Construction companies that operate in the GCC face a range of challenges that grow more complex every year. Low oil prices and geopolitical issues have caught them by surprise.
To get through this more complex business environment, they must have leaner operations and improve their management capabilities. In particular, they should take a structured approach to dealing with their two largest spending areas — manpower and procurement — and develop more flexible organisational models, according to a recent study by management consultancy Strategy.
“Local companies have benefited from significant investment by national governments,” says Alessandro Borgogna, a partner with Strategy and co-author of the study, and a member of the engineered products and services practice in the Middle East.
“Today, that spending has declined, in part due to low oil prices. In addition, companies are required to hire more nationals, which increases labour costs. These factors, along with geopolitical developments, have forced GCC contractors to suddenly cut costs and tighten their operations.”
Regarding manpower, companies can take several measures to reduce costs, according to the report.
Effective manpower management will help companies accurately forecast their labour needs and identify looming shortfalls in specific areas, so they can recruit accordingly.
GCC construction companies need to create more flexible organisations. For example, they can centralise their manpower and procurement functions, to maximise the benefits of scale. Companies can also improve their core project-management capabilities-such as project management; cost control; planning; contracts; quality; and health, safety, security, and the environment-which are consistently below those of international competitors.
Moreover, they can create a performance-based culture in which employees at all levels of the organisation take on a sense of ownership and accountability, rather than simply meeting baseline expectations.
“These are bold measures, but the current construction market in the GCC requires nothing less,” says Marwan Bejjani, a principal with Strategy.
“By reducing costs and becoming lean, construction companies in the region can position themselves to win regardless of what the future holds.”
Source: OmanObserver