The size of construction firms

1. Sewon Kim Kevin Tran Mary Svennerborg The size of construction firms

2. Contents • The size of construction firms • The size of business • The small firm • The medium-sized firm • The large-sized firm • References

3. 1. The size of construction firms • ‘Modernising Construction’ (National Audit Office 2001) reported that there are over 160.000 firms operating in the construction 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.

4. Top 100 contractors and house builders

5. 2. The size of business • Drucker(1989) suggested an interesting approach that is in respect of defining the four stages of business growth • Small Business • Fair-Sized Business • Large Business • Very large Business

6. 2. The size of business Small business • It is distinguished from the one-man proprietorship by requiring 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 guiding and managing the affairs of the business. In the majority of construction firms in this category, the tendency is to develop a departmental approach to the various sections of the organization.

7. 2. The size of business Large business • A large construction organization may be managed by a main board of directors, supported by departmental directors and regional and technical directors. Very Large business • This is characterized by the fact that the overall business objectives and resulting actions must be organized on a team basis. Each position requires the full-time services of several people.

8. 3. The small firm

9. 3. The Small firm • National statistics categorise the small firm as a business with between 1 and 24 directly employed staff. The number of firms in the UN is in the order of 1.100.000 with 91% employing less than 10 people. • Company background • Business control procedures • On the role of the principal

10. 3. The small firm①Company background • The business is managed by the principal or owner with three employed staff. Sixty percent of the work is obtained by negotiation and the rest from competitive tenders. Turnover after 2 years of trading is in the order of ₤800,000 and the largest project undertaken to date is ₤250,000.

11. 3. The small firm①Company background • The business is managed by the principal or owner with three employed staff. Sixty percent of the work is obtained by negotiation and the rest from competitive tenders. Turnover after 2 years of trading is in the order of ₤800,000 and the largest project undertaken to date is ₤250,000.

12. Organisation Structure – Small Company RESPONSIBLE FOR: PRINCIPAL OWNER

13. Project Organisation Small Company

14. 3. The small firm②Business control procedures • The principal’s major concern is providing a personal service to clients and ensuring that projects are completed on time at a reasonable 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 preparing tenders for new work and chasing round his existing projects.

15. 3. The small firm③On the role of the principal • The principal tends to make all decisions, and tends to do everything himself, which is the typical small company approach to managing a construction enterprise.

16. 4. The medium-sized firm

17. 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 offering a design and build or a work package service to clients. Many such options are available as a business expands.

18. Must be established at Medium-sized

19. 4. The medium-sized firm①Company Background

20. Organisation Structure Medium-sized company

21. Project OrganisationResponsibility lies with contracts divisionSites are serviced by head office-buying/surveying

22. 4. The medium-sized firm②Business control procedures

23. 5. The Large-Sized Firm

24. 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 eithera merger or a takeover. • Employ between 300-1200 people therefore the organisation structure must be designed to meet the specific needs of the company.

25. Business Unit Approach to Project Management

26. 5. The Large-Sized FirmOrganisation 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 explanation for difference.

27. 5. The Large-Sized FirmGrouping Arrangement • Functional • Product/Service • Geographical • Customer • Capital • Project

28. 5. The Large-Sized Firm

29. 5. The Large-Sized Firm • Head office is responsible for providing services 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.

30. References • Burke, R.(2003) Project Management, 4thedn. John Wiley&Sons. • Drucker, P.F. (1989) The practice of Management. Butterworth-Heinemann. • Lavender, S. (1996) Management for the Construction Industry. Pearson Education. • Winch, G.M. (2002) Managing Construction Projects. Blackwell Publishing. • Clutterbuck, D.&Crainer,S. (1990) Makers of Management. Macmillan Press.