By Michael Tobias
Strategic management in
construction is a relatively recent discipline, but it is one that has the
potential to greatly improve project performance. Strategic management doesn’t
operate in isolation to traditional management in construction. However, while the
planning and execution of projects are paramount in traditional project
management, strategic management addresses the challenges of operating
construction organizations rather than just focusing on the planning and
control of resources within individual projects.
There is absolutely no
doubt that the construction industry is a driving force in the global economy,
even though there is speculation (and some evidence) of a downturn since 2017.
Figures released on
November 1 by the U.S. Census Bureau for construction spending during August
and September 2019 tipped $1,287.1 and $1,293.6 billion respectively, with the
latter figure dropping by $26.1 billion from September 2018. Residential
construction has been relatively consistent, increasing from $509,632 billion
in May 2019 to $517,977 billion in September. Non-residential construction
figures decreased a little from $787,831 in May to $775,637 billion.
More than a million
firms of varying sizes operate in the construction industry, offering different
services from design to the provision of quality air inside buildings and the
installation of suitable energy-efficient appliances. Unlike manufacturing
companies that produce items like computers, air-conditioners, or automobiles,
the construction industry produces a vast array of unique end products. Traditionally
project management has been utilized to do this successfully.
Understanding Strategic
Management
A strategy is an overall plan or approach based
on an idea or ideas that respond to multiple external and internal influences.
Because strategies aren’t based on material science, physics, or mathematics,
they don’t contain universal truths than can be documented or proved using theorems.
However, strategic management is formalized by logistics, operations, and
finance. Human resource management also plays a major role. Additionally,
diverse organizations have varied needs and demands that are technical,
professional, and strategic.
Furthermore, there are different people in
organizations that might take on the role of a strategic manager including
trained professionals offering construction, plumbing, mechanical, and electric engineering services in Chicago, New York, Toronto, or any of the world’s big
cities.
What makes successful strategic management
difficult in the construction industry is that there are companies and people,
many of whom have competing interests, all working towards a common goal.
Although all highly trained professionals, architects, engineers, and
construction specialists, have partially incompatible vocabularies and ways of
working. They all work from their own definitional bases, which have
similarities but aren’t the same.
As a civil and environmental engineer, Paul Chinowsky states in an article on Strategic Management in Construction published in the Journal of Construction Engineering and Management in 2000, there is a need for “foundational concepts” that include strategy and well as strategic plans and planning, in addition to strategic management. This still applies today.
While individual projects require execution and
control plans, management strategies are developed in essentially the same way
rulers and military leaders have developed their strategies during war and
colonization. A strategy:
- responds
to a situation, and - predicts
future needs, or - presents
a method for achieving a specific goal
Development of Strategies
Strategic concepts don’t just happen, not even
in the environment of a professional company, a Chicago engineering firm or a New York architectural design company for
instance. Rather, it requires strategic thinking and focus.
In the construction industry, there are seven
focal areas that require strategic management:
- A vision, mission, and goals that indicate what needs to be achieved
throughout the organization. For instance, who the customers you are going to
target are. - Core competencies that establish what the business does best. For
instance, New York Engineers offers innovative engineering solutions for
the construction of sustainable structures that are highly energy-efficient and
will respond to environmental challenges. - Knowledge resources that enable the completion of projects on every
level. They include both technological and human resources. - Education that focuses on both the formal and informal
need for constant lifelong learning together with a thorough understanding of
ever-evolving business conditions. - Finance as it affects the budget and schedule control
of the whole organization and not just one project. - Markets as they affect the organization and its
business opportunities as identified in the core competencies. - Competition which will always be existing, future, and/or
emerging in existing business segments and any potentially untapped market. A
successful strategist will understand and analyze this.
There is also a need to build a strategic
planning team that will come up with solutions themselves rather than simply
carry out the team leader’s wishes. The team will also set strategic planning
objectives, as well as develop an implementation plan. The team, with guidance
from the team leader, will synthesize ideas and execute the plan, later
evaluating its success before a new planning timeframe comes into play.
Putting Strategic Management
into Place
Ultimately, when planning a successful
strategic management program, there are three areas that should be analyzed:
- Strategic
areas of market awareness and technology, including the use of virtual office
environments. - Additional
strategic areas that need much greater emphasis, specifically in terms of
education (see 4 above) and competitive positioning (see 7). Competition is
healthy and education is essential, right the way through the organization. - The
impact of size on strategic management practices, bearing in mind that a huge
number of small and medium enterprises are active in the construction industry.
It is also important to realize that when it
comes to strategic management, it is vital to focus on building a long-term
strategy on a good foundation, rather than simply focusing on dollars. By
establishing a good roadmap for the future, strategic management leaders have
the opportunity to set a direction for their organizations and with aggressive
leadership, independence, and a clear vision for the future, which can help to
ensure their businesses succeed by responding to the needs of a challenging
global marketplace.
Michael Tobias is the founder and principal of New York
Engineers, an Inc 5000 Fastest Growing
Company in America. He leads a team of more than 30 mechanical, electrical,
plumbing, and fire protection engineers from the company headquarters in New
York City, and has led numerous projects in New York, New Jersey, Chicago,
Pennsylvania, Connecticut, Florida, Maryland, and California, as well as
Singapore and Malaysia. He specializes in sustainable building technology and
is a member of the U.S. Green Building Council.
