What makes a company successful?

In 2010, 323 construction companies went into administration and the numbers of building companies experiencing financial problems had risen 30 per cent (UK Construction News, 2011). Some of the larger companies such as Rok and Connaught no longer exist whilst other companies, like May Gurney and Mears, have managed sizable growth in revenue despite trading under similar conditions. So what makes some companies thrive and some die?

The basis of any organisation is the interaction of the people in order to achieve objectives and the success and effectiveness of the organisation will depend on their interaction and performance. ‘People’ is the one ingredient in a company where it is impossible to copy or clone to ensure uniformity. The objectives, structure and management of an organisation can be minutely defined and repeated time and time again but the actual execution of the operations of the company is invariably undertaken at a level where human interaction and behaviour takes place. It is this informal and unpredictability aspect which gives companies their uniqueness and ultimately contributes to the success in some and failure in others.

This ‘human factor’ was explored by Peter F Drucker who examined how humans are organized across the business, government and the non-profit sectors of society and focused on relationships among humans. He demonstrated how organisations can bring out the best in people, and how workers can find a sense of community and dignity in a modern society organised around large institutions. Drucker was intrigued by employees who knew more about certain subjects than their bosses or colleagues and yet had to cooperate with others in a large organisation. Although there is invariably a need for the structure of an organisation to change to meet new demands, technology and processes, the identification of such a need must come from the operators of the system. 

The provision of a good structure allows effective and efficient organisational performance and although a good organisational structure does not itself produce good performance, a poor structure makes good performance impossible. In whatever organisational form a company takes, and whatever ethos the senior management wishes to adopt, the execution of the operations will rely, time and time again, on the individuality of the ‘people’. Although the consequences of individual decisions can be reduced, limited or controlled through an organisation’s structure, at some point, those decisions will need to be made - at some point the manager will ‘make his call’. 

Ultimately, the success of a company is based upon the ability to effectively process decisions made by managers. A mediocre manager in a well structured company will contribute more to an organisation and its success than a ‘star’ manager whose decisions and actions are stifled in a poorly structured system. Clearly where there is the combination of a ‘star’ manager and a well structured organisation you will see even greater success. No doubt such a combination is present in those top performing construction companies such as May Gurney and Mears whilst Rok and Connaught may have had a more unfortunate combination. 

Which way do you want to go?