Post on 24-Jan-2023
ORGANIZATIONAL FACTORS AFFECTING GROWTH
AND SUSTAINABILITY OF CONSTRUCTION
COMPANIES
BY
THUKU SHARON WAMAHIGA
UNITED STATES INTERNATIONAL UNIVERSITY
AFRICA
ORGANIZATIONAL FACTORS AFFECTING GROWTH
AND SUSTAINABILITY OF CONSTRUCTION
COMPANIES
BY
THUKU SHARON WAMAHIGA
A Project Report Submitted to the Chandaria School of
Business in Partial Fulfillment of the Requirement for the
Degree of Masters in Business Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY
AFRICA
SUMMER 2014
ii
STUDENT’S DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to any
other college, institution or university other than the United States International
University in Nairobi for academic credit.
Signed: __________________________ Date: _____________________________
Thuku Sharon Wamahiga (ID No: 628291)
This project has been presented for examination with my approval as the appointed
supervisor.
Signed: __________________________ Date: _____________________________
Fred Newa
Signed: __________________________ Date: _____________________________
Dean, School of Business
iii
COPYRIGHT
© 2014 by Thuku Sharon Wamahiga. All rights reserved. No part of this report may be
photocopied, recorded, or otherwise produced, stored in a retrieval system or transmitted
in any form or by any electronic or mechanical means without prior permission of the
copyright owner.
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ABSTRACT
The general objective of this study was to investigate the factors affecting growth and
sustainability of construction companies. The specific objectives of this study were as
follows: to evaluate the impact of strategy on growth and sustainability of construction
companies, to determine the impact organizational structures on growth and sustainability
of construction companies and to establish the impact organizational systems on growth
and sustainability of construction companies.
The research design that was adopted for this study is descriptive research design. The
population size of contractors in the county was 500 contractors. The sampling frame was
sourced from KeRRA Kiambu county to ensure that it was current and relevant to the
research being done. A sample size of 89 respondents was used to analyze and achieve
the specific objectives of the study. The research relied on primary data (quantitative). A
pilot test was first conducted to adhere to the fundamentals. The pilot test was given to 10
contractors (directors of construction companies) so as to test reliability of the
questionnaire. Descriptive statistics such as percentages and frequency distribution were
used to analyze the demographic profile of the participants. The study also used means to
describe each variable and inferential statistics such as correlation and regression analysis
to determine the relationship between independent and dependent variables.
The findings on the impact of strategy on growth and sustainability of construction
companies revealed that to evaluate having specific strategies enabled the company to
compete successfully in the market. The internal strategy boosted the capabilities of the
companies to grow. The main aim of a strategy is to give a company a competitive
advantage. The vision and mission statement of the company clearly outlined the
direction of the company in response to the changes in the business’s external
environment. However, Kenya’s construction companies use traditional methods of doing
business and barely consult professionals for advice to in boosting their growth and
sustainability.
The findings on the impact of organizational structures on growth and sustainability of
construction companies established that good communication is an important element for
the firm’s success. Poor communication on the other hand leads to unmet deadlines,
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customer dissatisfaction that may affect the organization growth and sustainability. In
addition, the organization need to dynamically respond to the turbulent business
environment and the lesson learned when going about its operations for successful
growth. The contribution of the employees in the company improves its capacity to grow
and sustain its competitive advantage. Project managers make decisions that provide the
direction of the company and the contributions of others as a basis of the management’s
strategic tool that is essential for enhancing organization performance.
The findings on the impact organizational systems have on growth and sustainability of
construction companies established that most construction companies have taken up
reward systems to keep their employees in attempt to achieve organization growth and
sustainability. Monetary and non-monetary aspects works positively towards what the
organization wants to achieve growth. A good reward system leads to great employee
performance as well as the company growth. Having a plan to monitor the way
employees perform helps the organization identify the areas that need to be improved and
the necessary action needed to ensure steady and consistent growth for the company.
Technology through performance management system and communication system are
also vital for organizational growth. The study concludes that internal strategy boosted
the capabilities of the companies to grow. Good communication is an important element
for the firm’s success and an appropriate reward system leads to great employee
performance as well as the company growth.
The study recommends that any company should specific strategies to compete
successfully in a particular market. Good communication leads to meeting of organization
deadlines, customer satisfaction, understanding between the employees and senior
management. It is important to have communication in an organization since it links
people, information and ideas together for the organization growth. The rewards system
should be optimally utilized to keep the employees working in the organization as well as
avoid high turnover rates.
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ACKNOWLEDGEMENT
I wish to express my deepest appreciation and gratitude to all the people that have
contributed to the completion of this project.
I had a great pleasure to do my research under the supervision of Mr. Fred Newa. I am
grateful for his guidance and encouragement. His profound knowledge provided me with
opportunity to broaden my knowledge and to make significant progress.
Last but not least, special thanks also to my family for their ever-present love and
support, without them none of this would ever have happened.
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DEDICATION
I hereby dedicate this piece of work to my beloved father-Mr.Thuku, mother-Mrs Thuku
and the rest of the family.
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TABLE OF CONTENTS
STUDENT’S DECLARATION ........................................................................................ ii
COPYRIGHT ................................................................................................................... iii
ABSTRACT ....................................................................................................................... iv
ACKNOWLEDGEMENT ................................................................................................ vi
DEDICATION .................................................................................................................. vii
TABLE OF CONTENTS .............................................................................................. viii
LIST OF TABLES ............................................................................................................. x
LIST OF FIGURES .......................................................................................................... xi
CHAPTER ONE ................................................................................................................ 1
1.0 INTRODUCTION ........................................................................................................ 1
1.1 Background of the Problem ........................................................................................... 1
1.2 Problem Statement ......................................................................................................... 3
1.3 General Objective .......................................................................................................... 4
1.4 Specific Objectives ........................................................................................................ 4
1.5 Importance of the Study ................................................................................................. 4
1.6 Scope of the Study ......................................................................................................... 5
1.7 Definition of Terms ........................................................................................................ 6
1.8 Chapter Summary .......................................................................................................... 6
CHAPTER TWO ............................................................................................................... 8
2.0 LITERATURE REVIEW ........................................................................................... 8
2.1 Introduction .................................................................................................................... 8
2.2 Impact of Strategy on Growth and Sustainability of Construction Companies ............. 8
2.3 Impact of Organizational Structure on Growth and Sustainability of Companies ...... 13
2.4 Impact of Organizational Systems on Growth and Sustainability ............................... 18
2.5 Chapter Summary ........................................................................................................ 23
CHAPTER THREE ......................................................................................................... 24
3.0 RESEARCH METHODOLOGY ............................................................................. 24
3.1 Introduction .................................................................................................................. 24
3.2 Research Design ........................................................................................................... 24
3.3 Population and Sampling Design ................................................................................. 24
3.4 Data Collection Methods ............................................................................................. 26
3.5 Research Procedures .................................................................................................... 27
3.6 Data Analysis Methods ................................................................................................ 27
3.7 Chapter Summary ........................................................................................................ 28
CHAPTER FOUR ............................................................................................................ 29
4.0 RESULTS AND FINDINGS ..................................................................................... 29
4.1 Introduction .................................................................................................................. 29
4.2 General Information ..................................................................................................... 29
4.3 Impact of Strategy on Growth of Construction Companies ......................................... 34
4.4 Impact of Organizational Structures on Growth of Construction Companies ............. 37
4.5 Impact Organizational Systems Have on Growth of Construction Companies ........... 40
4.6 Chapter Summary ........................................................................................................ 44
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CHAPTER FIVE ............................................................................................................. 45
5.0 DISCUSSION, CONCLUSION AND RECOMMENDATIONS .......................... 45
5.1 Introduction .................................................................................................................. 45
5.2 Summary ..................................................................................................................... 45
5.3 Discussion ................................................................................................................... 47
5.4 Conclusions ................................................................................................................. 52
5.5 Recommendations ....................................................................................................... 53
REFERENCES ................................................................................................................. 55
APPENDICES .................................................................................................................. 61
APPENDIX I: INTRODUCTORY LETTER ............................................................... 61
APPENDIX II: QUESTIONNAIRE .............................................................................. 62
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LIST OF TABLES
Table 3.1: Sample Size Distribution .................................................................................. 26
Table 4.1: Response Rate ................................................................................................... 29
Table 4.2: Number of Employees in the Company ............................................................ 32
Table 4.3: Projects Currently Running .............................................................................. 33
Table 4.4: Company Growth .............................................................................................. 34
Table 4.5: Impact of Strategy on Growth of Construction Companies ............................. 35
Table 4.6: Correlation between Strategy and Growth of Construction Companies........... 36
Table 4.7: Regression on the Impact of Strategy ............................................................... 37
Table 4.8: Regression Coefficients ................................................................................... 37
Table 4.9: Organization’s Communication Channel ......................................................... 38
Table 4.10: Organization’s Hierarchy ................................................................................ 39
Table 4.11: Regression on the Organizational Structure ................................................... 39
Table 4.12: Regression Coefficients .................................................................................. 40
Table 4.13: Reward Systems .............................................................................................. 41
Table 4.14: Performance Management .............................................................................. 41
Table 4.15: Accounting and Financial Systems ................................................................. 42
Table 4.16: Correlation between Growth and Organizational Systems ............................. 43
Table 4.17: Regression of Organizational Systems ........................................................... 44
Table 4.18: Regression of Coefficients ............................................................................. 44
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LIST OF FIGURES
Figure 4.1: Position held in the Company ......................................................................... 30
Figure 4.2: Gender ............................................................................................................. 30
Figure 4.3: Age of the Company ........................................................................................ 31
Figure 4.4: People Answerable to the Company ............................................................... 32
Figure 4.5: Company’s Turnover ....................................................................................... 33
Figure 4.6: Value of the Projects ....................................................................................... 34
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Problem
The business world today is very dynamic and to stay relevant businesses must be abreast
with adequate and relevant information that gives them a competitive advantage over
their rivals. Rapid advancement in technology, consumer demands changing, society
stopping to conform to a certain way of doing things and opening up to new thinking,
change in economic trends and political stability in most parts of the world are some of
the factors that have facilitated dynamism in the business world (Ansoff, 1990). The more
turbulent it is, the higher the availability of market information in the various industries.
Change is the only constant in any business, regardless of what line of business you are
in, the one thing that you can be certain about is that at one point or another there has to
be change. According to Hofer (1978), organizations must respond to change if they want
to be successful. How a business manages change is what keeps it ahead of the rest in the
game and ensures effectiveness and efficiency in its operations.
Globally the construction industry faces challenges with some of them having being
around for centuries while the rest are as a result of a dynamic business environment. The
challenge at hand when it comes to doing business is not to avoid risk but to it take
calculated risk by recognizing and managing it effectively (Raftery et al., 2006). In North
America, the construction industry is a billion dollar industry. There must be great
leadership in place to successfully run any company; in this case the focus is on
construction companies, the reason being leadership is about responsibility as it is a
challenge, privilege and profession (Breslin, 2009). Breslin refers to leaders of
construction companies as Alpha Dogs in his book; you do not pet an alpha dog you give
them a job and they get it done.
China is already making progress when it comes to embracing modern technology by
deviating from the traditional methods of construction with the construction of the
world’s tallest building Sky City, 838 metres, being a good example. It is estimated to
take 10 months whereas it took 5 years to build the Burj Khalifa, 828 metres (CNN,
2013). The Chinese have changed from the physically exhausting and low technology
model of construction to a new, modern, creative and innovative approach (Compass,
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2013).
Africa has too much room for growth as it is the new business dawn and this has stirred a
lot of interest from investors looking for new opportunities and room for business
expansion (The Economist, 2013). There is need to have infrastructure in place to
facilitate ease of conducting business this means that roads have to be constructed,
buildings have to come up and social amenities need to be availed. African development
is taking place at such a fast rate and this is a very good thing for a continent that was
previously referred to as the Dark Continent (The Economist, 2008).
The challenges facing construction industry in Africa, Asia, America, and Europe are
very different with some markets facing capital-intensive challenges whereas for others
their challenges are labor based. PriceWaterhouseCoopers (PwC) made a prediction that
by the end of this decade, 13% of the world’s economy will be from construction and
with such magnitude of business there is need for there to be modern structures in place
since most of the models that are currently used are the same models from centuries back
(Compass, 2013).
According to National Construction Authority (2014), the Kenyan construction industry
has over 10,000 registered construction companies. The body was formed to bring in
control measures in the industry. Construction industry has too much growth potential
and the government has put in place policies and structures to ensure that the citizens
positively contribute towards construction of their nation. The women, youth and persons
with disability haven’t been left out with 30% of the jobs that are tendered being allocated
to them.
Challenges that face the civil construction are direct challenges which constitute factors
such as time, safety of the foremen, managing the workforce, the nature of construction
works whereas indirect challenges constitute factors such as the government regulations
in place, environmental issues such as degradation of the environment when acquiring
raw materials like murram, delay in the payment of work done after completion from
government contracts, social issues include corruption especially in the tendering process
and, political issues constitute external influence during awarding of tenders (Muir,
2005).
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Strategies used by contractors in the Kenyan construction industry mostly include
competitive tendering where they tender for as many jobs as possible and ensure they
give fairer prices than their competition in order to secure the jobs. Having a good
company profile, highly qualified personnel who ensure the company does quality
execution of works is an added advantage when bidding. Kenyan contractors have a
reputation of doing poor quality work which is evident from the collapsing of poorly
constructed roads and buildings. The collapse of Nyamakima building in 2006 is a good
example (Githui, 2012).
1.2 Problem Statement
When it comes to growth and survival of any business, leadership is very important
because it is the link that brings together the various aspects necessary to implement
strategies (Gregoire et al., 2005). Leaders are as good as what they learn, their personal
performance, team performance, the leaders they develop, and the enduring quality and
succession of their vision which means that organizations need visionary leaders who can
help them grow and survive tough times (Brady, 2007).
Kenya’s construction industry has got a very negative image with majority of the
contractors being referred to as quacks due to their inefficiency in execution of works.
The constructions companies are ran like ‘kiosks’ with no organization structure in place
with the contractor playing the role of the marketer, finance controller, sole decision
maker, the human resource manager and site agent. This results in poor planning when it
comes to accomplishment of the organizations mission, objectives and goals; poor
decision-making and poor execution of works (Githui, 2012). National Construction
Authority was formed to redeem the image of the construction industry from what it is
known as (inefficient, poor quality work) to what it should be (professional, effective and
efficient) in execution of works.
After talking to a number of contractors, it was found out that most of the Kenya’s
construction companies are started by entrepreneurs who more often than not have no
future plan to ensure the growth and survival of their companies. They use traditional
methods of doing business and barely consult professionals for advice on how they can
go about affairs in their companies a good example of something lacking in their
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companies is being implementation of strategic goals with timelines when it comes to
future planning.
There is need to investigate how Kenyan contractors can be effective in running their
companies with objectively looking into their growth and sustainability. Studies have
been done all over the world on construction management but this study focused on why
Kenya’s construction companies are collapsing at a very high rate with Mugoya
Construction and Engineering Ltd being a good example. There was need to change the
systems in place so that they can handle growth as it happens.
1.3 General Objective
The general objective of the study was to look at factors affecting growth and
sustainability of construction companies.
1.4 Specific Objectives
The specific objectives of this study were as follows:
1.4.1 To evaluate the impact of strategy on growth and sustainability of construction
companies
1.4.2 To determine the impact organizational structures have on growth and sustainability
of construction companies.
1.4.3 To establish the impact organizational systems have on growth and sustainability of
construction companies.
1.5 Importance of the Study
This strategic and efficient research can help different stakeholders to develop appropriate
policies and recommendations to improve the effectiveness, efficiency, and image of the
Kenyan construction industry.
1.5.1 Existing and Potential Contractors
This study can be of benefit to both the existing and potential investors. It can help them
counter the problems they are facing and help them lay out strategies to competitively run
and grow their businesses.
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1.5.2 National Construction Organizations
National Construction Organizations including NCA, Kerra, KURA, KeNHA, Ministry of
Roads and Kenya Roads Board can benefit from the study as it can give them a picture of
the problem and they can come up with policies that can be solutions to the problem.
1.5.3 Researchers
The study can highlight the problems that are faced by contractors and provide
information on them. Researchers can gain from the findings that can be as a result of
research captured by the study. It can also bring out the areas that may require further
research by researchers.
1.5.4 The government
The government is the main employer for civil construction works companies therefore
the study can enlighten the employer on some of the problems faced that contribute to
inefficiency and ineffectiveness in execution of works. This can provide a platform for
the employer to evaluate and decide on the policies that they can come up with to make
the situation at hand better.
1.5.5 Employees
The employees of construction companies can benefit from this study because they are
part of the organization and people are the most important asset in any company. They
can be an important part in ensuring that growth and survival strategies are effectively
implemented.
1.6 Scope of the Study
The scope of this study was based in Kiambu County and the research subject included
the construction companies that are based in that county. The period for data collection
for this study was from April to May 2014. The researcher foresaw a high non-response
rate from the contractors since the study required collection of primary data from them.
To counter this, data collection was done as planned in order to have ample time to
collect the data for the study to avoid disappointment.
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1.7 Definition of Terms
1.7.1 Strategy
According to Johnson (2004), strategy is the direction an organization takes that has a
long term goal of achieving a competitive advantage in an environment that is constantly
changing by aligning its resources and skills towards the fulfillment of all the
stakeholders of the organization.
1.7.2 Organizational Structure
This is the laid out plan to ensure that the strategy, size and diversity in the organization
are in harmony with each other since they influence the structure. It includes division of
tasks among the employees and the mechanisms in place to ensure that there is
coordination in the organization (McKinsey & Company, 2007).
1.7.3 Organizational Systems
This refers to the procedures both formal and informal that support the structure and the
strategy. It takes into consideration how performance is measured, the organization’s
reward system, controls enforced by the management, the management’s information
systems, allocation of resources and planning (McKinsey & Company, 2007).
1.7.4 Strategic planning
This is planning for the future of an organization by dealing with its weaknesses and
threats and ensuring its success by maximizing on its strengths and opportunities. It
entails laying out different strategies and putting a plan in place to ensure that the
strategies are well implemented (Vargo et al., 2011).
1.8 Chapter Summary
This chapter has provided the background of the problem on the challenges facing
companies in the Kenya’s construction industry as well as the statement of the problem.
The specific objectives and the importance of the study to the contractors, the employees
in construction companies and National Construction bodies such as NCA, KeRRA,
KURA, KeNHA, Ministry of Roads and Kenya Roads Board. The scope of the study was
also outlined and the last part of the chapter provided the definition of key terms. Chapter
two reviews the literature of different scholars and chapter three enlightens the research
methodology of the study, the methods and procedures that were used to carry out the
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study. Chapter four presents the results and findings of the study. Chapter five is on the
summary, discussion, conclusion and recommendations of the study.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This chapter on literature review looked at literature from different scholars that have
relevance to the topic and it will be guided by the specific objectives of the study. Some
of the variables from McKinsey 7 S model show the impact that they have on growth and
sustainability of construction companies. The McKinsey 7 S model was developed in the
1980’s by Robert Waterman and Tom Peters and the 7 S in the model are: Strategy,
structure, systems, style, staff, skills, and shared values (Waterman et al., 1980). The
three 3 S were used for the purpose of the study and they included: strategy, structure and
systems.
2.2 Impact of Strategy on Growth and Sustainability of Construction Companies
2.2.1 Growth and sustainability
Growth is the expansion of a business with the aim of maximizing on the investment of
the shareholders while satisfying the needs of all the other stakeholders whereas
sustainability refers to the maintenance of the current industry position a business enjoys
(Thomson et al., 1995). In the construction industry, sustainability refers to the
environmental, economical and societal impact that a project makes therefore prior to
carrying out construction, there is need to do research on what the sustainability concepts
are and identify the relationship between the company and the industry in order to
achieve sustainable construction works (Jones et al., 2009).
When looking at how successful an organization’s system is, the 7 variables need to be
adjusted so that they can be more congruent and there is an easy fit among them. The
elements that can easily be seen among the seven variables are structure, systems and
strategy whereas the not easily recognizable elements are style, staff, skills and the shared
values (Rayam et al., 2011).
2.2.2 McKinsey 7S
From McKinsey’s model, the 7S’s are strategy, structure, systems, style, staff, skills, and
shared values. This study lays emphasis on three of the seven S’s namely strategy,
structure and systems and the impact they have on the growth and sustainability of
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construction companies. The strategy is an action planned by a company in response to
the changes in the business’s external environment. The main aim of a strategy is to give
a company a competitive advantage. The structure involves having a laid out plan to
ensure that the strategy, size and diversity in the organization are in harmony with each
other since they influence the structure. It includes division of tasks among the employees
and the mechanisms in place to ensure that there is coordination in the organization
(McKinsey & Company, 2007). Kantarelis (2010) suggests that an organization should
react positively to environmental changes by benchmarking what other businesses are
doing in the same industry so as to bring about competitive advantage in the market.
The systems refer to the procedures both formal and informal that support the structure
and the strategy. It takes into consideration how performance is measured, the
organization’s reward system, controls enforced by the management, the management’s
information systems, allocation of resources and planning. Each construction firm must
have quality management systems in place to assist the firm to improve its performance
(Stevenson, 2007). The emphasis of quality is on finding and correcting defects in
services or products before they reach the customer. Drihlon and Estime (2013)
contended that continual use of the quality management systems improves
competitiveness and customer satisfaction and is crucial in small medium micro
businesses. The quality management systems offer a variety of benefits to the
construction industry. These benefits range from improved employee efficiency to
reduced customer complaints, and from increased productivity to enhanced market image
through a greater emphasis on customer needs and expectations and improving business
performance through delighting the customers (Moloi, 2013).
The style consists of the organizations culture and management style. The organizational
culture aspect looks at the beliefs, values, and norms that the organization holds and the
way they develop with time, the dress code of the organization, and the way the senior
management and employees interact whereas management style looks at what managers
do, during the decision making process, how they spend their time, where their focus is
and the kind of questions they ask employees (McKinsey & Company, 2007). The staff
refers to the people working in the organization. The processes that are in place to select
the employees and develop their skills, how the employees interact with each other
socially and the recruiting process of the company. It also considers the way the
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organization manages the careers of its employees by looking into things such as
promotion.
The skill refers to the organization’s systems, the relationship between the organization
and its customers, its management practices and processes, how competent the employees
are and its technology (McKinsey & Company, 2007). Employees who lack accurate
skills and are not familiar with the work environment can have a negative impact on the
organization performance and in the construction business as well. This calls for staff
training to effectively implement the organization’s strategy (Boris and Naidoo, 2012).
Adequate training is essential for to increase the organization productivity as well as
reduce costs on the construction sites. Thus the level of employee job satisfaction is
raised (Moloi, 2013). McKinsey & Company (2007) suggest that the organization concept
of shared values refers to the concepts and ideas that a business is built on. They have to
be simple and hold great meaning to the organization or company. They serve as a guide
towards the organization achieving its vision and mission.
2.2.3 Impact of Strategy on Growth and Sustainability of the Firms
According to Grant (2012), development of a strategy includes having: a plan which is a
premeditated action with the goal of actualizing the strategy; a ploy that entails engaging
in smart moves to outsmart the competition; a pattern that explains why there is
consistency in the behavior or action taken over a duration of time which sometimes
explains the presence of an unplanned strategy; a position which concerns the strategic
positioning of the organization in relation to the industry or environment which it
operates in; a perspective looks into the mindset of the organization which is basically the
culture of the organization and its relationship to the shared view of the world.
The strategy taken up by contractors should always factor in the plans they have for
growth of the business, the way operations will take place in each department of the
company, the strategies it will use to boost performance, building a loyal customer base
and being ahead of the competing construction companies in the industry (Gamble et al.,
2010). A sustainable competitive advantage means that the contractor aims at being the
low cost provider in the industry, has successful differentiation strategies, serves the
specific needs of his or her clients and has skills that make it better than the competition
(Gamble et al., 2010).
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During the planning of the company strategy, there must be understanding of the
construction industry, a SWOT analysis of both the external (construction industry) and
internal (company) environments in the industry must be done to give the management
direction on how they can come up with plans that could be short term or long term to
ensure effective management of the company’s strengths, opportunities, threats and
weaknesses (Lawler et al., 2009). The company mission, vision, objectives, strategies
and policies should be formulated and implemented before evaluation of the strategy is
done. The greatest shortcoming associated with having a strategic plan is its lack of
sensitivity and ineffectiveness when dealing with crisis situations that are as a result of
dynamism in the turbulent business environment (Vargo and Seville, 2011).
In the construction industry, contractors have a huge impact on the kind of strategies that
are adopted in their companies and the resulting performance of the same (Alexander et
al., 2008). According to Analoui and Karami (2003), the problem facing most companies
that are started by individual investors is that there is no distinction between who does the
strategic planning for the companies and the people in charge of carrying out the day to
day operations since the directors like having control over everything. Construction
companies need to have a high level of strategic planning in order for them to cope with
the dynamism that comes with being in that industry (Pearce et al., 1987).
Having a strategic contingency plan in the event that the company is faced with a
catastrophic crisis is a good and smart practice that contractors should take up because it
minimizes the impact of unexpected occurrences that are inevitable and when they react
in good time they actually minimize the damage that is done to the operations of the
company (Maina and Nyamute, 2010). The key areas that are of importance to contractors
when coming up with a contingency plan for their companies is: carrying out a trend
analysis in order to come up with the industry pattern that can suggest when and how
often catastrophes occur; conducting a stress test on the impact that a catastrophe would
have on the company’s financial condition and its reputation; having different
contingency plans for different scenarios that the organization can find itself in; and in the
event of a catastrophe, there needs to be prepared for the actions that are to be taken to
ensure that there is effective communication with the organization’s stakeholders
(Fabozzi, 2010).
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Criticism of strategic planning according to Vargo and Seville (2011) is that: it puts up a
front of having a range of options but in a real crisis situation the organization usually has
a few options to choose from; crisis that are time pressure bound need to be handled
immediately before they escalate into a bigger crisis however strategic planning is done in
time-frames of months or years and this may not be in effective in a situation that needs
action pronto; strategic planning tends to assume a reasonable level of control over the
relationships and processes of an organization and a crisis can in a very significant way
inhibit its control; and last but not least in the event of a crisis, management can get
overwhelmed by the magnitude and severity of the threats it is dealing with which can
prevent the way strategy is formulated and implemented.
According to Makhija (2003), in the construction industry there are two strategies taken
by companies that make them perform way better than the other companies. The first
strategy is taking an orientation that factor in the external market environment and the
second strategy is the capabilities and resources the companies have that give them a
sustainable competitive advantage. A company has competitive advantage when it carries
out a thorough analysis of the industry and its governance (Mahoney and Pandian, 1992).
For a company to have sustainability, resources alone are not enough there must be an
element of core capability. This is the dimension of the potential of the firm with regard
to performance (Man, 2001). According to Rangone (1999), a construction company’s
performance is based on its marketing, production and innovation capabilities. This
means that construction companies with different core capabilities have an option of
taking different actions while exploiting the numerous resources at their disposal and use
this to ensure that they enhance their organizational performance (Chew et al., 2009).
In conclusion, adoption of new technologies, doing high quality works, establishing good
relationships with the customers, having highly qualified personnel to carry out execution
of the construction works are some of the competitive strategies a company can possess
that will give it the advantage of having superior performance (Porter, 1990). Resources
alone aren’t enough to give a construction company its competitive advantage; it needs to
ensure that there is a blend between its capabilities, available resources and its strategy to
enhance its performance (Chew et al., 2009). The performance of construction companies
is a function of both the core capability and the competitive strategies that they take up.
13
2.3 Impact of Organizational Structure on Growth and Sustainability of Companies
Organizational structure refers to the allocation of power and responsibilities on how
work is to be done in an organization among its members and it determines how tasks are
allocated, how roles are defined and how interaction takes place (Gerwin and Kolodny,
1992). Thomson (1966) defines organizational structure as the means used by
organizations to set the limits and the boundaries needed for effectiveness and efficiency
in the performance of the employees. The most common organizational structures used
are divisional and functional grouping respectively (Legerer et al., 2009). Organizations
with functional grouping have their focus on being efficient and enjoying economies of
scale whereas those with divisional grouping focus on adjusting to turbulent business
environment.
According to classics in the field of organization theory, Hall (1977) and Miller (1999),
the factors that determine the type of organizational structure that is to be used include the
market environment, advancement in technology and the size of the organization. Their
argument is that those three factors have economic impacts that force organizations to
pick some organizational structures over others. How successful an organization’s
structure becomes is affected by how fast technology advances to a very large extent
because with great advancements, communication becomes easier. People no longer have
to work from the same place since communication can take place over long distances. For
this study I will look at an organization’s structure with regard to its communication
channel, capacities and hierarchy.
2.3.1 Organization’s Communication Channel
According to Judge (2009), communication is the transfer and understanding of a
message. Getting the right information to the right person at the right time is an important
element of good communication (Kerzner, 2006) and it is through communication that an
organization can transfer and receive messages from its employees, customers and react
to changes in both its external and internal environment (Noe, 1996). Poor
communication leads to unmet deadlines, customer dissatisfaction, and misunderstanding
between the employees and senior management (Baker, 2007). It is important to have
communication in an organization since it links people, information and ideas together
(Phillips, 2006).
14
Versatility in the communication of an organization gives it the advantage of clarifying
messages that are not clear in good time as they are sometimes very costly when not
corrected in good time (Xu Lang, 2008). Versatility refers to the ability to communicate
and successfully deliver more than on message (Sandhu et al., 2011) and it increases the
richness and scope of communication and this goes a long way in ensuring that there is
effective communication which is necessary for the success of any organization (Kerzner,
2006).
With the current changes in technology, electronic communication plays an important
role in facilitating ease of communication in any organization (Sandhu, 2011). The
advantage of using electronic communication is that it is instant regardless of the location
of the message’s recipient which has a positive impact since with timely delivery of
messages to employees, meeting deadlines on current projects is much more achievable
and saves on unnecessarily costs such as increasing the set budget to accommodate other
expenses that are due to slow communication of the management’s decision (Judge et al.,
2009).
When electronic communication is adopted into an organization it provides a platform
that can actually transform the effectiveness of how communication takes place at the
work place (Xu, Yan and Zheng, 2008). However, adoption of electronic communication
may face challenges and not be as successful as expected because of: reluctance from
employees to adapt to change in the communication system of an organization; if they
shared their views or opinions in the design phase of the communication system and they
weren’t factored in that can make them reluctant to adapt and use the new system; if
employees are already accustomed to the traditional way of communication that can make
them very reluctant to a change in the communication system (Sandhu et al., 2011).
2.3.1 Impact of Communication Channel on Growth and Sustainability of the Firms
Management in a construction company has the challenge of coming up with great
communication channels that ensure that there is no deviation from the laid out company
plans and strategy especially when communicating with the employees on the ground in
the course of the life a project (Ahuja et al., 2010). The richness of a communication
channel lies in: its ability to handle different issues at the same time (in this case effective
communication pertaining tendering of jobs, getting bid and performance bonds,
15
procurement of machines and necessary equipment, communicating to the necessary
authorities in order to get paid for construction works already completed); how fast
feedback is given back and how personal the communication channel is (Kinicki et al.,
2001). An effective communication channel is one that: factors in all the stakeholders of
the business and has a communication plan on how to meet and fulfill their
communication needs; distributes information to the stakeholders that is correct and on
time; makes performance reports on how the organization is doing; and manages the
stakeholders by resolving any issues that arise (Baker, 2007).
2.3.2 Organizational Capacity
Lee (2002) defines organizational capacity as the ability of an organization to perform
whereas Eisienger (2002) looks at it as the attributes that help an organization to fulfill its
mission. Many scholars have tried to define organizational capacity but the definition that
comprehensively fits this study is by Sowa et al., (2004) and it argues that capacity is the
structures and processes that give guidelines on how members of staff in an organization
should act. Their argument is that capacity goes along way in ensuring that the set
outcomes of an organization are fulfilled and give a clear indication of whether the
organization is effective which in turn gives direction on the impact of structures,
processes and management on an organization’s effectiveness.
Under organizational capacity there is: organizational infrastructure which is the
administrative and operational capacity of an organization (Frederickson and London,
2002) that comprises of human resource, finance management systems, information
management systems and property management systems (Joyce et al., 2003);
management that refers to the organization’s ability to use its infrastructural capacity and
all other resources available in order to attain its goals (Finkelstein et al., 2007) while
focusing on visionary leadership and integrates all the management systems in place
(Zahra et al., 2009) and the main role of managers is identifying and implementing of
dynamic capabilities that bring about improvement of the organization’s performance
(Meier et al., 2010); knowledge and learning which is the ability of an organization to
learn how to approach things differently and to synchronize what it learns within its
existing operations (Koka et al., 2006); and collaboration which is the organization’s
ability to promote effective flow among the various activities and in the process sustain
its efforts and support its general performance (Arya and Lin, 2007).
16
2.3.2.1 Adaptive Capacity
Generally this refers to how effective the organization is when responding to changes in
the business environment and how it takes the whole experience as a lesson (Alexandria,
2011). An organization has to go through learning for there to be growth and
sustainability in its adaptive capacity which factors in: the commitment of the
management; the operation systems in place; transfer of knowledge; willingness to
experiment; and integration (Jenez-Gomez et al, 2005).
2.3.2.2 Absorptive Capacity
An organization’s ability to transfer knowledge and integrate it into its operations is its
absorptive capacity (Skelcher et al, 2010). However, Harvey et al (2010) looks at
absorptive capacity as successful when the organization’s internal processes are effective
enough to align the knowledge acquired with its other competencies and adapt to a
turbulent business environment.
2.3.2.3 Organization Knowing and Practice Theory
Whereas adaptive and absorptive capacity look at how the organization responds to a
dynamic business environment and adapts the lesson learned when going about its
operations, organization knowing and practice theory focuses on the internal
organizational processes that are needed for learning, which is a core capacity for any
organization that affects knowledge and its practice, to take place (Withers et al., 2009).
2.3.2.4 Impact of the Company’s Capacities on Growth and Sustainability
A construction company’s capacity is a multi-dimension factor with different elements
that bear concepts that enable it to grow (Armitrage, 2005). In the construction industry,
project managers make decisions that provide a learning platform for the company and as
a result of that, policies that can easily be adapted towards improvement of the
performance of the management are formulated (Wise, 2006). This adaptation of effective
policies by the company’s management is a strategic tool that is essential for enhancing
performance (Ingraham et al., 2003).
A contractor needs to be articulate in the implementation of his or her company’s mission
and vision as this plays a vital role towards how effective the learning process is in the
organization (Strichman et al., 2008). They should facilitate change and development of
17
their construction firms and be accountable for the development and renewal of their
company’s strategies when they want to cope with the dynamic changes in the industry
(Lei et al, 1999).
2.3.3 Organization’s Hierarchy
Henri Fayol (1841-1925) as quoted by Hernon (2013) suggested that: “the clearer cut the
chain of command is, the more effective the decision making process and greater the
efficiency” (pp. 12). A chain of command is usually created by giving different
responsibilities to different people in a way that it supports the structure and needs of the
organization it does not just happen it has to be created. As soon as authority is
established, the relationship between the various positions is then laid out creating what is
referred to as a chain of command (Crumpton, 2013). The goals of the organization have
to be factored in because the structure that is being formulated has to support the overall
strategy of the business (Hernon, 2013). A top down approach has the disadvantage of
having poor communication since there is some sort of dictatorship on how things are
done in the organization (Kassing, 2009).
Departmentalization takes place after coming up with the structure of the organization
and assigning of tasks to each employee follows thereafter. Each employee’s role,
responsibility and task are clearly defined and this leads to specialization with time as a
result of doing the same thing over and over again in the task assigned. Having
departments in place facilitates group tasking and it affects the way resources are shared
in the organization and provides a platform for better and effective communication and
coordination of duties when allocating them (Kassing, 2009).
2.3.3.1 Impact of the Company’s Hierarchy on Growth and Sustainability
When construction companies lay too much emphasis on having a chain of command,
that is not very ideal when it comes to positively handling employees (Lineback et al.,
2011). Employees in the field including project managers and site agents handling
company projects develop tendencies of circumventing the orders that have been issued
to them by the top management and in the process breaking the chain of command. There
is need to understand why they do it, how the supervisors of the company projects
perform (in this case the site agents and project managers), and to analyze how strong the
command hierarchy in the company is (Kassing, 2009). Weak leadership of the company
18
has poor company performance as one of its indicators. According to VanDuinkerken et
al, (2011) contractors need to make changes in their companies in order to cope with
changes in the industry and business environment in general and also come up with a plan
on how to deal with the resistance to change that is exhibited by the employees who are
currently employed or have been employees of the company for a long time and do not
easily fit into new company changes since their resistance to change comes from getting
accustomed to doing things a certain way (Hernon and Matthews, 2013).
2.4 Impact of Organizational Systems on Growth and Sustainability
Demming (1990-1993) said that an organization’s systems are many parts that make the
system whole and if there was stability in the system, pointing out the errors made by the
employees is tampering with the operations of the system. Each part of the system has an
impact on how the other parts in the system go about their operations and when all the
parts work together in a synchronized manner they make a positive impact on the overall
operations of the whole system (Seddon, 2008). When there is harmony in all the systems
in the organization, they accomplish its objectives and in the process attaining its goals.
This is different from how operations were carried out previously with each part being
responsible for its own goals for example production, marketing, logistics, and sales
departments in an organization aimed at achieving their departmental goals which
translated to the departments that didn’t accomplish their goals negatively affecting the
overall performance of the whole organization and in the process overshadowing the
performance of those that had successfully attained their departmental goals (Seddon,
2008).
2.4.1 Reward System
A reward is any form of compensation that an employee gets from the company he or she
works for because of a service rendered to it. It may range from getting money to having
a great relationship with the employer, getting a comfortable office to work from, being
made part of a decision making team on behalf of the company, the employer giving you
a platform to grow your career (Jiang, 2009). It also refers to any form of benefit that an
employee gets from his or her employer that is not within the compensation package. It is
done with the intention of attracting highly trained personnel to the organization and
motivating and retaining the employees in the organization (Kay, 2003).
19
A good reward system should address the behavior of the employees, how to go about
distribution of the rewards, the form in which the rewards will be given to the employees
that is whether they will include: equity in the company; money; or the implementation of
social benefit programs, and the way compensation will be measured for different
employees at different levels in the organization (Kesler 2011). Management also needs
to take the reward system as a strategic cost since the benefits given to the employees are
a cost that the company is going to be incurring (Schuster, 2012).
Reward systems should be both monetary and non monetary (Armstrong et al., 2006) and
it is important to have a reward system that acknowledges employees who are outstanding
at what they do (Baron, 2006). When coming up with a reward system, factoring in both
the monetary and non-monetary aspects works positively towards what the organization
wants to achieve with its reward system because non-monetary benefits more often than
not act as motivational factors. With the constant change in the world we live in, most
organizations have taken up reward systems as a way of keeping their employees in a bid
to avoid high turnover rates (Ferreira, 2008).
Employers previously only used monetary rewards to retain and employ highly competent
employees however research shows that non-monetary rewards may actually be of more
importance than monetary rewards (Ballentine, 2003). Non-monetary rewards do not
involve any form of direct payment and include things such as recognition and training
(Helen, 2004). The motivators behind non-monetary rewards revolve human needs such
as responsibility, influence, recognition, influence personal growth and achievement
(Armstrong, 2002).
According to Wang (2005), the productivity of employees is higher in organizations that
pay higher salaries or wages because they can afford to get highly qualified personnel. A
conducive work environment, training, new and challenging responsibilities, and
flexibility in working hours are some of the incentives that meet an employee’s internal
needs such as self- esteem, recognition, and job fulfillment (Rosenberg, 2006). People
always leave their current jobs for greener pastures or opportunities, the senior
management in any organization should have employee retention as one of its value
creation measurements (Todd et al., 2002).
20
Monetary rewards are the rewards given to employees that involve money and includes
incentives such as increases in salary (McLagan, 1995). Satisfaction of employees in
regard to monetary compensation is important since it can influence the way the
employees behave and perform and this has a direct impact on the performance of the
company (Atul, 2011). For a company to ensure that it has got a greater competitive
advantage over the competition, it should ensure that there is an easy fit between the
overall strategy of the business, the human resource practices in the organization and its
pay plan (Purcell et al., 2000).
Although high salaries tend to increase the efficiency of the employees and reduce
turnover (Newman et al., 2004), because hiring employees with great talent leads to
higher productivity because you will improve the quality of labor (Wang et al., 2005) it
can lead to an increase in the costs of a firm (Gerhart, 1996). Monetary incentives are
most appreciated by the younger workers in an organization because they tend to attach
higher value in the wages or salaries they get as opposed to more mature worker who
factor in other needs such as promotion and status (Kiyoshi, 2006).
When an organization is coming up with a reward system it needs to synchronize it with
the objectives it has set for itself and not pick a reward system from another organization
and directly apply it since that may not necessarily suit it (David and Christine, 2004).
The issues that a reward system needs to address are the evaluation of employees and
what reward is given for a certain level of performance (Reilly et al., 2010).
2.4.2 Performance Management
Performance is the accomplishment of a task and it is measured against already standards
cost, speed, accuracy and completeness. In contracts, performance is the fulfillment of the
obligation without the performer having any liabilities from the contract (Okumu, 2002).
In companies that really perform well such as Nike, Pepsi, Apple and Proctor & Gamble,
performance management is not seen as a function of human resource but as a business
function in itself (Kesler 2011).
Management of performance entails to having performance measures that quantitatively
give important information about the organization in regard to the services, products and
its processes. Effective performance measures give a direction on how well the
21
organization is doing (Boland et al., 2000). Performance measures are synchronized to
the organization’s objective and can show when the organization drifts from its goals
(Kazmi, 2002). Management and measurement of performance helps organizations justify
some of the costs that they incur and it can aid in coming up with reactive measures on
how to minimize them later on (Boland et al, 2000).
The companies that measure and manage the performance of their employees tend to
perform better than companies that ignore performance measurement and management.
The main challenge facing performance management is poor communication from the
senor management to the subordinates on how to implement the organization’s strategy
while blending it with the culture of the organization (Baker, 2007). Management of
performance must be effective, efficient, timely, safe, productive and have criteria and
quality control (Cannon, 1992). A structured approach to measure performance ensures
that the organization focuses on its vision, mission, objectives, goals and plans while
giving feedback on its performance to the senior management (Boland et al., 2000).
According to Dessler (2003), having a plan to monitor the way employees perform helps
the organization identify the areas that need to be improved and the necessary action
needed to ensure steady and consistent performance of employees. The individual
performance of each employee can be looked at on an annual basis and this would enable
the company to come up with performance and career development plans through
activities such as training and assigning the good performing employees more challenging
responsibilities (Dessler, 2003).
2.4.3 Impact of the Company’s Systems on Growth and Sustainability
In a construction company, there are various functions carried out by different people.
Some of the functions include marketing of the company, tendering, procurement and the
actual execution of works. Therefore, having company systems in place brings out the
understanding of how the various functions are interdependent (Urich et al., 1999). Of
equal importance is having great understanding on how the company is interdependent
with the changes in the external environment (Yang et al., 20007), and how the formal
and informal links within an organization act as networks between the stakeholders in the
company which in turn provides a platform for the creation of strategic alliances that are
necessary when addressing issues causing stunted growth of the company and coming up
22
with solutions to the problems that need to be addressed (Alexandria, 2011).
Construction companies need to know that having a reward system is a holistic approach
towards the alignment of their vision & strategy and their greatest asset which is their
employees because it looks into what the employees view as important with regard to
pay, the benefits they think they should get, what they expect as compensation while still
looking into the interest of the company and what is needed to ensure consistent growth
(Kaplan, 2007). The impact that a reward system has on the growth and sustainability of a
construction company is affected by the influence it has on how communication takes
place, how employees get motivated to work harder, and the job satisfaction that they get.
This in turn leads to a pattern in the way the employees behave since they start to have
certain perceptions and a belief system that is in turn seen to be what they company
stands for (Lawler 1993).
On the other hand performance management is vital as an organizational system in
construction companies with regard to their growth and how sustainable they are since it
looks into how each employee contributes to the overall performance of the whole
company, the employees can get motivated to perform when they know that they are
being monitored and at the same time fosters a team spirit that is necessary when
accomplishing group tasks used to gauge how effective the performance of different
departments in the company is (Blinder,1990). Through performance management,
contractors will get an opportunity to lay emphasis on what they feel needs improvement
in their companies through replacement of strategies that are undermining the company
performance and supplementing of strategies that are not yet delivering the desired results
(Kesler, 2011). It also provides a platform to make a comparison between how the
company was performing in the past and how it is currently performing and this can play
an important role in driving the decision taken when formulating the company’s plans
both short term and long term (Schuster, 2012).
2.4.4 Financial and Accounting Systems
Financial and Accounting Systems entails financial applications that factor in valuation,
asset allocation, performance measurement, risk management, and corporate financial
decision-making (Todd et al., 2002). The advantage of having a Financial and
Accounting Systems leads to improved efficiency by expanding opportunities for risk
23
sharing, lowering transaction costs, and reducing information and agency costs (Kesler
2011). It also acts as a means of providing the means for pricing and risk measurement of
derivative securities, finance science has contributed fundamentally to the remarkable rate
of globalization of the financial system (Ballentine, 2003).
2.4.5 Procurement Process Systems
The Procurement Process Systems is developed through extensive consultation with a
wide range of stakeholders. For the company to champion a successful Procurement
Process Systems implementation, it needs to overcome process, technical and cultural
blocks (Atul, 2011). Additionally, industry best practices and lessons learnt by early
adopters and experienced partners can help you fine tune the e-strategy of the
organization and achieve higher returns. The implementation of procurement process
systems alone will not produce a better business outcome (Dessler, 2003). Only the
transformation of associated processes can produce the desired benefits. For the
procurement process systems initiative to be successful it is essential that those involved
at all levels recognize and fully understand its strategic significance (Ballentine, 2003).
Successful implementation will require top management commitment to ensure that
procurement remains a priority and is seen as a critical element in achieving overall
service delivery objectives (Atul, 2011). A procurement process system solution typically
automates the key internal procurement processes for sourcing, catalog management,
requisitioning, receiving, and payment processes for direct or indirect commodities.
While procurement process systems implementation can be a challenge, getting it right
can really pay off for the growth of construction companies (Schuster, 2012).
2.5 Chapter Summary
This chapter clearly reviewed the relevant literature in relation to the impact of strategy
on growth and sustainability of construction companies. The literature review also looked
at the impact of organizational structures have on growth and sustainability of
construction companies and the impact of organizational systems on growth and
sustainability of construction companies. The next chapter is on the research
methodology.
24
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter discussed the research methodology and procedure that were used for data
collection and analysis in the study of organizational factors affecting growth and
sustainability of construction companies. This chapter explains the research design of the
study, target population, sampling frame and technique, data collection methods, research
procedures and data analysis methods.
3.2 Research Design
Research design is the blueprint within which research is done and relevant data collected
with the aim of studying the research objectives (Kothari, 2004). It has also been defined
as the structure for data collection, measurement and analysis (Cooper and Schindler,
2005). Cooper and Schindler (2008) are of the opinion that descriptive research design is
necessary to answer the questions: who, where, what, when, how to go about a given area
that is being researched. This is the most appropriate research design for this study
because it addressed the organizational factors that affect the growth and sustainability of
construction companies in Kenya and under descriptive research design, a survey was
conducted on a sample size of construction companies in the county of Kiambu. The
independent variables in this study were the organizational strategy, structure and systems
whereas the dependent variables in this study are growth and sustainability.
3.3 Population and Sampling Design
3.3.1 Population
Cooper and Schindler (2008) defines population as the subject that is measured therefore
it is a unit of observation; and it is also the total number of elements that a researcher
wants to make inferences from. An element is the subject on which the measurement is
being taken (Emory et al., 1995). A sample is the subset of individuals from a population
that is used to get an estimate of the characteristics of the entire population. The
population of interest in this study was the Contractors in Kiambu County. The
population size of contractors in the county was 500 contractors (KeRRA, 2014).
25
3.3.2 Sampling Design
Sampling is the process of a representative part of the population size in order to
determine the characteristics of the entire population. The reason behind doing sampling
was to give the researcher an opportunity to make a conclusion about the population
studied but with the aid of a sample as opposed to conducting research on the entire
population (Kalton, 1983).
3.3.2.1 Sampling Frame
A sampling frame is a the listing of what the researcher used to define his or her
population of interest (Lewis-Beck et al., 2004), it can also be defined as the list of
elements from which the sample is drawn (Emory et al., 1995). It usually has a
representation of the elements in the selected population for research in the study (Cooper
and Schindler, 2005). For this study, the sampling frame was sourced from KeRRA
Kiambu county to ensure that it was current and relevant to the research being done.
3.3.2.2 Sampling Technique
A sampling technique is the method used when a researcher is drawing a sample to
determine a hypothesis on the population (McGraw-Hill, 2003). For the purpose of this
study, the researcher used probability sampling method when collecting data. The most
effective sampling technique was stratified random sampling with is one of the sampling
techniques under probability sampling. During data collection the targeted population for
the study were the directors of the construction companies, they were picked randomnly
from each strata to provide information on how organizational factors have impacted
growth and sustainability of their companies (Cooper and Schindler, 2003).
3.3.2.3 Sampling Size
A sample size represents a small portion of total population (Cooper and Schindler,
2008). The importance of a sample size is it is very economical for the researcher when
they are doing their data collection. When the researcher underestimates the population, it
can be uneconomical because of producing results that are an inadequate presentation of
the entire population size whereas an over-sized population size can be very expensive
(Cooper and Schindler 2008). Using a confidence level of 90%, this meant that the
margin of error was 10% to achieve the intended objectives of the study. The following
formula (Yamane’s) justified the sample size of this study.
26
n = N
1 + N (e) 2
Where n is the sample size, N is the population size and e is the margin of error (Yamane,
1967).
n = 800
1 + 800(0.1)2
n = 89
A sample size of 89 respondents was used to analyze and achieve the specific objectives
of the study.
Table 3.1: Sample Size Distribution
Contractor’s
Category
Total Population Percentage of sample size to
the Total Population
Sample Size
A 50 11.13% 6
B 150 11.13% 17
C 300 11.13% 33
D 250 11.13% 28
E 50 11.13% 6
Total 800 11.13% 89
3.4 Data Collection Methods
The research relied on primary data (quantitative) and secondary data. A questionnaire
was developed based on the specific objectives of the research study used to collect data.
Questionnaires have a number of significant values and one of them is their efficient and
effective method of timely collecting research information from the field as compared to
other data collection methods. Structured and semi-structured questions were used in the
questionnaire. Structured questions are easy to analyze and facilitate harmonization of
information gathered from the respondents whereas semi structured questions explore the
issues more deeply since the respondents use their own words to answer the questions.
The questionnaire was made up of four parts: The first section contained the background
information of the respondents, the second section addressed the impact of strategy on
growth and sustainability of construction companies, the third section gathered data on
the impact organizational structures have on growth and sustainability of construction
companies. and the fourth section the impact organizational systems have on growth and
27
sustainability of construction companies. Likert scale was applied to investigate the
respondents level of agreement. Secondary data was conducted through research desk
technique, that was appropriate literature and materials on growth and sustainability of
construction companies.
3.5 Research Procedures
The questionnaire was formulated for the two categories of research design, the
qualitative and quantitative. The research instruments that were used in the study were
developed based on the specific research objectives. A pilot test was first be conducted to
adhere to the fundamentals described by Cooper and Schindler (2008) who define pilot
test as a tool that should be adminstired so as to detect weakness in the research design
and the instruments. The pilot test was given to 10 respondents selected by the researcher
conviniently. The respondents were contractors (directors of construction companies) so
as to test how reliable, capable, and relevant the questionnaire is. The questionnaires was
self administered by the researcher through hand delivery, courier and e-mails.
3.6 Data Analysis Methods
Gray (2004) defines a codebook as a set of rules for assigning numerical values to
answers obtained from the respondents. The collected data was coded prior to entering
the collected quantitative data into the computer for data analysis thereafter the data were
then cleaned to ensure completeness of the information obtained. The study used both
descriptive and inferential statistics. According to Cooper and Schindler (2008)
descriptive analysis involves a process of transforming a mass of raw data into tables,
charts, with frequency distribution and percentages, which are a vital part of making
sense of the data. In this study, the descriptive statistics such as percentages and
frequency distribution were used to analyze the demographic profile of the participants.
The demographic data was tabulated using frequency and percentages. In order to
describe the data, the study used means of each variable while inferential statistics to
analyze data using coefficient of correlation and regression analysis. The data collected
was statistically analyzed using the Statistical Program for Social Scientists (SPSS).
28
3.7 Chapter Summary
This chapter highlighted on the various methods and procedures the researcher adopted in
conducting research on impact of strategy, organizational structures and organizational
systems on growth and sustainability of construction companies in order to answer the
research objectives that were raised in chapter one and needed to be addressed. The
chapter equally highlighted the research design that was adopted for this study as well as
the target population and sampling design. The research instrument that was utilized, the
research procedures that were followed as well as the data analysis methods have also
been discussed in this chapter and lastly the chapter summary.
29
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
This chapter presents the findings of the primary data collected from the field using the
research questionnaire. The questionnaire used in this study as the instrument for data
collection as a basis of analyzing the factors affecting growth and sustainability of
construction companies. The findings are outlined according to specific objectives of the
study. The first research objective was to analyze the impact of strategy on growth and
sustainability of construction companies. The second objective determined the impact
organizational structures have on growth and sustainability of construction companies.
The third section objective established the impact organizational systems have on growth
and sustainability of construction companies. Out of the 89 targeted respondents, only 63
responded to the questionnaires. This represented an effective response rate of 71% that
was considered sufficient enough to answer the research objectives. The response rate is
presented in Table 4.1 here below.
Table 4.1: Response Rate
Contractor’s Category Target Respondents Response Response Rate (%)
A 6 2 36
B 17 14 84
C 33 25 75
D 28 19 68
E 6 3 54
Total 89 63 71
4.2 General Information
The general information is organized in the following areas: Company Category, position
held in the company, gender, age, age of the company, people answerable in the
company, number of employees, company’s turn over, projects that are currently running
and the value of the projects.
4.2.1 Position held in the Company
The study sought to determine the respondents’ position in the company. Figure 4.1
indicated that 35% of the respondents were senior accountants, 24% were company
secretaries, 22% were site agents, 14% were procurement officers, and 5% were company
30
directors. The findings indicated that majority of the respondents were senior
accountants.
Figure 4.1: Position held in the Company
4.2.2 Gender
The researcher sought to find out the gender of the target respondents involved in the
study. The findings in Figure 4.2 show that majority of the respondents were male (83%)
as compared to 17% females.
Figure 4.2: Gender
31
4.2.3 Age of the Company
The study aimed to determine the age of the company from the respondents involved in
the study. It was established that 7% of the respondents agreed that their company was in
operation for less than 2 years, 6% of the respondents agreed that they were in operation
between 6 to 8 years, 24% of the respondents agreed that they were in operation between
8 to10 years and 39% the respondents agreed that they were in operation for over 10
years. The findings are presented in Figure 4.3.
Figure 4.3: Age of the Company
4.2.4 People Answerable to the Company
The study sought to determine the number of people the respondents were answerable in
the company. Table 4.5 indicated that 48% of the respondents were answerable to none,
25% were answerable to one, 7% were answerable to two, 9% were answerable to three
and 11% were answerable to four. The findings are presented in Figure 4.4.
32
Figure 4.4: People Answerable to the Company
4.2.5 Number of Employees in the Company
The research aimed to determine the number of employees in the company from the
respondents involved in the study. Table 4.5 indicated that majority of the respondents
(40%) mentioned that their companies had employed between 1 to 10 employees, 31%
mentioned between 11-20 employees, 12% mentioned between 21 to 30 employees, 11%
between 31 to 40 employees and 6% mentioned more than 40 employees. The findings
are presented in Table 4.2.
Table 4.2: Number of Employees in the Company
Number of Employees in the Company Frequency Percentage
1-10 25 40
11-20 20 31
21-30 8 12
31-40 7 11
More than 40 4 6
Total 63 100
4.2.6 Company’s Turnover
The research aimed to investigate the turnover of the company from the respondents
involved in the study. Table 4.6 indicated that majority of the respondents (39%)
mentioned that their turnover was between 15 m to 20 m, 26% between 6m to 10 m, 15%
between 1m to 5 m, 13% between over 20 m and 7% between ksh. 11m to 15 m. The
findings are presented in Figure 4.5.
33
Figure 4.5: Company’s Turnover
4.2.7 Projects Currently Running
The research aimed to investigate projects that are currently running from the respondents
involved in the study. Table 4.3 indicated that majority of the respondents (26%)
mentioned that there were between 4 to 6 projects, 25% between 1 to 3 projects, 21%
mentioned between 10 to 12 projects, 18% mentioned between 13 to 15 projects and 13%
of the respondents mentioned between 7 to 9 projects.
Table 4.3: Projects Currently Running
Projects Currently Running Frequency Percentage
1-3 16 25
4-6 15 26
7-9 8 13
10-12 13 21
13-15 11 18
Total 63 100
4.2.8 Value of the Projects
The research aimed to investigate the turnover of the company from the respondents
involved in the study. Table 4.6 indicated that majority of the respondents (39%)
mentioned that their turnover was between 15 m to 20 m, 26% between 6m to 10 m, 15%
between 1m to 5 m, 13% between over 20 m and 7% between ksh. 11m to 15 m. The
findings are presented in Figure 4.6.
34
Figure 4.6: Value of the Projects
4.2.9 Company Growth
The study intended to investigate the trend of the company growth from the respondents
involved in the study. The findings indicate that a substantial proportion of the
respondents claimed that in the last five years the number of employees increased steadily
at work (m=2.40). This was followed by a large number of respondents who claimed that
in the last five years our profits have increased steadily (m=2.37). Third, a number of the
respondents mentioned that in the last five years the number of projects have increased
steadily (m=2.33) and in the last five years the revenues increased steadily (m=2.16). The
findings are presented in Table 4.4.
Table 4.4: Company Growth
Company Growth Mean Ranking
In the last five years our revenues have increased steadily 2.16 4
In the last five years our profits have increased steadily 2.37 2
In the last five years the number of projects have increased
steadily
2.33 3
In the last five years the number of our employees has increased
steadily
2.40 1
4.3 Impact of Strategy on Growth of Construction Companies
The study intended to investigate the impact of strategy on growth of construction
companies from the respondents involved in the study. The findings indicate that a
substantial proportion of the respondents claimed that the implementation of the company
strategy was divided into short term, middle term and long term goals (m=2.99). This was
35
followed by a large number of respondents who claimed that the company has a strategy
(m=2.98). Third, a number of the respondents agreed that the company’s monitoring and
evaluation of its strategy had an impact on its growth (m=2.97). The respondents also
agreed that their companies had a vision and mission statement clearly outlined (m=2.96).
On the other hand, quite a few number of the respondents claimed that the company’s
strategic plan impacted on its growth (m=2.59). Also, fewer respondents mentioned that
the way the company implements its strategy has impacted its growth (m=2.33with very
few respondents who agreed that a professional is sought to formulate the company
strategy, vision and mission statements at a mean of 2.27. The findings are presented in
Table 4.5.
Table 4.5: Impact of Strategy on Growth of Construction Companies
Impact of Strategy on Growth of Construction Companies Mean Ranking
The company has a strategy 2.98 2
The company has a vision and mission statement clearly outlined 2.96 4
The company strategy, vision and mission statements are
internally formulated
2.64 6
A professional is sought to formulate the company strategy, vision
and mission statements
2.27 9
The company’s strategic plan has impacted its growth 2.59 7
The implementation of the company strategy is divided into short
term, middle term and long term goals
2.99 1
The way the company implements its strategy has impacted its
growth
2.33 8
The company monitors and evaluates its strategy implementation 2.89 5
The monitoring and evaluation of the company’s strategy has an
impact on growth
2.97 3
4.3.1 Correlation between Strategy and Growth of Construction Companies
This section intended to measure the correlation between the correlation between strategy
and growth of construction companies. The findings in Table 4.6 suggested that there was
a strong correlation between the company having a vision and mission statement clearly
outlined and revenue increasing at (r=0.315, p>0.01).
36
Table 4.6: Correlation between Strategy and Growth of Construction Companies
In the last
five years
our
revenues
have
increased
steadily
In the last
five years
our profits
have
increased
steadily
In the last
five years
the
number of
projects
have
increased
steadily
In the last
five years
the number
of our
employees
has
increased
steadily
The company
has a vision and
mission
statement clearly
outlined
Pearson
Correlation .315** -.203 -.122 .199
Sig. (2-
tailed) .010 .092 .329 .112
N 67 70 66 65
The company
strategy, vision
and mission
statements are
internally
formulated
Pearson
Correlation .205 .240* .198 .115
Sig. (2-
tailed) .096 .045 .111 .360
N 67 70 66 65
The
implementation
of the company
strategy is
divided into
short term,
middle term and
long term goals
Pearson
Correlation -.288* .160 .068 -.316*
Sig. (2-
tailed) .018 .187 .586 .010
N
67 70 66 65
**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).
4.3.2 Regression on the Impact of Strategy
The findings in Table 4.7 indicate that the R square is 0.203 which implies that only
20.3% of the revenue of the construction companies is determined by existing strategy in
the company. In addition, with every increase in one unit of the growth, 0.319 units is
determined by the company strategy, 0.218 units determined by the existence of clearly
outlined and internally formulated vision and mission statements by a margin of
0.207units.
CS= Company Strategy
COVMS= Clearly Outlined Vision and Mission Statements
IFVMS= Internally Formulated Vision and Mission Statements
The equation of regression line is:
37
Growth of Construction Companies= 0.029+ 0.319CS+ 0.218COVMS+0.207IFVMS
Table 4.7: Regression on the Impact of Strategy
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .451 .203 .165 1.120
a. Predictors: (Constant), the company strategy, vision and mission statements are
internally formulated, Your company has a strategy, The company has a vision and
mission statement clearly outlined
Table 4.8: Regression Coefficients
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
B Std. Error Beta
(Constant) .029 .559 .052 .959
Your company has a
strategy .319 .118 .314 2.699 .009
The company has a
vision and mission
statement clearly outlined
.218 .127 .208 1.718 .091
The company strategy,
vision and mission
statements are internally
formulated
.207 .135 .186 1.530 .131
a. Dependent Variable: In the last five years revenues have increased steadily
4.4 Impact of Organizational Structures on Growth of Construction Companies
4.4.1 Organization’s Communication Channel
The study intended to investigate the impact of organization’s communication channel
from the respondents involved in the study. The findings indicate that a substantial
proportion of the respondents claimed that there was an efficient communication system
in the company is from top management to subordinates (m=2.70). This was followed by
a large number of respondents who claimed that the ability of the company to adapt to
changes in the environment led to greater company performance and sustainable growth
(m=2.69). Third, a number of the respondents agreed that the subordinates in the
company are given a platform to voice out their opinions (m=2.60). Fourth, the
respondents also agreed that the company has a formal organizational structure (m=2.56)
and a number of the respondents agreed that the company’s performance is directly
affected by effective communication (m=2.52).
38
On the other hand, quite a few number of the respondents claimed that the use of
dictatorial communication style in the company was more effective (m=2.38). Also,
fewer respondents mentioned that effective communication in the company has lead to
great company performance and positive company growth and sustainability (m=2.30)
with very few respondents who agreed that use of democratic communication style in the
company is more productive at a mean of 2.16. The findings are presented in Table 4.9.
Table 4.9: Organization’s Communication Channel
Organization’s Communication Channel Mean Ranking
The company has a formal organizational structure 2.56 4
The company has a formal communication structure 2.46 8
Communication in the company is from top management to
subordinates
2.70 1
The subordinates in the company are given a platform to voice out
their opinions
2.60 3
The company’s management forces decisions on the subordinates 2.39 10
Use of democratic communication style in the company is more
productive
2.16 14
Use of dictatorial communication style in the company is more
effective
2.38 11
The company has adopted use of emails and mobile telephones to
communicate to workers in the field
2.17 13
The company’s performance is directly affected by effective
communication
2.52 5
Effective communication in the company has lead to great
company performance and positive company growth and
sustainability
2.30 12
The company makes quick response to changes in the business
environment
2.50 7
The employees go for training programs to help them cope with
changes in the construction industry
2.51 6
The organization is open to learning and makes change to
facilitate performance
2.45 9
The ability of the company to adapt to changes in the environment
has led to great company performance and sustainable growth
2.69 2
4.4.2 Organization’s Hierarchy
The study intended to investigate the impact of organization’s hierarchy from the
respondents involved in the study. The findings indicate that a substantial proportion of
the respondents claimed that the company directors are the sole decision makers in the
company (m=2.82). This was followed by a large number of respondents who claimed
that there were different departments in the company responsible for Marketing, Finance,
HR, Accounting and Procurement (m=2.70). Third, a number of the respondents agreed
39
that the company has a reporting line channel (m=2.39) and fourth the respondents agreed
that there is a decision making structure in the company (m=2.18). The findings are
presented in Table 4.10.
Table 4.10: Organization’s Hierarchy
Organization’s Hierarchy Mean Ranking
There is a decision making structure in the company 2.18 4
The company directors are the sole decision makers in the
company 2.82 1
The company has a reporting line channel 2.39 3
There are different departments in the company responsible for
Marketing, Finance, HR, Accounting, and Procurement 2.70 2
4.4.3 Regression of Organizational Structures
The findings in Table 4.11 indicate that the R square is 0.241 which implies that only
24.1% of the numbers of projects in construction companies are determined by
organizational structures. In addition, with every increase in one unit of the growth of
construction companies, 0.364 units is determined by top management to subordinates
communication, 0.159 units determined by the ability of the company to adapt to changes
in the environment leading to sustainable company growth and the company directors
being the sole decision makers in the company by a margin of 0.197units.
TMSC= Top Management to Subordinates Communication
AECSG= Adapt to Environmental Changes for Sustainable Growth
CDSM= Company Directors as Sole Decision Makers
The regression equation is presented as follows:
Growth of Construction Companies=1.477+0.364TMSC+0.159AECSG+0.197CDSM
Table 4.11: Regression on the Organizational Structure
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .491a .241 .196 1.175 a. Predictors: (Constant), the company directors are the sole decision makers in the company, the ability of the company to adapt to changes in the environment has led to great company performance and sustainable growth, communication in the company is from top management to subordinates
40
Table 4.12: Regression Coefficients
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
B Std. Error Beta
(Constant) 1.477 .735 2.009 .050
Communication in the company is
from top management to subordinates .364 .134 .360 2.712 .009
The ability of the company to adapt
to changes in the environment has led
to great company performance and
sustainable growth
.159 .150 .130 1.064 .292
The company directors are the sole
decision makers in the company .197 .130 .201 1.516 .136
a. Dependent Variable: In the last five years the number of projects have increased
steadily
4.5 Impact Organizational Systems Have on Growth of Construction Companies
4.5.1 Reward Systems
The study intended to investigate the impact of the reward systems from the respondents
involved in the study. The findings indicate that a substantial proportion of the
respondents claimed that the monetary reward system is the best for construction
companies (cash/monetary terms) (m=3.38). This was followed by a large number of
respondents who claimed that the non-monetary system is the best for construction
companies (employee rewarded with benefits) (m=3.12). Third, a number of the
respondents agreed that the the performance of employees is affected by the
implementation of the companies reward system (m=2.87). The respondents also agreed
that a reward system has led to acquisition of talented employees with great credentials
(m=2.52). On the other hand, quite a few number of the respondents claimed that a good
reward system leads to great company performance and positive company growth
(m=2.51) and fewer respondents mentioned that the employee turnover rate has been
reduced by the company reward system (m=2.31). The findings are presented in Table
4.13.
41
Table 4.13: Reward Systems
Reward Systems Mean Ranking
A monetary reward system is the best for construction
companies (cash/monetary terms)
3.38 1
A non-monetary system is the best for construction companies
(employee rewarded with benefits)
3.12 2
The performance of employees is affected by the
implementation of the companies reward system
2.87 3
Having a reward system has led to acquisition of talented
employees with great credentials
2.52 4
The employee turnover rate has been reduced by the company
reward system
2.31 6
A good reward system leads to great company performance and
positive company growth
2.51 5
4.5.2 Performance Management
The study intended to investigate the performance management from the respondents
involved in the study. The findings indicate that a substantial proportion of the
respondents claimed that the company has a system in place to measure employee
performance (m=2.52). This was followed by a large number of respondents who claimed
that the individual performance of each employee should be reviewed annually (m=2.40).
Third, a number of the respondents agreed that the company performs better when it has a
performance management system in place as opposed to when it has none (m=2.00). The
respondents also agreed that the performance management system within a company is
crucial for attainment of company vision, mission and objectives (m=1.94). On the other
hand, quite a few number of the respondents claimed that the top management in the
company plays a major in the performance and implementation of the company’s
performance management system (m=1.88). The findings are presented in Table 4.14.
Table 4.14: Performance Management
Performance Management Mean Ranking
Having a performance management system within a company is
crucial for attainment of company vision, mission and objectives.
1.94 4
The company performs better when it has a performance
management system in place as opposed to when it has none
2.00 3
The company has a system in place to measure employee
performance
2.52 1
The individual performance of each employee should be reviewed
annually
2.40 2
The top management in the company plays a major in the
performance and implementation of the company’s performance
management system.
1.88 5
42
4.5.3 Accounting and Financial Systems
The study intended to investigate the impact of s accounting and financial systems from
the respondents involved in the study. The findings indicate that a substantial proportion
of the respondents claimed that the company has employment management system (m=
2.78). This was followed by a large number of respondents who claimed that the
company has an accounting system (m= 2.75). Third, a number of the respondents agreed
that the purchasing and procurement system has improved the efficiency and growth of
the company (m= 2.62). The respondents also agreed that the project management system
has improved the efficiency and growth of the company (m=2.61). On the other hand,
quite a few number of the respondents claimed that the company has a purchasing and
procurement system (m=2.27). Also, fewer respondents mentioned that the company has
formal financial systems (m=2.13) with very few respondents who agreed that the
accounting system has improved the efficiency and growth of the company at a mean of
1.99. The findings are presented in Table 4.15.
Table 4.15: Accounting and Financial Systems
Accounting and Financial Systems Mean Ranking
The company has formal financial systems 2.13 8
The company has an accounting system 2.75 2
The accounting system has improved the efficiency and growth
of the company
1.99 9
The company has a projects management system 2.42 6
The project management system has improved the efficiency
and growth of the company
2.61 5
The company has a employment management system 2.78 1
The employment system has improved the efficiency and
growth of the company.
2.64 3
The company has a purchasing and procurement system 2.27 7
The purchasing and procurement system has improved the
efficiency and growth of the company
2.62 4
4.5.4 Correlation between Organizational Systems and Growth of the Companies
This section intended to measure the correlation between the organizational systems and
growth of the companies. The findings in Table 4.16 suggested that there was a strong
correlation between the monetary reward system (cash/monetary terms) and increase in
profits at (r=0.333, p>0.01). There was also a significant relationship between the
performance of employees being affected by the implementation of the companies reward
43
system and the increase in the number of projects over the last 5 years at (r= -0.426,
p>0.01).
Table 4.16: Correlation between Growth and Organizational Systems
In the last
five years
our
revenues
have
increased
steadily
In the last
five years
our profits
have
increased
steadily
In the last
five years
the number
of projects
have
increased
steadily
In the last
five years
the number
of our
employees
has
increased
steadily
A monetary
reward system is
the best for
construction
companies
(cash/monetary
terms)
Pearson
Correlation
-.017 .333** .110 .205
Sig. (2-
tailed)
.897 .006 .393 .110
N 63 66 62 62
The performance
of employees is
affected by the
implementation
of the companies
reward system
Pearson
Correlation
-.003 -.135 -.426** .028
Sig. (2-
tailed)
.979 .278 .001 .830
N 64 67 63 62
**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).
4.5.5 Regression of Organizational Systems
The findings in Table 4.17 indicate that the R square is 0.241 which implies that only
24.1% of the profits of the construction companies are determined by organizational
system. In addition, with every increase in one unit of the growth of construction
companies, 0.034 units is determined by monetary reward system, 0.072 units determined
by the system to measure employee performance and the employment management
system by a margin of 0.077units.
MRS= Monetary Reward System
SMEP= System to Measure Employee Performance
EMS= Employment Management System
44
The regression equation is presented as follows:
Growth of Construction Companies=2.321+0.034MRS+0.072SMEP+0.077EMS
Table 4.17: Regression of Organizational Systems
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .091a .008 -.050 1.309
a. Predictors: (Constant), The company has a employment management system , The
company has a system in place to measure employee performance, A monetary reward
system is the best for construction companies (cash/monetary terms)
Table 4.18: Regression of Coefficients
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
B Std. Error Beta
(Constant) 2.321 .805 2.885 .006
A monetary reward system is the
best for construction companies
(cash/monetary terms)
.034 .168 -.029 .202 .841
The company has a system in place
to measure employee performance .072 .162 .063 .446 .658
The company has a employment
management system .077 .184 -.060 .418 .678
a. Dependent Variable: In the last five years profits have increased steadily
4.6 Chapter Summary
The findings on the impact of strategy on growth and sustainability of construction
companies revealed that to evaluate having specific strategies enabled the company to
compete successfully in the market. The findings on the impact of organizational
structures on growth and sustainability of construction companies established that good
communication is an important element for the firm’s success. The findings on the impact
organizational systems have on growth and sustainability of construction companies
established that most construction companies have taken up reward systems to keep their
employees in attempt to achieve organization growth and sustainability. Therefore,
internal strategy boosted the capabilities of the companies to grow. Good communication
is an important element for the firm’s success and an appropriate reward system leads to
great employee performance as well as the company growth.
45
CHAPTER FIVE
5.0 DISCUSSION, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction
In this section, the researcher provides a discussion, conclusion and recommendations on
the findings of the research findings. Since the study focuses on the factors affecting
growth and sustainability of construction companies, recommendations and conclusions
of the study are provided on the strategy, organizational structures and systems of the
businesses.
5.2 Summary
The general objective of this study was to investigate the factors affecting growth and
sustainability of construction companies. The specific objectives of this study were as
follows: to evaluate the impact of strategy on growth and sustainability of construction
companies, to determine the impact organizational structures have on growth and
sustainability of construction companies and to establish the impact organizational
systems have on growth and sustainability of construction companies.
The research design that was adopted for this study is descriptive research design. The
population size of contractors in the county was 500 contractors. The sampling frame was
sourced from KeRRA Kiambu county to ensure that it was current and relevant to the
research being done. A sample size of 89 respondents was used to analyze and achieve
the specific objectives of the study. The research relied on primary data (quantitative). A
pilot test was first conducted to adhere to the fundamentals. The pilot test was given to 10
contractors (directors of construction companies) so as to test reliability of the
questionnaire. Descriptive statistics such as percentages and frequency distribution were
used to analyze the demographic profile of the participants. The study also used means to
describe each variable and inferential statistics such as correlation and regression analysis
to determine the relationship between independent and dependent variables.
The findings on the impact of strategy on growth and sustainability of construction
companies revealed that to evaluate having specific strategies enabled the company to
compete successfully in the market. The internal strategy boosted the capabilities of the
companies to grow. The main aim of a strategy is to give a company a competitive
46
advantage. The vision and mission statement of the company clearly outlined the
direction of the company in response to the changes in the business’s external
environment. However, Kenya’s construction companies use traditional methods of doing
business and barely consult professionals for advice to in boosting their growth and
sustainability.
The findings on the impact of organizational structures on growth and sustainability of
construction companies established that good communication is an important element for
the firm’s success. Poor communication on the other hand leads to unmet deadlines,
customer dissatisfaction that may affect the organization growth and sustainability. In
addition, the organization need to dynamically respond to the turbulent business
environment and the lesson learned when going about its operations for successful
growth. The contribution of the employees in the company improves its capacity to grow
and sustain its competitive advantage. Project managers make decisions that provide the
direction of the company and the contributions of others as a basis of the management’s
strategic tool that is essential for enhancing organization performance.
The findings on the impact organizational systems have on growth and sustainability of
construction companies established that most construction companies have taken up
reward systems to keep their employees in attempt to achieve organization growth and
sustainability. Monetary and non-monetary aspects works positively towards what the
organization wants to achieve growth. A good reward system leads to great employee
performance as well as the company growth. Having a plan to monitor the way
employees perform helps the organization identify the areas that need to be improved and
the necessary action needed to ensure steady and consistent growth for the company.
Technology through performance management system and communication system are
also vital for organizational growth.
47
5.3 Discussion
5.3.1 Impact of Strategy on Growth of Construction Companies
Having specific strategies enables the company to compete successfully in a particular
market. The findings indicate that a substantial proportion of the respondents claimed
that the implementation of the company strategy was divided into short term, middle term
and long term goals (m=2.99). Dividing the strategies into long term and short term
strategies enables a company to have an advantage over its competitors in order to
achieve the companies’ objectives (which could be long term profitability or growth of
market share). Similarly, Johnson and Whittington (2006) argue that a strategy enables a
company to attain its growth by providing the customers with what they actually want or
need (high benefit) better than its competitors.
A company can come up with an internal strategy to builds on its own capabilities in
order to grow. The findings established that a large number of respondents who claimed
that the company has a strategy (m=2.98). By adopting this strategy, the market share
and turnover increases as higher quality accompanied by lower prices attracts new
customers, thus increasing demand for its products and services. Similarly, Kim and
Mauborgne (2007) confirm that when demand increases with respect to increase in
customers, the market share and turnover also increases. A strategy can help any
organization to compete successfully in the market place as a result of creating new
market opportunities by developing new markets, users and taking the organization into
new markets with a wide range of products in a way that competitor may not be able to
do (Johnson and Whittington, 2006).
Any successful company in the construction industry should be able to monitor and
evaluate its projects for successful growth. A number of the respondents agreed that the
company’s monitoring and evaluation of its strategy had an impact on its growth
(m=2.97). The project manager should have the ability to implement, track and report the
processes of the ongoing projects as well as reschedule to keep the project on track.
During this phase the project manager is responsible for scope management (Francis,
2009). It is during this phase that customer deliverables are produced and the project
manager is responsible for quality assurance and deliverable signoff. In addition the
project manager is also responsible for executing the risk management plan and ensuring
that risks have little or no unexpected impact on the project (Wideman and Westland,
48
2007). Once the project has begun, the project manager must have a strategy to
effectively monitor the progress of the ongoing or completed projects against the
baseline.
Many project activities may be occurring simultaneously and may be difficult to control
(Spinner, 1992). In order to stay involved with all phases of the project, the project
manager will establish a routine project review strategy and communication plan to
ensure current, accurate and consistent progress feedback. The frequency of each project
tracking/review is normally a function of the project’s remaining duration. As the project
draws to a close, the frequency should increase. Other variables such as project phase,
complexity, management visibility, overall cost, current performance, and proximity to
major milestones are also considerations. During the entire execution phase, the team
should adopt a proactive philosophy and think ASAP by establishing goals to out-perform
the target project. A healthy amount of pressure should be maintained by the project
manager to keep float usage at a minimum (Francis, 2009). The success of a project is
often determined by the strategy and recovery techniques the project manager uses when
problems arise or changes in scope are made. The methods used to put a problem project
back on a successful course are the same as those used to develop the original project
execution plan. The ultimate goal is continuous schedule, resource and budget
optimization (Floyd and Woolridge, 2002).
The main aim of a strategy is to give a company a competitive advantage (McKinsey &
Company, 2007). A number of the respondents agreed that their companies had a vision
and mission statement clearly outlined (m=2.96). This refers to the concepts and ideas
that a business is built on. These actions are planned by a company in response to the
changes in the business’s external environment. Similarly, McKinsey & Company (2007)
suggests that a vision and mission statement should be simple and hold great meaning to
the organization or company. They serve as a guide towards achieving the organization
objectives.
49
5.3.2 Impact of Organizational Structures on Growth of Construction Companies
Getting the right information to the right person at the right time is an important element
of good communication (Kerzner, 2006). The findings indicate that a substantial
proportion of the respondents claimed that there was an efficient communication system
in the company is from top management to subordinates (m=2.70). According to Judge
(2009), communication is the transfer and understanding of a message. It is through
communication that an organization can transfer and receive messages from its
employees, customers and react to changes in both its external and internal environment
(Noe, 1996). A number of the respondents agreed that the company’s performance is
directly affected by effective communication (m=2.52). Poor communication on the other
hand leads to unmet deadlines, customer dissatisfaction, and misunderstanding between
the employees and senior management (Baker, 2007). It is important to have
communication in an organization since it links people, information and ideas together
(Phillips, 2006).
Adaptability refers to how effective the organization is when responding to changes in the
business environment and how it takes the whole experience as a lesson (Alexandria,
2011). A large number of respondents who claimed that the ability of the company to
adapt to changes in the environment led to greater company performance and sustainable
growth (m=2.69). The adaptive and absorptive capacity look at how the organization
responds to a dynamic business environment and the lesson learned when going about its
operations (Withers et al., 2009). On the other hand, Legerer et al. (2009) suggests that an
organization has to go through learning process for there to be growth and sustainability.
In its adaptive capacity which factors in the commitment of the management, the
operation systems in place, transfer of knowledge, willingness to experiment and
integration that leads to greater performance of the company (Jenez-Gomez et al, 2005).
The contribution of the employees in the company improves its capacity to grow
(Armitrage, 2005). A number of the respondents agreed that the subordinates in the
company are given a platform to voice out their opinions (m=2.60). Even though the
project managers make decisions that provide the direction of the company, the
contributions of others can be a basis of the management’s strategic tool that is essential
for enhancing performance (Ingraham et al., 2003). A number of the respondents agreed
that the company has a formal organizational structure (m=2.56). A contractor needs to
50
clearly articulate in the implementation of the company mission and vision as it plays a
vital role towards how effective the learning process is in the organization (Strichman et
al., 2008). This also facilitates the development of construction firms to cope with the
dynamic changes in the industry (Lei et al, 1999).
A clearer chain of command is more effective in the decision making process and greater
the efficiency of the company. Quite a few number of the respondents claimed that the
use of dictatorial communication style in the company was more effective (m=2.38). It
seems that the dictatorial communication channels are not an effective way of
communication as the company directors are the sole decision makers in the company
(m=2.82). Kassing (2009) suggests that a top down approach has the disadvantage of
having poor communication since there is some sort of dictatorship on how things are
done in the organization. This may hinder the growth of construction companies. In this
case, Lee (2002) suggests that the organizational capacity is needed for a company to
perform well. Sowa et al. (2004) argues that the organization capacity should guide on
how members of staff in an organization should act, ensure a set outcomes of the
organization are fulfilled with a clear indication that the organization is effective to give
direction on the impact of structures, processes and management on an organization’s
effectiveness.
5.3.3 Impact Organizational Systems Have on Growth of Construction Companies
A reward is any form of compensation that an employee gets from the company for a
service rendered. A substantial proportion of the respondents claimed that the monetary
reward system is the best for construction companies (cash/monetary terms) (m=3.38).
Monetary rewards are the rewards given to employees that involve money and includes
incentives such as increases in salary (McLagan, 1995). Satisfaction of employees in
regard to monetary compensation is important since it can influence the way the
employees behave and perform and this has a direct impact on the performance of the
company (Atul, 2011). Kiyoshi (2006) suggests that monetary incentives are most
appreciated by the younger workers in an organization because they tend to attach higher
value in the wages or salaries they get as opposed to more mature worker who factor in
other needs such as promotion and status.
51
A number of the respondents agreed that the performance of employees is affected by the
implementation of the companies reward system (m=2.87). A good reward system should
address the behavior of the employees, how to go about distribution of the rewards, the
form in which the rewards will be given to the employees that is whether they will
include: equity in the company; money; or the implementation of social benefit programs,
and the way compensation will be measured for different employees at different levels in
the organization (Kesler 2011). Lawler (1993) points out that the impact that a reward
system has on the growth and sustainability of a construction company is affected by the
influence it has on how communication takes place, how employees get motivated to
work harder, and the job satisfaction that they get. This in turn leads to a pattern in the
way the employees behave since they start to have certain perceptions and a belief system
that is in turn seen to be what they company stands for ().
Performance is the accomplishment of a task and it is measured against already standards
cost, speed, accuracy and completeness. The findings indicate that a substantial
proportion of the respondents claimed that the company has a system in place to measure
employee performance (m=2.52). Management of performance entails to having
performance measures that quantitatively give important information about the
organization in regard to the services, products and its processes. Similarly, Boland et al.
(2000) points out that effective performance measures give a direction on how well the
organization is doing. Performance measures are synchronized to the organization’s
objective and can show when the organization drifts from its goals (Kazmi, 2002).
With the current changes in technology, electronic communication plays an important
role in facilitating ease of communication in any organization (Sandhu, 2011). The
findings revealed that a large number of respondents who claimed that the company has
an accounting system (m= 2.75). Also, a number of the respondents agreed that the
purchasing and procurement system has improved the efficiency and growth of the
company (m= 2.62). The advantage of using electronic communication is that it is instant
regardless of the location of the message’s recipient which has a positive impact since
with timely delivery of messages to employees, meeting deadlines on current projects is
much more achievable and saves on unnecessarily costs such as increasing the set budget
to accommodate other expenses that are due to slow communication of the management’s
decision (Judge et al., 2009).
52
5.4 Conclusions
5.4.1 Impact of Strategy on Growth of Construction Companies
Having specific strategies enables the company to compete successfully in a particular
market. A company can come up with an internal strategy to builds on its own
capabilities in order to grow. Any successful company in the construction industry should
be able to monitor and evaluate its projects for successful growth. The main aim of a
strategy is to give a company a competitive advantage. The vision and mission statement
of the company should be clearly outlined in response to the changes in the business’s
external environment. However, Kenya’s construction companies use traditional methods
of doing business and barely consult professionals for advice on how they can go about
affairs in their companies a good example of something lacking in their companies is
being implementation of strategic goals with timelines when it comes to future planning.
5.4.2 Impact of Organizational Structures on Growth of Construction Companies
Getting the right information to the right person at the right time is an important element
of good communication. Poor communication on the other hand leads to unmet deadlines,
customer dissatisfaction, and misunderstanding between the employees and senior
management. It is important to have communication in an organization since it links
people, information and ideas together. Organization need to dynamically respond to the
turbulent business environment and the lesson learned when going about its operations
for successful growth. The contribution of the employees in the company improves its
capacity to grow. Even though the project managers make decisions that provide the
direction of the company, the contributions of others can be a basis of the management’s
strategic tool that is essential for enhancing performance. A clearer chain of command is
more effective in the decision making process and greater the efficiency of the company.
Collaboration promotes effective flow of various activities that can sustain organization
efforts and general performance.
5.4.3 Impact Organizational Systems Have on Growth of Construction Companies
With the constant change in the world, most organizations have taken up reward systems
as a way of keeping their employees in a bid to avoid high turnover rates. Monetary and
non-monetary aspects works positively towards what the organization wants to achieve.
A good reward system leads to great company performance and positive company
growth. Having a plan to monitor the way employees perform helps the organization
53
identify the areas that need to be improved and the necessary action needed to ensure
steady and consistent performance of employees. Performance management is vital as an
organizational system in construction companies with regard to their growth. With the
current changes in technology, electronic communication plays an important role in
facilitating ease of communication in any organization.
5.5 Recommendations
5.5.1 Recommendation for Improvement
5.5.1.1 Impact of Strategy on Growth of Construction Companies
The study recommends that any company should specific strategies to compete
successfully in a particular market. The strategy should enable the company builds on its
own capabilities in order to grow. Monitoring and evaluation of projects are essential for
successful company growth. The implementation of a competitive strategy gives a
company a competitive advantage. The vision and mission statement of the company
should be clearly outlined in response to the changes in the business’s external
environment. Construction companies should use methods of doing business and consult
professionals for advice together with implementation of strategic goals with timelines for
a successful future.
5.5.1.2 Impact of Organizational Structures on Growth of Construction Companies
The study recommends that good communication within the company is essential for its
growth. Good communication leads to meeting of organization deadlines, customer
satisfaction, understanding between the employees and senior management. It is
important to have communication in an organization since it links people, information
and ideas together for the organization growth. Organization should have a good ability to
dynamically respond to the turbulent business environment and lessons should be learned
on the company’s operations for successful growth. The contribution of the employees
should be taken into consideration to improve the company capacity to grow. There
should be a clearer chain of command of communication for more effective decision
making process and greater the efficiency of the company operations. Collaboration
between different organization functions should help promote effective flow of various
activities that can sustain organization efforts and general performance.
54
5.5.1.3 Impact Organizational Systems Have on Growth of Construction Companies
The study recommends that the rewards system should be optimally utilized to keep the
employees working in the organization as well as avoid high turnover rates. Monetary
and non-monetary should be combined well to work positively well towards the
achievement of the organization goals and objectives. A good reward system should lead
to great company performance and positive company growth. Having a plan to monitor
the way employees should help the organization identify the areas that need to be
improved and the necessary action needed to ensure steady and consistent performance of
employees. Performance management should be important in ensuring the gals of the
company are met and the use of technology should facilitate efficient communication
within the organization.
5.5.2 Recommendations for Further Studies
The main objective of this study was to investigate the factors affecting growth and
sustainability of construction companies. The study recommends that future researchers
can look at the role that market growth strategies play on the construction company
market share, understand how market growth strategies are developed (process) and how
the strategic market types affect the market share of these companies.
55
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APPENDICES
APPENDIX I: INTRODUCTORY LETTER
Dear Sir/Madam,
RE: RESEARCH STUDY
I am pleased to inform you that I am a student at United States International University
pursuing a degree of Masters in Business Administration (MBA). As partial fulfillment
for my degree, I am conducting research on organizational factors affecting growth and
sustainability of construction companies.
Kindly note that any information given by you will be confidential and will not be used
for any other purpose other than for this research project. Your contribution and
assistance is really appreciated. I look forward to receiving your response.
Yours faithfully,
Thuku Sharon Wamahiga
Mobile Number: 072-232-8137
Email: swthuku@gmail.com
62
APPENDIX II: QUESTIONNAIRE
SECTION A: BACKGROUND INFORMATION
1) Gender…..…………………………………………………………………….
2) Age……….……………………………………………………………….......
3) Marital
Status…………………............................................................................................
4) Nationality…………………………………………………………………………
5) Company name (optional)
……………………………...…..…………………………………
6) What position do you hold in the company?
………......……………………………………...
7) How old is the company?
Less than 2 years
3-5 years
6-8 years
8-10 years
Over 10 years
8) Indicate to what extent you are responsible in your company
Director
Top Management
9) What is the number of employees in the company?
1-10
11-20
21-30
31-40
41-50
More than 50
63
SECTION B: IMPACT OF STRATEGY ON GROWTH AND SUSTAINABILITY
OF CONSTRUCTION COMPANIES
Indicate the extent to which you agree with the following statements by using a scale of 1
to 5 where 1= strongly disagree and 5 = strongly agree.
Str
on
gly
Dis
agre
e
Dis
agre
e
Neu
tral
Agre
e
Str
on
gly
Agre
e
10) Having a good company strategy affects the
performance of the company
1 2 3 4 5
11) It is a necessity for company’s to have a vision and
mission statement and company objectives
1 2 3 4 5
12) Having short term, middle term and long term goals
affects strategy implementation
1 2 3 4 5
13) Having a strategy is necessary for efficient and
effective operations in a company
1 2 3 4 5
14) The leadership in the company plays a major role in
the implementation of the strategy
1 2 3 4 5
15) Having a good company strategy affects its growth
and sustainability
1 2 3 4 5
16) How do you think companies can succeed in using strategy to ensure that they have
consistent growth and sustainability
….…………………………………………………………………………………………
…………………………………………………………………………………………….
64
SECTION C: IMPACT OF ORGANIZATIONAL STRUCTURES ON GROWTH
AND SUSTAINABILITY OF CONSTRUCTION COMPANIES
Indicate the extent to which you agree with the following statements by using a scale of 1
to 4 where 1= strongly disagree and 5 = strongly agree.
Organization’s hierarchy
Str
on
gly
Dis
agre
e
Dis
agre
e
Neu
tral
Agre
e
Str
on
gly
Agre
e
ORGANIZATION’S COMMUNICATION CHANNEL
17) The communication is from the top management
to subordinates
1 2 3 4 5
18) The subordinates are given a platform to air out
their opinions
1 2 3 4 5
19) The management forces decisions on the
subordinates
1 2 3 4 5
20) Participative communication style is more
productive
1 2 3 4 5
21) Dictatorial communication style is more effective 1 2 3 4 5
22) The organization has adopted use of emails;
mobile telephones to communicate to workers in
the field
1 2 3 4 5
23) The company’s performance is directly affected
by effective communication
1 2 3 4 5
24) Effective communication leads to great company
performance and positive company growth and
sustainability
1 2 3 4 5
ORGANIZATIONAL CAPACITY
25) The company makes quick response to
changes/turbulence in the business environment
1 2 3 4 5
26) The employees go for training programs to help
them cope with changes in the construction
industry
1 2 3 4 5
27) The organization is open to learning and make
change to facilitate performance
1 2 3 4 5
28) Good organizational capacities leads to great
company performance and positive company
growth and sustainability
1 2 3 4 5
ORGANIZATION’S HIERARCHY
29) There is a chain of command in the organization 1 2 3 4 5
30) The company directors are the sole decision
makes in the company
1 2 3 4 5
31) There are different departments in the company
responsible for Marketing, Finance, HR
1 2 3 4 5
65
32) What do you think are the other factors facing organizational structures (with
regard to communication channel, capacity, hierarchy) in construction companies
………………………….……………………...…………………………………
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.................................................................................................................................
33) Kindly suggest some recommendations on how the above challenges can be
addressed
……………………………………………………………………….……………
……………………………………………………………………………………
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66
SECTION D: IMPACT ORGANIZATIONAL SYSTEMS HAVE ON GROWTH
AND SUSTAINABILITY OF CONSTRUCTION COMPANIES
Indicate the extent to which you agree with the following statements by using a scale of 1
to 4 where 1= strongly disagree and 5 = strongly agree.
Str
on
gly
Dis
agre
e
Dis
agre
e
Neu
tral
Agre
e
Str
on
gly
Agre
e
REWARD SYSTEMS
34) A monetary reward system is the best for construction
companies
1 2 3 4 5
35) A non-monetary system is the best for construction
companies.
1 2 3 4 5
36) The performance of employees is affected by the
implementation of the companies reward system
1 2 3 4 5
37) Having a reward system has led to acquisition of
talented employees
1 2 3 4 5
38) The employee turnover rate has been reduced by the
company reward system
1 2 3 4 5
39) A good reward system leads to great company
performance and positive company growth and
sustainability
1 2 3 4 5
PERFORMANCE MANAGEMENT
40) Performance management system is crucial for
attainment of company vision, mission and objectives
1 2 3 4 5
41) Companies with a performance management system
perform better than companies without a performance
management system
1 2 3 4 5
42) There are employee performance measures in the
company
1 2 3 4 5
43) The individual performance of each employee should
be reviewed annually
1 2 3 4 5
44) The top management in a company plays a major in
its performance and implementation of the
performance management system
1 2 3 4 5
45) A good performance management system leads to
great company performance and positive company
growth and sustainability
1 2 3 4 5
46) What other performance management measures do you think that can facilitate
positive growth and sustainability of construction companies
………………………………………………………………………………………
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