Change and Increase of Complexity in the Construction Industry - Essay Example

?Construction organisations have adapted themselves to address change and the growing complexity of the construction industry. Prepare an essay that discusses the premise that there is no single ideal organisation. 1. Introduction In the context of the global market, the ability of the firms to survive is closely related to their potentials to align their strategies with existing market trends and changes. Firms that operate in quite demanding sectors, like the construction industry, have to continuously develop their operational practices making sure that they can respond to the preferences of the customers, which can be differentiated in countries worldwide. One of the key characteristics of the construction industry is its high complexity; the projects developed across this industry are depended on a series of factors, including technology, climate conditions, suppliers’ and employees’ efficiency and responsibility, local regulation and so on. Therefore, for the firms that operate in the particular industry the full achievement of their goals is a challenging task; in fact, the research on the industry’s characteristics and performance has led to the conclusion that operational and strategic failures are common phenomena in this industry. This issue is discussed in this paper; it is concluded that the above failures can justify the argument that in modern market no single ideal organization can exist. The aspects and the explanation of this argument are presented in this paper referring, as an example, to the challenges and the performance of firms operating in the construction industry. 2. Change and increase of complexity in the construction industry - characteristics, responses and consequences - discussion of the premise that there is no single ideal organization. In order to understand the challenges faced by the firms operating in the construction industry and the effects of these challenges on the industry’s performance it would be necessary to refer primarily to the most common characteristics of the construction industry worldwide. Then the challenges involved can be discussed addressing the issue whether an ideal organization can exist in modern market – as this assumption can be derived taking into consideration the challenges and the performance of firms in the construction industry. The value of the construction industry for economies worldwide cannot be ignored. For example, in USA, one of the most competitive construction markets globally, the value of the construction industry for the domestic product has estimated to 9% - referring to 2005 (Atallah 2006). Despite its size, the construction industry in USA is not well structured – a high fragmentation has been identified; more specifically, most of the industry’s firms are small and operate within their local area – about 2.1 millions of the relevant businesses are self-employed (Atallah 2006). This fact limits the potentials of these firms to face the challenges set by the globalization. The above phenomenon is common in countries worldwide. Firms in the construction industry are usually established and operate in the context of the development of particular construction projects; in many cases, the end of a construction project can set the survival of a construction firm in risk. In other words, there is no expansion of the activities or tasks allocated to the employees. Rather, the operation of each construction firm is depended on the successful development of a particular construction project; it is for this reason, that most of firms in this industry are self-employed – the number of employees is low. This trend is reflected in the figures released in the study of Bennett (2003); in accordance with the above study, the construction firms in Italy have been estimated to 482,000 (for 2002), a number extremely high taking into consideration the potential number of construction projects developed across the country/ compared to the country’s size and relevant needs (Bennett 2003). Moreover, in accordance with a series of statistics referring to the employees in the construction industry of UK and Finland, the average number of employees working in each construction firm in Britain is 5.3 while in Finland is 3.5. A similar issue is highlighted in the study of Barrett et al. (2008); in the above study it is noted that in Britain, a high percentage of the firms operating in the construction industry are self-employed while the representation of small firms in the construction industry is really impressive: it is revealed that small construction firms represent the 99.3% of the construction organizations in Britain – referring to relevant data of 2002 (Barrett et al. 2008). The figures presented above showing clearly the following trends: firms in the construction industry are likely to have a specific operational mode: a) they are most likely to be self-employed and b) the average number of their employees can be from 2-5. The above facts can lead to the following assumptions: a) the capacity of firms in the construction industry is not high – even if it shows signs of growth, b) the ability of these firms to respond to the challenges set by the expansion of globalization is limited and c) the potentials of these firms to handle the pressure of the global financial crisis cannot be high. On the other hand, there are certain facts that cannot be ignored: a) the growth of economies worldwide is not equal; in fact, during the last decade, a clear trend for the increase of economies of Asia countries can be identified; this means that the chances for the growth of the construction industry are important. For this reason, the activities of the firms operating in the particular industry should be expanded; the self-employed construction firms would be transformed to partnerships, which will be able to be involved in construction projects in the global market; however, such initiatives would be difficult to be developed – referring especially to the time required for their completion but also to the funds necessary. b) The technology used in construction projects worldwide has been updated – following the relevant technological trends in other industries of the international market; the ability of small construction firms to acquire this technology is limited – taking into consideration the funds and the expertise required. It is assumed that the technology used by construction firms worldwide is not satisfactory – having in mind the current status of technology and the increased needs of the construction projects, c) the development of the financial crisis has negatively affected the performance of construction firms – as also of firms in all industries. Small construction firms would be less able to survive, taking into consideration their low volume of work – compared to a large construction firm. In accordance with the above, it is assumed that the problems resulted by the high fragmentation in the construction industry worldwide would be difficult to be controlled. At this point, it would be necessary to refer clearer to the challenges of construction firms – as these challenges are likely to be developed in the construction industry worldwide. The responses of the firms to these challenges will be used for estimating the potential existence, or not, of an ideal organization in the context of the global market. The construction industry is a highly demanding industrial sector. The needs of the firm operating in this industry can be made clear by referring to a common definition of the construction firm – in accordance with its most common form. In accordance with Atkin (2009, p.115) ‘a construction firm is a group of people sharing specialized knowledge to design, estimate, bid, procure and obtain resources to complete a construction project’. In other words, a successful construction firm needs to have the following characteristics: a) its employees need to be willing to communicate and cooperate for the successful completion of each construction project, b) the resources available for each construction project need to be adequate and appropriate; it is assumed that construction firms that lack from expertise or technology cannot be involved in demanding construction projects, c) the employees of the firm would be rather considered as team workers – the development of hierarchy in construction firms could set in risk the quality of communication and cooperation among employees, d) employees/ team workers of the construction firms would be able to participate simultaneously in many different tasks – bidding on a construction project and designing another one, e) the allocation of tasks in construction firms would be quite important for the success of these firms; in fact, the leader in each construction firm should be able to understand the potentials of each team worker to perform in a particular position; because all phases of a construction project are equally crucial for the project’s successful completion, the failure in allocating the appropriate task to a particular employee – in terms of his ability to perform well in this task – could result to the failure of the whole project. On the other hand, there is the issue of growing capacity in the construction industry; in accordance with Ofori (1990) when referring to the construction industry the term capacity can be used for ‘showing the industry’s ability to meet the demand put to it’ (Ofori, 1990, p.45); it is also noted that ‘capacity in the construction industry is expressed in monetary terms’ (Ofori, 1990, p.45). In other words, in the context of the construction industry, capacity is a term used for indicating the level at which the firms of the industry are able to respond to the relevant demands of customers worldwide. As noted above, the number of construction firms worldwide is high; this fact can lead to the assumption that the capacity of the industry is growing – even if the size of the construction firms would need to be increased, taking into consideration the challenges developed because of globalization, the continuous change of technology and the differences in the performance of markets globally. In accordance with Ofori (1990) the increase of capacity of the construction industry is expected to be continued in the long term, mostly because of the following reasons: a) the continuous improvement of the knowledge management techniques used in the construction firms, b) the development of technology available to construction firms and c) the continuous increase of investment on the specific sector (Ofori 1990). At this point the following two issues need to be explored: change and complexity as part of the operational activities of firms in the construction industry. The introduction of changes in the operational practices of firms in the construction industry can be a challenging task; in fact, in accordance with Dainty et al. (2007) the firms operating in the particular industry tend to be reluctant in such perspective – the example of the UK construction industry which has not been changed since the end of the Second World War is mentioned in order to highlight the above problem (Dainty et al. 2007). It can be understood that the construction industry refers to values and activities, which are closely related to the ethics and the culture of a particular society; however, still, changes would be initiated in the specific industry without deleting or alternating the above values and traditions. The success of such effort would be depended on the ability of national legislators to develop rules that could protect the national heritage and ethics without prohibiting the promotion of innovation and change across the particular sector. This fact is made clear in a relevant report of the British Parliament in 2008; in accordance with the specific report ‘research and innovation is necessary to meet the Government’s targets for sustainable construction and its own needs as a client’ (British Parliament 2008, p.92). It is made clear that the needs for innovation and change in the construction sector are recognized by the British Parliament; at the same time the need for promoting sustainability following the rules set by the national legislators is made clear. However, the above two targets/ priorities are considered as possible to co-exist; it is assumed that it is left to the discretion of each construction firm to choose the methods that the above two needs would best served. As for the complexity of the construction projects, this is related to the following fact: each construction project has many different phases; the allocation of tasks among many employees/ team-workers would ensure the limitation of time required for the project’s completion (Winch 2010). From another point of view, the distribution of tasks would help employees to be more independent and more relaxed when working on a construction project; the delegation of many tasks to a single person can lead to severe delays in the completion of the project – mostly due to the increase of stress for the completion of each task (Winch 2010). On the other hand, in construction projects there are many different issues that need to be addressed: changes in cost of materials, increase of the final budget, increase of the total time required, lack of personnel, accidents in the workplace (health and safety issues), unexpected changes in the performance of the local economy – which could directly affect the demand in the construction industry, natural disasters and so on (Ruddock, 2008). Project managers in the construction industry should be able to handle all the above issues; the appropriate allocation of tasks could help to avoid major failures. However, due to the different nature and the high range of risks involved in this industry, the complete avoidance of failures in construction projects cannot be achieved. On the other hand, a lack of willingness for the development of changes in the particular industry has been identified (McCabe 2010) – reference is made specifically to ‘the unwillingness to invest time and money into long-term development and improvement of processes’ (McCabe 2010, p.7). In other words, the failure of the construction firms to face the challenges related to the increase of complexity and changes across the industry is based not only on cultural reasons – as in the case of Britain, mentioned above – but also on economic reasons; probably, there is the belief that the less possible funds would be invested as economic risks are quite high in current market conditions, a view that can be characterized as partially justified. This view also leads to the assumption that the non-existence of a single ideal organization is not an accidental phenomenon; rather, it is the result of the priorities set by managers – not just in the construction industry but also in all industrial sectors worldwide. 3. Conclusion The examination of the operational characteristics and challenges of the construction firms has led to the assumption that the ability of these firms to respond to the current market trends is satisfactory but it could be further increased. At the next level, it has been made clear that the changes and the complexity developed across the particular industry could cause severe delays in the successful completion of the construction projects. The potentials of construction firms to respond to the increase of complexity and to the need for continuous change can be characterized as rather limited. Different approaches are used in the literature – as presented above – in order to justify the above phenomenon. Taking into consideration the practices and the performance of construction firms – as analyzed using relevant literature – it can be concluded that no single ideal organization could exist in the particular industry. The above assumption would be involved in all industrial sectors, which are expected to face similar challenges and risks; of course, in the long term, the characteristics and the performance of each industry cannot remain stable. Still, the ability of each firm to face the market challenges cannot be differentiated unless radical strategic changes are initiated. References Adamson, D., Pollington, T. (2006) Change in the construction industry: an account of the UK construction industry reform movement 1993-2003. Taylor & Francis Atallah, P. (2006) Building a Successful Construction Company. Kaplan Publishing Atkin, B. (2009) Performance Improvement in Construction Management. Taylor & Francis Barrett, P., Sexton, M. (2008) Innovation in Small Construction Firms. Routledge Bennett, L. (2003) The management of construction: a project life cycle approach. Butterworth-Heinemann Dainty, A., Green, S., Bagilhole, B. (2007) People and culture in construction: a reader. Routledge McCabe, S. (2010) Corporate Strategy in Construction: Understanding Today's Theory and Practice. John Wiley and Sons Ofori, G. (1990) The construction industry: aspects of its economics and management. NUS Press Parliament: House of Commons, Britain (2008) Construction Matters: Report, Together with Formal Minutes. The Stationery Office, UK Ruddock, L. (2008) Economics for the modern built environment. Taylor & Francis Winch, G. (2010) Managing Construction Projects. John Wiley and Sons Read More