ORGANIZATIONAL FACTORS AFFECTING GROWTH

AND SUSTAINABILITY OF CONSTRUCTION

COMPANIES

BY

THUKU SHARON WAMAHIGA

UNITED STATES INTERNATIONAL UNIVERSITY

AFRICA

ii

SUMMER 2014

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.

iv

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.

vii

DEDICATION

I hereby dedicate this piece of work to my beloved father-Mr.Thuku, mother-Mrs Thuku

and the rest of the family.

viii

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

ix

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

x

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

xi

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

1

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,

2

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).

3

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

4

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.

5

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.

6

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

7

study. Chapter four presents the results and findings of the study. Chapter five is on the

summary, discussion, conclusion and recommendations of the study.

8

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

9

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

10

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).

11

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).

12

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

………………………….……………………...…………………………………

……...........................................................................................................................

.................................................................................................................................

33) Kindly suggest some recommendations on how the above challenges can be

addressed

……………………………………………………………………….……………

……………………………………………………………………………………

……………………………….………………………………….…………………

……………………………………………………………………………….......

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

………………………………………………………………………………………

………………………………………………………………………………………