Flatten your Business - It's Easier than you Think

Back in 2005 I read a popular book "The World is Flat" in, which the author, Thomas Friedman, interviewed business leaders in the US about the effect of technology on globalisation and business.

He was struck by the common thread that "flat" management was the path to productivity.

So what happened to the construction industry?

Why are we are still stuck in strict, hierarchical, vertical management structures and communication channels, frightened to use our front-line staff and subcontractors to their best advantage, for fear they might know or learn something, or, God forbid, do better?

This structure manifests, not only within business but within the extended construction team, where a contractor is required to manage a large team of specialist contractors, within the rule-book of a subcontract.

Try harder just does not work - successful businesses of the future will break the mould of old-world command chain management and adopt flat management practices.

What are the inhibitors and drivers of flat management in Construction?

Fragmented Business - Most construction businesses in Queensland are micro-businesses (up to 4 people) or small businesses (up to 20 people). Apart from the efforts of some industry organisations, they do not collaborate. Even when they do, in my experience, they struggle to tackle non-technical, ie., management/project management, and innovation Let's group them as CSB's.

Management - 60% of CSB's have no strategic plan and 50% do not monitor KPIs. 80% of these only monitor financial performance. Over half of all managers/owners are over 50 years old. They are half as likely to consider innovative approaches to business as younger managers.

Are they underfunded (not sufficiently profitable) to invest in training and technology?, too busy to think about it? (a function of underfunded), untrained (many construction businesses are stuck in a groove, or just think that things won't or can't change.

The extended business - Construction Projects - A project is, in effect, an extension of the business requiring the management of a large distributed workforce, undertaking a series of interrelated tasks. All the above business success criteria are amplified in a project environment, with one major difference - the process is revolutionary, not evolutionary. Once construction begins there is one key criterion - to finish.

Culture - Construction has a 40 - 50 year culture of risk-selling, as opposed to risk management. This has led to a culture of siloing data and project-critical information. The preferred management style became defensive and aggressive.

This style of contracting became embedded in contracts and a subcontracts.

But construction, by its very nature is a highly collaborative

enterprise. It is not a product, it’s a service (excluding manufactured building and components).

Clients believed they could insulate themselves from risk. Coordinating contractors forgot that their key product is a management service. The skill levels in contract management have sharply declined, even as the tools got better.

Post-covid disruption exposed the fault lines that had been building for many years. Profitability is at crisis levels; productivity has stalled, and worst of all, confidence that we can deliver major projects on time and on budget has collapsed, with governments and major clients abandoning projects.

Understanding Construction Processes

If this image of a flat management structure looks like a construction project, it's because it is. A construction project is a temporary organisation with hundreds of interconnected people.

Modern visualisation methods tell us that

AI, Systems, Automation and The Future

There is a view expressed that less competition and more money will begin to improve trust and productivity, thereby giving clients more certainty, and ultimately reducing construction cost.

This view needs a reality check. AI, in its many forms, is driven by the exponential growth in computer power.

Data Analytics requires consistent, reliable, accessible data sources. Before 1990, it was common for contracts to include rules-based cost data, upon which efficient management processes were developed. Even though creating this data is easier and cheaper than ever before, we have given it up in favour of isolated ad-hoc processes. Current data analysis systems offered are still locked away in corporate silos in the hope that they may deliver some long-term advantage.

Clients have lost sight of the value of owning mission-critical data. They can no longer access and analyse data for multiple whole-of-life purposes, even though the analysis of data is easier than ever before.

Business Process Automation requires consistent, reliable, repeatable business processes. To be effective, construction processes require transparent access to reliable data.

In order to make decisions before they are cast in concrete (literally), construction managers need to have access to reliable information, quickly. Repeating myself,  before 1990, it was common for contracts to include rules-based cost data, upon which efficient management processes were developed. Even though creating this data is easier and cheaper than ever before, we have given it up in favour of isolated ad-hoc processes.

Even though access to mission-critical data in real-time is readily available, automation will not be a reality until we break out of our fortress mindset and accept that sharing data is the first step to automated processes that will transform accuracy, productivity and profitability.

Once the first simple steps to data-sharing are taken, we can begin to move to seamless management processes where progress can be unhitched from process, so that the No 1 objective of a construction project, progress, is no longer inhibited by process.