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Construction Business Management is written for undergraduate courses in Construction firm Management, Construction Business Management, and Management of a Construction Company.
Construction is a risky business! And unfortunately the reality is that construction company managers often lack the necessary "business management" skills needed to ensure the survival of their firms. This groundbreaking new text is the first of its kind that consolidates critical business management topics, and presents them practically and accessibly by showing how they relate to the management of a construction company.
Construction Business Management covers key business topics as they relate to the construction industry. These include financial management, strategic planning, business development, human resources management, information management, quality management, and risk management. The author believes that through good planning and ongoing evaluation, a well managed company can survive the economic downturns of a somewhat volatile industry.
Through numerous practical examples and identification of common pitfalls, this text stresses the importance of the following tactics:
- Creating a robust business and plan.
- Strong financial management.
- Effective communication, and marketing.
- Recruiting and retaining effective employees.
In-text tools help ensure success in the field and the classroom. Practical features include:
- Overviews and summaries for every chapter, highlighting key points.
- Chapter review questions; application exercises.
- Additional sources of information for every chapter.
- Completed Strategic Plan sample.
- Residential and Commercial Construction Case Study.
- Sample Employment Manual.
Construction Business Management covers the various business management topics that relate to the management of a construction company and provides a construction industry context for the discussion of each topic. Emphasis is on understanding management-level issues in each topic rather than detailed technical discussions. The book is structured to provide a discussion of the various topics, with numerous examples and student exercises to require application of the material covered. Two case studies provide realistic contexts for student exercises.
Features:
- Scope of coverage and construction industry context.
- Provides students a single text that addresses the primary construction business management issues using an industry-specific focus.
- Includes a sample construction company strategic plan.
- Provides students with an example of the detail required in crafting a strategic plan for a construction company.
- Features a residential construction company case study and a commercial construction company case study.
- Provides students with realistic contexts for exercises in individual chapters and demonstrates the interrelationship between materials presented in the various chapters.
- Includes a complete glossary and a sample employment manual.
From the Preface
Construction is a risky business, and construction company managers often lack the necessary business management skills needed to ensure the survival of their firms. While good cost-estimating, project planning and scheduling, and project management skills are essential for success in construction, so are good business planning and management skills. Unlike other industries, the construction industry has few executive development programs, but relies primarily on on-the-job training. Most construction company leaders learn to run a business by watching others or by working with people who have been successful in managing construction firms. Many of these leaders lack formal business management education. Often they were promoted from project management positions within their companies or formed their own firms after working for others.
The business failure rate in construction is about 30 percent higher than the national average for all industries. This statistic provides a measure of the risk faced by construction company leaders and highlights the need for good business management skills. What are the reasons why construction firms get into financial difficulty? Some are external, such as economic downturns, but construction company leaders must understand that construction can be cyclical and that they must develop contingency plans for changes in the market. Many reasons, however, are internal and within the leader's ability to control. These may be grouped into the seven categories discussed below.
Pursuit of volume. Volume, not profitability, is often used as a measure of a contractor's success. Rarely are profit margins, return on equity, and changes in profitability used to describe the condition of a construction firm. This constant pursuit of volume may lead to accepting lower profit margins on projects because of intense competition. Rapid growth also stresses the firm's management systems and may spread management too thin to adequately monitor the performance of individual projects.
Lack of comprehensive business plans. Some construction firms do not have business plans that guide their business decisions. They simply react to the market. Business planning requires an understanding of the market, how construction procurement decisions are made, and the competitive advantages of the firm. This knowledge is essential in the selection of services to be offered, the selection of market area and focus, and the selection of people and equipment. In addition to understanding the market, the construction company leader must understand the firm's financial condition and devise strategies for financial success in both expanding and contracting markets.
Ineffective financial management. Contractors may not understand their firm's cost structure, which may result from accounting systems that do not provide the needed detail of cost data. In other cases, they may not manage their cash flow requirements properly or are not adequately capitalized and must resort to unplanned borrowing of capital. Another problem is the use of working capital to finance equipment purchases, thereby reducing the firm's ability to finance its cash flow requirements.
Poor internal communications. Poor internal communications between project sites and the home office plague many construction companies. Consequently, there may be little warning of project execution problems or financial difficulties. In most cases, it takes only one or two disastrous projects to bring down a company. Early warning is essential if corrective action is to be taken on time.
Inadequate marketing. Many contractors do little marketing, but focus on selling their services. Marketing involves everything a company does to retain and attract customers. Hard selling is of little value unless the firm has a reputation for quality customer service.
Poor human resources management. Construction firms succeed or fail based on the quality, skills, and motivation of their employees. Often this critical function is over-looked by construction company leaders. Quality team members must be recruited and given the skills needed to provide excellent customer service. They must be treated properly and recognized for their contributions to the company's success.
Unplanned leadership changes. Unplanned changes in leadership can be devastating to a construction firm, whether it be from retirement, illness, death, or resignation. Succession planning is essential to ensure continuity of operations. This is particularly important in family-owned businesses.
To be successful, construction company leaders must realize that their firms will survive only if the companies provide value to their customers and that customer value is provided with superior business practices, skilled people delivering quality services, and a good working environment to motivate their employees. Positioning their companies for success requires careful planning and periodic evaluation to ensure that responsible individuals have been given adequate resources to achieve desired goals and objectives. Management decisions made by company leaders will determine whether their firms succeed or fail.
This book was written to address the basic business skills that a construction company leader needs in order to be successful in the industry. It was written for use as a text in undergraduate and graduate construction management programs and as a reference for construction professionals. Most construction curriculums address the technical aspects of managing a construction project adequately, but few address the challenges of managing a construction company. My purpose in writing this book was to create a resource for construction educators and for construction firm leaders.
The book is organized into individual chapters that address the major business management functional areas. Each chapter concludes with a set of review questions that emphasize the major points covered in the chapter. Exercises are provided that require application of the principles discussed. The chapters have a list of other publications for those interested in additional information on the topics addressed. A sample strategic plan for a hypothetical construction firm is in Appendix A. There are two case studies in the appendix. The one in Appendix B is for a hypothetical residential construction company, and the one in Appendix C is for a hypothetical commercial construction company. Appendix D contains a sample employment manual for a construction firm. A glossary of terms is provided at the end of the book.
About the Author
John Schaufelberger, PhD, PE, is the Chairman of the Department of Construction Management at the University of Washington, where he has taught since 1994. He teaches both graduate and undergraduate courses in the areas of construction equipment management, construction practices, construction contract procurement, construction firm management, and international construction project management. A licensed professional engineer, he served thirty years as an officer in the US Army Corps of Engineers prior to joining the University of Washington faculty. He managed major public works construction projects in Asia, Europe, and the Middle East, as well as at many locations throughout the United States. He has represented the United States in negotiations with foreign governments. He is the author of Construction Equipment Management, and co-author of Contracts with the Trades: Scope of Work Models for Home Builders, Management of Construction Projects: Constructor's Perspective, and Construction Cost Estimating: Process and Practices. |
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