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UK Construction Industry Vision 2025

Executive Summary of Innovation Process and Control Function in Management

In today’s globalized market, not a single industry or economy has remained unaffected by the advent of the Covid-19 pandemic or the novel Coronavirus. The pandemic has adversely impacted almost every commercial activity. Out of all forms of business activities, construction is one of the hardest-hit sectors which is definitely on the wrong end of the curve. This is especially worse considering that following the formal withdrawal from the EU and the snap general election in Dec 2019, there was an emerged optimism in UK construction with enhanced confidence from investors. This, compounded by the promises of ‘infrastructure revolution’, and sustained policy support, would have facilitated a new investment cycle for the construction sector. This report aims to facilitate this change in the strategic decision by providing a critical review of key trends in UK construction sector, the way it is changing in the country and presents a “vision” of the UK construction industry in 2025. In addition to this, the report also presents an analysis of Tuckman’s team development model in order to help staff members to work from home using digital technology.

The report concludes with a set of recommendations for businesses in the UK construction industry and the way businesses can reshape the organizational structure to adapt to the new business environment. The findings of the report suggest that commercial property in the UK is not directly correlated with other asset classes which makes it suitable for portfolio diversification, it is exposed to larger economic shocks and trends, and has a higher degree of volatility as compared to the UK’s GDP growth. In terms of market trends in the residential sector, property prices have picked up growth despite continued political and economic uncertainty, yet they are far below the levels before the European Union referendum. On the other hand, the education construction sector is experiencing slow growth as compared to its progress in 2013 and 2017. This is mainly due to budget cuts in the public sector which is the largest client for education construction works. Furthermore, the residential building sector was one of the best performing areas in construction as of June 2020, but later the performance of sector deteriorated due to lockdowns.

The business volumes are starting to recover but only marginally as clients are still hesitant. This makes it important for businesses in the construction sector to diversify into the new sector to sustain themselves as common construction sectors are not fairing any better. Two of such sectors which can be used for construction business for market penetration are renewable energy and infrastructure. In addition to this, for the construction section in the UK, the pandemic will have a long-term effect on the confidence of investors especially considering the rising unemployment and reducing demand. This, in turn, affects the purchasing power of consumers. There is also a fundamental change in business practices reflected in the shift towards eCommerce, which is accelerated by global shutdowns, along with a shift towards homeworking. As the impact of the pandemic on business operations is evident, it is also important for organizations to reshape the way they manage their workforce. This is so as employees are starting to work from home with the help of digital technology which presents new challenges to manage and build virtual teams.

One of the commonly used frameworks for team management is the Tuckman’s team development models which can be adapted to the current circumstance to facilitate team management. The report further recommends Encouraging friendly competition among managers and undertaking Educational efforts to clarify what the matrix structure is and the way it works. Careful task analysis should also be carried out to remove uncontrolled layering. Also, to avoid decision strangulation, constant clearing of issues should be insured, with the implementation of a proper chain of escalation.

Contents

Executive summary.

Trends.

Commercial

Residential

Education.

Renewable energy.

Infrastructure.

Team management

Tuckman’s team development model

Forming.

Storming.

Norming.

Performing.

Adjourning.

Matrix organizational structure.

Tendencies towards anarchy.

Severe groupitis.

Excessive overhead.

Uncontrolled layering.

Decision strangulation.

Power struggles.

Conclusion.

Recommendations.

References.

Introduction to Innovation Process and Control Function in Management

In today’s globalized market, not a single industry or economy has remained unaffected by the advent of the Covid-19 pandemic or the novel Coronavirus. The pandemic has adversely impacted almost every commercial activity (Chetty, Friedman, Hendren & Stepner, 2020). However, this does not suggest that every industry has suffered to the same degree or the same extent as every other. On the contrary, some industries like online education and online meetings technologies have unwittingly prospered because of the pandemic, while others, although with much difficulty would weather the storm. Out of all forms of business activities, construction is one of the hardest-hit sectors which is definitely on the wrong end of the curve. Construction sector which was already dealing with numerous challenges such as regulatory burden because of environment laws, multiple frauds and a lack of credit avenues and capital to insolvencies (Fairlie, 2020), has been marred by the pandemic with no perceivable respite. Covid-19 induced disruption has sent ripples through the entire industry.

This is especially worse considering that following the formal withdrawal from the EU and the snap general election in Dec 2019, there was an emerged optimism in UK construction with enhanced confidence from investors. This, compounded by the promises of ‘infrastructure revolution’, and sustained policy support, would have facilitated a new investment cycle for the construction sector. However, rather than experiencing a boom, the construction industry again fell into a slump because of the emergence of the pandemic. This downfall is evident in the statistics shared by the Office of National Statistics (ONS) which reported that the total construction output of the sector plummeted by more than 45 per cent, the sharped decline since 2010 (Seetharaman, 2020). 

This has forced entities in the construction industry to reassess their business operations and strategic direction to at least survive through this pandemic and until the construction activities gain pace. The urgency of the matter is further emphasized by the fact that around 42 per cent of the businesses in the UK construction sector only have enough cash reserve to last for 6 months. This report aims to facilitate this change in the strategic decision by providing a critical review of key trends in UK construction sector, the way it is changing in the country and presents a “vision” of the UK construction industry in 2025. In addition to this, the report also presents an analysis of Tuckman’s team development model in order to help staff members to work from home using digital technology. The report concludes with a set of recommendations for businesses in the UK construction industry and the way businesses can reshape the organizational structure to adapt to the new business environment.

Trends

Commercial

The commercial property market in the UK is highly developed and estimated to be valued at £885 billion. Commercial properties mainly include retail properties, industrial properties and offices. While the commercial property in the UK is not directly correlated with other asset classes which makes it suitable for portfolio diversification, it is exposed to larger economic shocks and trends. The below-mentioned figure illustrates the quarterly changes in the commercial property’s capital value which show a higher degree of volatility as compared to the UK’s GDP growth.

This also enunciates the impact of severe economic wide shocks which often result in a sharp decline in the process of commercial property. Moreover, a comparison of the UK housing market and consumer confidence suggests that investment into both residential and commercial properties are driven by the expectations regarding future asset prices which are often pro-cyclical (Jallow, Renukappa & Suresh, 2020).

Residential

In terms of market trends in the residential sector, property prices have picked up growth despite continued political and economic uncertainty, yet they are far below the levels before the European Union referendum. Also, the northern housing market is outperforming the north-west and south market and demand in this area is relatively high. In 2019, the total value of the real estate market in Wales and England was GBP 251 billion which shows a decrease of 4.7 per cent from the previous year (Ozilli & Arun, 2020). Average rents in the region increased by 2.7 per cent in 2019 as compared to the previous year, and in respect of the competitive landscape, the market is highly fragmented because of low degree of market share concentration. The market is also experiencing a shortage of houses with increased demand and is driving the growth of the sector (Ritter & Pedersen, 2020).

Education

UK construction market in respect of education represents 11 per cent of the total constructions and mainly includes constructions for early years, primary, secondary and higher education. Most of the current education sector projects are due in 2020 due to a rise in a small number of high-value schemes. This growth is further supported by government initiatives like the Priority School Building Programme 2. Yet, the education construction sector is experiencing slow growth as compared to its progress in 2013 and 2017 (Badi, Rocher & Ochieng, 2020). This is mainly due to budget cuts in the public sector which is the largest client for education construction works. In respect of the ongoing pandemic, the education construction sector will be severely impacted but will perform better than other sectors because of spending promises by government and projects in the pipeline (Fernandes, 2020).

Retail Sector

In the retail sector, commercial properties include buildings in which consumers spend their money such as goods shops, furniture stores, and others. In broader terms, the demand in this sector relies upon the income and financial circumstance of the consumer in the country. The below-mentioned figure illustrates the annual growth in the consumption expenditure which coincides with the increasing household debt in the beginning and the impact of the subsequent financial crisis.

Also, the residential building sector was one of the best performing areas in construction as of June 2020, but later the performance of sector deteriorated due to lockdowns. The business volumes are starting to recover but only marginally as clients are still hesitant (Gamil & Alhagar, 2020). This is easily noted in the total activity index of the industry with a sharp decline is due to the pandemic and a relatively quick recovery.

Considering the impact of the ongoing pandemic, it is important for businesses in the construction sector to diversify into the new sector to sustain themselves as common construction sectors are not fairing any better. Two of such sectors which can be used for construction business for market penetration are renewable energy and infrastructure.

Renewable Energy

Foley & Olabi (2017) reported that the UK’s renewable energy capacity in 2020 will decline by 13 per cent which is the first downward trend since 2000. This mainly reflects the impact of the pandemic in terms of supply chain disruptions, social distancing guidelines, lockdown measures and increasing financial challenges. However, the sector is still suitable for venturing into by new businesses, a majority of the projects are expected to come online in 2021 and to result in capacity additions. Moreover, it is expected that the level of renewable capacity will reach the 2019 level regardless of the rebound. Still, the sector will not fully recover in 2021 mainly due to the fact that small investors are reprioritizing investment decisions (Allemand, Dreyfus, Magnusson & McEldowney, 2016).

Infrastructure

The public sector dealing with infrastructure development will also benefit from renewed progress of government projects which were delayed because of 2019’s snap election and the pandemic. The government has already projected investment in the sector with major infrastructure projects in the pipeline such as the Midlands Rail Hub, Northern Powerhouse Rail and new hospitals (Badi, Rocher & Ochieng, 2020). Moreover, general growth trends in the sector suggest that the increased investment is likely to be focused on increased operations outcomes by improving life cycle performance, and increased social, economic and environmental benefits from infrastructure. In addition to this, the growth is also likely to be aided by investing in the adoption of a platform-based system to facilitate more cost-efficient and faster infrastructure delivery (Kapustina, Macheret, Mejokh, Frolova & Kolyadin, 2020).

UK Construction Industry

With the advent of Covid-19, every aspect of the household and commercial activities are getting affected, mainly in a detrimental fashion. The construction industry is no exception to this, as the industry is also experiencing a recession, due to sharply reduced demand and restrictions on business activities. The Civil Engineering Contractors Associaton (CECA) suggested that the construction industry in the UK will become “severely and dramatically affects” form the pandemic. However, as the world is steadily starting to shift into the second phase of the pandemic with easing restriction on commercial and household activities, and trying to exist with the virus in order to get back to work (Jallow, Renukappa & Suresh, 2020).

Yet, this does not mean that everything will be the same as it was before the pandemic, businesses have to reshape their strategic decision making and their business operations to sustain themselves. For the construction section in the UK, the pandemic will have a long-term effect on the confidence of investors especially considering the rising unemployment and reducing demand. This, in turn, affects the purchasing power of consumers. There is also a fundamental change in business practices reflected in the shift towards eCommerce, which is accelerated by global shutdowns, along with a shift towards homeworking (Suresh, Renukappa & Stride, 2020). This is diverting retail spending away from high streets to online shopping and is reducing the demand for city-centre developments.

In this respect, “vision 2025” of the UK construction involves the adoption of new technology and automation with the increased of technologies like virtual and augmented reality. Even though autonomy is available in the industry, its uptake will considerably increase. Moreover, certain roles and tasks will be automated, and while automation technology will not execute the entire project, but the use of such technology in compaction, loading and stockpile will be evident by 2025 (Alwan, Jones & Holgate, 2017).

In addition to this, within five years remote data centres will be used as a hub for construction projects to facilitate better collaboration by sharing data among involved stakeholders in different stages of a construction project. Augment and virtual reality technology will allow project investors and key investors to see project progress virtually without actually attending the site. Since, like every other industry, the construction industry will also begin implementing digital technologies to facilitate business activities, it is also expected that enhance data analytics and analysis will be used to optimise workflows and for improving business processes (Tsiga, Emes & Smith, 2016).

For instance, engineers and designers are starting to use heavy digital collaboration tools like building information modelling (BIM), while contractors and leading engineers are using 4D and 5D simulation tech to reoptimize schedules and replan projects. Contractors are also starting to use online channels for monitoring employee well being and ordering the required materials (Gledson & Greenwood, 2017). Supply chains will also get rebalanced towards resilience in contrast with the current practice of emphasizing efficiency, with contractors building inventory and securing long lead items, along with having plans for alternative suppliers (Lou, Lee & Goulding, 2020). It is also probable that major players will consolidate in order to establish economies of scale and to support the required investment in R&D, IT and talent acquisition. Besides, investors and companies will actively go for consolidation for the required resilience in balance sheets (Ajayi, Oyedele, Akinade, Bilal, Owolabi, Alaka & Kadiri, 2016).

By 2025, it is also expected that the industry will be typified by vertical integration to increase efficiency and for controlling execution and design. Vertical integration will also present a route for better resilience (Sarhan, 2018). The increased reliance on digital and new technology will also present a shortage of skilled labour, which will further encourage developers to rely on automation technologies (Loosemore, 2016). Also, with no cure for the virus in sight, it can be expected that job sites in future will become safer and cleaner with distancing will become the norm with the help of new technologies. Consequently, these changes will add to the time it takes to successfully execute projects and construction schedules will not remain the same. Also, the future of the UK construction industry is characterized by the increased power of unions as during crisis unions tend to provide a voice for labours and employes and becoming a union member will become significantly beneficial (Rostami & Thomson, 2017).

Contractors and developers can also opt for off-site construction in order to execute the building activities in a controlled environment for fabrication and subassemblies. This will help to manage the interaction of the workforce and will lead to an increase in off-site construction (Charlson, 2020). Overall, it is also likely that there will be an increased push towards sustainability for healthier living due to a parallel shift in demand for buildings that promote healthier lifestyles.

Team Management

As the impact of the pandemic on business operations is evident, it is also important for organizations to reshape the way they manage their workforce. This is so as employees are starting to work from home with the help of digital technology which presents new challenges to manage and build virtual teams (Ritter & Pedersen, 2020). One of the commonly used frameworks for team management is the Tuckman’s team development models which can be adapted to the current circumstance to facilitate team management.

Tuckman’s Team Development Model

The model proposed by Bruce Tuckman, an educational psychologist includes five distinct stages for the development process which should be followed in order to become a high performing team. The said stages are; forming, storming, norming, performing and adjourning (Guttenberg, 2020).

Forming

During this stage of team development, team members are often eager to be a part of the team and usually have favourable expectations in terms of their team experience. They can also feel some anxiety regarding their role in the team. Concerning behaviour, this stage includes quite a lot of questions from team members because of uncertainty (Largent, 2016). Therefore, the main work for the team development in this stage is to create a team with a clear structure, directions, roles and goals in order to facilitate rapport and trust-building in the team. In the current scenario, management can kick off the team development process with good orientation with the help of online conferencing and can also discuss the mission and goals of the team along with the expectation of the organization (Natvig & Stark, 2016). Management should mainly focus on defining the team rather than accomplishing tasks in their stage.

Storming

Moreover, as the team starts to move towards its goals, some of the team members might discover that they are not able to live up to the early expectations and excitement, which can lead to the feelings of anger or frustration with the progress of the team. Therefore, they tend to express concerns regarding being unable to effectively meet the goals of the team. Simply put, under this stage, team members are mainly trying to see the way the team handles differences and conflicts (Guttenberg, 2017). This stage is typified by disagreements regarding roles, responsibilities, goals and expectations. Thus, in this stage, the team needs to refocus on their goals and they can also try to break down larger goals into achievable, small steps. Conflict management skills and task-related skills, both can be of great help in this stage (Kutob & Alhothali, 2020).

Norming

In the norming stage, team members start to resolve their differences in terms of the reality of the team’s experience and individual expectations. In case the team becomes successful in setting more inclusive expectations and norms, team members begin to feel an enhanced sense of comfort and start to express their real feelings and ideas (Black, Gardner, Pierce & Steers, 2019). Team members also feel an improved acceptance of other team members which makes the team more productive and stronger. This stage includes behaviour which includes team members making conscious efforts to achieve group harmony and resolve problems (Jones, 2019). Hence it is recommended that during this stage team should use their energy to show an increase in productivity in both collective and individual work. This is also an appropriate stage for evaluation of team productivity and processes (Guttenberg, 2020).

Performing

The fourth stage is of performing, in which team members feel satisfaction for the progress of the team and share insights into group and personal precess. In this stage, team members are also more aware of their own and other team member’s weaknesses and strengths. Team members also feel more attached to the team and become something “greater than the sum of its parts” (Natvig & Stark, 2016). They also feel more confident in the abilities of their team members and their abilities. In terms of their behaviour, team members in this stage exhibit a problem-solving behaviour with a “can do” attitude to support others throughout the process (Largent, 2016). Furthermore, the roles and responsibilities of team members also become fluid in this stage with team members executing various roles according to the requirement of the team. Under this stage, team members should continue to improve their skills and knowledge of working from home, including striving for continuously supporting team development. It is also important to note that this is not necessarily the end of the team development process. The team can keep setting new goals and making changes accordingly and can remain in this stage indefinitely.

Adjourning

The final stage of this model is not a part of the Tuckman’s original model, yet teams need to pay attention to termination or end process. In this stage, team members feel concerns regarding the impending dissolution of the team and can also feel anxious because of the same. They can feel a sense of loss or sadness with respect to the changes of the team relationships. Team members also find it hard to concentrate on work in this stage (Kutob & Alhothali, 2020). Teams should acknowledge the impending transition and need to complete any deliverables.

Matrix Organizatianal Structure

In this form of organizational structure, the reporting relationships are set up as a matrix or grid rather than a hierarchy, as in traditional structures. Simply put, this suggests that employees need to report to more than one manager or boss (Lukinaite & Sondaite, 2017). Considering the necessity of fundamental changes in the business operations due to changes brought by the pandemic, it is not surprising that management wants to change the organizational structure to facilitate other business processes. However, the matrix organization might not be the most suitable choice for the same because of the below-mentioned reasons. Here, it should also be noted that while the discussed ailments arise in several other conventional organizational structures, matrix structures are somewhat more vulnerable to these issues (Kiruba Nagini, Devi & Mohamed, 2020).

Tendencies Towards Anarchy

This refers to a situation in which a formless state of confusion persists in the organization and employees do not recognize a singly boss or leader to whom they feel accountable to. This mainly happens as in the matrix structure, businesses tend to rely on later or informal matrix for coordination, which in turn makes the relationship between different managers more ambiguous (San Cristobal, Fernandez & Diaz 2018).

Severe Groupitis

This is a common problem with matrix structure which involves mistaking matrix behaviour with group decision making. It is not necessary for management to hammer out business decisions in group meetings (Akhmetshin, Vasilev, Mironov, Yumashev, Puryaev & Lvov, 2018).

Excessive Overhead

The limited research on matrix overhead cost also suggests that in the initial stage of implementing the matrix organizational structure leads to increased overhead costs (George, 2020).

Uncontrolled Layering

Matrix organizational structure also leads to uncontrolled layering within matrices which usually develop because of the dynamics of power rather than from the logic of design. That is, sometimes matrices not only sink but also torrent down the organization and filter across different divisions and levels (Ioannidis & Makridis, 2020).

Decision Strangulation

This problem deals with the fact that matrix often leads to endless delays for debate and not enough action.

Power Struggles

Since the core idea of the matrix structure is a dual command, it is not surprising that involved managers often tend to get into a power struggle. The issue is further exacerbated by the fact that while power struggles are illegitimate in traditional organizational structures, matrix, on the other hand, makes power struggles inevitable with overlapping the boundaries of responsibilities and authority (Grubenmann, 2017).

Conclusion on Innovation Process and Control Function in Management

In conclusion, the pandemic has adversely impacted almost every commercial activity, and construction is one of the hardest-hit sectors which is definitely on the wrong end of the curve. This is especially worse considering that following the formal withdrawal from the EU and the snap general election in Dec 2019, there was an emerged optimism in UK construction with enhanced confidence from investors. Commercial property in the UK is not directly correlated with other asset classes which makes it suitable for portfolio diversification, it is exposed to larger economic shocks and trends, and has a higher degree of volatility as compared to the UK’s GDP growth.

In terms of market trends in the residential sector, property prices have picked up growth despite continued political and economic uncertainty, yet they are far below the levels before the European Union referendum. Average rents in the region increased by 2.7 per cent in 2019 as compared to the previous year, and in respect of the competitive landscape, the market is highly fragmented because of low degree of market share concentration. On the other hand, the education construction sector is experiencing slow growth as compared to its progress in 2013 and 2017. This is mainly due to budget cuts in the public sector which is the largest client for education construction works. Furthermore, the residential building sector was one of the best performing areas in construction as of June 2020, but later the performance of sector deteriorated due to lockdowns.

The business volumes are starting to recover but only marginally as clients are still hesitant. This makes it important for businesses in the construction sector to diversify into the new sector to sustain themselves as common construction sectors are not fairing any better. Two of such sectors which can be used for construction business for market penetration are renewable energy and infrastructure. In addition to this, for the construction section in the UK, the pandemic will have a long-term effect on the confidence of investors especially considering the rising unemployment and reducing demand. This, in turn, affects the purchasing power of consumers. There is also a fundamental change in business practices reflected in the shift towards eCommerce, which is accelerated by global shutdowns, along with a shift towards homeworking. As the impact of the pandemic on business operations is evident, it is also important for organizations to reshape the way they manage their workforce. This is so as employees are starting to work from home with the help of digital technology which presents new challenges to manage and build virtual teams. One of the commonly used frameworks for team management is the Tuckman’s team development models which can be adapted to the current circumstance to facilitate team management.

Also, considering the common problems in the matrix organizational structure, the below mentioned recommendations are made.

Recommendations on Innovation Process and Control Function in Management

  • Encouraging friendly competition among managers and making managers aware of the fact that using power axes to win power will ultimately lead to losing. Managers must see sharing power as the key principle of the organization.
  • Educational efforts should be carried out to clarify what the matrix structure is and the way it works. It should also be made known that there is nothing sacred about group decisions and that everyone doesn't need to be involved in the process.
  • Corporate should think through the dimensions of the organization that must be balanced and the aggregation level of the same to protect the matrix from sinking.
  • Careful task analysis should also be carried out to remove uncontrolled layering.
  • Also, to avoid decision strangulation, constant clearing of issues should be insured, with the implementation of a proper chain of escalation.

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