The construction process involves the
translation of client needs and intentions
first into documents and other information,
and later into a physical item. The process
is organized in several ways and so are
various players involved. The client
engages various professionals at a fee to
design, prepare documentation, advice
and finally build the project. The
professionals are knowledgeable with
various aspects of design and cost
implications along with any regulations
i. Design/consultancy
Various types:
 Surveying
and
cost
consultants
 Design & Engineering firms
 Construction
 Project management and
auditing
 Health
Safety
and
environmental
ii. Manufacturing
Various types:
• Material manufacturing
• Machinery manufacturing
iii. Building and construction
Various types:
• General Contractors
• Specialist contractors
The structure of the firm involves several
issues that must be addressed and
controlled early in the process. Among
these issues is the basic type of legal
entity planned, its organization – social,
managerial etc.
The organizational structure, reporting
relationships, line of authority and working
relationships must be designed. Will they
be rigid, loose or somewhere in between?
I. Social/cultural and political
• Social structure refers to relationships
or bonds between groups and
individuals. It refers to groups or entities
in definite relation to each other or
social institutions and norms becoming
embedded into social systems in such a
way that they shape the behavior of
actors within those social systems. We
need to understand that everyday life is
predominantly shaped by interactions in
the workplace.
• The organizational structure of a firm
affects the social formation and
interactions in that market competition
induces firms to adopt efficient forms of
internal organization which in turn shapes
attitudes and behavioral inclinations of the
employees. For example effectiveness of
economic incentives to workers is partly
determined by the workers
responsiveness to them.
• Societies vary in the work and authority
arrangements of which formal
organizations are composed, and these
reflect their distinctive traditions, values,
and historical experiences. For
multinational organizations become
hybrids of some sort: they adopt in varying
combinations the practices of the host
society in which they operate.
II. Technological
The structure of a firm’s technological profile
is related to its capability to innovate. The
relevance of the technological position of a
firm is that it is likely to influence both the
form and the future direction of the
evolution of the spectrum of the firm’s
technological competence.
The profile of technological competence of a
firm should be measured by its pattern of
technological specialization, relative to
III. Structural
This involves the definition, distribution, and
arrangement of interlocking roles (i.e., who
does what). This is in order to create a
structure that will coordinate tasks that shall
achieve the goals of the entity. The challenge
to be faced is to choose appropriate levels
and types of vertical and horizontal
differentiation and integration.
The structure of the organization shall affect the
physical appearance of the organization, the
nature of jobs to be done, its efficiency and
effectiveness, its relation with other
organizations, nature and quality of work
Basic Characteristics of
Organizational Structure
• Division of labor: dividing up the many
tasks of the organization into
specialized jobs
• Hierarchy of authority: Who manages
whom.
• Span of control: Who manages whom.
• Line vs staff positions
• Decentralization
Sub-Unit Choices
Departments, Divisions, etc.
• Functional: Based on functions performed (e.g., production,
sales, research)
• Product: Based on products and services produced (e.g., food,
cleaning supplies, pharmaceuticals)
• Market: Based on customers served (e.g., convenience
stores, supermarkets)
• Geography: Based on physical location
• Matrix: Based on a combination of function, product,
customer and/or geography. Creates dual authority and dual
responsibility
a. Functional Structure
CEO
Manufacturing
Sales
R&D
Advantage: efficiency, communication
Disadvantage: isolation of units
Accounting &
Finance
b. Product Structure
CEO
Soup
Division
Manufaacturing
Nuts
Division
Sales
Manufacturing
Advantages: Product focus, flexibility
Disadvantage: Duplication of effort
Sales
c. Market Structure
CEO
Corporate
Customers
Sales
Customer
Service
Individual
Customers
Sales
Customer
Service
d. Geographic Structure
CEO
West
Sales
Customer
Service
East
Sales
Customer
Service
e. Matrix Structure
R&D
Product A
Product B
Product C
Engineering
Manufact’ing
Hierarchy of Authority
• Tall organizations
have many levels
• Flat organizations
have few levels
iv. Managerial
The choices of managerial structure best suited
for the company are many and depend on
several factors such as the size of the
company, its geographical location, the type
of work being done, and the managerial and
technical skills available. The initial decisions
of the managers will be in terms of what
market the organization is entering, level of
competition, and characteristics of the
organization, who will be the boss and who
will directly influence the organization
structure. The construction industry in itself is
v. Legal
Firms in construction are regulated by laws
governing the different countries in which
they exist in. A firm should select the legal
structure that best meets its business
needs. Legal counsel should be sort in
determining the kind of legal structure to
go for. However it should be noted that for
consultants, they are personally liable for
their professional acts not the firm they
work in. some of the legal entities
i. Sole proprietorship
A sole proprietor is an individual conducting
business as an unincorporated entity.
Legally, the individual and the business
are indistinguishable from one another. All
business revenues and expenses
(including wages paid to employees, if
any) are treated as the personal revenue
and expenses of the proprietor. This is the
simplest form of organization for an
individual starting a business because it
ii. Corporations
The principal advantage of a corporate legal
structure is that, unlike a proprietorship or a
partnership, the personal assets of the
shareholders generally cannot be reached to
satisfy the liabilities or obligations of the
company.
General business corporations are separate and
distinct legal entities that may be formed for any
legal purpose and that are often recognized as
having many of the rights and obligations of
“persons” before the law. Certain legal
requirements must be met to establish and
iii. Partnerships
Like a sole proprietorship, a partnership is
an unincorporated business that
traditionally has been legally
indistinguishable from the partners.
However, because ambiguities,
assumptions, or differences in
understanding among partners sometimes
lead to legal disputes, “partnership acts” or
statutes have been enacted that establish
basic legal principles to govern the
relationship among partners and the
business relationships between the
Issues that a partnership agreement
should address are:
– Initial investment of each partner
– Distribution of profits and allocation of responsibility for losses
among the partners
– Fiduciary duties of the partners—how additional investments, if
needed, will be made, by whom, and in what proportion
– Management and operational structure of the firm, including
each partner’s decision-making responsibilities and authority
– Expectations for each partner
– Dispute resolution mechanisms
– Admission of new partners
– Departure of existing partners, including provisions in the event
of a partner’s death, divorce, or incapacity
– Terms of dissolution, liquidation, or sale of the partnership