CM 463 ch 1

Introduction: 

Chapter 1 Construction Business Management, Schaufelberger Kelly Keefe & Sean Jordan Introduction

NATURE OF CONSTRUCTION BUSINESS: 

NATURE OF CONSTRUCTION BUSINESS Construction Business Challenges Ensuring revenue exceeds construction costs Having adequate work in progress Maintaining ample financial resources to fund projects Having a skilled, motivated, and efficient workforce Keeping the company overhead affordable

NATURE OF CONSTRUCTION BUSINESS: 

NATURE OF CONSTRUCTION BUSINESS Construction Business Responsibilities Acquisition of work Performance of the work Management of financial, capital, and human resources Construction industry is risky 50% of construction business fail within 10 years Only internet companies and restaurants have higher failure rate

CAUSES OF BUSINESS FAILURE: 

CAUSES OF BUSINESS FAILURE External Influences Economic recession Loss of major customer New competition Shortage of skilled labor

CAUSES OF BUSINESS FAILURE: 

CAUSES OF BUSINESS FAILURE Internal Problems STRATEGIC PLANNING ISSUES Pursuit of volume (Focusing volume rather than profit) Lack of comprehensive business plan Diversifying into unfamiliar types of projects Diversifying into unfamiliar geographic areas Lack of managerial maturity STRATEGIC IMPLEMENTATION/CONTROL ISSUES Unrealistic increase in project size Unplanned loss of key personnel Poor estimating skills Lack of equipment control Poor internal communication

CAUSES OF BUSINESS FAILURE: 

CAUSES OF BUSINESS FAILURE Internal Problems FINANCIAL MANAGEMENT ISSUES Poor use of accounting systems Excessive debt

MINIMIZING RISK OF BUSINESS FAILURE: 

MINIMIZING RISK OF BUSINESS FAILURE Planning strategies Develop business plan and communicate it to all employees Test a new geographic area with a low risk project/repeat customer Monitor company management capabilities well during a time or growth. Learn the signs of inadequate management Plan Implementation/Control Strategies Develop management systems that monitor all projects Form long-term relationships with industry professionals Increase project size gradually Select project size based on financial/human resources. Don’t put anymore than 30% of resources in a single project

MINIMIZING RISK OF BUSINESS FAILURE: 

MINIMIZING RISK OF BUSINESS FAILURE Financial Management Strategies Price services according to the cost of doing business Prepare month-to-month cash flow budgets and track spending Manage company overhead and reduce it during slow times Finance equipment purchases with debt to preserve capital for cash flow Purchase a line of credit as contingency to cover negative cash flows

LEADERSHIP CHALLENGES: 

LEADERSHIP CHALLENGES Construction company leaders perform: Planning Company goals, strategies, and development plans Organizing Staffing Leading Creating vision, motivating employees, establishing company standards Controlling

LEADERSHIP CHALLENGES: 

LEADERSHIP CHALLENGES Good leaders need to have the ability to: Create a vision and pull people toward it Communicate effectively Empowering employees by sharing the power with them Recognize their own strengths and weaknesses Effectiveness of leadership is measured by: Business results Organizational structure Company culture

ORGANIZATIONAL BEHAVIOR: 

ORGANIZATIONAL BEHAVIOR Employee Motivation Employee performance is influenced by: Understanding of job importance Perception of value within the company organization Compensation Recognition for quality work performed Working environment Individual Behavior Characteristics of Individual Personalities Emotional stability Interpersonal behavior Agreeableness Conscientiousness Openness to change

ETHICS: 

ETHICS They involve determining what is right in a given situation and then having the courage to do what is right Primary Ethical Directives Loyalty Honesty Responsibility Core Values Need to include the company’s ethics Should be stressed to all employees