A Construction Stakeholders Theory Management Essay

Recent years a lot of publications were made about roles of various stakeholders in construction innovations. While Kulatunga et al. described construction client’s characteristics and influence on innovations, Manley (2008) represented construction innovations from a manufacturer’s perspective. The author gave

Lim and Peltner (2011)

2 Construction stakeholders’ theory

Steuer (2006) classified stakeholder theories into tree types: corporate, stakeholder and conceptual. He described conceptual approach as combination of both corporate and stakeholder interests related to different aspects Corporate Social Responsibility (CSR), such as ‘the Common Good’, human rights, environmental protection, sustainable development, etc. At the same time, OECD (2001) describes innovations as one of the main drivers for sustainable development. So, according to Steuer’s (2006) typology my dissertation considers ‘instrumental’ aspect of ‘conceptual’ stakeholder theory. In my case that means exploration of stakeholder influence on innovations in design of electrical substations.

Yang et al. (2009) introduced construction stakeholder relationship model which in contrast to Freeman’s (1984) stakeholder model takes into account not only stakeholders, who have direct communications with focal company, but emphasize mutual interactions between construction project stakeholders. Yang et al. (2009) highlight the fact that any construction stakeholder has variety of his own stakeholders, and his or her behavior cannot be properly predicted without consideration of such an influencing context.

Figure 1

(Yang et al., 2009, p168)

That is why in my dissertation I am planning to investigate the influence on innovative strategy of a construction designer’s company from both kinds of stakeholders: those who have primary influence on the company and those, whose influence is indirect. As well I would like to investigate any unexpected stakeholders who may influence innovations process in design of substations.

3 Involvement of stakeholders to innovations

Kulatunga et al. (2011) report on shortage of innovations in construction industry although the industry itself has great potential to be innovative. The author claims that proposed long-term exploitation of construction facilities in combination with project-based nature of construction process forewarn clients from acceptance of radically innovative ideas.

At the same time, Hülsmann and Pfeffermann (2011) describe innovations as a source of change which inevitably causes resistance from project stakeholders. That is why the authors suggest engagement of both internal and external stakeholders to the identifications of reasons for innovational change, scope of this change and stakeholders’ roles in the implementation of this change.

Furthermore, main constraints for innovations in construction projects were found to be caused by failures in stakeholder competency. Improper stakeholders’ management was found to be a cause of significant time and cost overruns. So concentration on stakeholders and their competency is needed in order to deliver innovations without damage to a project. (Murphy et al., 2011)

However, Ayuso et al. (2011) found that stakeholder involvement in a company’s innovation orientation only make sense if the company does not apply Knowledge Management (KM) for the same objective. They state that presence of KM within project organisation reduces or even eliminates the role of stakeholders’ involvement for innovations propose.

3.1 External stakeholders

3.1.1 Customer

Kulatunga et al. (2011) reported on necessity of construction client involvement in innovation process. It was found that construction industry did not reach its innovative potential yet, and that clients willingness to share risks connected with innovation process are crucial for the industry. As well a positive dynamics was found recent years that client is no longer considered to be only interested in completing a project on time, on budget and with desired quality. Clients now are regarded as a source of direction and coordination of innovation process in construction industry.

Kulatunga et al. (2011) found variety of characteristics of construction clients which are supportive for innovations. Among them are:

– Proactive attitude of a client, which influences the whole process of innovation. It joins the team together, and accelerate contributing decision making. It is important factor if the client becomes effective team player, his or her commitment in the construction team create a joint responsibility, which in turn prepossess team members to develop innovative ideas. However, misunderstandings between the team and the client may seriously damage the innovation process. (Kulatunga et al., 2011)

– Client’s ability to receive support from different members of his or her organisation is very important to any project success. Mutual understanding between the client and the project team was found important for both innovative and common projects, while client’s trust to the designer’s talents influence innovativeness dramatically. (Kulatunga et al., 2011)

– Client’s competence enhances innovative process as far it helps to ensure designers that the client is choosing the optimal solution and all the alternatives were properly investigated. (Kulatunga et al., 2011)

– Among the other client’s characteristics which are important to innovations in construction industry Kulatunga et al. (2011) mention: ‘effective dissemination of information’, ‘value judgment’, ‘support to innovation’, ‘strong relationships’, ‘foresight and vision’, ‘demand for innovation’, ‘maintain up-to-date knowledge about project development’, ‘flexible and receptive to change’, ‘managing knowledge and information’, ‘consistent requirements’, and ‘ability to manage risk’.

– However, the most important value was given by Kulatunga et al. (2011) to client’s respect to the project participants. The client’s desire and ability to listen not only to high skill professionals, but to every single team member who has something to say about the project, creates the atmosphere where innovative ideas emerge. One of the interviewed construction clients claimed: ‘I think best innovations often come from the most unlikely sources. They can be steel fixers, carpenters, labourers or whoever on site. They have really good ideas, but are scared to share them for the sake of being laughed at or they don’t think it is genuine or they won’t be taken seriously. Within the project we (the client and other professionals) took every person seriously.’ (Kulatunga et al., 2011, p390)

3.1.2 Contractor

Kulatunga et al. (2011) claims that construction builders have only one way to direct their innovative ideas: optimization of their own construction process. From manufacturer’s point of view Manley (2008) found that builders could have negative influence on innovations in construction industry, because new technologies could be unfamiliar to builders. The author suggests that this effect could be overcome by their education about these new technologies.

At the same time Lim and Peltner (2011) claim that although significant part construction companies do not see generation of new knowledge as a driver for their competiveness, recent increased rate of innovations within the industry made some of them interested in investing money to research and development (R&D).

Among the main stakeholders which have direct impact on construction firm contribution to innovations Lim and Peltner (2011) highlight clients and those stakeholders who have direct formal communication with the construction company. Therefore they suggest construction companies to create ‘value adding partnership’, which can help a company to improve its knowledge base and in turn support the innovation process.

At the same time Lim and Peltner (2011) recognize crucial role of government to R&D. Authors acknowledge traditional government funding directly to a private company’s R&D or to national R&D institutions. As well they indicate contribution to innovations from ‘government financed R&D in the other national sectors of business enterprise, private non-profit, higher education and abroad’ (Lim and Peltner, 2011, p290)

3.1.3 Supplier

Manley (2008) describe manufacturers as one of the most influential stakeholders to construction innovation process. One of the main reasons for that is that manufacturers tend to spend much more money on R&D than contractors or consultants.

The key influencing drivers for innovations for manufacturers are:

– Proper relationships with other project participants;

– Knowledge-flows between manufacturers and other project participants. (Manley, 2008)

Manley (2008) found several factors which support manufacturer’ contribution to innovations in construction industry:

– Creation of strong relationships with client is important, because well informed clients tend to procure supplier’s unique products designed especially for them. As well these relations help to agree proper procurement systems, educate clients about product innovations, and participate as valid construction team members. (Manley, 2008)

– Assistance from universities and government agencies which provide technical support for innovations. This support could cover new ideas, expert assessment and approval, and providing of testing facilities. (Manley, 2008)

– Support form industry associations helps manufacturers to gain reputation for a new product. (Manley, 2008)

– Engagement in installation of new products on the construction site, because it helps to establish good relationship with other project participants. Although traditionally relations with other project participants were poorly established, nowadays manufacturer’s presence at construction site helps to reduce the communication problem. (Manley, 2008)

3.1.4 Consultant

Levy (2010) describes the role of construction consultant as a representative of construction client. He or she could be hired if the client does not have skilled professionals in particular field. Consultant’s skills could be related to any type of construction professions, this could be: estimating consultants who provide cost estimates to the client, building-code consultants who analyse the project in terms of construction regulations, scheduling consultants who work on construction schedules during the project execution. At the same time, Hess et al. (2007) specify land surveyors, geological consultants, environmental consultants, land use consultants, etc. The authors see the role of these consultants as information providers for construction designers.

Manley (2008) states that competence of construction consultants without controversy affects innovations. As well the author claims project consultants as important stakeholders for construction suppliers.

3.2 Indirect external stakeholders

Manley (2008) present the role of government as a likely investor for manufacturers if development of new products is influenced by environmental or any other public regulations. At the same time Lim and Lim and Peltner (2011) highlight the role of government in funding construction companies’ innovative researches. As well the author describes important role of government in funding national R&D institutions, which research for construction industry.

I found a shortage of research made on influence on innovations by other external stakeholders indirect to design companies, such as general public, financial institutions, insurance companies, leasers, etc. So I will try to investigate empirically if any of these stakeholders influence innovations in substation construction.

3.3 Internal stakeholders

Hülsmann and Pfeffermann (2011) classified internal stakeholders which may influence innovations within a company as: ‘the idea generator, the project team, the project sponsor, headquarters of the firm, the stock holders, etc.’ (Hülsmann and Pfeffermann, 2011, pp199-200)

Internal stakeholders’ perception of innovations depends on the source of innovations, which could be introduced by top-down or bottom-up ways. In case of top-down innovations the project team becomes one of the main stakeholders, and the success of innovation depends on overcoming the team resistance. As well those members of staff who directly communicate with external stakeholders needed to be trained and motivated to win the external stakeholders’ support. If the source of innovations coming from the team member, in that case the role of management become crucial to such innovations. The ability of company’s management to support generation of alternative solutions to existing products and to benefit from mistakes and failures become very important. Creation of communication lines between the team working on innovations and other stakeholders, both internal and external promote the innovative initiatives as well. (Hülsmann and Pfeffermann, 2011)

4 Aims and objectives

Undertaking the literature review I have found that there are some gaps in the existing research on stakeholders influence on innovations in construction industry. According to Manley (2008) construction consultants have sufficient impact on innovations. However, their influence on innovations in construction design is not discovered.

As well I found shortage of research made on external stakeholders indirect to design companies, according to Yang et al. (2009) they could be: government, general public, financial institutions, insurance companies, leasers, etc.

Figure 2

(Own model based on Yang et al., 2009, p168)

The aim of this work is to investigate the influence of different stakeholders to innovations in design of electrical substations.

The research objectives are:

1. To identify the main stakeholders for substations’ design companies.

2. To find out which of these stakeholders influence innovations in design of electrical substations.