Company Organization
Chapter 3
Company Organization
3.1 Introduction
The management and operation of a construction company involve numerous diverse activities, including:
Procuring work
Preparing cost estimates
Negotiating contracts
Procuring materials and labor
Planning and scheduling projects
Determining construction methods
Equipment management
Insurance management
Management of surety bonds
Material control and storage
Payroll and accounting management
Documentation and record keeping
Cost control
Management of labor relations
Safety management and training
Supervisor training
The contractor's role is to coordinate these activities into an effective and profitable plan of action for the enterprise.
The basic element in this process is the contractor's company organization, created by top management to ensure smooth functioning of various functions.
The organization acts as a means to achieve company objectives, not an end in itself.
Contractors face complex organizational problems and must devise a general company organization to support all operations as well as a suitable field organization for each project.
Commonly, a contractor locates functional groups in a central office (home office), with field offices on-site to manage project functions.
3.2 Organization Basics
Establishing the fundamental purpose of the enterprise includes:
Defining the overall scope of operations
Setting long-term objectives
Establishing general operational plans and procedures
A successful enterprise requires an efficient company organization.
A key responsibility of management is establishing and maintaining a functional company structure, which acts as the foundation for operational management.
Organizing is defined as:
Establishing company structure and the functions of its parts
Determining responsibilities and authority for each position
An effective organizational plan improves operational routines requiring minimal direction from upper management.
3.3 General Considerations
Organizing a business involves:
Determining needed job positions
Defining duties and responsibilities for jobs
Establishing working relationships among job positions
The primary task of a construction contractor's organization:
Procure construction contracts
Plan, direct, and control field operations to achieve efficiency and profitability.
The organizational framework must:
Be stable for consistent action
Be flexible to meet changing needs.
Balance must be maintained between organizational duties, responsibilities, and the cost of salaries.
Management must protect against:
Under-organization (too few duties for too many responsibilities)
Over-organization (excessive administrative oversights that hinder productivity).
Understanding terminology:
Authority: The ability to make decisions without superior approval, which can be delegated.
Responsibility: Accountability for successful accomplishment of assigned functions. A supervisor is fully responsible for any delegated duties.
Duty: A specific task assigned that cannot be delegated.
3.4 Principles of Organization
No single organizational structure fits every construction firm.
Firms must create organizational plans best suited to their operations; however, general organizing principles apply:
Conduct a formalized analysis of tasks.
Clarify responsibilities for task performance.
Develop clear organizational understanding, reducing chaos, indecision, and duplicate efforts.
Suggested steps for developing effective company organization:
List all duties for successful company operation.
Divide duties into individual job positions with defined responsibilities.
Arrange positions into a functional structure showing supervisory lines.
Staff with qualified individuals.
Establish communication lines.
Prepare a manual of policies and procedures.
Prepare an employee handbook.
Implement the plan, monitor results, and adjust as necessary.
3.4.1 List of Duties
Duties for construction contracting businesses vary based on size.
Larger companies require a detailed list of duties, while smaller firms manage with fewer roles.
Illustrative list of duties includes operational categories such as:
Executive Duties:
Company organization, long-range planning, capital improvements, contract negotiation, financial structure, and more.
Accounting and Payroll:
Managing financial reports, invoicing, payroll records, and tax returns.
Procurement:
Managing purchase orders, subcontracting, insurance, licensing, material management.
Estimating:
Handling quantity takeoffs, pricing proposals, and bid invitations.
Construction Operations/Project Engineering:
Assigning project budgets, monitoring costs, ensuring safety procedures, managing quality control.
3.4.2 Division of Duties
Duties should be subdivided into groups assigned to individuals in an organization:
In smaller companies (e.g., a partnership), duties may be broadly assigned, while larger entities assign narrower specialization.
An essential characteristic of a small firm may intertwine various responsibilities across fewer individuals while larger organizations often apportion specific functions to separate people.
Job descriptions clarify assigned duties for specific roles.
3.4.3 Organizational Structure and Organization Chart
The organizational procedure ensures job roles execute identified duties.
Common practice includes departments, each with specified authority operating semi-independently but interrelated.
A functional form of organizational structure allows individuals/groups to specialize in business aspects.
Organizational charts illustrate positions of responsibility and the hierarchy of authority, clarifying each employee's role and supervisory relationships.
Charts enhance organizational clarity among employees, indicating expectations for responsibilities.
3.4.4 Staffing
Staffing requires selecting individuals qualified for defined positions within the organizational structure.
Supervisory personnel are often selected for their construction knowledge or technical abilities over management experience.
However, managerial and interpersonal skills are increasingly recognized as essential for effective management.
3.4.5 Communications
Effective operation relies on proper internal and external communication.
Communication needs include:
Job costs and progress updates
Contract changes information
Delivery status notifications for materials
Reporting accidents and payroll conditions.
Set procedures for routine communications improve efficiency and clarity.
3.4.6 The Manual of Policies and Procedures
A manual augments organization charts, providing comprehensive procedures and policies for the company.
Establishing policies aids decision-making, aligns operations across management levels, and offers consistency in problem-solving.
Procedures clarify communication flows and operational routines, minimizing supervisory needs.
3.4.7 The Employee Handbook
An employee handbook outlines personnel policies, including compensation, hours, drug policies, and dispute resolution methods.
It fosters company culture, communicates expectations, and enhances morale.
3.4.8 Plan Implementation and Adjustment
Organization planning requires team consultation and thoughtful decision-making.
Plans should be finalized, implemented, and subject to ongoing adjustments to meet evolving business conditions.
3.5 Responsibility, Authority, and Delegation
Responsibility: Personal assignment for which one is accountable.
Authority: Power to act independently for assigned responsibilities.
Delegation: Process of assigning responsibilities and authority to employees.
Effective delegation improves organizational function and creates clear responsibility lines at all operational levels.
3.6 Making the Organization Work
3.6.1 Decision Making
Timely decision-making is fundamental for effective operations and involves organizational policies guiding actions.
3.6.2 Personnel Development
Opportunities for skill improvement, training, and career advancement need to be provided by management to foster employee growth and satisfaction.
3.6.3 Training of Replacements
Companies should encourage succession planning and prepare existing employees for inevitable transitional events in staffing.
3.6.4 Motivation
Creating a motivating environment enhances productivity; recognition, team contribution, and meaningful work relationships drive employee satisfaction and engagement.
3.7 Summary and Conclusions
Company organization is vital for management and involves many factors that effectively align company needs with employee function to fulfill organizational objectives.
Chapter 3 Review Questions
Define staffing of a construction company, and name the most important consideration in staffing.
Define the manual of policies and procedures in a company.
Define the employee handbook.
Describe who in a construction company should have a copy of the manual of policies and procedures and the employee handbook.
Define the terms duty, authority, responsibility, and delegation.
Restate the cardinal rule regarding the relationship that should exist between responsibility and authority.
Review and list the eight steps in the development of an effective company organization as presented in this chapter.
List and discuss three important objectives of a company organization chart.