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One Size Does Not Fit All

One Size Does Not Fit All

 

Let’s Talk Businessis dedicated to profit. We are only interested in management technique in so far as it can help construction concerns be more profitable. We drill deep into the complex matrix of management process that governs construction and ferret out hidden profit opportunities. When the construction industry experiences a downturn, the typical management response is to simply “cut” expenses; often “too little-too late”. Redesigning the organization for maximum productivity and efficiency is rarely considered. However, how you design your organization can have a dramatic effect on your firm’s profitability.

 

Organic Growth

 

Construction contractors have traditionally developed their organizations on an as-need basis. When owners can no longer do all the work themselves, they hire someone to help out. We describe this as organic growth.

 

Diminishing Effect on Profits

 

As long as an increasing workload compels the growth of the workforce, no one ever questions organicgrowth. Department heads hire and train a staff they believe can handle the existing work efficiently. Each department becomes the fiefdom of the department head, and they fight to preserve their organization at all costs. Sooner or later, the overhead organization outgrows the workload. Top-heavy organizations seek new, often marginally profitable or unprofitable, work to prop up their top-heavy organization. The need for ever increasing revenues to support existing overhead leads to poor pricing disciplines that result in unprofitable contracts, thereby proving the axiom – “You can’t grow out of the problem”.

 

Designing Profitable Organizations

 

In most companies the formal organizational structure is delineated by a chart that focuses on management levels, spans of control, and who is responsible for decision making in each area of the business.

 

Traditional organization theory divides corporate organizations into departments and assumes that the title of the department implies what it does. This traditional chart is a static picture of your organization that tells you nothing about how you get the job done.

We must learn to look at things differently by viewing a construction company as outcome produced by an arrangement of inputs.

 

Functional Analysis

 

Engineering theory utilizes a design approach called FUNCTIONAL ANALYSIS described as the process of identifying design parameters that satisfy functional requirements.

 

When utilizing Functional Analysis to design an organization we view a corporate organization as a collection of inputs or “functions” that contribute to achieving the desired corporate outcome. We start with an empty organization chart and then:

 

  • Identify the ultimate desired output of the firm.
  • Identify inputs essential to achieving each area’s output.
  • Group inputs into activity areas called functions.
  • Chart workflows to reveal conflict and redundancy.
  • Convert inputs to positions.
  • Quantify each position as an equivalent employee (EE).
  • Assign a cost to each equivalent employee (input).
  • Calculate the cost of the resulting chart.

 

The resulting organization chart defines the manpower and financial budget required to achieve the desired output. By simply comparing the organization chart arrived at through a functional analysis with the existing organically grown organization, inefficiencies become immediately apparent. The functional analysis chart is the organization we should have to achieve our desired output. Our existing organization chart is simply the one we do have.

 

A Deeper Dive

 

I hope I have piqued your curiosity when it comes to actively re-designing your organization toward its most efficient functioning. You will find a complete discussion of Functional Analysishere on the site under “Articles” then “Additional Published Articles.” I strongly recommend you begin to analyze your organization from this fresh perspective. It takes a little time and effort to learn the technique, but I assure you it will pay off handsomely during this period of rapid organizational growth.

Read More A Contractors Guide to Functional Analysis