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  • Kseniya Lukyanova

Top problems of management in the construction business



The construction industry employs about 7 percent of the world’s working-age population and is one of the world economy’s largest sectors, with $10 trillion spent on construction-related goods and services every year. But the industry has an intractable productivity problem and, according to Reinventing construction: A route to higher productivity, a new McKinsey Global Institute report, an opportunity to boost value added by $1.6 trillion.

The main goal of management is to ensure effective management of resources and processes in order to achieve the set results within the established timeframes and budgets.

But according to statistics in the construction industry, budget overruns and delays are considered almost the norm. Providing effective management in such a complex project structure is really not easy, but there is always an opportunity to do better than it was.

Examples of innovative firms and regions suggest that acting in seven areas simultaneously could boost productivity by 50 to 60 percent. They are reshaping regulation; rewiring the contractual framework to reshape industry dynamics; rethinking design and engineering processes; improving procurement and supply-chain management; improving onsite execution; infusing digital technology, new materials, and advanced automation; and reskilling the workforce.

Source: https://www.mckinsey.com/business-functions/operations/our-insights/reinventing-construction-through-a-productivity-revolution



Many factors influence a company's productivity in the construction industry, here are a few of the key aspects:


Lack of risk management

In most cases in risk management, it is customary to pay attention to and anticipate global risks, but often attention is not paid to small failures, which are much more likely and have a significant impact on the performance of projects. Any little thing can affect the progress of the project.


Poor supply chain management

Construction supply chains can be very complex, especially on large projects. This complexity, one of the main characteristics, can be related to the variety of materials and sides on the construction site (suppliers and subcontractors) required for the construction project. As more people are involved, the project can become more complex, and there is also a correlation between the increase in project volume and the complexity of the supply chain as more workforce, parties, and project materials are required to complete. This requires careful planning, organization, and collaboration between supply chain partners, which can be challenging.


Poor cost management

Cost management is an important function of an enterprise that directly impacts the level of profit achieved and the position in the market. The ability of a company to receive the necessary and reliable information about its own expenses on time, analyze it and effectively manage them is key to achieving success. In the construction business, at the moment, cost management is still insufficiently effective, often with primitive analytical and control tools, which directly affects the speed and accuracy in making management decisions and assessing risks.


Poor communication

Inconsistencies in reporting often indicate that subcontractors, contractors, and owners do not have a common understanding of how the project is progressing at any given time. Communicating the vision, goals, and priorities to each link of the team and their common understanding between all the synchronization of actions is also a problem. Planning at the highest levels of management is launched with daily results of activities in the implementation of projects and promptly respond to changes in the course of projects.


Ineffective management

The lack of an ecosystem in which the delivery of information about emerging problems is prompt and makes it possible to make decisions here and now, leads to the fact that problems accumulate like a snowball, and sometimes completely go unattended.


Poor performance

Process management should include an ongoing review of each process for added or lost value. For example, imagine how many resources could be released for collateral to automatically send invoices and control their payment? How many processes in the organization can be automated or completely excluded from the chain?


These are only a small part of the problems, but they are all systemic and have a global impact on the company's success. The top-level problem, from which all subsequent ones follow, is the lack of strategic management in organizations.


After all, innovation always starts with a vision.


Problems of this magnitude must be addressed at the highest level of management. The type of management in which the basis for self-determination of managers and the basis for the formation of managerial influence are the vision, mission and values of the organization is called strategic. It plays a leading role in the organization's management system and is its predetermining basis at three stages - strategy - tactics - operational management.


In the modern world, strategic management is an integral part of any business. The only difference is in the awareness of its role and the quality of the approach. In a small business, you can go with the flow, quickly respond to external situations and make decisions, but when it comes to a large structure, such as a construction organization, it is important to understand that it must be programmed - follow a clear plan and be ready for a quick response. As the basis of a business, strategic management is its guiding and driving force. This is a complex of not only the strategy of management decisions that determine long-term development but also the planning of competitive actions that allow you to quickly respond to external changes, the awareness of the possible need for strategic maneuvers, and the revision of overall development goals.


The problem is that top management is so immersed in operations and firefighting that they simply do not have enough resources to make strategically important decisions for the company. In the rhythm of our daily routine, we often do what is needed instead of what is important.

The use of information technology and the introduction of software now allows to optimize activities and make management more efficient, but the Current State of IT in the Construction Business is still not as effective as in other industries.


Soon we plan to present a solution that will provide small construction companies with software that will make project management at all levels of the organization more efficient, without requiring large budgets for the development of individual optimization projects.


We hope that the use of our product will allow many construction companies to free up a sufficient amount of resources, optimize budgets and invest them in the further strategic development of companies, which means to influence the development of the industry as a whole and ensure economic growth and prosperity.

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