Organization Theory for the Management of Construction Projects

Introduction

Construction projects, be it vertical like buildings or horizontal like roads, are very much technical in scope requiring intricate details and complex processes. They are likewise relatively large in scale commanding mobilization of various organizational resources such as physical, financial, and human. Commitment of such resources must be sustained throughout the life of the projects. Construction projects employ technologies that add to the technical complexity and cost of the projects. More importantly, these projects need involvement of people from various technical backgrounds such as architecture, engineering, steelworks and woodworks, and interior design. Much coordination is expected from these people of varying technical expertise to work together and get the job done. Construction projects are necessarily high-risk investments what with the steadily increasing costs of construction supplies and materials, not to mention leasing of essential machines and equipment. Sizeable budgets are set aside to complete such projects. Construction projects take considerable time to finish because of the sheer magnitude of work that must be carried out. Work schedule is most of the time protracted. Strict adherence to it is imperative. Finally, safety is first and foremost in construction projects. Human lives are never compromised. Given all these attributes, construction projects are necessarily complex requiring a step-by-step procedure and managerial competence.
The sheer complexity of construction projects must follow a well thought-out plan with completely spelled-out procedures. This must be coupled with managerial competence to see to it that the specifications of the plan are followed to the letter. Organization theory is instructive here. Much can be learned from organization theory in terms of how to go about managing construction projects. Organization theory furnishes the needed tools and guidelines on how to carry construction projects to fruition.

Defining Organization Theory

What is organization theory? It is “the study of how organizations function and how they affect and are affected by the environment in which they operate.” (Jones: 2004, p. 8). This definition speaks of the centrality of organization theory in terms of describing what actually goes on inside and outside the organization. More importantly, it explains the structure and dynamics of the interaction between the organization and its relevant environment. In this case, organization theory is used to organize not only the internal functions and processes within the organization but likewise to analyze how that organization operates in a certain context. The same logic applies to construction projects. Organization theory helps explain the context or environment under which construction projects are carried out. Construction projects are managed within corporate settings and as such, they are subjected to financial scrutiny and return-on-investment (ROI) justification. Moreover, construction projects are expected to comply with corporate policies and guidelines of project contracting, reporting, and auditing. They also go under the knife of organizational politics, which further reiterates the importance of organization theory to the management of construction projects. Organization theory aids in sorting out the confusion brought about by politics. It clarifies the direction that projects take by requiring them to follow specific procedures and use certain tools.
This consideration of the context of construction projects as suggested by organization theory extends to the larger construction industry and the market for such projects in particular. The construction industry is characterized by spiraling cost of construction materials, restricted leasing of heavy equipment, numerous laws and regulations, fluctuating factor prices, and other competing projects for limited organizational resources. Project managers have to contend with these industry forces as working context for their projects. These contextual variables define the volatility and uncertainty of the industry. These variables can’t simply be ignored as what happens to construction projects affects and is affected by them. These variables determine the fate of construction projects as much as these projects impact these variables. The dynamics of the industry is very much a factor in managing construction projects especially for those large construction projects that take some time to finish. Changes in the industry have to be factored in.

Effectiveness and Efficiency

Organization theory prescribes the preoccupation with the twin concerns of effectiveness and efficiency. According to organization theory, organizations seek to be both effective and efficient. As suggested by Peter Drucker, a highly respected management guru, being effective means “doing the right things” while being efficient means “doing things right”. (Stoner, Freeman and Gilbert: 1995, p. 9). Effectiveness stresses hitting the targets and producing results as efficiency emphasizes processes and the use of organizational resources. Construction projects need to be managed effectively and efficiently.
Effectiveness in construction projects is seen in terms of delivering results according to quality specifications, on time, and within budget. Projects are expected to be effective for the straightforward reason of accomplishing their mandated missions. Project managers have three approaches at their perusal to ensure construction projects are managed effectively. These are the goal approach, the systems theory approach, and stakeholder approach. (Gibson et. al.: 2003, pp. 19-23). The goal approach requires project managers to set their sights on targets and work towards them. Effectiveness here is interpreted as actually completing the construction projects and turning over the outputs. The systems theory approach instructs project managers to look at the “big picture”, the totality of the projects in terms of inputs, processes, outputs, and most importantly, the environment or context of the projects. Effectiveness here is viewed from the projects’ location in the larger context of corporate settings and the construction industry. The stakeholder approach prescribes project managers to identify and consider the requirements and interests of relevant stakeholders, those who are either directly or indirectly involved with and affect or are affected by the projects. Examples of stakeholders for construction projects include corporate executives, project teams, investors who provide financing, external contractors or vendors, users or clients of the projects, government and other regulatory agencies, and the public or society at large. Effectiveness here is taken to mean the satisfaction of the needs and preferences of these stakeholders.
On the other hand, efficiency in construction projects is viewed in terms of employing organizational resources wisely and working the projects to the prescribed processes. Projects are expected to be efficient because resources are limited and processes are numerous and intricate. Construction projects are both capital- and labor-intensive. They depend so much on such critical resources as financial, physical, and human. These resources must be harnessed accordingly. Project managers have a wide array of tools to manage these resources including but not limited to budgeting, work scheduling, procurement, and subcontracting and outsourcing. Construction projects involve a myriad of processes that must be carried out according to plan. Efficient processes signify that project team members work with clockwork precision and stick to the process flow of the projects.
In organization theory, effectiveness and efficiency constitute organizational performance. Organizational performance is “the measure of how well organizations do their jobs.” (Stoner, Freeman and Gilbert: 1995, p. 9). Success is equated with effective and efficient performance at the individual, group, and organizational levels. The same goes for construction projects. In construction projects, performance means delivering the project on time, within the budget, and according to quality specifications given the allocated resources to the project and prescribed processes in the project plan. In other words, performance is measured in terms of effectiveness and efficiency. Successful construction projects are effective and efficient. Essential to the idea of organizational performance is managerial competence, which again is applicable to the case of construction projects. Managerial competence refers to the set of knowledge, skills, abilities, attitudes, and aptitudes pertinent to getting the job done in construction projects. Project managers must be competent in managing construction projects effectively and efficiently. Their performance hinges upon the success or failure of the construction projects.

Managerial Competence

The managerial competence of project managers must be evident in performing the various management functions: initiating, planning, organizing, executing, controlling, assessing, and improving. Initiating starts the management process by rationalizing and clarifying the need and viability of the project. Planning sets out the requirements and specifications of the project detailing the goals and objectives, processes, resources, task assignments, work schedule, and budget. Organizing determines the structure, rules, and norms of how to go about carrying out the project according to plan. Executing is actually working on the project and getting the job done. Controlling is concurrent with executing but focusing on the monitoring of the project ensuring its completion according to plan. Assessing is analyzing what happened to the project and how it is executed to completion. Improving is learning the lessons from the project and recommending courses of action for doing similar projects better in the future. These management functions are typical to construction projects. They are observed in managing construction projects one way or the other. If ever some of the management functions are non-existent, it’s usually recommended upon conclusion of the project as one of the action points to further improve the project.
Alongside these management functions, project managers must assume several managerial roles as they go about managing construction projects. These roles are categorized as interpersonal, informational, and decisional. (Stoner, Freeman and Gilbert: 1995, pp. 14-15). The interpersonal role is assumed by project managers to coordinate work done by the entire project team. Given the complexity of most, if not all, construction projects, project managers find themselves communicating and interacting with quite a number of people in the project team with diverse behavioral tendencies. But it doesn’t end there. The interpersonal role of project managers is further extended outside the team. Project managers are expected to likewise communicate and interact with other stakeholders who have direct and indirect interest in the project such as corporate executives, investors, suppliers and contractors, and users and clients. In this case, project managers do a lot of presenting, negotiating, reporting, and consultative meetings. The informational role is assumed by project managers to ensure the flow of relevant information in and out of the project. Project managers act as nerve centers where they receive and send out information critical to the success of the entire project. It’s important to manage the flow of information especially for construction projects where all the processes involved have to be in sync all the time. The decisional role is assumed by project managers to provide direction and move the project forward to completion. Decision points are found every step of the way in construction projects. Examples of these include resource allocation, task assignment, work scheduling, project creeps, and out-of-scope changes. Project managers have to be on their toes and keep tab of these decision points. They can’t afford to commit missteps with regard to these decision points as these spell the difference between project success and failure. These three managerial roles define what to expect when managing construction projects. To a significant degree, these roles are so crucial that they define what it takes to manage such capital- and labor-intensive projects.

Approaches and Frameworks

Organization theory is replete with prescriptive approaches on the what, where, when, who, why, and how to manage organizations. The evolution of management thought, as how the history of organization theory came to be known, traces these approaches as they emerged one after the other. The sheer scope and scale, depth and altitude of the prescriptions from these approaches prove to be too rich and instructive to be ignored and not to be applied to organizations despite their apparent limitations. Construction projects can also learn from these approaches.
The evolution of organization theories was started by the classical school at the height of the industrial revolution, which had Adam Smith, Frederick Taylor, Henri Fayol, and Max Weber as major proponents. Adam Smith advocated that division of labor and specialization could produce greater efficiency in production. (Hodge, Anthony and Gales: 2003, p. 18). The application of this principle is very evident in construction projects where team members perform specialized functions, each with his or her expected role and responsibilities. This division of labor enables the breaking down of complex construction processes into simple tasks that are easily assigned to team members. The scope and scale of construction projects become readily manageable through the principle of division of labor. This notion about efficiency through division of labor was extended by Frederick Taylor to his scientific management. He believed that the rational or scientific approach could be applied to redesign work processes and define the “one best way” to do the job. (Hodge, Anthony and Gales: 2003, p. 19). He used the principle of division of labor to breakdown work processes in production and identified simple, repetitive tasks and activities to get the job done. Again, the focus here was to make work processes efficient. In construction projects, this rational approach to work processes is observed in the single-minded view that the prescribed construction procedures in the project plan must be followed at all cost. Construction projects are carefully planned well before actual implementation. Thus, it’s only logical to follow the project plan to the letter since it specifies the “one best way to the job”. Henri Fayol expanded this concept of “one best way to the job” by generalizing the principles of management to the entire organization, not just limiting the application to production processes. He focused on the critical management functions of coordination and specialization as he considered organizations to be, by nature, complex entities. (Hodge, Anthony and Gales: 2003, p. 20). Coordination and specialization are typical elements of construction projects. In fact, these projects are organized around maximizing coordination and specialization so as to make these projects more manageable. Max Weber took the idea of efficiency to the hilt through his bureaucratic model. He believed that technical competence and impersonal rules were the keys to making organizations efficient. (Hodge, Anthony and Gales: 2003, p. 19). Same thing applies to construction projects. Technical competence and impersonal rules signal objectivity and strictly sticking to the standard construction procedures. Construction projects are expected to be tightly managed given the concern of costs and compliance to numerous laws and regulations. The bureaucratic model fits the bill for construction projects.
The human relations school provided an alternative view to managing organizations. It emphasized the human dimension of organizations particularly the role of groups and social processes. (Hodge, Anthony and Gales: 2003, p. 20). People run organizations. Organizations serve people. By all accounts, organizations revolve around people and so do construction projects. These projects are managed by teams of people and the target beneficiaries are still people. It follows that construction projects take into account the human factor. It’s not uncommon to find signs that say “safety first” and admonishing construction workers to wear protective gears in “hard-hat” areas of construction sites.
The contingency school was the last traditional school of thought to come out of the modern era of organization theory. It sought the consideration of the situation or context as an important variable in running organizations. (Hodge, Anthony and Gales: 2003, p. 21). Much of what is done in and out of organizations is on a case-to-case basis. That’s why even well thought-out plans need to have provisions for contingencies. Construction projects are not exempted here. In fact, construction projects are expected to contain buffers or slack resources for contingency purposes however tight the budget is. This is especially true for those projects that span several years. A lot of uncertainties are expected to happen.
Finally, contemporary approaches such as organizational economics, institutional theory, cultural perspective, and ecological perspective are finding their way and expected to further crowd out the field of organization theory in the years ahead. (Hodge, Anthony and Gales: 2003, pp. 21-23). These contemporary approaches are slated to further illuminate and deepen the understanding of how organizations function. Eventually, they will be applied to construction projects and strengthen the importance of organization theory in managing such projects.

Conclusion

Construction projects are like “mini” organizations that require managing. They mirror what goes on inside organizations. As such, managing construction projects doesn’t differ much from the way organizations in general are managed. Organizations make use of organization theory. It follows that organization theory is likewise applicable to managing construction projects. Construction projects are microcosms of organizations where the importance of organization theory is very much central to the success of such projects.