There has been particularly intense competitive pressure within the construction industry over the last couple of years. How companies have gone about responding to this pressure will determine how well placed they will be to take advantage of opportunities as they start to re-emerge.
I had a recent conversation with a colleague who I hadn’t seen in some time. In addition to the usual gossiping, we got to talking about change in the construction industry, an industry that both of us have been in and around for many years. It reminded me of my earlier blogs about recent changes in the rail industry and so I’d like to touch on some of the more general issues associated with change and how this might affect you and your organisation.
There has been much discussion in the construction industry lately regarding the competitive nature of tenders, particularly over the last year or two. The economic cycle has run its recent course and growth has slowed, with the industry moving from Alliancing as a preferred delivery methodology to fixed price based models such as Public Private Partnerships (PPPs). The Design and Construct tenders that form the basis of PPPs attract tight pricing, which highlights the need for organisations to focus on being cost-competitive in their submissions and to be super-efficient in delivering their services. Companies large and small have responded by looking hard at their cost structures and “right-sizing” their organisations, applying various methods in identifying unnecessary processes and people and removing same.
My question is: have organisations (a) spent enough time and effort in developing a DEEP understanding of how their business currently works – or does not work – prior to making changes and (b) made changes in such a way that the “new and improved” organisation is more effective as well as more efficient than before?
An observation, borne of working with many organisations, is that less overhead (i.e. less support people) does not automatically equate to greater organisational efficiency and effectiveness. There needs to be a deep underlying understanding of organisational capability, as a gap in capability will hurt businesses as they strive to the commitments they have made at tender time. Moreover, as economic circumstances turn and work starts to flow again, the organisations that clearly understand their capabilities – and their gaps – will be better able to take advantage of opportunities as they arise to augment their businesses with the skills they need.
There is increasing discussion in the media around the need for Australian workers to make improvements in productive output to justify their wages. I believe the issue to be more about organisational capability and the ability of companies to extract value from their workforces in excess of the sum of their parts. I’ll explore these issues in more depth in future articles.
BE (Mech), MBA