Term Paper - Case Study

On

Concrete Masonry Corporation (CMC)

For the course

EM 636 – Project Management

Submitted by

Ashok Ambashanker
1. Did CMC have adequate long range planning?

CMC was clearly lacking long term strategy and planning. This is clearly brought out

in there failure to be competitive in the prestressed concrete business in the current

market conditions. CMC’s top management had failed to plan on addressing

competition in the prestressed concrete business, which CMC had pioneered, once

competitors have come over the learning curve. Also CMC leadership should have

devised ways and means to retain there leadership in this segment by continuing to

innovate as well as reduce overall costs through steps like improving efficiency and

reducing overheads, by capitalizing on their extended experience and proven technical

expertise.

2. What are the problems facing CMC?

Following are problems facing CMC:

The key problem is that of CMC’s survival in the prestressed concrete business,

due to the present-day market condition of low cost competition. Based on this CMC

has decided to get out of the prestressed concrete business.

Another issue for CMC was in determining which functional area estimating

should be under. As highlighted by CMC general manager, there was difficulty in

getting accountability for project estimations.

3. Did CMC utilize a matrix organization effectively?

CMC could have optimized its matrix organization structure better. Project management

is most useful when applied to complex tasks with a limited duration. For prestressed

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concrete business, which is more of sustained business, functional groups should be

assigned to run it. Project management can assist functional group when large and

complex tasks have to be executed. Phases of CMC’s business like engineering and

implementation can be done through project management in the matrix structure since

they have to be completed within a definite time and cost, and needs single point

monitoring and control.

4. Where should project estimating be located?

Project estimation should be managed by an independent proposal and bid

management team, which in turn interacts with different functional departments for

inputs based on the work break down structure. Assigning estimation to a particular

functional department (“at one time or another during CMC’s history, the estimating

function was assigned to nearly every functional area of the organization, including sales,

engineering, manufacturing, and administration” [2]), will not be complete and accurate.

Further specialized functional costing groups for marketing and selling separately will

help better focus on prestressed concrete business and other specialist engineering and

implementations.

5. Does the shifting of the estimating function violate any rules for a matrix

organization?

Shifting estimating function does not violate rules of a matrix organization. In

principle a matrix organization is supposed to comprise of a separate project management

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function in parallel to its functional departments. There is no hard and fast rule of

where estimating function should be located in a matrix.

6. What are the alternatives for the future structure of CMC?

Future structure of CMC can be to make CMC follow a partly matrix organizational

structure and partly product structure. CMC could have an organization structure

such that prestressed concrete business, which is more of the nature of sustained

business, is assigned to appropriate functional groups. Project management can assist

functional group only when large and complex tasks have to be executed. Phases of

CMC’s business like engineering and implementation can be done through project

management in the matrix structure, since they have to be completed within a definite

time and cost, and needs single point monitoring and control.

7. Can/will they be successful as a job shop?

Job shop will not be successful if they continue with the current staffing structure of

having a concentration of in-house experts. CMC’s key differentiator in the market had

been (1) advance technology of manufacturing and (2) innovative delivery system.

As a job shop they will no more be able to capitalize based on these two. CMC can

succeed as a job shop if they restructure the organization such that one division

comprises of low skilled staff who can work as per specifications and by themselves

have limited design knowledge and expertise. This type of staff will have a much

lower pay scale; with limited involvement form their experts, design professionals and

architects. If CMC comes up with such restructuring they can do well as a job shop as

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they have the inherent expertise and experience in this industry and it just a matter of

scaling down their specialist work.

8. Should companies like CMC utilize a matrix?

Yes, matrix organizational structure is ideal for construction companies like CMC,

which are project driven. “This form (matrix organizational form) is ideally suited for

companies, such as construction, that are “project driven.” [1, p. 115]. The matrix

organizational form is an attempt to combine the advantages of the pure functional

structure and the product organizational structure.

9. How does the company recover R&D, bid and proposal costs? How should that

change?

There does not seem to be formal step in estimation covering R&D, bid and proposal

costs. Ideally the company should maintain estimation templates which cover

overheads like bid and proposal costs also including heads to cover R&D investment etc.

with appropriate proportions maintained against bit price. The fact that estimation

responsibility has been assigned to different functions (“at one time or another during

CMC’s history, the estimating function was assigned to nearly every functional area of

the organization, including sales, engineering, manufacturing, and administration” [2]),

signify the fact that generic costs would not have been considered by members of the

functional units unless guided by upper management during proposal reviews. By not

having standards to cover overheads and common specialized activities like R&D, it

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would be difficult for CMC to consistently recover investment of effort in these

aspects.

10. Has CMC correctly evaluated the market place?

CMC’s evaluation of the market place looks to be correct. CMC has lost its technology

expertise and knowledge monopoly over the prestressed concrete segment due to open

proliferation of information and knowledge, about it, through colleges and universities.

As technology becomes common place the market becomes open to low cost players

who do not require expert teams or high cost in-house equipments. Also the detailed

information made available during bid stage gives competitors enough details to come up

with bids without involving their designers etc. hence cutting down on their costs. With

these, competitors are able to offer lower bids and hence CMC is not able to effectively

compete in the market place. CMC is clearly seeing that competitors are now able to bid

at much lower prices than themselves and they are no more competitive in this industry

segment.

11. Do they respond to changes in the market place?

CMC’s top management had failed to recognize and respond to the changing nature

of the prestressed concrete business in due time. Progressive adaptation to the

changing market conditions due to the learning curve of the competitors and the product

users with respect to prestressed concrete business is totally lacking. There current

decision to move away from prestressed concrete business is more of a reaction than

response to the market place. Any business should ideally devise methods to counter

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competition and realign to survive within the current market conditions, like restructuring

their organization, which CMC has failed to do.

12. With what speed is monitoring done? i.e. how many projects are estimated, bid and

sold before actuals catch up to and become historical data?

According to the information provided in the case, monitoring is done continuously. So

with one project itself the actuals catch up and become historical data. The business

result from one project directly feeds as input and learning to future projects based on

which estimation is done. Also computer does the cost estimates based on quantitative

inputs from the estimator.

Reference:

[1] Kerzner, H. (1989). Project Management a Systems Approach to Planning,

Scheduling and Controlling.. 3rd Edition. New York: Van Nostrand Reinhold.

[2] Kerzner, H. Case study on Concrete Masonry Corporation