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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
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 inbuilt 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.
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.
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.
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.
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:
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
10
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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12
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.
13
14
15
16
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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.
18
References
Archer, David (2009). How Will Dubai Weather The Global Financial Crisis?, The
American
Enterprise
Institute,
http://www.thegovmonitor.com/world_news/international/how-will-dubai-weather-theglobal-financial-crisis-17934.html
Borgatti, Stephen, P. (1996). Organizational Culture, in Mowat, Joanne (2002).
Corporate
Culture,
The
Heritage
Group,
2002,
http://www.herridgegroup.com/pdfs/corp_cultures.pdf
By, Rune Todnem, (2005). Organisational Change Management: A Critical Review,
Journal of Change Management, Vol. 5, No. 4, 369380, December 2005
CIOB Policy Brief, (2009). The Impact of the Global Financial Crisis on the
Construction Industry, CIOB
DeWitt,
Daniel
J.
(2001).
The
Changing
Corporate
Culture,
http://www.informanet.com/corpculture.htm in Mowat, Joanne (2002). Corporate
Culture,
The
Heritage
Group,
2002,
http://www.herridgegroup.com/pdfs/corp_cultures.pdf
Fong, PSW & Lung, BWC (2007). Inter-organizational Teamwork in the Construction
Industry, Journal of Construction Engineering and Management, February
Frei, Marcel (2010). Implications of the Global Financial Crisis for the Quantity
Surveying Profession, Davis Langdon
Gameson, Rod (2010). Understanding Your Organisation's Culture (Based on the
work of Roger Harrison) in CULTURE & PEOPLE Learning Package 2 - Theory and
Practice of Organisational Structures and Cultures, University of Salford
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Knowles, MC; Reddy, Prasuna & Knonczey, Kinga (2002). An Analysis of Different
Kinds of Organisational Culture, Working Paper, 25/02, Faculty of Business and
Economics, Monash University
Mills, J.H; Dye, K & Mills, A.J (2008). Understanding Organizational Change
Molly, Katherine, K (2007). Six Steps for Successful Change Order Management, Cost
Engineering Vol. 49/No. 4 April 2007
Montana, P., and Charnov, B. (2008) Management (4th ed.), Barrons Educational
Series, Hauppauge:NY
Mowat, Joanne (2002). Corporate Culture, The
http://www.herridgegroup.com/pdfs/corp_cultures.pdf
Heritage
Group,
2002,
Ruddock, L & Ruddock, R (2010). Emerging from the Global Economics Crisis:
Delivering Recovery through a suitable Construction Industry , CIB Publication 333
Singh, S.K. (2009). Understanding Cultural Architectures of Organizations in India: A
Study, Singapore Management Review, Vol. 31, No.2
Why
organizations
need
to
http://www.cipd.co.uk/subjects/corpstrtgy/changemmt/chngmgmt.htm
change,
Wilkins, Becca (2009). Stability Ahead?, Regional Report: Middle East, International
Construction.
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Zou Yi & Lee Sang-Hoon (2008). The impacts of change management practices on
project change cost performance, Construction Management and Economics (April
2008) 26, 387393
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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 vision
3. Separate from the past- move on from the past issues- discuss them but put them to
rest
4. 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 lag
5. 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 plan
8. Develop enabling structures
9. Communicate, involve people and be honest
10. 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.