Evaluation of organizational structures formation of the construction industry enterprises of EKR
Table of contents: The Kazakh-American Free University Academic Journal №12 - 2020
Nepshina Victoria, Kazakh-American Free University, Kazakhstan
Urazova Natalya, Kazakh-American Free University, Kazakhstan
Today, the construction
industry in Kazakhstan is undergoing a crisis that began back in 2008. Despite
a sufficient number of construction projects, most of them are state-owned,
aimed at the construction of housing complexes by state order. However, this
fact is not critical for overcoming the crisis. Not to mention private companies
that are undergoing not only financial, but also managerial crisis. The way out
of these problems lies in a comprehensive solution to the issue of forming such
a management system that would rely on the experience of developed countries,
and also would not exclude the possibility of taking into account national
experience in organizing the work of a construction company.
The current state of the
industry is as follows: the construction industry requires the reform of
production and economic activity, because indicators of loss-making or crisis
state of companies in this sphere tend to increase.
In January - March 2017,
construction organizations in Ust-Kamenogorsk completed work worth 390.3
million tenge, or 42.7% of the total workload of large and medium-sized
organizations in the region. This amounts to 165.5% compared to January - March
2019 (in a comparable estimate).
Change in the volume of
contract work performed by construction organizations for the period from 2015
to 2019: the volume of contract work in comparable prices in 2019 amounted to
9542.0 million tenge, which is 111.0% of the volume in 2018. In 2018, there was a decrease in the volume of work compared to 2017 by 5.3%.
Considering the volume
of contract work performed by construction organizations with various forms of
ownership, it can be noted that in the period from 2003 to 2019, the largest
volume of work was performed by organizations with state, mixed and private
ownership. State organizations completed - 4.9%, municipal - 1.7%, private -
86.2%, mixed and public - 1.9% and 4.8%, respectively, and foreign - 0,3% of
the total volume of work performed in 2019. From this it follows that the
private form of ownership remains the priority form, the share of work
performed by them in the total volume of work increased from 77.1% in 2018 to
86.2% in 2019.
In January-March 2017, 49.5 km long-distance cable lines and 124 telephone exchanges in rural areas were introduced.
The structure of work
has changed in recent years. There is a reorientation of the activities of
construction enterprises from industrial construction to non-production. Thus,
the share of construction and installation works performed at social facilities
increased from 65% in 2018 to 82 percent in 2019, and at industrial facilities,
respectively, decreased from 35 to 18 percent.
The renewal coefficient
of fixed assets (the share of fixed assets introduced for the year in their
availability at the end of the year), determined in comparable prices, was 13%
in 2018 compared to 11% in 2017, and the liquidation ratio (the share of fixed
assets liquidated for the year in their availability at the beginning of the
year), respectively, was 16% and 6%. Depreciation of fixed assets in
construction by the end of 2018 was 48% versus 49% at the end of 2017 (Table
Table 1. Level of depreciation, renewal and liquidation,
shelf life of fixed assets in construction
From the above data it
is seen that, compared with 2018, there is an increase in construction
activity. However, the financial situation of construction companies remains
For January - February
2017, the balanced financial result of construction companies in current prices
amounted to 10.3 million tenge of profit against 21.5 million tenge for January
- February 2019, or 51.8% less. 26 construction organizations (61.9% of the
total by type of activity) received 21.2 million tenge of total loss.
The accounts receivable
of construction companies as of March 1, 2017 decreased by 0.6% compared to the
data as of February 1 of the current year (by 5.2 million tenge) and amounted
to 820.8 million tenge, of which 29.1%, or 238.5 million tenge accounts for
Accounts payable as of
March 1, 2017 amounted to 1074.1 million tenge. (48.8 million tenge, 4.3% less
than on February 1 of the current year), including 284.5 million tenge, or
26.5% - overdue. In general, for construction, accounts payable exceed accounts
receivable by 253.3 million tenge, or 30.9%.
The main indicators
limiting the effective productivity of construction organizations, according to
the Department of Statistics of the East Kazakhstan region, are still high
taxes (this factor is indicated by 59% of managers, insolvency of customers
(58%), high cost of materials, structures and products (46 %). There are also
factors such as a shortage and deterioration of construction machinery and
mechanisms (14%), a lack of skilled workers (21%) and competition (29%) .
According to forecast
estimates, in 2020, in the opinion of 64% of managers, a decrease in production
is not expected, in 73% - a change in the number of employees is not expected.
More and more firms are
closed due to lack of profitability. This situation is alarming regarding the
growth of the economy and development of the country. In addition, it is
important to be aware of the extent to which this problem affects the social
component of the issue: with the decline of the industry, there is a natural
decrease in the number of jobs, and hence a decrease in employment, and a
decrease in the flow of funds to the budget and, in general, a decrease in the
overall development indicators of the country.
The actual and most
effective tool for solving problems in the construction sector is rightfully
considered restructuring. Today, in Kazakhstan, large enterprises are seen as
bulky structures, stuffed with a huge amount of obsolete unused inventory and
production assets. With the help of them, products are produced that do not
meet modern market requirements both in terms of manufacturing time, and in
labor costs and quality. As for small enterprises, here the possibility of
development is exhausted by the lack of financial resources, production
capacities, qualified personnel and tax burden. Thus, domestic construction
companies are faced with the issues of finding working capital, the ability to
manage finances in the long term and tactically, creating marketing services,
developing new production assets and materials, developing new products and
In order to analyze the
main aspects and patterns of the formation of organizational structures of
construction enterprises, we chose a universal method - questioning, which
allows to comprehensively consider the subject under study and clarify the opinions
of respondents. In addition, for completeness, the questionnaire survey was supplemented
by interviewing, which significantly increases the reliability of experts' assessments
of the situation.
In order to justify the
proposed measures for the optimal and rational formation of the organizational
structure of East Kazakhstan construction enterprises during the study, a
survey of 200 managers of various construction enterprises was conducted: first
managers - directors, deputy directors, line managers - heads of departments,
sections, as well as foremen, specialists, foremen. The composition of the
survey participants is presented in table 2.
2. Distribution of respondent organizations by type
The questionnaire survey
was attended by employees of construction organizations with the following
distribution: 11% - TOP management of organizations, 10% - engineers, 29% -
line managers, 5% - foremen, 12.5% - foremen, 17.5% - specialists and 15 % -
other executives (Figure 1).
Figure 1. The proportion of respondents by
The results showed that
71% of managers have higher education, although 48.8% of them graduated from a
non-economic university (Figure 2); 28.8% of respondents graduated from
college, 20% of them - not an economic profile. In addition, 6.3% of
respondents said that in addition to secondary specialized education they have
incomplete higher education; and 3.8% - over one higher. There are not many
managers with a scientific degree - only 6.3%, but this is understandable,
since at the moment they need more effort and dedication in the workplace to
confirm the status of a good leader, and there is not always enough time to
develop professional specialization.
Figure 2. Executive
This sad situation is
also supported by the fact that managers confirm a lack of knowledge precisely
with the further development of vocational training. They have a lack of
computer knowledge. This is due to scientific and technological progress, which
was reflected in the widespread computerization of jobs, and managers who
mainly occupy the age group from 46 to 50 years (21%) did not have a wide scale
of computer training, even in universities. Lack of knowledge of accounting is
constantly being amended by all kinds of modifications, requiring additional
training in this direction. The lack of knowledge of foreign languages, and
most often English, manifests itself when an enterprise, organization or
company reaches an international level.
Leaders can improve
their professional skills directly in the organization, for which a network of
courses and schools has been created. In order to improve the qualifications of
this category of personnel, enterprises have established production and
technical courses, various special-purpose courses, training courses for second
and related professions, schools for the study of advanced working methods, and
schools for masters .
However, the majority of
managers believe that their managerial position is fully consistent with their
specialty and does not require additional knowledge, as 67.5% of respondents
The vast majority of
respondents indicate the importance of work for them. In it, they value, first
of all, the interest and content of the work corresponding to special training
- 37.5% of the respondents; sufficient wages - 28.8%. Sufficient independence
is provided by the work of 22.5% of respondents, as well as the opportunity for
professional growth - 21% of managers.
In accordance with this,
41.3% of managers believe that their work is evaluated fairly in relation to
their labor contribution, 22.5% - in relation to peers in office, 17.5% - to
peers in competence, 13.7% - to other categories of employees, and 5% - to
peers in the category of personnel.
An interesting fact that
emerged during the study: it was noted that managers who have more than 10
years of experience are less likely to take risks than those who have less than
the specified experience. In addition, age and education matter in this
question. Thus, managers with higher education and older age are less likely to
make impulsive and risky decisions. However, education provides an opportunity
and contributes to a deeper analysis and study of decisions, thereby helping to
reduce risk. However, the decisions of such leaders are more original and
When assessing the
organizational structure created at the enterprise, 37.5% of respondents
explained that their structure cannot be called ideal, since it has little efficiency
in the globally existing market conditions. As part of this, respondents
suggest the need to reform the organizational structure as possible, real and
justified by the requirements of the current time (55% of respondents).
23.8% of managers note
the presence of extra links in the management structure as one of the
constraining factors of the effectiveness of existing organizational management
structures. And what is important, 53.8% of respondents agreed on the need to
reduce the number of administrative workers.
According to the
assessment obtained during the survey, it should be noted that in 60 cases
during the functioning of enterprises, changes in the organizational structure
were carried out in the direction of complication (as 58.8% of respondents
noted). 37% of respondents noted that these changes did not lead to an increase
in the result of the enterprise�s work and were not effective enough, as they
were carried out on their own, and external management consultants were not
involved. The main actions that have been taken include: dividing the
enterprise into small LLPs; enlargement of units by creating vacancies;
breakdown into smaller divisions, but less dependent on each other, as a result
of which document flow increased, etc.
There were only a few
cases of a simplification of hierarchical subordination, an optimal reduction
in staff, in particular, a management apparatus by 10%, a reduction in
management links in the manager-production chain supervisor chain.
The inconsistency of the
organizational structure with the current economic conditions and its lack of
mobility to changing conditions requires its constant improvement.
This is evidenced by the
fact that enterprises in the construction industry do not have units that have
industrial independence and are fully responsible for the results of their
activities (80% of respondents). But if there are any, then 15% of respondents
consider their activity not effective. Modern construction enterprises are not
sufficiently adapted to changing conditions, due to the absence in the
structure of units that operate on a temporary basis and are responsible for solving
a specific problem (82.5% of respondents note this fact). Although 42.5% of
managers believe that there are opportunities for the development of such
units, it is very difficult to practically realize them.
At all enterprises, the
heads of which participated in the survey, there are units due to new business
conditions, such as the marketing department, economic analysis service,
estimated contractual services, etc. 76.3% of managers include the presence of
superfluous links in the management structure as the main problems of the
ineffective functioning of the organizational structure, 51.3% of managers -
the irrational number of administrative staff, due to the lack of staff with
the necessary qualifications (51.3% of respondents) and the lack of specialists
of the necessary profile (60 % of respondents) with a sufficient level of
structure that exists today at construction enterprises has many links that
complicate the operational work and speed of decisions, which naturally slows
down the entire production process.
A quality structure must
meet the requirements of manageability, flexibility, functionality and
constantly include opportunities for improvement. The quality of controllability
can be expressed through such an indicator as the norm of controllability,
which, according to researchers [5, 6], is based on the number of people and
the ratio of the number of managers and subordinates (the norm is no more than
10-12). That is, the number of people subordinate to one leader - no more than
a dozen, when it comes to functional departments - the figure varies from 7 to
10 people, technical and design departments are focused on 10-20 people, and
the number of workers in one team should not exceed 15 person. The optimum value
is recognized by 6-8 people working personnel per head.
If the magnitude of the
manageability norm is greater than the permissible values, then this indicates
a bloated managerial apparatus, duplication of functions and excessive control,
which also negatively affects the work of the unit. Determination the specific
number of managers per employee in each organization should certainly be based
on a clear analysis of mutually affecting factors, taking into account the
specifics of the industry and the specifics of a particular project.
While comparing the
organizational structure and the size of the enterprise, it should be
considered the following:
- there is a direct
relationship between the size of the enterprise and the degree of formality of
the organizational structure;
- the degree of
centralization of the structure decreases as the size of the enterprise;
- there is a maximum
need to use automated forms of work, accounting, analysis, movement and
decisions in large enterprises .
Thus, the combination of
factors, namely: mobility, flexibility of the organizational structure, volume
of products sold, customer demand for it, good working conditions, the number
of administrative and managerial personnel (AMP), efficient and maximum
possible use of production capacities, a group of factors of competitive advantage
and many others ultimately determine the possibility of an enterprise making a
Orientation to profit is
an objective regularity and the ultimate goal of the functioning of any
enterprise. The necessary level of profit allows you to solve a whole range of
tasks that determine the stability and efficiency of the enterprise. This
indicator is the main source of the current and strategic development of the
enterprise, an indicator of its creditworthiness. Stable and steady profit
growth indicates the high competitiveness of the enterprise, as well as
business efficiency, which is inextricably linked with management efficiency.
As a result of the
calculations of the indicators of the management system in terms of importance,
the following conclusions can be drawn.
The profitability of the
product is in the first place among the indicators characterizing the
efficiency of the enterprise management system.
Thus, it is necessary to
create such a structure that would correspond to an indicator reflecting the
profitability of the enterprise. The company's ability to generate profit
reflects its success in achieving economic growth in accordance with the chosen
strategy. Maintaining the necessary level of profitability is an objective
regularity of the normal functioning of the enterprise.
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Table of contents: The Kazakh-American Free University Academic Journal №12 - 2020