 2 2 Table 1 Number and types of employees in firm A
during study period

The fluctuations in staff numbers arise from a varying

workload. Most of the work

undertaken is reasonably large ($2 $20m construction

costs). There is therefore a need

for a relatively large team of people while the project is

being designed and documented.

The marketing effort is focussed on building long term

relationships with clients,

particularly those property owners and developers who can

use its specialist knowledge.

Major projects can take several years of nurturing before

a final commission is awarded.

Despite its specialist knowledge competitive fee bidding

is an important part of the firm's

marketing mix.

CAD and general computing is used but has not been

developed to the point where a

competitive advantage can be gained from it.

The firm has found it has to manage its cash reserves

carefully. To a certain extent it uses

the profits it makes from individual commissions to carry

it over quiet periods. However in

recent years fee competition has been such that commissions

are at best only marginally

profitable. In order for the firm to avoid losses it has

found it needs to downsize rapidly

when a work shortage is encountered. A side effect of this

strategy is that it has moved

offices five time during the study period in order to cope

with the changing size of the

firm.

Its current policy is to operate as a core group with a

network of temporary employees.

Some further flexibility is provided by interaction with

its overseas parent. Within the core

group are retained: • design skills particularly in its

area of specialisation • project management • base
technical knowledge • marketing activities

The temporary employees generally provide the following

services and skills • technicians engaged in the
production of documentation • CAD operators (some provide
their own CAD stations) • graduate architects who both
carry out detailed design and produce documentation

Registered architects have also been employed as temporary

employees on occasions.

Temporary employees can be with the firm for anything from

a few weeks to over one

year. Most often they are there for several months. The
firm tries to maintain a regular

group of temporary employees but finds this difficult as

they are often not available when

required as they are working with other firms.

3.1 Firm B

This firm is a structural engineering consultancy, formed

by its two owners in 1989,

although they had both had individual businesses for some

time before this. It now

comprises the two owners, three full time employees

(graduate engineers and technicians)

one part time draughtsperson and one part time

administrator. Now it does a wide range

of commercial and residential work. Its work load tends to

be a lot of small jobs
interspersed with some large commissions.

It seeks to build long term relationships with its clients

and regards regular clients as

"mends". Much of the work is as sub consultants to firms of

architects. However it has

also carried out significant commissions as lead

consultant. One recent commission was

for architectural and engineering services on a major

project in Asia.

It maintains the flexibility to provide this range of

services by having a small stable team

and a network of sub-consultants. These sub-consultants

include architects, soils

engineers, surveyors, fire engineers and another structural

engineer. All these sub

consultants are small firms of 1-3 people; some have

offices others work from home. The

firm tries to maintain a stable network of sub-consultants

that are reliable and know how it

works. However there are changes to the network if regular

sub-consultants are not

available when required.

In order to carry out the Asian project the firm used

twelve sub-consultants. They never

met as a whole team and each sub-consultant worked from its

own base. Coordination

required considerable management effort. Communication was

partly by meetings but

mainly by telephone, fax and courier. The firms sees these

last two communication

channels as essential for this type of networked working.

The firm only rarely sub contracts its core structural

engineering work. It has put a lot of

effort into using information technology to improve its

efficiency and now has a battery of

customised software to assist it carry out its tasks. It

has no drawing boards or secretary:

"everything is computerised'. As a result it can achieve

high levels of productivity "a

bridge that would have taken us six months to design now

takes only one month n. It

therefore copes with peak loads in its core work by working

extended hours (60 -70 hours

per week).

Work also comes to the firm through the network when other
members of the network

obtain commissions they are unable to handle on their own.

Cashtlow is an important factor of survival for the firm;

it is monitored closely and

carefully managed. Sub-consultants are paid as the firm

receives payment of accounts from

its clients. This can have significant cashtlow benefits

compared with paying employees on

a fortnightly or monthly basis. They have been hurt by

clients becoming insolvent in the

past. They now use a debt collection agency to collect

outstanding debts.

3.3 Firm C

This firm of Architects was started in 1989 when the owner

decided to leave the practice

he was employed in rather than become a partner. During the

first year the firm comprised

the owner and one junior draughtperson; it operated from

the owner's home. It now
comprises two architects, one graduate architect, two
draughtspeople and a part time

administrator. It operates from rented offices.

It does a variety of work including new houses alterations,

renovations to existing houses

and various small commercial and community projects. To

date they have not experienced

a quiet patch of substance. They put this down to the

width of the market they operate in

and the care and attention they have put into relationship
building. Much of their work is

now repeat business or comes from referrals.

All architectural work is carried out in-house, temporary

employees are not used. Peaks in

work load are coped with by working overtime. In addition

jobs are staged so that they

have break points which enables other jobs to be processed

in parallel. They also place

emphasis on managing their clients' expectations and making

explicit what time scales they

can work to at the outset. This means that commissions are

sometimes not accepted. They

find that the vagaries of obtaining town planning approval

are such that jobs can rarely be

fast tracked; clients therefore often have reasonably

relaxed time frames.

They are now using CAD for some operations and find that it
has improved their

productivity and flexibility to a certain extent. Computing

is also used for administration

and accounting purposes.

Management of their cash flow is an important aspect of

survival. The business is financed
by an overdraft which is limited. Collection of debts on
time is therefore important to

them. They have recently experienced some difficulties with

clients not paying which is a

noticeable set back. During the early years of the practice

the owner did some part time

lecturing work which provided some stability to the cash

flow.

3.4 Firm D

This firm of Architects has been in business since the mid

sixties. It is now a limited

liability company with two owner/ directors and a staff

shareholding. It carries out a wide

variety of commissions from one off residences to

significant commercial and community

buildings. It was at its largest in 1987 with a total

staff of fourteen including three

directors and a high proportion of full professionals. It

downsized to a total of five the

following year. It now comprises two directors, four

registered architects, a computer

technician and administrator.

All architectural work is done in-house; as a general

policy temporary employees are not

used. The firm places a high value on the quality of the

work it does and its relationship

with its clients. These are essential components of its

marketing effort and of the

satisfaction the owners get from being in business as

architects. It does not feel it can

maintain these standards if it uses temporary employees or

contracts work out. It has on
rare occasions used former employees on a temporary basis
to overcome peak workloads.

It has also in the past carried out a major commission in

association with anotber firm. In

recent years it has found that it is able to expand when

required by re-employing former

employees.

The firm tries to "maintain sufficient base capability" to

meet clients' demands. It

acknowledges this is an expensive policy and at times it

leads to taking work it otherwise

might not, in order to keep people employed. However it

feels that this enables it to

maintain its standards. An increase in fee competition in

recent years has made this policy

harder to maintain. During periods of high workload

overtime is worked. The firm does

not pay overtime as a norm but where a significant number

of extended hours need to be

worked a paid overtime regime is introduced.

CAD and online information systems are maintained, however

this is not thought to

provide noticeably greater flexibility or a competitive

advantage.

Cashflow and profitability are acknowledged as an

important component of the firm's

survival. It did not move quickly enough to downsize in

1987 and as a result suffered a

significant loss. As a result the firm has carried an

overdraft ever since. Nevertheless it

appears to have a stronger financial base than the other

firms interviewed and owns its

offices.
4 ANALYSIS

4.1 Key Factors in Survival

Analysis of the interviews with the four firms suggests

that there is no one right way to

survive in a volatile market. Rather there is an

interaction between and a balancing of a

number of factors that lead to survival. The experience of

the firms suggests that the

following are the key factors in survival: • market

orientation • flexibility in size and productive capacity
• efficiency and price competitiveness • management of
financial resources.

These are each discussed in more detail below. It is

argued that these factors are

interdependent, movement in one factor affecting the

required action within another. For

instance if the firm is successful with its marketing in

achieving a steady workload, then

there is less need for flexibility. Similarly if the firm

is sufficiently efficient in carrying out

the work and successful with gaining a good volume of work

for a time it may generate

sufficient financial reserves that it is able to carry its

staff over a quiet period without the

need for down sizing.

Whilst it is not the focus of discussion in this paper it

is important to recognise that the

firm's knowledge base forms the core of its ability to

provide a marketable service. Knowledge Base fig 2 Key
Factors in Survival

4.2 Market Orientation

The firms interviewed all placed emphasis on their

relationships with their clients.
Promotion (the bringing of the firm's name before the
potential client) and securing the

commission were naturally seen as being important. However

at least as great an emphasis

was placed on building a good relationship with the client

during the execution of the

project. Helping the clients explore their real

requirements and then ensuring that those

requirements are met were seen as being crucial to the

project's success. Delivery of the

service within the client's required time frame was also

seen as an important part of this

market orientation, particularly on commercial projects.

This concern for building good

relationships led to repeat business and referrals.

The management of customer expectations was also seen as

being important, particularly

on smaller architectural commissions. If the performance

capabilities of the firm (with

regard to time frames) is made clear to the client and

dates negotiated it is possible to

adjust the timing of execution of commissions to smooth

out some of the peaks and

troughs.

4.3 Flexibility in size and productive capacity

In a volatile market it is by definition difficult to

secure a steady flow of work. Of the four

firms interviewed firm A had the greatest volatility in

its workload; this appeared to arise

from the type of work it did. Its commissions comprised

fewer, larger parcels of work

carried out for commercial clients with high performance

expectations. It was therefore

less able to juggle its commissions to even out the

workflow. Nevertheless all firms to

some extent faced the problem of a varying workload. In

these circumstances the

managers of the firm face a dichotomy. On the one hand

they need the productive capacity

to be able to provide a good level of service to their

clients during times of peak demand.

On the other hand carrying staff through d~mand troughs

leads to a rapid erosion of cash

reserves and profit. A failure to properly manage either

of these problems can threaten the

survival of the firm. How this problem is handled seems to

require a two stage decision

process. One first must decide what level of work the firm
gears itself to do, then develop

a strategy for dealing with the variations from the geared

level. Each of the firms

interviewed has a different approach to this problem.

Firm A gears itself for somewhere near the low point in its
workload. This has itself meant

an almost continual adjustment in the size of the firm.

The productive capacity is then

further adjusted by using temporary employees.

Firm B has developed the use of computing to enable it to

achieve high levels of

productive output, from a small base. This can be further

expanded by the use of overtime

working. However to carry out large full commissions it

has the ability to expand its

manpower levels by a factor of five using a network of

sub-consultants. Its networking
arrangements are such that payments to sub-consultants
cease as soon as the project is

completed. Its size is therefore more or less self

adjusting.

Firm C has not to date experienced the same volatility in

its work load. It has therefore

found that growth in the size of the firm together with

the use of overtime has provided it

with sufficient flexibility. It does however have a clear

contingency plan for downsizing

rapidly if its workload dries up and its limited cash

reserves become threatened.

Firm D has adopted a strategy of gearing for an output

level that is closer to peak demand.

This obviously requires less flexibility but greater

financial resources. Its need to

substantially downsize in 1988 illustrates the difficulty

of maintaining this strategy. It is

currently pursuing a policy of cautious growth, expanding

only when it is confident that

the increase in size can be maintained.

4.4 Efficiency and Price Competitiveness

All four firms interviewed operate in a market where fee

competition exists. It is generally

not the only factor the client takes into account when
selecting a consultant, however it is

a factor in all cases. The ability to gain work by offering

competitive fees bids is therefore

an important part of a firms marketing activity. Of equal

importance to survival is an

ability to carry out the work profitably within the fee

income. Efficiency and price
competitiveness is therefore an important factor of
survival.

All four firms place some emphasis on maintaining a low

overhead cost structure. All

avoid high accommodation costs and generally minimise

expenditure on reception,

secretarial and administrative costs. Each firm uses

computing and information

technology to some extent to achieve efficiency. However

only firm B has pursued this

matter with vigour to achieve a competitive advantage.

4.5 Financial Resources

Of the firms interviewed only D has significant financial

resources. It owns its own offices

and the directors own other investment properties. The

other firms interviewed all have

limited financial resources. Earnings from one job are

needed to carry the firm through

until the earnings from the next job are received. If the
next earnings are not received in

time then the firm will experience a shortfall in cash and

be unable to pay its employees

and meet its bills. Further if the financial resources are

eroded the firm may find itself

unable to gear up again to meet the next peak in demand.

The interviewees were all very

conscious of this problem and monitor their cashflow

continually. Proactiveness with debt

collection and a willingness to downsize quickly in order

to maintain financial reserves are

seen as key factors of survival by all except firm D.

6 The Structure Of The Firm

This section of the paper considers how the firm can best
structure itself to cope with the

factors in survival identified above, when it is operating

in a volatile market.

Theoretically the managers can structure the firm anywhere

on a continuum between a

closed firm and an open firm. A closed firm is one that is

totally self sufficient and able to

meet all the demands of its customers, whilst an open firm

comprises a small core

surrounded by a network of sub-consultants and temporary

workers The concept of an

open firm can be extended to a multi nuclei open firm where

the firm has a series of

branches each with its own network. Open Firm Fig 3

Closed and Open Finns

Firms C and D align with the model of a closed firm whilst

firms A and B may be

characterised as relatively open firms.

In a truly volatile market the concept of a closed firm

seems unsustainable unless the firm

can isolate itself from the volatility of the market. Firm

C appears to have achieved this by

pursuing lots of small commissions and managing the amount

of work it takes on. Firm D

is also attempting to mange its workload; however its

experience of having to substantially

downsize in 1988 illustrates the difficulty of this

strategy. If it were now to be offered a

one off major commission it has three options: I. remain

at its present size and tum the commission down, 11.
enlarge the firm by taking on more "permanent" employees
and hope it will secure further commissions to justify its
enlarged size, 111. become an open firm.
If the market is truly volatile option two may be a rather
myopic approach, ignoring the

inevitability of a later downsizing. It also raises the

philosophical question as to whether

the firm is being entirely honest to the people to whom it

offers "permanent" employment.

If the managers of the firm wish to take advantage of all

or most of the business

opportunities of a volatile market, structuring the firm

as an open firm appears to be the

most realistic strategy. This notion has considerable

support in current management

thinking eg Handy! and Peters 2 Handy describes open firms

as shamrock organisations.

The first leaf of the shamrock is the core of permanent

employees of the firm, the second

the firm's network of subcontractors and the third the

temporary employees that are

brought into the firm when required. If Handy's analogy is

applied to firms A and B they

both appear as two-leafed organisations, A relying on

temporary workers and B on a

network of subcontractors (or sub-consultants).

The advantage of temporary employees is that they become

for a time part of the firm.

They work in the firm's offices and therefore can be easily

supervised and required to

comply with the firm's quality assurance procedures. As

individuals they are less likely to

become direct competitors to the firm and if they prove to

have skills and knowledge that

is particularly useful to the firm they may be taken on as

permanent employees. They can
also be easily dismissed if they are unsatisfactory.
Against this they have the disadvantage

that they may lack commitment to the firm, they make

acquire specialist knowledge whilst

working for the firm and take it to a competitor, and if

they have no further work to go to

they may spin out the work when the project is nearing
completion. In addition they need

to be accommodated and equipped, which may mean the firm

has to maintain larger

offices which are sometimes substantially unoccupied. The

cashflow problems of

increasing in size when a new project is started fall on

the firm.

A network of subcontractors seems advantageous if a wide

range of knowledge or

competencies is required. Each firm within the network can

concentrate on developing its

own expertise and the required balance of expertise can be

brought to each project. In

addition each firm provides its own accommodation and

equipment and manages its own

financial resources. The overhead costs during slack times

are therefore spread around the

network, as are the cashflow problems of gearing up.

Against this, if the project requires

large volumes of a particular expertise (eg architectural

design and documentation) the

only potential subcontractors may be the firms direct

competitors. This may lead to a loss

of specialist knowledge or client contact to that

competitor. In addition supervision of the

project is more difficult with the subcontractor operating

from its own premises; the
subcontractor may give priority to the work of other
clients or have different standards to

the core firm.

The decision to network with subcontractors or use

temporary employees would appear to

require a contingent approach, dependent on the nature of

the firm's business and the

market opportunities. In addition ongoing management action

to maximise the benefits

and minimise the disadvantages of the chosen option is

necessary. How this might best be

done requires further research.

The experience of A and B raises the question of how big

should the core be? A in

particular has regularly adjusted the size of its core. In

theory it may be possible to reduce

the firm to a marketing unit, all other work being

contracted once a commission is

received. Neither A nor B have gone this far, both

retaining key competencies within the

core. This would appear to be necessary if the firm is to

establish good personal relations

with the client during the execution of the commission.

Interviewees also felt there are

problems in marketing if the firm cannot demonstrate it

has sufficient in-house expertise

and capability to execute the project.

7 Conclusion

Within the limits that are possible with a pilot study the
following conclusions are drawn

regarding the survival of small professional firms in a

volatile market. Firstly in order to
survive it is necessary to manage the factors in: •
market orientation • flexibility in size and productive
capacity • efficiency and price competitiveness •
financial resources.

These factors are interdependent, the effectiveness of

managing one factor impacts on the

management options available for the others.

Secondly if the firm wishes to take advantage of the

opportunities offered by a volatile

market, the most realistic strategy is to structure the

firm as an "open firm". Within this

strategy there are options of using either a network of

subcontractors or temporary

employees, both having advantages and disadvantages. A

contingent approach to the

solution of the balance between these options appears

necessary. Further research is

required on the ongoing management of both options. In

addition further research is

required on the sizing of the core activities of the firm.

Acknowledgments

The firms who participated in the pilot study are thanked

for the time and knowledge so

willingly given.

The work of Miles and Sno~ influenced the advantages and

disadvantages of using

subcontractors and temporary employees set out in section

6.

1 Handy, Charles, (1989) The Age of Unreason, Harvard

Business School Press, Boston.

2 Peters, Tom (1992) Uberation Management, MacMillan,

London.
3 Miles, R. & Snow, C. (1995) Causes of Failure in Network
Organisations, California

Management Review, Vol 34, no 4, University of California,

Berkley.

CONSTRUCTION FIRMS' STRATEGIES

AND THEIR FINANCIAL PERFORMANCE

M.A.H. Mohammed

Faculty of Surveying and Real Estate,

Malaysia University of Technolgy, Johor Bahru, Malysia

Z.M. Yusof

Faculty of the Built Environment, Malaysia University of

Technology, Johor Bahru, Malaysia

V.B. Torrance

Bartlett School, University College London, London, UK

Abstract

This study has two main objectives. The first objective is

to identify the relationship

between the construction firms' competitive strategies and

their financial

performance. The second objective is to observe the

behaviour of the construction

firms' strategies in three different economic periods,

i.e., boom (1986-89), recession

(1990-93) and recovery (1994-onward). The findings of the

first phase indicated that,

there were significant relationships between firms'

competitive strategies and their

financial performance. In the second phase, it was found

that the construction finns'

strategies were changing drastically during the three

different economic periods.

Keywords: Firms' strategies~ financial performance,

economic periods

Sommaire

La presente ~tude a deux objectifs majeurs: identifier,

d'une part, le rapport existant

entre les stra~gies de comp~tition des entreprises du

bAtiment et travaux publics et

leurs performances financieres, observer d'autre part le

comportement des stra~gies

de ces m~mes entreprises au cours de trois pmodes

~onomiques distinctes, a savoir

Ie boom des ann~s 1986-1989, 1a r~ession des ann~s

1990-1993, et la convalescence

d'une periode commen/iant en 1994. Les resultats de 1a

premiere phase de recherche

ont indique qu'il existait un rapport d'importance entre

les stra~es de competition

des entreprises et leurs performances financieres. Pour ce

qui est de 1a seconde

phase, il a e~ montr~ que les stra~gies des entrepreneurs

avaient change a l'ex~e

au cours des trois periodes ~onomiques respectivement.

1 Introduction

The UK construction firms had experienced unprecedented

growth during the strong

and boom economic period from 1981 to 1989. It was during

this period that most of

the major construction firms had expanded their scope of

activities and geographical

coverage either nationally or internationally. The volume

of turnover and the level of
profit of these firms rose steadily each year to the peak
performance which probably

had never been achieved before this period. However, the

sweet success ended

abruptly by the rapid economic down-tum which began to

afilict the construction

industry by the end of 1989. Private housing became the

first sector which was

severely hit by the effect of the economic recession. The

recession had continued,

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

deepened and prolonged to 1993 and imparted devastating

effects upon the

construction industry. The word recession was then changed

to "depression" to show

the magnitude of the severity of this harsh economic

climate. During the depression,

many firms incurred heavy losses which eventually sent some

of these firms into

liquidation.

It was clear that the economic environment had played the

most important role in

determining the financial success or failure of a

construction firm. However, there

was room for a construction firm to maneuver in order to be

more impervious to the

effects of the turbulent economic climate. The ability of

a firm to decide on the

competitive strategic issues such as the scope of

business, the geographical coverage
and the resource deployment would increase its
competitiveness [I]. However, these

strategic decisions were related to the broader aspect of

the firms' strategies which

include developmental and functional strategy.

2 Objectives

This study aimed to achieve the following objectives:

(a) To investigate the relationships between the

construction firms' competitive strategies and their
financial performance.

(b) To investigate the appropriate construction firms'

strategies in the three different economic periods: boom
(1986-1989); recession (] 990-1993); and future
(l994-onward).

3 Methodology

This study was phased into two phases, i.e. Phase 1 and
Phase 2. Both phases have

used a questionnaire survey as a mean of collecting the

data. Prior to the

questionnaires' development, a sample (the UK top 120

construction public limited

companies) was contacted to provide their annual reports

and accounts for the period

of 1986 to 1992. In the first phase, data obtained were

analysed by using correlation

analysis and analysis of variance (Anova) which were

performed by the statistical

package SPSS for Microsoft Windows release 5.0 (SPSS® for

Windows™ Release

5.0). In the second phase, data collected were analysed by

using frequency analysis

and comparison of means which were also performed by the

similar statistical
package. The sample for this study was drawn from a list
of the top 500 construction firms

in the UK which was published by Jordan [23]. The turnover

of these firms ranged

from £ 1 0 millions to more than £4000 million per annum.

4 Scope and limitation

As discussed above, this study covered the top 120

construction public limited

companies in the UK. It means that the outcomes of the

study were biased towards

the medium and large construction firms in the UK. Data for
the first phase of this

study were collected within the period of 1986 to 1992

during which the UK

economic condition was changing from the boom to the slump.

In the second phase

of the study, data were collected to cover three periods of

different economic

conditions, i.e. 1986-1989 (boom), 1990-1993 (recession)

and 1994 onward (future

or slow recovery).

5 Results

The results of the study will be described in two phases

following the methodology of

the study.

Phase 1: Relationships between firms' competitive

strategies and their financial performance

The first phase of this study deals with the relationships

between firms' competitive

strategies and their financial performances. On the basis

of the theoretical

development four competitive strategies for a construction

firm were identified [1] [2]

[3] [4] [5] [6] [7] [8] [9] [10] [11] :

(a) type of activity;

(b) extent of diversification;

(c) extent of internationalisation; and

(d) level of gearing.

From the annual reports of the construction firms and from

the previous research, five

financial performance measurements were identified:

(a) RaCE;

(b) ROSF;

(c) current ratio;

(d) quick ratio; and

(e) turnover.

The relationships between these two sets of variable were

analysed by using

correlation analysis and analysis of variance which were

performed by the statistical

package SPSS for Windows. The summary of the findings is

displayed in table 1 and

can be concluded as follows:

i. Housing and property development activities generated a

high level of profit during the period of economic boom
but incurred heavy losses when the economy turned-down.
However, they produced a low level of positive cash flow
during both periods. Therefore, a company should undertake
massive projects of housing or property development when
the economic condition is

Table 1 A summary of relationship between competitive

strategy and financial performance

Competitive Strategy
Housing development activity

Contracting activity

Property development activity

High degree of Diversification

High degree of

Internationalisation

High level of gearing Financial Performance Boom

(1986-89) High level of profit but low level of cash
flow Low level of profit but high level of cash flow
High level of profit but low level of cash flow Large
turnover Large turnover High level of profit Recession
(1990-92) Loss Low level of profit but high level of
cash flow Loss Large turnover Large turnover Loss
strong and stable. When the economic condition turns soft,
a company should speedily reduce or withdraw (if
possible) from these activities to avoid further losses.

ii. Contracting activity generated a low level of

profitability but gave the highest level of positive cash
flow for both periods. During the recession, a company
should concentrate on contracting activity to maintain its
profitability even though at a low level) and to generate
a high positive cash flow which was extremely necessary
for the company's survival.

iii. Diversification and Internationalisation strategies

were found to be the main determinants of the size of
firms' turnover. The finding indicates that a high level
of diversification and a high level of internationalisation
were related to the greater turnover. It means that
construction furms have to diversify or internationalise
their activities in order to increase their turnover.

iv. Firms with a high level of gearing generated a high

level of profit during the economic boom. However, these
firms suffered heavy losses and eventually some of them
went into liquidation after a long and deep recession.
Therefore, construction firms must not burden themselves by
heavy borrowing at any time which exceeds 50 % of their
equity. The urge to expand rapidly during the economic
boom must be curbed to prevent a firm from incurring an
excessively heavy debt burden.
Phase 2: Appropriate construction firms' strategies within
three different. economic periods: economic boom
(1986-89); recession (1990-93); and future (1994-onward)

In the second phase of the study, the respondents were

requested to give their own

past experiences, perceptions, insights and predictions to

the various aspects of

construction firms' strategies within the three different

economic periods. The

respondents were asked to give their perceptions for each

variable according to the

following scale: 1 = not at all important; 2 = not

important; 3 = quite important; 4 =

very important; and 5 = extremely important.

From the literature search and the annual reports of the

construction companies

the following aspects of strategies were identified [1) [3)

[4) [6) [8) [9) [12) [13) [14)

[15) [16) [17) [18) [19) [20) [21) [22]:

• Developmental strategies which included directional,

method and generic;

• Diversification;

• Internationalisation;

• Functional strategy which included the use advanced

technology, R&D and

effective marketing;

• Resource strategy which included management, skilled

workers, cash from

borrowing, cash from right issues, plant and land banks;

• Financial performance measurements; and

• Profit determinants.
In some ways, the findings of the second phase of this
investigation can be used to

cross-check the findings of the first phase. A summary of

the results is displayed in

table 2 and can be concluded as follows:

i. Directional strategy

The respondents regarded expansion as an extremely

important strategy during the

boom period. However, retrenchment was stated as the most

important strategy

during the recession (regarded as very important). For the

future, expansion was

again regarded as the most important strategy but was only

perceived as very

important and not extremely important This indicated that

the industry tended to

be more cautious in its expansion programme after its

experience in dealing with

the severe recession.

ii. Method strategy

A clear cut trend can be seen in method strategy where

internal expansion was

considered as the most important strategy throughout the

three periods. It is also

interesting to observe that joint venturing was at the

second position throughout

the periods of study. It means that acquisition had been

less important than joint

venturing as a means of expansion. Internal expansion

gives more stability whilst

joint-venture gives more flexibility for a firm to expand.

iii. Generic strategy Under generic strategy, focus on

core business (either contracting, housing,

property, or some other activities related to construction)

was regarded as the most important strategy during the
stable period and for the future. However, during the
recession, reducing fixed costs and overheads was
considered as the most important Therefore, it can be said
that focussing on core business and reducing fixed costs
and overheads will be the basis of a firm's competitive
development for the future.

iv. Diversification strategy The findings indicated that

the industry considered housing as the most important
activity within the three periods. The reason for this
trend is quite clear, that is the industry believed that
housing would generate the highest level of profitability.
However, the findings of the first phase have indicated
that housing is not profitable during the recession.
Contracting was stated as the second important activity
during the recession and for the future.

v. Internationalisation strategy Europe was considered as

the main market outside the UK by the respondents. The
findings indicate that Internationalisation was not
considered as very important by the UK construction
industry. Only a handful of the largest companies have
significant operations overseas. Table 2 A summary of the
UK construction firms' strategies during three different
economic periods: stable, recession and future (slow
recovery) Strategic variables Stable period (86-89)
Recession (90-93) Future (94-onward) Directional
Expansion Retrenchment Expansion Method Internal
expansion Internal expansion Internal expansion Generic
Focus on core business Reduce fixed cost & overhead Focus
on core business Diversification Housing Housing Housing
Internationalisation Europe Europe Europe Functional
Marketing Marketing Marketing Resources Cash from
borrowing Management Skill workers Financial performance
measurement Pre-tax profit Cash flow Cash flow Profit
determinant Market condition Market condition Market
condition Strategic management practice Measure
achievement Anticipate changes Anticipate changes in
market condition in market condition

vi. Functional strategy

At the functional level, the findings indicated that

effective marketing was

regarded as the most important strategy in all three

economic periods. R&D was

not regarded as a very important strategy by the

respondents. Without a strong

effort on R&D, the UK construction firms might lose their

competitive edge over

their rivals in the international market.

vii. Resources

During the period of economic boom, cash from borrowing was

considered as the

most important resource followed very closely by land bank.

This indicated that

the industry was very active in speculative housing

development which was

buoyant at this period of time. However, during the

recession, management was

considered as the most important resource. The strategic

change had forced the

industry to react appropriately and this action needed good

management skills.

For the future, skilled workers were perceived as the most

important resource.

This prediction probably was caused by the believe that

there will be a shortage of

skilled workers in the future.

viii.Financial performance measurements

It was not surprising if the industry rated pre-tax profit

as the most important

financial performance measurement during the boom period.

However, the deep

and long recession had taught them that cash flow was the
most vital

measurement not only during the recession but also for the
future.

ix. Profit determinants

Throughout the period of study, market condition was

observed as the most

important determinant. There were no other determinants

either at corporate level

or at project level which were considered as equal to or

more important than

market condition. Therefore, a construction firm must have

a sensitive devise

which could enable them to sense any changes in the

economic conditions. Then,

it must also have a sound decision making process in order

to react promptly

before it becomes too late.

x. Strategic management practice

Additional information on the level of construction firms'

awareness as regards

their strategic management practice was also obtained from

the questionnaire

survey. The responds indicated that there was a steady

improvement in their

understanding of the importance of strategic management.

For the future, the

respondents believed that anticipating changes in the

market condition, strategic

planning and measuring their achievements as the three most

important strategic

management practices. However, they did not consider that

the employment of

external strategic management consultant as an important

practice.
6 Conclusion

This study showed that many major firms suffered heavy

losses because of their

inability to anticipate and to assess the magnitude and

length of the recession. They

took a decision to reduce or to withdraw from certain types

of business activities such

as housing development, far too late, when they were

already in the red. Therefore,

a warning mechanism by which they can anticipate and

assess the changes in the

economic environment at the earlier stage is needed. The

major firms also need to

devise a procedure to enable them to make a quick response

to any severe economic

climate.

The results of this study indicated that the UK

construction firms regarded

internal expansion and focus on core business as their

strategy for the future. It was

interesting to see that cash flow was regarded as the most

important financial

performance measurement during the recession and for the

future. It was clear that

market condition was agreed by the respondents as the most

important factor in

determining their financial performance.

The above results show two areas of concern for the UK

construction industry,

these are R&D and internationalisation. These two areas

have to be addressed

seriously by the industry and also by the UK government.

At the individual company
level, all construction firms should adopt a policy of
continuous and never ending

improvement or total quality management. This would not

necessarily need a big

expenditure.

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Construction. Oxford: Butterworth-Heinemann Ltd.

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Companies' Perfonnance. Review of Economic and
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Culture of Successful UK Construction Companies. The
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Market. Conference for Chief Executives: Competitive
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London.

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Construction Industry and The European Community. Oxford:
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Building Finns or Why Builders Fail. crn W-65 Conference.
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Strategy. UK: Prentice Hall.

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Business Strategies Add Value. Oxford: Oxford University
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Stimulate R&D. New Builder, November, 1991.

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Construction Management 1 Organisation Systems. Reprinted.
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Strategic Studies in Construction. University of Reading.

CONTRACTORS' STRATEGIES IN HONG

KONG'S COMPETITIVE CONSTRUCTION

MARKET

A. Walker

University of Hong Kong, Hong Kong

Abstract

This paper examines the competitive edge being developed by

a number of Hong

Kong's most sophisticated contractors in order to cope with

an extremely uncertain

business environment. The diversity of Hong Kong's major

contractors in terms of

corporate structure, organisation structure, market niche,

country of origin and hence

imported or local strengths is extremely wide. The business

environment is affected

by the rapid growth in construction work as a result of

the Port and Airport

Developments Strategy (PADS) and the uncertainty

associated with the reversion of

Hong Kong to Chinese sovereignty in 1997 which affects the

confidence contractors

feel about the stability of continuing workloads.

Compounding these factors is a

tightening contractual situation as the Hong Kong

Government place greater risk on

contractors. The major contractors have responded to this

unstable yet potentially

lucrative market in a variety of ways reflecting the

companies' perceived strengths.

This paper identifies the forces in the contractors'

business environment and analyses

the contractors' coping strategies and their potential for

success within this volatile

market.

Keywords: Competitive advantage, strategy, business

environment, Hong Kong, contractors.

Sommaire

Cet article examine l'avantage competitif qu'un certain

nombre d'entrepreneurs tres

distingues de Hong Kong developpe actuellement pour faire

face a un environnement

commercial extremement incertain. La diversite des

principaux entrepreneurs de Hong

Kong en termes de structure de l'entreprise, structure

d'organisation, creneau

commercial, pays d'origine et donc forces importees ou

locales, est extremement

etendue. L'environnement commercial est touche par la

croissance rapide dans Ie

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by DA Langford and A. Retik. Published in 1996 by E

& FN Spon. ISBN 0419222308.

domaine de la construction a cause de la strategie des

Developpements du Port et de

I' Aeroport ainsi que de l'incertitude associee au retour

de Hong Kong a la

souverainete chinoise en 1997 qui affecte la confiance que

les entrepreneurs ont pour

la stabilite des contrats qui continueront. Combiner ces

facteurs est une situation
contractuelle de resserrement car Ie gouvernement de Hong
Kong met les

entrepreneurs en situation plus risquee. Les principaux

entrepreneurs ont repondu a ce

marche instable, neanmoins potentiellement lucratif, par

une variete de fayons qui

refletent les forces des societes. Cet article identifie

les elements dans

l'environnement commercial des entrepreneurs et analyse les

strategies qu'ont les

entrepreneurs pour faire face, ainsi que leur possibilite

de succes au sein de ce marche

instable.

Mots-clef : A vantage competitif, strategie, environnement

commercial, Hong Kong,

entrepreneurs.

1 Introduction The dearth of research into strategic

management in construction was identified

by Male and Stocks [1] when they sought to redress the

balance in their book on

competitive advantage. They pointed to the major importance

of managers' ability to

develop skills to move away from a production orientation

to a strategic orientation

where the focus is external and involves the long term

relationship between the

company and its environment. The purpose of this paper is

to make a small contribution to continuing the

process of redressing the balance by presenting the views

of managing directors (or

their equivalent) of Hong Kong construction companies on

their companies'
competitive strategies. Whilst much has been written about
strategic management in

the general management literature, Male and Stocks' book

is one of the few to address

the issue in construction but even so there is little

empirical work aimed at

discovering the views of practicing managers. The

orientation of the paper is the competitive strategy of the
companies which is

defined as the positioning of a company to make the best

use of its abilities to

segregate it from its competitors [2]. In Hong Kong this

encompasses both the

competitive advantage in terms of technical and other

facilities and advantages in

particular markets through experience and/or contacts.

2 Hong Kong's construction market The years up to 1992 saw

a flattening out of total expenditure on building and

construction at nearly HK$57 billion per annum at constant

1990 market prices

divided in the ratio of about 2: 1 for private

sector/public sector work as shown in

Table 2.1. The type of work is categorized in Table 2.2 for

1992 which shows the

distribution of housing (both public and private), private

non-residential and civil

engineering. Over the last few years this pattern of

expenditure and distribution

between categories has been maintained but the immediate

future is expected to see an

increase in expenditure in real terms and an increase in

civil engineering's share of the

market as the airport and port developments get up full

steam. The provisional figures
for 1993 indicate a 10% increase in civil engineering's
share with commensurate

reductions in the other categories. Housing continues to

be a significant part of the construction market. The
public

sector (the Housing Authority) builds about twice as many

flats as the private sector

each year but private sector housing has about twice the
floor area of the public sector.

The Housing Authority also provides Home Ownership (HaS)

and Private Sector

Participation Scheme (PSPS) flats which allow flats to be

purchased. The territories

contractors complete one flat every 10 minutes or over

65,000 units per year on

average.

Table 2.1 Proportion of public and private expenditure on

building and construction Year 1986 1987 1988 1989
1990 1991 1992 1993 P Average Total expenditure on
building & construction 44.244 46.692 48.358 53.088
57.314 57.658 57.650 62.984 Public sector 14.546
15.632 15.075 17.142 18.142 17.190 18.315 25.930

At constant (J 990) market prices (HK$ En) % oftotal

Private sector 32.9% 29.698 33.5% 31.060 31.2% 33.283
32.3% 35.946 31.7% 39.172 29.8% 40.468 31.8% 39.335
41.2% 37.054 33.0%

Note: p . provisional figures, subject to revisions later

on as more data become available % of total 67.1% 66.5%
68.8% 67.7% 68.3% 70.2% 68.2% 58.8% 67.0%

Source: Estimates of Gross Domestic Product (IQ61 1994),

Census and Statistics Department, Hong Kong Government.

Table 2.5 Type of construction work in 1992

Source : Buildings Housing Private non-residential

Public non-residential Sub-total Civil Engineering Of
which decoration, repair & maintenance Total output =
63.056 billion 38.9% 29.2% 5.8% 73.9% 26.1% 100%
12.1% Estimation of Gross Domestic Product (1961-1994),
1992 Survey of Building, Construction and Real Estate
Sectors, Census and Statistics Department, Hong Kong
Government. The Government's Long Term Housing Strategy
(1985-2001) commited the

Housing Authority to producing 215,000 flats in the second

five year development

period from 1991 to 1996 and 135,000 in the third, up to

the year 2001. As the result

of the recommendations of a Government task force on

property prices and housing

supply established in 1994, a decision was made to increase

the supply of public

housing flats by at least 20,000 and private flats by at

least 15,000 by 2001. Overshadowing other public sector
projects, which have to go on even so, is the

new airport. Whilst parts of it will be privately

operated, it is a public sector project.

It requires that both the professional and managerial

skills of the public sector and

similar resources of the construction industry be

mobilized on a massive scale. The

new airport is part of the Port and Airport Development

Strategy (PADS) announced

in 1989. Hong Kong's new airport is one of the world's

largest infrastructure programmes.

The first phase is expected to cost HK$158 billion at early

1994 prices. The initial

phase, due for completion in 1998, will handle 35 million

passengers and 2.3 million

tonnes of cargo annually. The planned future expansion

programme will see the

capacity expand to include two parallel runways

accommodating 87 million

passengers and 8.9 million tonnes of cargo by 2040. The

scope of the new airport project is reflected in the 10
core components of

airport-related infrastructure to be completed between 1992

and 1998. Seven of the

ten projects involving the formation of new land and the

construction of highways

and a new town are being funded and carried out by the
Government as direct capital

works projects. Important and unique features of these

airport-related infrastructure projects

include:

• 75 per cent of the 1248 ha airport platform will be on

land reclaimed from the sea;

• the Lantau fixed crossing will include the longest span

suspension bridge (2.2km) in the world carrying both road
and rail traffic;

• the establishment of a new town (Tung Chung) adjacent to

the airport accommodating 20,000 residents by 1997;

• the completion of Hong Kong's third harbour tunnel;

• 35km airport railway, comprising eight km of tunnels and

six km of elevated structures will accommodate 39,000
travellers daily;

• 1670ha of land is being formed which will add about 50%

to the amount reclaimed in Hong Kong since 1945. In
addition, port expansion is part of PADS. Hong Kong's
first seven container

terminals were completed by 1988. The PADS strategy plans

for five further

terminals.

• Container Terminal 8, now operational, comprising three

berths on reclaimed land abutting Stonecutter's Island;

• Container Terminal 9 on reclaimed land at the southeast

of Tsing Yi Island;

• Terminals 10, 11 and 12 on the eastern side of Tsing Chau

Tai Peninsula which will create the Lantau Port Peninsula.
Additionally:

• berths for handling river trade containers at Tuen Mun;

• a multi-purpose terminal in Kwun Tong. The public sector

is likely to remain the major client of the industry but
it

represents a myriad of faces as each project has to

satisfy the specific needs of a

particular sector of society. To cope with a workload of

such complexity Government

is moving to a position where it relies increasingly on the

construction companies to

manage whole projects on a design and construct basis. The

contractor is responsible

for designing and managing as well as constructing the

facility so is in control of all

designers and other professional contributors and will be

free within constraints

imposed by the client to innovate in solving design and

construction problems.

3 Future scenarios A recent study examined the future

demand for construction in Hong Kong up

to the year 2006[4]. The study generated alternative

scenarios based on assumptions

regarding:

• GDP growth rate, for which two alternatives were taken

within the conservative framework employed; 6%, which is
higher than levels achieved over recent years, and a more
pessimistic view of a lower 2% growth rate;

• Total Consolidated Account Expenditure (TCAE) as a

percentage of GDP. This has been running between about 16%
and 20% in recent years. Four values (10%, 15%, 18% and
20%) were selected to illustrate a range of scenarios.
Further assumptions were made regarding the medium to long
term future which
was likely to be determined by four major political factors:

• continued modernization with controlled economic growth

in China;

• China's commitment to the 'one country-two systems'

concept;

• China's interpretation of the Basic Law;

• stability in China's political succession. In

considering future scenarios for Hong Kong's economy it was
assumed that

these four factors will be positive in favour of Hong

Kong. Without such assumptions

the outcome is likely to be one of reducing confidence and

economic activity and the

demise of Hong Kong as an international centre

distinguishable from other parts of

China. The more likely outcome is of China's economy

expanding with Hong Kong

taking full advantage to develop its own economy at a rate

which is greater than in the

recent past. Nevertheless a relatively conservative view

was taken in developing the

scenarIOS. Judgment regarding which scenarios are most

generally acceptable were made

against criteria represented by the parameters within which

Government decisions on

expenditure had been made in recent years. The scenarios

show that given future

growth which is conservative relative to recent growth, the

demands on the

construction sector of the economy will continue to

increase. The projected increases

in expenditure on construction in the year 2006 range from

35% to 123% more than
current expenditure (at current prices). The scenarios
which show better growth in construction all assume a
40%/60%

split between public and private expenditure which reflects

recent levels. Previous

years' ratios have been about 33%/66% but the airport

development has changed the

ratio. Nevertheless confidence will need to be maintained

in order to attract private

investment. Increased public investment, as long as it is

not too great, will contribute

to increasing confidence. In this respect the management of

the infrastructure

development plans of over HK$200 billion e.g. the airport

and container terminals,

will continue to be significant in terms of the ratio of

public to private funding. Only

if public expenditure exceeds private expenditure do the

demands for construction

decline below the levels given above.

4 Market access There is, in general, no formal

restriction for entry to the contracting business in

Hong Kong. However, contractors acting as main contractors

undertaking any

building works either public or private under the Building

Ordinance must be

registered. The Hong Kong Government maintains two lists

of approved contractors

qualified to tender for different sizes and categories of

work. List I are local

contractors and List II are foreign contractors. Firms

first enter the lists on probation

and membership is confirmed after satisfactory performance.

Technically entry is
relatively straightforward but, as Male [3] remarks,
project size and complexity pose

barriers to entry and this is particularly so for foreign

contractors in Hong Kong who

are only allowed to tender for contracts over HK$30

million. A good indication of the attractiveness of Hong
Kong to overseas contractors is

given by a list of some of the contractors involved on the

airport core projects: Hong Kong GEC (Hong Kong)
Dragages Sung Foo Kee (Civil) Leighton Hip Hing Shui
On Civil Contractors Hsin Chong Wah Hin Kumagai Gumi
Nishimatsu Gammon China China Fujian CSCEC Japan
Maeda Aoki Penta Ocean Britain Kier GPT (Exports)
Tannac GEC Alsthom John Laing International Balfour
Beatty Amec Trafalgar House Costain Germany AEG Ed
Zublin France GEC Alsthom CNIM GTM CFE Mitsiu Spain
Entrecanaies Cubiertas CAF

5 The Contractors New Zealand Downer Against this

backcloth of a market in Hong Kong which whilst having the

potential to increase will probably do so at a decreasing

rate due to the completion of

the airport, continuing increased competition from overseas

contractors which have

easy access to the market and are attracted to it due to

limited opportunities elsewhere

and the advent of 1997, Hong Kong's major contractors have

to plan their business

strategy for the next few years.[5] The strategy of six

of Hong Kong's major contractors, each of which has a quite

different profile, is examined against this scenario:

• Shui On (Contractors) Ltd., a mainstay of Shui On Group

Ltd., a home grown Hong Kong company;

• Hsin Chong Construction Group Ltd., part of the Hsin

Chong Group but separately listed on the Hong Kong Stock
Exchange, the longest standing of the major Hong Kong
construction companies;
• Nishimatsu Construction Co. Ltd., the Hong Kong branch of
a Japanese construction company but now classified as a
local contractor;

• Leighton Contractors (Asia) Ltd., the Hong Kong arm

of-the Leighton Group, Australia's largest construction
company whose major shareholder is Hochief, a diversified
European construction company;

• China State Construction Engineering Corporation, the PRC

construction giant, whose listed Hong Kong subsidiary is
China Overseas Land and Investment Ltd.;

• Hip Hing Construction Co. Ltd., the construction arm of

the famous Hong Kong developer, New World, but which also
competes on the open market. Table 1, which shows the
1995 workload of the six contractors, illustrates the

current strategy adapted by each company. Whilst there are

similarities, the

distinctive nature of each company portfolio of current

contracts is apparent.

Table Current contracts of six of Hong Kong's major

contractors (1995). ShuiQn HsinChong Nishimatsu Leighton
~S~EC HiQHing

Public housing 2083 240 208 2287 1076

Private housing 3008

Private non-residential 1180 191 181 1963

Airport related 1312 557 15301 3569 3759

Other civil engineering 532 202 5288 2166 2102

Public non-residential 1078 1872 198 1329 3676

TQtal 5005 4051 20780 6322 9477 9723

(HK$ miIIion) Shui On targets mainly public sector

projects and is involved with the airport.

Hsin Chong's profile is similar but with less civils and

airport work (although it has

won a large airport terminal contract for 1996) but has

some private non-residential.
Nishimatsu is quite distinctive focusing practically
exclusively on civils work and

having the largest portfolio with a massive exposure to the

airport. Leighton similarly

is heavily committed to civils work and the airport but is

also involved in public

housing and other sectors. China State focuses on the

public sector including the

airport for which it has obtained the major terminal

building contract (in joint venture)

which is not included in the table as it is not yet in

progress. Hip Hing is again

distinctive as it focuses particularly on the private

sector (largely but not solely

through its parent New World Developments Ltd). It

undertakes no civils work

except in connection with its building work.

It can be seen therefore that each company has a strategic

focus which it will need to

develop or adapt as the market changes as the airport

related work reduces. The

current strategies can be succinctly stated as: Shui On

Public sector, building and civils Hsin Chong Both
sectors, building and civils Nishimatsu Public sector,
civils Leighton Both sectors, building and civils CSCEC
Public sector, building and civils Hip Hing Private
sector, building The managing director (or chairman) of
each of the companies was interviewed

to ascertain their view of their company's major

competitive advantages and of their

company's future market and how their strategy was designed

to match their

company's strengths with their vision of the market. A

summary of their view are as
follows: Competitive advantage: Shui On Combination of
discipline and endeavor traditionally found in local Hong
Kong companies and a more creative people centered
environment which has allowed the natural hard work of
local people to be channeled into the development of
initiatives and new ideas within a climate in which people
seek responsibility. One of the earliest Hong Kong
construction companies to begin operations in China
(1985). Hsin Chong Staff orientated innovation retirement
fund scheme (first in Hong Kong) medical scheme education
fund share option scheme Joint venture companies to
undertake specialist work (e.g. building services)

Nishimatsu

Leighton

CSCEC

Hip Hing

Future market:

Shui On

Hsin Chong

Nishimatsu Developed expertise in design and build

(particularly hospitals). Development and application of
technology (supported by Japan headquarters).
Build-operate-transfer infrastructure project experience.
Lead in managing complex multi-discipline projects
involving joint ventures. Financial strength to put
together funding packages. Focus on designlbuild. Focus
is solely the effectiveness of the construction process
('Profits are made by completing projects efficiently'),
not involved in development. Versatility, the company
will bid for any project which it can cope with.
Experience of designlbuild, re-design and alternative
design approach. China connection extremely close, access
to projects strong. Directly under the PRC State Council.
Learning from its Hong Kong experience. Pre-eminent in
high quality construction for private sector developers.
Has available substantial work from its parent company.
(New World Developments). Designlbuild specialist with
in-house design capability. Hong Kong is a mature market
with limited opportunities for growth, more competitive.
Will concentrate on selective tendering. Will approach
designlbuild and other innovations with caution. China a
growth area. Hong Kong market growth limited, more
competitive. Will build on experience in China (project
management and investment). Some expansion in Malaysia
and Vietnam. Focus on design and build (valuable in above
regions). Potential in Indonesia and Thailand. Hong Kong
rate of growth will diminish and be more competitive.
Hong Kong the' engine room' of Southern China.
Cross-border infrastructure projects. Chinese high-tech
b-o-t projects. Create b-o-t projects for Hong Kong, China
and other South East Asia countries. (A Big Projects
Promotion Dept.). Leighton CSCEC Hip Hing

6 Discussion Hong Kong's market will continue to be

attractive after 1997 but competitiveness will increase.
Cautions diversification into other South-East Asia
countries. Hong Kong will become a more competitive
market. Focus on Hong Kong and Southern China only.
Maintain its position as a contractor for the high quality
private sector of the market anywhere in the region.
Whilst on the face of it the six companies considered here
could be seen to be

competitors, their individual orientation means that only

some of them complete and

even then only over a relatively small number of project

types. In many cases the

competitive advantage of individual companies give them a

decisive edge. An exception to this generalisation is Hip
Hing which has a pre-eminent place in

the niche (although a large niche) market of high quality

private sector projects for

which the company is often appointed by negotiation

particularly by its parent

company, New World. It will continue to focus on this

market throughout South-East

Asia. The remaining companies have some views which

coincide and some which

conflict. Whilst all companies agree that Hong Kong

market's will become more

competitive (as contractors remain after the airport

completion) they vary in their

opinion of its rate of growth. Their views reflect the

rang of predictions identified in

the study referred to earlier. The more pessimistic are

concerned about caution on the

part of the SAR government immediately after 1997.

Nevertheless, except for

Nishimatsu and Hip Hing, they all intend to compete over a

broad range of project

types in Hong Kong. The various companies' strategy in

China is interesting. All of them recognise

that China provides opportunities particularly from a

construction

management/management contracting base but also with some

opportunities for a

more entrepreneurial role. The out-and-out Hong Kong

companies, Shui On and Hsin

Chong, are bullish on China based on their long experience

of working there.

Nishimatsu and Leighton, whilst Hong Kong companies are not

"Chinese" and are

more cautions. Nishimatsu will aim to enter China on a

b-o-t basis using its financial

and technological strength rather than any Chinese

"contacts". Leighton will only

diversify into China cautiously as it has no special edge

in that market. CSCEC, as a

China State company, is working back in China out of Hong

Kong and has ready

access to projects. Two elements are particular beneficial

in penetrating the China market.. One is

an expertise in design and build and b-o-t, the other is

to be closely associated with a

developer working in China. Shui On, Hsin Chong and CSCEC

all have development
arms and have already invested in developing projects in
China. Hip Hing is also well

placed in this respect. However Hsin Chong is the most

experienced and committed

to design and build. On the other hand Nishimatsu does not

have a development arm

but is the most experienced in b-o-t including, most

importantly, providing financing

and taking an equity interest. The opportunity for and

attractiveness of joint ventures

amongst such a group of contractors is clear. Leighton are

the least likely to be able

to offer such advantages to China projects but they do have

strengths in design and

construct civils projects and are focused solely on

construction. There is a contrasting approach to other
South East Asia countries with Hsin

Chong, Leighton and Nishimatsu keen on opportunities there

but Shui On and

CSCEC concentrating soley on China. All those interviewed

were fully aware of the environment within which their

companies existed and the scope for strategic choices which

theses presented. The

way in which the companies were structured as a part of a

wider organisation reflected

the strategic contingency approach to organisation [6]

aimed at providing

organisations with a choice of strategies. Construction

companies are faced with complex business environments
which

included many elements other than those described here. In

order to cope with

increased risks, provision of finance, design and build

contracts, scarcity of labour or
increasing training, greater investment in plant and
machinery etc. to tackle the larger

high technology projects, it seems inevitable that only a

relatively small number of

companies in Hong Kong will be able to gear themselves up

for such challenges.

These will be impressive, well managed, technologically

adept, people orientated

companies with the critical mass of professionals and

finance necessary to accept such

risks. Such a development is likely to favour

multi-national companies with the

capability to put project teams together anywhere in the

world whilst retaining core

functions such as designing and estimating at head office.

A number of Hong Kong

companies such as those described could develop in this

manner to build increasingly

in China and other Asian countries and even further afield.

Such a development could

see the amalgamation of companies to provide the strength

required. Such mergers

may not be solely between construction companies but could

include financial and

other organisations. The distinction between Hong Kong and

overseas contractors in

Hong Kong is becoming extremely blurred and such a

development could blur the

distinction even further. The success of the strategies

adopted by the companies

included in this paper will to a large extent determine how

they will fit into such a

scenario. The companies' approach to defining their

strategies is neither as clear nor
paradoxically as complex as the theoretical literature on
strategy implies. It appears

that companies have broad visions of their strategy which

in its implementation is

strongly influential by opportunism as projects become

available. Companies remain

adaptable (which is the hallmark of Hong Kong) and ready

to capitalise on any

opportunity which the market provides.

1. Male, S.P. and Stocks, R.K. (1991) Competitive Advantage

in Construction, Butterworth-Heinemann, Oxford.

2. Porter, M.E. (1980) Competitive Strategy. Techniques for

Analysing Competitors and Industries, The Free Press, New
York.

3. Male, S.P. and Stocks, R.K. op. cit.

4. Walker, A., Chau, K.W., Lai, L.W.c., (1995) Hong Kong

and China: Real Estate in the Economy, Brooke Hillier
Parker, Hong Kong.

5. Walker, A, (1995) Hong Kong: The Contractor's

Experience, Hong Kong University Press, Hong Kong.

6. Scott, W.R. (1992) Organisations: Rational, Natural and

Open Systems, Prentice-Hall, Englewood Cliffs, N.J.

DEVELOPMENT OF CONSTRUCTION

MANAGEMENT BASED ON REGIONAL

CULTURE

K.Baba

School of Civil Engineering, Asian Institute of Technology,

Bangkok, Thailand

Abstract

From the end of this century to the beginng of the next

century, there
will be a boom of construction in Asia. In order to
implement these

project efficiently, the method developed in the field of

construction

management shall be adopted.

However, there had been some cases when strong resistance

against using

these method and systems in the actual construction works.

Conflicts

mainly came from the culturaL differences between Western

who developed

these methods and systems and of Eastern people who wanted

to employ

these methods and systems.

In order to apply the methods and systems of construction

management to

the actual construction works in the region where culture

are different

development and adjustment of the existing methods and

systems for the

regional culture will be necessary.

Keywords: Asia, construction management, culture. region.

Sommilll'e

D'ici a la fin de ce siecie et au debut du prochain,

l'Asie connaitra un boom

dans Ie secteur du bAtiment et des travaux publics. Afin

de mettre des

travaux en place efficacement, les methodes developpees

dans Ie domaine de

la gestion des travaux devraient etre adopMes. Cependant,

on a pu assister dans certains cas a de fortes resistances
contre l'utilisation de tels systemes et methodes dans les
projets m~mes. Les

conflits ont ete en general generes par les differences

culturelles, differences

entre les occidentaux qui developpaient ces systemes et

methodes et les

orientaux qui allaient les utiliser. Cest pourquoi il est

indispensable que les dits systemes et methodes

soient developpes et ajustes a la culture et a

l'environnement dans lesquels ils

vont etre utilises.

1 Introduction

The objective of "Construction Management" is to accomplish

a construction

project effectively to meet the requirements specified for

that project.

For this purpose, many practical methods and systems have

been developed

in advanced countries such as in U.S.A. ,United kingdom

and other countries

as well. In transfering and utilizing these methods and

systems to suit

'the other countries'needs, sometimes conflicts and

resistance will come

across due to the differences of principles bet'tleen the

source of those

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D .A. Langford and A. Retik. Published in 1996 by

E & FN Span. ISBN 0 419 22230 8.

methods and systems and the user, those people who are
trying to implement

these methods. These conflicts mainly come from the

differences in cultures.

To explain these facts more clearly, it may be helpful to

cite experiences

in Japan concerning conflicts caused by differences of

culture in

construction management.

These conflicts in the construction management were not so

important

when major part of the world construction was carried out

in the region

where these construction management methods and systems

were developed and

established. However, recent rapid development and growth

of the economy

in Asia, considerable part of the world construction are

carried out in

Asia where the methods and systems of the construction

management are

transfered from U.K and U.S.A.

These transefered methods and systems are sometimes quite

strange to

Asian people and cause some conflicts. Due to the increase

of the volume,

it is impossible to neglect the existence of the conflicts

and it is

necessary to find out the a countermeasure.

Differences in cultures will cause these conflicts,but,

they can be more

clearly classified into three categories: (a) traditional

organization

structure,(b)managerial differences,and (c)differences in

fundamental
concept and philosophy which contracts and laws are based
upon.

For this purpose,we must start with differnces in

traditional organization

sturacture in comparison with that of U.S.A and Japan.

Also,influences of

managerial differences,and differences of fundamental

concept and philosophy

which contracts and laws are based on are also considered.

2 Differences in construction management between U.S.A and

Japan

The differences in management practices related to

construction projects

between the United States and Japan consist mainly in three

categories:

(l)Differences in traditional organization structure for

execution of construction project.

(2)Managerial differences in executing the work.

(3)Differences in fundamental concept and philosophy which

contracts and laws are based upon.

These differences for each item shall be discussed and

describrd

hereinafter.

2.1 Organizational Structure for Execution of Construction.

One of the biggest differences in executing construction

systems is the

organizational structure for executing construction

projects as illustrated

in Fig.1. In the American system, three parties are

involved in project

proceedings, while that of the Japanese system, only two

parties are mainly
involved.Consultants act as in-house engineers of owners.

The triangle organizational structure adapted in the

U.S.A.,so to speak,is

one of the commonly used system in the countries where

present construction

management methods and systems are developed and accepted

as the most American Japanese Consultant Contractor
Contractor Note; --Contract, Supervise Fig.1.
Organizational structure for construction

reasonable structure for executing construction project.

However,if two

systems were analyzed by using communication theory, there

are many

advantages in the Japanese system over the American system

as shown in

Table 1.

The disadvantage of Japanese system is in its nature of

organization

structure. That is,Japanese system tends to be close and

unilateral. Table 1. Nature of organizational structure
Items American Japanese Nature Tends to be to be Open,
Bilateral Close, Unilateral 1 Effeetiyen." Low Moderate

C " " Centralization Low Moderate

omunlcatlon: L d h" Low Moderate ea ers IP Satisfaction

Moderate Moderate

Therefore, to evaluate Japanese system, it is necessary to

compromise

between efficiency of communication and unilateral nature.

Also, the difference in the organization structure of

execution of the

construction projects leads to the differences of the role

of each parties

as illustrated in Fig. 2.
A big difference is found in the role of the consultants.
In the Japanese

system, consultants are some kind of assistants to owner

and are not

completely independent in the organization structure.

Their role is limited

while that of the owner is quite big.

Stages Planning

Design & Supervise

Construction In the U.S. In Japan

Notes: ~ Role of Owner, ::m Role of Consultant,~llii Role

of Contractor Fig.2. Role of each parties

122 8aba

In the American system, consultants take more active role

and roles of

each party involved are some what balanced.

2.2 Nature and method of management in Practice

There are many differences in the actual practice of

management. Differences

in management in practice of both systems in general are

listed in Table 2. Table 2. Nature of American and
Japanese management Items American Japanese 1.
Decision Making by Individual by Group 2.
Responsibility by Individual by Group 3. Promotion Rapid
Slow 4. Control Mechanism Explicit Implicit 5. Career
Path Specialized Nonspecialized 6. Employment Term Short
Term Li fet ime 7. Object of Employment Function Person

As typical examples of differences in form of control and

communication

are listed in Table 3 and 4 respectively. Table 3. Forms

of control

Kind of Control

Goal
Formal i ty

Performance Focus

Organization Design

Reward System

Participation In the U.S. Bureaucratic Control Employee

Compliance Strict Rules,Formal Control, Rigid Hierarchy
Direct toward Minimum Level Acceptable of Performance
Tall Structure, Top Down Influence Directed at
Individual Performance Limited and Formal Table 4.
Forms of communication Form Advantages Disadvantages in
the U.S. Wri tten Tends to be More Accurate. Provides a
Record of the Communication. Inhibits Feedback and
Interchange. Is More Difficult and Time Consuming. In
Japan Clan Control Employee Commitment Group Norms,
Culture, Self-control Direct toward Enhanced Performance
above/beyond the Minimum Flat Structure, Shared (Bottom
Up) Influence Directed at Group Performance Extended
and Informal in Japan Oral Promotes Feedback and
Interchange Is Esay to Use. May Suffer from
Inaccuracies. Leaves no Permanent Record

2.3 Conformity with respect to contracts

Another difference is the comformity of the contract

between both countries

as listed in Table 5.

In general, Japanese system reads between the lines of the

contract, while

the American system reads the lines of the contracts. It

should be added

that in the Japanese system, only after making a good

relationship between

representative from owner and contractors,contract issues

will be discussed. Table 5. Meaning of conformity of
contract In the U.S. In Japan

Contract Attitude Highly Esteemed Highly Esteemed

Process of Each Clause and Put the stress Line of the on

the Sense
Conformity Contract is Carefully of contract as
scrutinized a Whole

Interpretation Judgement by Rationality Judgement by

Rationality Humani ty

Solving Dispute By Legal Proceedings, By Negotiation, By

Lawyer By Engineers

2.4 Social background

These differences in construction management of both

systems are backed

and originated by social systems of both countries.

One of the examples in the business is the number of

lawyers as shown in

table 6. Table 6. Number of new lawyer Items U.S Japan

Number of New Lawyers ~ year approx.25,000 approx. 500

Population (Ratio): 2

Number of New Lawyers ~year(ratio) 2 5

Table 6 shows the fact that U.S.A. produces lawyers 25

times as much as in

Japan. Too many lawyers sometimes result in existing of an

.. Ambulance

Chaser" and / or a" Philadelphia Lawyer." Also, because of

this, the

recent trend would be to have a question to solve almost

every dispute in

construction project by lawsuit.

3 Different countries have different cultures

There has been quite a bit of discussions concerning

comparison between

managerial systems of U.S.A. and Japan. For example, Peter

F.Drucker
points out many aspects of the differences between American
management

and Japanese management in his paper.

Also. a simple but systematic analysis of the differences

in the two

style of management is discussed and presented in the form

of comparison

table in the book written by H. Koontz. These facts show

that American

management has been built on logic and reason. while

Japanese management

is based on harmony and humanity.

Throughout the analysis. the differences in the principles

of construction

management between U.S.A. and Japan come from the

differences of the

history and culture of both countries.

Japanese system is on the premise that everything should be

preliminarily

controlled. This system is established based on the fact

that Japan

consists of several islands. In this case. the best way of

defending

itself is to fight against invaders at the shoreline.

This kind of process becomes a traditional way of control

and is applied

in many aspects of management. Similarly not only in the

Japanese system.

but also in the American system. management system is

completely dependent

on its history. cuI ture and gi ven background.

Some outstanding characters of both countries. U.S.A. and

Japan. which

influence most the process of construction management are

listed in Table

6. Facts listed in Table 7 explain the origins of the

differences in

construction management between U.S.A. and Japan more

clearly than explained

by any other theory. Table 7. Outstanding character of

U.S.A and Japan u.s Japan Country Cont inen t Island
Border River Sea Race Mult i ple Uni Culture European
Heritage Hybrid Constructed by Immigrant Aboriginal
Movement of People Come in Defense at shoreline Language
International Inherent Tends to be Open Close

4 Compromising the differences in the age of

internationalization

Recent rapid changes of the world economy due to

globalization and

diminishing borders, have made it impossible for any

country to remain as

a closed society. Therefore, every country should open its

market to the

rest of the world. This should be done for the benefit of

both parties.

However, the globalization of the world economy, in

general, will bring

much more chance to cause conflicts by the differences in

cuI tures.

Actually, the above mentioned differences in construction

management,

have been discussed by the U.S. and Japanese goverment to

open the Japanese

construction market to U.S. contractors.

Actual solution for these conflicts shall be found only in

compromising
the differences. Also, it can be said that in the process
of finding the

solutions for the conflicts, new methods and systems of

construction

management will be disclosed.

5 Expected rapid increase of construction projects in Asia

5.1 Growth of economy in Asia

In order to forecast the possibility of executing many

projects in Asia

towards the end of this century, it is useful to review

the recent world

economy and forcast its future.

Fig.3 shows the comparison of three major economic regions

in 1991:

EAEC ; Asia, NAFT North America, EEA ; Europe. EEA GNP

AREA Source: The World Bank. The World Bank Atlas. 1991
Fig.3 Comparison of three major economic regions (1991)

Also, Fig.4 shows annual averaged growth rate of economy in

these region

in '90s. Due to the rapid decrease of ratio of people in

poverty in the

countries in Asia as shown in Fig. 5 , growth rate of

economyu will be

maintained in considerable high level for several years in

the future.

Annual % 6 Source: 5 averaged 4 jakura Bank growth

3 apan 2 rate of I 0 economy (EAEC) (NAFTA) (EEA)
Fig. 4. Growth of economy in the three regions % 80
,---------,---------, Source;

Perce?tages 70

peopYe in 60

povept to 50 popu a ion 40 ................ ,. The

world :::~;.;I~;~~;~::~!:~::.::~~.......... Bank ' . ..
__ .. _ •.. __ .-._ ... _--... ~-~ ... -.. ........ ,.. ..
_ ...... '. 30 20 Philippine 10 China Fig.5. Decrease
of ratio of people in poverty in Asia

Under the assumption that same growth ratios of the economy

of these three

regions will be continued in the future, the amount of GNP

in thes~ regions

will be as shown in Fig. 6. At the beginning of the next

century, economic

regions of Asia will be the largest among the three big

economic regions in

the world. This rapid growth of economy in Asia will

provide and require the

enormous amount of construction investment in this region.

GNP 14

10

Trillion

in U. S. $ 14 12 10 2 o 1992 '94 '96 '98 '00 '02 '04

'06 '08 '10 '12 year Fig. 6. G.N.P. of three economic
regions in future

5.2 Cross cultural issues in construction management in

Asia

There are many discussions concerning the differences of

cultures of East

and West. Of course, this is one of the subjects to be

studied.. However,

culture of East itself is not monolith. As anyone can

find,there are many

varieties such as different languages, even different

letters, religions,

etc.,in the region of Asia. Therefore, cross cultural

issues are much more

important in Asia.
5.3 Each country has it's own culture

Compared with European countries, countries in Asia have

much more

varieties. Outline of the characteristic of societies of

the several

countries of the pacific rim of Asia is shown in Table 8.

Table 8. Characteristics of societies of major countries in
Asia

Country

People's Rep. Unidentified

of China Under communism but remarkable change, Changing

Korea Strong influence by Confucianism, Moderate by Buddhism

Japan Moderate influence by Confucianism, Buddhism,

"Harmony"ony"

Taiwan Unidentified

Hong kong Unident i/ied " Window to main land of China"

Philipine Influenced by Christianity, American & Spanish

culture re

Vietnam Under social ism, In the progress of " Doi Moi",

Changing

Thailand Influenced by Buddhism,(optimism," Sakdi Na",

Individualism)

Malaysia Mixed cui ture(Islam, Buddhism, Hinduism) "Look

east"

Singapore Mixed culture(Buddhism and western culture)

Indonesia Strong influenced by Islam, Source; some come

from Kokusai Hikaku Keieiron of reference 7

5.4 Today's role of Japanese engineers

As stated previously, Japanese management in the

construction industry has
many unique characteristics. This had caused some conflicts
with the

American management system in the construction management

which have been

discussed by both governments to find a solution. Since

Japan was isolated

from the rest of the world by sea,it has been able to

develop its own

culture. But because of the globalization of the world

economy, Japan

can not stand as a closed society.

Other Asian countries will experience the same kind of

situation in the

near future which Japan had experienced in past several

decades.

In fact, Japan was a receiver of technical know-how from

the West.

However, Japan is now in a position to transfer this

knowledge to the rest

of the Asian countries. Since Japan has experienced two

different and

opposite situations, Japan might be an example to other

Asian countries.

Today's role of Japanese engineers might be to listen to

people of the

other countries and to give adequate advice in executing

construction

projects in the Era of II golden age" to come giving due

consideration to

cultural differences and compromising conflicts.

6 Conclusion _" Let's challenge to new era of world

construction"

We are facing the age of paradigm shift in the world of

construction.

The main stream of world construction will be shifted from

the region of

Western culture to the Eastern culture, Asia. In this

transfer, conflicts

will appear due to the differences in cultures of West and

East.

But eastern culture itself has many varieties. Therefore,

it will be

difficult to find solutions if there arises a conflict.

However, efforts

to solve these conflicts lead to development of new methods

in construction

management. Moreover, there is a possibility that the

future system of

management in construction world, could be developed from a

combination of

Eastern and Western culture, but should also take regional

culture into

consideration.

This new form of construction management would comprise the

characteristics

of pragmatism and humanism along with a sense of many

differnt religions.

It can be said that America and Japan are both extreme

examples of

construction management. America is a rather new country

consists of

immigrants mainly from European countries. Japan has a long

history of

isolation from the rest of the world by the ocean.

Therefore, there are

many differences not only in construction management, but

also everywhere

in social system. However,it is quite useful to compare two

completely

different systems to find out a new and better system for

the future.

In the way of comparison, many advantages and disadvantages

over each

other are found. This analysis is bound to produce and

establish a new

system which will be used in future construction management

system, to

lesser cross cultural problems, which will be one of the

most important

128 Baba

issues in the next century.

1. Baba, K. (1990) Principal Nature of the Management in

Japanese Construction Industry. 10unaL of Construction
Engineering and Management, ASCE, Vol.116,No.2, N.Y.
pp.351-364.

2. Baba, K. (1989) Management by the UnconsciousReason of

the Strength of Japanese Management (in Japanese), Chuoh
Keizaisha Tokyo, Japan.

3. Drucker,P.F., (1971). What We Can Learn from Japanese

Management. Harvard Business Review, (March-Apri I)
pp.119-122.

4. Koontz,H.,O'Donnell,C. and Weihrich,H., (1984)

Management, McGraw-Hill Book company, New York.

5. Dunham,C. W.,Young,R. D.(1971) Contracts,

SPecifications, And Law For Engineers, McGraw-Hill Book
Company, New York.

6. Rose,H.F., Barrow,M.H., (1957) Project Engineering of

Process PLant, John Wiley & Sons, Inc., New York.

7. Tanno,Isao (1994), Kokusai Hikaku Keieiron,

(International Comparative Management, in Japanese),
Dohbunkan, Tokyo.
8. Hellriegal, D., Slocum, J.J., and Woodman R. W. (1983)
Organization Behavior (third Ed.), West Publishing
Company, New York,

9. Griffin,R. W. (1990) Management (3rd Ed.), Houghton

Mifflin Company, Boston Mass.

10. U.S.Department of Commerce (1990) StatisticaL Abstruct

of the United State I09th Ed., u.S. Government of
Printing Office,Washington DC.

11. Engineering News Record. (1991) Quiet RevoLution Brew

for SettLing DisPute, August 26, McGrow-Hill Book Company,
New York.

THE DEVELOPMENT OF AN INDUSTRY

FUTURES BULLETIN

J.R. Brightman, C. Eden and K. van der Heijden

Department of Management Science, University of Strathclyde,

Glasgow, UK

D.A. Langford

Department of Civil Engineering, University of Strathclyde,

Glasgow, UK

Abstract

The purpose of this study was to devise a means of

influencing the strategic thinking of

the managers within construction organisations, of

supporting their decision making and

helping them to make sense of the vast amount of data

about the business environment

which could potentially be used to inform strategic

decisions. Two tools were used to

assist with the design of the decision support system,

namely, scenario development and

causal mapping software, known as Graphics COPE. Scenarios

have been used

successfully in other industries as part of the strategy

development process. In this

instance the scenario methodology developed by Royal

Dutch/Shell was used and adapted

to the needs of construction contractors. The second tool,

Graphics COPE, has been used

to support strategy formulation in a number of different

industrial and public sector

contexts. In this study it was adapted and developed for

use as the vehicle for presenting

and structuring data which managers can then use to

explore multiple possible futures.

The development was aimed at facilitating the manipulation

of generic data in order to

generate company specific scenarios relating to their

future business environment.

Keywords: construction contractors, decision support,

information technology, multiple

possible futures, scenarios, strategic management.

Sommaire

Cette etude repose sur un tryptique d'objectifs: influencer

les entrepreneurs dans leur

fayon de penser les strategies, leur apporter des outils it

la prise de decision, les aider it

reconnaitre, parmi les nombreuses donnees de leur

environnement sectorial, celles qui

pourraient contribuer it l'elaboration des strategies.

Deux outils ont ete utilises en phase

de conception du systeme d'aide it la decision: un logiciel

de developpement de scenario

d'une part, un logiciel de reperage causal, d'autre part,

connu sous Ie nom de Graphics
COPE. Ces memes simulations ont ete appliquees avec succes
dans d'autres secteurs

pour Ie developpement des strategies. lci, c'est la

methodologie de developpement de

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

Royal Dutch/Shell qui a ete utilisee, apres avoir ete

adaptee aux besoins du batiment et

des travaux publics. Le second outil, Graphics COPE, a me

utilise pour la formulation des

strategies dans un certain nombre de contextes de

l'industrie privee et des travaux publics.

Pour cette etude, il a ete adapte et developpe afin de

servir d'instrument de presentation

et de structuration des donnees qui s'avereront utiles

pour l'exploration de differents

scenarios prospectifs. Le developpement a ete fait dans Ie

but de faciliter la manipulation

de donnees generiques qui puissent aider Ii l' elaboration

de scenarios specifiques Ii

I'entreprise dans son traitement leur environnement

d'applications professionnelles

futures.

1 Introduction

This paper reports on work carried out over the past three
years and follows on from the

paper Scenario planning for construction [1], published in

the proceeding ofCIB W-65

1993. The intention of this project was to combine the

principles of scenario development
[2,3,4] and the use of interactive causal mapping software
[5], in order to structure and

explore the information which managers in the construction

industry use to support their

strategic decisions. Construction organisations operate in

a particularly complex and

turbulent business environment and there is a vast amount

of potentially useful

information which managers could use to support their

strategic thinking. Our aim was

to find a means of filtering this information, offocusing

effort, in order to facilitate more

appropriate opportunistic strategic decision making.

2 Foundation research

At the start of the project it seemed appropriate to devote

a little energy to validating

those assumptions which were key to the project's success.

The outcome of this

foundation research was the precursor to designing the

overall research methodology for

the project and the project plan was established after its
completion. The purpose of this

initial research was to:

* test our assertions about the nature of strategic

management within the industry and in particular to
establish the level of sophistication of the strategic
management processes used.

* establish whether there was indeed an unarticulated need

for assistance to resolve the problem of assimilating the
large volumes of strategically important business data
available and to establish the nature of the most widely
used data sources.

* assess the extent ofthe managerial use of information

technology in the industry, both as devices to access
information and as decision support tools.
The basis for the foundation research was interviews with
senior managers in a range

of construction industry organisations and a review

ofliterature. This research proved to

be significant in shaping the future of the project.

2.1 Interviews

Sixteen organisations throughout the UK were approached to

be interviewed for this part

of the study and ultimately eleven individuals from eight

organisations took part. The

basis for choosing this sample was a mix of pragmatism and

breadth of population.

Organisations which might be amenable to acting as

collaborators later in the project were

chosen, as well as selecting those that would be

representative of different sizes of

organisation, location and assumed level of management

sophistication. Very small

organisations, unlikely to have a great interest in

formalised strategic management, were

excluded from the sample, although cognisance of the fact

that the construction industry

is characterised by a large number of small organisations

was taken in the research, so that

the resulting system has been designed to be flexible

enough to be used by a wide variety

of organisation types and sizes.

2.2 Foundation research outcomes

Managers tend to rely on soft sources of information for

their business intelligence and

they take an intuitive approach to strategic decision

making. Contractors operate with
an outward focus, reacting to market needs. Managers'
visions are resource based 'if

we have X, Y and Z, then we can play it as it happens'.

This is typified by the comment,

from one of the interviewees, that "if it's bridges next

year, we'll be in bridges". The

antithesis of this approach is a predict and control view

of managing, which is seen by

managers as inappropriate in the construction industry.

Rather than having explicit

strategy formulation processes it appeared that strategic

growth comes from a series of

step moves. These strategic moves are a response to

triggers, such as reports that "design

and build is on the increase", not the result of what

might be called 'traditional' strategic

planning. The reactive nature of construction

organisations and project life cycles mean

that planning horizons are generally limited to between

three and five years.

Interviewees responses to questioning about the type of

information used to support

strategic decisions led initially to the identification of

market or trade data, that is

information about volumes and prices. Trade data gives

pointers about how to act in

current and immediately imminent commercial activities, for

example, how to tender. It

provides information about what is going on now and in the

very recent past. Three types

of data are used for planning: trade data, trade rumours

(planning lead type information)

and data which has long term implications. The last of

these types informs strategic

thinking; this planning data tends to come from

interpretive sources, digests of information

and commentaries, and includes sources such as newspaper

and trade press reports. This

is in contrast to the use of large, government or industry

wide, databases such as the

housing and construction statistics. The interviews

demonstrated a consistent pattern of

information sources used to inform strategic thinking.

The contractors interviewed did not use statistical

information directly. They said that

they do not "clinically analyse statistics" but rather

they will cast an eye over them and use

them to confirm the validity of previous decisions.

Strategic decisions are based on

anecdotal evidence, which precedes statistical evidence.

Analysing statistics was taken

to be different from using them to inform their strategic

thinking, in that managers may

be powerfully influenced by statistics even though they do

not analyse them. Although

organisations may vary in terms of size and their degree

of management sophistication,

they still tend to scan the same data.

The information technology (IT) capabilities of the

managers interviewed were

universally poor. It was clear that there would be general

antipathy towards using a

computerised Group or Individual Decision Support system,

although individual

champions exist within organisations and such an individual

might still use a computer
based system.

2.3 Implications for the design and prosecution of the

research.

The level of sophistication of strategic management implies

that the impact of scenarios

can only be achieved indirectly. Rather than attempting to

persuade the industry to

change their approach to strategic planning it was more

appropriate for this project to

focus on finding ways of influencing their thinking about

the future. Any attempt to

influence thinking in the industry would have to reflect

the need to intervene in a fluid and

less formal planning process.

While the· foundation research suggested that a generic

scenario may not provide

organisations with a useful means of thinking about their

own future, there was support

for the project working with generic data sets; information

which 'everybody collects and

uses' and which it is assumed, by managers, that everybody

else has. A shift away from

the typical scenario methodology suggested the creation of

an adapted scenario approach

or, what we then called, an Industry Futures Bulletin

(IFB), based on generic data and

encompassing multiple futures. The structuring of data

into a scenario type format would

provide the screening process through which large amounts

of data could be utilised and

interpreted and which would support strategic thinking.

The most powerful data used for strategic thinking is of a

qualitative nature, thus the

project concentrated on selecting, organising and

structuring qualitative data to suggest

the type of multiple futures which are fundamental to a

scenario aspect of strategic

planning. The contractor interviews provided the portfolio

of data sources which the

project should explore for the structuring of generic data

sets.

The attitudes to the use ofIT suggested a potential lack

of interest in, or opposition to,

the originally conceived system. Managers who are not

themselves familiar with IT will

be more likely to use a system which is run for them by a

facilitator or chauffeur. To

overcome this problem the methods devised for interacting

with the IFB had to be kept

simple and the system design such that the user feels that
they are gaining added value,

new insights into their business environment, quickly.

Contractors would also require a

decision support system which fits in with their flexible

approach to business.

3 The revised project plan l---~ I Software I

L----'----.-J I=~I bulletin

Figure 1. Revised project framework.

Figure 1 shows the revised framework used to guide the

project. It depicts two parallel

research activities which follow on from the foundation

research: i) scenario studies,

undertaken to establish the differences between what can

be provided through an IFB

distributed to all construction companies and the

individualistic demands of companies;

ii) methods for constructing the IFB what data to extract

from industry data sources,

how to translate the data into an IFB and the adaptation

of computer software to depict

graphically the IFB in an accessible form. On completion

of these parallel activities the

final stage was to test the IFB with the managers of a

construction firm.

4 Exploring "thinking about the future" in the coUaborating

organisations

4.1 Scenario studies

The scenario studies consisted of interviews and workshops,

the aim of which was to

make explicit the way managers envision their future. By

going through a traditional

scenario development exercise visions of the future are

shared and explored by the

management team. This process of explication was vital to

collecting cogent data about

the type of scenarios that would be of interest to

managers in the construction industry

the research process followed the action research method

[6]. This part of the research

was conducted with directors of each of two collaborating

organisations.

As a result of the above process areas of strategic concern

were identified. From these

areas a smaller number, three or four areas considered to

'really make a difference' to the

business, were identified. These areas constituted a

scenario agenda. This agenda was

used as the basis of research and to collect further

expert knowledge which would inform

thinking about the future. The information derived from

experts was then used to

contribute to a number of alternative scenarios.

The most significant outcome ofthis exercise was absolute

reinforcement of one of our

initial conclusions from the foundation research, namely

that the role of generic scenarios,

which can service the industry as a whole, is problematic

and that any 'large database'

designed to inform strategic thinking will only be used by

the industry if it is accessible and

presented in a form which can be adapted to the specific

strategic environment of each

individual organisation.

Experience from the scenario studies also indicated that

the process of introducing

alternative futures, beyond those of immediate concern and

set within managers' current

mental framework, is very difficult. In particular it

became clear that the unique history

of an organisation and its growth pattern influences the

extent to which new futures are

considered. Possible futures which appeared to be close to

negative past experiences

would be rejected. This raised important issues for the

success of introducing a 'generic'

IFB. Thus the lFB needed to be designed in such a way that

initial exploration reflected

the particular needs of the organisation, and so that the

introduction to alternative futures

was gentle, after a degree of comfort about futures of

obvious interest had been
established. Access to the IFB needed to be flexible and
contingent and users would need

to be encouraged to add company specific data, to

customise and change the complexion

of the 'scenarios'.

4.2 Building the IFB

The foundation research identified the sort of information

which should be drawn on for

computer modelling and which would be used for scenario

development. The first

modelling experiment involved extracting headline type

information from eighteen trade

press publications, from five sources. Some of the

information selected was descriptive,

about what was already known, and some of it was

speculative. Information was

presented as short phrases (concepts) which were linked on

a cause and effect basis to

form maps. The concepts were expressed in terms of events,

that is a statement such as

'Labour say that they will introduce a minimum wage' would

be translated into 'Labour

introduce a minimum wage'. Information supporting this

statement would be added and

the consequences of this event would be explored and

linked to a number of other events.

In this way the interrelationship between events could be

examined. Thus the IFB

presents 'narratives of causality'. An example of an IFB

map is given in figure 2.

This exercise raised two significant issues, those of

sourcing and inter-coder reliability
for data selection. Sourcing the IFB data was an important
issue because of the credibility

which users place on different sources, for situations

where sources contradict one

another and to allow users to make a judgement about the

bias of a source. The sourcing

issue was dealt with by the development of a 'memo card'

facility within the software. A

memo card sits behind a concept, storing the source

reference and additional information

relating to the subject of the concept, allowing the user

to get a fuller picture, beyond the

headline information.

3014 LESS MONEY for building work 63 strong increase -07

in orders from leisure sector (1995-1997) [28] 22
reasonably ROBUST growth in the commercial sector
(1995-1997) [28] 3<til l , 3013 redistribution of
profits to cover wages 27

Figure 2. IFB sample map. 136 NEW ANALYSIS: plans for

minimum 16 wage hit leisure, -retail and brewing sectors
[10] 26 SUSTAINED ACTIVITY levels in retail sub-sector
(1995-1997) [7] 2<'165 outlook for private retail work
gloomy [28]

To establish a basis for reliability in the selection of

data a set of rules was needed to

guide the extraction of scenario data from the published

sources. An initial set of

guidelines for data extractions was developed by J.R.

Brightman, based on knowledge of

and experience within the industry and insights gained from

the contractor interviews.

Through the evaluation of data from a number of sources,

C. Eden and K. van der

Heijden, who have extensive experience of scenario

development, characterised the
elements which constitute scenario data and developed the
initial guidelines into a number

of interconnecting rules for the extraction of data to be

included in the IFB. Some of

these rules are shown in figure 3.

27 changes in

configuration of

relationships of

major players 31 change in relationship between small

and major <C"-__ players 25 significant 46 change in
power between contractors and their suppliers <,_. --~
13 fundamental shift in competitive positioning caused
by act of govt/agency change in perceived 26 technology
power between clientE-__ ._. developedwhlch.;--_ and
contractor enables client to . 14 creation of new
knowledge giving indy understanding and privileged
access and control become more proactive

Figure 3. Examples of rules for data extraction and

inclusion in the IFB.

Several experiments testing different forms of

presentation and structuring of the data

were carried out. Colour and font variations (styles) were

used to distinguish between

information categories. Initially three styles were used

to categorise information; that

which had implications for the levels of construction

activity , that which had implications

for organisational capabilities (either to be acquired or

maintained) and 'the rest', that is

supporting information needed to explain the activity and

capability statements. The maps

were hierarchical with activity and capability at the top

of the map and supporting

statements below.
One of the modelling experiments involved the use of
generic activity and capability

statements at the top of the model. This was an attempt to

move away from presenting

information in the commonly used classifications within the

industry. The aim of this was

to encourage an alternative and wider view of the business

environment, drawing attention

to other areas which might, at first glance, appear to be

of little or no consequence for the

business. This approach ties in with one of the lesson

learnt from scenario development

which is that it may be secondary issues that herald

changes in the business environment.

However, this structure proved to be unworkable because it

was not possible to find a

useful generic capability statement and generic activity

statements of the type 'more

building work' or 'less building work' are too bland and

unspecific and tend to condition

thinking so that only two, not very radical, or

necessarily helpful, possibilities are dealt

with.

4.3 Comparison of scenario studies and IFB development

In theory, if the data extracted from the sources

identified by foundation research was

accurate and this data was truly of relevance and interest

to the managers involved in the

project, then there would be a significant overlap between

the data contained in the IFB

and that gathered from the scenario studies. With company I

the scenario study was

completed using a 'traditional' scenario development

workshop. No computer software

was used during this session. The workshop involved

discussion of the areas on the

scenario agenda, with the participants' knowledge being

supplemented with feedback from

research and collected expert knowledge.

It was clear that there were areas of overlap between the

IFB data and the data from the

scenario studies, but that what might be termed as 'blind

spots' existed. These blind spots

covered issues where information was contained in the IFB

but which the managers did

not appear to want to consider. For example, it was

extremely difficult to elicit

information about a 'bad future', in relation to those

issues which had been identified, in

scenario terms, as most important for the organisation and

least predictable in nature.

This had implications for the final design of the IFB, in

that it would not be fulfilling its

function if it did not encourage users to explore these

'blind spots' as part of their

consideration of a number of possible futures and to

assess if it made sense to dismiss

these areas of business.

4.4 Modified IFB

After the initial IFB structuring and presentation

experiments and the scenario studies, the

next stage was to produce an IFB which was much nearer to a

'commercial' version of the

IFB. Over the period of a month approximately 100 data

sources were scanned for
information which could be of strategic importance to
construction organisations and

which would form the basis of a number of scenarios. By

this stage the software

development for referencing the data sources and providing

additional information 'behind'

concepts had been completed and the rules for structuring

the maps had been developed.

Ultimately these modelling experiments and comparison with

the scenario studies led

to the use of five categories for the classification and

presentation of the IFB data:

activity, capability, 'so what', commentary and past

event. 'Past event' represents

historical information needed to put today's events into

context. The need for these

history was added to the model. 'So what' is explanation

added at the top of the model

where a line of argument does not end in an activity or

capability statement drawn from

the literature (i.e where the user or model builder adds an

outcome). Commentary

(formerly the 'the rest' category) was renamed to suit its

purpose, providing supporting

information for the activity, capability and 'so what'

statements. Two further categories,

theme and seen, were added to facilitate exploration of

the model. The theme category

contained concepts which, from analysis of the map, were

the most highly elaborated

concepts, that is they had the largest number of links

going into and out of them. This

was taken as an indication of the importance of these

events as the 'most talked about'
issues in the data sources. The 'seen' category was for
ticking off theme items which had

been explored.

4.5 Testing the modified IFB.

With company 2 the scenario study was completed using the

IFB. This workshop was run

with two of the researchers acting as facilitators. The

session was filmed, recording

screen displays and participants' reactions so that

responses to the exercise could be

analysed. A structured approach to the exploration of the

model was devised, whereby

the managers were presented with a list of theme concepts

(the 'most talked about' issues

in the business environment) and invited to identify which

of these themes was of most

interest to them. The maps were then explored in small

sections, building up a picture of

the issues surrounding the chosen theme event. When a theme

had been explored it was

'ticked oft', changing its display style to 'seen' and

another theme chosen and explored.

When faced with the IFB the managers' first question was
''where has this information

come from", confirming the importance of sourcing and the

facility to easily access back

up information. The development of the memo card had

solved this problem, however

discussions in this session also focused on the question

of exactly what should be

contained in the memos. In cases where quantitative data

existed behind the qualitative
judgement the managers wanted to be made aware of that, so
that they could dig deeper

if that was deemed to be necessary.

In contrast to the workshop with company 1, where 'blind

spots' had been encountered,

with company 2, where statements in the IFB went against

the managers' beliefs they

followed contradictory lines of argument, to evaluate

whether or not there was any

substance in the argument, any information which they

might not have been aware of and

which might influence their decisions.

No client specific information was added to the model but

as the participants had been

interviewed during the first part of the scenario

development process their scenario agenda

was known. The model contained generic data and had

approximately 450 concepts.

During a five hour session only approximately a quarter of

the model was explored and

some issues previously identified as being on the scenario

agenda were not explored. This

rate of model exploration was mainly attributable to

dealing with and learning about a new

form of information presentation. As managers become more

familiar with the structure

and presentation of data in the IFB exploration will

become quicker.

The participants were very positive about what they had

seen but the leap between the

data presented and the development of a number of clearly

defined, company specific

scenarios was not adequately achieved during this session.

However the managers'

thinking was most definitely influenced by what they had

seen, as acknowledged in

subsequent correspondence.

5 Conclusions

The positive response of the collaborating firms suggests

that the product of this research

does have potential industrial use. This research has

sought to bridge the gap between

management theory and construction management practice, by

devising a usable and

flexible means of influencing managers' thinking about

future business environments and

encouraging thinking about multiple possible futures.

The research has produced clear evidence that it is

possible to enhance futures thinking

amongst managers in the construction industry. By

identifYing activity and capability

issues the method focuses on the building up of

distinctive competencies and capabilities

in anticipation of possible and possibly new demands from

the market. Decision support

systems ofthe type which we have been experimenting with

can be extremely successful

in assisting with this process, but so far this requires

facilitation through strategy

development workshops.

Weare currently undertaking further work to refine the

method of entering and

exploring the model and to add a help system so that

independent users are guided

through the model and prompted to add their own data. The
use of memo cards is also

being more clearly defined so that the additional

information which is given in them is

'what the managers want'. We are extremely encouraged by

our results todate and are

continuing this work with the ultimate aim of developing a

stand-alone decision support

system which could be used by organisations without expert

facilitation.

1. Langford, D, Eden, C and van der Heijden, K. (1993)

Scenario planning for

construction, CIB W-65

2. Wack, P. (1985) Scenarios uncharted waters ahead,

Harvard Business Review. Sept/Oct. pp73-89.

3. Wack, P. (1985) Scenarios: shooting the rapids, Harvard

Business Review.

NovlDec. pp139-150.

4. van der Heijden, K. (1995) Scenario thinking about the

future, in Rosell, SA et ai, Changing maps, Carleton
University Press, Ottawa.

5. Eden, C. (1990). Strategic thinking with computers. Long

Range Planning, Vol 23, No.6, pp55-43.

6. Eden, C. and Huxham, C. (1996). Action Research for the

study of organisations, in S. Clegg, C. Hardy and W. Nord
(eds), Handbook of Organisation Studies. Beverly Hills:
Sage.

ORGANISATIONAL STRUCTURE,

CORPORATE STRATEGY AND

SURVIVABILITY IN THE SCOTTISH

CONSTRUCTION INDUSTRY

J. Docherty

Barclays Bank, Newcastle, UK

D.A. Langford

Department of Civil Engineering, University of Strathclyde,

Glasgow, UK

Abstract

This paper examines the organisational structure, corporate

strategy and survivability

of medium to large sized Scottish construction firms. The

study looked at ten of the

largest privately owned construction firms, which in 1992

accounted for almost

nineteen percent of the total construction output in

Scotland.

The paper explains why the construction industry behaves

differently from other

industries and shows why these differences combine to make

it particularly vulnerable

during downturns in an economy.

Structure, strategy and survivability are discussed in tum,

drawing on some of the

broad range of literature available, before developing a

research model, which defines

the relationship between variables used in the study.

Organisational structure is the basis by which a firm is

physically organised to carry

out the tasks it has set. The structural variables which

are used in the study are;

Functional, Holding Company, Divisional and Functional with

Subsidiaries.

Strategy is defined as encompassing the organisational

behaviour of an organisation.

The strategic variables used in the study are Competitive,

Co-operative, Innovative and

Retrenchment.

Survivability is the term used to describe a firms

likelihood of remaining solvent

in the future, based on its past and current trading

performance. The method used to

determine this is the Multi-variate Discriminate Analysis

technique, also known as the

Z model technique.

The organisational structure a company adopted was found to

affect its survivability.

A Divisional structure gives the best survivability rating.

Similarly, strategy was

shown to have an affect on survivability, with a

Competitive strategy yielding the best

results. Both a Divisional structure and a competitive

strategy were found to be more

prevalent in larger firms.

Keywords: Construction; strategy; organisational

structuring; financial performance.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

Sommaire

Cet article examine la structure organisationnelle, la

strategie des affaires et la

capacite de survivre des moyennes et des grandes

entreprises de batiment ecossais.

L'etude a considere dix des plus grandes entreprises de

batiment privees, qui en 1992

ont represente presque dix-neuf pourcent du rendement total

de batiment en Ecosse.

L'article explique comment Ie bfitiment se comporte

differemment des autres

industries et montre comment ces differemment des autres

industries et montre

comment ces differences se combinent pour Ie faire

particulierement vulnerable

pendant les tendances a la baisse dans une economie.

On discute la structure, la strategie et la capacitede

survivre a tour de role, on a tire

des informations du grand choix de litterature a notre

disposition, avan de developper

un modele de recherche, qui determine Ie rapport entre les

variables utilisees dans

l'etude.

La structure organisationnelle est Ie fond autour duquel

une entreprise s'organise

physiquement, pour realiser les taches qu'elle s'est fixee.

Les variables structurelles

qui sont utili sees dans l'etude, ce sont des structures

"Foncitionnelles" (Functional),

"Holding" (Holding Company), "Divisionnelles" (Divisional)

et "Fonctionnelles avec

Filiales" (Functional with Subsidiaries).

On definit la strategie comme etant Ie comportement

organisationnel d'une

organisation. Les variables straregiques utilisees dans

l'etude, ce sont des strategies

"Competitifs" (Competitive), "Cooperatives" (Cooperative),

"Innovatives" (Innovative

et "Reductives" (Retrenchment).

Le terme "la capacite de survivre" de crit la probabilite

pour qu' une entreprise reste

solvable dans l'avenir, ce qui est base sur ses resultats

commerciaux actuels et du

passe. Cette proabiliteest determinee par la technique

"Multi-variate Discriminate

Analysis", aussi appelee la technique du modele Z (the Z

model technique).

On a trouve que las structure organisationnelle choisie par

une entreprise, influe sur

sa capacite de survivre. Une structure divisionelle donne

la meilleure evaluation pour

la probabilite de survivre. De la meme fa~on, la strategie

influe sur la capacite de

survivre mais une strategie competitive donne les meilleurs

resultats. On a trouve que

la structure divisionnelle et la strategie competitive

etaient toutes les deux plus

courantes dans les grandes entreprises.

Introduction

The well-being of the construction industry is of major

economic importance to the

United Kingdom.

In the year to December 1992, it accounted for £30,126

million, or 6% of the Gross

Domestic Product (Joint Forecasting Committee for the

Construction Industries, 1993).

In the winter of 1992/93 it employed a total of 1,586,000

people, or 6.56% of the

total workforce (Government Statistical Service, 1993).

Given the size and its power

to generate employment an understanding into how the

construction industry works
is an essential component of industrial policy. The
argument concerning how

governments have used construction as an economic lever

are too well known to be

rehearsed here but the evidence is that construction has

had a very difficult time

during the recession.

The deep recession experienced by the construction industry

has focused thinking

concerning strategic management and how to survive. The

depth of the recession can

be charted from the second quarter of September 1990 to

December 1992, when the

UK. economy, as measured by Gross Domestic Product, fell by

3.7%. At the same

time construction output fell by 15% (Source: Central

Statistical Office, 1993). Whilst

employment in the UK. as a whole dropped from 25.726

millions in the spring of

1990 to 24.176 million in the winter of 1992, or some 6%,

those employed in the

construction industry fell from 2.026 million to 1.586

million, a fall of almost 22%.

These figures demonstrate the importance of understanding

the financial

implications of structure and strategy within the

construction industry.

Scottish Construction

The research focused upon the Scottish construction

industry. The reasons for

limiting the study to Scotland are laid out below.

The construction industry in Scotland behaves differently

from that of the UK. as
a whole. For example between 1985 and 1990 construction
output soared in England

amid an economic boom. At constant factor costs (1985 =

100) construction output

rose from 100 in 1985 to 134.3 in 1990 (Central

Statistical Office, 1993). In Scotland

the rise was more modest, from 100 to just 107 (Scottish
Economic Bulletin, Summer

1992). The big, it may be averred, bang was not heard in

Scotland.

Even the very nature of the spending on construction is

different in Scotland. In

1981 the public sector in England accounted for 38.5% of

new orders obtained by

contractors, falling to 25.1 % in 1990 (Government

Statistical Service, 1992). At the

same time the figures in Scotland were 53.8% and 29.1 %

respectively. The nature of

home ownership in Scotland differs greatly from that in

England, such that while

government spending on housing fell in England between

1981 and 1990 by 5%, it

actually rose in Scotland by 6% (Government Statistical

Service 1992).

Not surprisingly, employment levels differ, in Scotland the

percentage of the

workforce employed in construction being 4%, as opposed to

over 6.5% in the UK.

as a whole (Source: Scottish Economic Bulletin, Winter

1992). Even so, while

construction output accounted for 5.9% of the Scottish

Economy, the industry shed

over 28% of all those made unemployed in Scotland in the

[last] recession.

Clearly, with growth, expenditure and employment patterns

different in Scotland an

investigation into the construction industry there is

merited.

These structural issues overlay the individuation of

Scotland, a country with its own

customs, language, tradition and character. These factors

alone would be cited by

many as reasons enough for a special study of the Scottish

construction industry.

STRUCTURE, STRATEGY AND SURVIVABILITY

There has been a great deal of work carried out in each of

the three fields

investigated. It has been possible to distil the mass of

opinions in to variables used in

the study.

Structure

Studies into organisational structure tend to take on one

of two forms; those

concerned with organisational behaviour and environment,

and those which focus on

physical organisational structure. While both were examined

in the course of the

research, it is inevitable that given the nature of the

data collection, an emphasis

would be placed on the descriptive, i.e. on physical

organisational structure.

However, there are areas which are of relevance to this

study in terms of providing

a fuller understanding of organisational behaviour as a

whole. There is no universal
agreement on which is the correct theory on organisational
structure but the

Contingency Theory, defined by Woodward (1965) and built

upon by others, is the

nearest to orthodoxy anyone has yet come to. Her

acknowledgement of the social,

economic and political factors which have an influence on

organisational structure was

to open the doors for further research in to the broader

environment. Put simply, the

contingency theory suggests that organisational structures

are dependant on the

parameters of the organisations environment. Or, as

Mansfield (1986) put it "the

performance of the organisation is contingent upon the fit

between its structure and

the organisational context and environment".

The concept of the environment within which an

organisation operates has provided

much scope for debate. Its importance is almost

universally recognised. Companies

which fail to take an adequate reconnaissance of their

environment will suffer. Closed

system organisations (Newcombe, Langford and Fellows,

1990) which fail to recognise

influences outside their own offices tighten internal

functions when under stress. One

assumes that this makes the organisation more rigid and

inflexible at precisely the

time when flexibility may be called for.

Such inflexibility is often attributed to bureaucratic

forms of organisation. The basis

for a bureaucratic form comes because the needs are

expressly designed to achieve

certain goals. Weber (1930), whose view this was, believed

the bureaucratic

organisation was technically the most efficient

organisation possible. Of it he stated

"precision, speed, unambiguity, knowledge of files,

continuity, discretion, unity, strict

subordination, reduction of friction and of material and

personnel costs these are

raised to the optimum point in the strictly bureaucratic

administration". Weber was,

of course, a philosopher, much of whose work was concerned

with religion and

morality. Religion and morality, while important, have not

been the subject of

empirical study in relation to the construction industry,

but some of his views on

bureaucracy survive and were echoed by Woodward who

believed that mechanistic

systems of management, where there is a recognised

hierarchy and communications

take the form of orders and requests, were made suitable

in stable conditions.

But bureaucracy is only one of the more recognisable

definitions of a style of

organisational structure, and is often attributed to the

older and larger organisations.

Indeed size has been cited by Harris and McCaffer (1989),

Mansfield (op cit.) and

Newcombe, Langford and Fellows (op cit.) as being of

particular importance to

organisational structure. Indeed the Aston Group (Pugh and

Hickson, 1976) found that
the larger an organisation became the more likely its
employees were to work in very

specialised functions, following standardised procedures,

or in other words a

bureaucracy. The Aston group defined four types of

bureaucratic organisation, but

there are other descriptions of organisational structure.

One of those is Shittu (1988),

who drew on the works of both Channon(1978) and Grinyer

(1980) to produce four

categories of organisation especially suited to the

construction industry. These are;

1. Functional Structure:The firms activities are subdivided

into a series of specialised functions with the Chief
Executive Officer co-ordinating all these specialised
functions.

2. Holding Company Structure:Where the firms are composed

of semiautonomous units, loosely held together as a
corporate legal entity.

3. Multi Divisional Structure:These are firms subdivided

into a series of autonomous multi function divisions
responsible for operations, but with a central office
which serves and monitors their function.

4. Functional with Subsidiaries:These are firms which are

basically functional in structure, but also have one or
more separate functions (not necessarily true
subsidiaries) reporting to top management or, in some
cases, to one of the functional managers (i.e. fully
centralised and outside the operating units).

For the reasons of simplicity, relevance to the

construction industry and the method

of data collection, the four variables above, defined by

Shittu, were the organisational

variables used in this study.

Strategy

A key question is: What is strategy? As stated, the

dictionary definition is "a

particular long term plan for success, especially in

business". The question most asked

by academics is what plans do strategy encompass. The

choice has perhaps been best

posed by Mansfield (op cit.) who asks whether the concept

of strategy includes both

the objectives an organisation wishes to achieve and the

means that will be used to

achieve them, or whether it includes only the means to the

objectives. Mansfield

answers this question by defining strategy thus:

"Basically, the strategy of an

organisation may be regarded as the more or less planned

collective predisposition of

senior management to make particular decisions regarding

the task of the organisation

and its relationship with the environment". This view is at

odds with that of Rumelt

(1986), who cites Chandlers' (1967) view, which states that

strategy encompasses "the

determination of the basic long term goals and objectives

of an enterprise and the

adoption of courses of action and the allocation of

resources necessary for carrying

out these goals". For the purposes of this study, strategy

broadly encompasses the

objectives of an organisation. How these are to be carried

out can be defined as

tactics, which themselves may be flexible.

A number of factors have to be taken into account when

deciding on strategy, not

least the fear of being left behind.(Lansley 1987) (Rumelt

1986). The need to create

flexibility is perhaps more explicit. The drop in

construction output in the 1970s

highlighted the need for flexibility, and the ability to

realign existing resources with

a change in demand .. Indeed Lansley stated "in an

uncertain environment ... the style

of management needed to reflect a long term vision of the

future, to provide

motivation to overcome the inevitable role stresses caused

by change and to encourage

the individual to develop the skills necessary to fulfil a

new role. Thus a corporate and

people oriented style became more important than the task

oriented style which had

characterised the 1960s". Managing in such turbulent

environments demands rapid and

creative responses by managers blessed with flair. The

organisation structure should

be tolerant of such flair with organic, rather than

mechanistic, structures.

Consequently the skills and motivation of decision makers

involved in a business

is crucial to a successful strategy. The view that

successful strategies require creative

and innovative people is well founded and has specific

implications for construction.

This point has been emphasised by Kinsman (1987) who, like

many futurists

emphasises the increasing demand for a deeper human

dimension in business. Rambo

style management is out. A need to understand more deeply

the motivation of
individuals is in. Kinsman believes "the intuitive capacity
for assessing situations ...

will come to represent the very essence of tomorrow's

management skills".

In this research firms were categorised in to one of four

types of strategy. Drawing

upon the work of Mansfield the strategic typologies used

are:Competitive strategy,

Co-operative strategy, Innovative strategy and Retrenchment

strategy. These are briefly

explained.

The purely Competitive business strategy involves an

acceptance that there will be

other firms carrying on very similar activities. To be

successful the implementation

of such a strategy is dependant upon being able to carry

out those activities in some

way better than competing enterprises.

The essence of the Co-operative strategy is an avoidance

of extreme forms of

competition. It may involve direct collaboration with

competitors, but more normally

it is based on a general attitude of

co-operativenesswithout any actual collusion. The

general strategy would seem to be particularly prevalent

in oligopolistic market

situations. The essential environmental orientation of all

firms involved in such a

situation is defensive.

An Innovative strategy involves the invention of new

products or methods of

working which allow the elaboration of the interlocking

cycles of production and
consumption in which the organisation is involved. The
kinds of innovation included,

whether technological or social, are those that go further

than the replacement old

products or systems. This sort of strategy, if

successfully implemented, is one that

positively adds to the wealth of the parties to the

particular cycles of production and

consumption.

The Retrenchment strategy also involves the revision of

input and output exchange

relationships and the modification of the pattern of

production consumption cycles in

which the fIrm is involved. However, in this case, far from

elaborating the pattern, the

move is towards curtailment and simplification, nonnally

involving a reduction of both

internal and external differentiation. Usually this

strategy is based on an attempt to

achieve survival by cost cutting and focusing on core

activities.

Survivability

It would not be possible to link strategy to survivability

were there no method of

comparing companies financial health. Predicting a

companies financial health is like

predicting the winning horse in the Grand National, with

the exception that, rather

than be given the Jockeys weight, you are given an

accountants guess as to what the

jockey would like to weigh.

When making comparisons, it would be simple to extract the

figure for profit from

the annual accounts and then make a direct comparison with

other organisations.

However such a comparison would be largely irrelevant,

given the variety of

accounting techniques which can make comparisons between

organisations misleading.

The absence of a coherent set of legal definitions in

accountancy has been

recognised as a draw back by, among others Jones (1991),

Freear (1980) and Tamari

(1978). Even so two methods have historically been used

for forecasting company

financial perfonnance, Financial Ratios and Multi variate

Discriminate Analysis.

Views vary on the applicability of ratios for prediction

purposes. Jones stated that

for any real conclusions to be drawn at least five years

data would have to be used.

Freear cited Beaver (1968) who found perhaps not

surprisingly, that longer tenn ratios

perfonned better than shorter tenn ratios, while Altman

(1968) noted that "the use of

financial ratios for analytical purposes is usually

tempered by qualifications as to the

applicability in the deductive reasoning process". However

Langford, Iyagba and

Kamba (1992) found that the perfonnance of an organisation

could be measured using

ratios. They stated that there would be an industry average

and that over a long period

of time a trend for a particular organisation would emerge.

It is not possible to predict
what the managers, shareholders, or creditors of the
company will do to improve the

situation.

All in all, ratios can only produce a snapshot of a

companies financial position, and

cannot provide the predictive capacity required for the

research. A more accurate

predictor is based on the Multi variate Discriminate

Analysis, of which Altman states

"the use of a multi variate analysis (is) appropriate ...

to arrive at an over all index of

a companies position".

The technique used in the research replicated Mason and

Harris (1979) and is

known as the Z model technique. It provided impressive

results and, as importantly,

used data which is readily available in each companies

annual accounts.

The method, designed specifically for application to

construction finns, uses

published financial accounts to create a solvency profile,

and that is compared to the

solvency profiles of known financially stable/unstable

companies. The solvency profile

is summarised in a single score.

To produce the score two sets of financial ratios were

used in an equation designed

to give the final solvency indicator. The first set was

derived from the final years

accounts of twenty construction companies which had failed

since 1969 and the other

from the 1976 to 1979 accounts of twenty construction

companies that were thought
to be particularly sound on a traditional financial ratio
analysis basis.

The authors then considered twenty eight discriminating

variables and with the use

of computers they managed to reduce these to the six with

the most discriminating

powers. Although the more variables used the better, or

more accurate the model, for

it to be of value it had to be easy and quick to apply.

They then produced a function

of the form

z = C(O) + C(1)R(I) + C(2)R(2) + ... +C(N)R(N),

where

z = Z score, C(O) is a constant C(l) to C(N) are the ratio

weights and R(l) to R(N)

are the discriminating financial ratios. The final model

was of the form

Z = 25.4 51.2R(1) + 87.8R(2) 4.8R(3) 14.5R(4) 9.IR(5)

4.IR(6)

where

R(l) = Profit Before Interest and Tax / Opening Balance

Sheet Net Assets

R(2) = Profit Before Interest and Tax / Opening Balance

Sheet Net Capital

Employed

R(3) = Debtors / Creditors

R(4) = Current Liabilities / Current Assets

R(5) = Log 10 days Debtors for Year

R(6) = Creditors Trend Measurements

and Days Debtors for Year N = D(N-I) + D(N) x 365/2

Turnover

and Trend Creditors for Year N = C(N) + C(N-I) 2C(N-2)

C(N-I) = creditors for year N·I, C(N) = creditors for year

N etc.

On completing their research the authors found that

companies with positive Z

Scores (i.e. above zero) had all remained solvent, while

companies with negative Z

scores had, without exception, failed. The authors do,

however, qualify their findings.

They admit that the Z score cannot accurately predict

failure. Unhealthy firms can

recover from having a "bankrupt" profile by the actions of

debenture holders, bankers

and creditors; "The Z score alone cannot predict failure,

it only indicates that a

company has a profile very similar to failed companies, and

therefore has a high

probability of failure".

Research Model

Organisational structure can be assumed to have an effect

on the success of an

organisation. Similarly there is an established link

between an organisations strategy

and its subsequent financial performance. It has been

noted also that company strategy

will influence organisational structure and vice versa.

Using the variables already

detailed above, these relationships can be illustrated

diagrammatically below. STRUCTURE Functional Holding
Company Product Divisional Divisional J STRATEGY
Competitive Co·Operative Innovative Retrenchment
ENVIRONMENT SURVIVABILITY Profit before Interest and Taxi
Opening Balance Sheet Net Assets Profit before Interest
and Tax/ Opening Sheet Net Capital Employed
Debtors/Creditors Current Liabilities/Current Assets
Log10 Days Debtors for Year Creditors Trend Measurement
Fig 1. Research Model

The Hypothesis

For the results to be of any value they must be tested

against a set of hypotheses.

It can be seen from the research model, drawn for our

earlier observations, that

strategy and structure are to a degree dependent on each

other. It has also been noted

that they both affect a companies financial performance and

therein its survivability.

From this three major hypothesis are derived:

1. An organisation's structure is linked to its subsequent

financial performance, and therein its survivability.

2. An organisation's strategy is linked to its subsequent

fmancial performance, and therein its survivability.

3. An organisation's structure combines with strategy to

provide the best financial performance, and therein its
survivability. As an aid to the research the link between
an organisation's turnover and both its structure and
survivability was examined. More specifically, two
subhypothesis were examined:

4. An organisations turnover is linked to its subsequent

financial performance, and therein its survivability.

5. An organisations structure is linked to its turnover.

The Data Collection

The data used in the study was retrieved from three

sources; annual accounts, a

piloted questionnaire and face to face interviews with the

most senior executive in a

number of firms.

The most recent available annual accounts for each firm

filed at companies house

were examined for relevant information. The Z model adopted

meant that at least three

years of accounts for each firm were utilised.

The questionnaire was designed to identify which of the

four structural and four

strategic variables applies to each company. A pilot

questionnaire was written and sent

to the managing director of one of the firms taking part

in the survey. Upon its return

an amended version was sent out to the twenty largest

privately owned construction

firms in Scotland.

It is accepted that the questionnaire method of data

collection is not ideal.

Organisational structure, not commonly held to be

confidential or confusing, can

indeed be established using this method. That being so, no

matter how well planned

the questionnaire it cannot be expected to record the fmer

nuances of strategy. Indeed,

assuming that senior executives are aware of their own

corporate strategy, commercial

confidentiality makes it uncertain as to whether they

shall wish to share that

information. However, given the time available to complete

the data collection and the

extensive geographical spread of the companies involved, a

piloted questionnaire was

included.

The purpose of the interviews was to build upon the

information provided in the
questionnaires and to add any information which can only be
provided through

conversation. This was intended to corroborate / modify any

findings from the

questionnaires. The ten firms used in the sample comprised

19% of the turnover of the

Scottish construction industry.

Method of Analysis

The ftrst step in discerning what conclusions should be

drawn is to create a null

hypothesis against which to test the propositions derived

from the research model. The

method used to test this null hypothesis was signifIcance

testing. Given the size of the

sample the method used to determine any links between the

variables was the Chi

Square distribution.

To determine what, if any, link that exists between

structure and strategy and

survivability (i.e. major hypothesis number three) it is

proposed to use the Two Way

Analysis of Variance with Interaction Technique.

The results of the interviews will be added to the

ftndings of the quantitative

evidence. The data provided by the managing directors will

provide an accurate

quantitative assessment of the relationship between

strategy, structure and survivability

in construction companies. The data collected has been

analysed thematically and so

enriches the understanding of any relationship that exists

between the research
variables.

Results

The ftnding of the questionnaire revealed that only two of

the four strategic

variables were being used; competitive and retrenchment. A

broader range of

organisational structures were given, covering Holding

Company, Functional,

Divisional and Functional with Subsidiaries.. The accounts

revealed a range of Z

scores, from -24.0 to +9.9. The exact combination of

strategy, structure and

survivability ratings can be seen below.

Company

10 Strategy Structure Z Score Competitive Divisional

+9.9 Competitive Divisional +6.7 Competitive Divisional
+0.2 Competitive Divisional -1.9 Competitive Holding
Company -2.5 Competitive Functional -3.2 Retrenchment
Functional -4.7 Retrenchment Holding Company -13.0
Retrenchment Functional -13.2 Retrenchment Functional with
Subsidiaries -24.0

At ftrst glance it would be apparent that a Divisional

Structure is reflected in a

positive Z score and that a competitive strategy will also

reflect favourably on a ftrms

chances of survival.

The Chi square tests prove statistically that strategy has

an effect on survivability.

Accordingly, the fIrst hypothesis, that an organisations

structure is linked to its

ftnancial performance, and therein it survivability, is

supported. More speciftcally that;

A divisional structure improves a firms financial

performance, and therein its

survivability .

Following this a test was conducted to explore the

relationship between an

organisations strategy and its subsequent survivability.

Using a Chi square test it was

possible to establish a link and, in particular, support

the second hypothesis,

demonstrating that;

An organisations strategy is linked to its subsequent

financial performance, and

therein its survivability

The next test was to try and establish statistically

whether a competItIve or

retrenchment strategy combined with one of the four

structural variables to provide

the optimal survivability. The test was unable to prove any

relationship, although it

would appear, and only appear that a competitive strategy

and divisional structure

combine to provide survivability.

While it was not possible to link statistically an
organisations structure, strategy and

survivability it was possible to show that structure was

linked to company turnover

and that company turnover was linked to survivability. More

specifically that;

A divisional structure is linked to a larger turnover (a

turnover of more than forty

million pounds was used as a break point).

and

A large turnover will lead to positive Z score and

accordingly is more likely to

maintain solvency.

Conclusions

The research has supported two of the main hypothesis,

whilst the third cannot be

validated. Furthermore the relationship between company

size and both structure and

survivability was upheld. It is necessary, however, to look

at the choice of variables

given in response to the questionnaire and relate them to

the current literature studied

and the views given in the in face to face interviews.

Only two of the four strategic variables were identified by

the questionnaire

respondents as being relevant to their firm, competitive

and retrenchment. Those

adopting a competitive strategy sought to pick up work

across a wide range of project

types and geographical location risk spreading. The group

adopting a retrenchment
had an approach. They sought to adopt a focus strategy.
These two strategies are

typical of firms under pressure and may be caricatured as

"get more work buy it if

necessary" or "lets downsize, get lean and mean and do what

we know we do well".

The lack of technical sophistication in the industry would

mean the absence of an

innovative strategy, involving "the invention of new

products or methods of working"

(Mansfield, 1986) would not be surprising. It is worth

noting that in the interviews the

only firm which said it would take on work for which it had
no previous technical

experience had the second lowest financial rating of the

ten firms surveyed.

In construction industries competitiveness is matched by

its extreme volatility,

illustrated by the Government figures for output and

employment. The interviews

showed that the two firms which most recognised the

instability in the industry were

among those with the healthiest survivability ratings. This

is supported by Lansleys

assertion that the business environment is of "fundamental"

importance to corporate

strategy.

The questionnaire data demonstrated a link between the size

of an organisation and

the organisational structure of the firm. The simplest

structural variable, functional,

was not identified in the largest of the firms sampled,

which would lend weight to the
view that the larger the fIrm, the more complicated the
structure, as voiced by

MansfIeld (op. cit.).

The link between a divisional structure and large firms was

upheld and reflects the

views of Harris and McCaffer that larger firms will be

more divisionalised. That the

link between structure and survivability was upheld is

reinforced by the findings of

the Aston Group (op. cit.), that organisational size

matters. Of the interviews, the two

fIrms which had implemented a specifIc restructuring had

done so in response to a

crisis, and this concurs with the view of Woodward (op.

cit.) who found reorganisation

to be the "result of crisis".

The study concentrated on private construction fIrms,

public companies are bound

by different accounting rules and therefore comparison

would not be possible. It can

be seen from the public accounts of the ten firms

surveyed, eight were substantially

owned by members of the board, the lowest fIgure being

fifteen percent and that

owned by the Managing Director. This may have a bearing on

the attitudes and

thinking of the board on matters of management and

certainly reinforces the fIndings

of Hillebrandt (1985)

The interviews revealed that almost all the managing

directors had specifIc

construction backgrounds and qualifIcations. This

demonstrates the lack of skills
transferability in construction managers which will have a
direct effect on not only the

"way of life" attitude to managers but on strategy, as

cited by Rumelt (op. cit.).

The paper has identified the diffIculties faced by

construction fIrms during a

recession. This was confmned by the fIndings; of the ten

fIrms surveyed only two are

healthily of solvent, with a third firm just showing a

positive score. The other seven

all showed a financial proflle similar to those fIrms

which previous research identifIed

as being at risk.

Limitations of the Research

This work has established a clear link between strategy,

structure and survivability

in the Scottish construction industry. Even so there are

limits to the findings of the

research which should be noted.

One drawback is the sample size. This has meant that

because of the requirement

that at least five units of data be contained in each

cell, the Chi square test is rendered

indicative rather than precise. Consequently with only ten

samples the conclusions

drawn are indicative rather than conclusive.

However, the sample size is, in part, a reflection of the

industry in Scotland. There

are only eight publicly quoted construction fIrms in

Scotland (Scotland's Top 2000

Companies). The ten private firms which took part in the

survey accounted for 609
million pounds of the 3073 million pound construction
market in Scotland. (Source:

Scottish Economic Bulletin, 1993/4, op. cit.) or some 19%.

A further nine fIrms,

representing over 7%, declined to participate in the

research. To extend the search for

fmns in Scotland any further would have meant having to

contact small fIrms, which

may have made an accurate comparative assessment of the

strategies and structures

misleading. The sample was restricted to Scotland to

minimise the impact of the

variability of the construction environment, so important

to how a finn behaves in a

recession (Lansley, 1994). Given this constraint it would

certainly have been

preferable to interview every managing director who took

part in the survey, but while

all were approached, only four agreed to an interview.

Further Research

Further research would include a comprehensive analysis of

construction finns.

Given the limited number of finns with a substantial

turnover in Scotland, the scope

for the research would have to be extended. It has already

been shown that Scotland's

economy behaves differently to that of the UK. as a whole

where the construction

industry is concerned. Therefore to increase the sample

size, without affecting the

validity of data collected, the research should be

extended to the north of England
only, where the economic differences with Scotland are at a
minimum. By doing so

a fuller understanding of the structure, strategy and

survivability in the Scottish

construction industry would result.

1. Altman, E., "Financial Ratios; Discrimination Analysis

and The Prediction of Corporate Bankruptcy. Journal of
Finance 23. 1968.

2. Beaver, W.H., "Market Prices, Financial Ratios and the

Prediction of Failure", Journal of Accounting Research,
6(2), 1968.

3. Central Statistical Office, "Housing and Construction

Statistics, G.B., 19811991", H.M.S.O., 1992

4. Central Statistical Office, "Annual Abstract of

Statistics", H.M.S.O., 1993

5. Chandler,A.D., "Strategy and Structure", Boston M.I.T.

Press, 1962.

6. Channon, D.F., "The Service Industries; Strategy,

Structure and Financial Performance", MacMillan, 1978.

7. Collins, "Collins English Dictionary", Collins., 1991.

8. Freear, J., "The Management of Business Finance",

Pitman, 1980.

9. Government Statistical Service, "Labour Force Survey

Quarterly Bulletin", H.M.S.O., June, 1993.

10. Grinyer, P.H., "Systematic Strategic Planning for

Construction Firms", Building Technology and Management,
February, 1972.

11. Harris,F. and McCaffer,R., "Modem Construction

Management", B.S.P. Professional, 1989.

12. Hillebrandt, P., "Economic Theory and the Construction

Industry", MacMillan, 1985.

13. Joint Forecasting Committee for the Construction

Industries, "Construction Forecasts 1993-1994-1995",
Construction Forecasting and Research Ltd., Summer 1993.
14. Jones, E., "Understanding Business Finance", Pitman,
1991

15. Kinsman, F., "Managing the Future", Management Today,

April, 1987.

16. Langford, D., Iyagba, R, and Kamba D., "Prediction of

Solvency in Construction Companies. Journal of
Construction Management and ##### 11, 1993.

17. Lansley, P.R., "Corporate Strategy and Survival in the

U.K. Construction Industry", Journal of Construction
Management and Economics, May, 1987.

18. Mansfield, R., "Company Strategy and Organisational

Design", Croom Helm, 1986.

19. Mason, R.J. and Harris, F.C., "Predicting Company

Failure in the Construction Industry", Proceedings of the
Institute of Civil Engineers, May, 1979.

20. Newcombe, R, Langford, D. and Fellows, R, "Construction

Management One: Organisation Systems", Mitchell,1990.

21. Pugh, D.S., and Hichson, D.J., "Organisational

Structure in its Context: The Aston Programme 1", Gower
Publishing, 1976.

22. Rumelt, R.P., "Strategy, Structure and Economic

Performance", Harvard Business School Press, 1986.

23. Scottish Office Industry Department, "Scottish Economic

Bulletin", H.M.S.O., Number 45 (Summer), 1992/3

24. Scottish Office Industry Department, "Scottish Economic

Bulletin", H.M.S.O., Number 46 (Winter), 1992/3

25. Shittu, 0., "Corporate Strategy, Organisation

Structure, and the Concept of Fit in the Construction
Industry", Unpublished Thesis, University of Bath, 1988.

26. Tamari, M., "Financial Ratios: Analysis and

Prediction", Elek, 1978.

27. Weber, M., "The Protestant Ethic and the Spirit of

Capitalism", Allen and Unwin, 1930.

28. Woodward,l,"Industrial Organisation: Theory and

Practice", Oxford University Press, 1965.
1 1. The Firm and Its Markets

1. King, M. and Mercer, A. (1988) Recurrent competitive

bidding, European Journal of Operational Research, Vol.
33, pp. 2-16.

2. Douglas, E.J. (1989) Managerial economics: analysis and

strategy, PrenticeHall International, Englewood Cliffs, New
Jersey.

3. Drew, D.S. and Skitmore, RM. (1993) Prequalification and

Ccompetitiveness, OMEGA International Journal of
Management Science, Vol. 21, pp. 363-75.

4. Male, S. (1991) Strategic management in construction:

conceptual foundations, In Male S. and Stocks R (eds.),
Competitive advantage in construction, Butterworth
Heinemann Ltd., Oxford, pp. 5-44.

5. Czepiel, lA. (1992) Competitive marketing strategy,

Prentice-Hall International Inc., Englewood Cliffs, New
Jersey.

6. Shepherd, W.G. (1990) The economics of industrial

organization, PrenticeHall International, Englewood Cliffs,
New Jersey.

7. Skitmore, R.M. (1989) Contract Bidding in Construction,

Longman, Harlow.

8. Flanagan, R. and Norman, G. (1982) An examination of the

tendering pattern of individual building contractors,
Building Technology and Management Vol. 28 (April), pp.
25-28.

9. Hillebrandt, P.M. (1985) Economic theory and the

construction industry, 2nd edition, Macmillan,
Basingstoke.

10. Davis, Langdon and Seah International (1994) Asia

Pacific construction costs handbook, E & FN Spon, London.

11. Langford, D.A. and Male, S. (1991) Strategic management

in construction, . Gower, Aldershot.

12. Lansley, P. Quince, T. and Lea, E. (1979) Flexibility

and efficiency in construction management, The final
Report on a research project with financial support of
the DoE. Building Industry Group, Ashbridge Management
Research Unit (unpublished).
l3. Raftery, 1 (1994) Risk analysis in project management,
E&FN Spon, London.

14. Newcombe, R, Langford, D. and Fellows R (1990)

Construction Management I : Organisation Systems,
Mitchell, London.

15. Hong Kong Government (1980) Rules for the

administration of the Public Works Department list of
approved contractors, Hong Kong Government.

16. Walker, A. and Rowlinson, S.M. (1990) The building of

Hong Kong, Hong Kong University Press.

17. Lee and Liu (1993) Foreign contractors in Hong Kong,

Organisation and management of construction the way
forward, International Council of Construction Research
Studies and Documentation, CIB W-65 Port of Spain,
Trinidad, Vol. 3, pp. 1299-l310.

MARKETING PLAN FOR INTRODUCING

A CONSTRUCTION MANAGEMENT

SERVICE

G. Saric and V. Luketa

CM-EXPERT, Zagreb, Croatia

M. Katavic

Faculty of Civil Engineering, Department of Construction

Management, University of Zagreb, Zagreb, Croatia

Abstract

The aim of the marketing plan presented in this paper is

to introduce a new service to

the emerging class of investors in Croatia, interested in

optimal execution of

construction projects. In order to accomplish this

challenging task CM-Expert has

evolved a marketing plan in which aims and objectives are

set, strategies and tactics
for their achievement defmed and activities needed for
implementation planned. In

addition a set of controls is provided for monitoring the

execution of the plan keeping

it always turn to set the objectives.

Keywords: Marketing plan, construction management,

procurement,

Resume

Le but du plan de marketing presente dans ce travaile tend

a l'introduction du nouveau

service pour la classe des investisseurs recemment apparus

en Croatie, interesses a

l'execution optimale des projets de construction. Afm

d'effectuer cette tache, CM

Expert a developpe tel plan de marketing que tous les buts

et les objectifs y sont

etablis, toutes les strategies et les tactiques y sont

defmes et que toutes les activites

necessaires pour l' application sont bien projetees. En

plus, Ie systeme des controles

est envisage afm de bien observer l'execution du plan pour

qu'on puisse toujour

atteindre ses objectifs.

1. Introduction

The Croatian construction industry market has during the

last ten years been

characterised by a constant decline in demand, which

recorded a serious downturn at

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.
the beginning of the nineties, when the war against Croatia
started. Until the 1980s

the construction industry accounted for between 10% and 12

% of Croatian GDP . In

1993, as a direct result of the war, the construction

industry accounted for only 3,3%.

From 1980 to 1990 total investments in the Croatian

economy fell by approx. 50 %

(from 4,5 billions US $ in 1980 to 2,3 billion US $ in

1990).The already deteriorating

situation got worst when war started so that in 1992 total

investments in the economy

were only 1 billion US $. Throughout the observed period

the share of the

construction industry in overall investments was between

40 and 50%.

The economic situation in Croatia has been improving for

the last two or more

years, and thus the investment in the Croatian economy is

slowly but surely rising as

is the value of construction work, as illustrated in Table

1 [2].

Table 1. Construction industry output in Croatia (bn DM)

Investment category 1992 1993 1994 1995

Total investments in the 2.0 2.0 2.1 2.5

economy

Construction industry 1.0 0.8 1.0 1.2

The construction industry market in Croatia can be divided

into six segments.

Their size and trends are shown in Figure 1.[2] Flgu", 2 •

CONSTRUCTION INDUSTRY MARKET TECHNICAL SEGMENTATION
0.35,.----------.-.-------------, i ~ .. .. 0 ~ ..
.. :1992·j 1_ 1993 1 i01994 , ~995 '

Even though the CM-Expert current service mix is spread

across all market

segments, the new service is in the short-term targeted

only to the commercial

property segment which has greater need for the new

service, coming from the clients

driven by profit objectives. It also has the highest growth

rate. Segment size in 1995

accounts for some 270 millions DM. Main participants in the

segment are private

developers (housing projects, office buildings and tourism)

and banks. Pension funds

and real estate investment trusts are not yet fully

established in Croatia for project

development purposes. In the long-term they may be

expected to emerge and also

foreign investors who are still reluctant to invest in

Croatia due to the unsettled

political situation.

CM-Expert is a privately owned company with profit

objectives, serving the

national construction industry sector in Project management

consulting services. Its

generic strategy of service differentiation, accompanied

by total commitment to the

client's needs is the key success factor, by which the

company can gain considerable

competitive advantage in its service niches. This will

result in increased loyalty of

the company's clients and the favourable word of mouth

recommendations that

follow the company. One of the benefits of this approach

has been the emergence of

opportunities for the introduction of new services,

requested directly by clients.

This developement emerged when a particular Client

requested the company to help

in choosing the most suitable contractor in Croatia for the

delicate construction project

he was developing.

His need actually triggered the development of a new

service in the company's

service mix. This was the service of construction contract

procurement which

includes elaboration of methodology, preparation of

necessary documents and

management of the process.

For proper development of the new service, it was

necessary to make an appropriate

Marketing plan. This paper contains the basics of such a

plan.

2. Marketing plan for the new service

2.1. Identifying needs for the new service

The company had spotted the need for a National

construction contract procurement

service much earlier, and entrance into this area was

already part of plans for the

future.

Even though this service is quite common in western

countries, where the market

segment has to face great competition, there was a

significant vacuum around this

service in the Croatian market. Croatian construction law

and related laws and codes
of practice treat this matter very roughly. Actual practice
is on a very low level, being

always on the side of contractors, who often write

conditions of contract and just

submit them to clients for acceptance.

This situation was the rule in the old days of socially

owned entities with no clear

profit objectives. However, recent restructuring and

privatisation of Croatian

economy changed this situation. Some clients have became

very decided in their

efforts to finish the project according to their own

objectives. They insist on a

contract procurement procedure that gives every bidder

equal transparent

methodology to fit in and thus an equal chance. This way,

the client will be sure that

he filters out the best contractor to fulfil his

objectives. Private developers and banks

prevail among such objectively oriented clients and they

will be targeted by this plan.

The political and economic turmoil of the nineties caused

a dramatic downturn in

demand for construction services, and market positions of

many construction

companies (contractors) deteriorated significantly. In

this situation it was difficult to

decide which companies were capable of executing

construction works according to

client's objectives of scope, quality, schedule and costs.

Therefore, introduction of

adequate pre-qualification and selective tendering

procedures was inevitable.
CM-Expert having a thorough knowledge base, acquired in
multiple international

tendering procedures and construction contracts, could

easily master the new service.

Being aware of such an opportunity, it was important to

strike first and gain an

appropriate market share and competitive advantage in this

service niche.

2.2. Mission, objectives and strategy

The company's aim is to provide top-quality consulting

services for clients in

construction management business (investors or

contractors), by protecting the

interests of the project and interests of the client, on a

professional and independent

basis.

In other words, the company must contribute in its service

niches to 'implement the

construction project within the client's objectives of

schedule, quality and costs' [3]

and its own profit objectives.

The aim of this marketing plan is the development of a new

service National

Construction Contract Procurement, for a newly emerging

class of clients in Croatia

that are interested in execution of construction projects

within their objectives.

The planning horizon for the development and application of

the new service was

one year. This corresponded with the fiscal year of 1995.

In that year, the following objectives regarding

introduction of the new service were
planned:

• extra revenue based on the introduction of the new

service of 250,000 DM;

• market leadership in the new service having a share of

more than 20 %;

• augmented market share in connected consulting services

due to benefits gained

from the introduction of the new service (synergy effects);

If we suppose that the new service accounts for some 0.4 %

of the average contract

value, we come to the real segment size of interest to

consultants of approx. 1.08

million DM.

This extra revenue created by introduction of the new

service of 250,000 DM

accounts for some 23 % of market share. It is expected

that the company will become

market leader in the first year, but also that it will be

followed by others (about 3

consulting houses capable of entering the niche).

The strategy chosen in this case was to focus on the still

unoccupied market niche in

Croatia, conquer it through the development of the new

service and further exploit it.

Marketing strategy centred on development of the new

service in existing markets

(domestic commercial property market).

Tactics for the strategy realisation will be explained

through the seven P-s of

marketing mix, defined by Kotler as 'the set of marketing

tools that the finn uses to
pursue its marketing objectives in the target market' [4].

2.3. Marketing mix

2.3.1. Product (service)

Specification of the service is given in the self

explanatory overview in Appendix A.

This shows six groups of activities, five out of which are

in the strict domain of our

company, covering handling of bidding, contract

negotiations and procurement

activities:

• pre-qualification activities

• preparation of tender documents

• pre-tender activities

• tendering activities

• preparation of software support

The first four groups represent core activities, for which

adequate software support

has been developed to ensure their effectiveness.

Engineering activities are elaborated by a separate

organisation, but they are closely

related to the company's activities, because some of them

must be compiled in tender

documentation (such as drawings, bills of quantities etc.)

In the pre-qualification process, the most important job

has been to create forms that

will ensure easy input of 'fair and true' data from

candidates and provide a reliable

basis for preparation of software that will evaluate

candidates in the same 'fair and

true' way. A key point in both activities is to agree

appraisal criteria and minimum

'pass' thresholds for candidates with the Client, and to

pursue what is agreed up to the

end of the pre-qualification process. This way, the

professional and independent

approach mentioned as a the company goal is best preserved.

Regarding tender documents, two documents are of paramount

importance. In the

first place general conditions in which all possible

contractual events between client

and contractor are stipulated in a concise and unambiguous

way. In order to achieve

this, experience from international practice was consulted

and compared with local

conditions. This has greatly contributed to the

competitiveness of the service.

Finished general conditions were also presented to legal

experts and scholars in

Croatia for review and comment.

The second important document is the appendix to the bid,

in which the bidder

shows his capability to perform works within the Client's

objectives. In this

document the bidder presents its organisation, quality

system, programme of the

execution of work, description of preliminary work,

curricula, etc. It has to be

elaborated very clearly to avoid any ambiguity in input

data.

The most important part of the tendering process is the

comparative analysis. It is

the apex of the entire process, in which the transparency

of the process must be
reflected. Sophisticated software support is elaborated for
appraisal of bidders in all

relevant elements, such as contract price, values from

bills of quantities, validity

period of the bid, suggested completion time, data from

appendix to bid, changes in

general conditions through special conditions, advance

payment amount, etc. Here,

the same approach shown in the pre-qualification process is

applied, i.e., all criteria

for the bid's evaluation and appraisal are previously

agreed with the client and

pursued through to the award of the contract.

Care for the variety of contract types that can be

elaborated for the process is also

kept in mind, because it can be a unit price contract, or a

fixed price contract, or a

combination of these two.

2.3.2. Price

Regarding price, the company could not apply recognised

international rates for its

services. In the first place, local conditions cannot be

compared with international.

Normal prices may be applied later, in case of successful

development of the Croatian

market.

The payment method is favourable for the client. The

company only takes a

percentage of the service charged value at the time of the

pre-qualification,

elaboration of tender documents and negotiations. The rest

is paid during the progess
of work according to the contract.

This way, the client is spared from spending large amounts

of cash before the start

of work. An the same time the company's loan to the client

has not endangered

company's liquidity.

2.3.3. Promotion

Promotion of the new service started parallel with its

development. However, we

must bear a number of things in mind regarding promotion.

The majority of

company's consulting services are characterised by a high

level of credence qualities

for the customer, which introduce an element of risk in

his decision to engage a

particular consultant. Credence qualities are 'attributes

which consumers may find

impossibJe to evaluate even after purchase and

consumption' [5].

To diminish the risk for the consumer (the Client), the

company has made efforts to

make the service more tangible. Completed tenders for a

certain project, are

attractively packaged and presented, and that way the

Client can have a closer look

into a new service.

This will especially be the case, if the consultant has

more accompanying

'tangibilizers " such as reference letters from satisfied

clients, opinions from experts

on contract law or excerpts from conferences where the new

service was presented
and discussed by experts.

A leaflet with all necessary information concerning new

service, which can be

mailed directly to all interested clients is also very

important in promoting the new

service.

2.3.4. Place

The company's target customers for the new service are

approached directly by the

company's managers, with no middlemen in the process. The

contact with future

clients is most likely to be executed in two stages. First

providing information about

the new service, either by direct mail or by word of

mouth. Second in detailed

presentation of the new service and experience gained from

former projects.

Consulting services must be ~one at the Client's premises,

but all paperwork will be

carried out in Consultant's office in order to save the

Client from unnecessary material

expenses.

2.3.5. Process

One of the characteristics of the service is its

variability. It is hard to maintain the

same level of service quality on all projects, especially

if the service providers are not

the same. The company should aim to standardise the

quality of process in order to

combat this variability.

In order to do this, written procedures have been

introduced and compiled in a

Quality Manual, in which the whole tendering process is

described step by step, with

discussion of all possible situations that may occur

between parties in the process. All

employees are made familiar with these procedures. This was

achieved through

selection of employees fit for consulting in the new

service and their continual in

service training. This is a part of internal marketing

that is also being developed in

the company.

Written procedures rely on a specific section of tender

documentation, i.e.,

instructions to bidders, which describes the entire

tendering process in detail.

Since, the process is supported and enhanced by adequate

software, this has

improved its effectiveness and shortened precious

pre-contract time for the client. For

example, any change in bills of quantities or in some

other condition that took place

after appraisal of the bidder, can be processed in a few

minutes showing new results,

such as a new contract price or a new evaluation of the

bider. This has improved the

client's position during negotiations with bidders.

2.3.6. Physical evidence

We have already mentioned the way tender documents must be

packaged. Well

presented packaging of books of tender documents in

quality bindings will be
persuasive not only to the client, but also to contractors,
which should pay for it in

order to approach bidding process.

The premises in which pre-tender meeting and tender buy-out

procedure take place

must be attractively furnished, with designeted sitting

places for all participants, and

organised secretarial services. Coffee and light beverages

are available in the meeting

breaks, as well as a meal after a session. The same is

valid for the bids opening

meeting and meetings for negotiations after bids opening.

All consultant's staff

should be in suits, perhaps with company ties, in order to

be distinct from other

participants.

An overhead projector is used to explanation the project

and tendering procedure,

as well as large sketching paper boards for additional

clarification.

The consultant will help the client in the organisation of

correspondence with

bidders during the process. It embraces the design of the

project's logo and

letterheads, as well as writing the drafts of all letters.

2.3.7. People

People present the most important part of the marketing

mix for the new service.

They provide the service for the client and take pains to
give them expected value for

money. We have said before that a sophisticated process

methodology and powerful
software support greatly contribute to the differentiation
of a company's service, but it

is people who deliver a service and give the final touch to

its quality, creating an

image that will ensure that the customer's perceived value

of service matches his

expectations.

People are responsible for covering any misunderstanding

that may arise during

various relations between participants in the contract

procurement process and

endanger the quality of the service. Everyone involved in

the process must be aware

of the possibility of such misunderstandings, and trained

how to overcom them. This

is part of the company's culture and job of its internal

marketing.

In order to have select people, careful selection of

employees capable of performing

the new service is carried out. They are all experienced in

multiple contract

procurement jobs, and they are all acquainted with project

management and computer

skills. Since the Croatian market lacks such professionals,

training was organised

within the company, where candidates were given all needed

instructions in order to

successfully follow the team leader during the application

of the new service.

For the fIrst company job in the new service, the task
force approach was used. The

team leader responsible for accelerated development and

application of the service
was the company's executive director. Three project
managers were assigned to him,

and he got all needed backup from the company.

In any new projects, team members should show commitment to

the job and to the

client's objectives. The team leader is responsible for

public relations. He will make

all necessary contacts with the client and other

participants in the process, and will be

spokesman of the team and the company on all formal or

informal meetings.

2.3. Timetable, budget, controls

A detailed timetable of the development of the new service

was made using adequate

CPM software. Pre-qualifIcation process, preparation of

tender documents and pre

tender activities were planned to fInish in 1994 in order

to start bidding procedure in

the beginning of 1995. The tendering process was planned

to fInish in February 1995.

After successful completition of the fIrst contract, three

new contracts were planned in

1995. Two new contracts for connected consulting services

were also planned in

1995. Achieving such plan, objectives mentioned in the

beginning of the marketing

plan will be achieved.

The detailed budget for the development of the new service

amounted to 166,500

DM. Its structure is shown in Figure 3.

A set of controls was established in order to monitor the

execution of the marketing
plan, and to take corrective action if needed. Actually,
three sets of control activities

existed in this case.

The fIrst set is connected with development dynamics.

Progress of all activities,

measured in time units, must be regularly recorded and

compared to the original plan

in order to pinpoint delays which might endanger its

execution. Using CPM

techniques, actual start and fInish dates and remaining

duration or percentage of

completion of activities are entered and the plan is

recalculated to show progress

status. Progress information is crucial because deadlines

of most activities will be

contracted with the client and the company should be

penalised for all delays in own

default.

176 Sari6, Luketa and Katavi6

The second set was connected with the budget. All planned
expenses were compared

with actual expenses in order to fmd out if any deviations

had occured. This is a

standard part of the company' s cost control procedure.

Figure 3· THE STRUCTURE OF THE BUDGET FOR THE DEVELOPMENT
OF THE NEW SERVICE Material expenses 26% Software
elaboration 3% Service development and application 71%

Finally. a third set of controls deals with the client's

perceived value of the company's

service. It may take the form of questionnaires in various

phases of tendering. or it

may be informal in day to day contacts with the client.

However. the company's
success in this area will be materialised through the
client's reference letter.

3. Conclusion

If company succeeds in the execution of the marketing plan

for the development of

the new service. it will not only satisfy its clients. but
it will also attain a market

leader position in this market niche. solid extra revenue

due to the new service and

augmented revenues in connected consulting services.

Finally. the Croatian construction market should also

benefit from its successful

accomplishment. because one important segment of the

project development process

that is not yet fully covered in Croatia will be

implemented.

1. Dukan. P. (1993) Javne investicije kao poticaj

gospodarskog preporoda. Sabor

hrvatskih graditelja 1993. Proceeding. Crikvenica. pp.15-31.

2. State Institute for Macroeconomic Analysis and

Forecasting. (1995) Intemal

material, Zagreb.

3. FIDIC. (1980) Intemational General Rules of Agreement

Between Client & Consulting Engineer for Project
Management, IGRA 1980 PM. Hague.

4. Kotler. P. (1991) Marketing Management, Analysis,

Planning, hnplementation and control, Prentice-Hall
International Editions, Chapter 3, pp. 68.

5. Rushton, A.M. and Carson. D. (199 ) The Marketing of

Services: Managing the

Intangibles. European Joumal of Marketing, Vol.23 No.2.

pp. 30. APPENDIX 1 • SPECIFICATION OF ACTIVITIES FOR THE
NEW SERVICE· DYNAMIC OVERVIEW I ~ Software Software
·······, ... :::::.:::·:t:/·}{I Evaluation ChcHce Fill
forms L.E!:iENll o CONSULTANrSACnVInES
>-:-::-:::-::::\>:::.::: CJ ACnVIES INVOLVING OTHERS
(CONTRACTORS, EMPLOYER AND ENGINEERJNG) >' { H .. . . -,
...

IMPLEMENTING COMMUNITY POLICIES

IN THE CONSTRUCTION INDUSTRY

K. Moodley and C.N. Preece

Department of Civil Engineering, University of Leeds,

Leeds, UK

Abstract

The 90's have seen the growth of social programmes and

awareness of corporate

responsibility by business. A new paradigm that encourages

business to play a long

term leadership role in society is emerging.The

construction industry is a major

industry which has a significant impact on communities

through its physical processes

and products. It has the potential to reshape communities

and their environments. The

industry is no longer isolated from the pressures and

demands of society. There is

greater scrutiny of the social and environmental impact of

construction.The community

and the industry can share in the potential benefits from a

closer relationship.

The aim of this paper is to illustrate how an effective

community policy can be

developed within construction firms in the UK. This paper

will provide a framework

that allows for the implementation of a community policy

that allows for the

development of sustainable competitive advantage.

Key Words: Corporate philanthropy, community policy, social
responsibility, social

impact.

Sommaire

L'industrie du batiment et des travaux publics BTP joue

ici un role important car c'est

une industrie qui a un impact significatif sur les communes

par son procede physiques

et ses produits. Elle a effectivement Ie potentiel de

restructurer les communes et leur

environment. Elle n'est done plus a l'abri des pressions

et demandes de la societe. Son

impact sur la societe et l'environement est done nueux

cerne ce qui lui permmattiait,

guace a une relation plus forte avec Ie milieu social de

beneficier d'eventuels

benefices.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

Le but de cet article est de montier comment une politi que

de la commune pouvait etie

developper par Ie BTP Britanique. Cet article construit

donc un schema structurel que

pernet la mise en placed'une politique de la commune, tout

en developpant les

avantages competitifs de l'industrie.

1 Introduction

Society is changing and looking at new ways of examining

organisational behaviour.
The socio-political lobby is becoming more influential and
sophisticated. Community

politics are becoming increasingly influential in shaping

local decision making.

Consequently greater accountability and community

involvement is demanded from

business by society. Business and development activity have

the power to shape and

alter the way society evolves through its actions and

direction of resources. It has a far

reaching influence over social order hence the greater

scrutiny of business by society.

The construction industry is not different in its impact

on society. It has the same

power to shape and alter the way communities develop.

Unlike many other industries it

has the ability to have a more profound impact through its

end products. The products

of other industries are consumed and do not have a long

term presence but the impact

of construction can be seen all around us. Construction is

a major employer and is

used as a vehicle for economic and social development.

2. Corporate Philanthropy

The social compact between business and the community has a

fairly established

history.[l] The tradition of benevolence and social care in

the UK from industry dates

back to the activities of Cadbury and Rowntree which tended

to be steeped in Quaker

philosophy. The tradition was that business and industry

had a role to play in the social

welfare of its employees and the community on which the

business was founded. The

existence and history of social benefactors from industry

has been part of industrial

history.

There has also been another school of thought that

believes 'the business of business is

business'. This philosophy is based on the work of the

economist Friedman. It follows

the view that business should concentrate on what it is

good at and not become

involved in any social engineering. The issues and problems

that society faced were

not a concern of business and were to be dealt with by the

state and society. These

views still have strong support from many who follow a

market driven philosophy

Most businesses tend to fall into these models. Donations

to charity are the most

clearly visible activity in modem corporate philanthropy.

This is a minimalist approach

that devolves the needs for 'corporate citizenship' to

charities and associated

organisation. In an age in which there is a growing demand

for industry to do more are,

these existing strategies adequate?

3. The New Philanthropic Paradigm

The latter half of the 1980' s and early 1990' s saw the
larger part of the developed

western economies go through a recessionary period.

Downsizing, retrenchment and

restructuring became the principal activities in the drive

to reduce costs, improve
efficiency and become more competitive. In an environment
that was associated with

cost cutting and laying off workers it was difficult to

justify corporate giving. A new

approach was needed that tied corporate philanthropy to

strategy.

The new philanthropic paradigm encourages companies to tie

their philanthropy to

their strategy. The business and welfare units join forces

to develop corporate

strategies that will give the organisation a competitive

edge. [2]

A criticism of this model may be that it serves to generate

an array of programs that are

self serving to the business. It is possible that this may

be the case if these initiatives

are purely public relations stunts without effecting any

real change. This new paradigm

asks firms to adopt a greater leadership role in the

society it operates in by taking a

long term approach to social responsibility.

4. The need for a focus the Exxon-Valdez case

It was generally taken as accepted that society was served

by three sectors; business,

government, and non-profit. Each was permitted to do what

it was best at and not be

involved in another sector. The non-profit sector in

particular described itself as

independent despite funding from the private sector and

government. Private sector

funding tended to be about their favourite causes rather

than activities associated with

their line of business. This approach has widespread

acceptance but the new

philanthropic paradigm suggests a more directed and focused

view.

The Exxon-Valdez oil spill case highlighted the need for

organisations to develop a

focus in their activity. The Exxon foundation was

particularly well known for its

educational activities and for being distant from the

activities of its parent. Its activities

were directed without consideration of the parent firm's

activities such as building

relationships with environmental groups and its consumers.

Flaws in this philanthropic

philosophy were not exposed until the Exxon Valdez spill

in 1989. Exxon adopted a

reactive strategy after the spill as it had nowhere to turn

for advice on handling the

crisis. This allowed Exxon to become an easy target for

the anger of environmental

groups. In effect Exxon had no relationships with

environmental groups and insulated

the company from feedback from important interest groups.[3]

5. Adopting a Stakeholder Outlook

The adoption of a more philanthropic outlook to the

organisation focuses on the

adoption of a total stakeholder approach to strategy.

Cannon [4]focuses on the need for

organisations to take cognisance of the all the

stakeholders of the company. By

adopting this approach greater attention can be given to

external environmental

influences and to people, communities and societies that

are present throughout the
lifecycle of a company's development and its products. A
shift in emphasis means that

issues outside the market also gain support thereby

allowing the company to prosper in

the total environment. The adoption of the stakeholder

approach provides the base to

justify the application of a new philanthropic paradigm.

6. Construction and the Community

The construction industry has often faced hostility over

its activity. The growing

concern in developed countries is the protection of the

environment on which

development is likely to encroach. In the UK, the major

battleground between the

industry and community is on roads and motorway

development and how the projects

degrade the environment. This confrontation pits the

industry against a variety of

interest groups and communities. These confrontations are

by no means isolated and

extend to other types of construction and development

projects. Can a new focused

approach that takes cognisance of the concern of people be

more successful than the

current approaches that often ignore concerns of society

in general?

In order to function more effectively the industry needs to

consider different strategies

when interacting with the external environment. The

construction industry is

inextricable linked to the communities within which they

operate through the planning
processes, labour, resources, production processes and the
final finished products. As

communities become more sophisticated they acquire the

means to disrupt, delay or

ultimately stop projects from achieving completion or

conversely help expedite them.

It would therefore be logical acquire the support of local

communities to ensure

projects are completed satisfactorily.

Clients with a social remit require greater social input

from their contractors and

consultants. A structured approach to social policy is

required in order to meet this

need and provide viable deliverables. A more focused

community strategy to develop

closer relationships with target communities, would

therefore seem ideal to help in the

implementation of construction activity.

7. Community Policies

The development of a community strategy is concerned with

the orientation of the

company to a key external environment influences. Corporate

involvement in the

community are not only geographically and project specific

but requires a long term

outlook that requires a philosophy that is contrary to the

short term approach of

construction projects. This would suggest that the strategy

needs to operate at two

levels, a project specific level and an

industry/environmentallevel.

The Industry/Environmental Strategy this strategy is aimed

at issues that influence the
firm irrespective of the project or location. The
community policy aims to support

activities that are of strategic interest to the firm, as

well as its norms and values. The

other influential factors are general social, economic,

political and environmental

issues. This part of the emerging strategy is concerned

with the long term approach

needed to make community policy meaningful.

This part of the strategy is easily implemented because it

relates more directly to the

corporate ethos of the firm. The values a firm adopts will

provide the springboard to

community related activity. A company committed to

education and training of its

workforce would be able to translate these activities into

a community policy. A

literacy initiative, skills development programme, etc may

follow as a community

strategy. The community policy meets the needs of corporate

goals.

Project Strategythis part of the strategy is aimed at local

and project concerns. Ideally

local policies fit into the industry wide strategy but

sufficient flexibility has to be built

in to allow implementation at a project level to be

meaningful. Local economics, local

values, local politics and local infrastructure play an

important part in community

strategy at a project level. Community Politics ~

Ethics :>

Local
Economics~ Local Values Emplo ment Fig 1 Stakeholders
1 / < Social Values Corporate Value Local Politics
~Local \ ~mrastructure Regeneration Enterprise
Environment

8. Implementing the Community Policy

8.1 Goal Setting

The starting point for the community policy is vested in

the corporate goals and values

of the company. The strategic objectives of the company

should include a clear

altruistic commitment. All subsequent action can then be

evaluated against these aims.

Clear strategic leadership is also necessary as was the

case with John Laing and the

Costain group. The CEO's of both organisation were

instrumental in driving the need

for community policy.[5][6]

8.2 Analysing the Opportunities

Once the commitment to a philanthropic policy has been

established the next stage is

to decide on the possible courses of action open to the

firm. The activities of the firm

establishes those that will most benefit from having a

community policy associated

with them. The current social issues and needs provide the
areas from which the policy

can proceed. The aim is to support a community issue that

would be beneficial to the

firm from more than a purely a publicity context. The

activities would contribute the

business interests of the firm.

8.3 Commitment of Resources

An essential part of the community strategy is the
commitment of resources to the

policy. This may take the form of finance, staff or

equipment. The commitment of

resources for what is often seen as intangible returns is

often the most difficult decision

to make. Inadequate resourcing and the lack of genuine

commitment to the policy will

lead to failure of the scheme. If the policy is tied into

the corporate goals then the

schemes are more likely to have adequate resources

allocated to them.

8.4 Gaining internal support

The construction industry is noted for its instability. In

a climate of restructuring,

downsizing and redundancies, it is difficult to convince

employees that a community

policy is important or that the firm is concerned about

social welfare. The case for the

policy has to be made if there is to be commitment to its

implementation. The

managers and staff that are required to implement these

activities need to be aware of

the importance of their actions and that there is a firm

commitment to the policy and

that it will not be axed during the next cost-cutting

exercise.

8.5 Gaining external support

Once the policy has been sold internally it has to be

tested in the environment in which

it will operate. Involvement in costly schemes that do not

satisfy community needs are
futile and often counterproductive to the aims of the
policy ideals. Consultation with

interest groups on the actions and activities to be

undertaken are important. The

practicalities of the implementation, the problems and the

possible outcomes are more

likely to be identified during this process. The principal

danger is that there are often a

wide variety of possible interest groups that may be

operating to their own agendas,

therefore care must be taken to ensure the programme is not

hijacked. A useful

dialogue will however, ensure that the policy can be

refined before being introduced.

8.6 Operational Issues

The policy should be fairly clear at this stage. Its aims

and mechanisms should have

been identified after the internal and external

consultation stages. It is unlikely within

the construction industry context that the execution of

these activities will be taken by

people exclusively involved in community policy. It is

likely that construction project

managers and regional managers will more likely be the

group that are involved in

many of the day to day decisions on these activities. These

individuals will have to be

made aware of the objectives of the community policy and

how they help in developing

the profile of the company. The business case for the

community policy must be made.

A clear and easy to use management interface has to be

developed between those
responsible for the community policy and those involved
directly in its

implementation. The support system for those staff who are

not familiar with the policy

should be introduced with a view to assisting in decision

making and action plans.

8.7 Policy Ideas

The foundations of community policy in construction have

traditionally concentrated

on four main areas: The Environment Regeneration

Enterprise and Employment Education and Training

Construction companies are often involved in many of these

activities and provide and

ideal springboard to develop a fully fledged community

policy. A resource and activity

commitment already exist for these activities therefore a

long term commitment to

them could develop into a community policy.

Environment -An environmental policy is almost a

prereqUlslte of every major

construction company. This likely to be the biggest

battleground between the

construction industry and the public in the future. A

company that is likely to be

involved in activity that is environmentally sensitive

should focus its activity on

community schemes that will bring them into closer contact

with interest groups. It

reinforces the commitment of the company to the environment

and provides a useful

mechanism to gain feedback and advice on how to deal with

future environmental

problems. A pro-active response to environmental problems

is a good way of setting

the tone for a community.

The investment in these activities should be targeted

towards meeting the corporate

goals of the firms. Adams[7] identify the areas to focus on

the development of

environmental policy as; renewable resources, pollution,

energy consumption, fossil

fuels, transport and pro-environmental initiatives. These

activities have to be promoted

as part of an ongoing commitment to improve social

conditions.

The environmental part of the scheme can be introduced at

a local project level as well.

Issues such as noise, dust, litter, graffiti, etc. should

become part of the environmental

response to any project. The environmental appraisal of

construction projects' should

also look at measures such as landscape rehabilitation,

removal of waste,

decontamination, etc. A community commitment is created to

improving the

environment that is closely linked to the key business

objectives of the firm.

Regeneration -Construction is a key driver for regeneration

particularly in urban areas.

This offers another opportunity to develop a community

policy and link it to the aims

of the firm. The traditional views on the regeneration was

to develop the infrastructure

and then allow the communities to fit into the schemes.

This approach was identified

as being flawed and the goal of new regeneration schemes is

a partnership between the

local community, the constructors and the

government/funding agencies.

Regeneration schemes allows construction organisations a

unique opportunity to build

a long term presence in the community. Opportunities exist

to develop the partnership

between the community and the regenerators during the

planning, design and

construction of the work.[8] Active involvement and a sense

of ownership of the

schemes can be developed. The project outcomes can be

better managed.

Employer The construction industry as a major employer

within communities can also

be brought into the remit of community policy. In

particular the extent of local labour

is used allied to any additional training provided.

Improved skills make people more

employable and is a value added benefit to society. The

extent of new jobs created and

the number of local undertaking these jobs are good

indicators of commitment to the

community's economic regeneration.

Enterprise, general education and training need not be

construction specific to help

society. Community involvement means attention to areas

outside construction.

Companies may have to help develop literacy programmes or

provide child care

facilities or provide sports equipment for the local

community to develop its policy.

The Costain group have a scheme called "the Costain & Young
people Joint

venture" [9] The programme is to involve the company in the

education in the

community. The education programme is driven nationally by

the organisation and

implemented where the company has work. The scheme is

centred around the work the

company does and this is the basis for the learning

process. This investment benefits

the communities concerned as well as Costain

Another useful tool is the provision of company skills to

benefit the community; for

example legal aid clinics by company lawyers or promotion

help by the marketing

department to local business. The Laing group use this

philosophy as part of its

management training schemes, where trainee managers are

seconded to community

organisation to use and develop their skills. Effective

training is provided while

making a contribution to the community.

9. Conclusions

Community policy inititiatives in construction firms will

have many detractors.

Questions will be asked about the use of resources and the

value added from the

activity. Many of the same arguments can be used against

public relations, charity,

education and training. The benefits from harnessing these

peripheral activities into a

cohesive structured strategy will not only accentuate the

corporate ethos of the firm,
but provide better value to the firm. The foundations are
already in place and all that is

needed is the vision to implement these ideas.

1. Avishi B. (1994) What is Business's Social Compact.

Harvard Business Review. January February. Pp 38-48

2. Smith C. (1994) The New Corporate Philanthropy. Harvard

Business Review May-June. Pp.105-116

3. Smith. Op. Cit

4. Cannon T. (1992) Corporate Responsibility. Longman

Group. London

5. John Laing Group PIc. Annual Reports 1986 -1994

6. Costain Group Publications. (1994) Community Involvement

Policy

7. Adams R., Curruthers J., Hamill S. (1991) Changing

Corporate Values. A guide to social and environmental
policy and practice in Britain's top companies. Kogan
Page, London.

8. Seeing is Believing (1994) Business in the Community

Publications. London

9. Costain Group Publications (1994)Costain and Young

People Joint Venture.

REFOCUSING CONSTRUCTION TO

MEET CUSTOMERS' REQUIREMENTS

M.F. Dulami and A.T. Baxendale

Faculty of the Built Environment,

University of the West of England, Bristol, UK

M.R. Jewell

Schallnternational Ltd, London, UK

Ahltmct

This paper investigates a Japanese design and project

management system called
Quality FlUlction Deployment (QFD) in the context of its
ability to solve the some of

the problems that the UK construction industry is currently

facing .. The paper focuses

on the early stages of design and the briefing process

where the impact of quality

improvements is greatest and provide the basis for further

development to extend the

use of QFD to the production stage. The study revealed the

frequent occurrence of

poor communication, inadequate information retrieval and

the lack of positive attitude

toward achieving customer satisfaction by construction

consultants and their effect on

customer satisfaction. The paper analyses QFD and its

potential in providing a

solution to these problem. QFD main advantage is its

recognition of both internal

and external customers and in structuring customer

information so that their needs

remained central to all design solutions. The evidence

suggests that QIDs adoption

would solve many of the construction industry's quality

problems.

Keywords: Quality FlUlction Deployment, customer

satisfaction, Design Brief.

Resume

eet article se propose d'explorer Ie modele japonais de

conception et de gestion du

projet, appele Deploiement de la Fonction Qualite,et .de

m~e en evidence. sa

capacite de resoudre lUle partie des problt::mes auxquels

l'mdustne de la constructIOn
en Grande Bretagne se voit confrontee. L'article se
concentre particulierement au

niveau des premieres phases de la conception et du

processus d'information, ou

l'impact des ameliorations de la qualite est tres important

et constitue la base d'lUl

developpement supplementaire permettant. d'ete~~

l'utilis~?t; ~u ~l?iemet;t de la

Fonction Qualite a la phase de productIon. L etude a

revele 1 appantion frequente

d'lUle faible communication, d'lUle recuperation

insuffisante d'information, et lUl

manque d'attitude positive de la part des consultants de la

construction dans la

satisfaction des clients. II y a de bonnes raisons de

penser que l'application du

Deploiement de la Fonction Qualite pourrait resoudre lUl

grand nombre de problemes

de qualite de l'industrie de la construction en Grande

Bretagne.

1 Introduction

The construction industry is a prime example of a project

based industry which has

received criticism of its performance in relation to time,

cost and quality. One of

the main reasons for dissatisfaction with its performance

and the quality of its product

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

may be attributed to the failure in understanding and

effectively translating the needs
and requirements of the clients into quality
characteristics. Having said that, it is then

essential that tools and techniques are developed to make

this possible. ''Building

Research Establishment figures show that defects cost UK

clients more than £J bn a

year. Research studies have shown overspecification and

over-design are as much as

50%" (1).

The economic downturn and fmancial uncertainty experienced

during the early

1990's exposed major international construction client

companies vulnerability to high

levels of debt and other overhead costs, compelling

companies to maintain

comparatively low levels of borrowing. However, major

international companies still

desire to achieve the construction goals set out in their

planned capital investment

programmes. As a result customers are demanding from the

construction industry

products that perform the same functions as before but for

less money.

International customers "will want to ensure that what they

are procuring in tenns of

value for money on capital expenditure, and the wqv their

buildings are designed (not

just aesthetically) and operate in proctise, is comparable

with world-class standards"

(2). This view is shared by the Chief Executive of BAA, Sir

John Eagan. Sir John

recently expressed some doubt toward UK construction ftrms

suitability to construct
the forthcoming £1.2 billion Terminal 5 at London's
Heathrow Airport, "they can build

it, but can they build it at a world-class cost, and to a

world-class quality?"(3). "The

experienced client now occounts for over 75% of project

clients," (4) and whose

influence and interest in construction has grown

tremendously in recent years and

continues to grow, therefore, heed must be given to their

opinions.

The Japanese were employing methodologies in 1966 which

focused on fmding out

what the customer actually wanted and produced products

which gave it to them at

the right price. They used Quality Function Deployment

(QFD) to translate the

customers requirements into designs which met the

customers real needs.

2 Quality Function Deployment

The concept of QFD was ftrst proposed by Yoji Akao but

gained its ftrst industrial

application in 1972 at the Kobe Shipyard of Mitsubishi

Heavy Industries in Japan.

One of the main driving forces in QFD's development was the

desire for

manufacturing companies to bring new or improved products

to the market before

their competition at a lower cost and improved quality.

QFD is now used by major

manufacturing organisations throughout Japan and the USA,

including applications in

Japanese construction, but as yet there is no sign of its

use in UK construction. All
proponents of QFD boast of its remarkable ability to
improve a companies design

process and product. ''Japanese companies using QFD have

ochieved notable

improvement in the design-development process:

• engineering changes have been reduced 30% to 50%.

• design cycle has been shottened 30% to 50%.

• start-up costs have been reduced 20% to 60%.

QFD also has a positive impoct on the product itself.

• increa5ed customer satisfaction and market share.

• improved designs and peifonnance.

• reduced warranty claims (a5 much a5 500/0)" (5).

Customer information gathering takes time, therefore,

product definition or

feasibility takes longer when using QFD, however, the

design period is shortened and

redesign is said to be almost eliminated.

3 Wlat is QFD?

The Japanese meaning for deployment is Iran extension or

broaiening of activities" (6)

and quality function refers " to any activity needed to

a5sure quality is achieved" (7).

Therefore, quality function deployment means that quality

is the responsibility of all

those within the organisation. Stated in this fashion QFD

could be confused with

TQM Akao (8) defmes QFD as Ira method for developing a

design quality aimed at

satisfying the consumer and then translating the consumer

demands into design targets
and mqjor quality a5surance points to be used throughout
the production stage".

Therefore, QFD can be described as the operational

defmition of TQM, the system

behind the philosophy.

QFD forms the framework that ties all the activities of a

company into one

complete harmonised customer orientated package. The

complete product

development process is driven by what the customer

genuinely wants, not what the

designers think they want, nor is it driven by innovations

in technology. ''if there is

a low-tech, low-cost w0' of satisfying the customer, it

should be used"(9). However,

this is not to say that QFD is a technophobic system,

rather, it is the customers needs

that will determine if new concepts or technologies are

required.

Without the QFD framework important details may be lost in

the process due to

discontinuities such as personnel changes, re-design or

whimsical management.

Within QFD would exist a documented system, the principal

documents being matrix

charts. QFD practitioners have at their disposal thirty

such charts, each chart is a

continuation of the last, deploying the needs of the

customer from design through to

manufacture. The matrices translate the 'voice of the

customer' into the technical

language of the organisation and deploy the product

characteristics that need to be
controlled through the complete process. QFD does not tell
the designer how to design

but aids him by indicating the relative importance of each

characteristic as expressed

by the customer. The design team will thrash out problems

and design conflicts whilst

referring to the evidence contained within the matrix.

Therefore allowing efforts to

be concentrated on those areas that yield the greatest

customer satisfaction. All

departments are required to assist in forming the initial

matrix 'The House of Quality'

(chart A-I), see figure 1. This early involvement in the

product deVelopment helps to

create ownership of ideas and a commitment to the common

goal. QFD does come

with several health warnings. Although simple in ideology

if undertaken properly QFD

can be very complex, King (10) states that "a5 a ritual it

will not be understood".

Some companies that have implemented QFD have found that

their matrices became

too large, the use of pareto theory (200/J80%) is generally

advised particularly for the

'House of Quality'. Newcomers to QFD are advised to select

a simple, lower profIle

project at first to form a practical experiment.

190 Dulami, Baxendale and Jewell RN'A Matrix x

Customer

Attributes Engineering Characteristics Easy to

open/close Draught free Secure I See-through ......
Total % Company now Competitor x Competitor y Plan 2
" '" .sa ~ " 0.. 0 .9 » ~ " ::: ~ • 180 180
16 so 4S 40 40 ., £ £ " £ 0 ::: '" S e! 1!
'" " os > .;;; .!! 00 1! .5 o; ~ N os " 0 6
rLJ ...J 0 60 • 0 203 45 A • 0 41 366 122 •
ISO 304 366 287 .. .. 27 32 2S .. .. 20 3 0.3 .. .. 2S
S 0.6 .. .. 20 2 0.4 .. .. 20 5 0.6 '" " i! ~ 0
0.. .13 .... 0 .!l os ~ 4 3 5 2 1137 99.9
Quality Plan E " a ., .:<: ~ > ~ )<: » ::: 2
00 .0; 8 '" 0.. .0; ~ .... .... C. S .9 .~ »
.13 .5 ~ "" " .~ ;; ::: .... 0 ~ "" os " 0
0.. ::: eeo.. ee 0 ., "0 e .~ .!! '" 0 0 0 0 os
.c 0 U U U U ~ rLJ « 2 3 4 4 1 1.2 4.8 20 2 3 2
3 1.S 1.2 5.4 23 3 4 3 4 1.3 1.S 9.8 41 1 2 1 2 2 1
4 17 Roof Matrix Total ]4 100 (2) Strong positive
correlation ." Positive correlation <!> Strong negative
correlation • Negative correlation Relationship Matrix
• 9 = strong correlation o 3 = some correlation A I =
possible correlation

Fig,' 1. The House of Quality (Matrix A-I). Example,

'Domestic External Door'

4 The Processes of QFD

'The House of Quality' is the foundation for all major

design and production decisions.

It maps out the customers requirements and lists how the

organisation will meet those

requirements. The matrix indicates the product control

characteristics that must be

deployed through the whole process from design through to

production. The

formation of the 'House of Quality' can be sub-divided

into six stages and are

described below.

4.1 The Voice of the Customer

Crucial to implementing QFD is the identification of who

the customers (internal and

external) are. Customers also include statutory regulators

whose needs must be

identified and met. If the customers are not identified

their needs will not be catered
for. Once the customers have been identified the product
requirements are stated in

customer terms, often referred to as 'customer attributes'

(CA's). CA's can be

identified using a number of techniques ego structured

surveys, interviews, market

research etc. Primary requirements of basic customer wants

are usually expanded into

secondary and tertiary requirements in order to obtain a

more definite list. The CA's

should be precise, King (10) recommends using a verb plus a

modifier such as 'easy

to use' or a noun plus adjective such as 'high

reliability'. Designers, engineers etc.

tend to translate customer requirements instantaneously.

Therefore, practitioners must

attempt to retain the same words as used by the customer

in stating the requirements,

ie. 'the voice of the customer'. This of course may lead to

interpretation differences

but is more likely to correspond to the views of the

customer than if the needs were

first stated in the words of the designer. Once customer

attributes have been expanded

they are listed down the left hand side of the matrix (see
figure 1).

This stage recognises that different requirements attain

different levels of importance

to the customer. Customers may want a product that has

both 'high reliability' and is

'easy to use' but feel that reliability is more important.

Each CA is assigned a

measure of relative importance, a scale of 1-5 is often

used, 5 being the of the greatest

importance. Therefore, if a trade-off was necessary

between 'high reliability' and 'easy

to use', the product solution would be weighted toward

reliability as it yields the

have close contact with the customer. The weightings are

listed in the same row as

their respective CA but in a section of the 'house' called

the 'Quality Plan' located on

the right hand side of the matrix.

4.3 Competitive Evaluation

Market evaluations are conducted by companies to ascertain

where their existing

product (where applicable) sits within the market place

with regard to achieving the

identified CA's. This indicates areas that may need to be

improved. It is also

necessary to see how the competitors fare under the

customers criteria, as this allows

targets to be set in order to match or better the

competitors performance in providing

the customers with what they want. The performance in

servicing each CA is ranked

on a scale of 1 to 5, with 1 being very poor and 5 being

very good. By examining

the company's performance in relation to it's competitors

and the rate of importance

of a particular CA the company plan can be developed.

Therefore, QFD maybe used

as a benchmarking tool (see the Quo/ity Plan section of

figure 1).

4.4 Voice of the Engineer

The next stage is to describe the product in the language
of the engineer. The product

is sub-divided into design features which have quality

characteristics, sometimes

known as engineering characteristics (EC). Each CA is

individually examined and the

EC's that are required to satisfY them are identified.

This is best explained by

example; 'easy to carry' is one CA of a product. The EC's

that will affect this CA are

size, weight, shape, the existence and location of handles,

etc.

An EC must be capable of being expressed in measurable

tenns since the

characteristic output is to be controlled and compared to

objective targets. An

additional requirement is that the EC should be directly

related to the customers

perceptions. For example, the weight of a timber door will

befelt by customers,

therefore, it is a relevant EC. However, the structure of

the door, ie. solid or hollow,

is a characteristic that the customer is unlikely to

directly perceive. 1his is because

it only affects the customer by influencing the weight of

the door and other EC's such

as 'sound insulation' or 'resistance to fire'.

4.5 Relatiomhip Identification

A multidisciplinary team now fills in the centre of the

chart, the 'relationship matrix',

indicating the correlations between CA's and EC's.

Decisions are made by consensus,

members rely on their knowledge and experience to assess

the strength of any

correlation but may also use direct customer input or data

from customer experiments.

Symbols are used to indicate the strength of

relationships, three categories are

frequently used, each being assigned a factor value, strong

correlation = 9, some

correlation = 3, and possible correlation = 1, those with

no correlation are left blank.

Some texts also distinguish between positive and negative

correlations. EC's that are

assigned lots of symbols can be generally regarded as

important to the customer. An

EC that is not assigned any symbols is a feature not

required by the customer.

However, if no symbols are assigned to a row of a CA then

the EC list needs to be

updated. Each CA's symbol factor is now multiplied by the

demanded weight of that

row and total put in the box with the symbol. The total of
each column is listed at

the bottom of the matrix and then converted into a

percentage Which is listed beneath.

In the next row the current measurable value for each EC

should be listed, ego an EC

is energy to open/close, the value is SON. In the

subsequent rows the competitor's

measurable EC values are listed. The final row is reserved

for the company plan or

target values (measurable) for each EC. Figure 1 shows the

company may need to

consider increasing lock levers on their doors to match

their competitor x as this
characteristic has greater importance than the others.

4.6 Identifying Design Conflicts

The final stage to constructing the 'house of quality' is

to complete the 'roof at the top

of the matrix. The roof highlights how EC's affect each

other. Often in design

conflicts occur between required features. The inclusion

of one particular feature may

impair the performance of others. The solution may lead to

the development of a new

product that satisfies all CA's or the 'roof matrix may

have identified various

engineering features that need to be improved

collaterally. For example, to improve

the door's security you may have to improve the hinges,

threshold details, and other

EC's. If a desired feature impairs lots of others then the

decision could be made to

leave it out completely.

The important aspect of the 'roof matrix is that it always

directs designers toward

balancing trade-offs in a way that best addresses the

customers needs. The roof

matrix uses four different symbols to depict the

correlation between EC's but are not

assigned a value. They four correlation categories

commonly used are; strong

positive; positive; strong negative; and negative. Figure

1 shows 'enelID' to open/close

relationship with both 'seal resistance' and 'lock levers~

5 cmtomer Satisfaction in Construction: 1he prnctice

The techniques and procedures adopted and applied in

practice to identify customers

requirements and translating them into design are to be

investigated. This is essential

for this study for two main reasons. Firstly, to establish

whether current working

practice and attitudes toward producing and using a project

brief could benefit from

implementing QFD. Secondly, the briefing stage forms the

first step into the

introduction of QFD and extending it to the production

stage as part of the research

programme conducted by the University of the West of

England.

A total of nine organisations were involved in the

interviews. Their annual turnover

ranged from £5m to £2bn. Projects discussed ranged in

value between £100,000 to

£90m. Architects, project managers and clients were

interviewed. Four main areas

were identified for investigation and analysis.

1. The methods of collecting customer requirements;

2. The handling of design information, internal

communication;

3. The translation of customer requirements into designs;

4. Individuals/organisations attitudes toward achieving

customer satisfaction.

5.1 Collecting cmtomer requirements

Recognition of the different forms of customer was

generally very low. The design

team for a pharmaceutical laboratory included a project

manager who conducted

buildability audits, thus taking into account the needs of

the constructors. However,

the lead architect remarked, "designers are let alone to

do the best possible design,

with little inteiference from the project manager". Methods

of collecting client

requirements varied considerably, however, two key

activities that appeared in the

majority of the individual processes. The first, is

clients comments on sketch designs.

The second is to use minutes recorded at formal meetings.

Clients often initiated the whole process by supplying the

lead consultant with a

''wish list". However, one of the clients, a high street

bank, has conducted trials of

various bank layouts and assessed their effectiveness by

observing the customers

behaviour. One client was an international pharmaceutical

company In order to

understand the client's unique technical requirements the

design team employed a

second lead architect who specialized in working with this

particular type of client.

This was the only case where the design team made it their
business to learn the

specific language of the client. Many of the companies

relied on the fact that they

had worked for the client on other projects, but none could
state that they had made

any effort to gain the client's perspective during their

first encounter.

During detail design the two largest design and project

management organisations

within the sample both undertook Value Engineering (VE)

studies. The VE process

was seen as a method of enhancing client value by

eliminating unnecessary cost whilst

maintaining fimction. Neither company approached VE in a

highly structured manner,

however, both applied Value Management (VM) studies in

conjunction with the VE

studies. The two companies approached the VFJVM interchange

in different ways.

The VM study was undertaken during the first two weeks of

project inception well

before any design or VE exercise with one company.

The project manager of a ~or retail development undertook

the VM study during

detail design and after VE. The designers carry out VE as

the project proceeds, then,

once the design is complete the project manager implements

a VM workshop with the

client and cost consultant. The aim is to "audit" the

design to achieve greater value.

An example application was where the specification for the

floor finish in the car park

was changed from an expensive paving slab specified by the

designer to a in-situ

concrete finish, saving £300,000. The slabs were deemed to

have no "added value" to

the client.

Many of the clients had appointed a single representative

to act as an "information

conduit" but admitted to frequently bypassing him and

talking directly to the design

team. All the interviewees agreed that they could not act
on an informal disclosure and
took the same basic approach of tactfully raising the
issue at the next meeting.

Architects working for large client organisations often

complained of late design

changes created by clients inefficiency, ''someone decides

to look at drawings sent to

him months before and decides he is not happy with them" or

whimsical management,

Ita new manager gets appointed and ha<; a big enough voice
to be heard in order to

demand design changes. " Consultants also stated that with

naive clients ''you don't get

the same story two days in a row". 1his may be due to the
wrong question being

asked in the first instance or being asked in a manner

which the client did not initially

understand.

All interviewees stated that defining the clients

requirements was an "iterative

process". Copies of all the information gathered from the

client and all designs were

sent to the client for approval. 1his is reflected by the

professional choice of the two

most popular information collection methods described

earlier as they both involve the

retrieval of information, its interpretation followed by

feedback.

There was a major difference between the approach of large

design organisations

and smaller ones toward the length and vigour to which they
would attempt to retrieve

information. The larger organisations had systems in place

that encouraged close client
participation, whereas the smaller design practices did
not. Where the small design

practices were working closely with the client the

closeness was always initiated by

the client. The smaller practices also seemed less at ease

with working too closely

with the client. "You can't cfford to go through every

stage with the client unless the

client states at the beginning and is willing to pay for

it!" The larger organisations

showed little sign of these pressures.

At the other end of the scale the design consultants on

the shopping mall project

took the clients to America to gain their opinion about

certain requirements and to

look for good ideas. One small company openly admitted to

not attempting to

encourage any sort of extra client disclosure thus not

retrieving any information that

the client didn't know would be relevant.

5.2 Handling of Design Infonnation and Internal

Conununication

In order to be able to successfully relay the requirements

of the customer through the

design process it is essential that the handling of the

information is both efficient and

un-distorted. QFD illustrates customer information in a way

that all of the different

members of the design team know what is actually required,

the decision not being

left to what they think the customer wants.

Design organisation for most projects consisted of several

design teams, ego

architectural, structural and mechanical/electrical. The

different design teams, covered

by the investigation, were often separated by over an

hours travel. It appeared that the

smaller design organisations had much weaker links with

their fellow consultants with

little synthesis. Lead consultants had the attitude that

the other consultants "know what

they are doing. .. if they have a problem they can e~ily

telephone or fax':

On one project the architects, project managers, client,

quantity surveyors, engineers

and constructors, who are all from different organisations

have been brought together

and physically located in the same office building. The aim

of this is to shorten the

usually ''protrcx:ted communication process".

The pharmaceutical project design team are all members of

the same organisation,

''we like to think of ourselves ~ an integrated design

team'~ They attempt to

encourage this in three different ways:

1. they 'physically' force integration by seating all the

different professionals that are

working on the same building area along side each other

(ie. architects, structural

engineers, mechanical engineers, electrical engineers etc);

2. they have a 'managerial' design team leader who acts as

a conduit between the

client project manager and design team;

3. they have 'procedures' that ensure that the different

designers meet and the work is

co-ordinated.

5.3 1'nul<ilation of Cttitomer Requirements Into Design

A key feature of QFD is its ability to successfully

translate the customer's

requirements into real design goals and features.

Professionals' differing orientation

tend to manifest by producing different solutions to the

same requirements thus

producing a misalignment with the real needs that the

client has expressed.

On the pharmaceutical project the VM study produced a

graphical representation

of the client and end user requirements in the form of a

"value tree" which detailed

the transition of lower level objectives to higher ones

and weighted them. However,

this technique, which is also used by QFD implementors,

does not translate those

requirements into design features, nor easily direct

trade-offs between design elements

to be made with the customer's true requirements central

to the decision.

All other designers translate the clients/users

requirements in their minds. They then

send a copy of the drawings to the client for approval.

Only the two largest design

organisations attempted to convey their designs using a

medium more easily

appreciable to the client, ie. 3D models or 3D CAD.

5.4 Attitudes Toward Achieving Cttitomer Satisfaction

QFD is usually implemented in conjunction with TQM

Therefore, the whole

organisation has a strategy and structured approach

focused toward the ultimate and

common goal of satisfYing the external customer. It is

important to note that all

design team members acknowledge 'client' satisfaction to be

their goal. Beyond

meetings there appeared to be no structured method or

framework in place in any of

the organisations that managed the progress of the whole

design team and project

organisation. Although the larger organisations were

implementing such techniques

as VM and VE they still lacked the elements that would

produce a united front toward

creating customer satisfaction. One lead architect

commented that focusing on the

common goal was "down to individuds, .. the very bright

and very dynamic individuds

who have a real sense of pwpose, .. they drive a project

toward a common pwpose ...

it's down to group dynamics. "

6 Discussion & Conclusion

In order to gain some insight into how QFD might be

received in industry,

interviewees were given a brief insight to its general

concept and had an example

'House of Quality' explained to them. They were then asked

to comment on its

usefulness. The general consensus toward QFD was positive,

the emphasis of

comments were made toward the ability of the matrix to aid

designers from omitting
requirements from the design, an occurrence that the
majority of architects admitted

to. However, it was mainly the architects that expressed

any doubt toward the House

of Quality's effectiveness. Most of these doubts stemmed

from the concern that the

matrix would become very complicated.

Designers seem to rely heavily on past experience in

creating design solutions.

Designers use their experience wrongly and create

inefficiencies in specification

because they apply a previous solution to a similar

situation not an identical one. QFD

tailor each solution towards the wants and needs of the

customer by structuring and

harnessing past experiences within a multidisplinary design

team. QFD requires a

multi-perspective of quality which is driven by what the

customer wants. This sharing

within the design team ensures no domination of anyone

professional perceptional

orientation. QFD articulates the customers needs and

desires in a clear manner at the

earliest possible juncture.

The two main pre-requisites for the implementation of QFD

are the recognition of

the internal customer, best achieved through a company-wide

quality initiative such

as TQM; and the collection of full, accurate and

un-distorted customer requirements

for each project.

1. Alden P. (1994) A Word About The Penny-wise, Building,

No. 50, 16th December 1994, page 15.

2. Fisher N. (1993) Construction as a Mantifa::twing

Process? An Inaugural Lecture, University of Reading, UK.

3. Building (1995) Better by Half, 10 February, pages 20-24.

4. HMSO (1990) Professiond Liability Study Team Report,

HMSO, London.

5. Fortuna R (1988) Beyond Quality: Taking SPC Upstream,

Quality Progress, Vol 21, No.6, June, pages 23-28.

6. Quality Progress, (1988) Listening to the Voice of the

Customer, Vol 21, No. 6, June 1988.

7. Sullivan L.P. (1988) Policy Management Through Quality

Function Deployment, Quality Progress, Vol 21, No.6,
June, pages 18-20.

8. Akao Y. (1990) QFD Integrating Customer Requirements

Into Product Design, Massachusets USA, Productivity Press.

9. Hunter MR and Van Landingham RD. (1994), Listening to

the Customer Using QFD, Quality Progress, Vol 27, April,
pages 55-59.

10. King R (1989) Better Designs In Half The Time, 3rd

Edition, Massachusets USA, GOAUQPC, Methuen.

MARKETING IN BUILDING SERVICES

ENGINEERING CONSULTANCY FIRMS

IN SOUTH AFRICA: THE WAY FORWARD

P.O. Rwelamila

Department of Building Sciences, Royal Institute of

Technology,

Stockholm, Sweden

T. Lethola

Department of Construction Economics and Management,

University of Cape Town, Cape Town, South Africa

A. Ngowi
Department of Civil Engineering, University of Botswana,

Gaborone, Botswana

Abstract

This paper examines the results of an empirical pilot

investigation into the nature and

extent of marketing in consulting building services

practices in South Africa, using

the Western Cape Region as a case study. A questionnaire

survey of building services

result suggest that marketing is, to some extent,

considered a legitimate management

function within these consulting firms. However, evidence

exists to support the

contention that the 'trappings' of marketing prevail

rather than the 'substance', the

latter being required if a professional practice is to

have the market-led and client

driven orientations important to the implementation of the

marketing concept. More

specifically, the paper deals with: the role and degree of

responsibility assumed by

the marketing manager; the nature and extent of marketing

research employed by the

firm; and the marketing policies prevalent in the firm.

Finally, recommendations are

made for future research.

Keywords: Marketing, building services, implementation,

clients, professional

services.

Sommaire

Ce papier examine les resultats de l'enquete empirique

pilote sur la nature et l'etendue

du marketing dans les services de consultation en batiment

en Afrique Du Sud. La

region du Western Cape est prise comme etude de cas. Un

sondage sur les consultants

actuelles du marketing dans les strategies de marketing

employees. Le resultat atteste

qu'on attribue au marketing, a une certaine ettendue une

legitime fonction de gestion

dans ces firmes de consultants. Cependant des preuves

existent pour soutenir que les

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

'signes exterieures' du marketing prevalent plutot que la

'substance', cette derniere

etant requise si pour une practique professionelle, les

orientations sur Ie marche et Ie

client sont important pour implanter Ie concept du

marketing. Ce papier traite plus

specifiquement Ie role et la responsabilite assumes par Ie

manager du marketing, la

nature et l'etendue de la recherche en marketing employee

par les firmes, et les

politiques de marketing qui prevalent dans la firme. En

fin, des recommendations sont

faites pour la pratique future.

Mots clefs: Marketing, service de batiment, implantation,

clients, services

professionnels.

1 Introduction
Marketing is one of man's newest action disciplines, and it
is also one of the world's

oldest professions. From the time of simple barter through

the stage of money

economy to today's modem complex marketing system,

exchanges have been taking

place. But marketing, the study of exchange process and

relationships, made its

formal appearance only in the 20th century.

Although the subject of marketing has attracted increasing

attention from companies,

institutions and nations, marketing ideas have made

singularly little penetration into

the centres of influence of the construction industry [1].

According to Pierce [2], the

concept of marketing is still seen as a young art, and an

alien concept which does not

rank high in the list of active interests of most

construction professionals [3] [4].

Despite the present status of marketing in the

construction industry, some

observations indicate that many firms in Europe and USA

are beginning to realise the

need to market their services and are anxious to improve

their marketing activities

[5].

In South Africa many stake holders in the construction

industry have shown

relatively little concern for marketing. The managerial

concern and commitment to

the marketing concept is somewhat limited, and at best,

most consulting professionals'

outlook to the concept is a conservative one. There is

evidence to suggest that the

buoyant state of the South African construction industry

contributed largely to this

attitude amongst the professionals [6]. However, the image

of marketing in the

industry is changing [7]. Marketing is beginning to

achieve a widespread acceptance

as an essential part of the management practice.

2 Research paradigm

Due to the perceived incompatibility of marketing with

'professional ethics', the

principles of marketing have been largely overlooked by

professionals in many

instances. It is apparent that most professionals do not

properly understand the

marketing concept and the merits that can be derived from

implementing a marketing

plan.

The building services engineering professional firms in

South Africa, are currently

under considerable pressure from a number of sources. It

is necessary for these

professional firms to recognise the benefits that can be

derived from marketing in

order to survive in the construction industry. The main

objective of this study was

to establish whether building services engineering firms

are realising the importance

of actively marketing their services. In order to achieve

this it was necessary to

establish if building services engineering firms are

understanding, adopting and
implementing marketing concepts. This being the case, it
was decided that the study

should follow the same format of similar studies carried

out in the United Kingdom

by Morgan and Morgan [8], which focused on engineering

consultancy firms.

It was hypothesized that the extent of adoption and

implementation of the marketing

concept by specialist building services engineering

consultancy firms in South Africa

is very limited.

3 Research methodology

The data was collected via the medium of postal

questionnaire. The questionnaire was

divided into five main sections: demographic data; the

nature and status of the

marketing iriformation and research employed by the

organisation; the marketing

policies employed by the firm; and the marketing strategies

adopted by the practice.

A postal questionnaire was conducted throughout the

province of the Western Cape.

Questionnaires were sent to all consulting firms (31 in

number), using the directory

of registered practices of the South African Association of

Consulting Engineers. The

number of replies that were suitable for analysis amounted

to 14, which resulted in

a response rate of 45.2%.

4 Survey results

4.1 Demographic

The survey was found to be dominated by practices with more

than 20 employees

(62%), the rest reported that they were employing between

16 and 20 employees

(10%), between 4 and 6 (6%) and less or equal to 3

employees (22%).

The majority of respondents (76%) reported that they have

at least 5 branches

nationally, 8% have 4 branches and 16% have one office.

These results are depicted

in Table 1.

Table 1. Number of branch offices within South Africa

Number of offices

Between 6 and 10 % of firms 16 o o 8 24 52

Table 2 provides information regarding the approximate

national fee income in the

most recent financial year. The results indicate that 86%

of the firms received a

turnover of at least two million rands (L 400, 00) in the

199"4/95 financial year.

These results provide further evidence that the respondent

firms are predominantly

large in size.

Table 2. Approximate fee income in the 1994/95 financial

year

Fee income
Not exceeding R 500 000

Between R 500 000 and Rim

Between R 1m and R 2m

Between R 2m and R 4m

Exceeding R 4m % of firms o o 14 43 43

It may concluded that the specialist building engineering

firms in the Western Cape

province (and nationally) are predominantly large in size,

enjoying a high turnover

and employing a comparatively large staff.

4.2 Organisation for marketing

The questionnaire first sought to establish whether or not

a marketing department or

a designated individual responsible for marketing exists

within firms. Fifty seven per

cent of the respondents reported that neither a department

nor a designated individual

exist, with the responsibility for various marketing tasks

tending to be just one of the

management roles of either one or several partners. This

interpretation is supported

by previous research findings in consulting engineering

professions [9] [10] [11].

The majority of respondent firms (67%) were more than 5

years old, and 33% of

the respondent reported that they have formed marketing

departments within the

previous three years.

4.3 Role of indivisual responsible for marketing

The survey sought to establish the role of the individual

assigned the position of the

head of marketing, the chief marketing executive (CME).

Table 3 records the

responses relating to the title given to the head of

marketing.

Table 3. CME job title

National marketing manager

National marketing manager

Senior marketing manager

Marketing partner

Marketing assistant % of firms 10 63 27 o

In the majority (63 %) of instances, the person(s)

responsible for marketing comprise

one or more of the partners, with no actual title relating

to marketing. These results

therefore indicate that marketing does not enjoy a distinct

organisational identity, at

least in terms of job title. Furthermore, the results

appear to be in contrast with the

previously reported existence of a formal marketing

department in more than 40% of

the respondent firms. When the reporting level of the CMEs

was analysed, it was

found that in the majority of cases (67%), they reported

to a group or board of senior

partners, 7% and 26% reported to a regional senior partner

and senior partner

respectively.

In order to establish the issue of CMEs reporting level

further, the respondents were

asked to rate the status of the CME relative to the

functional heads within the firm.

The majority of respondents (72 %) reported that CMEs

enjoy either equal or higher

status to other functional heads, while 28% enjoyed a lower

status. These results

imply that the CMEs are widely involved in policy

decision-making ranks within the

firms.

To enable the marketing tasks assigned to the CME to be

explored explored, a

selection of responsibilities often associated with the

marketing function were

proposed and respondents were requested to measure the

responsibility on a scale of

1-5 (l=.full and sole responsibility; 5= no

responsibility). The results are shown in

Table 4.

Table 4. CME marketing responsibilities

Area of

responsibility Full and sole (%) Major Equal Some No

Advertising

Promotional

activities

Public

relations

Income

forecasts

Marketing

research
Marketing

planning

Service

selection o 2 o o 38 33

& development 0

New service

launches

Divers

ification

studies

Marketing

staff

selection

Marketing

training

Corporate

planning

Fee stru

cturing 67 o 57 67 33 o but shared (%) (%) (%)

(%) 67 33 o o 98 o o o 33 67 o o o 67 33 o 56 6 o o
67 o o o 23 49 28 o 33 o o o 33 33 33 o o o o
43 o o o 33 o 33 o 33 o 67 33 o

The CMEs were reported to enjoy the full and sole

responsibility in the areas of

marketing training (67%), launching of new services (67%)

and marketing staff

selection (57%). The CMEs were found to share major

responsibilities mainly in the
marketing communication areas, more specifically in the
areas of promotional

activities (98%) and advertising (67%). The shared

responsibilities were also

exhibited in the areas of marketing planning (67%) and

marketing research (56%).

The areas at which all the CMEs were reported to share

responsibilities equally are

the fee structuring (67%), income forecasts (67%) and

public relations (67%), thus

giving an implication that such areas are more sensitive

for policy decision-making

in a firm.

When the above results were ranked based on the weighted

mean score, it was

found that the CMEs have the highest responsibilities in

the areas of structuring fees

and forecasting income for the firms. An average

responsibility is noted in the

marketing communication areas, which are: public

relations; advertising; and

promotional activities. Although there is an indication to

suggest that the CMEs have

excessive responsibilities, this does not imply that the

potential role of marketing is

being fully exploited. Instead, there is an indication to

suggest that CMEs still need

to improve on areas such as service launches,

diversification studies, marketing

planning as well as marketing communication.

Table 5 summarises the responses from those respondents

where a formal marketing
department or a designated marketing individual does not
exist, in respect of the

person(s) responsible for certain marketing functions.

Table 5. Person(s) responsible for marketing functions

where no formal marketing organisation exists

Marketing

functions

Advertising

Promotional

activities

Public

relations

Service

selection

and develo

pment

Marketing

research

Fee

income

forecasting Person(s) responsible for marketing functions

Partners/ Senior All Directors partner/ employees
Managing/ director (%) (%) (%) 61 39 0 93 7 0 93 7 0
33 67 o 60 40 o 53 47 o

Corporate plang. 67 33 0

In the majority of instances (66%), most of the marketing

functions are undertaken

by the partners of the firm. The senior partners are found

to be responsible mainly
for service selection and development (34%). Surprisingly,
all the respondents do not

view the junior staff as part of the marketing team in

their firms. This attitude

towards the junior staff was also indicated by Hansey [12],

who concluded that

smaller firms tend to choose one member of the management

team to be solely

responsible for the overall marketing activities.

4.4 Marketing infonnation and research

In response to whether there exists a unit responsible for

market research in each

consulting specialist engineering firm, an overwhelming

majority of firms (86%) do

not have a formal marketing department. Fourteen per cent

of the respondents

reported that there was an existence of a formal marketing

research unit.

Focusing on data relating to the use of various types of

marketing, respondents

(80%) reported to be using marketing research to find out

the potential for further

operating in existing offices, as well as the new offices

(86%). In support of this,

respondents reported that they further engage in studies

to determine client

characteristics (72 %), the bahaviour of comnpetitors (72

%), as well as the fees priced

in the marketing environment (86%). Interestingly, it

appears that there is a relative

lack of interest in research regarding the business trends

(58%) and the market share
analysis (43%), although these areas are of equal
importance in the marketing

environment [13] [14].

In order to establish the marketing culture of specialist

engineering practices, firms

were questioned on the extent to which they consider

marketing research to be

important. More specifically, respondents were asked to

comment on whether

marketing research emanates from the internal or external

services, and the nature

of their marketing research. The majority of respondents

(91 %) were of the opinion

that their knowledge of existing and potential clients is

such that it is sufficient to

engage in research on a client-by-client basis.

Furthermore, it was found that the

main source of marketing research is from the informal,

in-house service (72 %). Few

firms (32 %) reported buying external marketing research.

A point worth noting is that

43% of respondents claimed not to be needing any marketing

research, whether in

house or external.

In conclusion, it can be argued that most of the consulting

firms conduct marketing

research in an unco-ordinated manner.

4.5 Marketing policies

A number of questions were devoted to establishing the

marketing policies of the

firms. The majority of respondents (70%) strongly feel

that innovation and change
come directly from the client, and therefore, the main
objective is to provide a

reliable, high value-added service (70%). Interestingly,

these firms (86%) reported

to be encouraging feedback from their clients as a

yardstick in measuring the level

of client satisfaction.

A significant number of firms (79 %) reported that their

business success rests on

increased sales and long term profitability. These results

indicate that many firms are

rather sales-driven than market-led in theiir normal

"marketing" operations. However,

a general trend emerged indicating that the attitude of

marketing held in the firms is

such that marketing is generally an accepted business

function which also considered

"legitimate". These results compare well with the findings

of Morgan and Morgan

[8]. From the survey results, it may be concluded that the

consulting specialist

engineering firms are relatively client-oriented, although

they still need to improve

in the area of marketing communication. Many firms are more

sales-led than market

led. However, marketing has been found to some extent to

be a legitimate business

function within the firms, although some firms still view

it with some scepticism.

4.6 Marketing strategy

The concluding section of the survey was dedicated towards

the marketing strategies

pursued by consulting specialist engineering firms. The

classification of strategies

showed a slight predominance of firms endorsing a rather

offensive than defensive

aim in terms of the market share goals. On the aspect of

routes taken to increase the

market share, the the majority of respondents (86%)

reported that they favour

entering the new client markets with existing services and

72 % of the respondents

were in favour of diversifying into new areas involving

new services and clients.

However, many firms did not appear to be secure with

developing new services for

existing markets.

When respondents were asked to indicate the relative

importance of certain elements

within the marketing strategy from a list of probable

elements, technical service

excellence, professional reputation, specialised services

for defined segments and

utilisation of technology were rated as very important by

86 %, 86 %, 71 % and 69 %

of the respondents respectively. Interestingly, the

personal side of marketing (social

and personal contacts of staft) was seen as of lower

importance by the majority of

respondents. Advertising was ranked lowest in the list of

strategies elements in the

list of strategic elements in the firms. This is

indicative of the fact that engineering

specialist firms do not view promotional tools as effective

marketing strategy

elements. Similar results were reported in the findings of

Namo and Fellows [15].

The recent withdrawal of the statutory fees scales for

consulting engineers appears

to have very had very little impact on the use of fees as

a marketing strategy. Only

39% of the respondents considered this aspect to be

effective.

In conclusion, it has been found that consulting specialist

engineers rely mainly on

professional reputation, high quality of services and

improved technology as their

marketing strategies. A large proportion of firms do not

view promotional techniques

and competitive fees as effective marketing strategies.

5 Conclusions and recommendations

5.1 Conclusions

The objective of this study has been to establish the

extent to which consulting

specialist engineering firms have adopted and implemented

the marketing concept.

Based on the information and findings reported in this

paper, conclusions could be

drawn:

1. Organisation for marketing: the existence of marketing

organisation within firms

is limited. Many firms neither have marketing department

nor an individual

designated for marketing responsibilities. Even where

marketing departments exist

within the firms, the consulting firms still struggle to

implement marketing

functions effectively.
2. The marketing responsibilities: marketing is not seen as
an activity applicable to

all employees of the firm. The senior staff, especially

partners, carry out most of

the marketing responsibilities, whilst the junior staff is

almost not involved in most

of the activities.

3. Marketing iTiformation and research: the consulting

specialist engineering firm

seldom conduct marketing research to gather information

about their marketing

environments. For those that do engage in research, this is

conducted in an unco

ordinated manner and the firms rely mainly on in-house

information for research.

4. Marketing policies: the consulting specialist

engineering firms are distinctly client

oriented in approaching their business. The sign of

marketing direction is

manifested by the engineers' attempt to discover what the

clients really want and

orient their firms to satisfy those wants. The client

oriented approach to business

is close to the current marketing thinking in satisfying

the clients' requirements

profitably.

5. Marketing strategy: the relatively recent withdrawal of

the statutory fee scales for

consulting specialist engineers has had little impact on

the use of fees competitively

as a marketing strategy. Instead, consulting engineers

frequently choose to rely on
their professional reputation, the use of improved
technology and by offering high

quality services to market their services.

6. The hypothesis is proved that: the extent of adoption

and implementation of the

marketing concept by specialist building services

engineering consultancy firms in

South Africa is very limited.

5.2 Recommendations

Based on the findings and conclusions of this paper, the

following recommendations

are made:

1. Further research is needed nationally to establish the

role of marketing

communications within the specialists consulting

engineering services. The research

should also encompass client perceptions of such

communications.

2. Further research should be taken to establish the

cultural barriers of the

implementation of marketing concept within the consulting

specialist engineering

profession. This work could be extended to include a

comparison with similar

barriers in other professional services.

1. Jepson, W.B. and Nicholson,M.P. (1972) Marketing and

Building Management, Medical and Technical Publishers,
Manchester.

2. Pierce,P. (1992) Construction Marketing: A professional

approach, Thomas Telford, London.

3. Morgan,R.E. and Morgan,N.A. (1991) An appraisal of the

marketing development in engineering consultancy firms.
Construction Management and Economics, Vo1.9,pp. 355-368.
4. Rutland,P. (1987) Going to the market. Chartered
Quantity Surveyor,March,p.15.

5. Arditi,D. and Davis, L. (1988) Marketing of construction

services. Journal of Management in Engineering, Vo1.4(4),
pp. 297-313.

6. Phillips, R.S.B. (1990) Marketing and the quantity

surveyor. Quantum, Vo1.29, pp.17-21.

7. Van der Merwe, S. (1976) Some research findings on South

African top executives and the marketing concept.
Marketing Research and Media, Vol.1(2), pp.21-28.

8. Morgan, R.E. and Morgan, N.A. (1991) An appraisal of the

marketing development in engineering consultancy firms.
Construction Management and Economics, Vo1.9, pp.355-368.

9. Tessler, A. (1983) Success in Invisibles Report on the

marketing of professional services overseas. IT! Research,
London.

10. Hensey, M. (1986) Strategic planning: Its purpose,

value and methods. Journal of Management in Engineering,
Vo1.2(1), pp.213-221.

11. Port, J. (1991) Still room for improvement. Chartered

Quantity Surveyor, March, pp.17-18.

12. Hensey, M. (1986) Strategic planning: Its purpose,

value, and methods. Journal of Management in Engineering,
Vo1.2(1), pp.213-222.

13. Brunjes, B. (1995) Marketing series part4: Tenders

that talk! The Civil Engineering Contractor, Vo1.29(6),
pp.22-25.

14. Hansen, K.L. and Tatun, (1989) Technology and strategic

management in construction. Journal of Management in
Engineering, Vo1.5(1), pp.67-82.

15. Namo, F. and Fellows, R.F. (1993) The role of

advertising in marketing civil/structural engineering
consultancy firms. Construction Management and Economics,
Vol.11, pp.431-441.

COMPETENCE-BASED CONTRACTING

BUSINESS
P. Huovinen

Institute of Construction Economics and Management,

Helsinki University of Technology, Espoo, Finland

Abstract

The core competence perspective is here applied to the

construction sector. Construction

is defined as the generic contracting business which is

further differentiated into five

distinctive businesses by investment sector. A single

contracting business is then

redefined as a vision, namely a competence-based system

consisting of four interlinked

elements: (1) investors and their investment needs, (2)

solution contractors and their

investment sol utions, (3) sol ution integrators and thei r

core sol utions, and (4) competence

developers and their core competencies. The new kinds of

"Solution Contractors" act as

the leaders of leveraging networks. The business processes

will involve complete

investment solving, core solutions commercialization, core

competencies productization

and future investorslinvestment needs anticipation. The

primary benefits are radical

investment profitability and productivity improvements

over the life-cycles. The most

important precondition (barrier) is the renewal of the

current price-driven and capacity

driven procurement methods.

Keywords: Core competencies, construction, contracting

business, competition
Sommain~

La perspective des noyax de competence est ici applicuee au

secteur de BTP. Le secteur

de BTP est dMini comme activite commerciale d

entrepreneurs, se divisant en cinque

activites commerciales differentes en fonction du secteur d

investissement servi. La

naissance dune activite commerciale basee sur la competence

necessite Ie developpement

et une vraie integration des quatres elements qui suivent:

(1) investisseurs et besoins d

investissement, (2) entrepreneurs et solutions d

investissement, (3) integrateurs et noyaux

de solutions, et pour servir comme base aux precedants,

(4) developeurs et leurs noyaux

de competence. Les avantages dune activite d entreprises

basee sur les noyaux de

competences sont une amelioration radicale de la

rentabilite et de la productivite

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

1 Introduction

It is here argued that leading contractoas playa role as

the primmy investment solveas

or facilitatoas, who, by definition, undertake contracts to

provide all the technologies,

designs, production lines, materials etc. needed to execute

capital investments. Thus,

construction or investment markets are treated as

contracting markets.

In her pioneering theory [of growth], Penrose [1] states

that [a contractor] is seen as

a collection of productive resources [i.e. competencies]

for the purpose of producing and

selling investment solutions (end products). A contractor

aims at growth in order to

survive, and this growth is ... based on continuous use

and development of resources. His

competitiveness increases or decreases due to the ability

to combine resources [in a

unique way] to compete successfully in changing market

conditions. More recently,

Prahalad and Hamel [2] stated that [the contractor's]

competitiveness derives from an

ability to build, at lower cost and more speedily than

competitors, the COI"e competencies

that spawn unanticipated investment solutions (end

products).

The aim is to apply these two concepts to construction by

answering the following

questions:

1. What are the most common weaknesses of the construction

sector, world-wide?

2. Can construction be defined as generic contracting

business(es), as a prequisite before applying the core
competence perspective?

3. How competence-driven are large international

contractors, already? Can generic strategic competitor
groups be detected among these contractors?

4. What is competence-based contracting business? Can this

new competence-based approach fix the construction
sector's current weaknesses?

5. What are the preconditions for the adoption of the

competence-based approach?

While being in the first stages of the research process, my

primary argumentation IS

understandably partly hypothetical and visionary, and not

yet based on empirical

evidence on possible industry transformations already

taking place on a global basis.

2 From constlUction into a set of distinctive contJ-acting

businesses

2.1 Features of tJ-aditionai constJuction

It is argued that the following weaknesses apply to most of

the national construction, or

capital investment markets, world-wide: T8I-get quality,

costs, and throughput time of the new investments are
seldom attained. The procurement methods result in
quality variations, cost overruns, and delays. The actual
costs will be known often many years after the handovers
due to claims. Plice-dliven and capacity-dliven
procm"ement methods are widely used preventing design
expertise, production, and life-cycle knowhow from
cumulating at single organizations. Traditionally, the
investor hands out first a design task. A procurement task
is handed out to the same designer, who subcontracts the
erection. National technology and design IUles, and
fOlmalized pmctices prevent the best proven technologies
and investment solutions already widely used in one
country from penetrating neighbouring countries. 'MmXy"
pmctices are common in national and local markets. Besides,
the nonethical dealings are often detected in relation to
international multibillion projects.

The construction sector is regarded as an "economic

regulator" by national

governments trying to adjust to fluctuations. Public

investments and subsidies are

increased or decreased based on reigning governments'

opportunistic conduct.

The ad hoc, and often consecutively turnaround policies

prevent the construction

industry from adopting the long-term perspective.

For example, WS Atkins states in their sector report to the

European Commission that for

the most part ... construction will remain a

geographically concentrated industry, with

national and local characteristics. The level of demand

fluctuates unpredictably. Survival

depends on minimizing fixed capital assets and being

extremely flexible. There has been

'no European construction industJy' firms engage in ...

cut-throat competition ... and take

a very short-term approach [3].

2.2 Generic contracting business

The generic scope of capital investments includes

feasibility studies, engineering, design,

supply of a production line, construction of facilities

and infrastructure, start-up as well

as after-investment services [4]. The investment needs,

i.e. project and task contents, vary

markedly within this generic scope. Accordingly,

construction is defined as the generic

contracting business having the following, partly emerging

features:

• Domestic and foreign contractors are solving and

realizing investors' needs by partici

pating in their complex investment processes in targeted

locations, across the globe.

• Competing networks managed by the leading contractors

offer, and one or several of

them are chosen by the investor to carry out his particular

investment.

• Each investor applies a specific procurement method (in

the UK or EU context), or a

contracting mode (in the US context) to achieve the

objectives in terms of functiona
lity, buildability, quality, money, time etc. This method
determines the roles of con

tractors to become involved, as well as the nature of

competition, by project.

• Dominant characteristics are project specific, and

gradually more long-term, partner

ships and networking among all the parties to be involved

on a project. As a rule,

leading partners possess core technology that investors

prefer most.

• Typical operations include technology transfer, systems

selling, packaged deliveries,

alliances, subcontracting, as well as management and

services contracts.

2.3 Diffenmtiation of the contl'acting business by

investment sectol'

The capital investment sectors of economies form a

sustainable basis for a contractor to

define its mission, the investment types to be executed, as

well as to choose its

competencies, targeted markets and investors. It is argued

that that the generic contracting

business can be differentiated across investment sectors

into a set of distinctive

businesses as follows (Fig. I):

1. Natural resources contracting, i.e. execution of

investments in exploration, use and

processing of minerals, oil and gas, etc. including

related facilities and infrastructure

2. Power utilities contracting, i.e. execution of

investments in energy production based

on using coal, water, oil, gas, wind etc., inc\. related

facilities and infrastructure
3. Industrial plants contracting, i.e. execution of
investments in manufacturing and

process plants inc\. related facilities and infrastructure

4. Telecommunications networks contracting, i.e. execution

of investments in mobile

Backward

integration

Design &

engineering

services

Machinery &

equipment

manufactu

ring

Building

materials &

components

manufactu

ring

Trade In-coming logistics Wholesaling & transportation

services Core contracting businesses NATURAL RESOURCES
CONTRACTING POWER UTILITIES CONTRACTING INDUSTRIAL
PLANTS CONTRACTING TELECOMMUNICATIONS NETWORKS
CONTRACTING Out-going logistics Distribution &
transportation services Forward integration Plant &
utility management and operations Trading • Oil & gas
• Minerals • Energy • Products • Tele & multimedia
BUILDINGS & contracting Property INFRASTRUCTURE
CONTRACTING development, holdings, management &
operations

Fig. 1. From construction into five distinctive contracting

businesses with options to integrate backward and forward.

and fixed networks inc!. related facilities and

infrastructure

5. Buildings and infrastructure contracting, i.e. execution

of remaining investments in

housing, leisure, commercial and public buildings as well

as roads, railways, airports,

harbors, waterways and other infrastructure.

Many large, dive~ified contmctol's are currently

stretching and deploying their

competencies across two or more or all five contracting

businesses. In addition, large

contractors are typically integrated backward andlor

forward [5]. In general, Japan has

gone further [than the US or EU industry] in integrating

design and off-site manufacture

and creating a fully [backward] integrated construction

industry [6].

At this stage before applying the competence-based approach

to contracting business,

it is hypothesized:

HI. Each of the contracting businesses, defined by

investment sector and needs, is so

different from the other ones that long-term success

requires sector-specific technolo

gies, competencies and their combinations as well as

customized solutions:

(a) This is more often true when the investors consider

technology and effective investment solutions over
life-cycle as the primary criteria for making investment
decisions and choosing contractors.

(b) This is less often, or not at all, true when the

investors consider initial investment costs (price) as the
primary criteria for decision-making.
2.4 Generic strategic competitor groups

Large international contractors are grouped into the five

strategic competitor groups [7].

Contractors belonging to the same group have similar

competitive behavior based on

similar competencies. In addition, their offerings, roles

and contractual responsibilities

cover the same, broad or narrow scope [8]. The competitor

groups are as follows (Fig. 2):

1. General (or turnkey) contractor.;: typically responsible

for turnkey delivery at fixed price and by set execution
period. Their competencies cover capital project management
and investor services, feasibility studies, project
financing and trading services.

2. Engineering contractor.;: typically responsible for

process engineering & design, plus additional CM and
training services. Their competencies lie in technology
applications, feasibility studies and advanced engineering
capacity.

3. Plant contractor.;: typically responsible for complete

plant deliveries (excl. buildings) Their competencies lie
primarily in machinery design and manufacturing, and
production line delivery, in many cases also in plant or
special process design.

4. Design-construct (or design-build) contractor.;:

typically responsible for total delivery of a building or
infrastructure without process investment contents. Their
competencies lie in project and design management and often
in components manufacturing.

5. Construction contractor.;: typically responsible for

building or civil engineering works, purchases and site
services. Their competencies lie in project and purchase
management, works techniques and equipment, and often
components manufacturing. They represent the simple,
price-driven end of the contracting business spectrum. A
single contractor very seldom owns all the technologies,
competencies and

resources for a turnkey project, but general, engineering

and plant contractors are able to
bundle these competencies through partnerships and
networking. It is hypothesized: H2. In the advanced end
of the contracting business spectrum, the internationally
renowned general (or turnkey) contractors, engineering
contractors and plant contractors have, in fact, designed
and realized competence-driven strategies for years. This
requires that there have emerged advanced investors as
well. This is supported, for example, by WS Atkins [9]
stating that "Japan has the world's

largest... contractors with excellent research and training

organisations, providing

integrated design and CM services. The US industry has the

largest heavy engineering

specialist contractors which design processing plants ...

and undertake the R&D needed.". Towards the simple end of
the spectrum, it is hypothesized: H3 (a) In the simple end
of the spectrum, most of the buildings and infrastructure
are still first designed by designers, and then carried
out by trade contractors who all have access to the same
resources and competencies, in regions with simtlar
geographical conditions. There are more, and more severe
weaknesses, i.e. quality defects, costs overruns etc. (b)
Exceptions are a few contractors with design-driven
strategies, as well as many specialty contractors with
patented techniques and equipment. This is supported a.o.
by the Design-Build Institute of Amerixa (DBIA) stating
that

"the number of the US ... design-builder.; is relatively

small. They still think of

themselves as [construction] contractors ... who offer a

variety of delivery methods" [10].

5 Construction

contractors

c. . ~ :o~::~~~~~;nstruct

..

~ 3 Plant
~ contractors

...

...

"i 2 Engineering

f contractors

Vi

1 General

contractors 0 ~------f'}---• • 0 • ~ 0 Feasibility

Process Building studies enginee& infraring & structure
design design • • ---0 • ~ 0 0 0 ~ ~ • Machinery
& Materials & Project equipment components financing
supplies and supplies and & trading installations
construction services Total contract scope of a capital
investment Key: Typical contract scope and
responsibilities Additional contract responsibilities
Subscope based on in-house competencies and resources
Subscope based on subcontracting and/or partnering
-0--0-0---0-• o

Fig. 2. Generic competitor groups related to contracting

businesses.

3 Competence-based appmach applied to constlllction

3.1 Definition of the competence-based contracting

business ~ ~ • Afterinvestment services

So far, construction is differentiated into five

distinctive contracting businesses, and

contractors are divided into five competitor groups. What

relevance will the core

competence approach add to this contracting business

approach? According to the

concept of Prahalad and Hamel (II], management's [primary

task is] to consolidate

contractor-wide technologies and skills into competencies

that empower to adapt quickly

to changing opportunities. A contractor, like a tree, grows

from its roots. The core

solutions are the physical embodiments of one or more core

competencies, which

engender business units, whose fruits are investment

solutions (end products). According to the "followers" of
Prahalad and Hamel, the competitive locus is a

contest for acquisition [internally or through outside

means] of new competencies and

leveraging these across contracting businesses and

investment solutions [12]. When the competence-based
concept of Prahalad and Hamel is applied to any of

these five contracting businesses, the supply side is

divided into three elements of core

competencies, core solutions (core products) and investment

solutions (end products). The

investment needs (and investment projects) is the fourth

element [13]. Each of these

elements will have a primary stakeholder who is interested

in developing and leveraging

the specific deliverable within the total "contracting

chain". Besides the investors, the

stakeholders are contractors as well as collaborating

designers and suppliers. The competence-based contracting
business, as the system, consists of (Fig. 3): Investors
and their investment needs New kinds of "Solution
Contractors" and their investment solutions New kinds of
"Solution Integrators" and their core solutions New kinds
of "Competence Developers" and their core competencies.
Currently, the emphasis is on the "end product"
competition. It is envisioned: H4 Each contracting
business will become more competence-based, although with
varying degrees. This will take place nationally,
internationally (such as EU-wide) or globally, depending
on how widely integrated "the system" in question will
become. The d.iving force is the four enabling linkages,
or business processes (a) Complete investment solving,
which requires replacing current procurement processes and
competition rules with the new ones that encourage
execution of investments by competence-based solutions
(investors <-> solution contractors)
(b) Core solutions commercialization, through applying and
reusing core solutions, networking subcontractors and
creating delivery processes (solution contractors <->
solution integrators)

(c) Con~ competencies pJ"Oductization, such as integrating

and modularizing core competencies into core solutions,
and anticipating generic applications (solution
integrators <-> competence developers)

(d) Future investon;/investment needs anticipation,

leading to symbiotic building of new core competencies
(competence developers <-> investors).

H5 More and more investors will prefer "Solution

Contractors" who will offer com

plete solutions, based on networking (inc!. core solution

integrators and competence

developers), and re-engineering delivery processes. This

means reorganizations of

knowhow and resources among current stakeholders to form

national, international and

global networks that possess technology, designs,

life-cycle expertise, building

systems, prefabrication, modularization, automation and

miniaturization technologies

as well as project management and logistics expertise.

H6 All or most of the members of these networks solving

investment needs may

belong to the same corporation, or all or most of the

members are independent firms.

Leading contractors will adopt and foster competence-based

management to integrate

all the investment factors. This is supported a.o. by WS

Atkins stating that the future

improvements in productivity and value-for-money will come

from restructuring and
managing the whole supply chain from raw materials to site
erection [14].

For example, Brown & Root has a profession "that new

[communications]

techniques will [enable the creation of new alliances]. In

these alliances, the organizations

are totally integrated, saving costs up to 30 %. [15].

Similarly, John Brown E&C, of

the UK, "is forming alliances with clients and seeing more.
lump-sum turnkey work.

Technology is a key way to distance a firm from

competitors". It has a target of doubling

its portfolio of technologies over the next four years

[16]. INVESTMENT NEEDS AND ..---~ INVESTORS (CLIENTS)
Future investment needs & investors anticipation process
incl. symbiotic building of new core competencies

Core competencies productization process

incl. modularization and anticipation of

generic applications Total investment solving process

incl. re-engineered and networked delivery, and future
solutions over the life-cycle Core solutions
commercialization process incl. customization of the core
solutions and re-engineering of delivery methods CORE
SOLUTIONS AND INTEGRATORS Fig. 3. Definition of
competence-based contracting business as a system
consisting of four elements and their enabling linkages.

3.2 Benefits of the competence-based contracting business

A new approach is only justified when this will fix the

current weaknesses of

construction. The pl;mruy benefits of introducing the

competence-based contracting

business are envisioned as follows:

• Radical investment pmfitability IDId pmductivity

impmvements ovel' the life-cycles:

enabling investors and end users to define and control the

realized value for money.

For example, in the EU, US and Japanese scale of about the

ECU 500 bill. investment

markets, a 10 % savings in the initial investment costs

would be worth ECU 50 bill.

• New investment solution-dl;ven competition: instead of

the price only, all the primary

attributes of the investment will be included in a set of

investor's decision-making

criteria, incl. life-cycle costs. New solution-driven

codes of competition, and procure

ment methods will be adopted to replace the current

price-driven competition.

• New radical investment solutions cl~ation: to attain at

least 20-30 % more productive

solutions, higher quality, faster execution, lower

construction and life-cycle costs.

• New pmcurement IDId pelfonnIDIce specification systems:

to allow competition among

new kinds of investment solutions which integrate all the

elements over the life-cycle

inc!. divestment aspects. A new performance specification

system will offer the basis

for quality and productivity measurement, to enable a

solution-driven competition.

• Competence building IDId leveraging: managerial cognition

and organizational learning

will become the driving force of change, and determine the

search for competencies.

Accumulations of competencies and patterns in uses will

determine the future behavior

of [strategic competitor groups] as short-run conduct in

competence leveraging, as well
as long-run conduct in competence building. [17]

• Sustainable platfoml for integrating all the industJ')'

developments: to enable the

effective use of supporting technologies (such as

computer-integrated-contracting

systems), as well as concepts and tools (such as TQM) on a

large scale.

A superior competence in building competencies through

continuous learning ...

[ensures] sustainability of competitive advantages better

than unique resources [18]. For

example, Bechtel Corp. is rolling out seven standard

designs for gas and coal-fired

powerplants [which will] cut delivery time and cost around

the world dramatically while

assuring quality. Each package ... is tailored ... to meet

an owner's requirements. [19]

3.3 Preconditions for competence-based bn~akthrough

The primary precondition for the emerging competence-based

contracting business(es)

lies in raising radically the investors' objectives which

would ultimately lead to radical

improvements in contractors' offerings. This means the

adoption of new procurement and

cooperation processes which will enable solution-driven

competition between competing,

integrated networks managed by Solution Contractors. It is

hypothesized:

H7 Unless the procurement methods will be renewed by all

the parties involved in a

contracting business, or market, a major part of the

development efforts by single com

panies such as re-engineering, lean, total quality (TQM),

activity-based (ABM) and

time-based management (TBM) will turn out be ineffective.

This is so because in a

particular project, today's inflexible methods prevent from

combining those quality,

time, costs and services improvements that any party has

alone achieved.

WS Atkins states that innovation is most likely to come

from [those EU investors]

demanding better service, not from initiatives by the

industry itself. A new framework

[to be developed jointly] is suggested to permit investors

to choose from a range of

procun~ment processes to suit their own circumstances and

capabilities within the

context of a system of guarantees, insurance and legal

liabilities [20].

The other pl-econditions lie a.o. in establishing networks,

and creating competence

developers and solution integrators. It is hypothesized:

H8 The core competence concept best suits those leading

contractors who already

possess core technologies and investment solutions, have

multiple businesses, as well

as operate on large domestic and/or versatile international

target markets. They are

best equipped to renew competitive practices, in

cooperation with advanced investors.

WS Atkins states that the EU construction sector ... needs

to l-emedy stJuctu.'3I

problems, such as the separation of design from

construction and the uncertain role of the

manufacturer in the design process. [The re-engineering]

means putting research, .. .

investment and computer control where it is most

effective: in industrial manufacture ... ,

distribution and site process management. The contractors

should help suppliers to

develop better products ... , to adapt site processes to

these, ... and to combine the

flexibility of ... specialist and local firms with ...

world-beating contractors [21].

On the other hand, WS Atkins recommends the EU becoming the

style leader ...

world-wide, building on the reputation ... of Europe's

designers. This would build also on

... engineers, managers and high quality product

manufacturers, as opposed to cheap

labour, materials and energy, low cost finance and strong

government intervention.

4 Concluding remruks

Why should the core competence approach be preferred? The

author argues that this

concept will, more likely than many others, enable (a)

investors to raise radically their

investment effectiveness, (b) contractors (as solution

contractors) and other parties (as

core competence developers and core solution integrators)

to ensure profitability and

sustainable competitiveness, as well as (c) the contracting

[it is today's construction]

industry to become one of the most respected sectors in

the society

It remains to be seen, which of the leading EU, US and

Japanese contractors will take

the lead, and in which of emerging competence-based

contracting businesses.

1. Penrose, E.T. (1959) The theory of the growth of the

finn. Basil Blackwell, pp. 24-5, 65-6.

2. Prahalad, c.K. and Hamel, G. (1990) The core competence

of the corporation. Harvard Business Review, May-June, pp.
79-91.

3. WS Atkins International Ltd (1994) Strategies for the

European Constmction Sector, Construction Europe & Office
for Official Publications of the EC. p. 14,22.

4. Huovinen, P. (1984) The adjustment of constmction

industries to international investment markets. Research
paper. European International Business Association (EIBA),
Proceedings. Dec 17-18, 1984, Oslo. VoL III, 14 p.

5. Huovinen, P. (1990) What business directions and

concepts an international constmction company should
consider in the 1990s. A speech. The "Conditions of
Success" Symposium. Oct 4-5, 1990. 12 p.; reviewed in Hawk,
D. (1991) An Agendafor the Future. Report Two. Stockholm,
Sweden, pp. 33-43.

6. WS Atkins International Ltd (1994), p 81.

7. Heikkila, J, Huovinen, P and Silventoinen, J (1987) A

method for competition analysis in international
contracting. HUT. Construction Economics and Management
Report 82. Espoo, Finland, pp. 29-31. (in Finnish)

8. Compare with Porter, ME (1980) Competitive strategy.

Free Press, pp. 161-3.

9. WS Atkins International Ltd (1994). p. 80, 82 and 84.

10. Engineering-News-Record (1995) IndustlJi embraces

design-build. May 22, p. 74.

11. Prahalad, C.K. and Hamel, G. (1990) The core

competence of the corporation. Harvard Business Review,
May-June, pp. 79-91.

12. Sanchez, R., Heene, A. and Thomas, H. (1995) Towards

the theory and practice of competence-based competition.
John Wiley. pp. 1-2.

13. The original system is designed by Heikkila J,

Huovinen P and Warras T. (1995) Renewal of paralized
building constmction processes Finland as the initiator in
the EU? Espoo, Finland. 5 July 1995. A policy paper (in
Finnish, draft) 9 p.

14. WS Atkins International Ltd (1994), p. 103.

15. Engineering-News-Record (1995) Going global.

contracting .... Aug 28, p. 30

16. Ibid, p. 36

17. Sanchez, R., Heene, A. and Thomas, H. (1995), p. 33.

18. Ibid

19. Engineering-News-Record (1995) Delivery being

streamlined. July 24, p. 16.

20. WS Atkins International Ltd (1994). p. 6, 14.

21. Ibid, p. 15,103, 108.

2 2. The Firm and Its Competitive Partners

1. Latham, M. (1994) Constructing the Team: Joint review of

Procurement and Contractual arrangements in the UK
Construction Industry. London, HMSO.

2. Department of the Environment. (1995) State of the

Construction Industry February 1995, Issue 3.

3. Fenn, P. and Gameson, R. (1992) Construction Conflict

Management and Resolution, London, E & FN Spon.

4. Loosemore,M. (1994) Problem Behaviour. Construction

Management and Economics, Vol. 12, No.6, pp.511-520.

5. Simon (1944) Report of the Committee on the Placing and

Management of Building Contracts, HMSO, London.

6. Emerson, H. (1962) Survey of Problems Before the

Construction Industry (The Emerson Report), HMSO, London.

7. Banwell (1964) Committee on the PlaCing and Management

of Building and Civil Engineering Work, HMSO, London.

8. Riggin, G. and Jessop, N. (1965) Communications in the

Building Industry, Tavistock Publications

9. Bennett, 1. and Jayes, S (1995) Trusting the Team; The

best practice guide to partnering in construction, The
University of Reading, Centre for Strategic Studies in
Construction.

10. Baden-Hellard, R. (1995) Project Partnering: Principles

and Practice Thomas Telford Publications, London.

II. Lorraine, R.K. (1994) Project Specific Partnering.

Engineering, Construction and A rchitectural Management,
VoU,No. 1. pp. 5-16.

12. National Economic Development Council. (1991)

Partnering: Contracting without Conflict. NEDC, London,
June 1991.

13. Lamming, R. (1993) Beyond Partnership: Strategies for

Innovation and Lean Supply, Prentice-Hall.

14. Cooper, R.D. & Leverick, F. (1995) Supplier Role in

Product Development: A study of the automotive industry,
Final Report, University of Michigan's Japan Technology
Management.
15. Benchmark Research. (1993) The 1993 Manufacturing A
ttitudes Survey, Basingstoke, UK: Computervision Ltd,
January.

16. Hammel, G., Doz, Y. and Prahalahad, C. (1989)

Collaborate with Your Competitors and Win. Harvard
Business Review, Jan-Feb.

17. Contractor, FJ. and Lorange, P. (1988) Co-operative

Strategies in International Business: Joint Ventures and
Technology Partnerships between Firms, Lexington Books,
Lexington, MA.

18. McDermott, P. and Alsagoff, S.A. (1994) Relational

Contracting: A prognosis for the UK construction Industry?
in CIBW92, Procurement Systems Symposium, East Meets
West, Hong Kong, December 1994.

19. Alsagoff, SA (1995) Construction Transaction Cost

Conflicts: Analysis of Dispute Triggers in Construction
Contracts, in TGI5: Construction Conflict: Management and
Dispute Resolution, Japan, October 1995.

20. Koskela, L. «(I 992) Application of the New Production

Philosophy to Construction. CIFE Technical Report No.72,
Centre for integrated Facility Engineering, Stanford
University, Stanford, California.

21. Miyashita, K. and Russell, D.W. (1994) Keiretsu: Inside

the Hidden Japanese Conglomerates, McGraw-Hili, Inc., NY.

22. Sako, M. (1992) Prices, Quality and Trust: Inter-firm

relations in Britain and Japan Cambridge University Press:
Cambridge.

IMPROVING THE MATERIALS SUPPLY

SYSTEM IN SMALL SIZED BUILDING

FIRMS

C.T. Formoso

NORIE Federal University of Rio Grande do Sui, Porto Alegre,

Brazil

V.H. Revelo
Fundacion Ecuatoriana de Ingenieria, Quito, Ecuador

Abstract

This paper presents a research study aimed at developing a

method for improving the

materials supply system in small sized building firms

using TQM principles. The study

involved three companies from the Brazilian building

industry, which worked

cooperatively through several stages of TQM

implementation. The proposed method is

based on simple well known quality techniques for problem

identification, analysis and

solving, such as flowchart, brainstorming, checklist,

Pareto diagram, etc. The paper

points out some of the difficulties in applying such

techniques and principles in small

sized building firms and discusses some typical problems

found in materials supply

systems of such companies in Brazil.

Keywords: Quality management, materials management,

materials supply system

Resume

Cet article pn!sente une recherche qui a pour but Ie

developpement d'une methode pour

ameliorer Ie systeme de fourniture de materiaux dans les

petites entreprises de biitiment,

en utilisant les principes de gestion de la qualite totale.

L' etude a entoure trois

entreprises de I'industrie du biitiment bresilienne, qui

ont travaille conjointement au

travers les differents stages de I'implantation de la

gestion de la qualite totale. La
methode proposee s'est basee sur des techniques de qualite
bien connues pour

I'identification de probleme, analyses et resolution,

telles que diagramme de flux,

"brainstorming", "checklist", diagramme de Pareto, etc.

L'article met en evidence les

difficultes de I'application de telles techniques et

principes dans les petites entreprises,

et met en question quelques problemes typiques rencontres

dans les systemes de

fourniture de materiaux de ces entreprise au Bresil.

Mots cles: Gestion de la qualite, gestion de materiaux,

systeme de founiture de

materiaux

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

1 Introduction

Materials account for a very large percentage of building

costs. In recent years, the

proportion of building materials in terms of cost has

increased more than labour. In

Brazil, the cost of materials can amount to as much as 60

to 65% of the project cost

[1]. In addition, the lack of materials is one of the most

common causes of delays in

construction [2]. Despite the high percentage of materials

in the total cost, the materials supply

process is often neglected. While the manufacturing

industry spends 1 % of its costs in

the supply system management, the construction industry

spends only 0.15% [3]. Some studies in the field of
materials management have concluded that effective

materials management systems will result in 6 to 8%

improvement in labour

productivity, improved cash flow, reduced bulk materials

surplus, reduced materials

management human resources, improved vendor performance,

reduced requirement for

physical warehouse facilities, quantity purchasing

discounts, minimized cost impact of

change orders, and fewer project delays [2] [3]. The

process of supplying materials to building sites is fairly
complex, even for a

moderate construction project. It involves many steps,

carried out in several different

departments, such as design, purchasing, production,

accounting, etc. The number of

materials is very large, and there is a wide variety of

suppliers, ranging from small sized

low technology firms to modern capital intensive

industries. The efficiency of materials supply is also
strongly related to the strategic posture of

the firm, because it is dependent on the kind of

relationship that is established with each

supplier. This paper describes the main results of a

research project aimed at developing a

method for improving the materials supply system of small

sized building firms using

TQM principles and techniques. The study involved the

development of improvement

projects in three different companies which were working

cooperatively in quality

management programmes.

2 Materials supply process

Leenders & Blenkhorn [4] classify the contribution of the
materials supply system

towards achieving the objectives and aims of the

organization in three stages:

• Negative stage: materials supply is organized in a

bureaucratic way, rather than strategic. Many important
decisions in the organization are taken without
considering the materials supply system. Each element in
the net works independently, without taking into account
the global impact of their decisions.

• Neutral stage: supply operations are managed by a

specific department or sector, which works towards
eliminating some of the inefficiencies in the supply
process. However, materials supply still has a limited
role in the establishment of the company strategy.

• Positive stage: the materials supply system is thoroughly

integrated in the organization, participating in the
definition of important strategic guidelines. The staff
involved in materials supply have to identify important
strategic opportunities through their work. Besides, the
other sectors are encouraged to support the effort to
improve the materials supply system. Materials supply
should be considered a process, rather than a department,
which

involves a complex net of internal clients and suppliers.

Decisions are made at distinct

managerial levels. The supply net can be seen in three

levels [5]:

• Internal supply net: includes all departments of the firm

involved in the supply process, such as design, planning
and costing, purchasing, accounting, production, etc.

• Immediate supply net: includes direct suppliers and

clients.

• Total supply net: includes all suppliers involved, such

as suppliers of suppliers. It is necessary to understand
the needs and limitations of other intervenients in the

supply net, in order to improve the performance of each

individual operation and turn

the whole process profitable. If there are inefficiencies

in any part of the net, this may

affect the performance of other participants It may be

difficult to consider the total supply net in decision
making since most of

the net is out of the firm's control. However, such a view

brings several advantages to

materials supply management: (a) places the materials

supply operations in a

competitive context; (b) helps identifYing key partners;

(c) changes the focus from short

term opportunism to long term profitability; (d) avoids

sub-optimal solutions; and (e)

enables the organization to perform major changes in its

strategy [5]. This study is limited to improving the
performance of the materials supply net by

intervening in the internal supply net, because of the

limited time and resources for

carrying out the research. There is another work being

developed at the Federal

University of Rio Grande do Sui which aims at improving

the relationship between·

small sized construction companies and their suppliers.

3 Methods and techniques for process improvement

One of the main difficulties for improving a process is the

fact that decision making

tends to be ad hoc, intuitive, not based in data and

facts. Besides, errors tend to be

attributed to particular circumstances, such as the

performance of individual people or

departments, rather than to the efficiency of the whole

system [6], because of the lack

of a systemic understanding of the organization. Shared

decision making is one of the key principles ofTQM. It
ranges widely, from
joint consultation to full delegation [6], and is usually
based on the work of quality

teams. There are some simple well known techniques which

can make the work of quality

teams more effective and organized. The most common ones

are: flowchart,

brainstorming, checklist, Pareto diagram, cause-effect

diagram, histogram, and control

chart. These techniques inherently require participation

and involvement by all

members [7]. They also encourage the use of data and facts
in decision making and the

development of a systemic understanding of the process by

all the people involved,

including the notion of internal client-supplier

relationships.

Ishikawa [8] points out that those seven quality techniques

are effective in 95% of

the problems. However, although previous work has shown

that learning each of the

techniques is relatively easy, there are major

difficulties in carrying out an improvement

project, which are mostly related to the lack of

involvement of the quality team

members and the need for a consistent method, i.e. the

logical sequence in which such

techniques are applied.

4 Materials supply improvement project

The method for improving the materials supply system was

developed in three different

small sized building companies which were carrying out

quality programs in a
cooperative way within a group of six firms. All of them
had less than 100 employees,

used traditional building technologies, and were mostly

involved in speculative house

building. Cooperative TQM implementation has already been

practiced in other countries,

such as Norway, and has been widely adopted in Brazil for

implementing TQM in small

sized companies. It brings a number of advantages, as

pointed out by Hansen &

Sjoholt [9]: (a) companies learn a good deal from each

other; (b) each firm tends to

engage themselves thoroughly in the project, because of

the pressure from the other

ones to report on the internal progress at each meeting;

(c) they get to know each other

better, a factor that can be useful in other contexts; and

(d) the cost of consultancy

work becomes cheaper. Each of the three companies had a

quality committee, formed by four to eight

people, who met regularly every one or two weeks. The

chairperson of the committee

was the company quality manager. The members of the

quality committee were

representatives of the different departments or sectors of

the firm. The work of the

committee was supervised by a researcher from the

University. Usually once a month

there was a meeting gathering directors and the quality

managers of the six companies

and the research team to present the work carried out so

far and to plan the next stages. Differently from the
concept of quality control circles, the quality committees
had a
more strategic role in the quality program. The main
objective of the committee was to

plan and control the quality program, and also to carry out
interdepartmental

improvement projects. Initially, it was suggested that the

directors of the company should not participate in

the committee, since the aim was to delegate some of the

higher management

responsibilities to that body. However, the participation

of the directors in the

committee was of key importance in some of the companies,

since in a small sized firm

even the owners get directly involved in materials supply,

production, and other

operational processes. One of the initial actions of the

quality program was to give a 16 hour course on

quality concepts and tools to the participants of the

committee. After the course, the

decision was made to develop a quality improvement project

which would be common

to some of the companies in the group, in order to practice

the application of concepts

and techniques. An improvement project concerned with the

materials supply process was chosen by

three of the companies for the following reasons:

• There was a need to consolidate the quality committee,

and to train their members

on the application of quality concepts and techniques. As

the supply system involves

several departments, it was possible to engage most

members of each committee in

the project.

• It was desirable to develop in each member of the

committee a broader view of the

firm and a clear understanding of the interrelationships

between different

departments, as well as a notion of internal

supplier-client relationships. Developing

an improvement project in the materials supply system was

an opportunity to

understand the inter-dependency between departments.

• All companies had defined as a priority to deal firstly

with problems mostly related to

the main office, and only later to work on issues related

to site management.

• Deficiencies in the supply system had been pointed out as

one of the three most

important problems in those firms.

5 Application of the method

5.1 Problem identification

The objective of the first stage of the method was to

identify the most important

deviations in the process and their causes. It was divided

into three main steps: (a)

definition of the actual process flow and identification

of internal client/suppliers

relationships; (b) brainstorming; and ( c) prioritization

of problems.

A flowchart was used to represent formally the materials

supply process. Only one

of the companies had a material supply flowchart before the

project started. However,

that flowchart did not represent the real process, since it

had not been produced with a

strong commitment to model reality, and based on the views

of all the people involved.

Some problems were actually been solved while the flowchart

was being built. For

instance, there were problems related to the lack of

responsibility definition which had

to be negotiated during the meetings of the quality

committee. Also some unnecessary

zigzags were identified and eliminated. That had not

happened before since the process

had never been formally registered or discussed in a

systematic way.

The initial improvements carried out at that stage were

mostly related to

documentation formatting, introduction of new documents,

minor changes in the

process flow, and decentralization of responsibilities.

The resulting flowcharts were relatively complex, because

of the complex nature of

materials supply. A typical materials supply flowchart can

have more than 50 steps,

which makes it difficult for some of the members of the

committees to understand the

process thoroughly.

The production of the flowchart was one of the most time

consuming stages of the

improvement project. This was because of the initial

difficulties in starting the group

work in the quality committee. People were not used to

making decisions in groups,

and several of them found it difficult to apply the

flowchart technique to such a complex

process. Brainstorming was applied in identifying the main

causes of deviation in the materials
supply process, based on the perceptions of all the people
involved. A comprehensive

list of possible deviations and their causes was produced

for each company.

Compared to the other problem identification, analysis and

solution techniques,

brainstorming was the easiest one to be applied. It

provided an opportunity for

exchanging views and experiences and allowed the

participants to learn more about

each other's role in the process, increasing the

consciousness of internal supplier-client

relationships. Very often there were conflicts between

different participants of the

team, usually caused by disagreements on the way the

process works or should be

working. However, such conflicts had a positive influence

in the project, since they

encouraged people to have a constructive attitude towards

solving the problem [6]. As

the participants defended their point of view, they tended

to assume more responsibility

in the process.

Once all possible deviations were listed, they were

classified according to the

department which they were related to. These were:

production, design, finance,

accountancy, central depot, site depot. An Ishikawa (or

cause-effect) diagram was built

for visualizing the relationships between deviations and

their causes.

The perceptions of the participants was again considered

for ranking the deviations,
in terms of seriousness and frequency. Twenty six of them
were chosen as the most

important ones for further investigation

5.2 Data collection

5.2.1 Check list

A number of check lists were made to register the

frequency of different deviations in

the departments involved. Each department was responsible

for collecting data related

to the sub-processes in which they played the role of

internal client. For example, the

purchasing department were in charge of counting the

number of urgent material

orders. The check list was applied for a period of two to

three weeks. It allowed the

comparison of the quality committee perception with

reality. The application of the check list was not
straightforward. Although that technique

seems to be very easy to understand in theory, it was

necessary to carefully train the

people responsible for collecting data. In addition, a

pilot study had to be carried out to

avoid ambiguity in the definition of each deviation.

5.2.2 Time monitoring

A time sheet was used for monitoring both the processing

time and the cycle time for

each task in the process. This data collection technique

was applied during a one month

period in each company. Processing time is the time

effectively spent to perform a task, without considering

the waiting time. It can be used for estimating the cost

of labour in the whole process. The cycle time is measured
by observing the exact moments when the task starts and

finishes. It includes both the processing time and the

waiting time. The difference

between the processing time and the cycle time for each
task is a measure of the process

efficiency, since it allows the detection of excessive

waiting time. Time monitoring was one of the most time
consuming stages of the materials supply

improvement project in terms of preparation and training,

since it was necessary to

instruct all people involved both in defining very clearly

when each task starts and

finishes and on how to estimate the processing time. One

of the difficulties was the fact

that the process was not properly consolidated, and there

was some confusion on the

way some documents should be processed or approved.

Although the resulting data were approximate, they provided

a level of magnitude on

the way time was spent, which was helpful for identifying
some bottlenecks in the

process.

5.3 Data analysis

5.3.1 Pareto Diagram

The deviations were ranked by the frequency using Pareto

diagrams. A general Pareto

was built including all deviations. In addition, some

Pareto diagrams were produced

considering the deviations related to each department.

5.3.2 Cycle time and processing time

Table 1 shows the resulting cycle time and processing time

for each materials supply
task in one of the companies involved in the study. The
long waiting time in the tasks

"checking stocks" and "transport and delivery" indicates

these are the stages in which

there is potential for improvements in that company.

Table 2 presents the average cycle time and processing time
for the three companies.

Companies A and C have similar cycle time and processing

time, while these figures in

Company B are considerable higher. The proportion between

cycle time and processing

time in all companies were very similar. The former is

approximately three times the

later.

Table 1. Average cycle time and processing time for each

task in one of the case studies Task Cycle time Cycle time
Processing (h) (%) time (h)

Materials order 0.14 0.52 0.14

Checking stocks 7.47 27.98 0.66

Price survey 4.03 15.09 0.93

Purchase approval 0.44 1.65 0.43

Acquisition 0.23 0.86 0.18

Transport and delivery 12.77 47.83 1.66

Receiving materials from depot 0.53 1.99 0.50

Receiving materials from suppliers 0.56 2.09 0.53

Payment 0.53 1.99 0.27

Total 26.70 100.00 5.30

Table 2. Average total cycle time and processing time in

the three case studies Company A B C Cycle time
26h29min 1I9h21min 26h42min Processing time 14h52min
32h52min 15h18min Processing time (%) 2.54 12.45
17.55 8.11 3.40 31.32 9.43 10.00 5.10 100.00

The total cost of the process was estimated by considering

the cost of labour, based

on the processing time and other costs, such as telephone,

fax, and stationery. It does

not include capital costs. Table 3 presents the percentage

of the total cost in relation to

the monthly amount of purchases made in each of the

companies. In all three

companies the materials supply process was mostly done

manually.

It can be observed that all companies have very similar

costs. However, the

percentage in relation to the total cost of the purchased

materials varies considerably,

from 4.41% to 14.58%. It must be pointed out that,

although the relative cost of the

materials supply process is a measure of its efficiency,

its optimization should not be

seen as a major objective of the company, since this could

jeopardize the aim of global

efficiency.

Table 3. Percentage of the total cost of the process in

relation to the monthly amount of purchases

Company Number of sites A 4 B 8* C 3

* Refurbishment work

5.3.3 Prioritization (a) Materials supply process cost

(USS) 4,343.94 4,192.00 4,447.00 (b) Monthly amount of
purchases (USS) 98,450.00 48,023.63 28,538.00 alb (%)
4.41 8.73 15.58

Based on the analysis of Pareto diagrams and the average

cycle time and processing

time for each task, a prioritization of the problems

detected was made. Such

prioritization was important to establish a corrective

action plan (see item 5.4). The

results of this stage were very similar for the three

companies. The main problems

detected were:

• Problems related to design, such as delays,

incompleteness, lack of details, and inconsistencies
between different designs (e.g. structural and services);

• Lack of planning and organization of transportation and

delivery of materials;

• Materials ordered on short notice or verbally;

• Incomplete or inconsistent materials specification;

• Lack of estimation of the amount of materials needed;

• Delays in price surveys (or suppliers bidding), and in

ordering materials;

• Delays in checking stocks.

5.4 Corrective action plan

Through discussions involving all participants of the

quality committee, a corrective

action plan was made. A clear definition of aims and

responsibilities was achieved by

describing each action in terms of 5W1H (What? When? Where?

Why? Who? How?),

which is another well known quality management technique.

Because there was a

concern related to cost-benefit relationships, another "H"

(How Much?) was added to

the plan. The improvements chosen for the plan aimed at

blocking completely the causes of

deviations. For that reason, the plans included both long

and short term improvements.
They were mostly related to supply planning, design phase
management, qualification of

suppliers and designers, and changes in the process flow.

5.5 Documentation of the new process

The implementation of the plan was performed by each

company. The materials supply

process was then monitored in order to check whether there

were secondary deviations

as a result of the changes made.

Once the improvements in the process were consolidated, the

new flowchart was

made. A simplified 7 x 7 flowchart was produced in order to

disseminate the new

process for everybody in the company. This flowchart

divides the process into seven

major sub-processes, each of them being further divided

into seven tasks.

6 Conclusions

6.1 Work carried out by quality committees

The role performed by the quality committees varied to a

great extent, in terms of

frequency and continuity of meetings, form of

participation, and scope and emphasis of

the improvement project. It was largely dependent on the

commitment of high

management to the quality program, the previous degree of

shared decision making,

and the sort of problems which were considered priorities.

In all companies, there were difficulties in the initial

work of the quality committees,

because of the lack of experience in holding meetings

efficiently, since it was the first

formal mechanism for shared decision making established in

any of the companies.

Some of the participants did not have a clear idea about

the objectives and aims of the

committee.

It was necessary to establish a number of rules for running

the meetings, in order to

give everybody the chance of speaking out, avoid

deviation, and to create a positive

attitude towards the aims of the committee work. Rules had

to be established for time

management, documentation of decisions, participation,

etc. Training had a key importance in the performance of
the committees work.

Although quality concepts and techniques seem easy to

understand (several books on

TQM claim that), their application in complex processes,

such as materials supply

management tend to be rather difficult and time consuming.

The study suggests that

training should contain both formal classes and the

application of concepts and

techniques in real problems learning while working.

The committee played an important role in terms of

improving the integration of

different sectors of the company. It worked as a link for

the distinct departments as

well as a forum to discuss problems and negotiate changes

in inter-departmental

processes. It was also used for disseminating principles,

aims and actions of the quality

program throughout the organization. One of the

difficulties in carrying out the work by the committees was
the rate of

tum over among the members of the committees, which was

mostly caused by the fact

that the firms were in a process of rearrangement of

people due to the quality program.

6.2 Application ofthe method and techniques

Working with data and facts proved to be very useful for

the improvement project.

Many of the problems identified in the supply process were

different from what people

expected in the initial stages (based on the perception of

the group). For instance, the

Pareto diagram indicated that the most frequent problems

were not related to the

performance of suppliers but to internal inefficiencies of

the organization, often related

to previous stages, such as inconsistent design and lack of

planning.

In general all techniques were helpful in terms of making

the meetings more

objective. One of the main advantages was that all

techniques produced some kind of

documented output which gave some sort of concrete aim to

the meetings.

Very clearly, people involved found some of the techniques

more useful compared to

others. The cause-effect diagram was not considered very

useful for the kind of

process studied, and the flowchart was considered too

complex, even by managers and

engineers, not helping in the visualization of the process.

As far as data collection is concerned, check lists and

time sheets should be carefully

planned and thoroughly tested in pilot studies, before they

are applied. Some problems detected were relatively easy
to solve. In some cases, the fact that

communication had been improved in the company through the

establishment of a

quality committee was enough to create the conditions for

identifying, analyzing and

solving problems effectively.

In general, the development of the improvement project

helped the three companies

to consolidate the quality program and the work of the

quality committee.

1. Picchi, F.A. (1993) Sistemas da qualidade: uso em

empresas de construr;i1o. Sao Paulo, EPUSP. Doctorate
Thesis

2. Construction Research Institute (1987). Project

materials management handbook. Austin, Texas, USA.

3. Marsh, J.W. (1985) Materials management: practical

application in the construction industry. Cost
Engineering, ASCE, 27(8), pp. 18-28

4. Leenders, M.R. and Blenkhorn, D.L. (1991) Marketing

reverso: um novo conceito no relacionamento
compradorlvendedor. Sao Paulo, McGraw-Hill.

5. Slack, N. (1993) Vantagem competitiva em manufatura:

atingindo competivividade nas operar;oes industriais. Sao
Paulo, Atlas.

6. Hedenstad, K. and Meyer, B.O. (1993) Establishing a

quality system: pitfalls and psychological problems.
Oslo, Norwegian Building Research Institute.

7. Rosenfeld, Y. et al. (1992) Using quality circles to

raise productivity and quality of work life. Journal of
Construction Engineering and Management, ASCE,
118(1),pp.17-33

8. Ishikawa, K. (1982) Guide to quality control. Tokyo,

Asian Productivity Organization.
9. Hansen, R. & Sjoholt, O. (1989) Quality management: a
challenge for the construction industry. Oslo, Norwegian
Building Research Institute.

BENEFITS OF LONG-TERM

RELATIONSHIPS: UK CONTRACTORS'

EXPERIENCE

A.M. Haksever and H.S. Kim

Department of Construction Management and Engineering,

University of Reading, Reading, UK

G. Pickering

Faculty of Construction Management, Chongqing Jianzhu

University, Republic of China

Summary

This paper presents the results of a study into the

benefits of long term relationships

(LTR) between contractors and their subcontractors in the

UK construction industry.

The research was prompted by the awareness that although

the practice of L TR is

common in Japan, it is not generally considered so in the

UK. Consequently, many

potential benefits of such relationships are not widely

taken advantage of. Initially, the

Japanese experience is examined and then used as a basis

for a questionnaire survey of

UK contractors. In UK business environment, commercial

pressures tend to reduce

the weight placed on a successful working relationship.

This is confirmed by

demonstrating commercial factors are considered more

important than relationship

related factors in the selection process. However, the gap

between these two factors

does not appear to be significant. Furthermore, the

results show that contractors who

are in a mode of LTR with their subcontractors have mainly

experienced indirect

benefits such as effective communication, less conflict and

risk. Far fewer claim to

have experienced lower costs or shorter times. Some

implications of the results are

discussed and suggestions for further L TR research are

made.

Keywords: Contractors, Japan, long term relationship,

subcontractors, UK

Sommaire

Cet article presente les resultats d'une etude concernant

les bienfaits d'une longue

relation (LTR) entre entrepreneurs et sous-entrepreneurs

dans Ie domaine de l'industrie

de la construction au Royaume-Uni. Cette recherche vient

du fait que, bien que la

pratique de LTR soit repandue au Japon, elle ne l'est pas

en Angleterre. Par

consequant, plusieurs bienfaits potentiels de ce genre de

relations ne sont pas tres bien

exploites. Initiallement, l'experience japonaise est

examinee puis utilisee comme base

pour une enquete sur les entrepreneurs anglais. Dans

l'environnement des affaires

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Span. ISBN 0 419 22230 8.

anglaises, les pressions commerciales ont ten dance a

reduire Ie poids place sur une

relation couronnee de succes. Ceci est prouve en les

demontrant que les facteurs

commerciaux sont consideres de facon plus importante que

facteurs relationnels dans

la selection du processus. Cependant Ie fosse entre ces

deux facteurs ne semble pas

considerable. En outre les resultats demontrent que Ies

entrepreneurs qui sont dans Ie

mode de L TR avec leurs sous-entrepreneurs, ont experimente

des bienfaits, comme

par exemple une communication effective, et moins de et

conflicts et risques.

Quelques implications de ces resultats sont develop pes et

discutes ainsique d'autres

suggestions concernant les recherches de L TR.

1 Introduction

The UK construction industry in the mid-1990s is very

different from the industry in

the 1980s. The industry has been experiencing an

exceptional change mainly due to

political and economical pressures. One of the major

changes is that an increased

amount of construction activity is now being

subcontracted. It is reported that over

90% of construction work is subcontracted on the majority

of contracts. This suggests

that the contractor is at greater risk if the

sub-contractors fail, as more risk is passed to

the latter [1].

This changing situation makes the role and performance of
the subcontractor

critical to project success, yet subcontracting does not

have a glamorous image in the

UK [2, 3]. This is due to many reasons such as large

numbers of bankruptcies, high

levels of disputes and claims, and poor performance. The

uneasy and short term

nature of the relationships between contractors and

subcontractors could partly account

for this negative image. A great amount of friction,

dissatisfaction and mismatching

of goals were reported by various authors in their

investigations into the relationships

between contractors and subcontractors in the UK [1]. Each

party's viewpoints have

been reported and contrasted. It is interesting to quote a

statement which could reflect

contractors' point of view regarding the working

relationships with their

subcontractors:

"Whilst we try to maintain a good working relationship and

ensure repeat business

with approved specialists, the competitive tendering system

means we must see price

as the overriding feature and frequently this means an

inability to offer repeat

business." [1]

The statement above could be a fair indication of the

reason why relationships

between contractors and subcontractors are short-lived in

the UK. As a consequence,

an opportunity to accumulate skills and knowledge gained

from working with the

same subcontractor is lost. To overcome this limitation,

Gray and Flanagan[l] call for

a new working relationship where the contractor can

maintain all his sub-contractors at

a high level of efficiency and thus have the ability to

complete the work. It is

suggested that this can be achieved by working with the

same subcontractor

consistently over a long period of time, that is, on a

long term relationship (L TR) basis

[4,5]. This suggestion is based on a close investigation of

the Japanese construction

industry where LTR plays a major role in the achievement of

efficiency and business

success [6]. It is suggested that the great success of

the Japanese building industry depends on

long term relationships. Japanese contractors overcome many

of the problems

discussed above by working together with tightly knit

families of subcontractors for

decades. These long term relationships are based on trust

and a sense of brotherhood.

Contractors set tough standards but help their

subcontractors to achieve them. They

pay a fair price for work and feel responsible for ensuring
that their subcontractors are

profit making and have opportunities to grow. In return,

subcontractors strive to

deliver the agreed works to the specified standards. They

are willing to try new

methods and feel responsible for proposing ways of

improving quality, productivity
and so on [4]. While the practice of L TR is very common
in Japan and its benefits are

widely acknowledged in practice and literature, it is not

generally considered so in the

UK. As a consequence, an opportunity which L TR could offer

seems missing in the

UK construction industry [7]. The Japanese experience

could be a good example to support the argument that

LTR should be exercised in the UK as well. However, one

may argue that, due to

different business and corporate environment in the two

countries, there is a slim

chance that L TR could be used in the UK. As Table 1

shows, relationship-related

business environments are quite different in the UK and

Japan.

Table 1. Relationship-related business environment in UK

and Japan UK Japan

General Environment • Individualism • Group orientation

Corporate Level • Business relations based upon • Business
relations based upon competition trust and human relations
• Short-term view of the business • Long-term view of the
business • Business contact based upon • Human relations
based business competition on price and guality contact
forging long term relationship

Source: Adapted from Capital & Countries Report: Japanese

Construction Industry (1987) It may seem that the table
above supports the claim that L TR is merely something

Japanese and difficult to be implemented in UK

environment. This might be a reason

that makes UK practitioners hesitate to accept that LTR is

workable. Furthermore,

there is little empirical evidence as to whether or not

the use of L TR in the UK

generates the benefits proposed in the literature. The

discussions above pose two important questions in studying
LTR issues: (1) To

what extent are relationship-related factors considered

important above others for

invitation to bid and in final selection when

sub-contracting? (2) Have the benefits of

LTR been experienced by UK contractors or are those

benefits merely speculated in

the literature? If experienced, which benefits are most

common?

The objective of the paper is to investigate these two

issues in order to demonstrate

the current status of L TR practice in the UK construction

industry. It is hypothesised

that benefits of L TR are widely experienced by the

contractors in such relationship but

relationship-related factors are overtaken by commercial

factors at the point of

subcontracting. To fulfil the research objective, a

questionnaire survey was conducted

with randomly selected contractors in the UK.

Following this introduction, the paper next presents the

research methodology

employed for this investigation. Then, findings regarding

the importance of

relationship-related factors in the selection process and

contractors' experienced

benefits of LTR are discussed. Finally, some suggestions

for further LTR research are

made.

2 Thesurvey

A questionnaire survey of 53 contractors in the UK was

carried out, each firm
receiving 5 questionnaires. Altogether, 32 completed
questionnaires were returned

representing a 12.1 % response rate. Only top level

management personnel were asked

to complete the questionnaire. Job positions of the

respondents vary and include

titles such as chief executive officer, procurement

director, contract administrator and

so on. Common characteristics of the respondents are:

first, they have a vast amount

of experience in the industry with an average of 23 years;

second, they are in a

position which could reflect overall company policy. These

two criteria justify the

reliability of the data source for a L TR study in that

they are the right people to be

approached to seek information on the experienced benefits

of L TR and assess the

importance of the selection factors for both invitation to

bid and final selection.

Subcontractors chosen by the respondents for the

questionnaire vary in trade. More

than half of the respondents have had a relationship with

the subcontractor for more

than 10 years, see Table 2.

Table 2. Longevity of relationship of the respondents with

the subcontractors

Longevity of relationship

with the subcontractor (years) less than 5 5-9 10 19 over

20

Number of the respondents 3 13 11 5

Although it is difficult to draw a norm by which L TR

could be distinguished from
non-L TR, it is reasonable to propose that the minimum of
over 5 years of relationship

is sufficient to allow an opportunity to have repetitive

business and thus to experience

its benefits. All the respondents with LTR are either

satisfied or very satisfied with

their chosen subcontractors.

3 Selection factors for subcontractors

The selection process is important because the nature of

the contractor-subcontractor

relationship is project-based. As discussed earlier,

commercial factors are generally

seen as overriding features in the selection process.

However, it is important to

analyse where relationship-related factors are placed in

the process in order to

investigate how the value of long term relationships is

perceived by the contractors.

This analysis enables us to see the relative importance of

relationship-related factors

over others for invitation to bid and final selection.

A total of 12 selection factors were identified from

various literature sources and

presented to the respondents. A three-level scale of not

important, important and very

important was used to indicate the level of importance. In

order to rank the relative

importance of the selection factors for invitation to bid

and final selection, each answer

is given a weight of; not important (1), important (2) and

very important (3). A score

of each factor is calculated by the following formula: L n

x w where n is the total

number of respondents giving a particular answer and w is

the weight of that answer.

For this analysis, only 30 respondents' answers are

usable. This means each selection

factor has got a chance of scoring a minimum of 30 (n x 1)

and maximum of 90 (n x

3). The ranks and scores of the selection factors are

presented in Table 3. Table 3. The ranking of importance
of selection factors for sub-contractors Rank For
invitation to bid For final selection Experience of
similar projects (74) Previous project performance (78) 2
Previous project perfonnance (72) Current work load (76) 3
Previous disputes (71) Lowest bid (75) 4/5 Previous
experience with the sub (66) Previous working relationship
(74) Previous working relationship (66) Previous disputes
(74) 6 Technical/managerial capability (63) Experience
of similar projects (73) 7 Current work load (61)
Previous experience with the sub (71) 8 Reputation (58)
Technical/managerial capability (69) 9 Bank reference
(56) Bank reference (67) 10 BS 5750: quality systems
(50) Reputation (65) 11 Location of the sub-contractor
(49) BS 5750: quality systems (53) 12 N/A Location of
the sub-contractor (51)

As Table 3 shows, the top three factors considered

important for invitation to bid

are: experience of similar projects, followed by previous

project performance and

previous disputes with a close range of scores. The top

three places in final selection

are previous project performance, current work load and

lowest bid, also with a close

range. Overall, commercial factors are considered more

important in both stages. On

the other hand, relationship-related factors which are

highlighted are ranked middle

top for invitation to bid and middle for final selection.

This result confirms that
commercial factors are considered more important in the
selection process reflecting

the short-term and commercial-driven attitude of the

industry. It also confirms earlier

studies in that the industry's attitudes has not changed at

least as far as contractors are

concerned.

However, it must be noted that the gap between commercial

and relationship-related

factors in terms of their relative importance is not very

significant. An implication of

this is that if it is demonstrated that benefits of L TR

are experienced by the UK

contractors, this could support an argument that

relationship-related factors should be

given higher priority. In this regard, the next section

examines whether or not

respondents experience the benefits of L TR when it is used.

4 Experienced benefits of L TR with the sub-contractors

This section aims to find out whether or not contractors in

a mode of LTR with their

sub-contractors have experienced benefits and which ones

are experienced most. To

fulfil this objective, 15 major potential benefits of LTR

from the literature have been

identified and presented. These benefits are categorised

into 6 groups which are

cost/price, time, quality, risk, conflict and

communication. The respondents were

given the freedom to choose a subcontractor they wish to

consider, as long as the

chosen subcontractor fits the criteria which are that they

know the subcontractor very
well and they have been working together for a long time.
They were then asked to

indicate to what extent they experienced the benefits of L

TR with their subcontractors.

A five point agreement scale of strongly disagree,

disagree, undecided (neither

disagree nor agree), agree and strongly agree was used to

indicate the level of

experienced benefits. However, in the analysis of the data,

strongly disagree and

disagree options are combined into one group due to a

small sample size. The same is

also done for strongly agree and agree at the other end of
the scale. The result shows that contractors who have
worked with their sub-contractors in a

mode of long term relationship have experienced most of

the benefits of L TR. The

summary of the analysis is shown in Table 4. The most

experienced benefit is better

co-operation. It is followed by better team spirit, more

confidence of success and

effective communication. 8 out of 15 benefits have been

experienced by more than

70% of the contractors.

Table 4. EXEerienced benefits of lon~-term relationshiE

Cate~0!1: Benefit Disa~ree Undecided A~ree Time fewer
time overruns * 4 (12.9%) 5 (16.1 %) 22 (71.0%) shorter
project completion time 4 (12.5%) 13 (40.6%) 15 (46.9%)
Cost/Price lower bidding price 6 (18.8%) 13 (40.6%) 13
(40.6%) fewer cost overruns * 4 (12.9%) 8 (25.8%) 19
(61.3%) less supervision cost 8 (25.0%) 13 (40.6%) 11
(34.4%) Quality better quality 1 (3.1%) 11 (34.4%) 20
(62.5%) fewer defects 2 (6.3%) 9 (28.1%) 21 (65.6%)
Risk more willingness to share risk 4 (12.5%) 6 (18.8%)
22 (68.8%) more confidence of success 0(0.0%) 3 (9.4%) 29
(90.6%) less project risk 4 (12.5%) 4 (12.5%) 24 (75.0%)
Conflict fewer disputes 1 (3.1%) 6 (18.8%) 25 (78.1 %)
fewer claims and litigation 2 (6.3%) 2 (6.3%) 28 (87.5%)
better co-operation 0(0.0%) 0(0.0%) 32 (100.0%) better
team spirit 0(0.0%) 2 (6.3%) 30 (93.8%)

Communication more effective communication o ~O.O%~ 4

~12.5%~ 28 ~87.5%~

* Sample size is 31 due to an incomplete answer. It is

interesting to note that most of the benefits which
achieved over 70%

agreement fall into the risk, conflict and communication

categories. These categories

could be characterised as indirect benefits while time,

cost/price and quality as direct

benefits. The contractors have experienced more indirect

benefits than direct ones. In

addition, a close examination of the experienced direct

benefits of L TR reveals that

the least experienced are in the cost/price group, followed

by time and quality. This aspect of the result can be a
possible explanation for the less common practice

of L TR among contractors in the UK. Contractors who have

not been in a L TR mode

may be reluctant to use it due to the characteristics of

indirect benefits which are

qualitative in nature and difficult to observe in an

explicit manner. It may be a

common sense that these indirect benefits should eventually

contribute to direct ones

by creating better working environment and reducing risks.

However, contractors who

do not use LTR may need to be convinced about this

contribution in the first place,

although it is very difficult to prove it in the short

term. Nevertheless, it should be

emphasised that although most of the contractors that

participated in the questionnaire
have not achieved as many direct benefits as indirect ones,
they all are satisfied or

even very satisfied with their sub-contractors and maintain

a relationship for a long

period of time. This provides strong evidence that LTR is

not merely something

Japanese and should be beneficial to UK contractors if

they are in such a relationship.

The important implications of the findings above are

two-fold. First, researchers in

LTR studies should not concentrate only on such direct

benefits when attempting to

measure and promote the benefits of LTR. This may lead to a

narrow understanding

of the benefits of LTR. Alternatively, further research

should look into the qualitative

nature of LTR benefits in terms of risk reduced, effective

communication and better

working environment. Second, in order to promote L TR in

the construction

community, there is a need for a technique which can be

used to demonstrate in a more

explicit manner the contribution of indirect benefits to

ovemll project performance.

5 Conclusion

The paper demonstrated that the benefits of L TR mentioned

in the theory and achieved

in Japan have been experienced by most of the UK

contractors who have worked with

their subcontractors in a LTR mode. Most experienced

benefits are indirect ones such

as less risk, less conflict and more effective

communication. The direct benefits such
as cost/price, time and quality are not experienced as
much. Furthermore, it is

confirmed that relationship-related factors are not

considered as important as

commercial factors at the point of subcontracting. These

findings explain why L TR is

not commonly practised between contractors and

subcontractors in the UK

construction industry characterised by short-term and

commercial-driven attitudes.

The result of this paper suggests that future studies

should give emphasis to the

qualitative aspects of the L TR benefits and take a global

view. Also, more research is

needed into inter-organisational relationships in

construction upon which further LTR

research can be based. Furthermore, more studies are needed

into the subject to shape

up LTR theory in the context of the construction industry

and their outcomes should

constantly be disseminated to practitioners to promote the

implementation of L TR.

Today's business environment requires more co-operation and

collaboration

between organisations to improve business performance and

thus to achieve value for

money for their clients. L TR is a pro-active response to

it.

1. Gray, C. and Flanagan, R. (1989) The Changing Role of

Specialist and Trade Contractors, Chartered Institute of
Building, Ascot, UK.

2. CSSC. (1989) Investing in Building 2001, Centre for

Strategic Studies in
Construction, The University of Reading, Reading, UK.

3. CSSC. (1988) Building Britain 2001, Centre for Strategic

Studies in Construction,

The University of Reading, Reading, UK.

4. Bennett, J. (1991) International Construction Project

Management, Butterworth.

5. Bennett, J. and Jayes, S. (1995) Trusting the Team,

Centre for Strategic Studies in

Construction, The University of Reading, UK.

6. Bennett, J., Flanagan, R. and Noonan, G. (1987) Capital

and Countries Report:

Japanese Construction Industry, Centre for Strategic

Studies in Construction, Reading, UK.

7. Haksever, A.M., Kim, H.S. and Pickering, G. (1995)

Collaborative long-teon relationships in UK construction
industry: A lost opportunity?, Proceedings of the
IlthARCOM Conference, University of York, York, UK.

Acknowledgement

The authors wish to thank Professor John Bennett, Director

of Centre for Strategic

Studies in Construction for the insight and guidance he

provided during this research

project.

ORGANIZATIONAL EFFECTIVENESS OF

THE CONSTRUCTION FIRM: A

FRAMEWORK FOR ASSESSMENT

V.K. Handa and A. Adas

Department of Civil Engineering, University of Waterloo,

Waterloo,

Canada

Abstract
Assessment of organizational effectiveness in the context
of the construction finn is

typically based on project perfonnance measures where

finn's effectiveness is judged by

its ability to achieve specific project goals that relate

to costs or time of completion.

These ani crude indicators at best and could be misleading

in certain instances. An

assessment framework that incorporates the study of

important organizational attributes

and their relationships to overall firm's perfonnance would

give the construction finn a

better tool to monitor its organizational effectiveness.

First, a brief review is given of the various theoretical

approaches used by researchers

in the study of effectiveness and its assessment. Secondly,

the competillg values

approach is discussed as a suitable approach. The approach

consolidates most criteria

of effectiveness into four ideal organizational

configurations or types with dominant

values that could be pursued by a finn in its quest for

effectiveness. These

configurations are utilized to define variables from four

general categories of

organizational characteristics relevant for examining

effectiveness: structural context;

person-oriented processes; strategic means; and

organizational flexibility, rules and

regulations. These variables are hypothesized to influence

effectiveness of the

construction finn. The hypothesized relationships forms the

basis on which an
assessment methodology can be developed and validated.
Further research steps are

outlined as how to develop an assessment methodology based

on the proposed

framework.

Kevwords: ComDetin!! values approach, effectiveness.

assessment, construction finn

Abstract: L'evaluation de l'efficacite organisationnelle

aans Ie ContexlC Q unc: C:UU"'}JU~"

de construction est generalement basee sur la mesure des

perfonnances lors de projets, oil

l'efficacitc! de l'entreprise est jugee sur son aptitude

Ii atteindre des objectifs particuliers

du projet relatifs au cout ou a la duree de son

accomplissement. Ces donnees sont brutes

et peuvent mener a des conclusions erronees. Un cadre

d'evaluation incluant les

proprietes d'organisation importantes ainsi que leur impact

sur les perfonnances de

l'entreprise devrait donner aces dernieres un outil plus

approprie pour visualiser leur

efficacite organisationnelle.

En premier lieu, une revue generale des differentes

approches theoriques utilisees par les

chercheurs dans l'etude de l'efficacitc! et son evaluation

est faite. En second lieu,

l'approche des valeurs concurrentes est discutee comme

etant une approche appropriee.

Cette approche regroupe les criteres d'efficacitc! en

quatre configurations ou types

d'organisations ideales avec des valeurs dominantes sur

lesquelles l'entreprise peut se
baser dans sa quete d'efficacite. Ces configurations sont
utilisees pour la defmition de

variables a partir de quatre categories generales de

caracteristiques, capita1es dans

l'examen de l'efficacite: Ie contexte structurel, les

processus relatifs au personnel humain,

les moyens stratc!giques, les regles, la reglementation et

la flexibilitc! d'organisation. Ces

variables sont hypothetiques utin d'influencer

l'efficacite de l'entreprise de construction.

Les relations hypothetiques fonnent la base sur laquelle

une methodologie d'cvaluation

peut etre developper et valider. D'autres etapes de

recherche sont soulignees, entre autres,

la maniere de dolvelopper une methodologie d'evaluation

basc!e sur la cadre propose dans

la presente etude.

I Introduction

Principles and tools of emerging management strategies such

as total quality

management (TQM), strategic management and planning, and

conformance to ISO

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

9000 standards, have stirred structural and strategic

change in many organizations,

mainly because they are being advocated to improve

organizational effectiveness.

Researchers have offered a variety of models for examining

organizational

effectiveness, yet there is little consensus as to what

constitutes a valid set of

effectiveness criteria In order to properly evaluate the

impact of adopting these

principles, management in construction firms must address

two fundamental questions

related to organizational effectiveness: what theoretical

approach or model is most

appropriate to define and understand it? and how suitable

is that approach as a

framework on which a practical methodology can be developed

to assess effectiveness?

The study of organizational effectiveness represents a

complex part of organization

theory due to the various definition and approaches that

can be utilized to model it

Many researchers have offered a variety of models for

examining effectiveness, yet

there is little consensus as what constitutes a valid set

of effectiveness criteria [1] In the

literature many criteria and techniques were used in

developing measurement. The first

is traditional and is done by applying one of the common

approaches such as the goal

model as the case in Pennings and Goodman's framework [2]

Other techniques such as

Hitt's [3] also utilize a single approach however they rely

on the more elaborate models

such as the resource model or strategic adaptation model.

However, most commonly used methodologies are based on the
goal approach.

They measure the level of achievement of a specific goal

or goals. Three commonly

used indicators in construction ask if work was completed

on time, within budget, and
if it met certain quality standards. Other criteria such as
the level of achievement of

certain goals in term of profits and desired levels of

productivity are commonly used by

construction firms. Other indicators measure levels of

achieved profits and/or levels of

workers' productivity and compare these levels to specific

levels that were established

as goals. Profit indicators by themselves are crude and

shortsighted. Clearly an

organization can make a profit without being effective.

Ineffective organizations make

profits by cutting corners and improper practices; such

organizations do not stay in

business long These indicators do not give enough

information about organizational

effectiveness of the firm The use of inappropriate

measures is one of the reasons that

leads to low performance. Improper assessment of

effectiveness by firms lead to

inaccurate conclusions which in turn result in

sub-standards performance. Although

most managers use some indicators (mostly financial), these

do not capture all of the

salient elements of effectiveness and can not be relied

upon as predictors of

effectiveness. Development of better methods to measure

effectiveness should be a high

priority in order to achieve and maintain improved

performance.

2 Effectiveness

2.1 An Overview
There are various views of organizations advanced by
different theorists that compete

for the attention of researchers, each has its strength

and weakness. Theorists of the

classical school, developed universal principles or models

that would apply in all

situations and treated organizations as closed systems. For

example, Weber's theory of

bureaucracy that identified characteristics of bureaucratic

authority in the organization,

how formalized rules and regulation are used to govern and

control the firm through

hierarchically structured positions in order to achieve

effectiveness. One of the principal

drawbacks of classical theorists is that they tend to

treat all organizations as machine

like closed systems and that organizational control and

hence effectiveness can be

achieved by division of work, establishing lines of

authority, and discipline. Influence of

external environment is not recognized.

The classical view of organization was later challenged by

some theorists who

advanced the social nature of organizations. These

theorists view organizations as made

up of both tasks and people and represent a human

counterpoint to the classical

machine view of the organization. They proposed that

management's roles in achieving

effectiveness were to facilitate communication and to

stimulate subordinates to high

level of effort. An example here is the human-relation

school with its participative
decision making principles which emerged from McGregor's
Theory XTheory Y

which promotes the creation of responsible jobs for workers

and developing good

group or team relations.

Afterwards, an open-system perspective for examining the

functioning of the firm and

its effectiveness emerged. Systems approaches emphasize the

organization as a system

and attempt to assess the effectiveness of the system in

terms of its inputs,

transformation, and outputs. Examples here include the

internal process model and the

strategic adaptation model In the internal process model

effectiveness is reflected in

the efficiency of the processes inside the organizational

systems. Theoretically, looking

at the internal processes of the system, especially when

the firm has little control over

its environments seems to be more revealing of the

effectiveness of the system than any

other approach. However the approach has a narrow

perspective of the functioning of

the organization It has no focus on the external

interactions of the firm Strategic

adaptation model suggests that effective firms monitor

their external environment

constantly, receive feed back regularly, and take

corrective actions to achieve their

goals in the short term and ensure survival in the long

term This model recognizes the

open-system nature of organizations, and their

susceptibility to external forces. A major
limitation of this model is that it pays little attention
to what goes on inside the

organization.

Another perspective advanced that in order for firms to

achieve organizational

effectiveness, they should study their conditions or

environment in which they function.

This perspective is known as contingency theory. It states

that effective design of

organizational structures' parameters (such as job

specialization, unit size,

centralization, etc.) are contingent or influenced by the

various characteristics of its

environment such as complexity and stability; the age and

size of the organization; its

technical system (technology) used for production; and its

power system, for example,

who controls the organization. Many contingency theorists

have investigated

environment-structure relationship and defined many types

of environments and

organizational structures that best fit for them.

Yet, another perspective draws attention to the various

stockholders or constituencies

in the internal and external environment around the

organization. Stakeholders are

groups or individuals affected by the organization

performance who seek to influence

the organization to satisfy their goals. Stakeholders could

include any number of the

groups that include owners of the organization, government

and regulating agencies,

local community organizations, customers, competitors,

workers, special interest

groups, environmentalists, suppliers, and the media. This

perspective is based on the

political view of the organization and it integrates the

criterion of effectiveness for each

group or constituency within or outside the organization

that has a stake in the firm's

performance. An example here is the strategic

constituencies model. A major limitation

of this model is assignment of proper weights to

constituents to indicate the relative

importance of satisfYing their goals [4].

According to contingency theory firms must change their

internal attributes

structures, strategies, and processes-to cope with changes

in the environment. It is

argued that organizations opt for internal consistency or

stable configurations as long as

possible because of reasons that include: (a) environmental

change can sometimes prove

to be temporary and therefore it is sensible to delay

reaction to it; (b) internal changes

are costly and therefore it will be resisted especially

when a successful integration of

structural and process attributes have been achieved; and

finally successful

organizations are never sure of the attributes that lie at

the roots of their success and

thus would avoid tampering with their tried and successful

configuration [5]. Usually

adaptation is avoided until a major threat is perceived

because change must eventually

come. In the face of worsening environmental fit, firms

opt for totally new

organizational configurations changing all their

attributes drastically rather than

piecemeal attributes change.

In the literature, a number of configurations were

uncovered such as "mechanistic"

structures in firms dealing with stable environments and

"organic" structures in firms

found in dynamic environments. The prospector, the

analyzer, the defender, and the

reactor forms of organization resulted from classifYing

the organizations according to

their strategies, structures, and managerial styles [6].

The effective structuring of

organizations into five configurations that include: the

simple structure where force of

direction that the various activities of an organization

take to achieve a common goal,

and results in the entrepreneurial form when this force

dominates an organization; the

machine bureaucracy where the force for efficiency becomes

dominant, which attempts

to ensure a viable ratio of benefits gained to costs

incurred; the professional

bureaucracy where the force of proficiency is dominant,

which makes organization

carry out tasks with high knowledge and skill; the

divisionalized form where the force

for concentration helps concentrate efforts on serving

particular markets; and the

adhocracy form that develops in response to an overriding

need to innovate a new

product [7].
Organizational effectiveness study according to
configurations is justified on grounds

of attempting to understand commonalties across

organizations. Organizations are

driven toward configurations in order to achieve

consistency in their characteristics and

rather than trying to do well on everything, effective

organizations concentrate on

configurations and try to bring their elements into line

with these configuration [8]. A

configurational approach that models organizational

effectiveness criteria pursued by

organizations has been proposed and is called the competing

values approach [9]. It

identifies ideal configurations or types based on dominant

values of structural context,

focus, and strategic means and ends. An organization can

pursue the values of these

ideal configurations and depending how close it is to

these values determines its

effectiveness.

3 The Competing Values Approach

The competing values approach is based on the premise that

there is no one criterion

for evaluating effectiveness. It organizes, consolidates,

and integrates multiple criteria in

the domains of effectiveness into three sets of

incompatible dimensions. These are

flexibility versus control, internal versus external focus,

and means versus ends. The

first set contrasts two dimensions of an organization's

structure: flexibility values
innovations, adaptation, and change while control favors
stability, order, and

predictability. The second set deals with whether focus and

emphasis should be placed

internally on the well-being and development of the people

in the organization or

externally on the well-being of the organization itself.

The third set relates to

organizational means versus ends; the former stressing

internal processes and the long

term, the latter emphasizing final outcomes and the short

term.

These three sets are depicted into four organizational

models or configurations shown

in Figure 1. The models are the open system model, the

human-relations model, the

rational goal model, and the internal process model. In the

figure there are axes of

contrasting values that define the four models. Each model

represents a particular set of

values and has a polar opposite with contrasting emphasis.

The vertical axis pertains to

organization structural context and it contrasts stability

and control with flexibility. The

horizontal axis pertains to focus, which is whether

dominant values are internal or

external to the organization. The two inner axes pertain to

organizational means and

ends for each model and they contrast the processes or

means (e.g. goal setting) to

organizational outcomes and the outcomes or ends (e.g.

productivity) themselves.

In brief, each model has characteristics that differs from

the other and that which
influence the level of effectiveness in the firm
differently. The rational goal model

emphasizes control and organizational focus as dominant

effectiveness values; planning

and goal setting are means, and productivity and efficiency

are ends. The open system

model emphasizes flexibility and an organizational focus

as dominant effectiveness

values; readiness and flexibility are means, growth and

external support are ends.

Dominant effectiveness values for the internal process

model are control and internal

focus, stressing communication processes as means and

control as ends. The human

relations model emphasizes flexibility and internal focus,

with cohesion and morale as

means and skilled workers as ends.

3.1 Related Methodology

Maloney and Federle [10] developed a method for assessing

the effectiveness of

construction and engineering organizations based on

assessment of configurations of

organizational culture. The method is based on typologies

or configurations of cultures

identified by the four models of the competing values

approach. Assessment was

achieved by classification of the organizational culture

according to perceptions of

management and workers along the properties of four types

of cultures identified in the

competing values approach. The respondents' ratings are

compared with each other to
check for consistency. Particular attention is placed by
the method upon the comparison

of the ratings of the manager and that of his subordinates

because if there is significant

differences between the perceptions of the manager and his

subordinates, the potential

for major problems exists.

By delineating variables from the competing values four

models, Ostroff & Schmitt

[11] studied configurations of organizational

effectiveness and efficiency. Their findings

indicate that effective and efficient organizations are

influenced not only by strength of

culture, but also by other variables such as participation

in decision making, goal

emphasis, attitude toward change, and level of structural

contextual emphasis.

Although the study did not target construction

organizations, their findings suggested

the inclusion of other organizational characteristics or

variables along with culture in

the study of effectiveness seems to be appropriate.

Human-Relations Model Empowerment (ends) Cohesion

Morale (means) People Internal Focus Information
Communication (means)

Internal Process Model Stability (ends) Flexibility

Control Adaptability (means) Growth (ends) External
Focus Open System Model Organization Productivity
Efficiency (ends) Planning, Goal Settlllg (means)
Rational Goal Model

Figure 1 Four ideal models of organization in the competing

values approach and their

effectiveness criteria

4 Proposed Framework
4.1 Logic

A configurational-based approach towards organizational

analysis such as the

competing values can be used to develop a methodology to

assess effectiveness of

construction firm. The approach can serve as a conceptual

model to categorize

organizational characteristics of construction firms along

its four ideal configurations.

The reasons being, first its four models or

configurations, emphasize characteristics

that represent the integration of most effectiveness

criteria already used by researchers

and managers. Second, it is been validated for

construction organizations [10].

The use of multiple criteria in assessment can be

represented by the hybridization of

values in the four models of the approach. The

hybridization results in certain tradeoffs

between levels of conflicting or paradoxical values based

on the specific environmental

situation faced by the firm For example stressing a

moderate level of competitiveness

and external focus by a firm does not exclude it from

placing some emphasis on the

development of its workers, and adopting strategies to

enhance morale and cohesion

among them. The inclusions of paradoxical or conflicting

criteria in assessments of

organizational effectiveness in order to achieve a better

assessment has been argued

because firms could operate in multiple domains and may

perform well only in a limited
number [12].

This multidimensional view of effectiveness implies that

there are different patterns of

relationships between organizational effectiveness and its

determinants. It is suggested

that in order to develop accurate measurement at the

organizational level, variables/

measures must be combined into some overall model that

indicates performance in the

multiple domains of effectiveness. From this perspective,

viewing effectiveness as the

result of hybridization of certain levels of values of the

four models as discussed above

represents a more realistic view of the nature of the

organization, and how it organize

itself to achieve effectiveness. A firm could pursue any

of the four models of

organization in the competing values approach.

3.2. Methodology

Three main steps are suggested in order to develop valid

quantitative models based on

configurational inquiry [13]. First organizational

configurations in an identified

approach must be conceptualized and modeled as ideal types

where effectiveness is

highest because the fit among the contextual, structural,

and strategic factors is at a

maximum in these configurations. Second, organizational

characteristics/variables that

are relevant for examining effectiveness of firm and which

represents the different

effectiveness domains in the ideal types must be

identified. Third, those variables must

be integrated into an overall multivariate profile or

model to empirically determine the

significant variables and their levels against a valid

indicator of etfectiveness

Firstly and as discussed previously, the competing values

approach forms the basis of

the proposed framework This is because the four models in

the approach can be

modeled as ideal types or configurations with identified

effectiveness criteria.

Furthermore only, the hybrid of the four configurations is

considered here because it is

a more realistic modeling of how construction firms

organize to achieve effectiveness.

Secondly, the result of hybridization of the criteria in

the four models led to

identifYing four categories in which variables can be

grouped and they are as follows:

structural context; organizational flexibility, rules and

regulations; organizational focus;

and strategy (means vs. Ends). Analysis of construction

firm's characteristics along the

dimensions of effectiveness in these four categories helps

to identifY the important

variables that represent the backbone of the proposed

framework In the structural

context category, a number of variables can be used to

indicate the effectiveness of the

structural component of the construction firm in dealing

with its external and internal

environment The level of subcontracting used in majority

of construction projects has
been shown to influence the complexity of structure in the
construction firm and reflects

the firm's attitude toward risk sharing and enhancing its

costs effectiveness [14]. A

construction firm that pursues strategic flexibility must

have a structure that is better

suited for contractual arrangements that provide

flexibility such as subcontracting. A

construction firm, in its quest for flexibility of

services offered, may integrate vertically

upstream by offering financing and AlE design and material

supply services, or

downstream by offering maintenance services [15]. Therefore

the level of integration in

services offered by the construction firm can be considered

as another variable that

reflects the structural complexity of the organization in

its attempt to control the quality

and range of its construction product. Other variables

that can be identified in this

category include:

• level of multi-project handling which reflects the

ability of the construction firm's structure to handle
simultaneous work at different locations to increase its
volume of business and hence its profits.

• level of partnering, joint venturing, and strategic

alliances which reflects how successful the organization's
structure is in accommodating the added structural
complexity resulting from such relationships. Typically
construction firms enter into such relationships to access
technology, share risks, secure financing, enter new
markets, improve competitive position, and meet project
requirements [16].

• level of organizational coordination which reflects how

effective the organizational structure is in coordinating
its internal and external relationship.
• level of information flow which indicates the degree of
openness and quality of communication in the
organizational structure.

In the second category of flexibility, rules and

regulations, a number of variables can

be used to indicate the effectiveness of the

organizational structure in mediating

between the flexibility-control points of the flexibility

dimension. These include the

extent of using regulation in work procedures,

instruction, and evaluation by the firm,

the level of adherence to rules and regulation by

management and workers of the firm,

the level of control the firm attempts to exert over its

processes, and most important,

the firm's attitude toward change. This variable would

reflect management and

workers' attitudes in encouraging, adopting, and accepting

organizational changes in

order to adapt the firm to new challenges in market

The third category of variables is based on the dimension

of focus which represents

whether the firm is internally or externally focused

according to the competing values

approach. Internally focused construction firms that value

control in the assessment of

effectiveness stress adequate communication and information

management through a

strong culture of hierarchy with clear rules and

regulations for performance. Externally

focused construction firms which value flexibility in the

assessment of effectiveness

emphasize adaptability though a strong culture that

promotes readiness and innovations.
Externally focused firms which value control in the
assessment of effectiveness

emphasize planning, goal setting, and a strong culture that

promotes productivity and

accomplishment [10]. Two variables which are deemed

important in determining the

focus of the construction firm and its effectiveness are:

• strength of organizational culture which reflects the

internal climate in the firm and its strengths or
weaknesses which are directly tied to organizational
effectiveness of the construction firm [10].

• level of workers' participation in decision-making which

underlies firm's attempt to empower and motivate its
workers. Internally focused construction firms that value
flexibility in the assessment of effectiveness are more
sensitive to their workers. They achieve this by allowing
a higher degree of participation in decision-making
through a strong culture of team work. Therefore the level
of workers' participation in decision-making could be
considered.

The fourth category represents strategic means used by the

construction firm to

achieve effectiveness. Two important variables can be

identified in this category and

they are: the level of strategic planning, and the level

of goal-setting. The former

underscores the firm's attempt to adopt effective

strategies that adapt and fit its

environment. The latter reflects level of importance that

the firm puts on setting goals

such as increasing profits levels, increasing cost

effectiveness, growth into other

construction sectors, improving level of process quality,

improving client satisfaction,

and increasing workers' empowerment.

The variables identified in the four categories are not
inclusive of all variables that can

be used in the proposed framework. However, they represent

the most significant

variables that can be identified by this research and

which can be included in the

proposed framework. Further research is needed to

investigate and build a model of the

relationships between these variables and a valid measure

of effectiveness. In order to

develop this model, a field study must be carried out to

collect pertinent data from a

sample of construction firms. In this study, the

identified variables must be

operationalized and measured by accurate measurement

scales. Questionnaires can be

used in soliciting the desired data and they must be

checked. in order to ensure their

reliability in measuring the underlying attributes of the

variables. Statistical techniques

could be used to build and select a model that relate these

variables with a valid

measure of effectiveness such as overall performance in

the three domains that are

commonly used in construction as indicators of

effectiveness. Namely, time of

execution and whether work completed by the firm is

performed within scheduled time

or not, cost of work completed and whether it is within

budget or not, and quality of

completed work and whether it is according to specs or not.

The resulting model

would be a very valuable tool to management of

construction firms in predicting their
level of organizational effectiveness.

4 Summary

A framework for assessment of organizational effectiveness

of the construction firm is

proposed. The competing values approach towards analysis of

effectiveness criteria is

used to group criteria proposed for measurement in four

categories of organizational

characteristics. A number of variables are identified in

each category. These variables

possibly represent the most significant variables that are

deemed relevant for examining

effectiveness in the context of the construction firm.

Future research steps are outlined

to utilize the proposed framework to develop an assessment

model that relate the

identified variables with a proposed measure of

effectiveness.

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121, (1), pp. 100-111

ARCHITECTS' NEED STRENGTHS AND

SATISFACTION LEVELS, AND

ARCHITECTURAL ORGANISATIONS'
CLIMATES

P.J. Rutland

Faculty of Architecture and Design, UNITEC Institute of

Technology, Auckland, New Zealand

Abstract

This paper describes research undertaken within private

architectural practices. It is

part of a longitudinal study to determine changing patterns

of need strengths,

satisfaction levels, and climate typologies in professional

architectural firms.

The paper explains how a stratified convenience sampling

method was used to

gather data on need strength and satisfaction, and of

organisational climate using

eight sections, namely: Authority, Standardisation and

Formalisation (Routine),

External Environment, Ambient Personality System, Nature

of Work, Interpersonal

relations, Creativity and Innovation, Professional Presence.

The climate results are analysed and discussed, both from

an overall viewpoint, and

by significant difference analysis between Director/Senior

Partner and Architectural

Staff. The need strengths and satisfaction results are

discussed on an individual basis

and considered in the light of accepted need motivation

models and other studies (e.g.

MacKinnon's) of architects and other construction

professionals.

Some correlation analysis is performed between the need

satisfaction and climate

scores in order to examine possible conflicts between need

spectrums and identified

climate types, since climate has been shown to

significantly affect organizational

performance.

This research is being conducted on a longitudinal basis

to determine changes in the

measures so as to present possible reasons and then

prognoses of trends and their

likely impact on construction professionals.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Span. ISBN 0419222308.

Resume

Le present expose decrit les recherches conduites dans des

bureaux d'architectes

pnves. Il fait partie d'une etude de longue duree, menee

afin de determiner

l'evolution schematique de la force des besoins, des

niveaux de satisfaction

personnelle et de la typologie des ambiances dans les

entreprises d'architecture

professionnelle. Cet expose explique l'utilisation d'une

methode d'echantillonnage structure par

paliers, en vue de recueillir des donnees sur la force des

besoins et les satisfactions

personnelles, ainsi que sur l'ambiance des organisations,

ces donnees etant

repertoriees dans huit sections, a savoir: Autorite,

Normalisation et Formalisation
(Routine), Environnement exterieur, Systeme d'ambiance
personnelle, Nature du

travail, Relations interpersonnelles, Creativite et

Innovation, Presence professionnelle.

Les resultats obtenus sur l'ambiance sont analyses et

examines, tant collectivement

que par rapport a l'analyse differentielle significative

entre Ie directeur/associe

principal et Ie personnel des bureaux d'architectes. La

force des besoins et les

niveaux de satisfaction personnelle sont traites

individuellement et examines sous

l'angle des modeles d'analyse standard pour la motivation

des besoins, ainsi que

d'autres etudes (p. ex. celle de MacKinnon) portant sur les

architectes et sur d'autres

professionnels de la construction immobiliere.

Quelques analyses ont ete realisees pour etudier la

correlation entre la satisfaction

des besoins et les resultats tires de l'ambiance des

bureaux, et ce, afin d'examiner les

eventuels conflits entre l'eventail des besoins et les

types d'ambiance reperes,

puisqu'il est demontre que l'ambiance affecte sensiblement

les performances d'une

organisation. Ces recherches a long terme sont menees

pour evaluer les modifications des

mesures, afin d'en degager les raisons eventuelles puis de

formuler des pronostics sur

l'evolution des phenomenes et l'effet probable qu'ils

auront sur les professionnels de

la construction immobiliere.

Keywords
Architects, architectural practice, management, motivation,
organisational climate.

1 Introduction

Status, prestige and role play an important part in the

working lives of professionals

generally and in no less manner with architects.

Architects' claim 'to be different'

from other professions and there is some truth in this.

Carr-Saunders remarked on

aspects of this difference in his contribution to the

discussion on W. Allen's paper to

the RIBA on 8 March 1960, when he said "one saw that other
professions were using

a technique founded on the application of some natural or

social science: the architects

were doing more and introducing aesthetics ... They

(Carr-Saunders and Weston) find

that the proceedings of most professions were conducted in

a somewhat humdrum

way; but when they looked at the history of the

architects' profession and read

accounts of their meetings, they seemed to detect a certain

emotional atmosphere".

[1 ]. This is no less true today and throughout the

emergence of the architectural

profession the architect appears as someone highly

involved with intellectual and

emotional activities. It is important therefore to identify

and recognise the

characteristics of professional architects since they

constitute such a critical part of the

current construction team, to know if these

characteristics have changed over time and
if they have what effect will this have on the
architectural firm, the profession and the

construction industry. In searching through the

literature, there appears at every twist and turn, messages

that define characteristics of the professional architect.

Some are explicit even though

subjectively derived, as in the case of Carr-Saunders, "in

temperament, architects are

touchy, liable to take offence when they conceive their

dignity to have been affronted

and therefore anxious for the moral recognition as the

part of the community, ... and

for the more material recognition implied by a higher

(relative) standard of

remuneration. At the same time they are solicitous for

their art ... [2]. MacKinnon's study [3] identifies the
varied skills needed by an architect as being

" ... juggler-like ability to combine, reconcile and

exercise the diverse skills of a

business person, lawyer, artist, engineer and advertising

person, to say nothing of

author-journalist psychiatrist, educator and psychologist."

MacKinnon's study was

concerned mainly with creative architects (architect I),

and he identifies amongst them

characteristics of dominance, freedom from conventional

restraints and inhibitions,

rather low sociability and a readiness to admit views that

are unusual and

unconventional. It is important that the needs driving

architects in the quest for excellence in their

work and careers are understood so that they may be

satisfied within the context of a
climate formed in an organisational setting. Such
characteristics ascribed to architects

as above are not easy to assimilate in an organisational

system that meets both the

creative and business demands of society. This study

looks at the needs of architects in private architectural
practices in

Australasia, assesses their strengths and levels of

satisfaction. At the same time, the

climate of the organisations in which these architects work

is measured and some

cross matching analysis is performed. This study is to be

conducted as a regular longitudinal piece of research to
see if

the needs and levels of satisfaction change over time and

if the climate typologies

change also. The study reported here has established the

base instruments and

analysis for this longitudinal study. Changes in these

factors over time can be related to changes in the
political,

economic or social scenes and can be used to prognosticate

changes necessary in

architectural practice operations into the future.

2 The Research

Twenty-six private architectural practices were surveyed,

with ninety seven architects

and forty one partners forming the final individual sample.

This constituted an 8%

sample of the total population and was size stratified

with 90% having more than 10

employees and 56% having more than 20. Convenience

sampling was used, as previous experience had shown the
author
that random sampling of the architectural profession
produced an extremely poor

response rate. The data was gathered by questionnaire

distributed to each firm and returned

directly in a stamped addressed envelope, so that no

censorship could take place. The need strength
questionnaire used a set of 52 statements subdivided into
13

categories which were scored on a 5 point Likert scale.

Strong influences on the

choice of the 13 categories came from the work of Hall &

Nougaim, Alderfer,

Maslow and Murray. Table 1 shows the need categories and

question numbers:

Table 1. Need strength categories Category of need

Question Related needs from other sources numbers
Achievement 2,26,38,40 Similar to self-actualisation on
Maslow scale

2. Dominance 3,14,39,41 Self-esteem on Maslow scale

3. Social welfare 4,15,27,42 Altruistic desire

4. Self-expression 1,25,20,43 Component of

self-actualisation

5. Creativity and Challenge 5,16,29,44 Component of

self-actualisation

6. Affection and interpersonal 6,17,30,45 Social need

(internally met) relations (internal)

7. Recognition and approbation 7,18,31,46 Part of

self-esteem (external)

8. Affection & interpersonal 8,19,32,47 Social need

(career-line item as relations (professionally) in
WoodlLebold (1970) safety

9. Economic security 9,20,33,48

10. Dependence 10,21,34,49 Safety

11. Independence 11,22,35,50 Factor in self-actualisation

12. Socio-economic 12,23,36,51 Security as 'autonomy' in
Payne's sense

13. Recognition and approbation 13,24,37,52 Author of

Lebold' s 'career line' (professionally) type items. The
need satisfaction section was based on a measure of
deficiency of need

fulfillment, as described by Porter (1961). The 13 need

strengths were reduced to 7

by combining some of them, since deficiency was felt

harder to establish than strength

of need. Fourteen statements about ajob were produced

similar to that shown below:

e.g. Item 7 It enables me to do work that is highly

regarded by people in my profession (a) How much does it
do this now? 1,2,3,4,5,6,7 (b) How much do you
1,2,3,4,5,6,7 think it should do this? The difference
(b)-(a) gave the deficiency in need fulfillment. If (b)
was lower

than (a), the negative sign was ignored and the difference
was counted as a deficiency

(or dissatisfaction) since the respondent considers that

need is being given too much

attention than is necessary. The seven needs used for

deficiency measurement are shown in Table 2.

Table 2. Needs strengths and need satisfaction items.

Need Title Needs from need Statement numbers strength

section for need satisfaction

A Socio-economic status 12 1,9

B Security 9 4,12

C Social (internal) 6,3 2,11

D Esteem and Power 7,2 10,14

E Self-Actualisation 1,4,5 5,8

F Personal direction 10,11 3,6

G Professional attachment 8,13 7,13 Total 13 14 A
climate assessment questionnaire was developed based on the
work of Payne

and Pheysey, Tagiuri, Litwin and Stringer and Campbell et

al. The final instrument

contained eight sections, which were subdivided into

twenty-six subdivision and

eighty-nine statements were scored on a binary true/false

scale. The data from the

climate instrument was subjected to cluster analysis which

reduced the scale length

for the climate measure from 86 to 41 statements and Table

3 shows the outcome.

Table 3. Climate dimensions and interpretations

1.

2.

3. Dimension Authority Standardisation and

Formalisation Ambient Personality Interpretation
Measures (1) Questioning authority (2) Egalitarianism (3)
Management concern for staff Thus a high score means
authority is not over exerted. Thus firm is
non-authoritarian. Measures (1) Administrative efficiency
(2) Conventionality Thus a high score means high
efficiency and routine. Measures: open-mindedness System

4. Nature of Work

5. Interpersonal Relations

6. Innovation and Creativity

7. External Environment

8. Professional Presence

3 The Results Thus a high score means a very open-minded

firm. Measures (1) Future orientation (2) Practical
orientation (3) Scientific and Technical orientation (4)
Intellectual orientation (5) Job challenge (6) Task
orientation A high score means the firm has a good
motivational content of nature of work, whereas a low
score indicates most of the above are missing and hence
under Herzberg's theory, the firm will not produce a good
motivational climate. Measures (1) Altruism } both
measure consideration for (2) Sociability } others and a
feeling of togetherness. Thus a high score means an "all
pull-together" type of firm. Measures (1) Variety in
physical environment (2) Efforts to stimulate creativity
(3) Readiness to innovate A high score means firm has a
creative climate. Measures (1) Relation to Community (2)
Relation to other components in the Industry A high score
means the firm is good at extending beyond its own
boundaries. A high score means the firm has a climate that
is very much pro the Institute and Professional activities
on a broad basis.

The following tables show the results of the need strength

survey (Table 4), the

average need satisfaction data (Table 5) and the climate

analysis (Table 6). Table 7

shows a Pearsons product moment correlation results for

Climate versus Need

Satisfaction.

Table 4 Need strength N=97

Need Mean Mean Overall Split-half reliability of rank

score rank rank across all raters (after S-B correction)

Achievement 15.13 4.75 3 .977

Dominance 14.78 4.73 2 .983

Social Welfare 14.26 5.43 6 .965

Self-Expression 15.67 3.77 1 .982

Creativity and Challenge 14.46 5.31 4 .968

Affection and Inter-personal 14.05 6.05 7 .975

Relations (Internal)

Recognition and Approbation

(Internal)
Affection and Interpersonal

Relations (Prof)

Economic Security

Dependence

Independence

Socio-Economic

Recognition and Approbation

(Professionally) 13.65 11.05 lO.79 12.51 l3.25 11.59

10.37 5.39 9.76 lO.06 7.84 6.80 9.l0 lO.61

Table 5 and Table 6 please see Appendix 5 10 12 9 8

11 13 .982 .981 .984 .975 .973 .918 .987

Table 7 Climate correlated with need satisfaction N=26

Need

Satisfaction

Climate

Authority

Standardisation

Formalisation

Ambient

Personality

System

Nature of Work

Interpersonal

Relations A 0-.74 -.08 .32 0.46 .l9 B 0-.59 -.l3

C 0-.83 -.l9 o .l7 0-.52 -.41 -.14 .05 D -.42 .25
-.38 .l9 .25 E .30 -.l6 .30 0.56 -.37

Innovation and 0-.89 0-.88 .004 -.08 .17

Creativity

External .01 -.22 .01 .29 -.39

Environment

Professional

Presence .28 -.l6

o = significant at 0.01 level

• = significant at 0.05 level

4 Discussion 0-.78 .04 .28 F 0.48 .27 -.57 0.55

-0.46 .l9 0.61 .l9 G -.37 -.l2 -.41 0.60 -.41
-.41 0.50 .28

Not unexpectedly, the five most predominant needs for the

architect are shown to be:

• Self-expression high

• Dominance

• Achievement

• Creativity/Challenge

• Recognition and Approbation internally low

264 Rutland The placement of Social Welfare at sixth rank

(Table 4) indicates a desire of the

architect to do more than merely satisfy economic and

commercial funding in their

work. Recognition and Approbation professionally, in other

words the need to have a

study and career line in the profession of architecture

ranks last of the thirteen scores. This does not support
the contention that prestige is a strong modivator for
entry

into a profession, as Move and Kohn discovered in their

study of dentistry [4]. The combination of the 13 needs
into the 7 item need satisfaction scale, produced:

• Personal Direction (F)

• Self-Actualisation (E)

• Esteem and Power (D)

as the top three needs, with F & D being significantly

satisfied and Professional

Attachment is again last on the hierarchy. Table 8 shows

that three of the lowest level needs are the lowest
satisfied (C,A,B)

whilst the top three needs (F ,E,D) are the highest

satisfied (with exception of G).

Table 8 Mean need strength in relation to mean need

satisfaction.

Average satisfaction level 5.8 5.4 5. 5.3 5. 5.2 5.5 4

5 7 5 3 4 4 F E D C A B G Highest Lowest =>Descending
order of need strength The climate results show firms to
be non-authorisation, yet fairly high in routine

with open-minded attitudes. The highest score came from the

'all-pull-together' type

of climate, which is interesting in that architects in

general are individualistic in

nature. The lowest score was on the external environment

item, indicating the firms were

not good at extending beyond their own boundaries. It is

interesting in to see that this

climate dimension has a 0.39 correlation factor

(Significant @ 0.05 level) with the

satisfaction of self-actualisation needs (Table 8) which

indicates that architects do not

find satisfaction of their second highest need through

this dimension. The next two lowest items were Innovation
and Creativity and Nature of Work.

When put together as almost equal low scorers, the picture

presented is salutary as this

indicates a low motivational and creative climate for work.

This relatively low score
on Innovative/Creative Climate is of concern, particularly
in the light of Frederiksen's

findings [7] that innovative climates encourage greater

productivity from people who

are high on the personal direction and independence need

levels. This should also be

considered in relation to the 7 rank (out of 13) of the

need strength measure Affection

and Interpersonal relation (internal) (See Table 4). The

concept of organisational climate is critical in
determining the motivation of

members [5] and it is generally considered to affect the

behaviour of members of the

organisation [6]. When the measure of climate by

partners/directors is looked at separately from

that by the architectural staff, then on every dimension of

climate, the partners saw

their firms climate as being better than did their staff in

terms of the type of climate

that has been identified as good for self-actualising

motivatated people.

5 Continuing Research

This study was undertaken as a means of establishing

appropriate instruments and

analysis systems to continue with a longitudinal study. It

also provided a set of base

data on which to undertake a comparative study from

repeated studies over time. A further study is to be
undertaken in 1996/97 to establish changes from this study

with preferred reasons and explanations. Some significant

areas for consideration are:

• The low needs of architects in the Social Welfare

dimension. Will this continue or has it changed? Does the
pressure of commercial existence overpower this dimension
in the minds of architects or is there some other reason
if no change is evidenced?

• External professional recognition was not a high need in

the study and current indicators are that this has not
changed. The professional associations have been seriously
reviewing their roles in the light of falling membership.

• The highest level needs were most satisfied and the lower
level needs less well satisfied. Does this reflect a
disinterest on behalf of architects in the lower level
needs or will these become more important in the late
90's?

• The low score on the external environment dimension of

climate will surely be much higher but will it be
significant or be merely a move to generate an expected
profile for architects?

• The low motivational/creative climate in organisations

could well be a factor in some of the poor quality work
produced in the last decade or so. Has this factor
improved and, if so, do the architects recognise it and
respond to it?

• The significant gap between the partners and the staff on

the "goodness of climate" of the firms is another example
of the 'old school and new school' trying to work
together. Will the gap be greater in the late 90's,
particularly with the speed of technological progress,
and the nature of education of architects.

The next study should reveal some very interesting results

when considered in the

light of this reported research and in the light of

changes in society , the profession

and the education of architects. Already reports on

competency standards for architects [8], the RIBA strategic

study of the Professionas [9] and a special report for the

NZIA [10] have indicated

that changes should have taken place and should take place
in the items measured in

this research.

266 Rutland
l. Carr-Saunders, A.M. and Wilson, P.A. (1964) The
Professions, Frank Cass and Co. Ltd, London.

2. Ibid p.185

3. Mackinnon, D.W. (1970) The Personality Correlates of

Creativity, a Study of American Architects in Creativity,
Penguin Books, London.

4. More, D.M. and Kohn, N. (Jnr) (1960) Some motives for

entering dentistry. The American Journal of Sociology, Vol
66, No. l.

5. Litwin, G.M. and Stringer, R.A. (Jnr) (1968). Motivation

and Organisational Climate, Harvard University, Graduate
School of Business, Boston.

6. Pace, C.R. in Organisational Climate, Explorations of a

Concept, by Taguri, R. and Litwin, G. W. 1968, Harvard
University, Graduate School of Business, Boston.

7. Frederiksen, N. (1966). Some effects of organisational

climates on administrative performance, Research
Memorandum R.M. 66-21, Educational Testing Service.

8. R.A.I.A. 1994 Competency Standards for Architects.

9. R.I.B.A. (1993-95) Strategic Study of the Profession,

RIBA Publications, London.

10. UniServices (1995) NZIA J 993 Delphi Exercise Report,

UniServices, Auckland. APPENDIX

Table 5 Composite average need satisfaction results N=26

A B C D E F G

Dimension Social Security Social Esteem Self-Actualisation

Personal Professional economic internal and power
direction attachment status

Range 1-7 1-7 1-7 1-7 1-7 1-7 1-7

Range achieved 3.5-70 2-6.25 4.5-6.5 4.5-7 3-6.75 4.87-7

4.41-7

Mean 5.3 5.24 5.55 5.7 5.45 5.84 5.54

Standard .78 .86 .53 .67 .77 .55 .67

deviation

95% Confidence ±.27 ±.29 ±.I8 ±.23 ±.26 ±.I9 ±.23

limits on mean

Table 6 Composite climate results N=26

Dimension Authority Standardisation Ambient Nature

Interpersonal Innovation External Professional and
personality of relations and environment presence
formalisation system work creativity

Scale range 0 0 1 0 1 o 1 0 0 1 0 0

Range achieved .22 -.86 .20 .90 0-1.00 .22-.73 .29-1.0

.05-.80 .10-.75 0-1.00

Mean score .62 .60 .62 .49 .71 .47 .39. .53

Standard .17 .17 .27 .18 .18 .19 .17 .30

deviation

95% Confidence ±.06 ±.06 ±.09 ±.06 ±.06 ±.06 ±.06 ±.I0

limits on mean

MULTI-CHARACTER MODEL OF THE

CONSTRUCTION PROJECT INITIATION

PROCESS

Kalle Kahkonen

VTT Building Technology, Finland

Summary

In spite of its widely agreed significance, the

construction project inItIatIOn

process is still a relatively new research topic. Our

learning continuum along

research and development efforts has just begun, and a lot

of important challenges

face researchers in forming a basis for improvements in the

current practice of

companies. VTT Building Technology is carrying out a

two-year study of the

project initiation process. The study, which is called

Preplanner, is a joint effort

involving VTT Building Technology and five companies

representing owners of

heavy industry. This paper presents the findings of

sub-project of Preplanner

study. The sub-project focused on the modelling of the

project initiation process.

A multi-character model of the project initiation process

was obtained as the main

result. The model provides a balanced representation of

various characteristics of

the project initiation process. The feedback obtained from

company personnel

suggests that, compared with the other identified models,

this model provides

improved capabilities to explain the nature of the project

initiation process.

Sommaire

Malgre son importance largement reconnue, la methode de

lancement d'un

project de construction est encore un sujet de recherche

relativement nouveau.

Noitre projet d'etudes continues dans Ie domaine de la

recherche et du

developpement vient a peine de commencer et les chercheurs

se trouvent en face

d'un defi important pour trouver une mise au point afin

d'amelioner Ie methodes

courantes utilisees par les compagnies. Le Departement

Construction du VTT

(Centre de recherche technique de Finlande) est en train

d'effectuer un project de

recherche reunit les efforts de cinq compagnie represantant

l'industrie lourde. Cet

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Span. ISBN 0419222308.

article nous relate les decouvertes d'un sous-projet,

faisant partIe de la recherche

Preplanner. Ce sous-projet est concentre sur

l'etablissement d'une methode de

lancement d'un project. Les avis donnes par les compagnies

utilisatrices laissent

supposer que cd modele, compare a d'autres modeles

reconnus, permet de mieux

expliquer la nature de la methode de lancement d'un projet

de construction.

Keywords: construction projects, industrial plants, project

definition,

early project stages, project planning

1 Introduction

Project initiation is defined here to mean the process

prior to final investment

decision-making. The main objective of this process is to

maximize the chance of

successful project realisation. First, this is achieved by

producing strategic

information for the owner, resulting in sufficient

understanding. Second, an

important issue within the project initiation is the

necessary project
implementation arrangements. Examples of these
arrangements are the

establishment of the core project team and negotiations

with main equipment

suppliers and contractors. In practice, the project

initiation culminates in a number

of choices and decisions of strategic importance. These

define the project concept,

select alternatives, define the technical content and the

scope of a project,

determine its financial and commercial requirements, etc.

Nowadays, it is widely agreed that the project initiation
process has great

potential to improve significantly the success of the

whole project. However, the

project management concept itself is traditionally too

often understood and

applied in a way that does not introduce a systematic and

well-structured project

initiation process. The findings of earlier research

carried out in Australia and

USA show that the current practice is very uneven.

Compared with the later stages of project management, it
seems that the

basic nature of the project initiation process is poorly

modelled and understood,

leading inevitably to unsatisfactory practical

implementation. Within the project

initiation process one can often encounter unclear or

conflicting objectives, high

levels of uncertainty relating to most estimates,

communication problems between

individuals, unrealistic opinions and a lack of

creativeness, flexibility and
consensus between various parties. In summary, project
initiation can be

characterised as a learning process where those involved

are trying to achieve a

shared opinion and understanding about the problem and its

possible solutions. The objective of this paper is to
present the results of the two-year study on

the project initiation process. In particular, a project

initiation process model is

presented. This model aims to reveal some important

characteristics of the nature

of the project initiation process, and to form the basis

for a project initiation

guidebook and other training material.

2 Background to the study

It seems that, due to some historical preoccupations

regarding project planning

and management, the project initiation process has only

gained a rather small

270 Kahkonen

professional role. Historically, project management and

planning have been very

much project-realisation-oriented. This means that we

presuppose that an already

existing project demands our attention in terms of its

realisation. The project

formation process and its necessary decision-making has not

aroused so much

interest. In the first half of 1990s, however, awareness

of the importance of

project initiation has increased continuously in the

research community and
companies. The project initiation process is still a
relatively new research topic. At

present, the well-known project planning theories and

techniques provide only a

very limited understanding of this process. Laufer [1]

presents a summary of the essentials of project initiation
and

concludes by presenting some evolving principles for

effective project initiation.

Based on his experience of construction projects, Morris

[2,3] has found that most

of the factors explaining the success of construction

projects stem from project

initiation. In the USA a research group has been working

on this topic for several

years. After a number of research reports addressing some

specific topics, their

research programme has resulted in a project initiation

handbook [4].

Furthermore, in Australia work led by the Construction

Development Agency has

also led to the publication of a practical guidebook aimed

at improving the quality

of project initiation in companies [5]. Apparently, our

learning continuum along research and development efforts

has just begun, and a lot of important challenges face

researchers. Examples of

research problems to be solved in the near future are

1. Measurement of effective and sufficient project

initiation;

2. Effects of characteristics of projects on the project

initiation process;

3. Enhancement of current project initiation process models

towards multicharacter models (for example, this can mean
putting together chronological phases, project initiation
stages, topics and its cyclic nature); and

4. Appropriate decision-making techniques.

3 Preplanner research project

VTT Building Technology is currently carrying out a study

of the project

initiation process. The study, which is called Preplanner,

is a joint effort

involving the participation of VTT Building Building

Technology and five

companies representing owners of heavy industry (paper and

pulp, energy, mining

and chemical industries). It is acknowledged that advanced

project management comprises two main

components: i) knowledge about methods and tools, and ii)

individuals' personal

experience of live projects. The main objective of this

project is to improve

understanding about the project initiation process and

develop practical tools. The

companies involved have provided six live projects, and the

experiences of the

senior project managers and and the companies' chief

executives have been

collected. These experiences form an important starting

point for the various sub

projects of this research effort. The topics of the

sub-projects are 1) Project

initiation model; 2) Decision-making techniques; 3) Value

management; and 4)

Training package and its computerised version. This paper

presents the findings

of the project initiation model sub-project.

4 Project initiation process as a part of the project
life-cycle

The coverage of the sufficient project initiation process

over various phases

preceding construction can vary substantially between

different projects. In

certain cases owners need a rather detailed project manual

before the final

investment decision can be made. The level of detail

depends upon the project

uncertainties and the risks caused by them. Even basic

engineering or detailed

design of some key equipment item might be necessary if

unproven technology is

to be applied (Figure 1). Additionally, with regard to

overseas projects, adequate

project initiation might require careful examination of

local conditions, leading to

the identification and definition of a reliable procurement

strategy. In some

situations the necessary earthworks have been started or

almost finished before

the final investment decision. This "jumping-the-gun"

phenomenon is a

consequence of the need to meet to very tight project

completion times. PROJECT INITIATION Fig. 1. Project
initiation process as a part of the project life-cycle.
However, awareness and understanding of project risks seems
to be

surprisingly uneven, even though this is a major project

characteristic affecting

project initiation. Large companies are quite often

equipped with best practice,

but the problems lie in the small and medium sized

enterprises. What seems to be

272 Kahkonen

needed are practical rules and guidelines expressing the

role and coverage of the

project initiation process with respect to the project

life-cycle. Knowledge acquired from experienced project
managers suggests that in a

typical project: i) the cost of project initiation is 3-5%

of the cost of project

planning and design; and ii) the cost of completing

individual project initiation

stages increases exponentially compared with the earlier

less-detailed stage

(completion of a single project initiation stage costs ten

times more that the

completion of the preceding stage, see section 9 of this

paper).

5 Multi-character model

It is likely that the multifarious nature of the project

InItIatIOn process often

makes its understanding and successful implementation

difficult. For example, it

can be almost impossible to verify the suggested project

initiation approach since

the people involved do not share a common understanding

about the process in

question. What is needed is a simple and flexible model

capable of explaining the

dynamic nature of project initiation and its various

characteristics. Figure 2 shows a project initiation model
called the multi-character model.

The model comprises a conceptual classification which is

used to explain the
nature of project initiation.

PROJECT INITIA TlON

is affected by the followin ... focuses on the followin

five f actors, seven subjects ...

1. FACTORS

1. PROJECT

TECHNLOGY

2. PROJECT )

OTHER

~=====:: 1~3' SIZ==E OF :::::::=::)

14. PROJECT TIME )

5. NEED FOR INTERNAL

AND EXTERNAL

INTEGRATION 2. SUBJECTS 1. Background 2. Visio n,

mission and objectives 3. Scope 4. Technical solution
5. Implemenlation 6. Risks 7. Project appraisal ... and
proceeds in the manner of a process to finally reach
sufficiently detailed plans. 4. STAGES Fig. 2.
Multi-character model of the project initiation process.

The classification includes four groups of viewpoints and

characteristics, which

are:

1. FACTORS affecting the coverage and activities of project

initiation.

2. SUBJECTS on which the work focuses within each project

initiation stage.

3. PROCESS by which project initiation completes each

stage and proceeds to the next more-detailed stage.

4. STAGES of the project initiation process express the

level of detail of the information and understanding to be
gained.

An important finding is that these four groups together

form a basis to better

explain and understand the nature of the project

initiation process. One group can

provide only a limited view. Each group is briefly

presented in the following

sections.

6 Project characteristics affecting the project initiation

process

Five project characteristics have been identified as having

a direct effect on the

extensiveness, methods, level of detail and completion

time of project initiation.

These are:

1. Riskiness of technology.

2. Riskiness of other success factors.

3. Project size.

4. Project time.

5. Need for internal and external integration.

The first two groups refer to the overall riskiness of the

project initiative. It was

found that the technology risk is still often

underestimated and thus it often causes

the most severe problems. The rules, such as 'in the case
of development projects

the time required is often four times more than the first
estimate' [6], clearly

suggest that the need for careful and detailed project

initiation is too often
ignored. Several authors have suggested that the role of
technology risk is

decreasing, but it is apparent that technology is still the

most important risk at

least in the case of industrial plant projects to be

carried out by the small and

medium sized companies and in the case of very big

projects often having even

some industry-wide or national importance. The other four

characteristics are also important, requiring attention and

action during project initiation.

7 Aspects of project initiation

Project initiation activities focus on seven main subjects:

1. Background

2. Vision, mission and objectives

3. Scope

4. Technical solution

274 Kahkonen

5. Implementation

6. Risks

7. Project appraisal

It is important to understand that the people involved are

supposed to improve

understanding with regard to all subjects within each

project initiation stage.

8 Nature and repetitiveness of the project initiation

process

Experienced project managers have found that the same type

of working and

activities are encountered many times during the project

initiation process. in

particular, a lot of work is being done all the time in

order to generate, analyse

and decide on alternative technical, project implementation

or financial

alternatives. This process is composed of the five phases

shown in Figure 3.

These five phases comprise a single project initiation

stage. B c A = MAYBE (the same project initiation staQe
will be carried out aQain but with a different option,
assumption or workinQ method) B = GO or NO GO (project
realisation starts or the project is cancelled) C = MAYBE
(move to the next project initiation staQe)

Fig. 3. Internal repetitiveness of the project initiation

process is composed of five phases.

9 Project initiation stages

Different project initiation stages are used to address and

define the level of detail

of the results expected from the project initiation

process. As shown in the

previous section, the completion of any project initiation

stage requires chief

executives to decide whether or not to conduct further

studies, halt project

preparations or start project implementation. Various

project initiation stages are

an important means ofing understand and managing the

sufficiency of the project

preparations made to datye, particularly with respect of

the project uncertainties,

which are supposed to give way to reliable estimates when

project initiation

proceeds to the more detailed stages. The main project

initiation stages are:
1. Project strategic planning

2. Pre-feasibility study

3. Feasibility study

4. Front-end engineering

5. Basic engineering

Project initiation is very much a question of co-operation

between representatives

of owner company and consultants (or other suitable

organisation), who are often

in charge of organising the work, carrying out the main

activities and preparing

the documentation. The people from the owner company are

primarily responsible

for tasks falling under the heading project strategic

planning (this is not clearly a

project initiation stage, but rather the initial input from

the owner). Project

strategic planning starts from quite general statements

about the project mission

and goals, gradually evolving into more detailed evaluation

and selection of

project implementation alternatives, and finally becoming

increasingly concerned

with technical solutions. Likewise, the same type of change

takes place during the

stages (2-5) performed by consultants and/or by a specific

team (Figure 4).

10 Discussion

Awareness of the significance of project initiation seems

to be increasing amongst

project practitioners. Company people and particularly

those involved in the
Preplanner research effort would like to see a major shift
away from the current

very uneven practice towards a systematic project

initiation process, which would

clearly increase the possibilities for successful

industrial construction projects.

Obviously, this can be achieved with the aid of practical

tools which could be

straightforwardly applied by practitioners. These tools

must be holistic, flexible

and simple in order to be of sufficient value. However,

it is author's opinion that our current theories and
especially our

models about the project initiation process do not provide

a coherent basis for the

different tools required. Theories that can be used as a

starting point when such

models are developed for example, soft systems engineering

by Checkland [7]

are not very well known even amongst researchers. Thus the
need for new

improved project initiation models is an important issue.

276 Kahkonen 1 2 3 4 5 definition statement,

---+---P,rO/€!ct definition report, Company's chief
executives and experts from their office project manual
Consultants and/or the established project team D = Work
addressing project implementation (project appraisal &
planning) hk~ . I = Work addessing technical content
(design & engineering) Fig. 4. Stages of the project
initiation process and the relationship between them.

11 Conclusions

A new project initiation model called the multi-character

project initiation model

was presented in this paper. It is considered that this

model provides an improved
representation of the nature and characteristics of the
project initiation process

compared with the models represented in the literature so

far. This statement is

based on the feedback obtained from companies involved in

the Preplanner

research project. The model provides a starting point for

the development of project initiation

guidebook and other tools.

Acknowledgements

I gratefully acknowledge Mr. Seppo Harminen (Outokumpu

Engineering Services

Ltd.), Mrs. Eeva-Liisa Lehikoinen (JS Terasto Ltd.), Mr.

Markku Levonen (IVO

International Ltd.), Mr. Markku Metsliranta (Jaakko Poyry

Ltd.) and Mr. Mauri

Toivanen (Teollisuuden Voima Ltd.) for their support and

constructive critisism

during my work.

1. Laufer, A. (1987) Essentials of Project Planning:

Owner's Perspective, Journal of Management in Engineering,
6(2), pp. 162-176.

2. Morris, P.W.G. (1988) Initiating Major Projects the

Unperceived Role of Project Management, Proceedings of the
9th INTERNET World Congress on Project Management,
September 4th-9th, Glasgow, UK, Volume 2, pp. 801813.

3. Morris, P.W.G. (1994) The Management of Projects,

Thomas Telford Services Ltd, London, United Kingdom.

4. Construction Industry Institute ClI. (1995) Pre-Project

Planning Handbook, Special Publication 39-2, University of
Texas at Austin, USA.

5. CIDA Construction Industry Development Agency. (1994)

Project Initiation Guide, Sydney, Australia.
6. Kharbanda, O.P. and Stallworthy, E.A. (1983) How to
Learn from Project Disasters, Gower Publishing Company
Ltd., Aldershot, Hampshire, United Kingdom.

7. Checkland, P. (1981) Systems Thinking, Systems

Practice, John Wiley & Sons, Chichester, United Kingdom.
1 1. The Firm and the Human Resource

1. Beckhard, Richard and Reuben T. Harris, Organizational

Transitions. 2nd. Edition, Addison Wesley Publishing
Company, Reading MA 1987

2. Nord, Walter R. and Sharon Tucker, Implementing Routine

and Radical Innovations, Lexington Books, D.C. Heath and
Company, Lexington, 1987

3. Steele, Lowell W., Innovation in Big Business, Elsevier

North Holland Publishing Company, New York, 1975

4. Harvey, Thomas R., CHECKLIST FOR CHANGE: A Pragmatic

Approach to Creating and Controlling Change. Allyn and
Bacon, Boston, 1990

5. Lawrence, Paul; "How to deal with Resistance to Change,"

Management of Change, Harvard Business Review, 1991

6. Pinto, Jeffery K. and Dennis P. Slevin, "The Project

Champion: Key To Implementation Success, " Project
Management Journal, The Project Management Institute, Vol.
XX, No.4, December 1989, pp. 15-20.

7. Deming, W. Edwards; Out of the Crisis, Massachusetts

Institute of Technology, Center for Advanced Engineering
Study, 1986

8. Rydz, John S., Managing Innovation: From the Executive

Suite to the Shop Floor, Ballinger Publishing Company,
Cambridge, 1986

9. Tatum, Clyde B., "Innovation on the Construction

Project: A Process View," Project Management Journal,
Project Management Institute, Vol. XVIII, No.5, December
1987 pp. 57-67

ENHANCING LEARNING IN

CONSTRUCTION PROJECTS

D.Boyd

Faculty of the Built Environment, University of Central

England,

Birmingham, UK

A.Robson
Department of Building Finance, Birmingham City Council,

Birmingham, UK

Abstract

The performance of the UK Construction Industry has been

perceived as bad for

decades. Many technical and managerial solutions have been

tried and have failed. It is

contended in this paper that many of the problems within

the construction industry arise

because of its barriers to learning. This paper

investigates the enhancement of learning

within projects through the use of two semi-formal

techniques: personal project diaries

and debriefing, as part of making construction into a

learning industry. These

techniques were used both as tools to facilitate learning

by individuals and as research

tools to determine learning needs and barriers. The format

of these diaries and their use

by a small group of participants in two case study

projects is described. The critical

incidents recorded in the weekly diaries were used as the

focus of the structured

debriefmg at monthly intervals. The debriefing process used

the technique of cognitive

mapping which allowed the researcher to capture a shared

understanding of the events.

This debriefing made the learning from the task and process
more explicit in a way that

could be useful to the participant and, because it was

explicit, to their organisation. The

paper concludes that coupling personal project diaries with

structured debriefmg can

deliver enhanced individual learning and that, in the right

organisational circumstances,

this learning can be captured and could be used by the

organisation.

Sommaire

C'estl'affmnation de cette communication que pleusieurs des

problemes qui concerne

I'industrie du bfitiment brittanique ont leur origine en

les obstacles contre

I'apprentisage. Cette communication examine comment il est

possible d'augmenter

l' apprentisage pendent les des enterprises par Ie moyen de

deux techniques: joumaux

prives de I'enterprise et Ie 'de-briefing' de gagner

I'information des participants apres

coup. Le format des ces journaux et leur usages par une

groupage des participants

penant deux enterprises est deerit. Les moments critiques

qui sont rapporte dans les

journaux hebdomadaire a ere utiliser comme foyer du

'de-briefing' a l'intervaux

mensuels. Le processus de 'de-briefmg' se servera de la

tracerie des connaisances (en

anglais cognitive mapping), qui permettre au chercheur

d'attraper Ie comprehesion

communal apres coup. Cette 'de-briefing' a fait plus

evident I'apprentisage de la tache

et Ie processus dans une fa~on utile a la fois aux

participants et a leur organisation. La

communication conclure que la couplage des joumaux prives

avec un'de-briefmg'

formel peut livrer I'augmentation de I'apprentisage

individu, et que, en les

circonstances organisationelle exactes, cette apprentisage

peut etre attrape et utilis6 par

I' organisation.

1 Introduction

The UK Construction Industry is perceived both externally

and internally, as having a

poor record of performance which has national consequences

[I]. Past studies have

attributed this in terms of: under capitalisation [2],

fragmented organisational structure

[3], and inadequate communications [4]. It is contended in

this paper that many of the

problems within the construction industry arise because of

its barriers to learning. The

research reported here has investigated the use of two

semi-formal techniques: learning

logs/diaries and debriefing, to enhance learning within the

industry. This paper

focusses on the justification and application of these

techniques. This is part of a wider

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

research project which is advancing the concept of

"construction as a learning

industry", exploring what the idea of the learning

organisation [5] might mean in the

contruction industry. The industry has again been under

scrutiny by a number of bodies: Latham [1],

Technology Foresight [6], and the SERC [7]. All of them

see the industry as
problematic and unsuccessful. This present time is seen as
the opportunity to 'sort it

out' otherwise foreign competition might herald its demise

like other heavy industries

such as shipbuilding or steel. Suggested solutions tend to

be technical, formal and

managerial: design procedures or better contracts; making

construction more like

manufacturing, new technology or business process

approach. However, it has to be

noted that in the past such solutions have not met their
full expectation. Systems

building failed in the 70's and the popularity of quality

assurance and even project

management as panaceas appears to be waning. Thus, it has

been suggested that this

'search for certainty' [8] is a recurring myth which is

doomed to failure. It would be difficult to disagree with
the notion that new techniques and processes

can help the industry. But, a different industry cannot

just be set up; the current

industry needs to be changed. Even in the implementation

of relatively minor changes

such as the introduction of IT in offices, it is now

acknowledged that better solutions

result from working with the staff in creating the

solutions and implementing them.

There is a need to engage with the industry as it is, in

order to enhance its strengths and

to support its weaknesses. Such an engagement can be

accomplished through the idea

of the learning organisation. In 1986 Geoffery Holland,

then Director of the Manpower
Services Commission, called for a new management
development initiative in the UK:

"If we are to survive as individuals or as companies or as

a country we must create a

tradition of 'learning companies' " [9]. This has been

acknowledge for the construction

industry "An organisations only sustainable competitive

advantage lies in its ability to

learn faster that its competitors .... to produce world

class construction" [6]. The need

for learning is even more important for Groak's [10]

alternative view of the industry as

a field of projects surviving in a turbulent environment

with well developed complex

adaptive features: "knowledge for action and

organisational learning take their rightful

place". It is contended that this can be seen to occur

within informal systems set up

through individual relationships between people, alongside

individual's strong

motivation to complete the project [8]. These informal

systems, which involve coping

skills of people to deal with the unexpected and value

conflicts, are often employed to

expedite projects that would otherwise come to a halt if

the formal systems were relied

upon [3]. However, the informal system cannot be formally

acknowledged as it

conflicts with the organisational procedures and the

adversarial formal relationships [8].

Learning between projects is then held back because no

discussion can take place on

what really happened in a project. Revans [ 11] in his

description of learning organisations focuses upon the
empowerment of individuals struggling with intractable
problems to combine work and

learning. This sets out to seek improvements from within,

indeed from the common

task, as it acknowledges that the daily round offers

constant learning opportunities and

that the quality of such learning is often reflected by the

morale of the organisation.

Thus a defmition of the learning organisations as applied

to the construction industry

would be an industry that acknowledges the informal

systems employed by individuals

at project level to deal with the complexity of problems

on site which arise through the

interaction of human and technical elements. The promotion

of learning and learning

networks as one of their energies of change in the

industry has been proposed

officially: "Education and training should cater for

peoples need to learn, pass on

knowledge and adapt to change effectively throughout their

careers." [6].

2 Methodology

The research reported here is based on Kolb's [12] model of

learning. This states that

true learning can only take place if experience is put

under reflection. The strategy

considered here to improve learning in the construction

industry is for participants to

keep diaries in order to record experiences making them

available for reflection, in the

first place, to the individual and secondly to the

industry. By backing this up with
debriefing by the researcher then this can help the
individual to reflect on their

experiences and it also provides more impetus for the

individual to maintain their diary .

Such a semi-formal and structured arrangement is required

to counteract the crisis

nature of the industry where there is 'never enough time'

because of commercial

pressures. The research had three objectives in exploring

the aim of enhancing learning in the

industry [13]. Firstly to analyse whether the formalised

techniques of diaries and

debriefing can help to enhance the learning of individuals

on construction projects.

Secondly to determine whether the formalised techniques of

diaries and debriefing can

obtain information on the realities of managing

construction projects. Thirdly, whether

the formalised techniques of diaries and debriefing can be

used as a research tool to

identify the barriers to achieving all round individual

learning. The basic approach was

to test these techniques with people working on two case

studies of projects that were

on site. The first objective was tested within the case

studies directly by interpretting the

diary and debriefing responses. In many ways this is

intimately connected with the

second objective as it assumes that it is possible to make

explicit true information about

a project and one's role in it. This is a phenomonological

position in that it assumes

people construct valid meaning to the world around them

[14]. Thus, the information is

subjective and value laden but this is all that can be

known about a social world. In

addition the approach was analysed against Kolb's [12]

definition of learning both to

provide a language to describe results and to explain the

results obtained. It is stressed

that this first objective was focussing on individual's

learning, thus although a totally

explicit explanation might not be available, learning

might still be achieved. It is only

when diaries and debriefing are required for the second

and third objectives does the

reality and understandability of an explanation become

critical. These objectives might

be able to provide direction to the next levels of learning

that of the project group and

ultimately the industry. In the second and third

objectives it is not just the perceptions of what happened

that are important but also the feelings and emotions.

These dimensions demonstrate

individuals' values and their conflicts which guide actions

and prevent learning. By

making these dimensions have importance in the diaries

then subjects are more likely to

try to surface them even if this is not normal in their

practice. They then provide a point

of empathy between the researcher and subject which allows

a more in-depth study. In these objectives, the influence
of the researcher needs to be acknowledged.

Gummeson [15] indicates one limitation of case study

research as the researcher's Pre

understanding. Pre-understanding is defined as peoples

knowledge, insights and
experience before they engage with a research project. The
more consideration that is

given to the input, preunderstanding, the greater the

validity of the output,

understanding. Much effort was expended in setting down the

researcher's pre

understandings before embarking on the case study [13]. The

researchers knowledge

of the construction industry as pre-understanding is

important as it allows the

researcher to more quickly understand the subject. Gummeson

[15] also sees access to

cases as problematic. In this research, physical access is

essential and explicit,

however, access to the mind of a subject is more

difficult. Here the importance of

developing a relationship of trust and confidence between

researcher and the subject

who completed the diaries and debriefing was never

underestimated and was at the

forefront of all approaches. The research is of an action

research character [16] where change is a specific

objective. The researcher is not neutral or detached but

works with the subjects to

implement specific change [17]. In this case the change is

the learning of individuals.

However, additional change may take place in the short

term through modifying the

individuals approach to the project that they are working

on. This give rise to the

possibility of a positive feedback in that the project

learning environment may change,

making actions and learning occur differently than on a

normal project. Thus, the ability

to find information on the reality of managing projects

might be compromised. Two case studies were chosen for
this pilot research study. This research only

considered the construction phase as the critical

transformation point where concepts

become practice. In order to ensure access, both cases had

people who were familiar to

the researchers. This has the potential to influence

responses towards what the

researchers wanted, but this risk was thought less

important than having better access

and a quicker establishment of trust. Some subjects were

unfamiliar to the researchers

and so partially overcame the risk of familiarity. In

addition, the researchers were not

involved as professionals on either of the projects which

might break: trust or present a

conflict of interest [13]. Three subjects were asked to

participate in each case study.

These subjects were selected to span design, contracting

management and site

supervision levels in order to investigate differences in

perceptions that might occur.

3 Learning a definition for the Construction Industry

The notions of learning are central to the way we, as

individuals, respond to the world.

Most learning theories adopt a cyclical model with four

distinct stages. Kolb's Learning

Cycle [12] presents the stages as concrete experience,

reflective observation, abstract

conceptualisation and active experimentation. Effective or

'all round' learning requires
the full journey around the cycle. However the cycle
describes an ideal learning pattern

and Kolb's insight was that individuals differ in their

interest in learning form the

different stages of the cycle. Kolb [12] and Honey and

Mumford [26] established that

individuals evolve skills in one area of the cycle more

than others (called their learning

style) and so they have the propensity to short-circuit

the cycle. Short-circuiting the

cycle results in failed or insufficient leaming and will

cause people to act set ways. At work, individuals tend
to come together in, or are recruited into, organisations

which present environments characterised by the opportunity

to use a particular learning

style. There is therefore a tendency for people with the

same learning styles to associate

and create organisational environments with particular

styles of operation. These ideas

of learning environments have been developed by Kolb into a

cycle of complex

environments which effects the lifelong learning and

adaptation of individuals in

fundamental ways and involve typical responses to problems

[19]. Boyd and Wild [16]

considered the barriers to both practice and academia

achieving all round learning, i.e.

learning from all four segments in the experiential

learning cycle. They demonstrate that

construction practice is concerned with 'getting the job

done', finding pragmatic

solutions to problems and only addressing problems as they

arise. The expectations of

together in the organisation and generates structural and

cultural barriers to learning

[19]. In order to achieve all round learning in the

construction industry it is necessary to

close the gap in the learning cycle between the

behaviourally and symbolically complex

environments. Thus, it is not sufficient to have an

experience in order to learn as

without reflecting upon the experience it may be quickly

forgotten or its learning

potential lost. Schon [20] suggested that this gap can be

closed by the 'reflective

practitioner' and Boyd and Wild [16] suggested action

research. Argyris and Schon [21] have shown that most
organisational learning is single

loop, or error detection and correction. They saw only

isolated examples of double loop

learning which changes current operating assumptions, norms

and values and which

involves deeper enquiry, questioning and, inevitably,

conflict and power struggles.

Argyris and Schon argue that organisations can only learn

through the learning of

individuals and that it is through understanding this

process, through duetero learning,

that whole learning is brought about. Argyris and Schon

suggest that a learning

organisation is one which becomes better at double loop

learning and handling the

conflicts to achieve this. They propose a model of expert

facilitated intervention in the

reflective practitioner. Technical skills form the

grounding of education in the construction industry.

However this approach alone will only serve to maintain the

status quo and will not
respond to the need for change [22]. Experienced
practitioners in the construction

industry have a vast amount of knowledge which can be use

as a learning base for the

industry. This knowledge includes the skills and informal

systems employed by

individuals for dealing with uncertainty, complexity,

instability, uniqueness and value

conflict which exists in the industry. The industry needs

to harness this knowledge to

challenge current norms and achieve continuous improvement.

It is only if individuals,

and the industry, know what people are taking account of,
and what makes people do

what they do, that the situation can be improved. The

industry needs the skill of

reflection in order to achieve learning. By learning

through self-development

individuals and the industry will be able to form a greater

learning base which can be

used to promote innovation and change [22].

4 Diaries

Diaries have been used for some time as a tool for research
data collection in the social

sciences [14]. The criticism of them for this use, in that

it modifies behaviour [24], is

the very aspect important for this study. Further,

Zimmerman and Weider [25] suggest

that they are an alternative to participant observation if

coupled with interviews, thus,

supporting their use for establishing the realities of

construction projects. Diaries as
learning tools have been suggested by Honey and Mumford
[26] and Pedlar Burgoyne

and Boydell [27]. Pedlar et al [27] suggest that although

there is nothing new in the

idea of keeping a diary for reflecting on ones own

behaviour, to help make such an

exercise more meaningful for self-development the diary

should be structured round a

simple model of an individual's behaviour in a particular

situation. According to this

model there are three aspects to this behaviour: (i) the

individuals feelings, (ii) the

individuals thoughts and ideas, and (iii) the individuals

action tendencies. . The two examples of diaries
described above had been designed for self

development as exercises in a learning text carried out

alone. These used blank pages to

act as the diary so as not to constrain personal entries.

In the research project described

here, the subjects were unfamiliar with the theories of

learning, thus leaving blank

pages to be filled in was not considered sufficient. The

structure of the diary was more

rigid and tried to take subjects through an event described

(see figure 1). DIARY ENTRY Date Time

WHAT HAPPENED?

MY RESPONSES

My thoughts and ideas

My feelings

My possible actions

My chosen actions

Fig. 1. Personal Project Diary Format LEARNING SUMMARY

Date Time LEARNING Learning from previous diary entries
Suggestions for improving the operation of the project

Guidance on the infonnation required under each heading was

provided as an

introduction. Further, in designing a diary for use in the

construction industry, it was

felt that there might be resistance to self exposure which

had to be shared with the

researcher and maybe with the different organisations

involved in the case study

projects. The diary takes stages one and two of Pedlar et

al [27] journal, fIrstly asking

for a description of events which will provide infonnation

on the realities of what

happened. It then goes on to ask for an analysis of an

individuals thoughts/ideas,

feelings and possible actions. Finally it asks the subject

to identify the chosen action

and analysis the reasons for this. It is here that the

diaries can deliver infonnation on the

barriers to learning and the theories-in-action employed

by individuals. After

approximately four diary entries a second step is added

that of looking for learning

from the previous diary entries and an action plan or

suggestion for improvements to

the project or future projects. It is here that evidence

can be gained on the enhancement

of learning. The frequency of entries requested for a

diary entry were: once a week on a Friday

to prompt a review of the weeks events, and approximately

every four weeks for a

learning summary. As guidance it was anticipated that each

week this would take half
an hour for a diary entry. Weekly intervals would give an
opportunity to obtain a

longitudinal glimpse at the project over three months. In

order to prompt participants

into the discipline of keeping the diary a suggested

timetable of dates for entries was

included whilst leaving it open for participants to insert

the actual date and time of each

entry. These diaries were then be used as a basis for

debriefIng exercises.

5 Debriefing

DebriefIng was considered to compliment the diaries in two

ways: fIrstly to clarify the

meaning of the words to the researcher and secondly to

help the subject reflect more

holistically on the events. The focussing on an event in

this case is similar to the

'critical incident' technique [28] which has been used to

establish deep causes of

events. It was felt that subjects did not or could not

describe the full set of consideration

in their diary and that this could be teased out through

the facilitation of the researcher.

The subject was asked to clarify their assumptions and

then to explore their response to

the situation. There is a need to fIx a chronological order

as many participants become

so involved in their part they become unaware of the total

sequence of events. This

involvement can be very emotional and it is important to

release these feelings in a

constructive way to establish the assumptions and

preconceptions subjects brought to
the event. It was considered that there were still some
things which the subjects would not be

able to put into words, in particular the tacit knowledge

[29] and theories-in-use [20].

This infonnation makes an event unique for an individual

and is an excellent site for

issues that can provide double loop learning. To overcome

this language and concept

barrier, the technique of cognitive mapping was used [30].

Cognitive mapping is a

technique which aims to visualise an individuals ideas,

beliefs, values and attitudes

through creating a pictorial map of how the subject frames

a problem (e.g. fIgure 2).

This helps in exploring the real meaning behind the event

as well as ensuring that this

meaning is understood by the researcher. As the subject

explains a diary entry, the researcher builds up a view of
the

subjects world. The researcher then encapsulates the event

or issue in a word or short

phrase which is written at the centre of a large sheet of

paper. The subject is asked to

think of satisfactory alternatives to this event and these

are recorded on the paper. The

next step is to develop ideas through addressing the

questions "why does this matter to

you"? or "why are you worried about this"? As the ideas are
expressed they are

recorded and are linked back to the alternatives and to

one another to explore how ideas

and actions are inter-dependant. To help explore issues and

to develop a shared SITE SURVEY OF PRESERVED TREES SHOWS
THAT ONE ASH IS NOT AS TPO
Fig. 2. Example Cognitive Map (psychological opposites
omitted) REDESIGN AND REGULARISE LEGISLA nON BY
PRESENTING LOCAL AUTIIORITY WITH A PRACTICAL SOLUTION

understanding between subject and researcher, the meaning

of ideas/issues are explored

through asking subjects for the psychological opposites

[30]. The resulting pictorial

model is not only evidence of careful listening but an

explicit presentation of the

meaning of the problem to the particular individual.

Depending on an individuals'

disciplinary background, organisational role, past

experience and socio-political

interests they will frame problems in different ways. This

technique allows them to find

their learning from an event in the way best understood by

them. The researcher is able

to share this learning through the pictorial representation

and might be able to help

transfer this to the industry.

6 Case Studies

The first case study project was the construction of new

student accommodation to the

value of £5.5M under a design and build contract. The

project was on two adjacent

sites in an inner city area and involved the construction

of thirteen, three and four storey

blocks. The research was carried out towards the end of

the 51 week contract period.

When the research began the contract was on programme and

there was a general

feeling that time and cost pressures had been controlled to

a compressed programme.
This case study examined learning within a large
multi-national contracting organisation

with the research subjects being the Site Manager and the
Design Manager. The third

research subject was the Architect from a small local

practice. The second case study project was the
construction of a 2140 m 2 office

development to the value of £1M under a traditional form

of contract. The site was in an

inner city area and the project involved three blocks, two
new build and one

refurbishment where planning consent was subject to listed

building consent to retain

the facade. The research was carried out in the middle of

the 50 week contract period.

When the research began the contract was behind programme

on the refurbishment

element. There was a general feeling that time and cost

pressures and a dominant client

on the project were hampering progress on site. The

research subjects were the site

manager belonging to a small local contracting firm, the

project architect and the project

quantity surveyor. The case studies were analysed through

the series of events based on the

perceptions of individual research subjects. Research

subjects sometimes used the same

event which provided an interesting comparison of

different perceptions. By analysing

the information given under What Happened ? a description

of the events from an

individual's perspective and the antecedents to the events

were determined. These
descriptions provided information about the realities of
managing construction projects

and the informal system employed. By analysing The

Responses, information was

gathered on feelings, and on the process of problem

solving including the evaluation of

options. This allowed an understanding of the

theories-of-action which the research

subjects employed and some insight into their values,

assumptions, attitudes, and

beliefs. The evidence of theories-in-use included the

presentation of alternative courses

of action which were not followed, and imaginative

experiments during the debriefing

which indicated what the individual would do under various

circumstances. The

evidence of the governing variables will come from

graphical representation of tacit

knowledge. This information allowed the identification of

barriers to all round learning

due to experience, personal development, or the reluctance

to change. From the

periodic Learning Summaries, it was determined whether

single loop or double

loop learning occurred. This was then used as evidence to

exarnine whether learning

had been enhanced.

7 Learning Analysis

The diaries of the research have produced a large amount of

information which is still

being analysed [13]. All subjects demonstrated a wealth of

experience, however, the

diary entries showed that the problems in day-to-day

operations on site were resolved

pragmatically due to time and commercial pressures. This

demonstrated only single

loop learning where subjects created new techniques for

coping e.g. 'covering the

losses' due to poor performance of sub contractors or

inadequate design information.

In addition, the suggestions for improvement at a

individual level illustrated single loop

learning, e.g. to make subcontractors feel part of the

team, or to generate design

solutions on site. However there was also a strong common

thread in the feelings of

"frustration", "disappointment", "I've been here before"

and that "this is typical of the

industry in recession" illustrating that the values of

individuals were at odds with the

environment in which they worked. In the learning

summaries the research subjects set boundaries around the
recurrent

themes from their diary entries to come up with definable

problems. The summaries

provided the opportunity to reflect outside their

professional and organisational roles

and to consider the consequences of daily decision making

on the project as a whole.

The summaries identify double loop learning, for instance,

in their concern for the

reasons for accepting lowest tenders which led to poor

performance of subcontractors

on site, or for the reasons behind inadequate design

information. From the learning

summaries the boundary between learning in a behaviourally

complex environment,
typical of the environment of construction practice and
focused on results, can be

crossed to a symbolically complex environment and focused

upon consequences [16].

This facilitates all round learning for individuals. These

steps, towards looking below

the surface of everyday problem solving on site, gives an

indication that individuals at a

project level have the ability through self-development to

initiate change from their

experience. The frustration felt at project level when the

sarne problems occur again and

again appears on the surface to be outweighed by the buzz

of crisis management and the

satisfaction of achieving results and seeing progress on

site against the odds. The case studies and subsequent
analysis have shown that construction practice on

site restricts the learning process to experiencing and

acting and that project teams are

generally forced to focus on short tenn results, due to the

structural and cultural

pressures required by the system in which they operate

[19]. The research has started to

exarnine the barriers to learning, which will fonn the

subject of a future paper. It is

believed that at an individual level, the diaries and

debriefing have begun to attack both

the situational barrier to learning by presenting the

opportunity for reflection through

the discipline of completing the diary and providing time

for debriefing, and the

intellectual barrier to learning by making valid the

concepts of all learning to the
individuals. Diaries need to be continued at a group or
team level in order to attack

some of the further barriers to learning identified, for

example, the reduction of a blame

culture. The research subjects were not willing to share

their individual diary entries

with others, but were happy to take items recorded in the

learning summaries to a group

for suggestions for improvements to the project, or to the

organisation for suggestions

for improvement. But feedback needs to be encouraged and

learning to achieve

improvement. Thus, this formal approach to the infonnal

process of learning through

experience and self-development could prove of long tenn

benefit and ultimately result

in change and innovation in the industry.

8 Conclusion

This paper has contended that many of the problems within

the construction industry

arise because of its barriers to learning. The research

investigated the enhancement of

learning within projects through the use of two

semi-fonnal techniques: personal

project diaries and debriefing. The most prominent problem

seemed to be a lack of time

fonnally set aside to engage with double loop learning

through commercial pressures.

Short tenn problem solving was practised by all the

research subjects due to pressures

of the organisational environment and the construction

programme. The thoughts and

feelings of the research subjects when approaching day to

day problems were of

frustration and exasperation at the underlying causes of

the problems faced. but in the

daily action they had to put aside these feelings and find
pragmatic solutions. This is

indicative of Kolb's [18] behaviourally complex environment

and it was concluded that

individuals in the industry adopt a problem solving

approach which is focused on

results not consequences [16]. Both case studies

illustrated how problems were

resolved through infonnal systems which allowed progress on

site to work around the

value conflicts between individuals and organisations. It

was felt that individuals

wanted to change the cultural core of the indUStry to

alleviate the commercial pressures.

Thus. at an individual level, double loop learning was

demonstrated, and so learning

was enhanced by the diaries and debriefing. However, in

order to move this work on,

the barriers to learning that are fundamental to the

organisation and operation of the

industry need to be bridged.

1. Latham M.(l994), Constructing the Team, HMSO

2. Hillebrandt P.M.( 1984), Analysis of the British

Construction Industry. Macmillan

3. Higgin G. and Jessop N.(l965), Communications in the

Building Industry. Tavistock

4. Banwell H. (1964), The Planning and Management of

Contracts for Building and Civil Engineering Work, HMSO

5. Pedlar M .. Burgoyne J., and Boydell T. (1991), The

Learning Company: a stratef,?Y for sustainable
development, McGraw-Hill

6. HMSO (l995),Technology Foresight: progress throuf,?h

partnership. Office of Scence and Technology, HMSO,
London

7. SERC (1994), Innovative Manufacturinx Initiative,

Science and Engineering Research Council, Swindon

8. Boyd D. and Wild A. (1993a), 'Innovation and Learning in

Construction Project Management', 9th ARCOM conference
Sept 1993, Ed. R Eastham and R.M. Skitmore. ISBN
0951906070

9. Holland G.(1986), Excellence in Industry: Developing

Managers A New Approach, speech at Dorchester Hotel,
London, 1.2.86, Manpower Services Commission

10. Groak S.(1994), Is Construction an Industry?,

Construction Management and Economics, Vo1.l2, pp 287-293

11. Revans R.W. (1982), 'The Origins and Growth of Action

Learning', Chartwell Bratt

12. Kolb D.A, (1984) 'ExperientiaL Learning', Prentice Hall

13. Robson A (1995) Learning in Construction Projects, MSc

Construction Project Management dissertation, University
of Central England, Birmingham

14. Easterby-Smith M., Thrope R. and Lowe A (1991),

Management research: an introduction, Sage, London

15. Gummeson, E. (1991) Qualitative Methods in Management

Research, Sage, London

16. Boyd D.and Wild A( 1994), Action Research and the

Engagement of Construction Education and
Practice,lOthARCOM conference Sept 1994, Ed. R.M. Skitmore.

17. Whyte W.F. (Ed)(1991), Participative Action Research,

Sage

18. Kolb et al (1984), OrganisationaL PsychoLogy, 4th ed.,

Prentice Hall

19. Richardson J. and Bennett B.(1984), Applying Learning

Technique to On-the-Job Development, J. of European
IndustriaL Training, Vol 8
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Practitioner' , Jossey Bass

21. Argyris C. and Schon D.,(1974), "Theory in Practice,

increasing personal effectiveness", Jossey Bass

22. Boyd D. and Wild A.(1993b), 'Education and Training

for Quality', in proceedings of conference: What is the
future for CONSTRUCTION?, University of Central England,
29th October 1993, Ed D. Boyd, ISBN 1 86995428 9

23. Lait R. (1993), 'Human Resource Management as a Source

of Criticism of Present Approaches in Balfour Beatty, MSc
Construction Project Management dissertation, University
of Central England, Birmingham

24. Oppenheim. A.N.(1966) Questionaire Design and Attitude

Measurement, Heinemann, London

25. Zimmerman D.A and Weider D.L. (1977) The Diary

Interview Method, Urban Life, 5(4), January, pp479-499

26. Honey P. and Mumford A (1986), 'The ManuaL of Learning

StyLes' self published

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Manager's Guide to Self deveLopment, McGraw-Hill, London

28. Flanagan J.C.(1954), The Critical Incident Technique,

PsychoLogicaL Bulletin, 1, pp 327-358

29. Polanyi M. (1957), 'The Tacit Dimension', Wiley

30. Eden C.(1988), Cognitive Mapping: A Review, European J.

of Operational Research. No.26, ppl-13

THE MANAGEMENT OF PUBLIC

RELATIONS AS A BUSINESS PROCESS

IN CONSTRUCTION

C.N. Preece and K. Moodley

Department of Civil Engineering, University of Leeds,

Leeds, UK

Abstract

Organisations in the construction industry are faced witb a

number of challenges. How can tbey

respond to greater client and public concern about tbe

environment and demonstrate tbeir corporate

and social responsibility?

Construction organisations need to plan and co-ordinate

tbeir corporate and marketing

communications, moving beyond a reactive and crisis

management mode to a more proactive stance

in addressing tbe wide network of stakeholders ranging

from employees, investors and customers, to

potential recruits, local communities and tbe general public

This paper identifies tbe issues in tbe management of

public relations and builds a framework which

integrates corporate, public relations and marketing

communications in construction. The benefit of

adopting this is that organisations will be able to better

strategically plan tbeir overall image and

communicate with an increasingly diverse network of

audiences.

Keywords: Public relations; construction industry,

construction firms, communications, corporate

image

Sommaire

Les entreprises du batement et travaux publics (BTP)

doivent faire face a un certain nombre de

challenges. Comment peuvent elles faire face a une demande

plus importante au niveau du respect de

l'environement de Ie part de leurs clients et du public?

Et commentpeuvent elles demontrer leur

responsabilites sociales et corporatives?

Les entreprises du BTP ont besoin de plauifer et de

coordiner leurs declarations au niveau de leur
marketing et leur corporations afin de passer d'un mode de
gestion reactif ou de aise a une attitude

plus proactive aci en s'adressant a un reseau etentu

d'uinvestisseurs qui comprendrait aussi bien des

employes, des clients, des investisseurs ou des

organisations telles que des communes et Ie grand

public.

Cet article pose la question de la gestion des relations

publiques II met en place un schema de

gestion qui complendiait les corporations, les relations

publiques et Ie marketing daus Ie monde du

BTP.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

II est a souliaiter que de L' emploi d'une telle gestion

resultena une meilleure planification strategique

de la part des entreprises du BTP et que ceci leur

permettia une meilleure communication avec une

audience toujours plus etendue et diverse.

Mots cles: Relatipns publiques, BTP (Batiment et travaux

publics), entrprises du BTP, communication

(Moyen de .. ), image des corporations.

1 Introduction

Recent reports to the construction industry have emphasised

the need for greater attention to be paid

to its image (1, 2). Construction organisations;

contractors and professional consultancies alike, need

to consider their own response to increased competition for

contracts, more demanding and
sophisticated clients and a general public which may at
best be uninformed, and at worst hostile to the

industries activities.

The 1990's has seen increased action by environmental and

other groups, most notably the anti-roads

lobby. There is evidence of a movement particularly

amongst the larger organisations in construction,

to develop public relations management in an attempt to

improve communications with a wide variety

of different stakeholders, and to develop their

relationships with local communities through

community policies (3,4,5,6).

There has been little attention paid in construction to

the management of this business function, and

the practice and processes involved in developing an

overall communications strategy. This paper will

seek to define public relations in terms of the

construction industry, and develop an integrated

approach to internal and external communications.

2 Defining Public Relations As A Management Function

Public relations consists of a plethora of activities. A

generic definition provided by the Institute of

Public Relations states:

'Public relations is the planned and sustained effort to

establish and maintain goodwill and mutual

understanding between an organisation and its publics."(7).

The plural word 'publics' refers to the fact that every

company has several different groups with

which it wants to communicate. For instance it's own

management and staff, customers and clients,

the general public, government etc. Each one of these

groupings may be known as a public.
Public relations as a business process can be used to
create a positive image and identity for the

organisation. It can support marketing in a highly

competitive environment and improve

communications with management and staff resulting in

improved morale. The public relations

function may be involved in a diverse range of corporate

and marketing related activities including

producing press releases, the annnal report, marketing

brochures and internal newspapers, journals

and other material. In publicly quoted firms, the function

may be responsible for investor relations. As

a response to the need to improve an organisations

corporate image with the general public it may be

involved with educational and careers activities and

sponsorship of community activities.

3 The Role Of Public Relations In The Construction Industry

Public relations is being propelled by rapid changes in

technology and the way business is conducted.

The after-effects of streamlining, downsizing, and other

business strategies that have eroded

employee trust and loyalty, present communicators with

opportunities and challenges in media

relations, employee communication, strategic communication

planning, investor relations, marketing,

community relations, and related areas (8).

As mentioned earlier, with the exception of a number of

articles in professional journals in the mid

1980's (9,10,11), public relations as a business process

and a function of management has not been

given attention in construction. This section will examine

the role of public relations in the
construction industry under five broad headings; PR in
support of marketing, investor relations,

internal communications and the general image ofthe

construction industry.

3.1 PR In Support Of Marketing & Sales

Despite the importance of the construction industry to the

economy, there is little empirical data on

the PR strategies used by firms to communicate business

messages to clients. As indicated in recent

research into the promotional strategies of major UK

construction firms (12,13) there is a need for

organisations to develop and communicate more distinctive

and differentiating messages; as a means

of educating potential customers about the firm and to

retain existing clients.

Public relations activity is much misunderstood, and in the

context of the construction industry it may

be better known as 'press relations'. Media relations is

one of the most important tasks facing any PR

department. In commercial terms, the specialist press such

as New Civil Engineer, Building, and

Construction News can raise the profile of the firm and

its activities with those who influence the

client; architects, quantity surveyors and engineers.

General business magazines and newspapers may

be targeted to reach client organisations in specific

industries.

Many clients have been found to be concerned with bad

reflective image and are seeking a responsible

approach to operations on site and minimal disruption and

damage to the natural environment (14).

The business case for organisations in construction to

develop community relations plans in addition
to environmental policies is becoming clearer.

Press and media relations has an increasingly significant

role to play in support of the marketing of

contractna1 services in construction in communicating with

clients about the company and creating a

positive business climate before the use of more direct

promotional techniques i.e. promotional

brochures, direct mail and pre-qualification team

presentations and interviews.

3.2 Investor Relations & Enhancing Corporate Image With The

City.

There are several ways of achieving improved relations with

investors and enhancing corporate image

with city analysts.

The legal obligation, the corporate annual report, is the

biggest single communication and requires

considerable effort on behalf of the most senior directors

and management of the firm. In a survey in

the US more than 51 % of institutional investor

respondents ranked the annual report as the most

useful and informative information source within a

company's financial program, more important

than any investor relations officer, the Chief Executive

Officer and electronic information databases

such as Dow Jones (15).

Interim and final results are also seized by financial

journalists and relations with the 'money' papers

such as the Financial Times. and the financial section of

the other broadsheets is essential

The cornerstones of an investor relations (IR) program for

publicly quoted organisations are valuation,

disclosure, shareholder relations, and capital formation

(16). Valuation primarily encompasses
activities designed to ensure that the price of the stock
reflects realistic prospects for the company and

reasonable assessments of valuation by the marketplace.

Disclosure is disseminating information

considered material to the investment process. The purpose

is to ensure fair and equal aunouncement

of both good and bad news, as well as developments that

might have a material effect on the

investment decision. Shareholder relations encompasses the

care and feeding or a satisfied

shareholder base. The capital formation aspect is ensuring

that there is a market for the company's

securities and that capital is available at reasonable,

competitive costs.

Recent research which analysed annual reports in the

construction industry, identified that many

could be improved to provide financial and other

information in a more user-friendly manner (17). In

construction the strategy may be to publicise the most

profitable divisions of the firm rather than those

with the most turnover.

3.3 Improving Internal Communications

Public relations has an internal function within the

organisation. A firm needs to communicate with

its own management and staff, and indeed all those who
combine to produce the products and services

offered by the organisation. Public relations may be

involved in producing a variety of in-house

literature including journals and newspapers or organising

internal events such as management

conferences to discuss future strategy or announce major

changes to the organisation.
It is important that employees have a favourable image of
their company because they are important

ambassadors in their communities. Organisations are often

criticised for their lack of social

responsibility and respect for the individual. The U S Air

Force for example has had serious

community relations problem, particularly with recent base

closures. In addressing this problem, Air

Force Public Affairs have attempted to make base newspapers

more relevant, focusing on those issues

that are most important to people career development, pay,

benefits, and the future of the company

(18) .

Much of the construction industry is service based and

heavily reliant on people. The variety of

different managers, designers and engineers, across

functions and within and between organisations

and projects need to be involved in the culture, mission

and objectives of the firm or practice.

Improving the image of the organisation can only be

effective if all those whom the firm relies on in

delivering the services and products to the customer

understand what is expected of them in terms of

performance.

3.4 Responding To Environmental & Other Lobbying Groups

In construction there are many possible crisis situations,

most of which are applicable in any business,

for instance the unexpected death of a senior executive,

or a high-level fraud inqniry. Two cases that

are particularly industry specific are the unexpected

failure of a structure or building leading to

damage to property or human life, and the growing problem

of direct action in protest at
environmental damage; the Twyford Dam being a most recent
case ..

Crisis management deals with issues that are big and

dramatic enough to rapidly damage a company's

image. Good crisis management must include methods of

avoiding a crisis developing, as well as how

to react in the worst case scenario. The PR function needs

to identify likely risk areas, recommend

changes to procedure to reduce these identified risks and

finally prepare how to react swiftly and

effectively should the preventative moves fail.

3.5 Improving The Overall Image Of The Construction

Industry

The construction industry has had a very poor image with a

wide section of the general public,

customers and clients and the City. This image is partly

shaped by the major players, the construction

firms and major consultants who are judged largely on how

they execute their activities with as little

disruption to normality for the population as possible.

Public relations which is aimed at informing and educating

the wider society about the construction

industry's practices would do much to improve the

perceptions of many. Following from the Latham

Report (19), the professional institutions such as the

Chartered Institute of Building, Chartered

Institute of Civil Engineers, Royal Institute of Chartered

surveyors and the Royal Institute of British

Architects together with the construction firms and

professional consultancies need to consider their

response to more demanding and critical clients and

increased competition in the industry.
4 A Strategic Framework Of Public Relations In The
Construction Industry

This section will synthesis the previous discussion in the

form of a basic framework which integrates

public relations and marketing communications in the

construction industry.

Fig I shows diagramatically the development of this model

of public relations which is based on a

literature review and exploratory research with public

relations practitioners in a small number of

major construction organisations (N=12). The intention is

that this should be the basis of further and

more detailed work which would test the validity of the

model in the construction industry.

The model is presented in five phases in the development

of public relations strategies. Each phase is

split under two headings; internal and external

considerations. This relates to the fact that the

management of public relations as a business process is

concerned with communications with internal

audiences i.e. management and staff within the

organisation, and external audiences i.e. clients,

government, shareholders and investors, local communities,

the media and the general public.

4.1 Clear & Measurable PR Objectives

Internal communications would seem to be an essential part

of any public relations strategy. The

management and staff of the firm or practice are essential

in providing a quality service to the client

or customer. Public relations can be used to communicate

the mission and objectives of the firm or

practice through a variety of different media; from the

company notice board and newspaper in
smaller firms, to the management conference and house
journals in the medium to large

organisations.

A further objective must be to build a positive working

enviroument with an organisations

subcontractors and suppliers who will have either a

positive or negative impact on the overall image

of the firm with its many audiences. Issues concerning

quality and performance expectations need to

be communicated with all those involved in providing the

service to the client.

Public relations should have a separate and defined role

within the construction organisation. It

should, however, be complimentary to the marketing

function. Construction organisations need to

adopt both a pro-active and re-active strategy to enable

not only initiation of action in creating a

favourable business climate for the firm or practice, but

to be able to deal efficiently with crisis

situations.

4.2 PR Strategies

A comprehensive public relations program educates, informs,

explains, and persuades. It includes a

wide range of powerful tools that are used throughout the

year, rather than just an occasional press

release. In addition, it must support the organisation's

corporate and marketing objectives. A

multidimensional program should support any advertising,

literature, and more direct marketing and

sales activities (20).

4.3 Analysis Of PR Environment

It is important for public relations practitioners to have

an early focus on issues as a means of shaping

public opinion. Research plays an important role in the

early identification of possible public relations

issues and problems. Acting in a pre-emptive manner to

shape public opinion about a project before it

is formed can save time and money. One U S organisation

that has used this method successfully is

Arkla Inc. By employing one of the most fundamental of

research methods face-to-face meetings

and interviews the company worked with environmental groups

to build an interstate pipeline

system (21). This may seem to contrast with the reactions

of major construction firms who may have

taken a more heavy handed and reactionary view to

environmental direct action groups.

4.4 Choices Of Strategy

One of the key choices in the provision of an overall

commitment to public relations is whether to

develop an in-house public relations function, or to

contract out PR work to agencies or consultants.

Important issues concerning conflict which may arise

between a firm and an agent or consultant have

been identified in terms of concerns over knowing each

other's businesses, contributing to a consistent

communication flow, finances, and 'chemistry' (22).

Organisations may decide to contract out

specialised work such as investor relations or political

lobbying where particular skills and experience

are necessary.

4.5 Implementation Of PR Strategies

Implementation of PR strategies will include active

promotion of the need for a professional approach
to the top management of the firm. Senior management,
possibly across functional or geographical

boundaries will need to be engaged in the strategies for

them to be effective. The decision will need to

be taken as to whether to develop an in-house PR team or to

select outside PR consultants or agencies

to undertake the work. Managerial, executive and mechanical

functions would need to be defined.

There would appear to be an attitude within the

construction industry that PR is free advertising. This

would indicate a need for more formal training of those

charged with the implementation of public

relations within construction organisations. Firms need to

employ those with both experience and

formal education and to actively encourage the formal

training of existing personnel.

4.6 Feedback

Using research, practitioners can meet the growing need to

justify the cost of public relations

programmes, and prove results. The key is to make research

part of planning a campaign strategy.

During the late 1980's a number of medium to large UK

construction organisations were found to be

in the process of conducting corporate image research to

identify how they were being perceived by

their target clients and others (23) Public relations

researchers provide quantitative and qualitative

measures of what the media is saying about a client's

products and issues. Research can be applied to

assess what influence, if any, the PR techniques and media

applied have on peoples' attitudes,

perceptions and actions towards the organisation (24)

It would seem to be most important to feedback results to

the senior management of the organisation

who may not be convinced of the need for investment in the

communication function.

5 Conclusions And Recommendations

Public relations is an essential part of the business

process, particularly in the dynamic economic

climate of the construction industry. At a time of

increased competition and ever more demanding and

critical clients, the business case for developing a

positive public relations profile for the organisation

is clear.

Public relations can improve the perceptions of a wide and

diverse range of internal and external

audiences and thus create a positive general and business

environment for the firm. A public relations

strategy in the commercial sense needs to address both

internal and external audiences. For a

construction firm or practice this means communicating with

its management and staff, helping to

improve morale, retain skilled personnel and maintain

commitment to the overall objectives of the

organisation CLEAR'" MEASURABLE PR OBJECfIVES Intemal '"

Extemal Build a positive corporate image and identity *
Communicate mission. objectives and strategy of
organisation> Create a client oriented culmre * Improve
morale and retention of management and staff> Change
perceptions in the minds of target audiences * Support
marketing efforts * Improve relations with customers,
investors, local communities * Tackle crisis situations PR
STRATEGIES'" PROCESSES Intemal '" Extemal Employee
Relations * Investor Relations * Media Relations *
Community Relations * Crisis & Issue Management ANALYSIS
OF PR ENVIRONMENT Intemal '" Extemal

Clients * Employees * Suppliers & Subcontractors *

Shareholders * Westminster, Brussels & the Local Council *
Local Community * Professional Bodies * Print & Broadcast
Media CHOICES OF STRATEGY'" TECHNIQUES Intemal '" Extemal
Choices between managing PR in-house or through outside
consultants or agents * Different techniques to be used *
Newspapers,

House Journals and Management Conferences * News Releases *

Press Conferences, Press Briefings & Photo calls * Feature
Articles

* One-to-one Press Contact * Exhibitions & Speaker

Opportunities * Sponsorship * Corporate Hospitality *
Advertising * Corporate Identity IMPLEMENTATION OF PR
STRATEGIES Intemal '" Extemal Actively promote PR to the
top management of the fum * Engage senior managers in PR
activities * Development of in-house PR team * Selection
of outside PR consultant or agency * Establishment of
managerial, executive and mechanical functions * PR
management development and training FEEDBACK Intemal '"
Extemal Actively seek feedback on the effects ofPR on
improved client, investor, employee and community
relationships and commercial success * Ensure results are
fed to the senior management of the fum Fig I A Framework
For The Development Of A Model Of Public Relations In The
Construction Industry

From an external stand point, the construction business

needs to continually communicate with its

clients and customers, financial investors, subcontractors

and suppliers, the media, central and local

government. Construction is a highly transient industry.

Local community relations would seem to be

especially important at the level of building and civil

engineering projects on a national and

increasingly international level.

In recent years public relations has developed into a

distinct management function within the

organisation structures of many medium to large

construction organisations. If managed effectively,

and with the active support oftop management, public

relations can develop and sustain a competitive

corporate image and identity for the construction business

Organisations need to view there own PR activities, not

only as a business process which will enhance

their own corporate image, but which will improve the wider
image of the industry. A combined

cross-industry effort may be pursued to improve

perceptions of construction and those who work in it.

Public relations has a serious lobbying role. Professional

institutes and construction organisations

need an overall strategy in promoting the industry's cause

to those influential in local, central and

European government, the print and broadcast media and the

City. An overall public relations

strategy in the industry would also target the younger

generation as a critical audience, through

educational establishments i.e. schools, colleges and

universities (25).

This paper has set out to outline the development of a

model of public relations which takes an

holistic approach to corporate and marketing communications

in the construction industry. The next

stage will be to test the validity of this model in the

industry.

1. Centre for Strategic Studies in Construction (1989)

Investing in Building 2001. Reading University.

2. Latham Report (1994) Constructing The Team, HMSO.

3. Costain Group Publications Costain and Young People

Joint Venture. Costain Group PIc.

4. Costain Group Publications Community Involvement Policy.

Costain Group PIc.

5. John Laing Group Annual Reports 1986 -1994

6. George Wimpey PLCAnnual Reports 1989-1994

7. Green S G (1994) Winning PR tactics; Effective

techniques to boost your sales. The Institute of
Management Foundation, Pitman Publishing p 7.
8. Clemons J G (1994) A communication office in the year
2010. Communication World Vol: 11 Iss: 1 Jan/Feb p: 42-43

9. Kreamer P 91985) A strong identity creates a memorable

image. Building Technology & Management. Chartered
Institute of Building. December. pp 20-21.

10. Leech A (1981) PR begins at home. Building Technology &

Management Chartered Institute Of Building. February. p
24.

11. Rutland P (1985) Presenting the company image.

Building Technology & Management. Chartered Institute of
Building. October. pp 13-14.

12.Preece C.N (1994) Promoting construction for competitive

advantage. Chartered Builder July/August, Chartered
Institute of Building, UK.

13. Male S & Preece C (1994) Promotional strategies in the

marketing of contractual services within UK construction
firms. A J Etkin International Seminar on Strategic
Planning in Construction Firms, Haifa, Israel, June.

14. Preece C N (1993) The management o/promotion/or

competitive advantage in UK construction firms.
Unpublished PhD. Heriot-Watt University, Edinburgh, UK

15. Hutchins H R (1994) Annual reports ( ... who reads

them?) Communication World Vol: 11 Iss: 9 October p: 18-21

16. Brown L F (1995) Getting a grip on investor relations

Directors & Boards Vol: 19 Iss: 2 Winter 1995 p: 44-46

17. Preece C N (1993) op.cit

18. Dalton H J (1992) The importance of internal

information during organisational change. Executive
Speeches Vol: 7 Iss: 3 December 1992/January 1993 p: 10-15

19. Latham (1994) op.cit

20. Marken, G A (1993) Effective public relations ... more

than a few news releases Public Relations Quarterly Vol:
38 Iss: 4 Winter 1993-1994 p: 47-48

21. Hart M A (1993) Early focus on issues shapes public

opinion. Public Relations Quarterly Vol: 38 Iss: 4 Winter
1993-1994 p: 43-44
22. Bourland P G (1993) The nature of conflict in
firm-client relations: A content analysis of Public
Relations Journal, 1980-89 Public Relations Review Vol: 19
Iss: 4 Date: Winter 1993 p: 385398

23. Preece (1993) op.cit

24. Hauss D (1993) Measuring the impact of public

relations. Public Relations Journal Vol: 49 Iss: 2 Feb
1993 p: 14-15

25. Preece C & Moodley K (1995) A public relations strategy

for the construction industry. Chartered Builder CIOB
September.

HUMAN RESOURCE DEVELOPMENT IN

LARGE CONSTRUCTION COMPANIES

M.R. Hancock, C.K. Yap and D.S. Root

Construction Study Unit, University of Bath, Bath, UK

ABSTRACT

This paper is concerned with the incidence of human

resource development (HRD)

within large construction companies. Organisations that

undertake HRD comprehend that their human resources are an

asset rather than simply an expense. Furthermore, these

firms believe that a sense of

commitment towards employees signals to employees that they

are regarded as

important to the company's future success. The hypotheses

of the study are that large construction companies
understand the

basic concept ofHRD, the practice is common and that HRD

contributes to the

enhancement of managerial performance. The practice

ofHRD encompasses the activities of training, management

development and appraisal. Analysis of the data suggests

that large construction
companies which undertake HRD understand the basic concept
but that its practice is

not common within large construction companies.

Nevertheless, those that do practice

HRD perceive that it can contribute to managerial

performance. The study suggests that proper understanding
and practise ofHRD can be a

contributing determinant for competitive advantage in

large construction companies. Keywords: Human Resource
Development, Strategic Planning

SOMMAIRE

Cette etude se rapporte avec l'incidence du developpement

de la resource humaine

(ORH) dans les companies de la construction grandes. Les

organisations qui se chargent du DRH comprennent que ses
resources humaines

sont une valeur, plutot qu'une depense. Bien plus, cettes

firmes croient qu'un

sentiment d'engagement envers les employes signe aux

employes qu'ils sont consideres

comme important au sucres ulterieure de la compagnie.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

Les hypotheses de cette etude sont que les compagnies de la

construction grandes

comprennent Ie concept fondamental du DRH, la pratique est

courante et que Ie DRH

aide au rehaussement du fonctionnement directorial.

La pratique du DRH entoure les activites de I' education,

du developpement

directional et l' evaluation. L' analyse de la donnee

suggere que les compagnie de la

construction grandes qui se chargent du DRH comprennent Ie

concept fondamental,

mais que sa pratique n'est pas courante en dedans des

compagnies de la construction

grandes. Neonmoins, celles qui mettent en pratique Ie DRH

percevoient qu'il peut

contribuer au fonctionnement directional.

L'etude suggere qu'un entendement approprie et la pratique

du DRH peut etre un

determinant contribuant pour l'avantage concurrentiel dans

les compagnies de la

construction grandes.

Mots-clefs: Le Developpement de la Resource Humaine, La

Planification

Strategique.

Introduction

Human Resources Management (HRM) has received much

attention in the general

management literature during the 1980's and 1990's. A

number of writers suggest that

the reason for this lies in there being a direct

correlation between strategic HRM and

economic success. Porter (1985) believes that HRM can help

a firm obtain competitive

advantage. Schuler and Macmillan (1984:p242) make a

similar point; that "effectively

managing human resources gives benefits which include

greater profitability."

Arguably, economic gain is the primary objective of any

organisation going into

business (even charitable organisations. have to generate

'profit' in order to sustain their

activities). This is not a new idea for businesses or for

management commentators: The

Classical School stressed the importance of 'scientific

management' for improving

efficiency and effectiveness with the sole intention of

increasing profit. The research

reported here considers only one aspect of HRM: the

development of human resources Mangham and Silver (1986)
conclude that with the exception of a few large

organisations, minimum attention has been given to the

systematic development of

managers. They indicate that companies regard 'learning

from doing' (rather than actual

management training) as critical to the development of

managerial competence.

Consequently, most managers have to develop themselves,

struggling along as their

career progresses with little or no opportunity to reflect

on what they have learned.

Experience indicates that the construction industry tends

to "make or break" its

managers by hurling them in at the deep end, letting them

learn as they progress

(sometimes with the consequence of major mistakes), rather

than developing them

intelligently. If this idea has any foundation, then there

will be consequences for large

construction firms because:

1) Large organisations tend towards formality and

inflexibility with a plethora of rules and regulations
likely to impact upon the efficiency of managers.

2) Within large organisations it becomes difficult to

control everything from the top without depriving junior
managers of authority and autonomy.

3) Large organisations usually undertake a variety of types

of work which may create an 'ability gap' which the
organisation must fill with good calibre managers.

Hypothesis

Given the aforesaid and the importance of large

construction firms both to the industry

and the general economy, the following three hypotheses

were raised:

1) Human resource development (HRD) is a well-understood

concept within large construction companies.

2) HRD programmes are common amongst large construction

companies.

3) Large construction companies consider the provision

ofHRD programmes to be a positive aid to the enhancement
of managerial performance.

Methodology

A literature review considers the relationship between

strategic planning, HRM and

HRD. For the empirical work, a postal questionnaire survey

was adopted enabling a

wide geographical area to be covered. Questionnaires were

sent to human resources /

personnel managers considered to be the most appropriate

respondents. The survey was confined to large construction
organisations (determined by number

of employees rather than annual turnover): a figure of

greater than 115 employees was

chosen ...

a) to concur with statistical data available from the

Department of Environment on

Housing and Construction Statistics.

b) to achieve an adequate sample population for the survey

to be carried out and,

c) because it is debatable whether construction

organisations below the chosen size

would be adequate. Given the scale of the work and number

of people employed,

organisations in this group are unlikely to possess the

corporate or organisational

sophistication, capacities, capabilities and geographical

spread of operation, etc. to

reveal the type of information that would satisfy the

purpose of this study. Hypothesis testing was carried out
using a combination of the Mann-Whitney U Test

(hypothesis 1) and Chi Square Test (hypotheses 2 & 3).

Strategic Planning and HRM

Strategic planning has been identified as the management of

change (Fellows et al,

1983) and change has both direct and indirect effects on

the resources of the

organization. Despite the recent doubt cast on the efficacy

of strategic planning due to

the impossibility of controlling the firm's environment

(Mintzberg 1994 a & b) there is

evidence (Hussey 1982, Thune & House 1970) that, in

general, organizations who

undertake strategic planning are more successful than those

who do not. In a direct

response to Mintzberg's claim, Ansoff (1994) asserts that

strategic planning has

transformed itself into different varieties as a response

to environmental challenges.

Whatever the arguments, it seems reasonable to suggest that

organizations that do not

systematically analyse the environment, organisation, job

and individual, are more likely

to fail to anticipate how, when and where the people will

be needed. Fellows et al

(1983) recognise that attempts within the construction

industry to plan manpower have

been generally fruitless as there are too many variables

for the goals to be realised. This

is echoed in Langford, Hancock et al (1995) who claim that

the number of variables

demonstrates that building is rather less in control of its

environment than most other

industries. Key variables, identified by Hillebrandt and

Cannon (1990:p137) are :

1) "the finite construction period of each project;

2) the wide geographical spread oflocation of projects and

especially that oflarge ones which can be undertaken only
by major firms;

3) the uneven requirement for specific skills over the life

of the project;

4) the wide diversity of skills required is such that

anyone contractor may not be able to supply all of them;

5) and the demand for any particular type of works

fluctuates over time. "

Because of these variables, construction firms find it

difficult to anticipate workload,

which leads to difficulties in the long term

employment/deployment of manpower. All

of these variables affect the planning of manpower within

the industry and go some way

towards explaining the current employment trend away from

direct labour to self

employed and labour only sub-contracting: manpower planning

has been
confined/restricted to the management level of most
construction organisations. This

idea is supported by HiIIebrandt and Cannon (1989) who

claim that contracting firms

are basically selling their management skills. The quality

of management personnel is

therefore key and requires the organisation to invest in

HRD. HRD is an area ofHRM which itself has been defined
by Armstrong (1991:p81) as

"concerned with the development and implementation of

people strategies and ensuring

that the culture, values and structure of the organisation

and the quality, motivation and

commitment of its members contribute fully to the

achievement of its goals. " The employment trend referred
to above demonstrates the means by which

organisations are trying to enhance productivity in the

face of environmental influences.

Firms hope that improved productivity will lead to a

'competitive edge' and thus

enlarge their economic gain. It has been implied by

writers such as Hussey (1982),

Ouchi (1981), and Peters and Waterman (1982), that

resources such as finance, plant

and material are equal to all businesses; the only element

that can make a difference is

the human resource. Many organisations are now adopting the

concept of HRM to try

and gain that competitive advantage.

Strategic human resource development

The process of HRD starts with the strategic plans of the

organisation which define

where the business is going and the type of resources

required to get there. These
strategies are then translated by manpower planning into
more specific definitions of

how many and what sort of people will be needed in the

future. Simultaneously, the

business plan defines what levels of performance are

required to achieve these

objectives. HRD must be specific and organised, in the

sense that there are objectives, a process

of learning, and provisions for evaluation. As HRD

encompasses the activities of

training and management development and performance

appraisal, it should be regarded

as central to anything that can be sensibly termed HRM.

If the term HRM is to be taken as something more than 'a
new label for an old bottle

of wine', then the terminology must consider the employees

(present and future) of the

organisation to be a resource, as opposed to commodity or

cost. This implies

investment therein whilst management implies that

strategies aimed at the motivation,

development and deployment of this resource and its

associated investment will be

directed in such a way as to maximise its potential. HRD

plays a vital role here. Writers

have adopted a various perspectives in considering the

subject. Nadler and Wiggs (1986) view HRD as a
comprehensive learning system for the

release of the organisation's human potentials a system

that includes both learning

experiences (classroom, mediated, simulated) and on-the-job

experiences that are keyed

to the organisation's reason for existence (profit,

survival, service, etc.). The
organisation's HRD should aim to maximise the employee's
effectiveness on the current

job; facilitate the individual's mobility to the next

assignment; and increase the

employee's commitment to the organisation through learning

and opportunities for

personal growth and change. Keep (in Storey, 1989) stated

that companies that, for whatever reasons, are inclined

to treat their employees simply as a cost or commodity, and

who hence fail to invest in

training and development activity cannot meaningfully be

said to be practising HRM.

He further argued that there is a solid economic rationale

that is likely to bind the

incidence of training and development to wider HRM

policies. If a company has

invested in training and development of its workforce, it

then makes sense to develop

policies that will help to retain these employees and to

motivate and develop them in

such a way as to put their skills to best use, thereby

maximising the return on

investment. Furthermore, training and development

activities imply attempts to

motivate and involve the workforce. Thus, Keep implied that

a failure to treat

expenditure on training and management development as a

necessary investment could

rapidly undermine the credibility of an organisation's

attempt to adopt HRM practises. Hall (in Fombrun et
al:1984), defines strategic HRD as the identification of
needed

skills and active management learning for the long-range

future in relation to explicit
corporate and business strategies. He argues that the
element most often missing is the

linking of development needs and activities to an explicit

organisational mission and

strategy. Investment in training and development may be

considerable, but many

organisations rarely examine how training and development

can most effectively

promote organisational objectives, or how development

activities should be altered in

the light of the business plans. He further argues that the

focus is frequently on

immediate skill requirements in new or present assignments

rather than on future

projected requirements (i.e. operational rather than

strategic planning). Lastly, there is often an inadequate
amount of planning devoted to the identification

of future skill needs compared to the growth of those

skills. To be strategic about

development means to analyse future business opportunities

and plans and to think

objectively about future employee skills that will be

necessary to implement these plans. For an organisation to
understand and be more effective about HRD, various

problems and issues need to be resolved at the strategic

level. This requires a clear

understanding and commitment from top management that HRD

provides valuable

resources to the organisation. The success of HRD

programmes depends on many

factors at organisational level and the clearer the

organisation is about development

policies, the more effective control can be exercised over

employee's growth. Management training and development are
considered a strong area for effective

HRD. Recent investigations have sought to establish the

level of commitment to

management training and development within British

companies (MSC, 1985;

NEDOIMSC,1984; Coopers and Lybrand, 1985; Lovey, 1991).

These investigations

reveal that whilst training and management development are

undertaken by companies

this is rarely adequate. Training and management

development has also been investigated within a

construction industry context (Williams, 1987; Binder

Hamlyn/UMIST, 1988; Mphake,

1988) and reveals that an increasing level of management

and supervisory training was

undertaken during the boom period of the 1980s. Another

important aspect of HRD programmes is in the area of
performance

appraisal. Appraisal can be used as an instrument for a

systematic approach of

evaluating staff in respect of the work and comparing it

with a pre-determined target.

Appraisal is considered a necessary element because it

makes explicit what constitutes

effective and efficient behaviour of employees: this is

critical to the implementation of

any strategic plan. It is also considered as the foundation

of the training and

development process. Investigations into appraisal trends

have been carried out to determine the extent of

the practice (Gill, Ungerson and Thakur, 1973; Gill, 1977;

Long, 1986). These reveal

that the majority of companies use appraisal schemes with

the intention of evaluating
developmental needs and to improve current performance.
These findings concur with

a survey conducted in the construction industry

(Aboobucker, 1987) which also

revealed that the majority of users are contractors rather

than consultants.

Survey, results & analysis

Sample & response rate

112 firms were chosen from listings in the New Civil

Engineer's Contractor File of 1993

and 1994 and the Contract Journal 1994. This represents

about 13% of the companies

in the 'large' category. A total of 47 replies was

received representing about 42% of the

sample. From these 47 replies, 30 (26.8%) were usable and

the rest were letters

regretting inability to assist.

Current practices of large construction companies.

As a prelude to the main hypothesis testing, the data

collected was used to indicate

trends within large firms, related to the existence of

strategic HR policies; training

management development programmes and performance appraisal.

1. Strategic human resource policies

Respondents were asked whether their company implements any

strategic human

resource policies. 17 respondents (56.7%) have a strategic

human resource policy

within their company. This is encouraging in that the

linking of human resource policy

to a strategic plan shows that companies appreciate the

benefits of , humans' as assets.

2. Training and management development programmes

Respondents were asked whether their company implements any

comprehensive

training and management development programmes. 20

respondents (66.7%) indicated

that their company has a comprehensive training and

management development

programme. This result is interesting as earlier

construction specific research by Williams (1987),

Binder HarnlynlUMIST (1988) and Mphake (1988) stresses the

need for more

awareness of the benefits training and management

development programmes can bring

to the company; and emphasise the need to increase this

function within the company.

Although a "like to like" comparison could not be made

with the earlier research (due

to bias in the sample group), in general, the overall trend

seems to show an

improvement. More construction companies appear to be

undertaking training and

management development programmes than before. Of the 20

companies that implemented comprehensive training and
management

development programmes, 19 commented favourably towards

the programmes with 1

expressing no opinion. This seems to show an almost

unanimous belief that

comprehensive training and management development

programmes are positive in their

contributions to the company, especially in the area of

enhancing managerial
performance. Even for those 10 companies that do not have
a programme,S felt that it

could benefit the company: 3 expressed no opinion and 2 saw

no potential benefit.

3. Performance appraisal system

Respondents were asked whether their company has a

performance appraisal system.

26 respondents (86.7%) replied positively. This is in line

with surveys undertaken by

Gill, Ungerson and Thakur (1973) and Gill (1977) which

reveal that appraisal has

become a well-established feature of the British personnel

function. Construction

specific research by Aboobucker (1987) supports this. Of

these 26, 21 commented positively on the system, 2
expressed no opinion and 3

considered it to be not effective. 20% (5 out of 26) of

the respondents do not think or

have no opinion as to whether their appraisal system is

effective. Latham (in Fombrum

et al:1984) points out that for appraisal to be viewed

positively, it must be an

instrument to sustain effective and/or efficient job

performance rather than a

reward/punishment instrument. Nevertheless, the result

shows nearly 80010 (21 out of 26) of those companies
having

an appraisal system are positive towards the contribution

the system can bring to the

company. This may be attributed to the fact that the trend

in performance appraisal

systems is moving towards more openness of reviews with an

increase in career

counselling (Long, 1986).

The practice of HRD in large construction firms

The foregoing are all indicators of current practice and

firms have not been considered

to be practising HRD unless all three factors are in place.

53.6% of respondents (15 Nr) confirmed that a strategic
human resource policy;

comprehensive training and management development

programmes; and performance

appraisal system existed in their firms. This indicates

that more than half of the large

construction firms surveyed have HRD programmes. Of the 15

companies that practise HRD, 13 commented favourably
towards it with 2

expressing either dissatisfaction or no opinion on training

and development or the

appraisal system. This shows that nearly 87% (13 out of

15) of the respondents are

positive that HRD contributes to effectiveness in the

company.

Statistical analysis of hypotheses

Following the establishment of the simple trends shown

above, formal statistical testing

of the hypotheses was undertaken in order to confirm that

the patterns observed in the

data were not merely chance occurrences and are 'robust' in

the sense that they would

be replicated should the research project be repeated

(Kinnear and Gray: 1994).

Hypothesis 1 HRD is a well-understood concept within large

construction

companies.

In order to test the above hypothesis, various statements

were made within the
questionnaire for respondents to 'voice' their opinion.
These statements were designed

to test the respondent's conceptual understanding of HRD by

their strength of answer

from disagreement to strongly agree. The hypothesis was

sub-divided into 5 sub

hypotheses (within which both null and alternative

hypotheses were set). In each case

the Mann-Whitney U Test was applied and in each case the

corrected 2-tailed p-value

was smaller than the significant p-value (at the 1%

significance level in all but the first

sub-hypothesis which was significant at 5%). As a result

the sub-hypotheses accepted

were:

Sub-hypothesis l.1 Human resources are an asset to the

organisation rather than an

expense.

Sub-hypothesis 1.2 Strategic Human Resource Planning has

been successful in linking

the management of human resources to the organisation's

overall strategic goals and

objectives.

Sub-hypothesis 1.3 Humans are the most important resource

for a construction

company (compared to finance, material and machinery).

Sub-hypothesis 1.4 HRM helps the organisation to optimise

return on its investment in

people.

Sub-hypothesis 1.5 A proactive HR policy is essential for

the effective and efficient
running of the organisation.

Hypothesis 2 HRD programmes are common amongst large

construction

companies.

Null and alternative hypothesis were set and the Chi-square

test carried out to compare

the observed frequency with the expected to see if there

was a significant relationship

between them. The result showed the calculated chi-square

value to be smaller than the

tabulated critical value. Accordingly we have accepted the

null hypothesis and

conclude that HRD programmes are not common in large

construction companies.

Hypothesis 3 Large construction companies consider the

provision of HRD

programmes to be a positive aid to the enhancement of

managerial performance.

Once again the chi-square test was applied to null and

alternative hypothesis. In this

case the calculated chi-square value was greater than the

tabulated critical value at the

1 % significant level and therefore we rejected the null

hypothesis and accepted the

alternative hypothesis. This result suggests that the

provision of HRD programmes in

large construction companies has a significant relationship

with the enhancement of

managerial performance.

Conclusion

Results of the hypothesis tests indicate that large

construction firms understand the
basic concept of HRD. This is a good sign as the
literature suggests that companies

that practise HRM exist in a continuum. Companies

demonstrating an understanding

of the concept are at the 'strong' end of the continuum and

have a distinct approach to

labour management where strategic interventions are

designed to elicit commitment,

development and full utilisation of resources. Having

established that companies understand the basic concept
behind it, hypothesis

2 sought to determine the extent of this practice within

large construction companies.

Results show that there is no significant incidence of HRD

in large construction

companies. From a sample of 28 companies tested, 15

practise HRD (representing

53.6% of the valid total). As the test indicates that no

significant relationship exists, the

sample is not a representation of the population. This is

mainly because the sample

group is taken from the top ranking construction

organisations and it can be concluded

that these organisations are already high achievers and

thus more advanced in their

management technique. It is proper therefore to show that

the practice of these groups

of companies cannot be a representation of the population

on the whole. If the sample

was taken on a random basis, the result might have shown a

significant relationship. Hypothesis 3 was designed to
test whether those companies that undertake HRD

consider it to be an enhancement to managerial

performance. The test shows that there
is a significant relationship between large construction
companies which practise HRD

and the enhancement of managerial performance. Although no

hard data is gathered to

prove this relationship and the relationship is based on

the perception of the one

answering the questionnaire, nevertheless, a strong

significance (beyond the 1 per cent

level) indicates that HRD programmes have been viewed as a

positive aid to the

enhancement of managerial performance. The purpose of HRD

programmes is to

create conditions whereby potential of employees can be

utilised to the fullest and thus

contribute to the success of the organisation.

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CHARACTERISTICS OF WINNING

CONSTRUCTION MANAGEMENT TEAMS

D.H.T. Walker

Department of Building and Construction Economics, Royal

Melbourne Institute of Technology, Melbourne, Australia

Abstract

Good management of construction time is closely associated

with sound management

practices. Recent research undertaken on a representative

sample of 33 construction

projects in Melbourne, Australia has revealed interesting

insights into the reason why
some buildings are constructed more quickly than others.
One hundred and two factors

which may affect construction time performance were

analysed in the study using

regression analysis, one way analysis of variance (ANOV A)

and correlation analysis.

Characteristics of 'winning' construction teams are

discussed from the perspective of

the manager of the construction team and construction time

performance. Interesting

and valuable insights can be gained from this work.

Important construction team

leader characteristics are discussed which can be useful,

in terms of construction time

performance, to select an appropriate leader of the

construction team.

Sommaire

La bonne exploitation du temps de construction est aUiee

fort avec la direction

solide. Les recherches recents sur une section

representative de 33 projets de

construction ii Melbourne, Australie, nous ont permis de

comprendre pourquoi

quelques biitiments sont construits en plus de vitesse que

des autres. Cent deux

facteurs lies avec le fa(:on d'accomplir la construction

ont ete analyse dans I'etude,

en employent l'analyse regression, l'analyse variance

(ANOVA) et l'analyse

correlation.

Les characteres des equipes de construction qui ont de

succes sont discutes de la part

du cadre de l'equipe, ainsi qu'en vue de I'exploitation du

temps de construction. Cet

oevure offre des perspicacites avantageux et interessants,

en tenant compte du

charactere du cadre d'une equipe de construction, etant

utile en fonction de chiosir Ie

cadre juste pour l'equipe.

Keywords: Construction Time Performance, Leadership,

Construction Management.

1 Introduction

Construction time performance has been identified along

with cost and quality as one

of three crucial success factors for a construction project

(PRD 1991a, p32). A number

of researchers have investigated the role and influence of

the construction leadership

team in achieving timely construction and meeting the

client's needs and have

concluded that the construction management team plays a

pivotal role (Ireland 1983;

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Span. ISBN 0 419 22230 8.

Sidwell 1982; Morris 1983; Walker 1989). Case studies of

best practice reveals

interesting, though indicative, evidence taken from small

samples of projects (BCA

1993; CIDA 1993; CII 1995). These add weight of evidence

to support conclusions

drawn from earlier studies (NEDO 1988) which advanced

preferred characteristics of

construction management teams to achieve sound construction

time performance.
Many leading academics have contributed to the debate and
this has lead to the view

that in order to perform well, winning construction

management teams must engage in

effective planning and communication with other teams

involved with construction.

With the benefit of a substantial body of knowledge and

empirical evidence being

available in this area of investigation from the late

1970's and early 1980's, a detailed

study was undertaken from 1990 to 1993 on a representative

sample of Australian

projects undertaken in Melbourne (Walker 1994a). General

results have been reported

elsewhere (Walker 1995) and more specific aspects have also

been reported upon

(Walker 1994b; Walker 1994c).

Sumarised specific findings are reported in this paper on

an investigation into

construction time performance. The work represents an

in-depth study of 33

construction projects of mixed type of end-use, of scope

(measured in 1990 Australian

dollars) from $4 million to $45 million constructed and

completed during the boom

bust period of 1987 to 1993. The findings reported in this

paper relate specifically to

the construction management team factors.

Conclusions flowing from the research provide useful best

practice characteristics of

leaders of the construction process. The findings suggest

that winning construction
teams are sophisticated and competent in the discharge of
their duties. Managerial

performance of the construction team was found to be the

most significant factor, the

interaction between client's representative and the

construction management team was

also found to be pivotal in facilitating good construction

time performance. The value

of the research reported upon in this paper lies in the

weight of evidence that supports

conclusions reached.

The paper is structured with a brief outline of research

findings followed by more

detailed discussion of the evidence. It is considered

beyond the scope of this paper to

discuss the methodology developed for the study. The paper

concludes with

recommendations.

2 Research Findings

The thesis tested by the research (Walker 1994a) was that

'variance between actual

peiformance and trend line peiformance can be substantially

explained by

managerial effectiveness of the project team in response

to challenges posed by

factors outside the control of the construction management

team. '

More specifically, four principal hypotheses are tested by

this work:

client's representative team's management effectiveness

P ]-HO that construction time performance ]S NOT

significantly affected by the management effectiveness of
the client's representative;
Pi-Hi that construction time performance IS significantly
affected by the management effectiveness of the client's
representative;

construction management team's effectiveness

P2-HO that construction time performance IS NOT

significantly affected by the management effectiveness of
construction management teams;

P2-H] that construction time performance IS significantly

affected by the management effectiveness of construction
management teams;

Design teams' effectiveness

P3-HO that construction time performance IS NOT

significantly affected by design team management
effectiveness;

P3-H] that construction time performance IS significantly

affected by design team management effectiveness;

Project challenges

P 4-HO that construction time performance IS NOT

significantly affected by a small number of challenges
posed by factors outside the control of the construction
management team;

P 4-H] that construction time performance IS significantly

affected by a small number of challenges posed by factors
outside the control of the construction management team.

Investigation of evidence to support or reject the

principal hypotheses involved testing

102 sub-hypotheses because the principal aim of the work

was to investigate the

reason why some projects are built more quickly than others
by establishing a 'league

table' of factors for the sample grou to also indicate the

stren th of each factor tested. Economic Environment
Inherent Site Conditions COMPLEXITY ++ i Construction
Management Team's i Effectiveness In Managing the :
CONSTRUCTION PROCESS '-------------r-++++---L
Construction Time Perforrrance ow High
Figure 1 Model of Factors Affecting Construction Time
Performance

The '+' symbols provide ordinal scales of significance. A

'+++' significance is not three time more

significant than a '+' influence. Significance means

likelihood of the result NOT happening by chance.

A model, based upon the literature and findings from a

pilot study, was refined and

expanded through knowledge gained in analysing results from

this 33 case study

research (Walker 1994a). Figure 1 helps explain the

strength of relationship between

factors affecting construction time performance. It

expresses two ideas. construction

time performance is directly affected by the construction

management team's

managerial performance. This performance is affected by

challenges outside the

construction management team's control, the client

representative's team effectiveness

and the design team's communication effectiveness.

This model places responsibility for good construction time

performance flfmly with

the construction management team. Berkeley et at. (1991,

p5) state that 'the fact that it

may be difficult to control the occurrence of risk does

not absolve the manager from the need to

anticipate the risk. and thus find ways of lessening the

impact of its occurrence on the achievement of

project goals. This may involve ensuring that the planning

for the project is flexible in the face of the

occurrence of the risk and/or that subsequent contingency

planning can be made in the event of its
occurrence. Their view that construction time performance
is substantially in the hands

of those capable of dealing with risk supports the

conclusions of this research. It is

proposed that this group is generally the construction

management team.

The model indicates that the most significant cluster of

factors relate to the

construction management team's effectiveness in managing

the construction process

which forms the filter through which construction time

performance is determined.

The construction management team is in direct control of

construction activities and it

is this team which can best formulate plans to control and

mitigate risks to achieve

satisfactory construction time performance. High

construction management team

performance results in high construction time performance

and low construction

management team performance results in low construction

time performance.

No specific team structure is proposed, however, the

results strongly support the idea

that team member's qualities are crucial. A well

functioning construction management

team will be able to identify risks and plan to mitigate

detrimental impact upon

construction time performance, be able to effectively

communicate using appropriate

media and have the capacity to develop sound interand

intra-team synergies. Though

the construction management team's management style was not

identified as a factor

affecting construction time performance, it is moderately

correlated to construction

management team management related factors that do affect

construction time

performance. The model in figure 1 indicates that high

construction management team

effectiveness leads to high construction time performance.

The model, illustrated in figure 2, explains the

relationship between construction

management and client representative team effectiveness and

other factors acting on

these two teams. The construction management team's

effectiveness in managing the

construction process is affected by developing an

organisational struCture that is best

suited to meet the challenges and risks accepted (Morris

1994, p219).

This model helps explain the elements and their relative

significance and impact upon

contributing to the construction management team

effectiveness in managing the

construction process.

Figure 2 Indicator of Construction Management Team

Effectiveness

The '+' symbols provide ordinal scales of significance. A

'+++' significance is not three time more

significant than a '+' influence. Significance means

likelihood of the result NOT happening by chance.

3 Discussion

Table 1, The ANDV A test (at the 95% confidence level),

reveals that important
summary and detailed construction management related
factors affect construction

time performance. Six of the seven factors affecting

construction time performance

with a significance level of less that 0.01 are

construction management team related.

This demonstrates overwhelming support for the conclusion

that construction time

performance is most significantly affected by construction

management team

performance. The 0.01 significance level means that this

result may occur by chance

in one in one hundred cases.

Table 1 illustrates the sub-hypotheses tested and their

ANDV A significance level for

summary construction management variables and table 2 for

detailed variables. The

column headed 'HY' is the tested sub-hypothesis. In the

short-hand description of the

sub-hypothesis the term HI+ refers to a high or greater

level measure, A VG+ refers to

average or better, SH+ refers to slighly high or higher,

CM refers to the construction

management team and CR refers to the client's

representative team. The third column

indicates the significance level of the conclusion being

due to chance, thus a 0.001

result (for the first row in table 1) indicates that lout

of 1,000 cases may be chance

results. The 0.95 confidence level expects a significance

result of I 0.95 or 0.05, thus

results less than 0.05 are considered significant.

Table I Summary construction management Sub-hypotheses

Supporting P2-H I

Table 2 Detailed construction management Sub-hypotheses

Supporting P2-Hl

The 18 reasons highlighted in tables I and 2 indicate why

construction time

performance is affected by client representative factors.

Reasons fall into three broad

groups, with HY -100 being a summary sub-hypothesis, which

describe good

construction management practice:

• HY-9, 52, 53, 56, 57, 58 and 61 , construction management

planning management and control procedures;

• HY-49, 59, 60, 62 and 84, construction management

organisational structure, coordination and management
style;

• HY-87, 90, 93, 96 and 99, construction management

communication skills.

Results from the sub-hypothesis 9 test indicates that

construction time performance is

dependant upon 'the building duration time being within 5%

of estimated duration

adjusted for approved extention of time (EOT)'. The only

significant association with

any of the factors compared in the analysis was a moderate

correlation with impact of

client representative/construction management working

relationship. This may

indicate that projects constructed ahead of approved

revised schedule tend to

demonstrate better construction time performance than

others. It may also mean that in

those cases the estimated duration was generous and could

be reduced, that the client
representative was generous in approving EDT, or some
combination of both. It is

probably more realistic to assume, given that projects are

awarded under market

conditions, that the estimated duration was reasonable. The

most likely explanation for

these results is that this measure indicates good time

management on the part of the

construction team and that the client representative

granted reasonable EDT claims.

Sub-hypothesis 56 is a summary of sub-hypotheses 52 to 55

of which sub-hypothesis

52 'CM's forecasting planning data' and sub-hypothesis 53

'CM's analysing

construction methods' are indicated to significantly impact

upon construction time

performance. Sub-hypothesis 61 is a summary of

sub-hypotheses 56 to 60 and each of

these impact upon construction time performance, i.e.

sub-hypothesis 57 'CM's

monitoring and updating plans to reflect work status',

sub-hypothesis 58 'CM's

planning responding to problems or opportunities',

sub-hypothesis 59 'CM's

effectively coordinating resources' and sub-hypothesis 60

'CM's developing an

organisational structure to maintain workflow'. These

hypotheses generally have high

correlation with each other and with team communication

variables. Test results for

sub-hypothesis 56 indicate moderate correlation with a

number of client representative

factors. This supports the hypothesis that a sophisticated

client representative, who
can facilitate an environment in which a construction
management team plans and

controls well, can achieve high construction time

performance.

Correlation results for sub-hypothesis 61 also indicate

high correlation with factors

that do not directly affect construction time performance

such as 'CM's management's

systems and procedures' and 'CM's effectiveness in team

management to achieve

synergy' . Management style has been shown to have moderate

influence on

'effectiveness of the CM's monitoring and control' ,

particularly 'CM's people

orientated management style', 'task-orientation of the

CM's management style' and

flexibility of both the client representative and the CM's

management style. The

general picture emerging from the Spearman Rank Correlation

analysis is that CM

performance is linked, and is probably assisted, by

positive client representative

sophistication and managerial effectiveness factors.

The importance of team relationships, organisational

structure and management style

is indicated through the results of those sub-hypotheses

tested and found to

significantly affect construction time performance, notably

sub-hypotheses 49, 59 60,

62 and 84. These pertain to a well organised, well managed

and cooperative

construction management team.

Sub-hypothesis 49 test results for 'impact of CR/CM
working relationship' suggests

that a better quality relationships between the client

representative and construction

management team leads to better construction time

performance. Spearman Rank

Correlation results support this, indicating high

correlation between this factor and

'confidence of the CM and design team in the CR' and also

with 'CM's

communication management to facilitate decision making' .

Most of the factors

affecting construction time perfonnance have moderate

correlation with this factor.

There is also high correlation between this factor and 'the

CR's ability to quickly make

authoritative decisions'. The weight of evidence suggests

that the client

representative's influence upon this factor is strong with

elements of good

management perfonnance being linked to a good construction

management/client

representative working relationship, which is also shown to

influence good

construction time performance. The importance of positive

construction

management/client representative working relationship is

supported by this factor's

moderate NEGATIVE correlation between 'direct use of power

in the CR's

management style'. This indicates that a power rather than

cooperative approach

results in lower construction time perfonnance.

Test results for sub-hypothesis 59, 'CM's effectively
coordinating resources' ,

highlights the importance of good construction management

managerial practice. It is

not surprising that Speannan Rank Correlation analysis

reveals very strong association

between this variable and 'CM's planning', 'responding to

problems or opportunities'

and 'effectiveness of the construction team's monitoring

and control'. The high

correlation between the variables 'CM management systems

and procedures' and

'CM's analysing work sequencing to achieve and maintain

workflow' supports the

overall assessment of good team management skills

reflected in its association with

'CM's effectiveness in team management to achieve synergy'

.

Results from testing sub-hypothesis 60 revealed a strong

correlation between 'CM's

developing an organisational structure to maintain

workflow' with the summary CM

management variable. The particularly strong association

with this variable and

'effectiveness of the construction team's monitoring and

control' confinns an

expectation that strong evidence could be found to link the

CM's organisational skills

and good managerial practice. The moderate correlation

between this variable and

with construction management and client representative

management style suggests a

construction management 'hands-on' and involved but

team-oriented style is
associated with positive construction time performance
results.

Sub-hypothesis 62 test results clearly demonstrate a strong

link between the

construction management team structure, its quality of

personnel and staffmg level

being appropriate for the management task, and good

construction time perfonnance.

Correlation analysis strongly links this factor with

'effectiveness of the construction

team's monitoring and control' and 'CM's analysing work

sequencing to achieve and

maintain workflow'. A strong association exists between

this variable and 'the

construction team's confidence in the CR's contribution'.

This association, together

with moderate correlation with the client representative's

ability to contribute both

construction and design ideas, indicates that an involved

and sophisticated client

representative assists the construction management team to

achieve management

effectiveness. The moderate association of this variable

with 'stability of client/client

representative objectives' and 'clarity of communication of

clientiCR objectives'

supports this view.

The only management style factor shown to directly impact

upon construction time

performance is the 'key sub-contractor's task-orientated

management style'. This

factor has moderate association with a number of

construction management planning,
control and communication variables that directly impact
upon construction time

performance. Associations with factors not directly

affecting construction time

performance include the management styles of other team

members. The picture

emerging from association with both people-oriented and

task-oriented managements

styles of the client representative and construction

management suggests a task

oriented and people-oriented management style encourages

key sub-contractors to be

results-oriented, using people's skills to overcome task

related problems in a flexible

manner.

Construction management communication skills is an

important element for good

construction time performance. Sub-hypothesis 87 test

results provides clear evidence

of construction management's communication management

facilitating decision

making affecting construction time performance. This

variable has strong correlation

with impact of 'CR/CM working relationship', 'CM's

effectively coordinating

resources', 'effectiveness of the construction team's

monitoring and control', and 'CM

decision making, communicating and actioning'. This

evidence links communications

management with planning and control and developing sound

client

representative/construction management relationships as

well as the effectiveness of
decision making. The moderate association indicated of this
factor with others not

directly affecting construction time performance indicates

that client representative

sophistication and management style also plays a part. The

moderate negative

correlation between this variable and direct use of power

in the client representative's

management style supports the contention that a

confrontationalist management style

has negative impact upon construction time performance.

Test results for sub-hypothesis 90 'CM and design team

communication effectiveness

for decision making', sub-hypothesis 93 'decision making

communication within the

construction management team', and sub-hypothesis 96 'CM

decision making,

communicating and actioning' support the evidence that

general communications and

decision support affects construction time performance. The

argument is further

strengthened by construction management and design team

communication

effectiveness being moderately associated with a design

team people-oriented

management style. construction management decision making

effectiveness is

moderately linked to both 'planning and control' and

'general communication

performance' . construction management decision making

performance is also

moderately associated with a task-oriented client

representative and construction
management and people-oriented management styles. 'CM
decision making,

communicating and actioning' is highly correlated with

construction management

planning and control and is also highly correlated with

'CM's effectiveness in team

management to achieve synergy' and communication management

to facilitate

decision making.

Sub-hypothesis 99 'construction management's effective use

of information

technologies' test result also suggests that good

construction management

communication skills in using decision support technology

assist the construction

management to become a more effective manager.

4 Conclusions

The ANOV A and Spearman Rank Correlation analysis has

provided valuable

statistical evidence which helps explain why good

construction time performance is

significantly affected by construction management team

performance. The

construction management's professional approach to planning

and control contributes

to good construction management team performance. This

approach is evidenced by

the construction management team's:

• initially thinking through the plan and defining the

issues, planning construction methods effectively, and
putting in place a coordination strategy that allows for
adequate monitoring and control;
• communication both with internal and external team helps
to facilitate decision making, decision communication and
decision action;

• adoption of a management style that maximises cooperation

but still maintains a focus on results. this does not
mean that task-orientation and flexibility or
people-orientation are mutually exclusive.

The useful application of this work is that it proves,

within the statistical constraints

and sample definition, that good construction time

performance has strong association

with good construction management management performance

and that the client

representative has a strong influence on providing an

infrastructure of cooperation,

communication and commitment which significantly affects

construction management

performance. This work, however, draws to our attention the

critical importance that

leadership on the part of the client representative has

upon construction management

performance.

In the past some client representative's have been able to

influence client's into

believing that a confrontationalist management style,

direct use of power and an

unyielding results-oriented approach to management produces

sound construction

time performance outcomes. It is always difficult post-hoc

to fairly allocate praise and

blame for construction time performance results because

issues get muddied by

details, personality factors, and the time taken to design

and build. This work has
provided a clear picture of client representative and
construction management best

practice for achieving good construction time performance

and as such can form a

sound basis for developing benchmarks for achieving these

best practices.

5 Recommendations

The work reported upon here is restricted to construction

management teams and the

research investigated wider issues which included the

impact of the client's

representative team. The following summary statements and

recommendations are

proposed. There are a number of lessons to be learned from

the research findings

which construction companies and building clients could

implement to their

advantage. Results indicate that a well organised and

functioning construction management team can offer much to
the achievement of construction time performance. This is
exemplified by effective planning and communication for
decision making. A construction team's flexibility in
responding to problems and opportunities is based upon
sophisticated planning for control where plans are seen as
a focus for action rather than static or rigid commands or
procedures. This implies that effective use of planning
tools should be encouraged for simulation analysis to
predict a range of possible futures of which a 'preferred
future' can be selected. Close involvement of team
participants in the construction planning and
implementation of work is needed to achieve this. This
needs to be integrated into the monitoring cycle, checking
reality against the 'preferred future' of the plan. If
construction teams can see plans as 'preferred futures'
which are subject to impact of reality and unexpected
events, then they may be more prepared to see plans as
goals to be constantly aimed for rather than predictions
in which guilt may be attached to those who prepared them
or those who 'failed' to realise them.

• It is proposed that construction companies should ensure

that team members, charged with defining plans and those
closely involved with carrying out the work, be trained
in the use of planning techniques, idea generation and
problem solving. This will provide a better chance for
enhancing a team's responsiveness to changed environments
and circumstances.

2 The research results also draw clear conclusions about a

favourable nature of the client and construction team
relationship. Research evidence presented in this thesis
suggests that where a good relationship exists there is a
better chance of good construction time performance.

• It is proposed that the client's representative team

should gain a good understanding of the project's
complexity and constraints to assist the development of
confidence of the construction management team in the
client's representative team. This can be achieved through
mechanisms such as partnering (Patching 1994) or other
models which better integrate the client's representative
and design team with the construction management team in
problem solving and investigation of strategies for
construction. These have been documented as being
successful in many cases in Japan and the USA (Bennett
1991; Walker 1989).

3 The research results give clear indication of the need

for competent team members. This may seem obvious and the
evidence provided conftrms this requirement to achieve
high construction time performance. According to Bennett
(1991, p254) competent people require not only a good
technical and general education but also practical skills
in problem solving and analytical thinking.

• 1t is proposed that the construction industry invests in

its future by promoting life-long learning. This can be
achieved in a number of ways. Formal training at trade,
undergraduate, and post graduate levels can be, and in many
cases are, encouraged. The methodology developed for this
thesis also provides a usefulframeworkfor project team
members to learnfrom experience.

This short and by no means exhaustive list, explores how

industry can adapt to

improve construction time performance. It attempts to link

what has been learned from

the research to provide a few practical and useful

recommendation for industry to
improve construction time performance.

Bennett J. 1991, International Construction Project

Management General Theory

and Practice, Butterworth Heinemann, Oxford.

Berkeley D., Humphreys P.C. & R.D. Thomas, 'Project risk

action management',

Construction Management and Economics, vol. 9, pp. 3-17.

Business Council of Australia 1993a, Case Studies of

Project Implimentation in the

Building Construction Industry, BCA, Melbourne.

Construction Industry Development Agency (CIDA) 1993,

'Project performance

update a report on the time and cost performance of

Australian building projects

completed 1988-1993', CIDA, Sydney.

Construction Industry Institute (CII) 1995, Winning Teams,

CII, Australia.

Ireland V. 1983, The Role of Managerial Actions in the

Cost, Time and Quality

Performance of High Rise Commercial Building Projects, PhD

thesis, University of

Sydney, N.S.W., 1983.

Morris P.W.G. 1983, 'Project management organization',

Construction Papers, vol. 2,

no. 3, pp. 5-18.

Morris P.W.G. 1994, The Management of Projects A New

Model, Thomas Telford,

London.

NEDO Construction Industry Sector Group 1988, Faster

Buildingfor Commerce,
Report prepared for the National Economic Development
Office (NEDO) Commercial

Building Steering Group, London.

Patching A. 1994, Partnering and Personal Skills for

Project Management Mastery,

APA, Sydney.

PRD 1991a, 'Productivity and the Australian construction

industry' A report prepared

by Policy and Research Divisions (PRD), Royal Commission

into Productivity in the

Building Industry in NSW.

Sidwell A.c. 1982, 'A critical study of project team

organisational forms within the

building process'. PhD thesis, Department of Construction

and Environmental Health,

University of Aston in Birmingham.

Walker A. 1989, Project Management in Construction, 2nd

edn., BSP Professional

Books, London.

Walker D.H.T. 1994a, An Investigation into Factors that

Determine Building

Construction Time Performance, PhD thesis, Royal Melbourne

Institute of

Technology, Victoria 1994.

Walker D.H.T. 1994b, 'Risk identification and developing

benchmark measures of

construction time performance', Proceeding of INTERNET '94,

12th World Congress

On Project Management, Oslo, June 1994, vol. 2, pp.41-47.

Walker D.H.T. 1994c, 'Procurement systems and construction

time performance',
Proceedings ofCIB W-92 East Meets West conference, Hong
Kong, December 1994,

pp.343-352

Walker D.H.T. 1995, 'An investigation into construction

time performance',

Construction Management and Economics, vol. 13, no 3,

265-274, Spons, UK

ORGANISATION BEHAVIOUR IN A

TRANSITIONAL ECONOMY ROMANIA

c. Oltean-Dumbrava

School of Construction and Environment, University of

Abertay,

Dundee, UK

Abstract

The decision to change a country from a command economy to

a market economy

impacts especially upon how companies are subsequently

managed during the period

of transition and afterwards. Previously large construction

companies in Romania

functioned knowing that contracts would be awarded because

competition did not

exist. However, with the advent of a market economy, it

has been necessary for these

large organisations to be divided into small or medium

sized enterprises, and some

new privately operated companies have also been created.

The concept of generating

working capital to operate such companies, providing new

and additional plant and

equipment, and the need to develop commercial business

practices for such matters as
tendering and marketing, has created major challenges
within these companies during

the transition. The paper will identify these challenges

and problems from a

Romanian perspective and discuss how these are being

resolved.

Keywords: Transition to a market economy, organisation

behaviour, privatisation,

generation of capital.

Sommaire

La decision de changer un pays d'une economie centralisee a

une economie du marche

affecte surtout la maniere dans laquelle les entreprises

sont gerees pendant et apft!s la

peri ode de transition. Avant, les grandes entreprises de

construction functionnaient

sachant qu'ils aIlaient avoir les contracts pursque la

concurrence n'existait pas. Avec,

l'introduction de l'economie du marche, il est devenu

necessaire pour ces grandes

entreprises de se diviser en petites et en moyennes

entreprises. Des nouvelles

entreprises privees sont aussi creees. Le concept de

generation du capital de

fonctionnement, la necessite d'acquerir des nouvels

materials et de developper la

strategie commerciale pour des activities telles que I'

offre et Ie marketing presentent

un grand defi pour ces entreprises pendant la periode de

transition. Cette article

The Organization and Management of Construction: Shaping

theory and practice (Volume One).
Edited by D.A. Langford and A. Retik. Published in 1996 by
E & FN Spon. ISBN 0419222308.

identifie ces defis et problemes dans la perspective de

Roumanie et discute comment

ils sont resolus.

1 Introduction

The major changes which affected Romania, starting in 1990,

had a great impact on

the economy as a whole, and on the construction industry in

particular. Lack of money from public sources, coupled
with a virtually non-existent private

sector at the beginning of the 1990, brought in a great

turmoil in this sector. The

volume of investment reduced from 100% in 1989 to 45.2% in

1992, and the amount

of the investment in the GDP from 29.6% to 14.8%. In the

same period of time, the

amount of public investment in the total investment went

from 57.5% in 1989 to 16%

in 1991 (See Figure I). • Volume of inves ---r-~

(1989-100 %1 Weight of inve s t Weight of public
investment from the to tal investment % ~ R?-S ""'-..
40 --2. 6 ,8 30 ........... 16 .192 20 10 0 1989
1990 1991 1992

Fig. 1.

Source: Romanian government data

Large companies with more than 3000 employees were forced

to close, as were many

design and research institutes. Highly qualified technical

personnel were made

redundant overnight and billions of Lei worth of equipment

were condemned to rust. Faced with all these difficulties,
the remaining companies tried to overcome these
problems in different ways. Some of them were lucky to
find niches abroad and

started to subcontract particularly the labour and

technical know-how in the Ukraine,

Germany and the Middle East. Some others split into smaller
companies which were

more flexible and thus more able to cope with a rapidly

changing environment, and

address their activities to the emerging private sector.

2C 1993 Organisation behaviour in a transitional economy
337

2 The formation of the private sector in the construction

industry

The majority of the population could not even .consider

starting a business. They had

to struggle for their life in a dramatically changing

economy, where jobs for life were

replaced with job insecurity, fixed prices with rapidly

growing ones, coupled with a

high rate of inflation. Some of them were the first to be

made redundant and the only

chance they had to earn money was to start their own

business. Some others were

more fortunate, having relatives abroad, or working abroad,

and had saved or

borrowed a small sum of money in hard currency. This made

a great deal of

difference. Others started joint ventures with foreign

partners with as little as US

$5000. This was the start of the privatisation process,

coupled with a legislative

framework such as: the Law of Privatisation, the Law of

Foreign Investment, the Law
on State Owned Enterprise Restructuring and the Land Law,
which all tried to

encourage local and foreign investment. The state or

co-operative property gradually

started to change in a great variety of types of property

(see Table 1, in which is

presented the type of property of the business companies

involved in building activities

in mid 1993).

Table 1. Type of property of business companies involved

in building activities

Source: ARACO Bulletin No 611993

No Type of Property No of Average No of Enterprises

Employees 2 3 4

1 Independent managing companies 4 906

2 State business companies 544 341,640

3 Other state economic enterprises 3 1108

4 State autochthon & foreign capital 5 402

5 State, private autochthon & foreign capital 4 1245

6 State & private autochthon capital 50 21,830

7 State & foreign private capital 2 214

8 General partnership company 149 2690

9 Sleeping partners company 19 297

10 Joint stock partnership company 2 190

11 Joint stock company 89 18,669

12 Limited liability groups 2992 128,322

13 Domestic co-operative industry 9 1388 TOTAL 3872

518,321

The weight of investments of private sector as a

percentage of the total investments

rose from 1.9 in 1989 to 17.4 in 1993, (see Figure 2) and

a large number of small and

medium sized companies were formed (see Figure 3).

Presently, more than 57% of the

companies employ less than 200 employees, compared with

only 12% of companies

employing more than 200. A large number of companies (32%)

were employing

temporary labour during sporadic contracts. These companies

had not previously

employed a permanent staff.

U1

c:

::0 (")

OJ

c:

::0

n
o

U1

.......

-'

\D

\D

.:-r-U'l .~ GROUPING THE BUILDING COMPANIES IN ACCORDANCE

WITH THE NUMBER OF WORKER S '-C 00 0. c:i E zo ()
nLmber of ccrnpanies = 3,872 number of workers 518)321
1~od . 1~001r ==t=j--t--f--t==r= IIl1fr II
1POOf90d1"T111Irl-+--L800Lm 1--1--700 600 500 [,00 300
200 100 % 20 % 23% 1 2 0 ... 10 11...50 t~ ~ 7 ,I 226
II i ~ Y I II 1 6 ,j,l Fig. 3. 1very sm911 companies
I< 2 small companies ... 3"'medium ccrnp:nles [, -large
companies 5 -very large comp. Source: GO'lernement
Ordonance No.25/9: No. of workers Organisation
behaviour in a transitional economy 339 17.,>;>
.........r11 --o:cn:g::::: fj 1990 1991 1992 1993

Fig. 2. Weight of investments of private sector in total

investments (%)

Source: Romanian government data

The state sold the flats in the blocks to their tenants at

very low prices. Thus, by the

end of 1992,6.8 million (88%) dwellings were private

property (see Figure 4). On the

one hand, the new businesses, including the new banking

systems, needed

headquarters, and on the other hand, the new owners of

flats and houses became more

conscious of their values. This contributed to the

creation of a new market for the

construction industry, formed of new investments,

maintenance and repairs of the

existing properties. The large scale privatisation of the

industry also required investments in the

infrastructure, which offered a market for the larger

companies. ~

8 ;l1L 77 77 E ~ I 7 Ik::.:·.~~::1 Public Property

U1

t!) 6 D Private Property Z

-.J 5 -.J f

LU

3 ~ 5.2 5.3 6.1 6.8 0

LL 3 88°A 0

0:: 2 ~ LU .:, ....

CD ~ eo. '. :.~ , '. .......

:::E 1 \8':' 2.3: 16:, ~ ~ ......... ' , . ... . '

:?~~,~ z ..... . " .. " Years .... o : ',I 0 ....
"." 1980 1985 1991 1992

Figure 4. Dwellings stock by type of ownership

Source: Romanian Statistical Yearbook 1993

3 The process of generating working capital

The process of dividing the existing working capital

between the smaller companies

formed from a larger one was, and is still, a difficult

one. The existing equipment,

such as tower cranes or big excavators, is appropriate

only for major industrial or

residential developments. Its current market secondhand

value is low. This

equipment, however, represents an important value for the

company. In the cases of

former large state companies which wanted to privatise, it

is very difficult to evaluate
their capital in order to calculate the value of the
shares to be sold to private investors,

because of this low market value equipment, which

represents the capital of the

company. Residual values are high, the writing-off period

was fixed to between 10-20

years, and the situation has been exacerbated by high

inflation and devaluation of

national currency in the years 1990-1993. Thus, this type

of investment opportunity is

not attractive. The nature of the market has changed

completely. Major industrial, residential or

agricultural developments are now hardly undertaken because

of lack of funds. The

existing built asset has to be maintained in the present

form or refurbished to improve

its image. This market needs other types of equipment and

a change of emphasis

towards a better quality, especially for finishings.

Small companies need to invest in tools rather than plant
because of the nature of

their activity. The supply of tools, plant and equipment

certainly exists, and the

demand is high. However, the construction companies, no

matter how large they are,

do not have enough money to buy new equipment in order to

replace the existing stock

entirely. Sometimes, they have to use what they possess,

even if it is not efficient,

because they cannot afford to buy or rent what would best

suit their needs at the

present moment. The joint venture organisations, in which

the foreign partner could contribute to the
formation of the working capital by bringing in the
necessary equipment and tools, are

in a more fortunate situation. They can also afford to

import some building materials

of high quality, which are in short local supply.

4 The development of the commercial business practices

The general climate of economic competition, typical of the

market economy, requires

managers to have expertise in techniques and methods

suitable to satisfy the demands

of clients as far as deadlines, quality and initially

agreed budgets, are concerned. The

Romanian business culture thus needs to be changed in order

to:

• engender trust and respect between national or foreign

trading partners

• appreciate the true cost and value of time

• explain the need to take personal responsibility for

quick and effective decision making, without reference to
some higher authority

• have a willingness to manage and take risks Organisation

behaviour in a transitional economy 341

• understand what profit and competition means (there is a

tendency to see competition as something to be "killed
off', rather than as a challenge to deliver better price,
quality etc)

• understand the importance of marketing and business

strategy

• have professional integrity and clarity in providing good

quality business information.

A new procurement system had to be put in place and

enacted. Thus were formed the

new laws on authorising construction work, the decision of

the Government of
Romania on the approval of a procurement system, tender
procedures and public

works contracting, and the Law of Quality in the

construction industry. This legal framework tries to
create the proper climate for healthy competition. In

the public sector, especially in infrastructure activities,

major projects were funded by

EBRD, the World Bank and other important banks. Thus, there
is competition from

European and other countries in Romania. This is only one

example of many to prove

the viability of the existing procurement system which

encourages competition. On 27 May 1995, the Romanian
Parliament adopted the draft law to accelerate

privatisation. In late May, an IMF team visited Romania,

recognised Romania's

significant macro-economic achievements, but also

highlighted the need for measures

to increase structural reform. Some other positive signs

were reported in the first quarter of 1995. For example,

the monthly inflation rate was l.6% in April (year-on-year

rate fell from 40.4% in

March to 34.6% in April), below the NBR's forecast of 4%.

The National Bank of

Romania cut the auction credit rate for refinancing to

47.5% in May and they are now

coming under increased pressure, from businessmen and

Parliamentarians who

consider that the rates are over-positive, to make further

cuts. Romania's M2 money

supply rose by 5.1 % in the first quarter of 1995 and the

household savings have risen

by 20.2% in the same period of time. The industrial

production rose by 15.7%
(unadjusted) in March 1995 on March 1994. All these are
positive signs for achieving

a swift transition to a market economy.

5 Conclusion

To change a country from a command economy to a market

economy is a difficult

process which influences the whole activity of the country

and its people, their lives,

expectations, and standards of living. This process cannot

be smooth; it is a dramatic

one in which companies and people have to struggle to

survive.

There is much scope, will and determination to make the

period of transition as short

as possible, but this can only be done with much suffering

and sacrifice. High social

costs will have to be paid. At the end of this change, it

is believed that the lives of the

people will be better, and that they will enjoy a higher

standard ofliving.

l. ARACa Bulletin No 6/1993.

2. Romanian Statistical Yearbook 1993.

3. ARACa Bulletin No 5/1994.

BUILDING ON FAIR FOOTINGS:

IMPROVING EQUAL OPPORTUNITIES IN

THE CONSTRUCTION INDUSTRY FOR

WOMEN

S.RhysJones

RhysJones Consultants, Greenwich, UK

A.R.J. Dainty and R.H. Neale

Department of Civil and Building Engineering,

Loughborough University of Technology, Loughborough, UK

B.M. Bagilhole

Department of Social Sciences, Loughborough University,

Loughborough, UK

Abstract

This paper reviews the work of the Construction Industry

Board Working Group 8,

one of the groups set up as a consequence of Sir Michael

Latham's review of the

construction industry, with a remit to improve equal

opportunities for women in the

industry. The paper describes the working procedures of

the Group, and explains the

rationale behind the preliminary recommendations, which had

the aim of creating parity

of opportunity for women at both the professional and

operative levels. These

recommendations are set in the context of a changing

economic and employment

market, and the other Latham proposals and Working Groups.

The authors contend

that there exists a valid business case for diversification

of the construction workforce,

and that failure to catch up with other sectors' progress

towards good equal

opportunities practices could ultimately affect the UK

industry's ability to compete in

global markets. It is argued that equal opportunities,

when seen as an integral part of
good management practice, provide the tangible benefits of
better levels of staff

retention and operating efficiency. The paper presents the

findings of research

conducted by the Working Group into client attitudes and

current equal opportunities

practice, and goes on to explain the likely recommendations

of the forthcoming final

report.

Keywords: Equal opportunities, Latham report, women.

Sommaire

Cet article passe en revue Ie travail du groupe d'action 8

du conseil du secteur de

construction qui est l'un des groupes d'action qui ont ete
formes, apres la critique de

Sir Michael Latham du secteur de construction, en vue

d'ameliorer l'egalite de chances

professionnelles des femmes dans l'industrie.

L'article decris la procedure de travail du groupe et

explique Ie raisonnement derriere les

recommandations preliminaires qui avait pour but de creer

une parite de chance pour les

femmes au niveau intellectuel ou manuel.

Ces recommandations sont formules dans Ie but de changer

Ie marche economic et de

l'emploi, les autres groupes d'action et Ie projet de

Latham. Les auteurs soutiennent

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308.

l'idee qu'il y a une raison valable pour la diversification

de la main-d'oeuvre de

construction et que l'echec de rattraper les autres

secteurs dans leurs avance pour une

bonne pratique d'galite de chances professionnelles peux

affeter la competence du

secteur de construction dans Ie marche global. Il est

souvent soutenu que si l'galite de

chances professionnelle est integree dans Ie systeme de

gestion, la perte de personnel

peut etre diminuee at laperformance operationnelle

amelioree. L'article presente les

resultats d'une recherche conduite par Ie groupe d'action

concernant l'attitude des

clients et les pratiques d'egalite de chances

professionnelles et aussi expliquer les

recommandations probable du rapport final a venir.

1 Introduction

No major British industry has lower representation of women

than the construction

industry [1][2]. The industry employs around l.75 million

people, yet less than 10%

are women [3], and only 5.72% of members of professional

institutions at all grades

are women [4]. It is unacceptable that an industry which

accounts for approximately

10% of the GDP, and which has such a profound impact on

peoples' lives, almost

exclusively employs men. Furthermore, recent legal cases

have highlighted that the

few women that do work in the industry are likely to face

discriminatory work

practices, and find it more difficult to progress their

careers than their male peers [5][6]. In addition to the
ethical and moral arguments for an increase in female

representation, there are also renewed worries over skills

shortages, which are expected

to become apparent towards the end of the century as the

number of people available for

employment continues to fall [7][8]. The CITB predicts

that 10% of all new jobs in the

industry, including professional, managerial and trade

positions, will need to be filled

by women by the year 2000 [9]. In the wider context of

industry in general, concerns

are being expressed about the suitability of the male

management style to the modern

business. The Institute of Management [10] has recently

predicted that the female

management style will be more appropriate in the

millennium. They cite female

attributes such as team-working, consensus management,

negotiating, interpersonal

skills, and the ability to manage several projects at the

same time. There is, therefore, a need for the
construction industry to move away from its

current male-dominated workforce, to a more diverse and

efficient skills base. An

increase in the number of women should benefit the

professions by providing new

blood and energy [11]. The construction industry must make

a choice between

remaining isolated as the male bastion, maintaining its

'special case' argument and

retaining its male culture; or take advantage of the

benefits of effective employment of

non-traditional groups as many other industries have done

already. If the make-up of the construction work force
changes significantly, so the industry

must react by increasing the flexibility of its employment

practices in an attempt to

retain its staff. The Hansard Society commissioned report

"Women on Top" [12]

suggested that age bars, excessive mobility requirements,

informal selection

procedures, stereotyped assumptions, unspecified job

criteria and the 'old boy'

network were all responsible for women's under-achievement

in paid work. All of

these barriers currently operate in the construction

industry, which is a long way behind

other sectors, and so putting forward practical

recommendations to achieve this aim is

the key objective of the working group. Taking a more

positive view, one advantage of being one of the last
industries to

move towards modern personnel practices, is that the

construction industry can benefit

from adopting good practices developed by others. It is by

adopting good tried and

tested human resource policies and practices that the

industry can quickly adapt to

employing women.

2 Under-representation and under-achievement of women in

construction a statistical overview

The labour market is still horizontally segregated across

all industries and services, with

women tending to occupy positions in catering,

administrative positions and the health

service whilst men occupy positions in engineering,

manufacture and construction, as
shown in Figure 1. Despite the number of women
construction professionals rising

steadily over the past 20 years, in proportion to the

total membership of over 331,000

individuals who belong to a professional institution in

membership of the Construction

Industry Council, only 9,050 (3.98%) are fully qualified

women and 9,478 are

students. Overall, women represent only 5. 71 % of the

professions. It is also

interesting to note that over half of the women in the

industry work in architecture,

landscape architecture, interior design or town planning.

If these professions are

removed from the analysis then only 1.54% of qualified

construction professionals

who may actually work on site are women [4]. Equally

important, however, is the degree to which women that do
work in the

industry are vertically segregated. Unfortunately, no

relevant and reliable vertical

segregation data currently exist [13][ 14]. However, 1991

census data indicates that

women are concentrated in clerical and secretarial

positions, or other positions not

directly involved with the construction process, as shown

in Table 1.

Figure 1. Employment by Industry: 1994 3000 • Females

Full-time III Females Part-time II Males Full-time ~
Males Part-time Q,l 2000 .5 ::: :; r'" Q,l 'i e
Q,l 1000 r0~-""'101111."""1.11111."""'-"" E c o U E
E o u de! t: o 0.. ~ Industries E-<

Source: EOC "Some Facts About Women" 1995 after Dept. of

Employment 1994.

Table 1. Employment in construction by occupation and sex:

1991 (%)

Managers and

administrators

Professional

Occupations

Associate Prof. &

Technical

Clerical &

Secretarial

Craft &

Related

Personal &

Protecti ve service

Sales

Pant & Machine

Operatives

Other occupations

TOTAL Distribution of men % 9.3 2.9 2.9 1.1 61.2

0.2 0.8 9.9 11.0 100.0 Distribution of women % 15.4
1.1 2.6 63.0 4.8 0.6 4.7 1.8 5.6 100.0

Source: Court and Moralee [3] 1995 after 1991 Census:

Activity. Women's share of total % 14.0 3.4 8.0 84.5

0.8 22.3 36.7 1.8 4.8 9.0 Great Britain Economic

The relatively high proportion of female managers is

achieved by their roles as

personnel managers and administrative managers. If the

positions not directly relating

to the construction process are ignored, it can be seen

that women generally occupy

only the junior positions in construction organisations.

These figures indicate that the

industry, as well as needing to attract women, also needs

to improve women's careers.

3 Background to Working Group 8

Latham's review [15] expressed concern regarding the state

of equal opportunities, in

particular the under-representation of women both in the

trades and in the professions. "Equal Opportunities.... be
vigorously pursued by the industry, with encouragement
from Government. The CIC, CIEC and CLG should produce
co-ordinated action plans to promote equal opportunities
within the industry and to widen the recruitment base."

The Construction Industry Board, set up to further

investigate and implement Latham's

recommendations, created a working group (WG8) to examine

how equal opportunities

could be improved in the industry, and how the recruitment

base could be widened.

The working group comprises 14 nominated members of the

CLG, CIC and CIEC,

chaired by Sandi RhysJones and supported in research and

analytical tasks by Barbara

Bagilhole, Andrew Dainty and Richard Neale of Loughborough

University. Given its original remit, the fact that women
represent the single greatest source of

potential labour, and the strong evidence that an increase

in the employment of women

in the industry would lead to less adversarial

relationships, an end to skills shortages

and an improvement in the image of the industry [16], WG8

concentrated on sexual

discrimination and the under-representation of women.

Although many of the
recommendations and initiatives put forward by the working
group will be applicable to

other under-represented groups, it is acknowledged that not

all will be relevant, and

improving opportunities for groups such as ethnic

minorities and disabled people

demands considerable further investigation and action. The

recommendations will,

however, apply both to women in the professions and women

in the trades. The scope

of the working group was, therefore, defined as: "To

encourage the development of attitudes, practices and
physical environments in the industry that neither
directly nor indirectly have the effect of placing women
at a disadvantage within the construction industry. Also to
encourage more women to enter the industry at all levels
in all trades and all professions and seek progression
within it."

4 Process of producing the report

WG8 has sought to develop a range of practical

recommendations that can be easily

adopted by the industry at little cost or increase in

administrative procedures. They

have drawn upon a wide body of existing literature and

have consulted experts in the

field. Perhaps more importantly, they have continually

sought industry opinion from

clients, consultants and contractors throughout the study

to ensure the general

applicability and acceptance of the ideas put forward. It

is important that their recommendations are not seen in
isolation from the other

working groups. Equal opportunities can be seen as an

integral part of the work of all

construction firms, and should be built into all

recommendations put forward under the

Latham review. Core issues were established by WG8 and

investigated by individual members.

These were as follows:

• Current practice and experiences within the construction

industry at both professional and craft and trade levels;

• Current practice in other sectors, central and local

government and other countries;

• European and UK policy and action on equal opportunities;

• Influence and role of education and training;

• Working conditions and how they can be improved;

• Positive action;

• Attitude and influence of customers;

• Innovative construction projects, initiatives, academic

studies and statistics concerned with women in
construction.

An interim report was published in March 1995, as a

discussion document. This

explained the views and beliefs of WG8, and the key

issues. This report generated

many responses from practitioners in the industry, which

have been analysed in order

to refine the recommendations, and to improve their general

applicability. Also, two questionnaire surveys were
conducted to establish the views of clients

towards gender issues in the industry, and current practice

in the development of equal

opportunities policies in consulting and contracting firms.

Two "presentation days" in

which invited speakers addressed the working group members

and invited guests in

influential positions within the industry. The speakers at

the first prevention day had

implemented initiatives to increase the representation of

women in the industry, or to

improve the working conditions and practices for women. The

speakers on second

presentation day had initiated programmes in other

industries and professions. All of these data have been
handed over to the Loughborough research team who

have been commissioned to write the final report, due for

publication in early 1996.

5 Principal findings and recommendations

5 .1 Recommendations of and reactions to the interim report

The interim report explained WG8's approach to gender

issues in the construction

industry. Recommendations were that: a code of practice

for the formulation of an

equal opportunities policy should be formulated; a

co-ordinating body be set up to

oversee the various initiatives around the country and act

as a forum for dissemination

of effective ideas; an international body should also be

created to collect information on

initiatives from around the world; support networks be

created to allow women

working within the industry to get in touch with each

other, learn from each others'

experiences and find out about possible job opportunities;

data bases of role models and

mentors be set up; recommendations on improving working

conditions be published;

research into standardised job classification models to aid

the monitoring process be

commissioned; and a review of appropriate apprenticeship

programmes and training

schemes be conducted. Analysis has shown that many of the

comments and much of the discussion

generated by the interim report were contradictory,

emphasising the controversial nature

of the issues raised, but generally responses from

practitioners, and professional

institutions were very positive. A common comment regarding

attracting women to the

industry was that construction suffers from a lack of

professional culture, particularly

in contracting and outside the professions at an operative

level. It has been suggested

that improving the standing of the industry, particularly

on the contracting side, be

offered as a challenge to the professional institutions.

Another popular point was that retaining women should be
seen as apriority. Child

care, career break schemes, job share and part-time work

are all ways in which

employers can help women combine work and family

responsibilities, and the money

saved in retaining their professional staff should more

than cover the expense of such

flexible working practices. Equal pay was another important

point raised as, despite

the Equal Pay Act, women may not being paid the same
amount as men for doing the

same or similar jobs. The key recommendations of the

report were widely welcomed, with some

respondents adding that contractors should demonstrate a

well-implemented equal

opportunities policy as a tender pre-qualification. It was

also suggested that an
informal annual meeting of all the women in construction
groups should be undertaken

in place of the umbrella body as similar bodies exist

already. The general view was to

avoid adding to bureaucratic procedures, but it was

acknowledged that a set of

guidelines for the effective formulation and implementation

of an equal opportunities

policy would benefit the industry greatly, particularly if

set in a construction specific

context and applicable to all sizes of company.

5.2 Research findings

Survey of current construction industry practice The 20

largest contractors and 20

largest consultants by turnover were asked to submit a copy

of their equal opportunities

(E.O.) policies. There was a 60% response rate. Some of the

companies approached

stated that their E.O. policy was private document held by

the company and not for

release into the public domain. All of the respondents had

the minimum of a simple

mission statement which stated that the company was

committed to equal opportunities.

Around half of those surveyed also produced guidelines for

its staff on fair recruitment

practices including some guidance on advertising. Only one

employer, however, had a

comprehensive monitoring and review procedure. Most major

employers in other

sectors now have such procedures, indicating how far behind

good practice the
industry is at present. This is reflected by construction
industry membership of

Opportunity 2000, the charity set up by the government to

promote the employment of

women into the next century. Only two construction firms

have joined. The

conclusion just be that the construction industry has so

far failed to address Equal

opportunities Issues. Survey of Client Attitudes Ninety

five major clients were sent a postal

questionnaire requesting information on the sex of their

in-house construction related

staff, staff from outside agencies working for them and

general information about their

equal opportunities policy (including whether there had

been an increase in the number

of women employed since the policy had been in operation).

Twenty one responded, a

response rate of 22.1 %. Although it is difficult to draw

firm conclusions from such a

small sample, some interesting findings included that

clients tended to employ far more

women in their construction divisions than construction

firms, that they tended to have

comprehensive equal opportunities policies and

implementation strategies including

flexible working practices and that since the formation of

their E.O. policy more

women had joined the construction section of the business.

Overall it seems that clients

have a far more positive attitude towards employing women

and developing their

careers within their organisations.

5 .3 Presentation days

The first presentation included speakers involved with

proactive initiatives to attract

women to the industry and improve the working environment

for them. What became

clear was that public funds are needed to support positive

action initiatives in the

industry in the short term. It was felt that this would

then achieve a 'critical mass' of

women workers so that the industry would be viewed as a

standard career for women. The fact that women's mistakes
are more noticed than men's and that they have to

work harder for equal recognition were also cited as

important barriers to break down.

It was suggested that a few well co-ordinated groups

looking after women's interests

should be set up, although it was acknowledged that many

women do not want to join

an organisation which implies difference from their male

peers. A paradox exists,

therefore, in that most women don't want to "look

different", but organisations to co

ordinate networking, role models and mentoring are

essential if women are to find out

about new opportunities and benefit from other's

experiences. The second presentation day concentrated on
how other professions had managed to

attract and retain women and improve their working

practices. In addition to this, other

topics included the advantages of diversifying the

workforce, improving working

conditions and how to succeed as a woman in the industry.

Invited guests attended

representing the trade press, professional institutions,

women's groups, trade institutes

and various major construction industry employers. The

relevance to the construction

industry of the initiatives put forward was established by

a lively debate following each

pair of speakers. The central theme running through the

speakers' presentations was that change is

needed in the industry, and women could provide the

innovation and different

perspectives needed for progress. To become flexible, the

industry first needs to

develop a climate that values diversity. Latham's

recommendations were seen as very

important by a number of the speakers, and it was

suggested that women have the

ability to integrate as part of the team, look at things

in different ways and improve the

team. Structural change such as flexible working practices

and improvements in

working conditions is one thing, but ultimately it was

generally agreed that it is cultural

change that needs to be fostered. The issue should not be

"what can the construction

industry do for women", but should be what contribution can

women make to the

industry.

6 The benefits and case for diversification of the

construction workforce

Equal opportunities in construction is not so much a matter

of social justice as a vital

economic necessity for the industry. Diversity in the work

force is now widely

recognised as both desirable and inevitable, and can bring

many benefits to the working

environment. The 'feminization' of the workforce [17] is a

continuing and irreversible

trend, and therefore women will form a significant and

growing proportion of the

customers and clients of industry and commerce. The

benefits are identified by

Howard Davies, Director of the CBI [18] as 'widening not

only the talent available to

business, but its understanding of the market-place and

its links with the community'.

The fundamental argument for equal opportunities is the

benefit derived from

recruiting, retaining and promoting the best people for the

job. This will improve the

quality of output, lead to an improved customer, enhance

organisational flexibility and

improve team effectiveness. The following indirect benefits

also arise as a consequence

of having the best candidates selected, developed and

retained; satisfying work

environments, improved morale and job satisfaction,

improved working relationships

between workers, and a better public image. A significant

step is now being made in the evolution of equal
opportunities through

the concept of 'managing a diverse workforce', which

includes women. The main

argument is that diversity and differences between people,

if managed effectively, add

value to any organisation. It is shown that 'harnessing

these differences will create a

productive environment in which everybody feels valued,

where their talents are being
fully utilised and in which organisational goals are met'
[19]. An effectively

implemented equal opportunities policy is fundamental to

an organisation committed to

total quality management.

7 Working group preliminary recommendations and

implementation mechanism

As Latham [15] stated, equal opportunities in the

construction industry require an

urgent and comprehensive review. Simply promoting the

entrance of women into the

industry who will leave after 4 or 5 years is a futile

exercise. The Working Group

contend that creating a working culture accepting of women

is the ultimate aim.

However, this is a long term objective that will not be

realised quickly. In the mean

time, therefore, structural changes in the workplace to

make it easier for women to

develop their careers will begin to promote the type of

change needed, for cultural

change to follow. The first presentation day demonstrated

that much of what is needed to attract

women to the construction industry is already in place,

with many women's groups and

initiatives already operating effectively in attracting

women to construction. The

industry should capitalise on this by taking a lead in

developing structural policies to

ensure equality of opportunity, equal pay, improved

working conditions implemented

through existing professional institutions, trade

organisations and women's support
groups. The industry must begin to learn the value of
women's contribution as clients, end

users and practitioners. Modem life patterns are very

different to those of 20 years

ago. Demographic and societal change are defining a new

working role for women and

men and it is up to the industry to harness this change and

take advantage of it. The economic climate in which the
industry operates is currently seen as a constraint

on implementing the types of initiatives suggested in this

report. However, other

industries put a tangible value on retaining their skilled

workforce, and promote this by

instituting flexible work practices and improving the

working environment of their

employees. The authors contend that the construction

industry should adopt this

attitude as in the long term, the investment will be

recouped many times by the savings

in reduced training costs.

8 Further research

A current problem is that it is hard to assess how well

women are progressing in the

industry relative to their representation. This is because

there currently exists no

conformity in job titles or standard career paths to

benchmark women's progress

against. To overcome this, the Loughborough research team

have developed a set of

standardised job titles, job descriptions and career paths

for all major professions in the

industry. These have been built into a questionnaire which

is being distributed to the
top 500 construction companies. This accurate vertical
segregation data should make it

possible to establish for the first time the areas of the

industry where opportunity exists

and the areas where action needs to be taken. For many of

the same reasons that women are important for the
construction

industry, issues surrounding other under-represented groups

such as ethnic minorities

and disabled people must be addressed. There needs to be

further investigation as part

of a more wide ranging review of equal opportunities in the

industry.

9 Conclusions.

The role of construction as a major contributor to the

fabric of society is undermined by

poor image. This hampers the ability of the industry to

recruit the best skills, creating a

vicious spiral of poor image and poor performance. The

process of implementing the

recommendations of the Latham Review offers an

unprecedented opportunity for

change. Sir Michael Latham calls for fair dealing, trust

and teamwork, to improve the way

in which business is carried out between client,

contractor, specialist sub-contractor and

design professional. These are the same factors needed to

change the dirty, dangerous

and macho culture of the industry to one that will

encourage and retain more women,

helping to change vicious spiral to virtuous cycle. In

addition to the recommendations outlined in its interim
report, the working group
on Equal Opportunities called upon its fellow working
groups, the industry and its

representative institutions and associations to acknowledge

the wider application of

these three key elements by taking action on: fair dealing

in recruitment, equal pay and decent working conditions for
all; trust in providing career opportunities and giving
responsibility to women and men; and

• teamwork in rejecting stereotypical attitudes and

recognising and utilising the skills and attributes that
women can bring to the business of construction.

1. Gale, A.W. (1991) What is good for women is good for

men: theoretical foundations for action research aimed at
increasing the number of women in construction
management. Practice Management: New perspectives for the
construction professional, Chapman and Hall, London.
pp26-34.

2. Employment Gazette. (1994) 'Labour Force Survey Help

line', December.

3. Court, G and Moralee, J. (1995) Balancing the Building

Team, Institute of Employment Studies, Brighton.

4. Construction Industry Council (1995) CIC Membership

Survey 1995.

5. Architects' Journal (1994) Construction Women Hit Glass

Ceiling. Architects Journal, 24 Nov 1994. pl1.

6. Building (1995) QS Awarded £9000 compensation for sexual

discrimination by contractor. Building, 20 Jan 1995. p13.

7. Agapiou, A. Price, A.D.F. & McCaffer, R. (1995)

Planning Future Construction Skill Requirements:
understanding labour resource issues. Construction
Management and Economics, Vol 13, ppI49-161.

8. Ball, M. (1993) Public Capital Expenditure and its

Implications foe the Construction Industry: A Research
Agenda for Industrial Efficiency, Birbeck College
University of London, Oct 1993 ppI9-23.

9. Opportunity 2000 (1994) 'Did you know .... ?'.

Opportunity 2000 Newsletter, Issue Summer 1994, p3.
10. Institute of Management (1994) Management Development
to the Millennium, Institute of Management, 1994.

11. Greed, C. (1991) Surveying Sisters: Women in a

traditional male profession, Routledge, London.

12. Hansard Society. (1990) Report of the Hansard Society

on women at the top, London: The Hansard Society.

13. Langford, D. Hancock, M. R. Fellows, R. & Gale, A.W.

(1995), Human resources management in construction,
Longman Scientific and Technical, Essex.

14. Gale, A.W. (1994) Women in Construction: An

investigation into some aspects of image and knowledge as
determinants of the of the under representation of women
in construction management in the British construction
industry. Ph.D. thesis, University of Bath.

15. Latham, M. (1994) Constructing the Team, HMSO, London.

16. Gale, A.W. (1992) The construction industry's male

culture must feminize if conflict is to be reduced: The
role of education as gatekeeper to a male construction
industry, Proc 1st International Construction Management
and Resolution Conference (Fen, P and Gameson, Reds.),
Sept 1992, pp416-427.

17. Hagen, E. and Jenson, J. (1988) Paradoxes and

promises: work and politics in the post war years. in
Feminization of the labour force: Paradoxes and promises,
(eds. J.Jenson, E.Hagen, and C.Reddy), Polity Press,
Cambridge.

18. EOR (1995) Agenda '95, Equal Opportunities Review,

No.59, January/February. pp. 12-19.

19. Kandola, P., Fullerton, 1. and Ahmed, Y. (1995)

Managing diversity: succeeding where equal opportunities
has failed, Equal Opportunities Review, No. 59,
January/February. pp. 31-6.

INDUSTRY AND UNIVERSITY IN A

MUTUAL PROJECT OF EVALUATION:

A SWEDISH EXAMPLE

Jan Borgbrant and Fredrik Hansson

Department of Construction Management,

School of Civil Engineering, Lund University, Lund, Sweden

1. Summary

The following anicle accounts for the evaluation of a

development project. 3T. carried

out at Sweden's largest construction company. Skanska. It

describes the methods and

results of the evaluation, as well as general ideas

concerning future operational

development within the two organisations. The opportunity

was given to let the people of the university world and the
practical

world meet in open discussions with the mutual goals to

allow company as well as

depanment to: 1. Lessen the distance between researcher

and practitioner 2. Create instructive organisations 3.
Increase the knowledge of the production process 4.
Analyse the possibilities to improve the process

Thanks to an insightful attitude among the management at

Skanska Syd AB. we were

given the opportunity to work according to our proposal

with continual seminars, where

representatives from the company met with the doctorates

of the depanment every

three weeks, with approximately seven participants from

each group. In conclusion, some panicipants of the
evaluation make personal reflections

concerning this form of evaluation project.

Sommaire

Cet article decrit l'evaluation d'un projet de

developpement appele 3T, qui a ete conduit

dans Ie plus grande entreprise de construction Suedoise,

Skanska AB. Nous decrivons les
methodes d'evalution et les resultats ainsi que la fa<;on
dont I'entreprise et I'institution

universitaire vont plus loin avec des activites de

developpement dans les organisations

respectives. Dans ce projet de l'evalution a ete donne la

possibilite de laisser les personnes des

entreprises et de I'universite se rencontrer dans des

discussions ouvertes avec des

objectifs communs au deux panis; 1 Diminuer l'ecart entre

la recherche et les activites des entreprises. 2 Creer
des organisations capable d'apprendre. 3 Ameliorer la
comprehension du procede de production 4 Analyser les
possibilites d'ameliorer Ie procede

Grace a une attitude comprehensive de la direction de

Skanska Syd AB. nous avons re<;u

la confiance pour travailler selon notre proposition avec

de frequent seminaires OU les re

presentants de l'entreprise et les futurs docteurs de

I'institution se SOnt rencontres toutes

les trois semaines, avec environ sept participants dans

chaque groupe.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0419222308. En conclusion, quelques
personnes qui ont participe a l'evaluation, donnent leurs

reflexions personnelles sur cette forme de projet.

2. Background

Since 1991, extensive development work has been pursued

within the Skanska concern,

Sweden's largest construction company (The annual trade

1994: SEK 32,6 billion, 1995:

SEK 38,4 billion), under the name of 3T, which stands for
"ThinkTotaITime". With the 3T -programme, Skanska is
hoping to render their enterprise more efficient
through a reduction of the time consumption within the
construction process. A higher

efficiency is wished-for, by means of planning work

operations and target practice of

material and machine resources more thoroughly. The goal is

to work wiser rather than

faster. Initiative and new thinking is desirable at all

instances. 3T is said to be a process

in which all employees take part and continuously develop

together. To support the change in progress, a 3T training
programme, aimed at all members

of staff, has been planned and to a great extent carried

out. Through Management by Objective (MbO) the company
wishes to make better use

of the unused potential among the skilled workers. The

productivity and

competitiveness of the company will be enhanced through

commitment and fresh ideas

among all employees. Management by Objective is described

as "an acknowledgement

of the fact that those positioned closest to a task usually

know best how to solve it".

3. The Evaluation Commission

Skanska Syd AB (The annual trade 1994: 2 billion Swedish

kronor, Employees 1994:

1908):, a subsidiary company within the Skanska Concern,

turned to the Department

of Construction Management at Lund University, to ask for

help with a professional

evaluation. A fundamental idea was the achievement of

synergy effects between

industry and university. The Department was commissioned

to plan and carry out an evaluation. The
evaluation work was realised in the form of a series of
seminars.

Purpose of the Evaluation

The evaluation had several purposes. The basic purpose was

to evaluate the carrying

through and the result of the 3T-programme. Besides, the

intention was to increase the

knowledge of matters of evalutation as well as giving a

base for Skanska Syd's and the

Department's continued developmental work. This paper

emphasises the very

evaluation process. Jan Borgbrant and Fredrik Hansson were

responsible for the

carrying out of the evaluation and the documentation.

Method

The set-up of the evaluation project can, slightly

simplified, be described by a three

step-model including the steps Input, Process and Output.

INPUT PROCESS OUTPUT Working Methods in the Evaluation
Contents of the Evaluation ce Material • Seminars •
Group Work • HomeWork • Documentation • Definitions •
Instruments of Evaluatio • Forms of Presentation Result
Report -New Personal Empirical Research oral Contin al
Experiences written Development

Figure 1 A three-step evaluation model including the

steps INPUT, PROCESS and OUTPUT

A series of 18 seminars was carried out during the

one-and-a-half years in which the

evaluation took place. Employees within the company as well

as at the Dept. of

Construction Management took part in the seminars.

Collection of data has been completed through
questionnaires and interviews as well

as studies of original sources. Through the questionnaires,

a broad inventory of opinions
among Skanska employees concerning development work was
made. The purpose of

the interviews was the acquisition of deeper insight into

the level of commitment in

single individuals when it comes to the process of change.

4. Working methods in the Evaluation

Theory of Methodical Change

A first step by deep-going changes within an organisation

is the participation of all

affected parties in the analysis and description of the

CURRENTSITUATION. The

description must include demands from the surrounding world

as well as questions that

deal with. the individual working place and working team.

In the second step the

DESIRED-SITUATION, the goal for future activities must be

challengingly

formulated. It involves thinking outside of established

patterns what at first sight

appears unachievable can be formulated as an offensive

goal. The third step ACTIONS deals with the strategy of
change. Small as well as large

improvements, which will lead to the set-up goals, are

described in plans of actions.

They can concern anything from changes in the

organisational structure to individual

basic values or technical investments . Managers as well

as employees must realise that

change is a long-range process. The fourth step EVALUATION

thus appears as crucial in the realisation of actual

change. It is based upon the following-up and evaluation

of every step in the process, as
well as the increased insight of what actually supports and
undermines the developing

process, for individuals as well as working teams and the

concern as a whole. In this four-step strategy, reflection
and systematic feed-back play a great part in the

implementation of true change. The main hindrance to

successful and extensive

strategic change is the lack of habit to pause in the daily

tasks to exchange thoughts and

ideas as to how the process of change really works, and

what ought to be done to

provide it with new energy.

Series of Seminars

The series of seminars was given a great amount of space.

Through the series, a high

quality of the final report was wished-for, as well as an

open dialogue which would

enable continual learning in questions of evaluation. The

participating group from the

company was made up of skilled workers, foremen,

intermediate managers and one

representative from the management (departmental manager).

The seminars have had three different items on the agenda:

1. Discussions concerning literature. Theoretical questions

were discussed in order to provide high scientific
quality.

2. Contents of evaluation and methodical scheme.

3. Analysis and report of research results.

The seminars have been carried out for five hours at a time.

Group Work

During the seminars work in small groups took place. The

group work formed the basis
for discussions about the forms and contents of the
evaluation. The group works were a

means of letting the participants exchange personal

experiences and make reflections on

the goals and methods of the evaluation. The group work

was an excellent opportunity for the making of closer
acquaintances,

and offered the possibility of understanding each other's

professional roles.

Homework/Literature studies

A major part of individual work contributions consisted of

literature studies. The

literature was dealt with at each seminar session and

provided a basis for research

methodical discussions. On several occasions, literature

readings proved supportive in

the practical evaluation work.

Documentation

During each seminar, notes were taken. The participants in

the series of seminars had

full access to all material produced by the "evaluation

researchers". By making all work

material available to every seminar attendee, the quality

of seminar discussions was

increased. The opinions of each participant have

influenced the choice of produced

material, such as questionnaires, interview foundations,

result summaries and final

reports. The evaluation focused on four areas. To make

sure the data compilation covered the

four levels individual, group, organisation and surrounding

world, the matrix in figure 2
was constructed. This matrix was used to establish whether
our questions within the

evaluation instrument were complete. At one seminar, great

amounts of time were spent

correcting imbalances in the data compilation.

~ Work Leadership Change Construction Level Environ

ment Strategy 13T Management of orQanization Environment
M\ lJ.!1J lJ.';:: lLiI'1 Organization ~ ~ ~(~ :1i[(1f
Group :~ ~J]: ;";;;~.I ~ '::»(11 Individual ., .
.{}lli 4.l<' I.. cJwIll

Figure 2 Matrix for the analysis of the data compilation

instruments

Questionnaire

The most important compilation of data for the evaluation

turned out to be the

questionnaire. 6 Do you get response to your ideas: Never

Always a from your colleagues? 0 0 ~ 0 b from your
superIOr manager? 0 I8r 0 0 c from the management above
your nearest superior? 0 13: 0 0 d with the management?
8:l 0 0 0

Figure 3 Example of multiple question as part of the

questionnaire The questionnaire came to include 54
questions.

The questionnaire was handed out to all employees at the

randomly chosen construction

projects at Skanska Syd AB. The number involved as listed

in figure 4 Pilot project Normal project Total

Category Number % Number % Number %

Craft man 52 75,3% 304 74,0% 356 74,2%

Salaried Employee 16 23,2% 106 25,7% 122 25,5%

Unstated profession 1 1,5% 1 0,3% 2 0,3% ]: 69

100,00/0 411 100,00/0 480 100,00/0

Figure 4 Compilation of the selection of the research

Interviews
The compilation of data was also carried out thorough
interviews. The target group of

the interviews was on principle the same as by the

questionnaires. The guiding principle in the selection of
respondents was the idea that all professional

categories should be represented by at least two persons.

Considering the great amount

of skilled workers at the randomly chosen building sites,

it was decided that this

category should be represented by at least 50% of all

interviews. In all, 23 interviews were carried out. 12
skilled workers were chosen at random from

in turn randomly selected projects, within building and

road construction.

Strategy of Analysis

The strategy has been, on the one hand, to try and obtain
the largest amount of

information possible from each separate data compilation

instrument, on the other hand

to systematically search for differences and similarities

in the answers from the different

sources of information. The questionnaire answers were run

through a data base programme, which offered

great opportunity to deal with the material according to

demands that appeared in the

process of evaluation The data base was developed

continually. This enhanced the

possibility of processing and analysing the extensive

amount of data. In the analysis work hypotheses were
formulated. The purpose of the hypotheses was

to systematically establish whether the available data from

the questionnaire and

interviews supported or discarded these assumptions.

Members of the seminar group worked with testing the
hypotheses. The seminar

group was divided into three smaller groups, which each

took responsibility for testing

one third of the hypotheses. The work of the groups came to

play a central role in the

whole reporting of the analysis and results of the

evaluation.

Skanska +-Internal target groups ~ Lund University ~~

'€acS~ Skanska Syd :a~ School of Civil Engineering =;:J
=$ =;:J 0 ..... .9 ta :e .~ =~ .... '" Departments
"'P..t Q ... -S:Jj Department of <IS <IS t--= §'al
Construction Management ~~ QQI ~~ ~ ...

Building sites ~;l Student of Technology/ Researchers ,

External target groups

Figure 5 Target groups of the final documentation

5 Results of the Evaluation

Continued Development Work within the

Company

3T I Innovative Work

Many results in the study indicate the success of Skanska

Syd's venture called 3T, and

the fact that the staff within the organisation has got the
message. The employees are in

general sympathetic towards the changes. The questionnaire

answers do however show a

lack of understanding of the 3T -message within the

production lines. To increase knowledge and understanding,
systematic support from the

management, for instance in the form of additional

training, is necessary. Traditionally, this line of
business has been marked by a limitation in the spreading
of

information. Our study shows that the communication between

heads of departments
and employees is better today than only a few years ago.
There are however still

traditional patterns of behaviour, which consciously or

subconsciously work against a

good spreading of information. The risk of 3TIInnovative

work is that the staff gradually loses interest in it and
sees

it as a time-limited project rather than a long-term

process. It is therefore important to: • spread the
theoretical concept behind the 3T concept, in a pedagogical
fashion • make example of the theory by turning it into
practical models • systematically spread new ideas and
practical solutions • point to positive as well as
negative results

Information! Communication

To illustrate the flow of information within a company, we

can analyse its movements

from office to work site and from building site to office.

Information that comes from

the office usually contains purposes, conditions and guide

lines. Information from the

building site, on the other hand, usually takes the form of

results, experiences and

solutions to problems. It is important to demand

information and to perhaps clearer formulate which kind

of information one wants. Within a large information flow,

there is the risk of

informing on the wrong matters, which leads to the

recipient still feeling uninformed or

misinformed. Working towards a more decentralised

organisation increases the possibility of an

effective information flow, since the number of levels the

information has to pass

decreases. Lack of communication and information leads to

a lack of commitment, less pleasure
taken in the work as well as less understanding of and
identification with set operational

goals. Improved communication and information is a

prerequisite for increased

productivity and better experiential feed-back.

Technical Support and Experiential Feed-Back

The questionnaire shows that salaried employees as well as

skilled workers wish to make

more use of computers. Exactly what computers should be

used for, they find it hard to

define. Knowledge and proficiency when it comes to

computer usage within the

construction process, is little developed, which means that

the co-workers find it hard to

see practical advantages of computer usage. Front

competence within Skanska Syd AB must be provided, i e
someone who can

follow and evaluate the development in the computer area,

which takes place within the

construction industry as well as in society in general.

Motivation and Work Environment

In the Pilot Projects (using MbO), there is a greater

awareness of the theoretical models

that are the basis of the 3T process, and theories are

connected to practical situations.

Compared to traditional projects, the Pilot projects

emphasise the practical application

of the 3T-message more consciously. This shows a greater

commitment, a higher level

of motivation and a larger assumption of responsibility for

the work. The work environment is formally controlled by
laws and regulations. The company
appears humble when it comes to questions that deal with
work environment, and

accepts rather than questions sets of rules. Work

environment questions are dealt with,

in that the law is abided with, necessary measures carried

out and directions followed

up and checked. There are still great differences between

employees and skilled workers, for instance

when it come to terms of employment, trade union

affiliation, salaries and wages. This

system may lead to a division in professional interests,

which works against changes.

This has led to increased difficulty in the development of

competence and a lessened

inclination towards change.

Development within the Deptartment of

Construction Management

Development Projects

The development of the organisation and distribution of

work within the Department

can be carried out with the help of the methods that have
been used in the evaluation

work. Concrete needs for further training of the employees

can be identified, for

instance concerning methods of introducing and evaluating

the quality assurance in the

construction process. The evaluation of 3T has also

provided the basis for changes concerning the planning

of teaching, from a traditional type of teaching to a more

reflective and analysing form.

Basic Training

The evaluation project has shown that a continual survey

and evaluation of all courses

within the basic training is required. Such a process has

been at work since 1992, but has

gained increased actuality through the project results.

The sections on management and

leader development ought to be extended and another

important goal lies in the

extension of interplay with other departments within the

School of Civil Engineering.

Supplementary Training

There is need for a supplementary training for active

engineers and architects. In this

field, experiences from this evaluation project can be very

helpful. The 3T efforts at

Skanska, to further develop the working methods, means of

assistance, steering, and

follow-up in the construction process, can provide many

practical examples for practice

cases and exercises.

Postgraduate Studies

The general methodical questions to do with research have

been given an encompassing

illumination within the project, and has shown the need

for new postgraduate courses

aimed at increased insight in the dynamics of the

construction process. The mode of procedure in this
project will be used in a co-project with the Danish

Institute for Construction Research, SB!. Researchers and

contractors will co-operate in

the evaluation of one or several construction projects with

a focus on questions

concerning productivity. The project will also serve as a

postgraduate course for
doctorates from both countries.

Research

We have through this project come very close to the

essential questions of the contractor

companies. It therefore feels urgent to continue the

mutual build-up of knowledge. The

forms may be continued closer co-operative projects with

the industry, for instance in

the development of methods and means of assistance and

their testing and evaluation. In the collected material
there is further information to be dealt with in order to
give

a deeper insight, as to which factors support or hamper

the carrying-out of innovative

projects. The material can also preferably be completed

through studies in other

companies, in order to reach deeper insight into this group

of problems.

Experiences from an Evaluation Project

At the final stage of the evaluation project, all

participants were offered the opportunity

to comment upon the evaluation work in written form. The

following are extracts from

their personal essays. Departmental manager: '1 have

learnt that a research report, which a 'normal human being'
.from the real world in general has the energy to read,
contains a ceaseless source of information. Knowledge and
facts, which, if rightly used, can achieve grand things
out in the company. The perhaps largest and most important
observations has however been concerned with the
cooperation between university and employees within
Skanska. " 3T-Manager '1 believe that I will carry with
me the following experiences: -What is the truth today may
not be the truth tomorrow. -The majority of things,
including 'the wonders of technology; contain human
values. " Professor "Some of the company's
representatives expect to receive easily accessible, lucid
and concentrated result reports, preferably with
recommendations summarised in a simple and concrete
fashion, that can lead straight to measurements. Other
people express expectancies that are very close to my own.
We have to make the evaluation methodically planned
enough, for a production of working material to be used
for long-term operations within the Company as well as
the Department. " Foreman ''it has been immensely
stimulating to experience the successfol coworking of the
seminar group. Despite very different backgrounds, we have
been able to speak the same language and make ourselves
understood. The difference in attitudes between the
representatives .from The School of Civil Engineering and
Skanska respectively wasn t marked until now that the
report is taking shape. " Doctorate Student "The extent
of the difficulties included in the change of routines and
work forms, I do not believe can be fully appreciated until
one finds oneself in the middle of the changing process,
either as a participant or as an observer. I have during
the course of the project learnt that the most difficult
thing in executing changes usually is not to make people
accept new ideas so much as to make people reject the old
ones. " Project Engineer 'To form a group by mixing
university and company people proved interesting. The
individuals had, independent of background, pretty for
into the evaluation fundamentally different opinions of
the relation timequality. I do however believe that the
individuals .from both organisations in time learnt to not
only accept but also to appreciate and acknowledge each
other's best qualities. " Craft Man " '-Would you like to
participate in the evaluation of 3 T, in co-operation with
the School of Civil Engineering?' '-Of course: was my
answer. But I thought to myself, what contributions can I
make among professors, architects, psychologists, engineers
and other 'schooled people'? I was not thinking that my
school consisted of 20 years of work experience at
Skanska. But I have realised that what is the truth for
one, is a lie to the other. And both are right, are they
not?"

1. Thuren, T. Theory of Science for Beginners, Runa forlag,

Stockholm, 1993

2. Molander, B. Philosophy of Science: A Book on Science

and the Scientific Human Being. Bokforlaget Thales,
Stockholm, 1988

3. Holme, M and Solvang, B. Research Methods: About

qualitative and quantitative methods. Studentlitteratur,
Lund, 1991
4. Repstad, P. Closeness and Distance: Qualitative Methods
in Civics. Srudentlitteratur, Lund, 1993

5. Borgbrant, J. Strategic Dialogue. Natur och Kulrur,

Stockholm, 1987

6. Borgbrant, J. Strategic Dialogue 2. Natur och Kulrur,

Stockholm, 1990

7. BruzeliuslSkarvad. Speed Management. Almquist&Wiksell,

Ekonomiforlagen, Lund, 1992

8. Skanska AB.Annual Report. 1993

9. Skanska AB Annual Report. 1994

10. Construction Trade Outlook 1195, Byggentrepenorerna

11. A Presentation of 3 T A new Way of Thinking and

Constructing", Presentation Material, Skanska AB, 1993

12. Skanska AB. Questions and Answers, 1994

13. Borgbrant J, Strategic Dialogue a framework to improve

developmental process in counstuction companies,
Management Quality and Economics in Building, Sydney 1991
2 2. The Firm Turning Money into Quality

1. Fayul, H. (1916 1949 English Edition) General and

Industrial Management Trans C. Storrs. Pitman and Sons
London.

2. Steel, M. and Cheetham,D.W. (1993) Frank Bunker Gilbreth

: Building Contractor and Pioneer Industrial Engineer
Construction History. No.9, pp. 51-69.

3. Calvert, R. E. (1986) Introduction to Building

Management. 5th Edition. Butterworths, London.

4. Cheetham, D. W. (1980) Managementby Objectivesa case

history. Building Research and Practice. Vol. 8, No.6,
pp. 378-387.

5. Revans, R. W. (1982) The Origins and Growth oj Action

Learning. ChartwellBratt Ltd., Bromley.

6. Adain, J. (1986) Effective Team building. Gower,

Aldershot.

7. Cheetham, D. W. and Carter, D. J. (1993) The challenge

of assuring quality on site. Building Research and
Information. Vol. 21, No.2, pp. 85 98.

8. Ashford, J. L. (1989) The Management oJ Quality in

Construction. E.&.F.N. Spon, London.

9. See for instance Freeman, I. L. (1975) Building Failure

Patterns and their Implications. Architects Journal. Vol.
161, No.6, pp. 303-308.

10. Anon. A national strategy for quality A consultative

document.. Department of Prices and Consumer Protection,
London.

11. Deeming, W. E. (1982) Quality, Productivity and

Competitive Positions. MIT Centre for Advanced Engineering
Study, Cambridge, Mass.

12. Juran. (1964) Management Breakthrough. McGraw-Hill,

Manchester.

13. Saski, N. and Hutchins, D. (eds) (1984) The

JapaneseApproach to Products Quality. Pergamon, Oxford.

14. Robson, M. (1986) The Journey to Excellence. John

Wiley & Sons, Chichester.
15. British Standards Institution (1979) Quality Systems
Parts 0-6, London.

16. Hughes, T. and Williams, T. (1991) Quality Assurance

aframework to build on. B.S.P. Professional Books,
Oxford.

17. Cheetham, D. W. and Lewis, J. (1993) Implementing

quality plans the role of the subcontractor. Advances in
Construction Management Research, Proc. Ninth Annual
Conference, Association of Researchers in Construction
Management, pp. 124-139.

FINANCIAL FAILURE MODELS:

HYPOTHESIS TESTING FOR UK

CONSTRUCTION COMPANIES

L. Ruddock

TIME Research Institute, University of Salford, Salford, UK

Summary

There is a high level of financial risk in the

construction industry, perhaps more

so than in any other industrial sector. Previous work, by

the author and others,

has been undertaken to develop statistical models that can

be used to predict

those companies at risk. This work was mainly based on Z

score models, and

identified the major problem of too small a capital base.

The premise put forward in this paper is that a ratio

model's predictive value

can be improved by cash flow based (CFB) models. An

analysis of data from the

failure of several construction and property companies in

the u.K. suggests the

importance of cash flow in studying the causes of

financial distress. In the study

undertaken. the importance of cash flow is demonstrated,

and additional

components such as accounts receivable, capital

expenditures and dividends from

the cash flow funds statement are added to ratio-based

models to increase their

accuracy.

A vital difference between this study and its predecessors

is formal hypothesis

testing. Results of financial failure forecasts by three

different models are

compared and differences tested using statistical

techniques.

Keywords: Cash flow, financial distress, risk.

Sommaire

L'industrie de la construction, peut-etre plus que

d'autres secteurs industriels,

est exposee a un risque financier eleve. Un travail

precedent, de l'auteur et

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by DA Langford and A. Retik. Published in 1996 by E

& FN Spon. ISBN 0 419 22230 8.

380 Ruddock

d 'autres, a ete entrepris afin de developper des modeles

statistiques pouvant etre

utilises pour predire quelles sont les societes en danger.

Ce travail, base

essentiellement sur les modeles "Z-score", faisait

ressortir Ie probleme important

de l'insuffisance des fonds propres.

Dans la presente communication, nous avons pose en
premisse que la valeur

de prediction d 'un modele a base de ratios peut etre

amelioree par des modeles

bases sur les cash-flows (CFB). Une analyse des donnees sur
la defaillance de

plusieurs societes de construction et du blitiment au

Royaume-Uni suggere

I'importance de la marge brute d 'autofinancement dans

l'etude des causes de

difficultes financieres. Dans l'etude entreprise,

l'importance de la marge brute

d'autofinancement est demontree et des composantes

supplementaires, telles que

les comptes clients, les depenses en capital et les

dividendes a partir des tableaux

des emplois et des ressources sont ajoutes aux modeies

bases sur ratios afin

d'accroitre leur exactitude.

Une difference vitale entre cette etude et les precedentes

est l'utilisation du

test d'hypothese forme!. Les resultats des previsions de

defaillance financiere

selon trois modeles differents sont compares et les

differences sont testees au

moyen de techniques statistiques.

Mots-cles: Cash flow, defaillance financiere, risque.

1 Introduction

There have been several studies in recent years, concerned

with research into the

early detection of financial difficulty in U.K.

construction companies, based on a
Z score model approach.

Studies by both Langford [1] and Abidali [2] come to a

general conclusion that

a Z score alone provides insufficient evidence for failure

prediction.

Langford applied the Z value technique to failed

construction companies to

test whether the technique could be used for predictive

purposes with other

companies in the sector, and advocated the development of Z

models to assist in

the assessment of construction companies.

Abidali has undertaken research directed towards the

development of an

operational system for identifying construction companies

in danger of failure.

In this research, the use of a Z score model was reinforced

by a secondary

method concerned with managerial performance aspects, based

on the notion that

both adverse financial and adverse managerial indications

may be observed as a

company moves towards insolvency. The study concluded that

the Z score alone

could not predict failure, providing only a financial

indication of the solvency of

a company. The model being able to indicate for example,

that a company had

a profile very similar to a failed company and, therefore

possessed a high

probability of failure.

So, whilst the usefulness of a Z score approach to the

determination of a

company's health may be obvious, it is also apparent that

research into

modifications to or expansions of the Z model may prove

beneficial.

This current study tests the notion that a Z score based

model's predictive

value can be improved by the addition of cash-flow-based

(CFB) variables;

specifically, the usefulness of a cash flow identity that

includes external capital

flows is tested.

2 Business risk in construction

According to a major risk management consultant [3],

building is the weakest

industrial sector in the U.K. in terms of business

failure. In mid-1993, average

profit margins were as low as negative 10% and more then a

half of the

companies in the sector were losing money. The results of a

survey by the

Building Employers Confederation (see Fig 1) indicated that

40% of firms were

tendering for work at a level based on negative margins.

What is the average margin, before central overheads, at
which you are currently tendering fer work? <-10'1(,
~~--:';"---::-----;;: o 5 ro u ~ ~ ". rwporlClenW

Fig.1. Average tender margins Balance sheets have been

weakened by totally inadequate levels of capital in

relation to their turnover. Additionally, too high a

proportion of companies'

funding comes from short-term borrowing or creditors. On

average, 50% of the
funding of construction companies is short-term, coming
from current liabilities

such as bank overdrafts and money owed to subcontractors.

Many construction

companies believe they can manage effectively on low levels

of capital. They hire

much of their plant, subcontract much of the work and pay

their subcontractors

only when they have been paid. A larger capital base is

essential to support the

working capital of a business, and when new work is hard

to achieve, a reservoir

of capital is essential.

3 The Z score approach

A scientific approach to financial management can be used

to take account of

these financial inadequacies. The U.K. based Z score

models described here,

have been in use for several years. The first stage in

building each model was to

compute more than eighty ratios from the accounts of failed

and solvent

companies. Then, using stepwise linear discriminant

analysis, the solvency model

was derived by determining the best sub-set of ratios,

which, when taken together

and appropriately weighted, distinguished optimally between

the two samples.

If a Z score model is correctly developed, its component

ratios typically reflect

certain key dimensions of corporate solvency and

performance, such as

profitability, working capital adequacy, financial risk and

liquidity. Various

models have been calculated using different component

ratios, such as: Profit

before interest and Tax/Sales; Debt/Net worth; Current

liabilities/Total assets;

Cash flow/Total liabilities; Debt/Quick assets;

Debts/Credits.

Not surprisingly, different combinations of ratios and

coefficients are required

for companies operating in different sectors. By way of

example, a model for the

analysis of quoted U.K. building companies is shown below:

where = = = = profit before tax/ current liabilities

current assetsltotalliabilities current liabilities/total
assets no credit interval

Table 1 shows the Z score for six listed companies in the

fields of property and

construction, that entered into receivership in 1990.

Every one of the companies showed a negative Z score in

advance of failure.

Table 1. Analysis of receiverships

Company

Bestwood

City Grove

Federated Housing

Stanley Miller

Rockfort Group

Rush & Tompkins

3.1 The risk rating Activity Property developers

Property developers House builders Building contractors
Property developers Developers and contractors Z score
-4.5 -1.2 -1.1 -3.3 -1.9 -4.8

Most academic research in this field has focused

exclusively on the Z score itself.

However, to improve its use as a practical tool, it had to

be developed further.

Further research into companies which at some stage had a

negative Z score

identified three determining factors of ultimate failure.

The degree of negativity of the Z score. The number of
years it was negative. The steepness of the Z score
trend.

Using these variables, an additional statistical model was

developed, generating

a 'risk rating' on a five point scale for all companies

with a negative Z score, with

1 indicating a low probability of immediate financial

distress, and a risk rating of

5, indicating a company that has only rarely survived in

the past.

A study of U.K. companies in the early 1980's (in related

economic conditions

to the early 1990's), showed the cumulative probabilities

of companies with risk

ratings of 4 or 5 suffering financial distress to be 80%

[4].

3.2 The PAS

Taking the Z score analysis a step further, a company's Z

score can be

transformed into a PAS (performance analysis score). A

company's PAS is its

ranked Z score in a particular year, in percentile terms.

The percentage of

companies with lower Z scores represents the company's PAS

in that year. In this
way, a simple readily interpretable performance measured
on a scale 0 • 100 is

derived. By deriving a PAS over a series of years, problems

can be identified as

the positive Z score company starts to decline and well

before the company

reaches the solvency threshold, giving more time for

appropriate action to be

taken.

Considering the case of Rush & Tompkins, Figure 2 shows

its PAS trajectory

and consists of three lines· the PAS for the company

itself, the solvency threshold

(where Z = 0), and the contracting and construction

industry average. Rush &

Tompkins, with a risk rating of 5, was at risk of

financial distress for all of the six

years of the graph, financing increasing activity levels

mainly through trade credit. While the construction
industry was booming, the company was just able to

survive, but as soon as the sector started to turn down, it

fell into receivership. 40 40 • KEY ~ c:on.-.
--.......,~211 -.... IL -,.,'0 '0 -0~ ,. ,. ..117
,. ,. v_

Fig.2 PAS scores.

384 Ruddock

3.3 Merits and limitations of the Z score model

The model is statistically derived, objective and

unbiased. It is effectively

reflecting and condensing multi-dimensional information

conveyed in the accounts

themselves, communicating the result in the form of a

readily interpretable single
index. Because of the model's multivariate methodology, it
is preferable to one

at-a-time ratio analysis. It should be noted that a company

rarely collapses

overnight and will generally be seen to be giving out

signals years in advance,

once measured in this holistic way.

The analysis used in this research for the calculation of Z

values is based on

the multiple discriminant analysis proposed by Altman [5],

assigning weightings

and combining ratios to produce a composite figure to tell

the story of a

company's financial state.

A major short coming is the use of a sample containing

equal proportions of

bankrupt and non-bankrupt firms (obviously much higher then

exist in the real

world). Samples are selected from companies whose fate is

already known and

the calculated Z equations are the best fit only for

companies with the same

characteristics.

4 Cash flow based (CFB) models

Cash flow analysis has two justifications.

• Firstly, Gombola and Ketz [6] found that cash flow ratios
contain certain

information not revealed by other financial ratios.

• Secondly, an analysis of data from the collapse of

several companies suggests

the importance of cash flows in studying bankruptcy causes

[7].

In this current study, the importance of cash flows is

demonstrated. Adding

components such as accounts receivable, capital

expenditures and dividends from

the cash flow funds statement to ratio-based models

increases their accuracy.

Past studies have used different definitions of cash flows.

This study tests the

usefulness of a cash flow identity, initially specified by

Lawson [8], which includes

external capital flows. This model bases the prediction of

bankruptcy on both

internal earning variables and external stock market

variables. Since stock market

value influences the external capital a firm can raise, the

probability of a firm

going bankrupt would be influenced by the external capital

used. According to

this reasoning, a bankruptcy prediction model should

include external capital

flows i.e. debt as well as equity.

A critical difference between this study and previous ones,

is formal hypothesis

testing. Results of bankruptcy forecasting by three models

(Z, CFB and Mixed)

are compared and differences tested using standard

statistical techniques.

The hypotheses tested are stated as follows: Hypothesis

1: CFB models perform better than Z models in the overall
classification of bankrupt and non bankrupt firms.
Hypothesis 2: CFB models perform better than Z models in
identifying potentially bankrupt flrms. Hypothesis 3:
Mixed models perform better than Z and CFB models in
identifying potentially bankrupt flrms.
A sample of 18 flrms that entered bankruptcy between 1985
and 1993 was

matched with 18 firms that did not.

4.1 The cash flow identity

According to Lawson. operating cash flow applications are

taxes paid. net capital

expenditures and liquidity changes. Any surpluses or

deflcits flow to or from

lenders or shareholders. Thus a firm's total cash flow

statement for any year, i

can be represented as the identity:

(k; hi) (A; + R; Y i ) Hi t; = (Di B i ) + (Fi Ni M i )

where:

(k; h;) denotes operating cash flow in year i represented

by cash collected from

customers k; and operating payments h;.

(A; + R; Y i ) denotes net capital investment in year

irepresented by replacement

investment A;, growth investment ~ and proceeds from

assets displaced Y i .

Hi denotes liquidity change in year i represented by

change in cash and

marketable securities and t; denotes taxes paid in year i

(Di B i ) denotes shareholder cash flow in year i

represented by dividends paid Di

and equity capital raised Bi in year i

(Fi Ni M;) denotes lender cash flow in year i represented

by interest payment

F i , medium or long-term debt Ni and short-term debt

raised M;.
Taken over a series of years, the equation is concerned
with both economic

performance and flnancial policy. The left side of the

equation contains

information pertinent to three decision areas sales and

production. capital

investment and liquidity and reveals the effective

incidence of taxation on

corporate cash flows. The right side provides information

on dividend and debt

equity financing policies.

4.2 Sample design and model development

The study used a sub-sample of bankrupt companies and a

matching sample of

non bankrupt companies. A company was included if at least

two consecutive

years of data for the five-years preceding bankruptcy was

available. This rule also

applied to non bankrupt matching firms. The sampling

method can be faulted from the use of non random matched

sampling but then is not entirely counter indicated.

Zmijewski [9] investigated the influence of non random,

matching samples on

bankruptcy studies and concluded that statistical

inferences and overall

classification accuracy rates are not affected.

The identity components were used as independent variables

and tested for

predictive ability. As already indicated, to determine the

ability of the

components to discriminate between bankrupt and non

bankrupt firms, multiple
discriminant analysis was used.

4.3 Preliminary data analysis

Basing a bankruptcy prediction model on the cash flow

identity seems to be

empirically justified. The use of cash flows in a model to

predict bankruptcy is

valid if there are significant differences between bankrupt

and non bankrupt

firms.

There are significant differences between operating cash

flow and tax payments

from the fifth to the first year prior to bankruptcy;

lender cash flow is significant

in the fourth and third year period before bankruptcy and

the liquidity change is

significant in the fifth year.

4.4 The mixed model

Three sets of models were developed for each of the five

years prior to

bankruptcy. One model contained only CFB variables, a

second model contained

only Z variables and the third contained both CFB and Z

variables. (The Z

variables used in the latter two models were those

indicated in section 4.1 of this

paper).

In order to assess the validity of the models,

classification accuracy is defined

operationally as the ability to classify firms in a given

year using that year's data.

Table 2 shows classification accuracy for the three models.

Table 2. Comparative classification and prediction
accuracy between the CFB, Z and Mixed models (in %).

Model CFB Z Mixed

Year 0 B 0 B 0 B 1 93.1 88.3 87.7 79.1 96.4 95.2 2

88.6 84.6 81.6 74.4 94.2 87.7 3 80.0 81.1 72.9 72.4
84.0 79.4 4 76.1 75.2 70.1 68.2 78.2 77.6 5 70.7 68.9
66.8 62.3 73.4 72.0

o = Overall accuracy

B = Bankrupt firm accuracy

5 Findings and conclusion

As far as testing the hypotheses is concerned, the

conclusion to be reached is that

the cash flow based model does improve on the Z model's

accuracy. At the oc =

0.05 level of significance, seven out of ten percentage

comparisons are significant.

The results indicate that when the Mixed model values are
compared to either

of the other two models, the data in Table 2 show that the
direction of difference

is always in favour of the Mixed model.

The significant rise in predictive accuracy from the mixed

model indicates that

the addition of cash flow based variables contributes to

lendinglinvesting

strategies and emphasis on cash flows in the monitoring of

the financial health of

construction companies is a positive step .

1. Langford, D., Iyagba, R. and Komba, D.M. (1993)

Prediction of solvency in construction companies.
Construction Management and Economics(11).

2. Abidali, A.F. and Harris, F. (1995) A methodology for

predicting company failure in the construction industry.
Construction Management and Economics (13).

3. Syspas (1994) Report: Construction Companies, London.

4. Tafler, R. (1984) Empirical models for the monitoring of

U.K. corporations. Banking and Finance, Volume 8.

5. Altman, E.!. (1968) Financial ratios, discriminant

analysis and the prediction of corporate bankruptcy.
Journal of Finance.

6. Gombola, M.F. and Ketz, J.E. (1983) A note on cash flow

and classification patterns of financial ratios. The
Accounting Review.

7. Gombola, M.F., Haskins, M.E., Ketz, J.E. and Williams,

D.D.,(1987) Cash flow in bankruptcy prediction. Financial
Management.

8. Lawson, G.H. (1985) The measurement of performance on a

cash flow basis. Accounting and Business Research.

9. Zmijewski, M.E. (1984) Methodological issues related to

the estimation of financial distress prediction models.
Journal of Accounting Research.

COSTS OF MANAGEMENT AND

MAINTENANCE: THE ITALIAN CASE

v. Manfron

Architectural Construction Department, University Institute

of

Architecture of Venice, Venice, Italy

Abstract

The forecast of generalised building costs, understood as

the total of all expenses

necessarily incurred from the moment of conception and

planning of a building to its

final demolition, requires due consideration of the costs

of use and deterioration

(particularly management and maintenance costs) even in

early phases of planning.
With reference to Italy, which does not have a consolidated
tradition in this field, the

above mentioned costs can be analysed using a case study

done by the Institute

(I.T.E.A.) that administrates public housiI)g in the

Trento Province. This study analyses

aforesaid costs and management and maintenance costs by

taking into consideration the

correlation between the evolution of construction

technology and the costs in question,

studying past models of building construction and relevant

wear and deterioration of

these products.

Keywords: Costs of Maintenance, Costs of Management,

Generalised Costs, Public

Housing, Quality, Reliability

Sommaire

La prevision des couts generalises d'un edifice,

c'est-a-dire la somme de tous les couts

qu'il est necessaire soutenir du moment de son projet a

celui de sa demolition,

comprend aussi la prevision des couts d'usage et, en

particulier, ceux de gestion et

d'entretien. Pour ce qui concerne la realite italienne,

qui n'a aucune tradition consolid6e

en matiere, on analyse les couts susdits en considerant un

cas etudie par l'Institut

I.T.E.A. qui gere Ie biitiment public de la province de

Trento. L'analyse considere les

couts susmentionnes, I'influence

reciproque entre les couts de gestion et d'entretien, Ie

rapport entre l'evolution des
technologies de construction et Ie couts d'usage en
question et les models de

deterioration du biitiment verifies a posteriori.

Mots cle: couts d'entretien, couts de gestion, couts

generalises, bitiment public, qualite

du bitiment, fiabilite.

1 The planning of costs of a building product

In Italy the most widely used approach in building project

and design is to consider

building costs uniquely as the actual cost of

construction. There exists, therefore, a

general custom which considers management and maintenance

expenses as an invariable

in relation to decisions taken in the actual planning and

design of a building; it seems

almost that one does not have significant impact on the

other. This practice and attitude

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

does not find comparison in other industrialised nations

and is found in Italy as a result

of the peculiar structure of its building market (lack of

co-ordination among the public

corporate bodies that manage large property estates). This

has rendered management and maintenance cost studies of
building products

unserviceable, and so a delay in national research on this

subject has resulted. Such

delay makes it difficult to initiate a policy of accurate

economic forecasts of all actual
costs in the expected life cycle of buildings. Therefore,
the total costs of a building

from its conception to the end of its life cycle are not
calculated when the building is on

the drawing board. This situation is in direct conflict

with the necessity for the Italian

construction sector to conform with other countries within

the European Community.

The singularity and individuality of each separate market

makes the importing of data

and procedures from other countries relatively useless. For

this reason, recently

introduced national legislation which requires that

management and maintenance costs

be included in the economic forecast of any building

project, risks failure in its attempt

to control expenses by calculating these costs. A research

project which has been going on for the last ten years at
the University

Institute of Architecture of Venice, has studied public

housing with reference to the

northeast part of Italy, Veneto, Trentino and Alto Adige,

Friuli and Venezia Giulia,

with prevailing, but not exclusive, attention paid to

residential, partially or wholly public

financed, housing and its management and maintenance. This

type of analysis of management expenses has been made
possible through the

existence of data banks, although quite elementary, found

at specifically interested

institutes. The statistics are, unfortunately, relative

only to that part of the above

mentioned costs which has been assumed by the owners of

the estates, and thus,
expenses incurred by individual home owners are not
included. To study maintenance

costs, expenses incurred by this corporation from 1983 to

1992 were compared. These

expenses have been documented because of the recent

application of a national law

(Number 457178) which provides state financing of such

interventions.

2 Theoretical framework

This data is aimed at appraising:

1. In which manner the selection of design influences

management and maintenance costs

2. In which way the technological evolution of construction

influences management and maintenance costs

3. The means in which a subsequent analysis of maintenance

projects can give, not only an idea of general costs, but
also an idea of the reliability of the constructions, by
studying the type of work done on different types of
buildings. In this way, the durability, reliability and
quality of the constructions can be analysed over a
certain period of time.

3 The generalised cost of the building product

In calculating general costs or costs during the expected

life span of the building which

we are referring to, one must consider "cost of

construction" as the sum of all costs

sustained during the entire time the building is used-that

is, from the moment it is

conceived as a project to its final demolition. The

following correlation can be

considered valid: Cg = Cbui + Cman + Cmai + Cue (1) that

is, generalised costs (Cg) being the sum of building costs
(Cbui), management

costs (Cman), maintenance costs (Cmai) and the costs of

unpredictable events (Cue).
From this correlation and in this study, building costs
(considered as the total of

briefing, design and construction costs) [I] and the costs

of unpredictable events, will

be omitted. We classifY unpredictable events as the

probability of a certain event and

the expense of obviating its consequences: the probability

of building collapse is [2] one

in a million over a year but minor building accidents

frequently occur in the order of one

in a hundred or even one in ten. Considering the other two

components of our sum, that is management and

maintenance costs, it is necessary to refer to the research

which Ciribini [3], Dell'Isola e

Kirk [4], Marshall [5], Di Battista [6], Di Giulio [7] and

Arbizzani [8] have done on

the subject. For management costs, the following formula

can be considered valid: Cman = Cre + Ccn + Ccl + Che +
Ccg + Cse + Cfi (2) Here management costs are the sum of
replacement costs (Cre), conversion costs

(Ccn), cleaning costs (Ccl), heating costs (Che), cooling

costs (Ccg), security costs

(Cse) and financial costs (Cfi). This type of generalised

formula, to which various

studies tend to add more and more expressions, must be

properly adapted, as will be

shown, to the particular type of construction being

examined and to the objectives of its

financiers and its administrators. Maintenance costs can

be expressed as follows: Cmai = Cmn + Cml + Crh (3) with
the three expressions of the formula being post natal
maintenance cost or

maintenance costs in the early life of the building (Cmn),

maintenance costs caused by
the ageing of the building (Cml) and the rehabilitation
costs (Crh) necessarily incurred

at the end of a building's life cycle when restoring the

building becomes necessary to

render it reusable. The introduction of the first voice

(Cmn) and its distinction from

traditional maintenance costs (Cml), which are directly

tied to the ageing of a building,

is most necessary when one realises that the major part of

maintenance problems occur

in the early years of the building's live span. This fact,

which distinguishes building and construction production
from that of

other industrialised production, (as represented in Fig. I)

is not only an Italian

phenomenon, but can be found in other countries as well.

One can consider that

Sycodes [9], for example, indicated how, in the French

market, 75% of all problems in

construction occur in the first six years of the life ofa

building-a phenomenon not found

in ordinary industrial products which tend to wear out with

ageing. In Fig. 1, the "a" curve represents the
reliability in a certain time span of a typical

industrial product. One can see that initial reliability

is high but decreases as the

product grows older. Curve "b", on the other hand, refers

to a building or construction

product; three distinct phases can be noted. The first part

represents a low reliability of

the product until a general stabilisation of regime is

reached (the second part). In the

final phase, the product is more and more unreliable; the

third part of the curve
represents this final senescence of the building.
reliability time

Fig. 1. The reliability of building products as compared

with industrial products. These numerous failures during
the early years of a building are a result [10] of the

impossibility of experimentation on a prototype of said

construction. This possibility of

experimentation and testing is fundamental in the

industrial world. Every new building,

although built with materials of certifiable quality, has,

in fact, an extremely complex

comportment which is very difficult to anticipate in the

planning and development

stages, because no valid experimentation on a prototype is

possible for obvious

economic reasons.

4 Cost of management

The case which will be considered is made up of properties

which constitute the estate

of the (ITEA) Institute that manages public housing in the

Trento Province. This estate

[11] is made up of 749 buildings with 9,493 flats or

residences. We are speaking of

buildings of various ages (as we can see in Fig. 2) built

from the end of the First World

War up to 1990. The type of construction to be considered

includes relatively small

units-four, six or twelve flats, built in the smaller

communities of the Province and

larger buildings that house thirty or forty flats which

were built in larger more important

communities in the seventies and eighties. Building

technology used up to the 1960s,
was composed of traditional construction techniques,
load-bearing walls, floors and

roofs in layered wood, vertical divisions in brick and

window and door frames in wood.

With the 1970s and the introduction of much larger

buildings, reinforced concrete was

adopted in the building field (reinforced concrete frames

or concrete bearing walls,

reinforced concrete slabs or hollow type slabs) and the use

of special technology or

industrialised casting (tunnel, demi-tunnel, banches et

tables, banches et predalles) was

also developed. Our sampling, taken into consideration for

the above sited

characteristics, can be judged sufficiently valid as a

means to study the Italian national

building market. 1980-89 1970-79 1960-69 ::: 1950-59 :

o 500 1000 1500 2000 2500 3000

Fig. 2. Buildings for which management costs classified by

year of construction have

been analysed. Note that more than 2/3 (71%}.have been

constructed after 1970. The management costs which have
been analysed are those sustained and

administrated by estate owners for the years 1991, 1992 and

1993; expenses paid by

single tenants (such as electricity, water, telephone,

etc.) have been omitted. It should

be underlined that heating costs paid individually by each

tenant has become a common

practice in Italy with the introduction of methane gas for

heating to each individual flat. In detail the statistics
which we have on hand regard: cleaning of communal zones,

lighting of these areas, lift expenses, as well as heating

and hot water supply to each
single residence. The aforesaid study of maintenance costs
(2) should be, therefore,

adapted to our case study in the following way and with

these symbols: (2 bis) costs of

cleaning the communal areas (Ccl), lighting them (Clh),

lift costs (Clf) and heating

(Che) and hot water (Chw) costs. Cman = Ccl + Clh + Clf +
Che + Chw (2 bis) Our sample for these costs is made up of
3,202 residences, that is 1/3 of the cases

under study; a small part of these buildings were built in

the fifties and sixties, 1.06%

and 3.72% respectively, but for the most part, they were
built in the seventies, 79.02%,

and eighties, 16.02%. We must take into consideration,

therefore, that these buildings

are generally large scale constructions of thirty or forty

flats and "reinforced concrete

structures" was the building technology used for

construction. To analyse the costs which we are looking
at, we must consider the percentage of

each one in the yearly consideration of building costs

(Cbui), the first addend in our

equation (1). In Fig. 3, the aforesaid incidence is

represented for the various time

periods of the construction of a building. Variation from

the values indicated in Fig. 3, is considerable. One
finds, in fact,

that there is a range from 1.29% to 2.00% each year. It

must be further pointed out

that administration costs for buildings built in the

seventies are 55% higher than for

buildings built in the fifties. Thus, one can assume that

the different building technology

used in various periods of time has significant influence

on management costs. This
renders the following consideration important: ° 0,2 0,4
0,6 0,8 1,2 1,4 1,6 1,8 2 (%)

Fig. 3. Yearly incidences of management costs on building

costs classified according

to the age of a building.

1. The management costs under consideration are made up of

74% for heating costs (Che), followed by hot water costs
(Chw = 16.18%), lift expenses (Clf = 7.83%), eleaning
(Cel = 0.26%) and lastly lighting (Cli = 1.73%) of
communal areas. It immediately meets the eye that heating
costs are by far the most important and the most subject
to fluctuation in the global consideration of total
management costs.

2. The progression of statistics in Fig. 3, should be taken

into consideration remembering that in the seventies,
traditional construction technology, that is, masonry
bearing walls with excellent thermal insulation properties
were substituted with reinforced concrete structures. This
solution, while permitting the building of thinner and
lighter external walls, does not give the same thermal
insulation properties as the older method and, therefore,
heating costs naturally increase as a direct result.

3. The noted reduction of heating expenses in the seventies

and eighties (16%) is due to the better thermal insulation
properties of building materials imposed by a national
political policy (Law 373176) adopted during the famous oil
crisis after the noted Kippur War, a policy that fixes
energy consumption for heating a building within given
limits and is aimed at reducing national energy consumption
on all levels.

5 Costs of maintenance

As in our study of management costs, only certain

components of maintenance costs are

available-thus, generalised cost is defined as expressed in

the aforementioned equation

(3). These missing statistics are a direct consequence of

the general practice adopted

by estate administrators in public housing of carrying out

only emergency repairs and
modifications while ignoring a more enlightened policy of
general programmed

maintenance. The above equation (3) should, then, be

rewritten for our purposes as: Cmai = Cmfl + Cta + Cpa +
Cda + Crh (3 bis) In equation 3 bis, the first addend
represents the cost of repairing failures (Crnfl)

reported by tenants. The next three represent the cost of

adapting thermal insulating

materials (Cta), technological installations (Cpa) and

living unit modifications (Cda).

Our fifth and final voice (Crh) represents the costs of

rehabilitating empty properties for

re-use; these costs are generally assumed by the owners of

the property before a flat is

rented to a new tenant and generally include work on

floors, window frames etc. and

other installations no matter what the actual condition of

the empty flat was when

evacuated. This last voice in our formula could, then,

reflect the cost of restoration and

not of general repairs on the wear of a building even

though these repairs do probably

prolong the life cycle of the dwelling. They do not,

however, depend on the

deterioration or wear of a building but only on the

incidental fact that a lodging has

been vacated by a former tenant and must be prepared for a

future resident. We can

point out that these five expressions in our equation can

generally represent the whole

maintenance operation that is carried out by national

managers of public housing, and it

is for this reason that we have cited a general lateness by

these corporations in planning
a proper economic policy of programmed maintenance of said
properties.

1980-89

1970-79

1960-69

1950-59

1940-49

1930-39

1920-29 0 500 1000 1500 2000 2500 3000

Fig. 4. Buildings in which maintenance costs have been

classified according to the

year of construction. This time our sampling is greater

than that used for the analysis of management

costs: we are considering 4,933 residences, that is, 52%

of the building estates under

study. Different age groups are represented in Fig. 4, and

one can note, even though

we are referring to a longer period of time than before

when we were studying

management costs, that, also in this case, about 2/3 or

65% of the residences were built

after 1970 and thus, with the use of modern technology.

Such costs can be divided into three almost equal parts:
repairing offailures (Crnfl)

36.88% of the total, modification of thermal insulation of

installations in common areas

and in individual flats (Cta + Cpa + Cda) 30.22% and

finally the restoration of empty

flats to prepare them for new tenants (Crh) which is

32.90% of our total. Detailed consideration of these
statistics and an accurate analysis of the single
expressions under maintenance costs are necessary. In the
first voice (Cmfl), costs of

repairing failures, we can note that constructions built in

the 1920's (5.67% of total

estates) weigh upon total reparation costs for 26.59%. On

the other hand, buildings of

the 1980s cannot be considered homogeneous, because

maintenance was done on these

buildings immediately, that is, practically at the same

time they were being built (in

1983 to 1992). In the other age classifications, there is

a direct relationship between

size of the categories and amount of expenses. Thus we can

presume that, leaving out

the oldest constructions, there is very little connection

between age of the building and

resulting problems in need of repair. 1980-89 :::<

:::h~""""',.,..."" 1970-79 p;-;.;..c.;~;.;..c.;.;.!<;-~
1960-69 ~~~~~~~~~I 1950-59 ~~~~~~~~~I 1940-49 ~~~~~~~~
1930-39 ~~~~~~~~~~~~~~~~~~~ 1920-29 o 0,5 1,5 2 2,5 3
3,5 4 4,5 (%)

Fig. 5. The components of maintenance costs divided into

age groups of buildings

considered in our study. If we look at adaptation and

restoration costs, we can immediately note that the

cost of adapting thermal insulation to new standards (Cta)

regards only buildings built

from the 1970's. In the same way, as was previously seen

in maintenance costs, the

greatest factor influencing these costs is the change in

construction technology, that is,

the passage from buildings with masonry bearing walls to

buildings in reinforced

concrete that makes increased costs inevitable. When

considering the adaptation of
installations (Cpa), we note that 88% of total expenses
fall in the same age group. The

same is true for restoration and adaptation costs of

single residences that make up 77%

of the total. In relation to this, we should remember that

buildings from the 1970's and

on, make up 67% of the total estates in the hands of large

scale proprietors. There is,

then, a direct relationship between the period of a

building's construction, the relative

technology used and the costs of restoration and

adaptation. New technology seems,

surprisingly, less trustworthy than older traditional

construction technology. Lastly, considering
rehabilitation and restoration costs (Crh), it appears that
older

buildings are the ones for which this type of intervention

is most burdensome.

Buildings of the 19205, in fact, which weigh upon total

estate value for 5.67%-weigh

upon the voice of total rehabilitation costs for 42.62%.

Looking at the successive age

classifications, the relationship between the incidence of

the number of residences and

amount of expenses seems to balance itself out. Buildings

of the sixties that are 7.95%

of total estate value, weigh upon restoration and

rehabilitation costs for 12.83%, those

of the fifties, 9.43% for 23.83% those of the forties,

4.41% for 15.35%, and those of

the thirties, 1.4% for 4.96%. Thus, we can deduce that an

increase in the age of a

396 Manfron
building necessarily increases the rehabilitation and
restoration costs which must be

sustained.

6 Conclusion

The over all management costs analysed weighs annually for

1. 92% on the total costs of

production (understood as the total of briefing, design and

construction costs) of a

building. As we have seen, the principle part of this

voice is heating costs which

contributes as much as 74%. Of lesser importance are the

expressions regarding

maintenance costs that make up 0.4% of the annual total.

One can note the remarkable difference between our figures
and the programmed

maintenance costs estimated [12] in Sweden and Germany, 3%,

and Great Britain,

2.5%. Our statistic is substantially confirmed in France

when looking at its repair and

maintenance costs [13] which generally make up about 0.6%

of the annual total, as it

does in the Venice Province (0.5%) and in the Bolzano

Province (0.8%), (14]. In our final consideration, we can
look at the problems posed in this theoretical

framework. We can deduce by observing the first problem,

that is, the relationship

between design and plans and management and maintenance

costs, that management

costs (see Fig. 3) of a building built in the seventies

using modem technology

(reinforced concrete casting, tunnel, demi-tunnel, banches

et tables, banches et

predalles) are over 55% higher than those of traditional

buildings with masonry bearing
walls and that this cost is, above all, heating. There
is not, however, the same correlation regarding maintenance
costs (see Fig.

5), in so much as there seems to be a direct relationship

in each different age

classification between the amount of expenses and the

number of flats taken into

consideration. The technical evolution does not seem to

have had undue influence on

differences in the maintenance costs analysed. An

exception to this premise can be

found, however, analysing restoration and adaptation costs

(Cta, Cpa, Cda) of buildings

built from the seventies and onward. In our case study,

the technological construction evolution has resulted, and
this is

our second problem, in a worsening of the costs of

deterioration and wear, thanks to

the increase of management costs. Traditional technology

seems, thus, more

economical in the long run when considering management

costs, than the new

technology adopted in the seventies. This statistic

appears to contradict recent

strategies used in other sectors of industrial production

where the ultimate object is to

create a product in which the costs of deterioration are

as low as possible. The third problem-models of decay and
deterioration-maintenance costs that must

be assumed by owners (we must underline that we are

referring particularly to the

problem of breakage and eventual repairs), it must be

noted that the major part of these

expenses concern external elements, that is, walls, roofs,

galleries and other external

works, that absorb as much as 64% of the necessary cost of

maintenance. The second

expense factor regards installations, hydraulic, heating,

electric, lifts etc. by which 22%

of total costs are incurred. Longevity is threatened by

those technical elements that

suffer from atmospheric phenomenon-rain, for example. Above

all, it is the various

technological systems, heat, electricity etc., necessary

for the life and use of a building,

which are at greatest risk in construction, and it is to

these elements that it is

indispensable that greater attention and care be paid,

especially in the design and

planning state.

1. Manfron V., A Later Analisys oj the Models oj

Degradation oj Buildings, in Proceedings oj the
International Symposium Dealing with Dejects in Building,
Varenna, 1994

2. Manfron v., Verso la qualita: un appproccio

statistico-strategico alia definizione della qualita, in
Modulo n. 7/8, Be-Ma, Milano, 1985

3. Ciribini, G., Durabilita e problerni manutentivi negli

interventi di recupero, Recuperare n. 6, Peg, Milano,
1983.

4. Dell'Isola, Al, Kirk, S. l, Life Cycle Costing Data,

MacGraw Hill, New York, 1983.

5. Marshall, H., Standards Practices for Measuring Life

Cycle Costs of Building and Building System, Astme 917,
Washington D.C., 1983.

6. Di Battista, V., Manutenzione, Recuperare n. 32, Peg,

Milano, 1991.

7. Di Giulio, R., Qualita edilizia programmata, Hoepli,

Milano, 1991.
8. Arbizzani, E., Manutenzione e gestione degli edifici
complessi, Hoepli, Milano, 1991.

9. Sycodes, Guide de ['expert, E.G., Paris, 1986.

10. Manfron V., Qualita e affidabilita in edilizia, Angeli,

Milano, 1995.

11. Pompermaier, F., I Jallori componenti if costo

generalizzato, thesis, Universitary Institute of
Architecture of Venice, AA 1993-1994, Prof. Manfron, v.,
tutor.

12. Hammarlund, Y, Josephson, P. E., Sources of Quality

Failures in Building, in Management, Quality and Economics
in Building, E & FN Spon, London, 1992.

13. Toubon, l C., Le politiche di recupero in Francia,

Recuperare, n. 3, Peg, Milano, 1983.

14. Manfron, V., Le cornacchie del Middle-West:

comunicazione e successo tecnologico, Performance, n. 25,
Ance, Rome. 1993

A PILOT SURVEY OF THE

SUPPLIER/SUB-CONTRACTOR

PAYMENT SYSTEM

R. Kenley

Faculty of Architecture, Building and Planning,

University of Melbourne, Melbourne, Australia

8.M. Wood

School of Architecture and Building, Deakin University,

Australia

Abstract

The analysis of the cumulative working capital which is

available to a building

company from operations has focussed in the past on the

net cash flow of individual
projects. There has been a search for an ideal reference
curve, an examination of

applied systematic delays and analysis of the individual

source curves for specific

projects to derive net cash flow. However there has been

little exploration of the

cumulative effect of a significant number of projects, and

the resultant net cash flow,

or working capital generated from operations, available at

the organisational level. This paper explores some of the
relationships between the supplier/sub-contractor

payment system the timing of client, sub and head-contract

payments and the

resultant cumulative working capital at the organisational

level. A pilot survey is used

to develop an understanding of contractor financial policy

regarding the timing of

contractual payments, credit terms and credit control. It

is shown that there is a wide

variance between firms in their approach to cash flow

management, and that this has

implications for organisational financial policy.

Precis

Dans Ie passe, l' analyse du capital de roulement accum.ule

dont une compagnie de

construction dispose en raison d'operations precooentes,

s'est concentree sur Ie

mouvement d'argent comptant venant de projets individue1s.

On a essaye de decouvrir

une courbe de reference idea1e, on a examine les retards

systematiques appliques et on

a analyse des courbes individualles concernant certains

projets specifi.ques et la fa~n
The Organization and Management of Construction: Shaping
theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

dont ils obtenaient leurs des fond de roulement. Cependant

on a neglige l'exploration

de l'effet accummule d'un nombre significatif de projets

et du capital de roulement en

decoulant, disponible au niveau operationel. Cet expose

explore certains des rapports

entre Ie systeme de paiment en ce qui concerne Ie client,

Ie contrat principal et

secondaire et Ie capital de roulement qui en resulte au

niveau organisationel. Nous nous servons d'une etude
pilote pour essayer de comprendre la politique

financiere des entrepreneurs en ce qui conceme la date des

paiements contractuels, les

clauses et Ie control du credit. On peut voir qu'il y a

une enorme diversite entre les

firmes dans leur attitude envers la gestion d'argent

comptant et que ceci a des

implications pour la politicue financiere organisationelle

..

Keywords

Cash flow, Working Capital, Trade Credit, Payment Terms.

Introduction

The management of the flow of funds on individual projects

has been investigated

over the past 25 years, and several mathematical models

have been developed for

analysing the net cash position on a given project. There

has been a search for an

ideal reference curve [1], an examination of applied

systematic delays [2] [3] [4] [5]

[6] and examination of the individual source cash flow

curves for specific projects [7]

[8]. However, there has been little exploration of the

cumulative effect of a

significant number of projects, and the resultant net cash

flow, or working capital

generated from operations, available at the organisational

level. Models of cumulative multi-project organisational
cash flow [1] [3], have

assumed that estimated receipt-disbursement time-lag

factors [3] can be used to

calculate monthly cash flow figures, and that these once

calculated can be overlaid

cumulatively. This approach is supported by Archer [9] who

analysed the literature

and concluded that monthly transaction or activity

summaries could be summed to

arrive at what was termed a "stock of cash" needed for the

management of the firm. While there is agreement that
overlaying individual project net cash flows will

result in the net organisational contribution, there is no

such agreement on the method

for modelling the net cash flow source curves. Kenley &
Wilson [7] argued that there

is not a standard curve and that all projects will be

unique. Other models have used

some variation on the idea that a standard delay applied

to either an inward or

outward flow, c·r in fact two delays applied to a

work-in-progress curve, would

provide a net cash flow curve. If the assumption that a

standard delay may be applied is to be utilised, then it is

necessary to increase understanding of the types and

extent of delay involved in the

management of cash flow by construction companies. These

delays relate back to the

work-in-progress curve and apply to both the flows of cash

in from the client, and the

flows of cash out to the sub contractors. Cash in-flow

delays relate to the delay between the work being
completed on the

site, and the payment by the client. This delay typically

relates to the delay in claiming

(typically at the end of the month) and the subsequent

delay while the client values the

work and then processes the payment. These delays may be

assumed to relate to the

contractual terms applicable and could vary between one

week from the end of the

month in which the work was carried out, to one month from
certification which

might be 2 weeks from the end of the month in which the

work was undertaken (a

total of approximately 6 weeks). These delays relate to

individual circumstances,

client and certification team practices, contracts, etc and

are beyond the scope of this

paper. In contrast cash out-flow delays relate to the

financial policy decisions made by

individual contractors. Rather than define weighted

average delays based on

individual projects [5], it is believed that individual

contractors will have delays which

apply based on their own financial management policy,

including the supplier/sub

contractor payment system. Accordingly it is necessary to

examine individual contractor firms to assess their
cash flow management policies and the implications which
this might have on a delay

based analysis; and which in turn these might have on the

overall financial

management of the firm. It is contended that builders

have different interpretations and management of

trade credit which has significant implications for

organisational working capital. In order to assess this
contention, a pilot study was established to analyse

individual contractors understanding of cash flow

management and their policies. It is

intended that this pilot study be followed by a full

analysis of major construction firms

within Australia. This paper presents the results of this

pilot study.

Method

With the objective of determining where future research in

the area of contractor

credit control could be directed a pilot study of eleven

(11) contractors was

conducted. The contractor sample was chosen to include,

medium to large employers

of subcontractors, from both country and metropolitan

Victoria. The method of data

collection was by way of structured interview technique,

employing both closed and

descriptive questions. The questions seek to investigate

the following financial policy issues which

relate to cash flow management

• the management of retention

• the management of the timing of payments

• adherence to contractual conditions

Results

In order to assess the management of retention, contractors

were requested to provide

their average annual turnover for the past three financial

years and whether it was

company policy to allow subcontractors to provide bank

guarantees in lieu of cash

retentions and proportionally by value, what percentage of

subcontractors work

would be included in each category. They were also

requested to indicate their policy

toward the provision of security to the client. When

asked whether it was company policy to provide bank
guarantees when

allowed under the contract, 80010 responded in the

affirmative. The results in Table 1

indicate that contractors, in approximately 60010 of cases,

withhold cash retention from

subcontractors. When questioned whether interest earned on

subcontractor cash

retention was returned, 75% responded in the negative.

Table 1. Percentage of subcontractors work in cash or bank

guarantee by turnover

Contractor 1 2 3 4 5 6 7 8 9 10 11 Average

Cash Retention % 70 60 50 50 0 60 50 70 0 0 30 40%

Bank Guarantee % 30 40 50 50 100 40 50 30 100 100 70 60%

Turnover$m 300 75 30 30030 30 300 300 4 8 2 Adjusted

Average

Cash Retention 15 3 1 11 0 1 11 15 0 0 0 58%

Bank Guarantee 7 2 1 11 2 1 11 7 0 1 0 42% The general

policy then appears to indicate, as would be expected, that
contractors utilise bank guarantees to avoid cash
retentions being held by clients, but

receive both cash and subsequently interest payments from

subcontractors. Thus,

considering weighted average delays only, and not referring

to financial management

policies would give an erroneous financial picture of

overall trade credit management.

Consider, that by mid-contract on a ten million dollar

contract at 5% subcontractor

retention, the contractor may have at its disposal

$500,000 plus interest accruing. By

disregarding this cash input which has no corresponding

cash outlay (as the contractor

has provided bank guarantees) the true company financial

position would be distorted. There is, of course, no
guarantee that the cash retentionlbank guarantee scenario

would be the same on every project. This finding is

supported by the pilot survey and

is consistent with the Kenley & Wilson [7] case for

non-standard delays. Therefore,

unique projects may have differing cash retentionlbank

guarantee policies. Any model

developed must, once applied, account for differing

contract conditions, trade

emphasis and client certification procedures. In order to

answer the management of trade credit, or terms of payment,

contractors were asked for their standard terms of payment

for different work trades.

In order to ensure that terms have equivalency, they were

also asked to describe what

they understood "30 day terms" to mean. Understanding the

definition and use of

such terms is critical when developing any model which

addresses the management of

trade credit, such as weighted mean delays. The

construction industry has for years claimed the general
credit terms are "30

days". This pilot has attempted to try and define the term
30 day payment, for, when

considering weighted delays for payments in and out this

concept is critical in any

calculation. When asked for their general terms of payment

for subcontractors and suppliers,

the answers were unanimous in stating 30 days (although

minor exceptions were

made by most for labour only sub-contracts particularly

form-worker, reinforcement

fixer, bricklayer and carpenter). However, when asked what

they understood 30 day

terms to mean, the answers were totally diverse. Of the 10

respondents who replied to

the question the following definitions were provided:

1. Payment 30 days from valuation of certification of work

completed

2. Payment 30 days from invoice date

3. Supplier's/sub-contractor's claims in by the 25th of

the month, payment on the 30th of the following month

4. Supplier's/sub-contractor's claims at end of the month,

payment 30 days later

5. Payment 30 days from date of invoice

6. 30th day of month following receipt of invoice

7. Payment within 30 days of invoice being presented

8. Payment 30 days from valuation back to back, ie: client

pays 30 days after head contract claim,
suppliers/sub-contractors paid after head contract payment
9. Payment 30 days from end of month that claim presented

10. Payment made by the end of the next month goods!

services invoiced It is interesting to compare these
individual definitions (all provided by the

finance director or managing director) with accepted

accounting definitions. Warren

& Fess [10] define "net 30 day terms" to mean 30 days from
the date of invoice.

Almost all of the definitions adopted by the building

firms examined are beyond the

accounting definition. These replies indicate that any

model which uses delays based on a single

definition of "30 day terms" should be treated very warily.

30 days takes on various

meanings according to the above definitions, such as being

30 days from a particular

date ( eg 25th of month or end of month) or from valuation

date, or from date of

invoice, or from when invoice presented, or 30th of the

month following invoice, or

30 days from end of month claim is presented! Therefore,

ifwe take a scenario which

has work completed and accepted on the 5th of the June 1995
and invoice dated 12th

of June and presented two days later using the above

responses would give the

following ranges for the term 30 day payment. These delays

are presented in Table 2.

Also presented there are the equivalent delay figures for

the instance when the invoice

is not presented until the 1 st ofJuly.

Table 2. Delay from completion of work to payment

Respondent
(Contractor)

10

Accounting date of payment (to supplier/ sub-contractor)

5th July 12th July 31 July 31 July 12 July 31 July
3rd July 7th July 31 July 31 July 12 July Actual delay
with invoice received 14/6 30 37 56 56 37 56 27 31
56 56 37 Actual delay with invoice received 117 56
86 86 47 86 37 86 86 37 30 37 The variance in
definition of 30 day payment results in a range of the
actual

number of days from work completed to payment of 27 56

days. The comparison

with the accounting definition can be viewed in figure 1.

It is clear that using the

accounting definition of net 30 day payment and applying

weighted delays without

taking into account the actual company policy would not be

representative of the

industry. Further to this it can be seen that the situation

can be exaggerated,

particularly when receipt of an invoice is delayed.

Figure 1: Chart of payment delay compared with the

accounting definition 2 3 ii 4 .. oe 5 = ~ =.. 6
.. ~ 7 g ~ 9 10 -10 0 10 20 30 40 SO Days delay
The supplier who is three days late with supplying invoice
can actually be paid

90 days after completing the work. If we take for example

respondent's 3 and 9

definition of thirty days a claim made three days after

the 25th or the end of the month

would result in a payment being made to these suppliers on

30th August or a period

of 86 days after work complete. If the contractor had

claimed from the client at the

end of June, as would most probably be the actual

situation, and therefore received

payment at the end of July, then the weighted delay for

the contractor in respect of

their cash flow would be recorded as positive; again with

accruing interest charges. A premise of much research to
date has been that contractors strictly follow the

contract terms with regard to payments. It is assumed

payments to suppliers and

subcontractors are made on dates specified in the contract

usually claimed by the 25th

of the month and payment made 30th day offollowing month.

However, the results of

the pilot study indicate that payments are frequently

withheld as a carrot and stick

method of controlling suppliers and subcontractors. Asked

whether payments to

suppliers are ever delayed due to reasons other than

contractual ie. slow progress

five(5) or 45% replied, yes. Similarly, when asked whether

subcontractor payments

were ever withheld for reasons other than contractual ie.

as a penalty for being behind
program, disagreed back-charges etc., eight(8) or 73%
replied yes. Thus company policy could have potentially
significant implications on the

company operational cash flow, especially if it is found

to be commonplace

throughout the course of the contract.

Conclusion

It is clear that contractor financial policy may have

hitherto unknown implications on

the development of mathematical models for the analysing of

the net cash on any

given project. This in turn impacts on any overlaying of

individual project net cash

results required to give an overall company working

capital profile. The accounting definition of "net 30 day
terms" being payment 30 days from date

of invoice was only being employed by two of the eleven

contractors. The remainder

have a subcontractor payment distribution range between 23

and 49 days (and longer

in certain circumstances). This would obviously impact on

any weighted delay analysis

of project cash flow. The contractor's policy toward bank

guarantees for the head contractor and cash

retention for the subcontractor may indicate that the cash

flow may be receiving a

considerable boost and weighting delays could be applied in

the positive as well as the

negative. Respondents indicated that it was commonplace

for contractual obligations to be

overlooked if the withholding of payment served as an

incentive for the subcontractor

to increase rate of work. Again, if the suspension of

subcontractor payments is in any

way prevalent, this could have a marked effect on project

cash flow. The significance of these results is that
previously held beliefs of conformity in

the application of payment terms, retention policy, and

adherence to contract

conditions have been brought into question. If the wide

variance to accepted norm is,

in fact the norm, then models of working capital derived

from building projects may

need to be reviewed. Future research must make allowance

for this variation in the

mathematical models developed. This pilot study has

demonstrated a requirement for more detailed research in
the

area of the building firm's financial policies and its

subsequent impact on working

capital generated from individual projects.

Acknowledgments

The researchers would like to thank the contractors who

participated in the pilot

study for their time and co-operation. The work described

herein has been financially

supported by Deakin University.

l. Nazem, S.M. (1968), 'Planning contractor's capital',

Building Technology and Management, 6(10), 256-260.

2. Hardy, J.v. (1970), Cash flow forecasting for the

construction industry, M.Sc. Report; Dept. of Civil
Engineering, Loughborough University of Technology

3. Peterman, G.G. (1973), 'A way to forecast cash flow',

World Construction, October: 17-22.

4. Trimble, E.G. (1972), 'Taking the tedium from cash flow

forecasting', Construction News, 9, March.
5. McCaffer, R (1979), 'Cash flow forecasting', Quantity
Surveying, August: 22-26.

6. Ashley, David B. and Tiecholz, Paul M. (1977),

'Pre-estimate cash flow analysis', Journal of the
Construction Division, American Society of Civil
Engineers, Proc. Paper 13213, l03(C03), 369-379. See also
discussion by Gates, M. And Scarpa, A (1978), l04(COl),
111-113, and closure by Ashley et al. (1978), l04(C04),
554.

7. Kenley, R & Wilson, D.D. (1989), 'A Construction Project

Net Cash Flow Model', Construction Management and
Economics 7, 3-18.

8. Kaka, Ammar and Price, AD.F. (1991), 'Relationship

between value and duration of construction projects',
Construction Management and Economics, 9, 383-400.

9. Archer, S.H. (1966), 'A model for the determination of

firm cash balances', The Journal of Financial and
Quantitative Analysis, 1-14.

10. Warren, C.S. & Fess, P.E. (1989). Principles of

finanCial and managerial accounting, 2nd Edition, South
Western Publishing Co., Cincinnati.

MANAGING PROJECT QUALITY

J.M. Mars

Stichting Bouwresearch, Rotterdam, The Netherlands

According to the NEN-ISO 9000 standards series, each

company must prepare a "quality plan"

for the individual tasks which it performs. In building,

people often talk about a "project

quality plan". A project quality plan covers in essence the

tasks which the company performs

in a project, who bears responsibility for them, how the

company manages its own project

processes, and what steps it has taken to ensure that the

required quality is actually delivered.

Usually in a building project, various planning and

executive companies work together to
achieve a joint end-product. To be able to supply a good
quality end product, all participating

companies must work well together. That means that their

own individual project quality plans

must be harmonised with each other. This can be achieved

through an "integral project quality

plan" (IPQP).

A model is made for this. The IPQP model is a "blank"

model, which must be filled in for

each project. It will be completed differently for each

project; this is dependent on all sons of

project-specific circumstances. The IPQP model is then

nothing more nor less than a staning

point, a pattern with the tools and accessories to be

brought in to suit the specific project.

In practice not all building partners need have a quality

system, nor have their system based

on a tixed methodology. Additionally, each project will

again in practice turn out differently,

because of all kinds of circumstances. However, the IPQP

model is not just suitable for

projects where all panicipants operate a standard quality

system, or where projects neatly fit

into the "ideal" procedure. In principle the model is

universally adaptable, even in projects

where no individual participant operates a quality system

which has been put down in writing.

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

Suivant la norme ISO serie 9000, toutes les societes

doivent etablir un "plan de qualite"
pour les travaux individuels qu'elles realisent. Dans Ie
domaine de la construction, on

parle souvent de "plan de qualite de projet". Dans un plan

qualite de projet, sont

mentionnes brievement resumes les travaux que la societe

execute dans Ie cadre d'un

projet, les personnes qui en ont la responsabilite, la

fa<;on dont la societe maitrise les

processus de projet qui lui sont propres et les mesures

qu'elle a prises pour veiller a ce

que la qualite demandee soit reellement foumie.

Au niveau d'un projet de construction, diverses societes

d'etudes et de realisations

collaborent la plupart du temps pour realiser un seul

produit fini commun. Afin de

pouvoir livrer un bon produit fini de qualite, toutes les

societes participantes doivent

mettre au point une bonne collaboration. Cela signifie que

les plans de qualite de projet

distincts doivent s'harmoniser les uns aux autres. Ce qui

est possible au moyen d'un

"plan de qualite de projet integral" (PQPI).

Un modele a ete realise a cet effet. Le modele PQPI est un

modele lacunaire qui doit etre

rempli pour chaque projet. Il sera complete differemment

pour chacun des projets ; cela

depend des differentes circonstances liees au projet

lui-meme. Le modele PQPI n'est

donc ni plus ni moins qu'un point de depart, un exemple

proposant une aide et des

conseils, qu'il faut remplir en fonction d'un projet

determine.
Dans la pratique, tous les partenaires participant a des
travaux de construction ne

disposeront pas d'un systeme de qualite ou n'auront pas

fonde leur systeme sur une

methodologie determinee. De plus, dans la pratique, chaque

projet se deroulera chaque

fois de fa<;on differente en fonction de plusieurs

circonstances. Cependant, Ie modele

PQPI n'est pas seulement applicable a des projets pour

lesquels tous les participants

disposent d'un systeme de qualite standard et ou les

projets suivent correctement Ie

processus "ideal". En principe, Ie modele est

universellement applicable, me me dans les

projets pour lesquels aucun participant ne dispose d'un

systeme de qualite consigne par

ecrit.

Introduction

In Holland an increasing number of construction companies,

architectural

firms, consulting engineering firms, suppliers and building

managers are

developing internal quality systems in accordance with the

NEN-ISO 9000

series. The (large) construction contractors have taken the

lead, but in the last

two years various architectural and engineering firms have

also made a start.

One of the reasons for this is that the (international)

market is increasingly

asking firms to prove that they can properly manage and

control quality in

projects. In this context many firms are pursuing

certification.

The quality plan

According to the NEN-ISO 9000 series every company must

produce a "project

quality plan" for individual orders. This is therefore the

translation of such a

company's general quality system for a specific order or a

specific project.

The project quality plan states which tasks are carried out
by the firm, who is

responsible for this, where the different authorities are

situated, how the firm

manages its own project processes and those measures it

has taken to ensure

that the quality required is actually delivered.

However, different design, construction and supply firms

work together in a

construction project to produce one collective end product.

All of the participa

ting parties must therefore cooperate well if they are to

be capable of delivering

a good quality end product, a building that satisfies the

client.

This means that quality care among all the construction

partners, with their

individual project quality plans, must be well

synchronised; an Integral Project

Quality Plan (IPQP) can be used for this.

An "IPQP Model" has been developed for this and this can
be used as a

manual for producing project orientated quality plans. The

"Model" incorpora
tes a number of general procedures that can be filled in
depending on the

project circumstances.

The Model is primarily intended forpanicipants who are held

responsible by

their clients for the management of construction projects

in the different phases

of the construction process.

The initiative for producing an IPQP must come from the

client or the mana

ging contractor.

This pany must appoint a manager who is responsible for

producing the IPQP

for each phase of the construction project. The form of

organisation chosen for

construction will decide which of the panicipants is

mainly responsible in a

specific phase of the construction process.

The QSM framework

The Model is based on the Construction Quality System

Model (QSM frame

work). In Holland, various panicipants in the construction

sector have derived

their quality care models from the QSM framework. The most
imponant

feature of the QSM framework is the structure for building

a quality system in

the form of a matrix. The functional steps of the business

process are set out

horizontally in the matrix; the aspects which have to be

managed in each

process are set out venically.

~-----~---

QSM

Framework ... ~

structure ~ ;:: ~ ~ III ~ " cS ..

o goalslprinciples

1 organisation

2 communication

3 requirements

4 resources

5 purchasinl/lfhini parties

6 time

7 nnances

8 realisation

9 experiences ~ ~:t ;:: gg ~ ~~ :t 0 ~!Ii! !2

III f3 ~ III III R:i Q .. ...; ""I ;;c !Ii! ~~
::e;:: :~ I au ~ ,.; , I I I .~~I

It is derived from the Norwegian Bygg-forsk system for the

construction

industry.

410 Mars

In cell 0-0 of the matrix, "general goals and principles",

a firm can describe

the general quality policy and the managing strategy for

accomplishing the

policy objectives. The firm can formulate derived

objectives for each phase in

the business process in the remaining cells of row O.

In column 0, "General", the firm can further describe how

it generally goes

about the management, quality control and quality assurance

of its business

processes based on the quality policy and strategy from

cell 0-0.

This can be worked out in detail, as required, in the other

fields of the matrix

(cells 1-1 to 6-9) , and may be backed up by all kinds of

tools such as check

lists, standard forms, data files and calculation methods.

In practice this means that all procedures and tools within

the quality system

are given codes that correspond to the relevant cells in

the matrix.

This may be seen as a chest of drawers, every drawer of

which can be used

separately without losing its cohesion with the whole. '"

::> ~ c C 2 "0 .g co ~ ". K "5 :!? co 0 ~ 2"
C "5 <{ > .0 C .. 2 C '" c "51 ::> " '" a 0
(!) E " ~ :~ c .~ ~ .. '" :: ",; '" c "~ c
:f " co 0 C co C ci: u c ::0 M '" '"

o General

1 Organisation

2 Communication

3 Requirements

4 Resources

5 Purchasing

6T",e

7 Finances

8 Realisation

9 Experience
Good conditions for integral quality care in a construction
project are created

as a result of the layout, which is jointly chosen by the

construction partici

pants.

The Model

The IPQP model is built up in the same way. It can

therefore be used as a

guideline when producing project orientated IPQPs. The

IPQP Model contains

an indication of what information could or should be

incorporated in an integral

project quality plan depending on the specific project

situation and an

indication of how such a plan can be drawn up.

The information in the IPQP mainly concerns the intrinsic

and organisational

synchronisation of the tasks of the construction partners

involved. The mana

ging. It is aimed at answering questions from the client

relating to the form of

organisation chosen for construction. An IPQP incorporates

the agreements and

practical tools which are necessary for this

synchronisation. When considering

"tools", one can think of checklists, standards, contract

schedules, planning

systems and other management tools.

Unfortunately, it is still true in practice in the

construction sector that not all

construction partners have a quality system. Others have

not based their system
on the QSM framework. Many installation fin.; for example
have synchroni

sed their quality system with dozens of sector-specific

assurance criteria and

are even certified in compliance with these criteria.

Other firms have synchro

nised their quality system directly with NEN-ISO 9000.

branch of industry sectors N9I·'S/J 9000-_tie industry

projects I i ! OlIVe."'""! ; .... pk.rot ...... i
t......... 7·-'" p.n f""; ------I. Integ,el p,oteCt a ..
...., Pion

412 Mars

However, the IPQP Model is not just applicable in projects

where all the

participants have a quality system based on the QSM

Framework. In

principle it may be applied universally.

The Model also provides the possibility of adapting the

phasing of the project

to the circumstances and principles of the project

concerned. Firms that have a

quality system Ii la QSM Framework will be able to provide

input to an IPQP

relatively simply and conversely will be able to adapt

their own project

quality plan relatively simply to the conditions imposed on

this by an IPQP.

The structure of the IPQP Model

The IPQP Model contains directions for producing the

project orientated

IPQPs. How this is actually worked out will be different

for each project; this
depends on all kinds of project-bound circumstances.

The matrix columns, or phases in the construction process,

and the "General"

column form the main sections of the Model.

The vertical layout of the matrix consists of "management

aspects", which are

process and product aspects that have to be managed in

every project. The

management aspects make up the paragraphs of the IPQP

Model; each cell in

the matrix represents an IPQP Model paragraph. There is a

description for each

paragraph of what information can or must be included in

the relevant cell in

the framework of a project orientated IPQP

IPQP-Model ~ f? " '" g

structure i ~ ~ ~ g ~ .. : e: .. .. il!Q g '"

i1 ill o.§ ~ .. .. ..; .... oriU ..

o goalS/pnrn;IpleS

1 orpanlUllOn

2 communicatIOn

3 reqUIrements

.. resoutees

5 {MJrchasmgAhlff1 part~s

5 time

7 'mances I

I""I$.I/On I

8 expenences

The information for the IPQP Model consists of "work

orders". Appendices,

standards, reports and so on that can be used in working

out the project are

referred to here.

The first cell of column "0 general" contains a general

project description.

The nature of the project; who is the client, who are the
(envisaged) users,

what accommodation problems does the project have to

solve? General policy

principles can also be formulated, including those in the

areas of environment

and working conditions.

The goals and principles for the different phases can be

described in the

remaining cells on row "0". This is done by describing

start documents and

results (decision documents) for each phase. The results

from one phase form

the basis for the "start documents" for the next phase.

In each project the project partners must agree on what

information has to be

included in a start document, what is taken into a phase,

what basic documents

will be supplied in the different phases and what

information must at least be

contained in the decision documents.

The project organisation is described in cell 0.1,

"General organisation); the

form of organisation chosen for construction along with

the associated main

responsibilit(y/ies) for each phase and the apportionment

of tasks, responsibili

ties and authorities.

A conclusive apportionment of tasks is important for the

project partners'

contract agreements; reference may be made to the task

apportionment charts in

the contracts. I will come back to this later.

Consultation structures and principles for information

exchange in a project are

described in row "2", "Communications".

This can be done in a general sense in cell 0.2 "General

Communication"; the

principles can be worked out for each phase in the

remaining cells of row 2,

including the information carriers to be used for this.

Row 3 contains a description of how every participant can

always be assured of

having the most up to date versions of internal and

external requirements and

conditions applicable to the project. These can be listed,

specified by phase, in

the remaining cells of row 3.

Row 4 "Resources" indicates for each phase the common

tools (including

calibrated inspection and approval resources) which will be

jointly used to

achieve the objectives.

The procedures and tools for the selection of partners who

are to be added

during the process are described in row 5, "Purchasing I

Third parties".
Procedures are also included for the purchase of jointly
acquired goods and

materials.

Row 6, "Time", is the overall planning and detailed

planning of each phase. A

place must be given not only to the plans themselves, but

also to the set up and

supervision procedures.

The information for managing investment costs is described

in row 7 "Finan

ces".

The operational procedures for quality management in each

phase are described

in row 8 "Fulfilment". The procedures must ensure that

project management

always has insight into progress of the process so that

this can be driven

intrinsically. There must for example be a specification

of who inspects what,

and when and where.

Finally, in row 9 "Experiences", there is a description of

how experiences, test

results and so on have to be collected and fed back both

within the project and

for the benefit of subsequent projects. In principle the

process must be evalua

ted at the end of every phase, in relation to both quality

achieved and process

progress. The evaluation may lead to adjustments in the

following phase.

Now I am going to give a few examples of how this is

filled in.
Column 2: design

2.0 Goals and principles

• Using the procedure in paragraph 0.0 establish what the.

results to be achieved from the design phase have to be:
check the important decisions that have to be taken in the
design phase and, based on this, decide on possible
sub-phasing; check what start information is necessary to
be able to take well founded decisions (check results of
previous phase); establish what minimum information has to
be in the dossier at the end of the (sub-)phase(s) to
enable well founded decisions on progress of the project
to be taken. Use the task instruction here.

U Organisation

• Check whether changes are necessary in allocation of the

final responsibility for the entire project. Determine who
will be acting as mainly responsible partner for the
design phase and who will be acting as the party
responsible for drawing up and implementing the IPQP. Work
out the organisation structure for this phase in more
detail in an organisation chart.

• Apportion the product development tasks, responsibilities

and authorities in accordance with paragraph 0.1.
Elements that have to be discussed here are: list of
tasks which must be performed to enable realisation of the
decision documents / phase results or to enable the dossier
to be filled for each sub-phase; the composition of the
team for this phase; appointment of a responsible partner
for each decision document; draw up task apportionment
plans, which include indications of the product
development tasks and (derived) responsibilities and
authorities of the participants involved for production of
the decision documents; check that the apportionment of
tasks has been intrinsically concluded.

• Where necessary, supplement paragraph 0.1 of the

(project-bound) IPQP with the most up to date information.

Column 5; construction

5.3 Communication

• Establish in detail the consultative structure for the

construction phase in accordance with paragraph 0.2.
Aspects that have to be discussed here are: types of
consultation, participants in each type of consultation,
(standard) agendas; full meeting schedule; arrangements
for convening, chairing and minute taking; arrangements
for the distribution of minutes.

• Implement the procedure for document management and

information exchange for the fulfilment phase (see
paragraph 0.2). Establish the routing and handling of
vital (decision) documents in a "document schedule".

5.3 Requirements

• Implement the procedure for requirements management

(paragraph 0.3) which apply to the project process in the
fulfilment phase (relevant legislation and regulation,
product and process requirements): list the requirements
relevant to this phase; ensure that the latest known
versions are available in the right places at the right
times.

5.4 Resources

• Manage the tool and/or product resources to be supplied

jointly by the process partners for the fulfilment phase
in accordance with the agreed procedure (see paragraph
0.4), i.e.: list the resources to be used jointly in this
phase; ensure that these resources are always available at
the right time, in the correct quantities, at the right
place and in good condition.

• Check whether individual partners manage their own

digital and measurement systems properly and whether they
are working with accredited software.

Tasks Model

Base documents for each phase have to be present in the

quality plan in order

to enable the right decisions to be taken. A task inventory

is used for this.

Project managers can use these as a checklist when listing

the tasks in a

project. This involves tasks which would normally be

carried out in every

construction project with "ideal" progress of the process.

In practice every project is different and the processes

and tasks will therefore

differ on many points from the "ideal" process each time.

The task inventory is derived from the "decision documents"

in the constructi

on process. These decision documents are the interim

results for each phase of

the construction process. The tasks are linked to decision

documents.

IPQP r-2. design b ] c: .Q ~ 2 " c: '" oS ~ "

~ c: '" oS §, .~ c: .. .. 0 c: ~ ~ " '" .. ~
c: .. '" 0 .. ~~ Q. Q. " " c '" ..; "" ,,; ,.;
'= '" '" "'''' ..

o'!lamsal,on

J req""emenls

• resourres f-

5 Ih,rd part,es

e plannm9

1 cost controtr

8 rea' .. al,on

e",enences

Tasks in the framework of a construction project may be

separated into

"intrinsic professional tasks" or "product tasks" and

"coordination and steering

tasks" or "process tasks" .

Here, this mainly involves the product tasks: the tasks

that must be executed in

order to obtain a good (interim) product; the decision

document, based on
which a go/no go decision is possible. This involves
filling in row I, "Organi

sation", for each phase.

The coordination and steering tasks will come up for

discussion themselves

when working out the remaining matrix lines.

A "task" is understood to be:

a cluster of associated activities, aimed at achieving a

well defined result,

which is generally executed by one participant.

I will also give an example of this.

Final Design Task Inventory

• Working out the functional and architectural structure

and the layout of the land in detail (final building block
borders, final spacial plan, location and size of
"material box plan" building sections, outer wall layouts,
principle details, material use and colour of
image-governing elements);

• establishing the dimensions of and drawing foundation and

load bearing structures, developing principle details for
the foundations and load bearing structures;

• establishing the dimensions of and drawing the water and

electrical installations and ducting packages, specifying
the capacity of the installations;

• developing the Final Design base on the pre-design

results with integration of the detailed functional,
structural and technical installation calculations;

• consult with municipal services;

• initial consultation with the building inspectorate;

• consult with the local fire service;

• consult with the utility companies;

• calculate construction costs (in elements and

sub-elements) and investment costs, inspections and so on;
• estimate operational costs and incomes, inspections and
so on;

• coordination of partners' health and safety obligations

in the design phase, based on the Working Conditions Act
Construction Process Decree; maintain/update the Safety &
Health plan and the Safety & Health dossier;

• possibly: produce environmental effects report;

• test final design against the current Programme of

Requirements; accept the Final Design;

• submit the provisional building application;

• decide on next step.

Finally

Good communication between the partners from the initiation

phase right

through to the management phase of a construction project

is important in

managing a good quality product. It seems that in

practice, good communicati

on is still a difficult problem to solve in construction

and because of this it is

one of the greatest factors in the costs of failure.

The Integral Project Quality Plan Model (lPQP) provides

ample opportunities

to improve and optimise mutual communication. It gives an

indication of what

participants have to communicate and when, what they have

to communicate

about and where the relevant information is to be found.

The agreements that

are made are recorded and controlled. Everyone can draw on

these. Because of

this Quality Management is guaranteed.

EVALUATION OF THE QUALITY

ASSURANCE SCHEME IMPLEMENTED

IN PUBLIC HOUSING PROJECTS OF

HONG KONG

C.M. Tam

Department of Building and Construction,

City University of Hong Kong, Hong Kong

A.P.C. Chan

School of Building and Planning, University of South

Australia,

Adelaide, Australia

Abstract

Quality assurance has attracted much attention in the last

few years. The release of

the ISO 9000 in 1987 further fuelled the 'quality debate'

in Hong Kong and all over

the world. The construction industry in Hong Kong is no

exception. In April 1990,

the Housing Authority mandated the requirement that main

contractors must take ISO

9000 certification before 31 March 1993. Contractors then

made a dash for ISO 9000

registration. In less than two years' time, more than 50

contractors have successfully .

acquired certification and many of them are still in the

queue. The industry has

expended large amounts of money and resources in setting

up and running the system.

In fact, the study shows that the setting up cost of the

system ranged from HK$1 3
million with a mean running cost of around 0.2% of
contract values. Given the above,

reasonable questions might be, "What are the benefits in

return? Has the quality of

buildings really improved?" This paper aims to study the

benefits claimed in exercising the system. The study

has exposed a number of difficulties encountered by

contractors in meeting the ISO

9000 requirements, due partly to the unique

characteristics and attributes of the

construction industry in Hong Kong.

Keywords: Quality Assurance, Main Contractors, ISO-9000,

Quality System, Quality.

Sommaire

L' assurance de qualite a attire beaucoup d' attention

recemment. La creation d' ISO

9000 en 1987 a relance la discussion sur Ie "debat autour

de la qualite" a Hong Kong

et ailleurs. L' industrie de construction a Hong Kong n'y

echappe pas. En avril 1990,

Ie Ministere du Logement a oblige les entrepreneurs

principaux de souscrire a la

riglementation d' ISO 9000 avant Ie 31 Mars 1993. En

consequence, les entrepreneurs

The Organization and Management of Construction: Shaping

theory and practice (Volume One).

Edited by D.A. Langford and A. Retik. Published in 1996 by

E & FN Spon. ISBN 0 419 22230 8.

se sout precipites pour s'enregistrer a ISO 9000. En moins

de deux ans, plus de 50

entrepreneurs out obtenu Ie certificat arec succis et un

grand nombre d' entre eux font
toujeurs la quene. L' industrie a consacre grandes sommes
d' argent et de ressources

pour creer et gerer Ie systeme. En fait, l' etude indique

que Ie cout pour Ie fondement

du systeme etait compris entre HK$l et 3 millions avec un

cout moyen des frais de

gestion d' environ 0.2% des valeurs de contrat. Compie

-tenu de ces donnees, on

pourrait poser les questions suivantes, " Quels sout les

avantages en echange? Est-ce

que la qualite des immeubles s'est vraiment amelioree? "

Cet article vise a etudier les avantages tires par la
pratique de ce systeme. L' etude

a revele un certain nombre de difficultes rencontrees par

les entrepreneurs pour

satisfaire aux criteres d' ISO 9000, dues partillement aux

caracteristiques uniques et

aux specificites de l' industrie de construction a Hong

Kong.

1 Introduction

The increasingly competitive and quality discerning

international markets indicate a

compelling need for all industries in Hong Kong to upgrade

the quality of their

'products'. In March 1990, the Hong Kong Government

launched the 'Quality

Awareness Campaign' which stressed the importance of

'Quality'. Thereafter, 'quality'

became the centre of debates in Hong Kong. The ISO 9000

series of quality management and assurance standards was

published by the International Organisation for

Standardisation (ISO) based in Geneva

in 1987. In the following three years, as recorded in

1990, over 30 countries [3]
adopted the ISO 9000 Certification Scheme. In the same
year, the Hong Kong

Quality Assurance Agency (HKQAA) started administering the

certification exercise. The first ISO 9000 certificate in
Hong Kong was awarded on 16 April 1991 to a

semi-conductor manufacturer [4]. The first ISO 9002

certified contractor was

designated in June 1992. Up to May 1994, over 200

companies have been awarded

ISO 9000 certificates. Table 1 shows the distribution of

organisations certified up to

the end of April 1994 [1] .

Table 1: Types of Business Obtained ISO 9000 Accreditation

as at April 1994

Type of Business Number of Organisation

Construction Contractors 55

Concrete Production Plants 47

Construction Related Engineering Firms 12

Telecommunication 15

Electronic/ Computer Production Firms 36

Manufacturing Firms: Toys, Office Appliance, Bicycle, etc.

7

Others 14 It will be noted that the construction industry

sector takes up a significant

proportion. This is attributable to promotion of the

scheme by the Housing Authority;

implementation of quality assurance system and ISO 9000

registration through the

Hong Kong Quality Assurance Agency has been made mandatory

by the Hong Kong

Housing Authority for main contractors tendering for public

housing projects in Hong

Kong after mid 1992. This makes Hong Kong unique in the
world, having the largest

percentage of building contractors registered in the ISO

9000 scheme, over 50% of the

accreditated ISO 9000 certification companies falling into

the construction sector.

2 Background of Quality Management in the Construction

Industry

Due to scarcity of land and very rapid increases in

population, the Hong Kong

government was concerned about quantity rather than quality

of housing in the 60's

and 70's. This resulted in the poor quality public housing

and concomitant high

maintenance and remedial costs incurred in the last decade.

In pace with the

economic progress and the worldwide quality awareness, the

aspirations of Hong

Kong people have increased and the whole of society has

become more quality aware.

In recent years, the Housing Authority introduced the

Performance Assessment

Scoring System (PASS) and ISO 9000 certification

requirement in order to overcome

its poor quality image. The Housing Authority required that

before 31 March 1993,

all construction contractors must be ISO 9000 certified.

Although there was a leeway

period from April 1990 to March 1993, most contractors

rushed to obtain the

accreditation before March 1993. Most people believed that

the accreditation exercise
would be beneficial to the quality of the industry. It
has been two years since the introduction of the Quality
Assurance·

Accreditation Scheme in the construction industry. The

writer has conducted a

comprehensive survey to investigate the scheme.

3 The Study

The study was conducted in 1994, and comprised two parts:

mailed questionnaire

survey and structured interviews.

3.1 Mailed Questionnaire Survey

The questions were designed to assess the benefits of the

quality assurance (QA)

scheme that were partly envisaged by the author and partly

claimed by previous

researchers [5]. Each question was split into two parts;

the first being the expected

benefits before running the QA scheme, the second

concerning the actual benefits

experienced after its implementation. There were 42

replies from 136 dispatches sent by facsimile. The targeted

organisations were obtained from the Buyer's Guide, a

register of the HKQAA ISO

9000 certified companies [2]. Companies are those who have

obtained the ISO 9000

certification. The response rate was 31 %, an acceptable

figure in comparison with

similar surveys in Hong Kong. The results of the

questionnaire survey are

summarised in Table 2. The answers were then verified by

'Prior Probability'.

Answers favoured by around 50% respondents or less are

obtained by no better than
chance. Results which were lying well clear of 50% are
significant. The following

section discusses a few interesting findings.

1. Site conditions: Most people expected an improvement in

site control and conditions. Table 2 shows that most
people were actually enjoying the advantage. The high
percentages obtained indicate that there was an actual
improvement in site conditions. This may be the result of
improvements in proper material delivery, handling,
storage and packaging systems on site.

2. Overall quality awareness: 95% of respondents agreed

that the QA programme can induce quality awareness
potentially and 70% actually encountered the expected
outcome. This is the only significant item among the
various quality issues proving to have a positive effect
on quality.

3. Reduction in defects, rejection and remedial works: 85%

of respondents expected that there would be a reduction in
defects, the rejection of works, and remedial works.
However, only 40% of the respondents actually encountered
these benefits. The low percentage (below 50%) cannot
statistically verify the actual reduction in defects. This
shows that the quality of 'products' is not actually
improved with the implementation of QA system in an
organisation. One of the reasons was the huge amount of
paper work, deterring people from actually carrying out
the necessary inspections before putting their names on the
checking forms.

4. Reduction in quantities of defects during the defect

liability period: Once again the findings agree with the
above result that few people experienced such a benefit as
shown in Table 2 although 85% of respondents expected such
an outcome.

5. Improved filing and documentation system: 95% and 85% of

respondents expected and actually experienced such a
benefit. The high percentages indicate that the
documentation system has been improved.

6. Delineation of Responsibility: 95% and 80% of

respondents expected and actually experienced such a
benefit as shown in Table 2. The high percentages
indicate the improvement in this respect due to the
implementation of QA system.
7. Motivation: Just over half of the respondents expected
an improvement in staff morale. This infers that people
are not quite sure whether the system would motivate their
staff. However, none of them did observed the benefit in
reality. This means that the QA system may even generate a
negative effect on staff morale.

8. Improved documentation leading to less reliance on

memory: 95% and 85% of respondents expected and actually
experienced such a benefit. The high percentages indicate
that there was some improvements in this respect.

9. Speedier information update: 85% and 70% of respondents

expected and actually experienced such a benefit. The high
percentages indicate that there was actual improvement in
this respect.

10. Controlling: 89% and 71 % of respondents expected and

actually experienced such a benefit respectively. The high
percentages indicate the likelihood of improvement in
this respect.

11. Setting up costs: Small contractors estimated the costs

to be around HK$l million, while large contractors quoted
HK$3 million.

12. Running costs: The costs quoted were quite variable;

ranging from 0% to 1 % of the contract values. The mean
lies at 0.2%.

Table 2: The Overall Results of the Questionnaire Survey

FEATURES EXPECTED ACTUAL YES NO YES NO

General Site Discipline

Improvement in site conditions such as 95% 5% 70% 30%

cleanliness and tidiness

Improvement in site safety and security 75% 25% 50% 50%

Reduction in wastage and re-work 75% 25% 45% 55%

Project Management

Reduction in project duration due to less 55% 45% 10% 90%

remedial works
Improvement in competitiveness and 90% 10% 75% 25%

marketability

Internal Management

Improvement in internal management discipline 85% 15% 55%

45%

Ouality of Works

Overall improvement in quality awareness 95% 5% 70% 30%

Reduction in defective works 85% 15% 40% 60%

Reduction in defects during the defect liability 85% 15%

45% 55%

period

Planning

Overall improvement in planning 88% 12% 73% 27%

Organising

Improvement in site supervision and management 95% 5% 60%

40%

Improved filing and documentation system 95% 5% 85% 15%

Clearer delineation of responsibility 95% 5% 80% 20%

Motivation

Improvement in staff morale 55% 45% 0% 100%

Communication

Improvement in site communication 75% 25% 50% 50%

Improvement in communication with architects 55% 45% 25%

75%

and consultants

Easier agreement on performance criteria with 50% 50% 20%

80%
clients

Improved documentation leading to less reliance 95% 5%

85% 15%

on memory

Speedier information update 85% 15% 70% 30%

Controlling

Improvement in site control due to formalised 89% 11% 71%

29%

checking procedures

3.2 Structured Interview

The interviewees included site supervisors, project

managers and quality assurance

managers from eleven large and small building contractors

who have obtained the ISO

9000 certification; some employing more than 500 staff and

with annual turnover

greater than $500 million. The interview results have

highlighted problems

encountered by ISO 9000 certified contractors and the

problems are summarised as

follows:

1. Control of Subcontractors: The labour supply structure

in the industry is characterised by the presence of
multi-layers of subcontractors. It is quite impossible to
impose the requirements of ISO 9002 on these
subcontractors as few of them have any management system
or quality system; some are not even registered as a
company. The QA managers must assume 100% management
control on these subcontractors. However, as the skill of
labour is not tested or proven, and labour mobility is
high, this makes the tasks very difficult and costly.

2. Control of Suppliers: Most materials are purchased

through agents who named themselves 'suppliers' in the
industry. These agents normally deal with many subagents
who order goods from manufacturers all over the world; such
as the PRC, the Philippines, etc. where no quality system
is in existence and the arm of the main contractor hardly
reaches.

3. Inspecting, Measuring, and Testing Equipment: Owing to

the vast workforce involved and the large number of
trades in ajob site, calibration, identification and
traceability of all the measuring and testing equipment are
very difficult to manage. For example, it is impossible to
control measuring tapes used if everybody brings his own
tape. Moreover, most small contractors usually hire plant
rather than owning, and calibration and control of a third
party's plant could be very difficult.

4. Changes in Design and Drawings: Changes in design and

drawings is very common in the industry. This results in
many variations and additional works hampering the
documentation system and communication efficiency.

5. Site Management and Control: ISO 9000 involves setting

up a proper documentation system resulting in a great deal
of paper work and control forms. It is, perhaps easier for
younger staff but very difficult to educate older and more
experienced site staff. These result in site staff
bypassing the checking procedures by just signing the
forms without doing the actual checking. For small
contractors who have limited additional resources, the
lack of additional staff to support the QA system may
jeopardise it.

6. Multi-quality system: In cases where most nominated

subcontractors and suppliers may have their own quality
systems, and different procedures, then it may be
difficult to reach a compromise on the system used. Thus
the amount of paper work may be doubled or even tripled.

7. Considerable Amount of Paper Work: In order to ensure

100% quality and compliance with specification, at least
10% checking to every process of work is required.
Considering the large number of different trades working
simultaneously in hundreds of different locations on a
large site, there are thousands of check forms to be
handled daily and each form may need to be signed and
verified by sometimes three or more persons. This
considerable amount of paper work often annoys site
management staff, who then may cut comers in handling the
paper work.

8. Acceptance Criteria: Different people may have different

acceptance criteria, especially as regards qualitative
works such as finishing trades. Subcontractor themselves
may accept works which are not acceptable by the main
~contractors. This always creates disputes and
confrontation.

9. Document Control: Often, the quality system stipulates a

document control procedure that all obsolete documents
must be promptly removed from all points of issue. That is
extremely difficult in the industry because: the existence
of the multi-layers of subcontractors makes the chain of
issue very long and hardly reachable. many drawings may
be affected by a single change. it is still very common
for architects and engineers to give verbal instructions,
sometimes without written confirmation.

10. Material control: The handling, storage, packaging and

delivery methods stipulated in the quality system may
sometimes be very difficult to follow due to site
congestion and restricted site conditions as encountered in
most private jobs in Hong Kong.

11. Contract Review: Some interviewees asked sarcastically,

"Would anyone believe that a contractor would submit his
non-conformance report to the Architect?"

12. Competitiveness and Marketability: For contractors who

work both for the public housing and private jobs, they
may be deterred from applying quality systems in private
jobs in order to cut the administrative costs and reduce
abortive works. Nevertheless, the Hong Kong Quality
Assurance Agency requires contractors to implement the
quality assurance system in all construction projects under
the same. company name once it becomes certified. As the
adoption of quality systems is more costly, it will no
doubt hamper contractors' competitiveness in other business
sectors. In the meantime, private clients and architects
may not be ready for a quality assurance system and
therefore, may not welcome and even refuse to adopt it.

13. Client's Control: One of the major principles of QA is

that all parties to the building process must play an
active role and their respective contributions may be
integrated [6]. However, with the current contractual
agreements, clients and architects retain the ultimate
authority in approving subcontractors, materials used, and
construction process. Hence contractors need to follow
instructions in carrying out their works. Thus there is
little room for contractors to contribute innovative, cost
saving and quality enhancing suggestions.
15. Full Top Management Support: In order to secure the
accreditation and windowdress the quality manual, the
quality policy always stressed the need for full support
of the quality system from top management. However, some
interviewees mention~d that profitability is more
important to them; sometimes in the sacrifice of quality,
rather than following the quality management system. Most
people admitted that the QA system is designed to meet the
contractual requirement rather than trying to improve the
company's internal efficiency and external image.

4 Conclusion

The questionnaire survey unveils that site conditions such

as tidiness and cleanliness,

were indeed improved but safety, security, wastage and

rework remained unchanged

after the implementation of the QA system. Item 10 of the

interview highlighted the

difficulties in following the material control procedures

due to site congestion and

restricted site conditions which are the attributes of

most private building sites in

Hong Kong. The project duration was unaffected, but the

competitiveness of

contractors was improved after adopting the QA system.

Contractors did not see any

improvement in their internal management affairs. Perhaps

this may be due to the large amount of paper work
generated which would

of course not be welcomed by site staff and thus cause

dissension that induced

frustration and had negative effects on staff morale. As

regards quality of works, only the quality awareness of
organisations was

improved while the actual defects, rejection and reworks

were not reduced. The

frequent change in design and the difficulties in

controlling the multi-tier
subcontractors and suppliers hampered the quality
improvement effort. Documentation systems and information
updates were improved but otherwise

communication was generally no better. This is due to the

existence of multi-quality

systems and the difficulty in quantifying the acceptance

and performance criteria. The major benefits of the QA
system were the improvement in site planning and

procedural control, site supervision, documentation and

delineation of responsibility.

However, the benefits may not outweigh the costs of the QA

system which include a

setting up cost ofHK$1 to 3 million and a mean running cost

of 0.2% of the contract

values. If the advantages of the QA system are to be fully

achieved, especially the

improvement in quality, wholehearted commitment from top

management of

contracting firms and more effort input by clients to

encourage the system are

required. Although the quality of works has not been

improved two years after the

implementation of QA systems, the rise in quality

awareness both in the public and

construction professionals may eventually culminate in the

fruitful results.

1. Hong Kong Quality Assurance Agency, HKQAA (Up to 13 May

1994, issue 26), ISO 9000 Certification (Buyer's guide)
Register of HKQAA certified companies according to ISO
9000: 1987. Hong Kong Government Printer.

2. HKQAA (September 1994, issue 29)., ISO 9000

Certification (Buyer's guide) Register of HKQAA certified
companies according to ISO 9000: 1987. Hong Kong
Government Printer.

3. Shui On Construction Review (1991), Focus on QAA.

4. Industry Department: Quality Quest, Issue No.9, March
1994.

5. BSI Quality Assurance "International Quality Assurance

Management System Standard. " Milton Keynes: BSI Quality
Assurance 1990. (Videorecording)

6. The Chartered Institute of Building, CIOB, 1990, Quality

Assurance in the Building Process.

7. Hong Kong Quality Assurance Agency, HKQAA, (1992), An

Executive's Guide to the Use of the International
Standard for Quality Systems. Hong Kong Government
Printer.