MODULE 2 Construction Project Organization PDF

Aurora State College of Technology (ASCOT)
DEPARTMENT OF ENGINEERING
Brgy.Zabali, Baler, Aurora
Course: BSCE-5
MODULE 2: CONSTRUCTION PROJECT ORGANIZATION
CONSTRUCTION COMPANY
A construction company can be defined as a group of people sharing specialized

knowledge to design, estimate, bid, procure/purchase, and obtain resources to complete
a construction project. Thus, the construction company, whether it involves a one-person
organization or a larger firm with several departments, is primarily devoted to giving
service with the aim of making profit.
In general, the common functions of a construction company are general

administration, estimating, managing contracts and personnel, design, engineering,
purchasing/procurement, accounting, and managing field construction. The organization
of a construction company is the conceptual framework of the resources that carries out
the above-mentioned functions. These functions are not limited to areas within the
construction organization itself, but include the interwoven relationships with other
stakeholders as well. The stakeholders could be architects, engineers, other general
contractors, subcontractors, manufacturers, material suppliers or vendors, equipment
distributors, labour, government agencies and the general public.
The broad aim of an organization is twofold—to divide responsibility according to

the technical knowledge and to divide that responsibility by degrees of executive ability.
The extent to which authority, work, or responsibility is delegated (the entrusting of
authority and responsibility) is, therefore, an important feature of any organization. For
the purpose of the upcoming discussion, we follow the definitions given by Kerzner (2004)
for authority, responsibility and accountability.
 Authority is the power granted to individuals (possibly by their positions) so

that they can make final decisions for others to follow.
 Responsibility is the obligation incurred by individuals in their roles in the
formal organization in order to effectively perform assignments.
Engr.Jerome M. Galam
Insturctor - I
Course: BSCE-5
 Accountability is the state of being totally answerable for the satisfactory

completion of a specific assignment.
I. FORMS OF BUSINESS ORGANIZATION
A construction organization can take any of the following forms of business

organization.
 Sole Proprietorship
This kind of organization is owned by a single person. The owner is licensed
with the government. This form of organization is widely used in service industries.
No formal charter of operation is required in such arrangements. Also, there are
few government regulations to which such organizations are subjected. Such
organizations do not have to pay corporate income taxes and their earnings are
subject to personal income tax. The proprietor of such organizations has unlimited
personal liability for debts and they also find it difficult to obtain a large sum of
money for the business. The organization lasts as long as the proprietor lasts.
 Partnership
When two or more persons associate to conduct business, a partnership is
said to exist. This ranges from informal oral understandings to a formal agreement
filed with the respective ministry/body. Similar to proprietorship, in partnership
there is ease and economy of formation as well as freedom from special
government regulations. The profits generated out of the business are taxed as
personal income tax in proportion to the partners’ claims, whether they are
distributed or not. In the event that a new partner joins the business, the old
partnership ceases and a new one is created. In case of dissolution due to disputes,
the distribution of assets can be made based on the agreement formulated while
forming the partnership organization. The major disadvantage in such organization
Insturctor - I
Course: BSCE-5
is that of impermanence, the difficulty faced in transferring ownership, and the

unlimited liability.
 Corporation
A corporation is an artificial being, invisible, intangible and existing only in
contemplation of the law (Marshall 1819, available at http://www.1700s.com).
Being a mere creation of the law, it possesses only those properties that the charter
of its creation confers upon it either expressly or as incidental to its very existence.
It exists as a separate legal entity and apart from its owners. Consequently, owner’s
liability is limited to his or her investment. Also, the capital required for business
can be raised in the name of the corporation, without exposing owners to unlimited
liability. The ownership is evidenced by shares of stocks that are transferable, and
so is the ownership. Thus the organization continues to exist even if the owner dies
or sells his stock. One of the major disadvantages of such organizations is the
double taxation that they are subjected to. While company pays tax on the income
it earns, the stockholders are also taxed when they receive income in the form of
dividend.
 Limited Liability Company (LLC)

This form of organization is the combination of corporation and partnership.
It provides its owners with corporate-style limited liability and the tax treatment of
a partnership. This is well suited for small- and medium-sized firms. It has a few
restrictions and greater flexibility. This form of organization has unlimited life.
Complete transfer of ownership and interest is usually subject to approval of at
least a majority of the other LLC members.
 Private Limited Company

It is a type of incorporated firm that (like a public firm) offers limited liability
to its shareholders but which (unlike a public firm) places certain restrictions on its
ownership. These restrictions are spelled out in the firm’s ‘articles of association’ or
Insturctor - I
Course: BSCE-5
bylaws, and are meant to prevent any hostile takeover attempt. The major
restrictions are:
 Stockholders (shareholders) cannot sell or transfer their share without

offering them first to the other stockholders (shareholders) for purchase.
 Stockholders cannot offer their shares or debentures to the general public
over a stock exchange.
 The number of stockholders cannot exceed a fixed figure (commonly 50).
 More details can be found in Company Act.
 Public Limited Company

Public limited company is an incorporated, limited liability firm whose
securities or shares are traded on a stock exchange (national, regional and
international) and can be bought and sold by anyone. Public limited companies are
strictly regulated and are required by law to publish their complete and true
financial position so that investors can determine the true worth of its stock
(shares). It is also referred to as publicly held company. For more details, readers
may refer to the Companies Act, 1956, and Business Dictionary Online.
 Government Enterprises
A government-owned corporation, a state-owned enterprise, or a
government business enterprise is a legal entity created by a government to
undertake commercial or business activities on behalf of an owner government.
The defining characteristics are that they have a distinct legal form and they are
established to operate in commercial affairs. While they may also have public-
policy objectives, government companies should be differentiated from other
forms of government corporation or entity established to pursue purely non-
financial objectives that have no need or goal of satisfying shareholders with return
Insturctor - I
Course: BSCE-5
on their investment through price increase or dividends. In India, PSU is a term

used to refer to companies in which the government (union/state) owns a majority
(51 per cent or more) of company equity.
 Joint Ventures
According to Shreshtha (Shreshtha 1993, cited in Ogunlana et al. 2003),
construction joint ventures combine certain attributes of one venture with
complementary features of another, for the purpose of engaging in a specific
individual or multiple construction undertakings either as a one-team project or
on long-term basis. The enterprise is co-owned and co-managed by the JV
partners. Joint ventures between contractors from developed and developing
countries are recognized mechanisms for technology transfer and, therefore, one
way of improving the skills that are lacking (Ofori 1994). In the construction
industry, creation of joint ventures may mostly result from complementary needs
of technology, capital management and human resource. A number of JVs
operated in the construction of Delhi Metro. Another variant of joint venture is
unincorporated joint venture, in which the legal means of dividing the project’s
equity is by shareholdings in a company.
II. STRUCTURE OF CONSTRUCTION ORGANIZATION
The organizational structure is about how to use one of the basic resources, people,
and how to facilitate overcoming the communication barriers at organizational interfaces
(Enshassi 1997). It refers to the organizational and administrative patterns. For example,
the organizational structure indicates the arrangement of different departments and the
division of labour. The arrangement has a bearing on the response time for delivering
decisions.
It is rare for two construction companies to have an exactly similar kind of

organization structure. In fact, it is often jokingly said that there are as many organization
structures as there are construction companies. Even for the same construction company,
the organization structure may not remain same over a long period of time. The
Insturctor - I
Course: BSCE-5
organization structure keeps on evolving and it depends on a number of factors such as

technology, complexity, resource availability, products and services, competition and
decision-making requirements (Kerzner 2004).
Most of today’s large construction companies had a modest beginning in terms of

undertaking small construction activities. Some of them started as subcontractors or petty
contractors. During the initial days, these companies were able to get relatively simple
construction assignments with little or no complications, and were basically labour-
intensive. Such assignments were executed with the direct involvement of owner, with the
help of managers/supervisors. These managers/supervisors were directly overseeing the
works carried out by their subordinates. One such arrangement is shown in Figure 2.1.
The communication follows vertically in such an arrangement. For example, owner will
command manager/supervisor, who in turn will command the foremen 1, 2 and 3. The
foreman, in turn, will command workers directly under them. For example, Foreman 1 will
command workers 1 and 2, Foreman 2 will command workers 3 and 4, and so on. There
is negligible horizontal flow of communication. For example, Foreman 1 will neither
receive any instruction nor issue any command to Foreman 2. This type, in which the line
of authority is direct from one level to another level of hierarchy, is similar to the military
or line organization.
FORMS OF ORGANIZATION
A. Military or Line-type Organization

B. Line and Staff Organization
C. Departmental Organization
I. Centralized Functional
II. Decentralized Multidivisional
A. Military or Line-type Organization
Insturctor - I
Course: BSCE-5
Advantages:
 These are the easiest to establish.

 They are one of the simplest to explain to employees.
 In this structure, there is a unity of control.
 There is a strong sense of discipline.
 Each of the employees is assigned a fixed role and responsibility.
 Decisions can be quickly taken and the organization can adjust to changing
needs in no time.
Disadvantages:
 There is a lot of expectation from the person holding the authority. The efficiency
of the structure is heavily dependent on the person in authority.
 The advice of a smart employee at the bottom of the hierarchy may go
unheeded, as there is no communication from an employee belonging to a lower
hierarchy.
 The structure suffers from lack of specialized skill of experts. For example,
Foreman 1 may not be skilled in all aspects of work; yet, he is supposed to give
guidance to workers 1 and 2 under him. Also, there may be chances of
favouritism creeping in such a structure.
When the construction companies started getting relatively bigger projects, the
owners realized that they would not be able to handle such projects with the traditional
line- or military-type organization. The owners felt the need to consult specialists on
occasions. Thus, there were additions of people with staff responsibilities, and that led to
Insturctor - I
Course: BSCE-5
the ‘line and staff’ type of organization. The staff specialists advise the line managers in
performing their duties. These staff positions are purely advisory. The staff personnel can
recommend but they do not have authority to implement those recommendations. For
example, manager-safety plays the role of staff. In practice, it is very difficult to make a
distinction between staff and line departments.
B. Line and Staff Organization
Advantages:
 In the line and staff structure, line employees are responsible for execution while
staff employees play the advisory role.
 The line and staff structure offers ample opportunity for the growth of
employees. It also offers good training opportunity to the employees.
 The quality of decisions arrived at in a problem situation is high, as careful
thought is given to arriving at the decision.
Disadvantages:
 There is a lack of well-defined authority structure.

 The structure is suitable mostly for large organizations where there is constant
need for employing people with specialized skills.
Insturctor - I
Course: BSCE-5
 There is always a possibility of conflict arising out of various reasons, which may
prove to be detrimental for the growth of the company.
 The distinction between line function and staff function is difficult to make.
With the increase in size and complexity of projects, the line and staff type of
organization fails to deliver. This is because line and staff organization tends to load a few
men at the top of the hierarchy with more duties than they can handle efficiently. This
eventually gave rise to adoption of the departmental organization. One typical
departmental organization is shown in Figure above. The departmental or functional
organization has departments with department heads. The department heads have
control of the functions allocated to them and they are free to communicate directly with
the field forces. In this organization structure, the top-hierarchy people are relieved from
much of the heavy burden. The structure combines the best of the military- or line-type
structure and the ‘line and staff’ structure. It also leaves functional managers in direct
charge of the work and ensures them the support of a highly trained technical staff.
C. Departmental Organization
Insturctor - I
Course: BSCE-5
I. Centralized Functional
In this form, the centre of power is concentrated at the top of the organization. The
departments are arranged by important functions, each headed by a manager who
reports to a chief executive officer. The chief executive officer coordinates the activities of
functional departments.
Advantage:
 It has a simple reporting mechanism and, thus, administration is easier.

 Functions are organized logically and in a cost-effective manner.
 Power and prestige of major functions are maintained, and strategic direction-
setting is easier to attain.
Insturctor - I
Course: BSCE-5
 Duplication of efforts is minimized.

 Tight control at the top can be ensured.
Disadvantage:
 The over-specialization and narrow vision of key personnel are problematic.

 There is a possibility of limited development for project managers.
 There may be difficulty in achieving economic growth if the firm attempts to
diversify, as the functional management may not be quick to react.
 The lack of coordination between functional departments may be a problem
area. This increases the burden on the chief executive officer. As the number of
functional departments increases, the burden also increases.
II. Decentralized Multidivisional
In this arrangement, the departments are separated on the basis of the project
market or region. Each unit is relatively self-contained in that it has the resources to
operate independently of other divisions. The division manager has almost total authority
to establish division strategy and to manage internal operation. It is like dividing a
company into a number of smaller companies, except that each division manager is
generally subject to some degree of evaluation and control by the central corporate office.
Advantage:
 The decision-making is quicker and simpler. The various divisions can take
advantage of their own functional organization.
 The divisional focus is on the end result rather than the work required to produce
the end result. The management can react to changing business conditions
quickly and adapt to it.
 The output and responsibility can be easily identified.
 In this arrangement, each of the divisions can be operated as a profit centre.
 Corporate executives can be removed from the operating details to concentrate
on overall corporate matters and long-range planning.
 Motivation and development prospects of project managers are enhanced, and
there is greater likelihood of innovation and creativity.
Insturctor - I
Course: BSCE-5
Disadvantage:
 The increased number of managerial and functional people may be unnecessary

and may not prove to be cost-effective.
 The divisions may have little real incentive to cooperate with other divisions and,
as such, lack of coordination among different divisions may be an issue.
 Coordination of customer relations and research-and-development activities
may be difficult because of divisional autonomy.
Owing to its various disadvantages, the departmental organization is now giving way
to the matrix organization. In the matrix organization, as we shall see later, the normal
vertical hierarchy is overlaid by some form of lateral authority and communication. This,
in turn, allows maximum efficiency in the utilization of resources as opposed to the
departmental organization.
One of the distinct features of the matrix organization is that a dual rather than a single
chain of command is followed. For example, some of the managers under matrix structure
may report to two superiors instead of a single superior.
There are two alternatives through which a construction company can create a matrix
organization. In the first alternative, the company can abandon the departmental
groupings and adopt a structure solely on a project basis. In the second alternative, it can
overlap construction/project management on top of the existing departmental
organization. Most of the construction companies follow the second alternative.
III. ORGANIZING FOR PROJECT MANAGEMENT
One of the primary functions of a construction company is to execute construction

projects. This function is performed by companies following different organizational
structures at project level. The organization at project level and at corporate level is not
Insturctor - I
Course: BSCE-5
the same. Construction companies follow different organizational forms at project level.
It is not an easy task to integrate the project management structure into a corporate
structure. The inherent challenge here is to organize people from different specializations
and different departments into an effective project team. The challenge gets further
compounded when a number of different organizations with different objectives are
involved in the project. Depending on the extent to which the authority is delegated to a
project manager and the mode in which the power is delegated, the project management
structure can be divided into categories such as—
(1) functional,
(2) matrix, and
(3) project forms of organization.
While in the first form the project manager has virtually nil authority, in the third
form complete authority is vested with the project manager. The matrix method is a
compromise between the two extremes.
The factors that are important for choosing a particular project-management

authority structure, as identified by Thomas et al. (1983), are—(1) project size and
duration; (2) organizational experience; (3) resources; (4) difference; (5) importance; (6)
technology uncertainty; (7) financial uncertainty; (8) number of projects; and (9) cost and
schedule control. The three most frequently used organizational forms for managing
construction projects are—classical or functional, pure project, and matrix.
Insturctor - I
Course: BSCE-5
1. Functional Organization
Traditionally, classical or functional organizations are marked by a vertical structure

with long lines of communication and a long chain of command. A typical functional
organization is shown in Figure 2.4. In this form, each employee has one clear superior.
For example, the general manager is reporting to the owner, the senior project manager
is reporting to the general manager, and so on.
The employees are grouped by speciality—for example, human resources

development, construction, engineering, tendering, finance, and so on. Each of these
speciality groups works under one executive. The groups are further subdivided into
sections. For example, engineering can be subdivided into civil, electrical and mechanical
sections. Sections under other groups are not shown for clarity in diagram.
In a functional organization, project-related issues are resolved by the functional

head. For example, construction-related issues would be sorted out by senior manager,
construction. The functional organization structure assumes that the common bond
supposed to be there between an employee and his superior would enhance the
cooperation and effectiveness of the individual and the group (Enshassi 1997).
Insturctor - I
Course: BSCE-5
Advantage:
 The degree of efficiency is high since the employees have to perform a limited
number of activities.
 There is a greater division of labour and, thus, the advantages of functional
organizations are inherent in this structure.
 The specialized groups can enhance the possibility of mass production.
Disadvantage:
 The structure as such is unstable as it lacks disciplinary control.

 The structure is slightly complicated as it has several layers of sections.
 The responsibility for unsatisfactory results may be difficult to fix under such
structure.
 There may be conflict among employees of equal rank.
2. Pure Project or Product Management
Pure project or product organizations can be formed to support a steady flow of

ongoing projects. One such typical pure project organization is shown in Figure 2.5. In a
Insturctor - I
Course: BSCE-5
project organization, employees are grouped by project. The majority of the

organization’s resources is directed towards successful completion of projects. The project
managers enjoy a great deal of independence and authority. In such structures, the
different organizational units called departments either report directly to the project
manager or provide supporting roles to the projects.
Advantage:
 The project manager maintains complete authority over the project and has
maximum control over the project.
 The lines of communication are strong and open, and the system is highly
flexible and capable of rapid reaction times. Thus, the structure can react quickly
to the special and changing project needs.
 The project is the only real concern of the project employees. The pure project
structure provides a unity of purpose in terms of effectiveness. It brings together
all the administrative, technical and support personnel needed to bring a project
from the early stages of development through to operational use.
 The appraisal of employees is based upon the performance of the project.
 The focus of resources is towards the achievement of organization goals rather
than the provision of a particular function.
Disadvantage:
 There could be a duplication of efforts.

 It is very difficult to find a project manager having both general management
expertise and diverse functional expertise.
 The administrative duties of a project manager may be demanding and the job
could be quite stressful.
 Due to the fear of impediments in career growth, some employees may not
prefer to leave their departments.
The pure project or product organizations are unusual in the construction industry
(Newcombe et al. 1990, cited in Uher and Toakley 1999). In order to address some of the
disadvantages of the pure project structure, ‘partial projectization’ has been used in some
cases. Here, the critical functions such as engineering and construction are assigned to
Insturctor - I
Course: BSCE-5
the project manager, while functions such as procurement and accounting are performed
within the functional departments.
The advantages of such partial projectization are:
 The project manager can spend more time directing the project-related activities
of the major functional group.
 The project manager need not be an expert in all functional areas, as is the case
with the pure project structure.
The disadvantages are:
 The project manager would still be under significant administrative burden

despite some of the functions being carried out by the functional departments.
3. Matrix Organizations
The matrix organizations have evolved from the classical functional model. They
combine the advantages of both the classical and the pure project/product structures. A
matrix organization can take on a wide variety of specific forms, depending on which of
the two extremes (functional or pure project) it most resembles.
Insturctor - I
Course: BSCE-5
In the matrix organization, the human resources are drawn from within various
functional departments to form specific project teams. Every functional department has a
pool of specialists. For example, the plant and machinery functional department may have
the experts P1, P2, P3, P4, and so on. Similarly, the safety department may have experts S1,
S2, S3, S4, and so on. When the project team for executing a project X is organized, the
experts from different functional departments join together under the leadership of a
project manager. For example, P1 and S1 may represent plant and machinery department
and safety department, respectively. Similarly, depending on the requirement, personnel
from different functional departments may join the project manager. The functional
representatives such as P1 and S1 are referred to as the project engineers. On completion
of projects, the project engineers return to their functional units within the vertical
organization structure.
The matrix organization recognizes the dynamic nature of a project and allows for
the changing requirements. Such structures can cater to the varying workload and
expertise demanded by the project. For example, if at any stage it is found that the services
rendered by P1 are inadequate and needs strengthening in the form of more persons, the
project manager can request the functional head of plant and machinery department to
send a few more persons such as P2, P3, and so on. Similarly, during less workload the
project manager can request for demobilization of these project engineers. The project
engineers P1, P2, P3, and so on usually contact their parent functional departments for
getting advice on complex technical matters or when they encounter unusual problems.
Otherwise, for all practical purposes the project engineers are under the control of the
project manager. One of the features of the matrix organization is that the knowledge
gained by the project engineers P1, P2, and others while executing projects can be shared
vertically upwards for the benefit of future projects.
As mentioned earlier, the project manager heads a team of personnel sent in by

their respective functional specialist departments. The role of project manager is that of a
coordinator with considerable authority. While the main advantages are in the shorter and
shared lines of command and communication, there is the potential of conflicts arising
from dual lines of authority and dual reporting.
Advantage:
 The structure facilitates quick response to changes, conflicts and project needs.
Insturctor - I
Course: BSCE-5
 There is a flexibility of establishing independent policies and procedures for each

project, provided that they do not contradict company policies and procedures.
 There is a possibility of achieving better balance between time, cost and
performance than is possible with the other structures such as functional or
project forms.
 The project manager has authority to commit company resources provided the
schedule does not cause conflicts with other projects.
 The strong base of technical expertise is maintained.
Disadvantages:
 Successful matrix authority application tends to take years to develop, especially

if the company has never used dual authority relationships before.
 Initially, more effort and time is needed to define policies, procedures,
responsibilities and authority relationships.
 The balance of power between functional and project authority must be carefully
monitored.
 Functional managers may be biased according to their own set of priorities.
 Reaction times in a fast-changing project are not as fast as in the pure project
authority structure.
3 FORMS OF MATRIX ORGANIZATION
1. Functional matrix:
A person is formally designated to oversee the project across different
functions. This person has limited authority over the functional people
involved, and primarily plans and coordinates the project. The functional
managers retain prime responsibility for their specific segments of the
project.
2. Balanced matrix:
A person is assigned to oversee the project and interacts on an equal
basis with functional managers. This person and the functional managers
jointly plan and direct workflow segments and approve technical and
operations decisions.
Insturctor - I
Course: BSCE-5
3. Project matrix:
A manager is assigned to plan, direct and oversee the project, and is
responsible for the completion of the project. The functional managers’
involvement is limited to assigning personnel as needed and providing
advisory expertise.
IV. MANAGEMENT LEVELS
Management level can be defined as ‘a position in management that is stratifiably

(layer or level) differentiable (degree) in terms of power, authority, responsibility, and
accountability over resources required to achieve defined objective(s).’ Tenah (1986)
identifies five management levels:
(a) Board of directors’ Level
(b) President’s Level
(c) Construction Management Level
(d) Project Management Level
(e) Functional Management Level
(a) Director’s Level
Insturctor - I
Course: BSCE-5
The different functions at this level are:
 setting plans,
 formulating objectives, and
 deciding among different courses of action.
The three basic types of information required at this level to perform the above functions
are:
 environmental information,
 competitive information, and
 the company’s financial status and general performance data.
(b) President Level
Insturctor - I
Course: BSCE-5
The primary functions at this level are acquiring business and formulating the
company’s immediate objective, in line with the board’s plans and strategies. This level
requires a much more detailed and departmentalized format of the environmental,
competitive and internal information. It also requires progress reports that summarize, for
each project, its status, current and future cost and schedule performance, and problems,
with management actions underway to resolve them.
(c) Construction Management Level
The major functions at this level are—obtaining and monitoring work for the
company at the district or divisional level. This level requires summary formats of the three
Insturctor - I
Course: BSCE-5
basic types of information (environmental, competitive and internal) that apply to the
geographic areas. In addition, this level requires a clear and straightforward summary
format of information on general progress, financial status, schedule status, procurement
status and engineering status on each project under their jurisdiction.
(d) Project Management Level
The major functions of the project management level are:
 managing the day-to-day operations of all aspects of a project, and

 watching closely the development of the project as a group.
The information needs of this level are the same as those of the construction
management level, backed up with the following details—
 field costs,
 summary and/or detail construction schedules,
 list of critical or near-critical items in the network,
 detailed prediction of future accomplishments,
 current working estimates, and
 cash-flow summaries..
Insturctor - I
Course: BSCE-5
(e) Functional Management Level
The functional management level directly organizes, supervises and coordinates

the workers, materials, equipment and services, to ensure that the project is built within
the required time, budget and safety and quality standards. All data are collected at these
levels to be used for costing, estimating and scheduling purposes. The functional
management level requires performance and productivity information on the
organizational units that each manager or supervisor handles, as well as detailed analyses
of the problem areas.
Insturctor - I

MODULE 2 Construction Project Organization PDF

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MODULE 2 Construction Project Organization PDF

Uploaded by

Copyright:

Available Formats

Aurora State College of Technology (ASCOT)

MODULE 2: CONSTRUCTION PROJECT ORGANIZATION

A construction company can be defined as a group of people sharing specialized

In general, the common functions of a construction company are general

The broad aim of an organization is twofold—to divide responsibility according to

 Authority is the power granted to individuals (possibly by their positions) so

 Accountability is the state of being totally answerable for the satisfactory

I. FORMS OF BUSINESS ORGANIZATION

A construction organization can take any of the following forms of business

is that of impermanence, the difficulty faced in transferring ownership, and the

 Limited Liability Company (LLC)

 Private Limited Company

 Stockholders (shareholders) cannot sell or transfer their share without

 More details can be found in Company Act.

 Public Limited Company

on their investment through price increase or dividends. In India, PSU is a term

II. STRUCTURE OF CONSTRUCTION ORGANIZATION

It is rare for two construction companies to have an exactly similar kind of

organization structure keeps on evolving and it depends on a number of factors such as

Most of today’s large construction companies had a modest beginning in terms of

A. Military or Line-type Organization

A. Military or Line-type Organization

 These are the easiest to establish.

B. Line and Staff Organization

 There is a lack of well-defined authority structure.

 It has a simple reporting mechanism and, thus, administration is easier.

 Duplication of efforts is minimized.

 The over-specialization and narrow vision of key personnel are problematic.

II. Decentralized Multidivisional

 The increased number of managerial and functional people may be unnecessary

III. ORGANIZING FOR PROJECT MANAGEMENT

One of the primary functions of a construction company is to execute construction

The factors that are important for choosing a particular project-management

Traditionally, classical or functional organizations are marked by a vertical structure

The employees are grouped by speciality—for example, human resources

In a functional organization, project-related issues are resolved by the functional

 The structure as such is unstable as it lacks disciplinary control.

2. Pure Project or Product Management

Pure project or product organizations can be formed to support a steady flow of

project organization, employees are grouped by project. The majority of the

 There could be a duplication of efforts.

The advantages of such partial projectization are:

The disadvantages are:

 The project manager would still be under significant administrative burden

As mentioned earlier, the project manager heads a team of personnel sent in by

 There is a flexibility of establishing independent policies and procedures for each

 Successful matrix authority application tends to take years to develop, especially

3 FORMS OF MATRIX ORGANIZATION

IV. MANAGEMENT LEVELS

Management level can be defined as ‘a position in management that is stratifiably

(a) Board of directors’ Level

(b) President’s Level

(c) Construction Management Level

(d) Project Management Level

(e) Functional Management Level

(a) Director’s Level

The different functions at this level are:

(b) President Level

(c) Construction Management Level

(d) Project Management Level

The major functions of the project management level are:

 managing the day-to-day operations of all aspects of a project, and