University of Salford

School of the Built Environment

Date: 14th January 2011

Student Name: Nahallage Don Ravindra Ben Guneratne

Roll Number: PYP 382 (@00255238)

Title of Assignment: International Joint Ventures; The Culture of Construction in India and the Global Financial Crisis: Lesson Learned & Way Forward

Module Name: Culture and People

Programme of Study: Msc in Quantity Surveying

Year of Study: 2010 - 2011

Full Time/Part Time/Distance Taught: Distance Learning

Declaration I confirm that this work is mine, I have not plagiarized and there is no hidden collusion. I have read and agree with the Declaration on Conduct of Assessed Work Form on the student intranet, URL: http://intranet.sobe.salford.ac.uk/studentintranet_share/bb_Declaration_Conduct_Assessed_Work.pdf

International Joint Ventures; The Culture of Construction in India and the Global Financial Crisis: Lesson Learned & Way Forward

Report Submitted by;Ben Guneratne (Qserve Global Pvt Ltd)

Report Submitted to theBoard of Directors ofPink City Expressway Pvt Ltd

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Table of Contents

Executive Summary .................................................................................... 2

Background ................................................................................................ 3

Introduction ................................................................................................. 5

Pink City Expressway Pvt. Ltd and Organisational Culture: ........................ 6

Strategic Analysis ....................................................................................... 6

Organisation Background ........................................................................ 6

PCEPL & Organisational Culture ............................................................. 7

Proposal for a Way Forward ................................................................... 12

The Change Management Process........................................................... 14

Rethinking Corporate Culture for an Internally Consistent Organisational Culture ...................................................................................................... 16

Conclusion ................................................................................................ 18

References ............................................................................................... 19

Presentation to the Board of Directors (Annexure A) ................................ 22

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Executive Summary

The Global Economic Crisis impacted many industries none so much as the construction industry. This report looks at the impact of the crisis on a international joint venture project between Dubai and India. The report examines the impact of financing delays on project implementation and how the culture of an organisation can positively or negatively affect a project. This report is intended for the directors of Pink City Expressway Private Limited (PCEPL) as a midpoint review of where they are at and the way forward post Global Financial Crisis. The report covers the economic crisis, background & current situation of the organisation, recommendations on future strategies for improvement and a presentation to the management on the key points discussed.

Background: The Economic Crisis

The collapse of the American mortgage market had a ripple effect on global financial markets worldwide. Overnight short term and long term credit markets dried up and access to capital was hard to come by. The effects of this financial melt down had an adverse effect on all industries especially in the construction industry which is often referred to as the barometer of an economy. All countries around the world downgraded their growth rates and the whole world slowed down.

Current Situation of the Organisation

Just before the financial meltdown Pink City Expressway Private Limited was formed as Special Purpose Vehicle to undertake a mammoth road expansion project in India. Joint venture partners were a Dubai based diversified conglomerate namely Ascon Group and an India based construction company namely KMC Constructions. Both companies embarked on the 6 Laning of the Guragon Jaipur highway which is approximately 267 km long and was 4 lanes wide. The project was marred by financial delays; ad hoc management changes and substantial delays in project performance, in part a residual effect of the global financial crisis. These issues continue to date. The report found that PCEPL had a mixture of a power and role type organisational culture. The management style was identified as top down with a reactionary style of doing business. Top management reacted first rather than anticipating risks and having in-built remedial strategies. Whilst the organisation does have some problems, it also has much strength that can be built on to take this project forward.

Recommendation The Way Forward

The author on analysis of the corporate culture of the organisation recommends a change management approach to address the current challenges being encountered. The author found that the organisation has many positives including strong human capital; strong leadership qualities among its management and the need to excel which can be built on, in moving forward.

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Background

The economic crisis affected all regions of the world in varying degrees and a few sectors were particularly affected by this crisis namely the construction industry (e.g. Ruddock & Ruddock, 2010:1; Frei, 2010). The global financial crisis was so severe that consequences are still being felt three years later. Many commentators made comparisons to the great depression due to the severity and reach of the crisis through out the world. As a result of the crisis the short term availability of money all but disappeared (Friei, 2010:2) which had a significant impact on the construction industry, an industry reliant on capital injections. The key ingredient leading to the crisis was the collapse of the American mortgage market leading to a domino effect with the crisis affecting other sectors. The impact of the crisis on Dubai and India is particularly relevant to the organization being examined; hence analysis of the crisis will focus on these two countries.

Dubai and India have significant linkages especially in the context of the construction industry. Much of Dubais construction labour force is sourced from India. However before looking at the Dubai-India link and its impact on the company being examined in this paper, first let us look at the global financial crisis and how it unfolded. As mentioned earlier, the global financial crisis affected all regions of the world. The impact of the crisis in India was fairly muted. According to Ruddock & Ruddock, India avoided the worst of the economic recession and the construction industry will keep pace with that of China with about ten percent growth (2010:7). Of course this figure should be looked at within the context of the construction industry in China which is about 3 times the size of Indian construction Industry (Ibid). Nevertheless, if Indias estimated growth in 2010 in GDP is examined, it was estimated at 8.8 and 8.4 in 2011 (IMF, 2010). So in terms of overall growth, it can be seen that India was and is not particularly affected by the crisis. In contrast Dubai is another story. Dubai was one of the worst affected countries in the United Arab Emirates. Construction growth was expected to slow from 20% in previous years to about 15% in 2009 (CIOB Policy Brief, 2009). With the collapse of major banks (Lehman Brothers in September 2008) the availability of short term money vanished which resulted in interbank lending disappearing (Frie, 2010). This particularly affected Dubais construction industry and as a result countless construction projects were halted. According Frie, many contractors in response to the crisis prepared for the down turn by rationalising their operations and becoming leaner organization (2010). The primary cause for this slowing down in the construction industry was a lack of financing stemming from the Global Economic Crisis (Wilkins, 2009). Why was Dubai so severely affected by the crisis? Well according to Archer (2009), Dubais infrastructure could never keep pace with its pace of development. The impact of the financial crisis has had far reaching consequences for investment and development in not only Dubai but especially for those companies investing abroad. Many large construction companies had to down scale ongoing projects and in some instances abandon proposed projects due to lack of finance.

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For some companies projects untaken outside of the Gulf had to be reconsidered, especially finance of such projects. It has been estimated that approximately US$ 500 billion worth of projects have been put on hold since the financial crisis began (Wilkins, 2009:21). Many projects found themselves in serious trouble as funding that was freely available prior to the crisis was now scarce and in short supply. Construction companies faced many social problems with a large number of suicides of construction workers who suddenly found themselves out of work and in debt to their employment agents.

It can be seen that the crisis had vastly different impact on both Dubai and Indias construction industry however the impact of the crisis had particular impact for the company being examined in this paper.

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Introduction

Pink City Expressway Private Limited (PCEPL) was formed through a Special Purpose Vehicle (SPV) between the ASCON Group of Dubai and KMC Group of India. The company was formed as result of an award by the National Highways Authority of India (NHAI) for purpose of the 6 laning of the Gurugon Highway Gurugon to Jaipur in India. PCEPL engaged Qserve Global (QSG) to act as an independent project consultant to monitor the cost of the project and ensure the project meets its milestones. The project commenced in the wake of the global financial crisis and was severely affected by its impact as the ASCON group based in Dubai was the main investor in this project with an interest of 51%.

The project is a Build Operate and Transfer (BOT) initiative that will be an ongoing concern for at least 40 years. PCEPL together with QSG will be engaged for the duration of this BOT project. The impact of the crisis has had a significant impact on the project finance however in addition to the consequences of not receiving the financial draw-downs on schedule there has also been a significant impact on the morale and organizational culture of PCEPL. This has had a significant impact on the ability to do business. The organization is based in India and consists of mainly Indian nationals however the company has also engaged QSG from Sri Lanka as mentioned and several international project management consultants from varying nationalities. QSG in its role as independent consultant is intending this report as a recommendation to PCEPL on how to further improve its delivery and get the project on track. This report will provide an analysis of the current organization culture including the strengths and weakness and opportunities to capitalize and areas for improvement.

Part of QSGs mandate as subsidiary of this organization is to ensure the organizations main project which is the 6 laning of the Gurugon Highway from Gurugon to Jaipur in India to be constructed in time within the requirements of the concessionaire agreement. Despite the best efforts of PCEPL, the project is behind schedule and this is foreseen as having a huge impact on the project as the concessionaire agreement signed between PCEPL and NHAI for the purpose of this project has stringent conditions. The delays in the project will have serious financial implications on the project which in turn will have serious repercussions on PCEPL.

In light of this emerging problem QSG has prepared a report and presentation to be presented to the board on how to mitigate this situation. The first step is having a hard look at the organizational structure; the influence of culture on the structure and strategies for improvement in this new reality of post global financial crisis particularly focusing on the project at hand given the importance to the organization. The next section of the report will provide a strategic analysis of the current situation of the organization and will be followed by an in depth look at the organization culture present in PCEPL and examine the strengths and weaknesses of the culture of this organization.

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Pink City Expressway Pvt. Ltd and Organisational Culture:

Strategic Analysis

Organisation Background

Fong and Lung (2007) argue that the construction industry is a project based industry as such each project has different people with professional knowledge and experience associated, this requires a necessary requirement to work and coordinate with others from different companies (157). In this context it is hoped that this report will be taken with the intention it is prepared- to facilitate the end goal which is to ensure that the project is completed with minimum cost to PCEPL with maximum utilisation of available expertise.

The Concessionaire agreement requires PCEPL to Widen and Up-grade the 4 existing lanes to a 6 lane road from Gurgaon to Kotputli in Haryana and Rajasthan in India. The road has not been closed and is currently being used. The project was awarded in August 2008 at the initial stages of the global financial crisis however the impact on the project has been profound as financial drawdowns only started coming through around April 2009. The gap between the project commencement and actual receipt of financial draw downs had a negative impact on the project as can be imagined. The project is worth 1859.7 Crore (INR) which is approximately USD 413 million at the current rate of 1 USD = 45 INR (source xe.com).

The SPV consisted of the ASCON group with a 51% stake and KMC- an India based company with 49% but just as the project commenced, Dubai underwent a massive crisis where ASCON was unable to provide the necessary financial draw downs that were required at the times required. This caused huge delays to the project whose repercussions are still being felt with the project being more than 1 year behind in terms of time. This has had huge impacts on the viability of the project- part of the concessionaire agreement is that until project completion, the current toll collection is to be kept in a interest bearing escrow account and will only be credited to PCEPL on timely completion of the project. If the project is not completed on time, the Concessionaire agreement allows, NHAI to not pay the collected toll. This will have a significant impact on the profitability of this project given that it is a BOT.

Liquidated damages (LDs) will come in to effect for major delays and the ability to recuperate costs of project become less realistic as the project gets further and further delayed. The impact of these factors has influenced the organisational culture that has developed in PCEPL and its relationship with various stakeholders. The severity of the impact of the lack of access to finance could have been reduced if the organisation had maximised its use of its human capital and managed the project in a slightly different manner in terms of its organisational culture. In the next section, the management style of the PCEPL will be described and analysed.

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PCEPL & Organisational Culture

The recent global financial crisis illustrated the importance of checks and balances in financial sectors of an economy including the corporate world. Although many countries are making headway in terms of recovering from the crisis, it is important to understand how the way an organisation conducts business influences the success or failure during the a crisis situation. This is particularly important in examining the construction industry, as finance is integral to the success or failure of any construction project. However, capitalising on the strengths of an organisations culture during a crisis can assist in mitigating some of the issues faced by an organisation which will in turn ensure a smooth transition to a post crisis reality. If the organisational management is described, it could be said PCEPL has a very top down approach. Before looking in depth at PCEPL, it is important to understand the different types of organisational cultures that manifests in an organisation.

If the definition of organisation culture is examined, it is described as the personality of an organisation where the culture is symbolic, holistic, and unifying, stable, and difficult to change (Mowat, 2002:3). It can be argued that based on this definition a culture of an organisation develops as a result of what goes in to an organisation- its employees; management and management style to name a few.

According to Singh (2009), Culture is made up of visible and invisible, conscious and unconscious learnings and artefacts (also called as practices, expressions, forms and symbols) of a group where the culture is the shared mental model (2). In the context of PCEPL, its organizational management styles are very much in line with this idea of culture as conscious and unconscious leanings. PCEPL is based in India and hierarchy is very important in Indian cultures and by extension, it would be expected that the management style would manifest from this idea. In examination of the organizational culture of PCEPL, it is very much a top down management style in line with this thinking.

According to Borgatti (1996), corporate culture is different to an organisations culture and generally a strong organisation culture will be internally consistent, widely shared and give employees a clear idea as to what appropriate behaviour is in a given situation (in Mowat, 2002:3). It is different to corporate culture in that it is not simply the vision and mission but more how employees express themselves in day to day communications. Organisational culture allows employees and management to know how to conduct day to day business, in the case of PCEPL, the development of this culture was ad hoc as the organisation although had a widely shared mandate , lacked internal consistency within the organisation. This was because of the challenges faced at the commencement of the project as there was a lack of clarity as to who was in charge as a result of the financing issue. This point will be discussed further on in the report. However in short, for the employees of the organization, the mixed messages and lack of clarity emanating from the top, led to the development of a fragmented organization culture that was divided based on loyalty to particular individuals-which was an unhealthy situation.

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Let us examine what we mean by organisational culture and its relevance to this report. Well to put it simply, all organizations have an organisation culture that goes beyond a corporate culture and this culture defines the way things get done in an organization. The culture of an organizing determines the drive and action of an organization; it guides employee thinking processes and how they act and feel. In defining culture DeWitt (2001 in Mowat, 2002:4) describes culture as where philosophy expresses values; values are manifest in behaviour; and behaviour gives meaning to the underlying philosophy. Philosophy, values, and behaviour describe an organizations culture and culture is the glue that holds the organization together. Therefore it can be seen the importance of the development of a healthy organizational culture.

Culture develops and evolves overtime and is influenced by the entities that form the organization - a big part is its employees. Certainly in the case of PCEPL, the organizational culture has developed over time however the dynamics of the SPV has influenced the current culture prevalent through the organization negatively as the SPV partners have not acted as internally consistent entity but rather as fragmented set of organisations pursuing its own interests rather that the organisations shared goal.

It is important to note that culture may be effective at one time, under a given set of circumstances and ineffective at another time. This was and continues to be the case for PCEPL. Theorists suggest that an organization could have one of four types of culture (e.g. in Gameson, 2010:16 & Handy; 1985). They include the following:

Power in this type of organisational culture, power is concentrated among a few people and control emanates from the centre. The organisation here is influenced by one central group or individual and the personal relationships with that group or individual is what matters. Generally in this type of culture an organisation have few rules and almost a nonexistent bureaucracy. The benefit of this type of organisational culture is that decisions can be made quickly (e.g. in Gameson, 2010:16 & Handy; 1985). In examining PCEPL , certainly its organisational culture has some characteristics of this type of culture

Role balances the power of the leaders with a system of bureaucratic structure and procedures. A role culture organisation consists of people with clearly delegated authority within a highly define structure (e.g. in Gameson, 2010:16 & Handy; 1985). In terms of roles, at the start of the project it was apparent that one particular role was significant in terms of the functionality and decision making in the organisation however as the balance of power in the SPV has shifted so too has the power associated with particular roles.

Task/Achievement evokes internal motivation by providing opportunities to use ones talent and abilities. An organisation that has task culture is where teams are formed to solve a particular problem. Power derives from expertise as long as the team requires expertise (e.g. in Gameson, 2010:16 & Handy; 1985).

Support offers members satisfaction which comes from relationships

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Generally, in organizations, senior management will determine the corporate culture of an organization based on the objectives of the organization. Whilst at the same time, there will be an existing internal/organisational culture among the work force that will also manifest itself in the organization (Montana & Charnov, 2008). The resultant culture tends to be a mixture between what the organization wants and the manifest culture from the workforce. If the characteristics and nature of PCEPLs organization is examined it is quite apparent that the culture is a mixture of Power and Role type of culture. At the commencement of the project the ASCON group had a larger stake in SPV as it was the majority investor and the individual that was put in the position of authority tried to do everything in others words the organizational bureaucracy was not very well developed and everything went back to this person- he made all the decisions. This changed later on when the organization could not provide all the finance. In other words the organizational culture manifested itself based on the stake holding of the organization and although the primary objectives of the organization remains consistent, the internal working culture changed when employees saw internal changes at the top.

As mentioned above PCEPL has a very top down management style with a mixture of role and power culture present in the makeup of its organisational culture. As reaction to the slow progress of the project construction and inability to meet milestones, PCEPL has been adding layers of management in the belief that this will assist in achievement of the project milestones. However the reality has been that increasing layers has created challenges to the various groups involved in the project and the management has become dysfunctional in particular areas.

Initially the ASCON group which had a larger stake in the SPV had a more dominant role in PCEPL and the project was guided by what Dubai wanted in a manner of speaking. The management was shared by both companies with representatives from each group however the President Operations appointed by ASCON had a larger say in what went on and his management style was very much a top down approach with elements of the power culture in place. The project was micro managed and the approach to contractors was adversarial in nature. There was a significant lack of transparency in terms of communication. The adversarial approach taken by PCEPL became a problem especially when the draw downs from Dubai did not come through as scheduled.

Figure 1 below illustrates the organisational structure present at commencement of the project. QSG was engaged to provide independent cost and risk management support to the project. The chart below shows a organisation that has clear reporting lines. Of course the reporting lines could be further broken down however it is clear there was one person who reported to the SPV. From the start of the project, management did not seem interested in mitigating issues that presented instead looked to blame groups or avoid the real issues. This was at the heart of the organisational structure at the time. This caused groups within the organisation to align themselves based on personal relationships relating to the two companies. Concurrently the project was falling behind due to lack of financial draw downs. However if the management had not encouraged an organisational culture that was so individual /personality based, perhaps some of the

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residual issues that are still ongoing could have been avoided. It is not say that strong leadership was not necessary but the resulting organisational culture was one where there was lack of communication between departments with each team blaming the other for issues and money being spent unnecessarily without adequate accountability. There was also an un-willingness to listen to the expertise provided by different stakeholders including the independent consultants such as QSG. Managements adversarial attitude toward not only external consultants but also toward contractors hindered and continues to hinder progress with some contractors having to be terminated or abandoning the sites.

This adversarial relationship between client and contractor is very much a cultural phenomenon and if the nature of the relationship had been adjusted to more of a team environment, perhaps the company would not have faced some if the issues it is now facing today. To address the financing issues, KMC obtained some additional financing and as a result started to get the upper hand in the SPV. That is the inability for Dubai to obtain the financial draw downs in a timely fashion forced KMC to explore options in India as well. This resulted in a shift in the balance of power. Today several more layers have been added to the management of PCEPL several vice presidents have been employed; now representatives of ASCON have also introduced another layer over the

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president to monitor the project. However this has inadvertently caused additional issues- now the president of operations wings have been clipped and as such the staff has again re-aligned themselves along those lines. So again the organisational culture and internal workings have shifted. In addition although representations from each organisation has reached higher levels with top management of each of those companies being a part of the PCEPL, the problem is that still the culture of the organisation remains the same. With essentially groups within the organisation continuing to blame other groups for short comings and lack of team environment in the execution of this project. Figure 2 below provides another organigram which illustrates the current organisational structure.

The above chart shows that senior management, rather than building on the existing organisational structure- created a new one. This was not done in consultation with the former President Operation but rather just decided- this non- consultative process is not conducive to a healthy organisation and the demotion of the former President to a VP created many mixed signals to the staff of the organisation in terms of reporting, to say the least.

In this context QServe proposes the following way forward for the organisation.

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Proposal for a Way Forward

QSG proposes a step by step approach to mitigate the residual impact of the Global financial crisis on this organisation. There is much strength in the current hierarchy of the organisation however each group within the organisation should have specific reporting lines. PCEPL currently looks at the lack of progress in the organisation and affiliates it simply to financials however if the organisation was to re-think how it did business in terms of relationships with the various groups within the organisation some improvements can be made. Many of the issues that are being faced could be solved and processes streamlined. The solutions in the past and now has been for senior management to add further layers to organisation and more reporting lines rather than streamlining existing ones.

One of the major issues that QSG noticed at commencement of the project was that the implementation and progress of this project appeared to be in the hands of one person. This is a project worth1859.75 Crore (INR) or USD 413 million was in practical terms left to one person to manage. Realistically this person should have had a sound organisational structure with clearly delegated roles for staff. However from the start, even qualified personnel were not made use of in a meaningful manner. In fact the president of operations was someone with a very strong personality and he appeared to make all decisions minor and major often micro managing staff. The current structure has many Vice Presidents all currying favour with the top management of PCEPL rather than working together as a cohesive group. So it would have been prudent rather than adding layers to rather build on the existing structure. Based on this premise, QSG believes that PCEPL would benefit from undertaking a change management process.

If a change management process was undertaken, management buy-in is essential for the process to be successfully implemented. According to Egbu (1999), there are several factors that create a favourable environment for an innovative culture in an organisation. Among them of note are support from top management in other words the a strong innovation champion; flexibility in communication- top-own, bottom up and lateral communication and a risk tolerant climate where it is accepted that lessons can be learned through mistakes (Ibid:5). In the case of PCEPL, the author believes that the will is there. If the change management process is to be effective, then PCEPL must be in a position to accept the above factors and champion the cause. This would involve a significant re-structure of the existing organisation followed by team building exercises. As mentioned previously, PCEPL is characterised by its adversarial nature in terms of doing business internally and externally hence for any type of change process to be successful, a culture and climate of openness and willingness to share information, experience and knowledge across teams is essential ( Egbu, 1999:8).

Unfortunately the current situation is that information sharing is one sided and there is no real acceptance of the idea that shared learning can innovate. However QSG believes that PCEPL has the knowledge and the expert personnel required for such an exercise, all PCEPL has to do is be open to this process.

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The next section will provide a brief outline of what the change management process would include and how QSG proposes it should be taken forward.

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The Change Management Process

Mills, Dye & Mills argue that change is an everyday occurrence but when change is significant, this creates attention and forces leaders in organisations to take action (2008). In the case of PCEPL, change was recognised but the steps that were taken were not necessarily the right steps. It is important to understand that leadership and culture are interlinked (Knowles, Reddy & Konczey, 2002). Therefore there is no point in adding layers to an existing bureaucracy but rather it is more beneficial to improve the existing culture of the organisation. Zou and Lee (2008) argue that although there is agreement in both academia and industry that project change management practices can improve project change cost performance , individual change management practices are not equally effective (387-393). However Molly (2007) argues that change is inevitable and occurs to some degree in almost every construction project (12). Although there are various views on the effectiveness of change management, it is the view of the author that based on the events and experiences with PCEPL; it is recommended that a change management at the management level be undertaken.

So what is change management and how will benefit PCEPL? Well change management is a structured approach to shifting individuals, teams and organisation from a current state to a desired future state and the process is positive in that it empowers employees to embrace change (Hiatt and Creasey, 1996-2010). Organisation change management begins with a diagnosis of the current situation (Ibid), in the case of PCEPL the organisation is suffering from multiple reporting lines; lack of cohesiveness within the organisation; lack of communication and adversarial relationships internally between departments and externally causing business to conducted in an ineffective manner.

The positives include strong leadership and qualified personnel. Generally organisations undergo change due to challenges in growth; economic down turns; and changes in strategies to name a few (http://www.cipd.co.uk/subjects/corpstrtgy/changemmt/chngmgmt.htm). However effective leadership is the key to ensure that change happens in a beneficial manner. Given the nature of the organization, first it will be necessary for the two partners to come to agreement on how to manage their involvement without causing employees to align themselves with the parent organizations. In other words, senior management needs to ensure that the rest of the organization takes appropriate cues from the two partners.

During the change management process PCEPL as an organization can look at their mission and vision and re-define it based on the new structure. By redefining their mission and vision as an organisation, PCEPL can create a cohesive vision that has the organisation as heart. According to Molly, there are 6 steps to change management:

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1. Effective change order management is to understand the requirements of the contract fully- in the case of PCEPL it would be to have thorough understanding of the concessionaire agreement

2. Identify the change when it occurs. Change according to a contract can be defined as extra or additional work; defective or deficient plans or disruptions to the work progress and methodology. The case with PCEPL is slightly different as the organizational structure experienced several changes in dynamics as result of external forces outside the confines of the concessionaire agreement. Nevertheless, the impact on the dynamics of the organization and resulting organizational culture has had a significant impact on business and recognizing that change has occurred and dong something about it can only benefit the current project outcome.

3. Notification is the third element and is both internal and external function. 4. The fourth step is documenting the change 5. Preparing for change order request is the 5th step. This is to establish cause and

effect 6. The final step is to attempt to have all parties resolve the change order request

(2007:12)

It is argued that change is the only constant in construction projects and the ability to manage change can determine the success or failure of project objectives. The fact that the SPV was formed for this project and given that this is an ongoing concern it is important that PCEPL recognize that change has occurred and the manner in such it has dealt with is ad hoc and a structure process would be beneficial (Molly, 2007:12).

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Rethinking Corporate Culture for an Internally Consistent Organisational Culture

The change management process will not only involve re-thinking roles but also how they do business. Where PCEPL has a strategic advantage especially in terms of human capital, the organisation can maximise and use this capital to its full potential this can lead to cost savings in terms of project costs and also in catching up in achieving project milestones. By (2005), argues that often change is unpredictable and tends to be reactive discontinuous, ad hoc and often triggered by a situation of organisational crisis (375). This is certainly the experience with PCEPL; initially the two representatives of the ASCON and KMC had an adversarial relationship, with the ASCON representative often asserting his representation of 51% on decisions regarding the project when the power structure changed as result of the Dubai groups inability to obtain funding, a new layer of management was implemented.

This was definitely a reaction to the changing circumstance. To be fair to the representative from ASCON, his hands were often tied due to lack of access to capital however the relationships within the organisation could have been handled delicately, if that had happened from the start, the organisational dynamics might have been different. There are various change management methodologies however for the purpose of this proposal; the author believes the emergent approach best suits the needs of the organisation. This approach is modelled after the premise that organisations are dynamic and unpredictable and they constantly have to adapt (By, 2005), certainly the construction industry post the global financial crisis is testimony to this line of thinking. The table below (By, 2005: 376) provides 3 models of emergent change.

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Table 1: Comparison of three models of Emergent Change sourced from By, 2007: 376.

The first model Kanters Ten Commandments for Executing Change fits in with the status of PCEPL. QSGs proposal is to use this methodology in the change management process. The rational for the use of this model is that the current organisational culture and management is fragmented and employees are divided. Although there will be challenges to completion on time the first step in addressing these issues is for PCEPL to get their house in order. This requires recognising that there is a problem and coming up with a shared vision. The model allows for the use of existing resources like in the case of PCEPL the presence of strong leadership. At the heart of the model lies the importance of communication which has been a serious failing in the past. This will allow employees to take there cues from management and develop a more internally consistent organisational culture rather than one that is based on personal relationships.

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Conclusion

Organisational culture grows out of a need and develops as result of the people involved in that organisation. It is not static but constantly evolves. However it is important that when organisational culture is ineffective or affects the organisations ability execute projects, that the need for change is embraced. Change management does not happen overnight. In the case of PCEPL, the author firmly believes that change management would benefit the organisation. The first stage is acceptance of the need for the process and to embrace the proposed methodology. QSG believes that the above commentary provides the case for change management and the proposed methodology is appropriate based on the current nature of the organisation. If the PCEPL management accepts this proposal, the next stage will be to facilitate the process of change. It is recommended that PCEPL consider these implications as the time is right for correcting some of the bad practices that have developed over the life of the organisation which is fairly young to ensure a long and fruitful lifespan.

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CIOB Policy Brief, (2009). The Impact of the Global Financial Crisis on the Construction Industry, CIOB

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Presentation to the Board of Directors (Please refer to attached Annexure A)

NOTES

The Global Economic crisis had an impact on many industries and as you all know none so

much as the construction industry.

We particularly felt its impact when the financial draw-downs were not coming on time

As you all know, we are now approximately 1 year behind in terms of progress and it is

important that we take stock of what has happened and try to mitigate some of the issues

that we can fix.

The report in front of you is meant as mid point review in terms of the organisational as

a whole and how we can capitalise on our strengths and perhaps iron out some of our

weaknesses.

NOTES

Every organisation has both a corporate culture and an organisational culture. The former

develops based on the vision and mission of the organisation and the latter develops based

on the day to day operations of the organisation and its inputs come from you as

management and your employees.

Corporate culture is unique to each individual organisation. The current organisational

culture that has developed is fragmented and a reflection of dynamics at the top.

This fragmentation has developed a negative organisational culture with departments

and individuals aligning themselves based on personality or advantage. It is important that

an internally consistent organisational culture develop

The top down management style that has emerged does not capitalise on the many

strengths of the organisation including the high level of expertise available.

By capitalising on the strengths, some of the cost related impacts that are affecting the

organisation can be mitigated.

QSG proposes some steps to be taken to create a more beneficial working environment.

This will be discussed next

NOTES

Change is a constant phenomenon that construction companies need to face. The extraordinary events of the global financial crisis early in the project created much of the issues being faced today. However some of those impacts could have been minimized.

This report in front of you is a mid point review of the project as whole and provides some recommendations to ensure the project runs smoothly

QSG believes that the time is ripe for a Change management process to take place. Many bad practices have developed over the last 2 years and this process will allow PCEPL to change some of these bad habits. So what is change management: it is a structured approach to shifting individuals and teams of an organization from a current state to a desired future state which is a positive process which embraces the employees to embrace change.

Organizational cultures (OC) develops from the cues received by employees from top management. OC is basically how employees conduct day to day business; beliefs on communication and the norms of an organization. This different to corporate culture which is simply the vision and mission etc.

If the employees do not have clear guidance on what this means, a fragmented type of organisational culture develops. This has a negative impact on the day to day running of the business with factions being formed and the shared end goal being lost in the process of currying favour with various top managers.

Through change management, a shared and cohesive vision and mission can be developed by top management that takes in to account the new dynamics between the two partners in the SPV. This then can lead to a more cohesive internally consistent organisational culture.

The benefit for PCEPL, is that staff can put aside petty differences and irrelevant issues and work toward the end goal which is to complete the project on time, with minimum costs.

NOTES

Internal and external communication in the past has been poor- it is important that

proper processes be in place to manage this communication. The monthly meetings that

PCEPL have with the various departments are excellent however these can be improved

upon by ensuring that these meetings are not an opportunity to nit pick or blame

departments but an opportunity to improve areas that have issues.

Leadership is an important part of the change management process- there are many

strong leaders within the organization. Through the change management process these

individuals can be identified and capitalize on their strengths while at the same time

making use of the internal expertise available.

PCEPL is backed by a team of architects, designers, engineers who can take this project

forward it is important that this expertise is used!

NOTES

PCEPL has many strengths as outlined in the previous slides but with these strengths we

also have weaknesses. The main issue we face is a lack of team cohesion. The different

departments seem to work in isolation without communication and working together with

the other teams.

Rather than having a risk log and contingency plans in place, management tends to react

to issues rather than anticipate. This can create additional layers of management and no

real understanding of the potential risks and anticipating measures to mitigate these said

risks

One of the biggest weaknesses is micro management- it is important that management

learn to trust the various departments to do their job and not create unrealistic

expectations. For example un-realistic expectations may lead departments/employees to

be afraid to report accurately on issues due to fear of reprisal.

Through the change management process clear reporting lines and roles can be defined

and agreed upon which will allow for easier maneuvering within the organization.

NOTES

In this slide we will discuss what the change management process entails.

The first step is to recognise that change is constant in a construction project and that

anticipating change is important and recognising that change is not necessarily a bad thing.

The next step is to acknowledge that a organization has a culture and defining what that

culture entails- its positives and negatives

Finally recognizing that management buy-in is essential for the change management

process to be successful

NOTES

According to Kant- there are 10 steps to change management and they are as follows:

1. Analyze the organization need for change- so why do we need change?2. Create a vision and common direction- the current situation is that we are fragmented,

this is an opportunity to get together as a team and create a cohesive vision3. Separate from the past- move on from the past issues- discuss them but put them to

rest4. Create a sense of urgency- it is urgent- we are 1 year behind- lets work toward the end

goal and try to formulate strategies to reduce that 1 year lag5. Support a strong leader role- the former structure of have a an overall president was

useful rethink how we can use strong leadership given that top management is only in one place once every month- an overall leader is necessary.

6. Line up political sponsorship- top management meaning the two partners need to be both onboard to ensure success

7. Craft and implementation plan8. Develop enabling structures9. Communicate, involve people and be honest10. Reinforce and institutionalize change

I just described the emergent approach to change and this approach is modelled after the premise that organisations are dynamic and unpredictable and they constantly have to adapt . This model allows us to use existing resources and capitalise on the many strengths the organisation has.

NOTES

For this process to work- you the directors have to recognize that the organization can

benefit from such a process. QSG can facilitate this process of change however from the

management side -a champion to take this forward will be required to ensure that all staff

believe in the process and benefit from the same.

NOTES

Change is constant -denying its existence is a mistake. For us to succeed as organization we

need to recognize this process of change and rather than reacting to it- we should

anticipate. This proposal is an opportunity to correct some of the bad practices of the past ;

capitalize on our strengths and create some good practices.

Most importantly to ensure that PCEPL successfully manages to complete the project with

minimum costs and maximum profits.