The Globe Construction Company top management held a management workshop one weekend in April of 1989 for the purpose of discussing present policies and procedures with the ultimate objective of formalizing these in a new company operations manual.
The company was established in the mid-50s by Mr. Eduardo Concepcion. The company grew at a very fast rate due to the construction boom in the government sector during the administration of ex-President Ferdinand E. Marcos, During the seventies and early eighties, the company constructed large projects for both the government and private sectors. However, most of its projects were for the government. Globe enjoyed high margins from its government projects during this period. Competition was not a problem.
When Mrs. Aquino became President, private sector construction projects in the country outnumbered government projects. Competition became more stiff forcing Globe to reduce its margins when bidding for both sectors. This change in the environment led management to call the management workshop to discuss ways of improving organizational efficiency and effectiveness. The workshop was attended by the president, the vice-president for administration, the vice-president for operations, the purchasing manager and all the project managers ( See exhibit A for Organizational Chart)
Project managers are the engineers in-charge of construction projects. The company employs twenty project managers. At present, there are about eighteen on-going projects at an estimated Bid price of at least P100 million each ranging from office condominiums, shopping centres and government buildings. The purchasing unit is headed by a purchasing manager to whom buyers report. Each buyer is completely in-charge of purchasing materials required by one or more construction projects. The VP for operations is over-all in-charge of on-going projects.
During the workshop, one of the project managers, Isidro Remigio, proposed that the buyers should be located at the job site reporting to the Project Manager (See Exhibit B for the Organizational Chart at the Project Site) Mr. Remigio argued: “It takes so long, sometimes about 2 weeks, before Purchasing reacts to our purchase order (PO). If the buyers report to me directly, there is no doubt that they will attend to my PO.
I will be the one who will evaluate the buyer’s performance. More importantly, his proximity to the job site will make him better understand the urgency and the nature of our requests. Communicating with him will be easier too. Sometimes, when the items I need are not available, he calls me to ask for substitutes. I always have problems reaching him by phone. If it’s not busy, he is not there! If my material are delayed, my project will not be completed as scheduled.”
At this point during the workshop, the Purchasing Manager interrupted Mr. Remigio and said, “Our function is not merely to implement Pos. We purchase materials ordered by the projects only 1) if the items are not on stock in the central warehouse and 2) if the items are included in the Bill of Materials (BOM) as provided by the Executive Committee. Any order in excess of the approved by us unless there is an amended bill of materials. Therefore, if the buyers will report directly to project managers, this could lead to cost overruns.
The President of the Company took the floor after hearing Mr. Remigio and the Purchasing Manager. “I am also concerned about the availability of funds for approved Pos to be acted upon by purchasing. While it is good for the projects to have the required materials on time, I wouldn’t want to encourage them to stock-up too much. This will tie-up funds and increase our interest costs. I hope that wherever Purchasing is to be located in the organization chart, we will also consider the matter of fund availability.”
The Central warehouse is located in Antipolo while Head office (where the buyers gold office) is located in Paco, Manila. Approximately P10Million worth of materials are kept in the Central warehouse.
Exhibit BPROJECT SITE ORGANIZATION CHARTBOARD
* General Foreman* Asst. Foreman
Exhibit AGLOBE ORGANIZATION CHART* Marketing* Design* Estimating* Drafting* Accounting* Personnel* Finance* Treasury* Bookkeeper* Stock Clerk* Time KeeperProjectsConstruction