An empirical examination of the relationships between strategy, structure and performance in building industry organizations

The purpose of this research was to study the relationships between strategy, structure and performance in professional and commercial organizations that operate in the building industry under the current business environment, by using the multiple case study method. Eight organizations were investigated which included engineering, architecture, and general contractors. The principal research question was: Given the current building industry environment when looking at the prevailing model (or models) of organizational structure of the architect/engineer (A/E) and general contractor (GC) firms, what are the relationships between structure, strategic decisions and business performance indicators? A general hypothesis was formulated as follows: Building industry organizations possess structural attributes such that they are able to respond to an intensely turbulent environment that is endemic to the building industry. Various systems models of the building industry were examined in order to gain an in-depth understanding of the dynamics that impact on the principal constructs studied in this research. This undertaking provided the researcher with essential input in designing an appropriate research method. The findings of this study revealed that the general hypothesis was supported by the data, which was expected based on the literature. This suggested that building industry organizations are resilient and robust, and are set up to weather turbulent environments and the cyclical nature of the industry. With respect to core activities, building industry firms operate on a project by project basis, and consequently, they operate in a network mode. However, the role of the “designer” of the network is often assumed by the building owner (often without him realizing it) and not by a principal actor in the industry. With respect to strategy, firms operate for the most part on a tactical versus strategic level; however, engineers were more sophisticated in this regard and showed some strategic orientation. Performance indicators tended to be financial for engineers and general contractors, with architects more commonly focusing on issues of professional reputation. The implications of this research suggest that structures must be developed which are able to accommodate more than just core business activities. Strategies must be tailored to the structural attributes of the firm and to its market orientation. Financial performance has become important for all firms, and they should make financial performance a priority to balance the other appreciations of success. In conclusion, researchers now have a perspective view of the variations that exist amongst specific cases of the principal types of firms in the building industry. Future research directions should take the findings of this study and elaborate on them by means of quantifying dimensions for comparison purposes.