Introduction – Identification of Basic Bindings in the Company

1. Lecture was elaborated with the help of grant project of Ministry of Education, Youth and Sports, FRVŠ n. 2005 „Innovation of Subject Financing of Building Order“ Introduction – Identification of Basic Bindings in the Company

2. Specifications of the Building Industry • Each building object is unique • Production equipment moves to the product - building object • Long production cycle, complicated production process • High dependence of the production process on weather • For construction there are used product from all branches of national economy that then influence the result quality of the building object • As a product of the building production is considered the building order Financing of Building Order

3. Subject of Building Market • Investor corporation or individual, from his sources the building is financed and that usually ensures its preparation and realization. Investor usually becomes the owner or the user of the building, in the relation towards supplier he is in a role of a customer • Designer corporation or individual ensuring a supply of a project documentation of a building • Supplier corporation or individual that realize building works and ensures a supply of a building object • Sub supplier corporation or individual that is by main supplier entrusted with realization of specified part of works on a building order • Provider of financial sources corporation that provide to investor financial sources for a realization of a building order Financing of Building Order

4. Kinds of Building Production Building production it is possible to divide into following kinds: • Basic structural production • Includes supplies of building works realized own workers or sub suppliers • These supplies it is possible next to divide into following kinds of production: • Main building production • Includes supplies of building works realizes mainly on fabric (foundations, horizontal and vertical constructions etc.) • Associated building production • Includes professions and handcrafts • Subsidiary production • Includes preparation of resources and facilities needed for basic structural production, e.g. production of intermediate products and production of building materials Financing of Building Order

5. Property a Sources of the Property Coverage in the Building Company Property • Long-term property • Long-term intangible property • Long-term tangible property • Long-term financial property • Short-term property • Supplies (stocks) • Accounts receivable (receivables) • Financial property Sources of the property coverage • In-house sources (own capital) • The registered capital • The capital funds • The funds created from net (after-tax) profit • The economic result • Extraneous sources (liabilities) • Liabilities • Bank credits and loans • Reserves Financing of Building Order

6. Returns in a building company Returns • In monetary units expressed outputs of a company Classification of returns • According to the kinds: • Returns from the sale of goods • Returns from the sale of own production • Financial returns • For needs of enumerating of economic result: • Operational • Financial • Extra Financing of Building Order

7. Costs in a building company Costs • In monetary units expressed consumption of property and work in order to achieve outputs Classification of costs • According to the kinds • Consumption of material • Wage costs • Consumption of services • Depreciation and amortization • Financial costs • According to the purpose, for that they were consumed • Production • Administrative • Costs for research and development • Calculation classification • Direct costs • Overhead costs Financing of Building Order

8. Objectives of a Building Company Basic objectives of a building company • Maximization of market value of a company • Maximization of benefits of company’s owners • Maximization of a profit as a difference between returns and costs Profit = Returns – Costs Particular functional departments allows the assurance of maximum profit: • By maximization of returns • By minimization of costs Financing of Building Order

9. Functional Departments of a Building Company Functional departments ensuring the achievement of basic objectives of a building company • Marketing department • Trading and technical department • Production department • Department of sub-supplies management • Economic department • Department of the stock management • Personal department • Legal department • Investment department • Quality management department • Other departments Financing of Building Order

10. Organizational Structure of a Building Company Organizational structure • Formal structure of organizational units in the formally organized company Main objective of an organizational structure • Delegating of authorities of the owner (owners) of a company to the management from the reason of limited managing abilities of the owner • Achievement of maximally possible efficiency of production based on effectively running system of management Basic suppositions for the organizational structure creation • Identification of activities necessary for the company’s objectives achievement • Aggregation of identified activities into organizational units (specialization) • Dividing of authorities and responsibilities of organizational units and responsibilities for organizational units Financing of Building Order

11. Organizational Structure of a Building Company Way of organizational units creation • Functionalization • Specialization according to company’s functions • Specialization of organizational units on specific activities • Diversification (specialization according to an object), an object can be in the form of: • Group of products • Product • Market • Project From this dividing basic kinds of organizational structure result: • Line organizational structure • Project organizational structure • Matrix organizational structure • Divisional organizational structure Financing of Building Order

12. Line Organizational Structure Characteristics: • Base on particular functions a company is divided into partial departments • Each department is responsible for realization of directly defined activity • Employees of the department are directly subordinated to heads of particular departments • Partial departments communicate with each other through heads of particular departments Advantages: • Clear determination of subordination and superiority • Possibility of reaching of high specialization in the frame of the department • Efficient work for one chief Disadvantages: • Sometimes quite long information flows (communication among departments usually through they heads) • Low involvement for whole company’s objectives (above all the best effort for department not for the company as a whole) Financing of Building Order

13. TOP MANAGEMENT MANAGEMENT A MANAGEMENT B MANAGEMENT D MANAGEMENT C A1 B1 D1 C1 A2 B2 C2 D2 A3 B3 C3 D3 Line Organizational Structure Financing of Building Order

14. Project Organizational Structure Characteristics: • In the frame of basic organizational structure of a company there is provisionally created new organization oriented on a realization of certain project (a load with specific features) • Project structure is interdisciplinary, there is named the head of the project that creates team of workers of various professions needed for the project solution Kinds of project organizational structure (according to the way, how much the basic structure is influenced): • Co-ordination of the project • Line still dominates • Head of the project only connects workers creating the team • Workers work on the project in the frame of their position in the line structure • Net project organization • In parallel with the existing structure there the new fully organizationally independent project team arises • Workers of the project team are completely freed form their duties in the frame of the department and they are fully subordinated to the head of the team Financing of Building Order

15. TOP MANAGEMENT MANAGEMENT A MANAGEMENT B MANAGEMENT C MANAGEMENT OF PROJECT 1 A1 B1 C1 A2 B2 C2 A3 B3 C3 Project Organizational Structure Financing of Building Order

16. Matrix Organizational Structure Characteristics: • Primary structure is created according to the one criteria (e.g. line structure) and it is connected with the secondary structure created according to the second criteria (e.g. project structure) • This form can better react to changes in the surrounding through project managers • However this higher elasticity brings a failure of a management unity • It concerns about “structure of two chiefs”, where the first chief is represented by head of the department and the second is represented by head of the project or order (site manager) Financing of Building Order

17. TOP MANAGEMENT MANAGEMENT A MANAGEMENT B MANAGEMENT C MANAGEMENT OF PROJECT 1 MANAGEMENT OF PROJECT 2 Matrix Organizational Structure Financing of Building Order

18. Divisional Organizational Structure Characteristics: • Structure intended mainly for high companies with wide portfolio of production • According to the kind of output the company is divided into particular divisions (dividing according to the product - similar with the project structure) • Particular divisions are organized according to the line or project organizational structure • Divisions in the project structure are completed by departments common for the whole company Financing of Building Order

19. Příklad divizionální organizační struktury Financing of Building Order

20. Organizační struktura - Skanska Financing of Building Order