How should you structure your construction company?

Are you thinking about structuring your construction company to help things run more smoothly and become more profitable? Then you’ve come to the right place. In this post, we’re going to break down why it’s important to structure a business and how to do it.

Creating an organizational chart is a great way to start. Besides creating an identifiable company structure, the main purpose of this chart is to visually represent the decision-making process of a business. 

Construction companies can operate without such a structure, but it’s similar to building IKEA furniture without instructions. It can be done, but there’s a high chance that you will miss a few parts and your table will always be wobbly for some reason. 

Therefore, we believe it’s better to save time and resources by creating a solid structure that your construction company can build on. 

The Start...

Now before we get into the types of structures that your construction business can implement, we’ll look at 3 important steps to follow when creating a company structure. 

Step 1 - Decide on Departments

Instead of starting from specific roles then expanding to departments, it’s best to start at the very top. This way, you will define what department is responsible for which part of the company, which makes roles easier to identify. 

Usually, each construction business has three departments: Operations, Administration, and Financial. Unless you’re a very large company with more than 100 employees, then it’s best to keep the organizational chart simple.  Afterward, defining how these divisions serve your business is a great way to keep track of the main goal: 

Building a functional organizational chart that will help your company structure become more efficient and productive.

Here are some examples of how to define departments for a construction business: 

• Operations: How the company produces the work/product/service

• Administration: How the communication between divisions and employees is coordinated

• Financial: How the profitability of the construction business is measured

Step 2 - Specify Department Roles

The next step is, as the title suggests, defining the roles within each department. These roles help attribute specific tasks and responsibilities to the respective employee. This way, everyone within the company will be aware of who is responsible for what. It makes the workflow run much smoother and internal communication much faster and clearer - since employees will know who to contact for the answers, service, or advice they need. 

Some roles that construction companies might have are an executive, manager, leads, support, entry levels, and more. Similar to the first step, it’s also important to define these roles as well. We’re not going to go into the nitty-gritty details of each role because those can easily be found online with a simple Google Search.

Many construction companies fail to create a hierarchy with clearly defined roles and responsibilities as simple as this sounds. In absence of a structure, when projects get delayed, costs start to overrun and other problems occur when there is not a single person that management can hold accountable, rather there will be many responsible individuals that will throw blame at each other.

Step 3 - Naming the Positions

Once roles are defined, it’s time to give them names. Usually, these names or titles combine the name of the construction company’s department and role, but they can always be altered to suit the company’s needs. 

Here are some examples: 

• The Chief Financial Officer (or CFO) is the executive level position responsible for the financial division of the construction business.

• The Director of Operations (or DOO) may report to the Chief Operations Officer (or COO). 

• Project Manager - usually reports to the Director of Operations.

If you need a little inspiration, check out Shawn Van Dyke, a construction business expert, who suggests starting with an org chart template where you fill in “Divisions” on an X-axis and “Roles” on a Y-axis. See this picture below for an example.

What about the types of structure?

Now that we know how to create an organizational chart and why it’s so important, let’s take a look at a few company structure examples. 

There are many types of company structures that businesses use. The way these mainly differ from one another is by the needs of a company, personal preference, or specific goals that require one structure or the other. 

While the Functional Structure is the most common, you should always choose one structure that works best for your company. You can even combine two or more structures if that works better! Just be sure to match it to your company’s needs so there will be no potential problems or inconsistencies that can slow down progress. 

Functional Structure

• Staff is divided into teams of those with different skills and knowledge.
• Departments are structured vertically, where each role is outlined from the CEO (at the top) to entry-level positions (at the bottom).
• The aim is to foster a stable work environment where departments work simultaneously to complete tasks and assignments that are clearly defined by the structure.
• Each group or team reports to their team leaders or managers, and managers communicate with one another within the company. Depending on the complexity of the tasks, managers can take on decisions themselves, or request the COOs for support.
• An advantage of a Functional Structure is that it creates a dynamic and highly efficient work environment.
• A disadvantage could be a possible decrease in innovation and flexibility. Because the structure is focused on clear channels of communication and hierarchy, when communication is not successful problems could arise. Also, because of the fixed structure, the “tunnel effect” vision is possible. 

Flat Structure

• Consists of little or no middle management level between the company’s executives and staff.

• Managers usually have more responsibility than in other structures because they are responsible for a larger number of people.

• Managers also don’t have to heavily rely on their superiors for guidance or help in decision-making processes. As a result, they usually have more independence during their work.

• A possible disadvantage is that leaders could become indecisive or mismanage their teams.

• A solid management plan is a prerequisite for this structure to fully work. Executives and managers need to know exactly what they are responsible for and be constantly aware of everything going on within their business. 

Network Structure

• A new network structure is a newer form of organizing businesses. Relative to other types of organizational structure, a network structure takes into account strategic partnerships. 

• This structure is characterized as less hierarchical (flat), decentralized, and more flexible than other structures.

• The concept for this structure stems from social networks where open communications and trustworthy partnerships greatly contribute to success. 

• The network structure introduces an outside perspective that promotes innovation and productivity.

• A disadvantage of a network structure, however, is the lack of control. Contracted third parties have independent agendas and multiple projects that they manage at once. This makes it difficult for the business to plan their involvement.

Team-Based Organizational Structure

• Also a recently created structure, it’s focused on employees being grouped into teams to cover various company functions.

• Teams operate more independently, which makes project tracking easier. 

• Teams are also responsible for specific functions such as marketing or product management. Each function is completed at a specific time within these teams, and rarely overlaps with other teams (unless specific skills or information is needed)

• A big advantage of this structure is that even if teams don’t work directly with one another, they complement each other. This way, all teams have a common goal, focus, and encourage growth and development within the company. 

The benefits of an organizational chart help businesses create a better company structure where employees are happier, productivity is higher and business is overall more efficient. Having an established org chart shows that your business is organized and serious by also focusing on growth. This way, construction businesses will have better internal communication, fewer inefficiencies and problems, and a more positive and encouraging work environment. 

It also helps to motivate your employees to further their careers. When there is a clear organizational chart available, employees know that there is a path to achieve a better role or even a completely different one where their skills will be better used. 

See Related: Rightsizing: Getting it right on the first try

In the end, the employees will be happier, the business will be better and the only way to move from here is towards success and growth.