Two sides of the same coin

Failure and success are stated to be two sides of the same coin (Anon). This thesis discussed business failure and its determinants in the construction industry because, knowing the signals of impending failure and being ready to work on the root causes, is the best way to manage it. Although failure is painful, it allows people to accept criticisms, suggestions, and to search for root causes of the failure (Roberts, 1992). For a construction company to stage a turnaround, it must first identify root causes of failure and then work on the solutions. Consequently, business success and factors were studied to see if the two are actually two sides of the same coin. Table 2.7 shows the comparison of the top ten factors for both business success and business failure.

Table 2.7: Business success factors vs. Business failure success

Business failure factors Business Success factors

Determinants

1. Management incompetence/experience

2. Insufficient capital/Scarcity of financial resources

3. Lack of business knowledge

4. Fraud

5. Lack of organisational knowledge

6. Poor relations with clients/government

Symptoms 7. Insufficient profit

8. Heavy operating expenses

9. Inadequate sales

10. Poor company image

Factors

1. Strategic organizing, planning and goal setting

2. Honesty, Integrity, Reliability & Dependability

3. Capitalization and Financial management

4. Good Profit margins

5. Company image/Reputation

6. Competitive pricing/ Product affordability

7. Company experience in the market

8. Leadership Knowledge/Experience in

Construction

9. Good and Qualified Employees

10. Having a thriving organizational culture

The other side of the coin

 Management incompetence – Leadership knowledge and experience

 Insufficient capital – capitalization and financial management

 Lack of business knowledge –strategic organizing, planning and goal setting (business

strategy)

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 Lack of organisational knowledge – Having a thriving organisational culture, as well a

good qualified employees

 Insufficient profit – Good profit margins

 Inadequate sales – competitive pricing/product affordability, as well as company

experience in the market

 Poor company image – company image/reputation

Table 2.7 shows that failure factors and success factors are more often than not, two sides of the same coin. It shows how the two intertwine. For example, in order to achieve ‘strategic organizing, planning and goal setting,’ in a company, there has to be a ‘competent management’ that knows what it is doing – a management with the right business and organizational knowledge to set out the business strategy and direction for the company. In order words, if there is management incompetence/experience, the company cannot strategically and successfully organize, plan, and set goals that will be realized. Management incompetence/experience is also a lack of leadership/experience in the industry and will also affect financial management. Insufficient capital/scarcity of financial resources is inversely related to, or is the flip side of ‘capitalization/financial strength’. Insufficient capital affects reputation and company image, affects funding of projects and hence profit levels. It also affects the ability of management to hire good and skill employees, since they will have to pay more. Furthermore, a lack of business knowledge results in poor relationship with clients and poor company image. Many of these factors affect each other directly or indirectly.

Table 2.7 also shows how a number of common themes can be derived from in business failure and success. These are:

 Management and leadership, and leadership characteristics  Capitalization and financial management

 Organizational knowledge/culture  Business knowledge/strategy  Company image/reputation

 Industry/market knowledge: sales and marketing/bidding strategy, profitability

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2.13

Management

It seems to be a general consensus among researchers that the major and number one determinant of business failure in the construction industry is “Management Incompetence” (Dikmen et al, 2010; Arditi et al, 2000; Everett and Watson, 1998; Kale and Arditi, 1998; Stead and Smallman, 1999; Chan et al, 2005; Byabashaija, 2007; Perry, 2001; Harada and Kageyama, 2011). But what does management incompetence mean? Perhaps looking at the words “management” and its intricacies, might aid our understanding. There is also a misunderstood meaning of management and leadership in the construction industry (CIOB, 2008; Ng, 2011; Ricketts, 2009, Kotter, 1990). This section is designed to give an overview of “Management and Leadership’ and what constitute an incompetent or ineffective manager. Several researchers have shown that “Leadership” is the focal point and the necessary ingredient for a successful turn-around and for changing a company from good-to-great.

In succinct terms, “management means getting things done effectively through people to achieve the desired results (Ng, 2011). This is arguably the most concise definition of management found in literature. A similar definition is that by Kotter (1990), which states that “management is the skill of getting results with the cooperation of other people”. If management is a skill, therefore, it can be learnt. Cole (2004) defined management in-terms of its functions. It states; “management is a process that enables organisations to set and achieve their objectives by planning, organising, controlling, and motivating. Cole viewed management as a collections and synchronisation of a variety of activities carried out by an individual who has been assigned to a “manager’s” position.

2.13.1 Management functions

Here is a summary of management functions/activities as described by Cole (2004).  Planning Deciding the objectives and goals of the organisation and

preparing how to meet them.

 Organising Determining activities and allocating responsibilities for the achievement of plans; coordinating activities and responsibilities into an appropriate structure.

43  Motivating Meeting the social and psychological needs of employees in the

fulfilment of organisational goals.

 Controlling Monitoring and evaluating activities, and providing corrective mechanisms.

According Bennis (2009), the rules of management have changed because the game has changed. The game is much faster and more competitive today than it was several years ago, and the competition for good people and pressure for superior performance is greater than ever. Leadership skill and abilities are now of greater a ‘must have’ for managers in organisations.