JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000 / 43
PEER-REVIEWED PAPER: SPECIAL ISSUE ON GLOBALIZATION
CONSTRUCTION BUSINESS COMPETITIVENESS AND
GLOBAL BENCHMARKING
By Ali Jaafari1
ABSTRACT: The focus of this paper is on developing ‘‘quality’’ and sustainable construction
businesses capable of riding market shifts and growing both nationally and internationally.
Knowledge of current management tools and techniques will no doubt prove useful in the
quest for transforming a nonperforming business. However, no long lasting effect can be
expected unless attention is paid to the fundamental principles and practices that govern
organizational behavior, including the views an organization has of its customers, competitors,
and itself. Commercial performance of organizations has increasingly become not only dependent on resource efficiency, but also on retooling and aggressive new business development
initiatives as well as reduction in base production and operational costs. The human factors
and mental models that people have within any given organization profoundly affect the
success or failure of that organization. In this paper a critical review of the current concepts
and techniques influencing construction organizations is offered with a focus on people and
organizational improvements. A set of critical success factors is then distilled, followed by a
systematic process of applying the same to achieve success.
INTRODUCTION
How do you transform the construction industry from
a fragmented and poorly organized industry to a fully
streamlined and globalized industry that can competitively meet the needs of construction customers globally? The answer that many governments and owners
around the world had in 1988–1995 was simple, force
it to work under the newly released ISO 9000’s quality
assurance (QA) standards. The adoption of QA standards
worldwide was a manifestation of the belief that managing the delivery process would ensure a quality outcome (i.e., constructed facilities that meet the needs of
owners and users) regardless of where the project was
taking place and the culture and traditions under which
construction projects were being executed. The QA
move was followed by the introduction of total quality
management (TQM) and a whole host of other managerial concepts such as strategic planning, business process reengineering (BPR), benchmarking, and learning
organizations.
The emphasis in TQM, BPR, and benchmarking is not
1Assoc. Prof. and Discipline Leader, Proj. Mgmt. Programme,
Dept. of Civ. Engrg., Univ. of Sydney, New South Wales 2006, Australia. E-mail: [email protected]
Note. Discussion open until May 1, 2001. To extend the closing
date one month, a written request must be filed with the ASCE Manager of Journals. The manuscript for this paper was submitted for
review and possible publication on February 10, 2000. This paper is
part of the Journal of Management in Engineering, Vol. 16, No. 6,
November/December, 2000. qASCE, ISSN 0742-597X/00/0006-
0043–0053/$8.00 1 $.50 per page. Paper No. 22179.
only on meeting contractual obligations or customer requirements, but also doing this while continuously
achieving a lower production cost or reducing product
cycle time, or both, thus positively affecting the construction contractor’s profitability. As seen, the focus is
shifted from project quality management to construction
organization performance. Improving the company’s
competitiveness and its commercial success will thus
feature prominently.
This paper will examine the development, relevance,
and application of the various philosophies and techniques to construction businesses seeking to globalize
their operations and maintain international competitiveness.
QUALITY MANAGEMENT
Quality management is a commonly used term for
managing the process under which a QA contract is administered. It also is applied to the operation of a business unit. The QA contract binds both supplier and purchaser to discharge their obligations in accordance with
the ISO 9000 series. At project and construction levels
there are several misunderstandings that must first be
addressed (Jaafari 1990, 1994, 1996; Jaafari et al. 1994,
1995; Buta and Karakhanis 1996):
• The adoption of ISO 9000’s standards by owners
will not necessarily assure facility performance and
fitness for purpose, as the standards basically deal
with defects reduction and regulate the process un
44 / JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000
der which the contractual obligations of the parties
are discharged.
• Facility quality/performance (fitness for purpose) is
not even covered by adopting a QA approach to
the work done by designers, as their duty is to design a facility to the relevant client’s brief in compliance with the relevant statutory requirements.
• The current practice for ‘‘assuring quality’’ has
been to apply quality control to the relevant construction processes to ensure these will meet contractual requirements. This practice is not a costeffective means of assuring quality.
• The construction industry has tended to confuse
QA and TQM, believing that compliance with QA
standards is basically all that there is to the application of TQM on construction projects.
The most important message, however, is the fact that
the imposition of QA standards has not necessarily improved the construction industry’s capabilities to meet
the needs of its customers more cost effectively nor has
it led to any product cycle time reduction or cost savings
(Jaafari 1990, 1994, 1996; Jaafari et al. 1994, 1995; Buta
and Karakhanis 1996).
The basic tenet behind the application of ISO 9000’s
standards is that developing and applying QA procedures
to the processes under which a purchase order is supposed to be delivered will give confidence to the purchaser that the products and deliverables will be as per
those specified in the relevant purchase order documents.
The QA standards strictly regulate the purchaser-supplier
relationship. The problem lies in the fact that, in construction, often the required facility cannot be defined
well in advance, the client’s brief may contain insufficient information or, as is often the case, the facility
definition and design evolve as the project progresses
over time and as more information comes to hand. More
often than not, a client does not normally buy a facility
straight from a single supplier but enters into a series of
contracts for the provision of services independently
with a number of suppliers. A single QA scheme to govern all the relevant supplies of goods and services on a
given project would thus be useful. This is not customary
in the construction industry due to diffusion of responsibilities and dispersion of knowledge and expert resources among diverse professional firms. This is particularly typical on large projects where international
procurement is nowadays the norm.
Studies have shown massive confusion surrounding
the application of QA standards and excessive costs
borne by the industry for no appreciable gain in quality
(Jaafari et al. 1994; Buta and Karakhanis 1996; Jaafari
1996). So the initial expectations of governments and
owners that forcing the industry to follow QA standards
will make it more efficient and customer focused has not
generally turned out to be true. Change has come from
an unexpected front—opening up of markets and globalization of construction businesses. These are making
waves across the world. Owners and governments no
longer feel obliged to put up with inefficient businesses
if they can employ the best of the best. To survive these
dynamics, construction businesses need to reinvent
themselves to be a lot more market driven and customer
focused.
TQM
The term TQM is commonly associated with meeting
or exceeding customer requirements in a cost-effective
manner. It has a major emphasis on building a feedback
loop to capture process information for continuous improvement and reduction in production costs. Although
many writers and practitioners refer to TQM techniques
[e.g., the seven tools of TQM in McConnell (1986)], the
reality is that it is more of a managerial mind-set and a
way of approaching anything that an organization does.
For an individual contractor, the major challenge lies in
the integration of the supply chains on projects that it
undertakes and alignment of its entire business practices
with the strategic needs of the relevant client/customer
organizations. Viewed as the latter and as a means of
improving the performance of an organization in its totality, it will have useful ramifications for construction
organizations. Taken in isolation from the total picture,
it is of little value to construction organizations that are
already burdened with quite complex bureaucratic procedures to prequalify, tender for, implement, and administer construction orders.
The concept of TQM and its emphasis on continuous
orderly improvement is particularly suited to manufacturing and similar operations where the production cycle
is repetitive and one is able to establish a feedback loop,
study the operation, and apply incremental beneficial adjustments. In construction, indirect learning and transfer
of knowledge from one project to the next may work
well, particularly at the time of construction master planning, integration of design and construction, and broad
balancing of the construction sequence. At a given project site with a given workforce, once construction gets
underway, the opportunity to apply TQM principles is
normally limited due to the fact that construction operations are typically short lived, diverse, and subject to
situational limiting factors and statutory requirements.
At the worker or task level, provided that the workforce is properly trained and empowered, each worker
should be able to act as his/her own inspector and learn
to get smarter as he/she builds up experience. Much of
the construction is still planned in detail at the time of
execution by the rank and file of the workforce. The
knowledge held at this level of construction organization
is generally untamed and poorly used. So worker participation in the planning of construction operations should
be promoted as part of the TQM approach. Evidence
from numerous field studies suggests that this is not happening (Jaafari et al. 1995; Jaafari 1996).
However, the true potential from the application of
TQM can only be realized if the focus is shifted to the
broader picture (i.e., the total business system and associated procedures under which projects are conceived,
designed, procured, and delivered, not just the work at
JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000 / 45
FIG. 1. TQM and BPR Impacts on Business Units
site level or the head office of a single player). Going a
step further, it is imperative to work backward from the
strategic objectives of the client organizations and reengineer the whole system (i.e., to apply TQM to a line of
projects) in an attempt to look at how the customer’s
strategic objectives can be delivered more efficiently and
effectively.
Under this philosophy, each time a contractor executes
a project, it will try to systematically capture information
on all the relevant processes that were used on the project, identify areas of waste (particularly in administrative
processes), examine synergy between entire activities
along the project life cycle, chart and examine communication processes with clients, look at the procurement
and supply chain management, etc. The information so
captured will then be examined strategically and used to
strengthen the contractor’s business practices for improved competitiveness. Such an approach to construction business management requires a substantial mindshift, which is not easy to come by (Jaafari 1997). There
are additional problems of the diversity of the line of
projects and services that a contractor typically handles
and the very long-term view that this approach necessitates. Project environments tend to be unique and affected by external forces.
BPR
The concept of BPR commenced life at about the
same time that TQM was gaining popularity in the early
1990s. In fact many TQM followers thought of BPR as
a step in the TQM process, whereas others saw it in a
different light, believing that there comes a time when
TQM and continuous improvement will reach a limit and
at that juncture it is necessary to deploy the BPR methodology to redesign the entire product (or service) cycle.
This school of thought considers BPR as a means of
achieving paradigm shifts. A third group believes that
BPR and TQM go hand in hand, the former defines/
designs the process, the latter makes sure that over time
it will deliver its promised efficiencies and productivities
through continuous adjustment and improvements as the
operators get to learn more about the new process and
put their experience to use. As seen from Fig. 1, TQM
and BPR affect a business unit in different ways, so these
techniques should not be confused with one another.
A study of the origins of BPR shows that it was not
intended to be a step in the TQM approach (Hammer
1990) nor a prelude to implementing TQM. In other
words, BPR is a fundamental and radical approach to
process redesign in terms of meeting customer demands
on such characteristics as cost, quality, service, and
speed (Hammer and Champy 1993). A generalized approach involving five steps was developed by Davenport
and Short (1990):
• Develop business vision and process objectives
(prioritize objectives and set stretch targets).
• Identify processes to be redesigned (identify critical or bottleneck processes).
• Understand and measure existing processes (identify current problems and set baseline).
• Identify information technology (IT) levers (brainstorm new process approaches).
• Design and build a prototype of the process (implement organizational and technical aspects).
Davenport and Short (1990) believed that, unless strategic vision and direction are clearly stated, process redesign by itself would not be successful. The strategic
vision and direction will translate into quite specific process objectives, such as cost reduction, time reduction,
output quality, and quality of work life (including learning and empowerment). Hammer and Champy (1993)
have provided nine characteristics for reengineered business processes: (1) Several jobs are combined into one;
(2) workers make decisions; (3) steps in the process are
performed in a natural order; (4) processes have multiple
versions; (5) work is performed where it makes the most
sense; (6) checks and controls are reduced; (7) reconciliation is minimized; (8) a case manager provides a single
point of contact; and (9) hybrid centralized/decentralized
operations are common. These characteristics are not always applicable to all processes.
McKinsey and Company (Hall et al. 1993) studied
over 100 companies that had reengineered processes and
found that, although the process unit time and cost were
significantly reduced, the business unit costs had in
46 / JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000
TABLE 1. Characteristics of Benchmarking (McNair and
Liebfried 1992)

creased and profits declined. The study group found that
success was dependent on the following factors: setting
an aggressive and broad performance target; strong commitment from senior managers, including significant investment of time and resources by the CEO; need to
conduct a comprehensive audit of customer needs to
benchmark against competitors, and to analyze the best
practice in other industries and perform economic modeling of the business; and assignment of a dedicated senior executive to oversee the BPR implementation and to
test the feasibility and viability of the proposed new process, via pilot testing and refinement, beforehand.
The BPR movement has had little impact on the construction industry to date. Love and Li (1998) stated that
‘‘BPR is currently seen as a change mechanism for permanent organizations and much more difficult to apply
to project organizations where there are competing and
diverging business practices, cultures, structures and
technologies.’’ Kagioglou et al. (1999) described an attempt in the United Kingdom to develop a generic design and construction process control model, with the
participation of a few local construction firms. They reported progress made so far on a publicly funded research project, whose premise is that construction is a
special case of manufacturing and it should be possible
to apply the advances made in the manufacturing industries to construction.
Many construction management writers are skeptical
about the BPR application to construction projects. For
example, Loosemore (1999) questioned the applicability
of BPR generally and its relevance to construction in
particular.
There is little cynicism in the construction industry,
where academics and managers appear to have been
swept along by the euphoria which has accompanied the
latest wave of management fads, showing uncritical perspective towards them and a blind enthusiasm to experiment with new ideas that often have dubious records
and offer questionable results (Green 1998). Green’s arguments suggest that the ‘‘groupthink’’ phenomenon
may be at work and indeed, trendy techniques such as
benchmarking, value engineering, partnering, re-engineering, TQM and most recently, lean construction, being hailed as the way forward in the face of declining
profitability, increasing global competition and poor performance. In the UK, the momentum to accept these
ideas has been fuelled by influential government sponsored reports such as Latham (1994) and Egan (1998),
which use similarly emotive and rhetorical language to
that which characterizes much of the trendy literature.
de Valence (1999) reviewed the push in the Australian
construction industry for government directed reform.
He views the construction industry as being long overdue for taking up radical reforms such as BPR. This view
is a misunderstanding of the nature of this complex industry. It has been shown that, at least in the short term,
government enforced reforms have paid little, if any, dividends (Lansley 1983; Jaafari 1996).
WHAT IS BENCHMARKING?
Benchmarking aims to develop internal processes and
practices of a company to that of best practice status as
measured by comparison with leading companies in the
field or in other fields. According to McNair and Liebfried (1992), the objective of benchmarking is to enable
a company to identify opportunities for improvement
and proactively direct efforts to become the best of the
best. Table 1 is based on McNair and Liebfried (1992)
and illustrates benchmarking.
Benchmarking has had a more successful reception in
business and commerce, because it focuses on strategic
thinking and gradual learning, not on a radical reengineering of the business. By comparing with external
leaders, gaps in an organization’s performance can be
found and improved via the application in a planned
fashion of continuous improvement at each part of the
organization. It also aims at taking the interests of all
stakeholders (including the employees) into account, not
just focusing on a ruthless push for efficiency.
The most difficult aspect is how to define best practice
and achieve interorganizational comparison. Best practice is really a moving target. In the construction industry, where project orders are highly diverse, the best
practice is also dependent on the unique characteristics
of a project under consideration, including the project
environment, owner expectations, and other situational
variables. Even at operation level (for example excavation or piling), there are multiple best practices depending on many specific factors.
Gilmour and Hunt (1995) reported the application of
benchmarking to a heavy engineering firm in Australia,
which established 11 project areas for improvement:
• Award restructuring—to enable development of a
multiskilled workforce that will be flexible and
willing to learn continuously, with supervisors taking the role of trainers and facilitators
JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000 / 47
• Work organization—formation of work-team based
organizational structures and simplification of work
processes
• Job design—new ‘‘job models’’ to generate skillsbased career paths
• Skills analysis and development of training plans
• Quality measurement systems—revision of previous quality efforts that included the achievement
of ISO 9001, implementation of a quality management system
• Manufacturing resource planning—installation of
closed-loop MRPII
• Information technology—selection and planned
implementation of suitable software and hardware
solutions
• Engineering design skills—an expansion of the
computer-aided design and drafting facilities
• Product development—new customer-focused specialist designs
• Performance measurement and strategic planning
—review of current measures and development of
additional measures to capture the real issues relevant to productivity and quality
• Benchmarking
The above approach embraces all facets of an organization, not just singling out one process for improvement. As seen, the human factor features strongly in this
approach. Most of the information on best practice in
this case came from the company’s trading partners. A
delegation from the company visited numerous other operations at home and overseas to establish its performance gaps. This was not an easy exercise and entailed
a considerable expense supported by a grant from the
Australian government. One of the drawbacks in benchmarking is the tendency to fall into the trap of popular
politics and blindly follow trendy managers or popular
management literature. Another drawback is the tendency to just look within the industry sector, whether
local or international. Perhaps, it is more beneficial to
look across other industry sectors and then, rather than
imitating the subject practice, attempt to adopt the underlying principles in a judicious way.
Benchmarking is of course a complex task; the answer
that it provides very much depends on the characteristics
evaluated. Segev (1997) used 28 variables to assess
where an organizational unit is relative to its competitors. These variables are strategically divided into six
groups:
• Business unit’s environment
• Content of the strategy
• Strategy-making process
• Unit’s organizational structure
• Unit’s performance
• Unit’s basic characteristics
Segev (1997) defined a series of indicators for evaluating each of the aforementioned 28 variables. These
indicators are used to determine a numeric value for each
variable (in percentage points and from a scale of 0 for
worst practice to 100 for best practice) at a given juncture relative to the industry average and leader. The industry average performance is assigned 50, and the industry leader is assigned 100. Depending on the business
sector and type of organization, a weight also may be
assigned to a variable. Upon evaluation of all the variables, computer software is used to plot the given business unit’s position relative to its competitors.
The next step is to apply one of the commonly referenced typologies, such as the ‘‘competing generic approach’’ for determining where the unit is relative to the
models described in each typology (Segev has included
eight typologies in his methodology). For example, the
competing generic approach developed by Porter (1985)
(Segev 1997), defines five strategic models: ‘‘cost leadership,’’ ‘‘differentiation,’’ ‘‘focus costs,’’ ‘‘focus differentiation,’’ and ‘‘stuck in the middle.’’ The software developed by Segev (1997) permits plotting the unit’s
position versus these strategic models. The resultant information may be used to learn where the organization
is heading and decide if change of direction/strategy is
necessary, for example, from a cost leader to that of differentiation. These studies are a useful means of understanding the strategic position that the unit has at a given
time and for charting a strategic direction for its future
[see Segev (1997) for details].
When combined with strategic planning, the use of
benchmarking can be useful. Case studies conducted by
Edum-Fotwe and McCaffer (1999) illustrated the practical application of benchmarking to construction organizations in Europe.
LEARNING ORGANIZATION
There is no doubt that construction organizations will
need to become learning organizations to remain competitive. This is because of the following:
• Construction is a technology-based business, and
innovation is the key to remaining competitive.
• Construction orders are diverse, and continuous innovations in the delivery and management of such
orders are essential for remaining competitive.
• In reality, climbing to the top rank and maintaining
one’s position requires learning ahead of one’s
competitors.
Learning can be from past failures or successes, and
it can be achieved by systematically capturing and analyzing any item of information deemed relevant to the
organization’s business. Senge (1992) offered five components for a system’s perspective for creating a learning
organization:
• Systems thinking—to consider a holistic approach
to analyzing and affecting ‘‘patterns’’
• Personal mastery—a desire to continue to master
one’s discipline
• Mental models—people have ingrained views of
48 / JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000
FIG. 3. Organization Structure for Management by Projects
FIG. 2. Components of Quality Organization (Gilmour and Hunt 1995)
the reality that affects their perceptions and behaviors so, to change an organization, these models
need to be changed
• Building shared vision—to motivate members of
an organization for continuous learning, a shared
vision for the future must be created first
• Team learning—applying ‘‘dialogue’’ to create an
environment conducive to team learning
According to Love et al. (1999), the learning organization outcomes include
• Learning becomes a continuous process
• Shared vision among employees
• Learning from failure
• Change is recognized as an ongoing process
• New knowledge is transferred throughout the organization
• Individuals are encouraged to develop personal vision
As a concept, learning organization is not new. Jaafari
and Schub (1990) showed that organizations have been
sensitive to management of technical and technological
risks in line with an increase in project complexity.
Many large engineering and construction organizations
have firm policies and procedures for learning, sharing
of knowledge, and operational improvements.
COMPONENTS OF QUALITY ORGANIZATION
Gilmour and Hunt (1995) stated that the components
of an integrated approach to creating a quality organization include customers, processes, suppliers, leadership, empowerment, measurement, training or preferable
education, information technology, and strategy. Fig. 2
shows the components of an integrated quality organization.
The integrated quality organization is essentially built
around the premise that there will be regular lines of
products, for each of which one can identify a process.
The entire company is then reorganized around the processes, including streamlining the production from a
value chain perspective to maintain competitiveness
(Porter 1985). The value chain perspective seeks to create complete synchronization of inbound and outbound
logistics and corporate and support processes (including
marketing, sales, postproduction servicing, etc.) with the
main production processes that go into creating the line
of products the company delivers to its customers. In the
construction industry, this translates into a fully projectbased organization at regional or headquarter level to
support project operations (Fig. 3).
Although synchronization at the organizational level
is a prerequisite to achieving business efficiency and customer satisfaction, by itself it is not enough. Success also
will depend on an effective integration of suppliers, processes, and customers (Fig. 2). This is the greatest challenge facing the construction industry as a whole (in
JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000 / 49
cluding the client bodies) and suppliers, as the industry
is characterized by a diffused supply chain. Seeing customer satisfaction is not so much in terms of the immediate fulfillment of contractual obligations, as important as these are, but in terms of the facility’s life-time
performance and how well it fulfills the strategic objectives of the customer or users concerned [i.e., concentrating on the unique selling propositions of the product
(the product is the required constructed facility in this
case)].
At an individual organizational level (e.g., construction firm), the following will be worth noting:
• Suppliers—Include both on-site and off-site subcontractors, consultants, equipment manufacturers,
materials and components suppliers, plant hire
companies, etc.
• Processes—Include not just construction processes
that are conducted on a client’s site, but also the
head office processes to facilitate planning and
winning new construction orders as well as logistics, corporate services, human resources management, etc., supplying and supporting the company’s
operations.
• Customers—Include not only the clients who place
an order for new facilities or extensions, but also
the other parties in the construction process. However, it may be necessary to include a broader perspective to include the stakeholders in each case,
such as the end users, financiers, host community,
and relevant government agencies.
Compared to manufacturing, there is no definitive
product line in construction (at least in the sense that
exists in manufacturing or unless one calls a finished
facility a product) that hinders reengineering the relevant
processes around the product cycle time and value chain.
Typically a construction company offers an amazing array of services and takes on quite a diverse range of
projects and operations within a wide geographical area.
This can be both blessing and curse. The blessing side
stems from the competitive advantage that can be gained
by being totally market driven and responding to what
the customer wants. This brings the opportunity to keep
a lean organization and seek outsourcing for the resources required to respond to business peaks. The trouble is that nearly all companies go smart and operate this
way without a longer-term perspective of the required
capabilities for future market competitiveness.
The curse stems from the uncertainty in not knowing
exactly what the customer wants over a reasonable time
frame, which prevents the company from making appropriate investments around a definitive line of products.
Many large companies, having a higher overhead burden, are at a competitive disadvantage, costwise, when
compared to small- to medium-size companies. Their
competitive advantage is not in the total assets they control or in their production equipment. It comes from their
managerial capabilities, core human resources, value engineering skills, use of innovative solutions, systems and
infrastructure, ability to accept and manage facility delivery or performance risks, and ability to respond to
complex statutory requirements, such as those frequently
found on nuclear power stations.
WHICH APPROACH TO TAKE?
The thesis put forward here following the brief study
of the above management concepts and techniques is
that, without strategic direction, strong focus on leadership, and engagement of human resources, not much
progress can be made even through the application of
benchmarking. Also, in the construction industry, there
will always be a diversity of organizations and business
methods in response to diverse business requirements.
So success is generally not how well a particular organization emulates the industry leader, but how well that
organization is placed to meet the customers’ needs in
the niche market it occupies (or aspires to occupy). The
approach advocated is to understand what the underlying
critical success factors (CSFs) are initially and then to
attempt to synthesize a solution that fits the organization
under consideration. This solution will have to be
broadly defined and applied within a strategic framework
and in a culturally sensitive and commercially prudent
manner.
Tools and techniques can then be redesigned to suit
construction and applied to measure performance in a
way that allows human discretion above all the process
reengineering directives. The emphasis must also be on
value maximization to the stakeholders, not just shortterm financial gains. The so-called reengineered processes may work for a short period, but if people are not
committed to them or the organization ends up being too
lean in terms of capacity to think and create the future,
or too weak in terms of capability to accommodate business fluctuations, the gains will quickly turn into losses
and result in many disillusioned people.
The other major philosophical point is that of considering when the organization has arrived at its destination.
Really creating a ‘‘quality’’ competitive organization is
a journey, not a destination. Goals are shifting targets,
the environment is dynamic, and competition is global.
To survive and prosper, one must attempt to inspire and
coalesce the entire organization and its human resources.
CSFs
The following CSFs determine success in building a
long-lasting construction business: leadership, strategy
and empowerment, organizational factors, training or
preferable education, creativity, proactive management,
IT, and performance measurement/benchmarking. These
are considered below.
Leadership, Strategy, and Empowerment
Leadership (within a strategic framework) seeks to lay
the foundation for the transformation of the construction
organization, particularly in relation to the creation of a
culture for continuous improvement and customer/market focus. It also seeks to create conditions where the
50 / JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000
workforce will be empowered to the extent that workers
at all levels of the organization will find it their mission
to improve the business and satisfy customer requirements. The ultimate test of customer satisfaction must
relate to how well a given service or facility will fulfill
the business needs of end users and how well the stakeholders’ interests are satisfied. This type of perspective
creates a base value that serves the business and strategic
needs of the customers on a competitive basis while satisfying the stakeholders’ interest. The following are the
leadership levers in this quest:
• Development of a supportive environment providing respect for and tolerance of the diversity of
cultural values and beliefs
• Cultivation and maintenance of the right attitude to
collaboration and teamwork
• Creation of a shared vision, emphasizing teamwork
• Recognition and inclusion of the customers’ needs
• Recognition and inclusion of long-term business
goals
• Recognition and inclusion of the community, governments, and other stakeholders
• Open and responsible approach to the management
of community interests
• Effective communication goals, resources, processes, and monitoring to ensure desired outcome
Organizational Factors
This important CSF relates to the organization of a
given construction company. It is based on the premise
that construction organizations must develop a management-by-project strategy and related organizational
structures (Fig. 3). Under this approach the so-called
functional silos are dismantled and replaced with area/
project teams. The selection and assignment of resources
to projects and operations will be based on competencies
(who is best for the project or operation) not seniority.
Outsourcing, networking, alliances, and strategic partnerships are forged to further strengthen the organization’s competitive advantages. The administrative procedures are simplified and communication made direct.
The entire organization is thus restructured to fit in with
its clients’ strategic objectives. The following are the enablers in the quest for creating a project-oriented organizational structure:
• Firm, but flat, management structure (organized
along resource and core businesses) providing for
single point of authority-responsibility (virtual absence of functional structures)
• Formation of work-area teams at production front,
with team leaders acting as frontline managers
(work-area teams are formed of the relevant technical, managerial, and skilled workers in response
to the scope of work in each area)
• Development, installation, and maintenance of an
effective and efficient communication system
• Placing customers at the top of the organization,
followed by work-area teams, which are in turn
supported by project and construction managers—
under this strategy, the managers are assuming
more of a mentor/facilitator role, leaving the production and quality management decisions to the
frontline managers and work-area teams that work
closely with client representatives.
Training or Preferable Education
Training and education are at the heart of success in
any innovation that involves human factors (Jaafari and
Schub 1990; Jaafari 1996). In terms of creating a competitive construction business, there are two aspects of
training and education that need consideration:
• General education, skills, and attitude
• Specific training for specific purposes
General education is within the domain of the education system that supplies the skilled and trained workforce to the whole of industry. It is normally beyond the
responsibility of an individual organization to educate
the workforce in general terms. This is the responsibility
of the universities, technical and vocational colleges,
trade schools, and apprenticeship schemes.
Specific training, on the other hand, is for achieving
the desired understanding or high level skills and seeks
to align and develop individuals to the extent necessary
to create a dynamic and responsive organization. Successful organizations take special care in recruiting and
developing their core people. Once inside an organization, they are continuously encouraged to develop further, both at an individual skill level and for organizational synergy. Investment in developing core people is
seldom wasted.
At the project level, it has been shown that project
specific training is needed to form work-area teams and
empower the workforce (Jaafari 1996). It also is needed
for management of safety, environmental, and other statutory requirements. When dealing with complex construction technologies, prior piloting or mock construction is found most beneficial in achieving a quality
outcome.
Creativity
Creativity in construction relates to the creation and
inclusion of innovative solutions and embraces the following factors:
• Recognize that innovation is not only about technical and technological solutions, but also about
managerial and social innovations integrated with
technical and technological solutions.
• Recognize that construction is a technology-based
business, which utilizes different levels of technology to respond to diverse construction orders and
client requirements. The road to competitiveness is
to seek innovative solutions that can deliver value
to the diverse range of services that construction
customers typically demand.
• Recognize that construction is different from man
JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000 / 51
ufacturing and improvements are normally achieved
via the indirect transfer of expertise or extending
workable solutions from one project to the next
(thus knowledge development, adaptation, integration, and application are vital skills in crafting successful businesses).
• Preconstruction time is vital in the development of
optimum/competitive integrated solutions, embodying unique selling propositions with respect to
overall business arrangements, design and construction methods, implementation strategies, finance, and service life or maintenance warranties
to meet specific customer requirements.
• Include the interests and requirements of the stakeholders in the planning process alongside technical
and construction issues. Attempts to integrate and
optimize the total requirements of owners and
stakeholders should thus be pursued.
• Allow the workforce to participate in the generation of cost-effective solutions and optimum construction methods.
• Recognize that optimum methods will often
emerge from collective deliberations and repeated
evaluations of the proposed methods, allowing for
continuous evolution of ideas and going through
repeated cycles of replanning and evaluations, considering the total requirements.
• Recognize that to achieve maximum creativity in
implementation, a competitive and challenging environment must be fostered (including use of
stretch targets).
• Develop means of capturing and extending the
knowledge and experience gained on past/current
projects with a view to utilizing the same effectively and creatively in future undertakings.
Proactive Management
It is important that problem anticipation and prior solution be the focus of every member of the construction
organization. This is not only important in construction
planning and project implementation, but at organizational levels where strategic decisions are made. The following list serves to illustrate the importance of this critical success factor:
• Follow Pareto’s principle and concentrate on the
major items when making decisions on projects or
organizational units.
• Emphasize milestones and go for a proactive/preventive style of management.
• Separate accounting and project monitoring systems from one another. (Accounting has an emphasis on past and accurate data capture, whereas
project monitoring has an emphasis on forecasting
future outcomes and needs approximate data on
performance and trends virtually in real time to
make the right decisions. The integration of these
systems tends to be complicated and, because functions are not the same or similar, incompatibility
will result.)
• Planning and cost estimation must reflect the local
or achievable capabilities and be realistic.
• Go for continued workforce training, with thorough preparation beforehand, and ensure the maximum safety and welfare of employees.
IT
There is widespread recognition that IT is one of the
enablers or facilitators for achieving construction business innovation and integration of the inputs from diverse contributors in a given project or organizational
unit (Davenport and Short 1990; Hammer 1990; Hammer and Champy 1993). There is no doubt that with the
use of current IT technologies it is possible to quickly
deliver the right information to project team members or
the organizational rank and file in an efficient and effective manner.
The facilitation of real-time communication and sharing of information have always been considered critical
to achieving efficiency, and this is what IT systems are
attempting to deliver. Examples include collaborative
teamwork, integration of inputs, and sharing of knowledge, training, and development. However, this potential
is not yet fully understood or captured by the bulk of
the construction industry. The real-time integration of
knowledge and expertise of diverse participants in the
planning and decision-making processes on projects and
business unit operations is being fostered by many client
organizations. Although there are examples of prudent
and effective use of IT as an integrating system, in the
eyes of the vast majority of construction organizations,
IT is synonymous with word processing, electronic
spreadsheets, simple database applications and, most recently, e-mail.
Performance Measurement and Benchmarking
The extent of progress that a construction organization
can make toward achieving its long-term goals must be
measured periodically using facts and data. Using performance indicators, it should be possible to show to
every employee and stakeholder that the organization is
making progress toward its goals. Unless the majority in
the workforce is thoroughly convinced that ‘‘their’’ organization is making progress and their contribution is
making a difference, there will be little chance that longterm goals will be met.
It is not appropriate to relate the performance to shortterm events such as quarterly reports. Short-term performance may show considerable fluctuation, which can
prove a demotivator if taken as indicative of the longterm progress of an organization. Also, it is important to
take a more comprehensive view of performance, which
is not just financial indicators. That is why benchmarking may be a good basis to consider, as it addresses the
total benefits accrued to stakeholders alongside commercial performance. The following points reinforce the
specific points to be considered in monitoring and performance measurement in the field. To be effective, performance measurement and benchmarking must:
52 / JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000
• Emphasize the results and adopt a simple and clear
reporting procedure
• Ensure that the key participants are thoroughly
briefed on the purpose and objective of control/
monitoring
• Ensure that the monitoring process is objective and
focused on finding out the facts, not tracking the
‘‘guilty’’ (i.e., the purposes of monitoring are to get
the performance compared with the plan without
hunting for the guilty party, facilitate teamwork
and maximize performance in relation to goals,
motivate and acknowledge individual contributions, and plan ahead and communicate key aspects
to the relevant parties)
• Have a continuous planning process used as the
basis for monitoring of the performance for the
control and monitoring to be effective
PROCESSES FOR REPOSITIONING
CONSTRUCTION BUSINESSES
There are many examples of successful attempts in
repositioning of organizations in a variety of industries
[see, for example, Artto and Arenius (2000), Byers and
Williams (2000), Gerrard and Fanthome (2000), and
Turner and Keegan (1999)]. An aspiring construction organization needs to apply the aforementioned CSFs judiciously through the following processes: (1) Social; (2)
strategic planning; (3) reengineering; and (4) implementation. These processes are briefly described below:
Social process. The views of the customers, suppliers, and other stakeholders in the niche market that
the organization is operating or wishes to operate must
be thoroughly researched and distilled to give a comprehensive picture of what the customers/stakeholders want
(it is important to gain a good view of the strategic direction of the customer organizations, as this should be
the basis for deciding how to design one’s services). This
process naturally involves surveying key people, noting
trends, constructing patterns, and developing insights
into the market dynamics. It is a qualitative process and
must be based on understanding the customers’ core
businesses, defining the suppliers’ positions, discovering
the limiting factors, and distilling the results in a form
that can be applied to organizational strategic planning.
Strategic planning process. This process follows
from the social process and aims at positioning the organization optimally in relation to the customers’ needs
and relevant business dynamics. The strategic planning
process and outcomes will provide a roadmap on how
the organization can achieve the necessary shift and optimally deliver the required services that satisfy the strategic needs of the customers’ organizations. Segev
(1997) defined strategy as the sum total of all measures
taken to influence the status of the six groups of variables that define the positioning of the organization relative to its competitors. As noted, these variables include
the business unit’s environment, content of the strategy,
strategy-making process, unit’s basic characteristics,
unit’s organizational structure, and unit’s performance.
Reengineering process. The purpose of the reengineering process is to develop a new organizational structure and new ways of delivering the services needed by
the customers, in harmony with the practices of the suppliers. The reengineering process is guided by the strategic plan, as the plan contains vital information on the
new paradigm that the organization wishes to operate
(e.g., changing from a functional hierarchy to a project
and resource-based structure).
Implementation process. The implementation process comprises three phases: (1) Making the organization
rank and file aware of the need to change; (2) introducing the multifaceted changes, as per the strategic and
reengineered plans (including reeducation of the workforce where warranted); and (3) monitoring and continuous improvement to allow the organization to settle
down in its new form and culture and assume a learninggrowth path.
The key to the entire repositioning approach is to create an adaptive and self-learning organization with a new
culture and focus on the strategic needs of customer organizations.
CONCLUSIONS
In this paper an attempt was made to explore the potential for the application of a range of popular management concepts and techniques for driving change and
achieving competitiveness in a globalized and dynamic
economy. Generally speaking, a more holistic and integrated approach was advocated. The tenet of this paper
is to recommend banking on people, focusing on customer needs, and attempting to strike a fair balance between the interests of all stakeholders. Emphasis should
be on creativity, not administration.
To climb to a level of international competitiveness,
construction organizations must first understand, tame,
and apply strategic planning and management principles
to drive changes in management purposefully and optimally (i.e., attempting to build a committed and sustainable business, based on business structures that are
aligned to the strategic and business goals of the respective customers and integrated with the company’s supply
chains).
The CSFs are the key to achieving success. A systematic process is needed to apply these factors objectively
to pursue change. The shift to delivering value to customers and stakeholders should be the guiding light at
all times. The reform must start within the organization
and then migrate onto projects. A long-term approach
needs long-term learning and continuous improvement.
The rank and file of the organization must acquire a new
mental model of the business and its charter and customer focus. This is not an easy task and requires continual attention. The transformation of an organization is
not a destination, but a journey.
ACKNOWLEDGMENT
The writer wishes to specifically thank Barry Ireland,
director, City Link Authority, Melbourne, for his review,
JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 2000 / 53
critique, and new insights offered on the original manuscript.
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