Profitability Improvement of Construction Firms Through Continuous Improvement Using Rapid Improvement Principles and Best Practices

Fekadu Melese Debella, Purdue University

Abstract

The internal and external challenges construction companies face such as variability, low productivity, inefficient processes, waste, uncertainties, risks, fragmentation, adversarial contractual relationships, competition, and those resulting from internal and external challenges such as cost overruns and delays negatively affect company performance and profitability. Though research publications abound, these challenges persist, which indicates that the following gaps exist. Lean construction, process improvement, and performance improvement research have been conducted wherein improvement principles, and best practices are used to ameliorate performance issues, but several knowledge gaps exist. Few companies use these improvement principles and best practices. For those companies applying improvements, there is no established link between these improvements and performance/profitability to guide companies. Further, even when companies use improvement principles and best practices, they apply only one or two, whereas an integrated application of these improvement principles and best practices would be more effective. The other gap the author identified is the lack of strategic tools that construction companies can use to improve and manage their profitability. This thesis tried to fill the knowledge gap, at least partially, by developing a two-part excellence model for profitability improvement of construction companies. The excellence model lays out strategies that would enable companies to overcome the challenges and improve their profitability. The excellence model also gives an iterative and recursive continuous improvement model and flowchart to improve the profitability of construction companies. The researcher used high impact principles, guidelines, and concepts from the literature on organizational effectiveness, critical success factors, strategic company profitability growth enablers, process improvement, and process maturity models, performance improvement, and organizational excellence guidelines to develop the two-part excellence model. The author also translated the two-part excellence model into the diagnostic tool and Decision Support System (DSS) by use of process diagrams, fishbone diagrams, root cause analysis, and use of improvement principles, countermeasures and best practices at the most granular (lowest intervention) levels to do away with root causes of poor performance. The author developed the diagnostic tool and Decision Support System (DSS) in Access 2016 to serve as a strategic tool to improve and manage the profitability of construction companies. The researcher used improvement principles, and best practices from scientific and practitioner literature to develop company and project process flow diagrams, and fishbone (cause and effect) diagrams for company, department, employee, interactions and project performance for the profitability improvement, which are the engines of the diagnostic tool and DSS. The diagnostic tool and DSS use continuous improvement cycles iteratively and recursively to improve the profitability of construction companies from the current net profit of 2-3 percent to a higher value.

Degree

Ph.D.

Advisors

Pilotte, Purdue University.

Subject Area

Information science|Management|Operations research|Statistics

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