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THE SIZE OF CON-STRUCTION FIRMS
Sewon Kim
Kevin Tran
Mary Svennerborg
Contents
The size of construction firms The size of business The small firm The medium-sized firm The large-sized firm References
1. The size of construction firms
‘Modernising Construction’ (National Audit Office 2001) reported that there are over 160.000 firms operating in the con-struction industry and many of these are small contractors.
The current annual turnover of the top 100 contractors in terms of annual turnover is shown next table. This indicates that the vast majority are either medium-sized or small.
Turnover(₤ million) Number of firms
Less than 100 0
100 – 249 37
250 – 499 26
500 – 599 20
1000 – 1999 10
2000 – 2999 1
3000 – 3999 4
4000 – 4999 0
5000 + 2
Top 100 contractors and house builders
2. The size of business
Drucker(1989) suggested an interesting approach that is in respect of defining the four stages of business growth
① Small Business
② Fair-Sized Business
③ Large Business
④ Very large Business
2. The size of business
Small business It is distinguished from the one-man proprietorship by re-
quiring a level of management between the man at the top and the workers.
Fair-sized business The role of the managing director has become a full-time
position. He is required to concentrate his efforts on guid-ing and managing the affairs of the business. In the major-ity of construction firms in this category, the tendency is to develop a departmental approach to the various sections of the organization.
2. The size of business
Large business A large construction organization may be managed
by a main board of directors, supported by depart-mental directors and regional and technical directors.
Very Large business This is characterized by the fact that the overall busi-
ness objectives and resulting actions must be orga-nized on a team basis. Each position requires the full-time services of several people.
3. The small firm
3. The Small firm National statistics categorise the small firm
as a business with between 1 and 24 di-rectly employed staff. The number of firms in the UN is in the order of 1.100.000 with 91% employing less than 10 people.
① Company background
② Business control procedures
③ On the role of the principal
3. The small firm
①Company background
The business is managed by the prin-cipal or owner with three employed staff. Sixty percent of the work is obtained by negotiation and the rest from competit-ive tenders. Turnover after 2 years of trading is in the order of ₤800,000 and the largest project undertaken to date is ₤250,000.
3. The small firm
①Company background
The business is managed by the prin-cipal or owner with three employed staff. Sixty percent of the work is obtained by negotiation and the rest from competit-ive tenders. Turnover after 2 years of trading is in the order of ₤800,000 and the largest project undertaken to date is ₤250,000.
Contact with clients / architects etc
Preparation of tenders / obtaining work
Submission and adjudication decisions
Pre-contract arrangements
Letting of subcontracts
Planning – programming of work
Interim certificates / final accounts
Payment to subcontractors / suppliers
Establishing policy
All decision making
PRINCIPAL OWNER
RESPONSIBLE FOR:
Organisation Structure – Small Company
Project Organisation Small Company
Principal
Construction site
manager
Subcontractors
Construction site
manager
Subcontractors
3. The small firm
②Business control procedures
The principal’s major concern is providing a personal service to clients and ensuring that projects are completed on time at a reason-able profit. Maintaining client contact during a project is considered essential to the success of the business. Management checks are made on project profitability and monthly site meetings are attended by the principal. The majority of the principal’s time is spent on pre-paring tenders for new work and chasing round his existing projects.
3. The small firm
③On the role of the principal
The principal tends to make all deci-sions, and tends to do everything him-self, which is the typical small company approach to managing a construction enterprise.
4. The medium-sized firm
4. The medium-sized firm
The medium-sized firm has developed from expansion of the small business, brought about by the increase in workload, turnover and business diversification. The core business may have been refurbishment work, but the company may now be offer-ing a design and build or a work package service to clients. Many such options are available as a business expands.
Must be established at Medium-sized
Team approach
Strategic plan
Policy objectives
Delegation of responsibility
Control & Reporting procedures
Channels communication
4. The medium-sized firm
①Company Background
Organisation Structure Medium-sized company
Chairman
Managing Director
Commercial managerdirector
Estimating/Surveying
directorSe-nior es-
tima-torBuyer
/scheduler
Se-niorsur-veyo
rContractsurveyor
Contractsdirector
Contractsmanager
Con-struc-tionSite man-agers
Project OrganisationResponsibility lies with contracts division
Sites are serviced by head office-buying/survey-ing
Head Office
Contractsdirector
Contractsmanager
Construction manager
Subcontractors engaged on project
4. The medium-sized firm
②Business control procedures
• Input to projects to aid management• Wages, personnel, surveying measurement, valuation
services, buying and overall project planningHead Office
• Control of the various functions• Cover construction management, estimating and sur-
veying• Managing cash flow
Director• Programming and progress reviewing• Reporting on progress
ContractsManager
• Short-term planning• The coordination of subcontractors
ConstructionManager
5. The Large-Sized Firm
5. The Large-Sized Firm Develop originally from the expansion of a
medium-sized business. Growth is by acquisition when separate
business join together via eithera merger or a takeover.
Employ between 300-1200 people there-fore the organisation structure must be de-signed to meet the specific needs of the company.
Business Unit Approach to Project Management
Unit 1
Head Office
Project 1
Site Engineer Quantity Surveyor Assistant construction manager
Construction Manager
Project 2 Project 3
Contracts Manager
Business Unit Manager
Unit 2 Unit 3
Construction Director
Managing Director
5. The Large-Sized Firm
Organisation Structure- Large Company
Organisation structures tend to be based on the individual preferences of the owners or directors and are very much personal to each type of business.
○ nature and source of firm’s respective workloads and their expertise available are possible explana-tion for difference.
5. The Large-Sized Firm
Grouping Arrangement
Functional Product/Service Geographical Customer Capital Project
5. The Large-Sized Firm
Organisation Example
Design and build director
Contracts director
Contracts director
Plant director
Design and build Major contracts Minor contracts Plant holding
COMPANY DIVISIONS
Chairman/Managing Director
5. The Large-Sized Firm
• Head office is responsible for providing ser-vices to all projects in the form of …
• Head office support may be provided from a single head office or may be regionalised in order to serve its customers’ needs better.
Office services Estimating services Surveying services Marketing services
Office manager
HEAD OFFICE SERVICE SECTIONSServicing the company divisions
References Burke, R.(2003) Project Management, 4th edn. John
Wiley&Sons.
Drucker, P.F. (1989) The practice of Management. Butter-worth-Heinemann.
Lavender, S. (1996) Management for the Construction Indus-try. Pearson Education.
Winch, G.M. (2002) Managing Construction Projects. Black-well Publishing.
Clutterbuck, D.&Crainer,S. (1990) Makers of Management. Macmillan Press.