CMPM Lecture 2

• Types of Organizations (Business)

And
• Types of Construction Organizations
 Organization
collection of people, involved in pursuing
defined objectives and goals

An Organization :

• divides work among employees based

on their skills

• Delegates work , authority and

responsibility to others

• Organization align tasks of people

to…

Achieve ultimate goal of the company.

 Organization also involves
Dividing work responsibility according to :

• technical knowledge

• degrees of executive(leadership and

management ability. )

Good Management and Organization is

combined to pursue all Goals of a A company
 FORMS OF BUSINESS ORGANIZATION
1 Sole Proprietorship
• simplest and most common type of business
structure
• easy to set up , requires minimal paperwork,
registration fees
• low start up cost.
• operated by a single individual,
• do not pay corporate income taxes ( personal income
tax).

• Example are ukay ukay business , sari sari

stores, accessories shops, bakery, auto
mechanic shop
 2. Partnership /Joint Ventures
• formal arrangement by two or more
parties to manage and operate a
business
• share liabilities and profits equally,
parties may be governments,
enterprises, businesses, or private
individuals.
Example

• Philippine Airlines, a partnership between Lucio Tan

and other investors,
• Globe Telecom, a partnership between Ayala
Corporation and Singtel, is one of the leading
telecommunications companies in the Philippines.
 3. Corporation (corporate business)
• 1.legal entity(Judicial Entity) created by individuals, and
stockholders
• 2.Corporation Like a “Fictitious person” (with rights and
privileges under the Country’s Law
• 3.Owned by group of shareholders
• 4.The group submit “articles of incorporation” required
for business to the Government
• 5.And be approved by the SEC (security and Exchange Commission)
• 6. managed NOT by the OWNER But by a elected board of
directors
 What is a corporation?
Since it is a legal entity (fictitious person) it
Corporation possesses:

• legal rights and responsibilities like an individual

• such as right to make contracts
• sue and be sued in Court of law
• own assets (buildings , roads, schools etc)
• remit taxes (corporate tax)
• borrow money from financial institutions ( e.g central
banks)
Example are san Miguel , Nestle Philippines,
Shell Philippines, BDO unibank
 Corporations
• Corporation purpose of operating is for
profit. (non profit are Phil. Medical.
Association (PMA) for example)
• Shareholders (owners) do not take part in
day to day operations
• Corporations , continues to exist even if
owner dies (unlimited life).
 Corporation
Some important Definition of Terms

• Legal Entity
• Shareholder/stock holder
 What is a Legal Entity?
• is an individual or group that has
• legal rights and duties related to contracts,
agreements, payments, transactions,
obligations, penalties and sues.

• it is a body incorporated, with a specific name

and personality to the eyes of the legal system
or nation’s Law system
 What is a Stockholder?
• A Stockholder is a person, company, or an institution who owns one or more
company shares (total Capital of company)

• He owns a share of the Company

• They are the company owners

• Their influence in the business depends on the percentage of stock that

they own out of the total share capital
 4 Private Limited Company
• common type of org. Adopted by new
companies
• initial capital come from the owner’s money, .
• owned by small group of individuals
• Example
• SMNI (Pastor Quiboloy broadcat station)
• Viva Entertainment Banco Dipolog Sarao
Motor Radio Mindanao Network
 Private Company
• shares are not listed on stock
exchange.(buy and sell)
• (not traded to general public. )

• does not have to offer information to

public and government
 5 Public Limited Company
• company that offers its shares(ownership) to the
public
• .It is a separate legal entity(legal entity) from its
owners
• shareholders have a claim to company's assets and
profits.
Example
Philippine Airlines University of Bohol Inc San
Miguel Corporation , Pag Ibig Fund (receiving
Dividends) GSIS, PLDT
 5 Public Limited Company

• Public disclosure of financial

activities and performance is
required
• Public limited companies are
strictly regulated.
 6 Government Enterprises /Government
Owned and Controlled Corporation GOCC)
• 1.Privately held but state-owned enterprise that conducts
both commercial and non-commercial activity. on behalf of
an owner government.

• 2.Created by congress
• 3.Privately held but provide public financial services
• 4.Government organization but has separate entity
and activity (“legal person”)

• Ex. NAPOCOR, Land Bank of the Philippines, National Food

Authority
•
Examples of GOCCs
 continued
• GOCCs are created by Government (thru act of
congress)

• GOCC provide commercial business for the country

(i.e. Tolls in Expressway NLEX)

• to enhance the of infrastructural services

(road, bridges) to the public.
• ( build build build! Under PRRD)
 Part 2

• THREE TYPES OF
CONSTRUCTION
ORGANIZATION
 STRUCTURE OF CONSTRUCTION ORGANIZATION

Organizational structure is utilization of

1.resources
2.people (manpower)
3.overcoming communication barriers

(Enshassi1997).
 organization structure depends on a
number of factors
• technology,
• Complexity of organization
• resource availability,
• products and services,
• competition with other companies
• decision-making requirements

(Kerzner 2004).
 Part 2

• THREE TYPES OF
CONSTRUCTION
ORGANIZATION
 1.Line type (military) organization
• For simple construction projects
• Owner is directly involved in const. process
• Managers /supervisors directly oversee the work
• Tight CONTROL is required to use Line org.

• Direct line of authority from top to bottom level

• All major decisions are taken by the executives at the
top .
Line or Military type organization
 Advantages:

• easiest to establish.(highly dictatorial)

• simplest to explain to employees.

• unified control of the organization

• strong sense of discipline in organization

 Advantages:

• employees assigned a fixed role and responsibility.

• Decisions are quickly taken

• can adjust fast to changing needs (due to its

simplicity)
 Disadvantages:
• autocratic organization (dictatorial)
• Expectation is high for top management

• work efficiency depends on top authority.

• advice of a smart employee at the bottom of the
hierarchy may not be heard

• Lack of communication from a low rank employee

to top hierarchy
• Lacking staff with specialized skills
 2.Line and staff organization
• For medium size projects construction projects

• Staff specialists (HR, Safety, Accounting managers)

are added (but advisory role only)

• Provides advise to the direct construction line

manager (PM) (but advisory role only)

• The General Project manager receives ADVICE in

aspects of HR, Safety , accounting,procurement)
Line and Staff
 advantages
• construction manager is advised on various
construction process (safety procurement,
Quality etc)

• Offers opportunity for professional growth

(e.g. thru the HR dept)of employees.

• training opportunities for employees

(thru the Quality Manager)
 Disadvantages:
• lack of well-defined authority
structure.(many advisors)

• suitable only for medium to large

organizations who might need specialized
skills.

• conflicts may arise between Staff managers

 3.Departmental Organization
• For very large complex projects
• combines the best of line-type structure and
the ‘line and staff’ structure (type 1 and 2)

• Departmental organization has departments

with department heads.
• Contracts Dept , Planning Dept., Materials marketing,
finance, human resources, information technology,
administration and production.
•

•
Departmental Organization
 Features of Departmental Org
• 1.Individuals and workers are grouped
on the basis of their similar skills.

• 2. Creates SPECIALISTS (e.g.planning,

engineering, contracts administration)
in organization which produces optimal
performance in construction project
operations
 Features of Dept. Org
• 3. Top-hierarchy people (PM and resident
Engr)are relieved heavy work burden

• 4.There is support of a highly trained

technical staff and department
• (e.g.contract and materials experts, financial
experts etc)
 Advantages of the
Departmental Organization
• Every department has a specific job. (No work duplication)
• job security for loyal employees

• skills of groups are developed (specialization)

• clear communication within the department

• Work accountability is enhanced (acceptance of

own responsibility by departments)
 Disadvantages of Dept. Org.
• results in people with similar skills ( conflicts may
arise during promotion)

• Each of the Departments is a small company

resulting in mismanagement and discord.

• Lack of instant decision making due to hierarchy in

the system

• Departments become engrossed in their personal

goals , and may ignore the greater company goals
• End of Lecture 2