Management for the Construction Industry

Stephen D. Lavender

• Publisher: Routledge
• Year: 2014
• Print ISBN: 9780582262355
• eBook ISBN: 9781317889908
• Edition: 1
• Topic: Technik & Maschinenbau
• Subtopic: Bau- & Architekturtechnik

Management for the Construction Industry introduces the principles of management and applies them to the construction industry. It covers the level 2 module of the CIOB's Education Framework on management and is officially sanctioned by the CIOB as the recognised text for that module. The text builds on the knowledge of basic disciplines, such as technology, economics and law, and forms the basis for more advanced studies in specialist aspects of management. The main context of the book is the construction industry but emphasis is also given throughout to transferable skills in the study of management. This book is a core text for the CIOB level 2 module on management, as well as BTEC HNC/D building studies and degree courses in building, construction management and surveying.

Part One
Foundations of management

1
An overview

Introduction

‘Management’ has an extremely broad practical application. It can include anything from handling a discontented bricklayer on site, to the planning of the multi-million pound capital budget of a major client. It is, of course, unrealistic to expect that the same person will carry out both functions, as they require very different skills. This gives some idea of the required breadth of a book designed to contribute to the education of managers in the construction industry.

The purpose of this book is to make a contribution by examining the principal concepts which inform management in general and are applied to the construction industry in particular. It is pitched at an intermediate level, that is, it assumes a basic technological, economic and legal knowledge. It is designed to form a basis for additional education and training appropriate to whatever aspects of management the reader aspires.

Management in society

Management has become one of the key words in society, with its use suggesting importance. Hardly a new concept or service is introduced these days without ‘management’ appearing somewhere in its label — total quality management and the management of change being but two examples.

Agreeing on a definition of the meaning of management is probably impossible since each individual will adapt the word to fit his or her own usage. Thus ‘management’ may be used to describe a complicated technological process, or it may be used to add weight to a much more straightforward process.

The implication is that the study of management cannot be objective, and although there are general principles which can be discussed, it is unlikely that a universal scheme can be devised which sets out the best way to manage.

The multi-disciplinary nature of management

Management is not a well-defined or single discipline in the sense that many academic subjects are. Instead it is best thought of as an area of interest which brings together aspects of many disciplines. Thus the study of management is informed by economics, sociology, psychology, engineering, law, statistics, and so on. Writers from all of these disciplines have made a contribution to the understanding of management.

The study of the subject of management is only part of the requirements needed to equip the reader to be a manager. Additional training programmes will be necessary, preferably undertaken throughout the working life, which develop the practical skills necessary to carry out management tasks, including the examples mentioned above — handling a discontented bricklayer on site, or planning the multi-million pound capital budget of a major client.

The meaning of management as used in this book

It will be apparent that since any organisation needs to be managed whatever its objectives, so management as a subject aspires to a degree of universality. This book is primarily concerned with management in the construction industry where most organisations are of a commercial nature, driven by economic objectives such as the need to make a profit. Commercial organisations of this kind are normally referred to as ‘firms’ in strict economic terminology, whereas management literature normally uses the term ‘organisation’ to emphasise the universal application of management principles. For the purpose of this book, the terms can be regarded as interchangeable, and although the main emphasis will be on commercial organisations, this will not preclude consideration of different organisations, or other objectives.

Outline of contents

As aforementioned, this book is a study of management as appropriate to the construction industry. It is designed as an intermediate treatment, building on relevant disciplines, and forming a basis for more advanced studies in specific areas. However, although the construction industry forms the principal context, to enhance the general applicability and transferable skills element of many of the principles, contexts of other industries and of the economy generally will be included.

Because of the wide-ranging content of the book, its relationship to other publications is extremely important. As well as references within the body of the chapters, there will also be guidance on further reading at the end of each chapter.

The main part of this chapter will provide an overview of the content of the book, drawing attention to the main principles to be examined. Following this, there will be a general guide to further reading in the study of management. The book is organised in four parts:

• Foundations of management
• Functions of management
• Human aspects of management
• Management applied to the construction industry.

Foundations Of management

The seven chapters which form this part will identify key topics, particularly as they relate to commercial organisations. Many of the principles introduced in these chapters will form the theoretical basis of subsequent work.

Chapter 2 explores management perspectives, and recognises that it is difficult to be objective. There is no single view of management, or indeed of any of the social sciences. Historically, a variety of perspectives or schools of thought have developed. In management literature there are several, including ‘Scientific Management’, ‘Human Relations’, ‘Bureaucratic’, and ‘Systems’. Industrial relations literature refers to ‘Unitary’, ‘Pluralist’ and ‘Radical’ perspectives, while economic commentators refer to ‘Monetarist’, ‘Keynesian’ and ‘Radical’ schools of thought. The purpose of this chapter is to explain the various perspectives — to show their similarities and differences. According to the perspective held by individual managers, different solutions may be implemented for a given management problem.

Chapter 3 examines the objectives of organisations. All organisations have the overriding need to survive. In the context of the commercial organisation, this can be translated into measurable objectives such as short-term liquidity to maintain cash flow, and long-term profitability for re-investment and growth. This will be explained in the context of construction organisations through an examination of revenue and costs, and by reference to the payments chain in construction projects. Beyond these basic requirements, individual organisations will vary in their objectives according to the perspectives of those in the organisation, and whether it is a private or public limited company. Some of the different types of construction organisation will be considered within the context of the changing structure of the industry.

Chapter 4 considers the external influences on organisations. Two major sets of external influences are market forces and public policy. Organisations have multiple market relationships, for example, as buyer of resources such as labour, materials, plant, subcontractors; and as seller of products such as houses, and the services of consultants. Capital must also be acquired through financial markets. Therefore the nature of competition and market strength must be considered, along with the plethora of commercial and contractual relationships found in the construction industry. An organisation’s market position can greatly influence the achievement of objectives such as liquidity and profitability. Public policy on economic and legal matters can have a major impact on the management of organisations. This may occur in a general way through interest rates, or changes to employment or company law. Or it may have a more specific effect, say through health and safety legislation pertaining to construction.

Chapter 5 concerns internal influences within organisations. There has always been considerable debate on the extent to which all within an organisation share a common set of objectives. The debate often concerns matters of ownership and control, and is a reflection of the perspectives adopted, as discussed in Chapter 2. Among the matters to be considered are: whether there is a separation between ownership and control, and whether it matters; whether the task of management is to satisfy the needs of shareholders only, or some wider range of ‘stakeholders’; whether there is inherent conflict between managers and other employees. This will enable an assessment of management in the organisation, and will be an important prerequisite for considering organisational structures in Chapter 7.

Chapter 6 concerns financial structures of organisations. An important requirement is to obtain sources of finance appropriate for particular uses. Short-term finance is required to provide working capital to maintain liquidity, while long-term finance is needed to invest in assets which form the basis for profitability. Organisational objectives and performance are often expressed in financial terms, for example through the balance sheet; profit and loss account; source and application of funds statements.

Chapter 7 examines organisational structures. Early studies of organisations were based on ideas such as bureaucracy — not a very appealing term, but a model to which many organisations still conform. The way in which an organisation’s activities are structured vary according to a wide range of factors such as the type of industry, range of work, geographical dispersion, and how managers perceive organisational objectives will best be achieved. Consideration will be given to centralised and de-centralised structures; those based on functional department, and on multi-divisional structures. This chapter will also discuss matters such as hierarchies, spans of control, and communication within the organisation.

Functions of management

The five chapters which form this part will consider the various functions to be undertaken in managing the organisation, including marketing, production, finance and personnel.

Chapter 8 examines processes of management, and begins to study in more detail the practical aspects of the management role. This chapter is intended as a basis for Chapters 9–12. Management functions can be considered from the perspective of fulfilling organisational objectives, for example by increasing revenue and/or reducing costs, to improve profits. However, the traditional starting point for this topic is the work of Fayol, and his well-known list of management processes. This contrasts with the approach taken in Chapter 13 which instead considers what managers actually do, and how they spend their time. In addition, it is important to distinguish between general and project management, a classification particularly relevant to the construction industry.

Chapter 9 considers marketing management, one of the main purposes of which is to increase revenue and hence profit. It is usually argued that the contemporary firm is market orientated rather than production or operations orientated. This chapter includes a study of the main elements of marketing management, the organisation of the marketing function, plus what is known as the marketing mix — which products should be produced and for whom; what price should be charged; how the products should be promoted and distributed.

Chapter 10 concerns production management. Production creates the wealth of society by adding value to resources. For the firm, a major element of production management is the control of costs. The key to production management is the study of productivity, which is essentially a study of the efficiency of production. Consideration needs to be given to technological and social factors which influence production. A useful way of understanding production management is to note how it has developed over the years through the influence of the various schools of thought. This chapter will also examine some contemporary issues such as the influence of Japanese methods. In particular, ideas such as ‘just-in-time” and ‘total quality management’will be considered.

Chapter 11 concerns financial management. It was shown, in Chapter 6, how financial statements can be used to assess an organisation’s performance. This chapter will further study the interpretation of these accounts, through financial ratios. Consideration will be given to the ROCE (return on capital employed) pyramid, which enables profitability to be analysed into profit margin and rate of asset turnover. Thus the financial structure and strength of organisations in different industries may be assessed. The apparent vulnerability of building contractors to cash flow crises is of particular interest. This chapter also considers financial planning and control, including the setting of different types of budget. An essential element of financial management is an analysis of costs, particularly the distinction between fixed and variable costs. This forms the basis for various management accounting techniques such as marginal costing, break-even ana...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Preface
• Acknowledgements
• PART ONE: FOUNDATIONS OF MANAGEMENT
• PART TWO: FUNCTIONS OF MANAGEMENT
• PART THREE: HUMAN ASPECTS OF MANAGEMENT
• PART FOUR: MANAGEMENT APPLIED TO THE CONSTRUCTION INDUSTRY
• Bibliography
• Index