Organizational Design

Turner Construction Company

Arrigo Gaetano
Rinaldi Alessandro
 Turner Construction Company

In 1983, turner led building contractors in the value of

contracts booked
 Construction services
Turner operated as

General Contractor: Construction manager:

a Contractor plans to A CM acted as the owner’s
deliver (and built a agent and adviser, providing
portion of) a finished preconstruction services
product to an owner and monitoring the firms
(customer) that actually built the
project.

Contracts were:
• Lump-sum: an owner’s architect completed plans and specifications and then
contractors bid on the project; the contractors competed primarly on price, and their
incentive was to meet specifications at minimal cost because their remunerations was
the lump-sum price minus their final cost of materials and construction.

• Negotiated: contractor and owner worked together from the planning stage,
negotiating specifications, cost estimates, a guaranteed maximum price, and the
contractor’s fee.
 Construction services
Turner perfomed most of its work through negotiated fee contracts where it
acted as both General Contractor and Construction Manager

• Planned and scheduled the project;

• Procured materials;
• Marshaled the different personnel required;
• Awared and supervised subcontracts;
• Assumed responsability for on-time completion at a guaranteed
maximum price;

‘’Our business is a combination of consulting and underwriting: we buy risk and sell
predictability’’
‘’ We manage all the project’s details for the owner and, because we’re involved early,
we can guarantee a price earlier than the lump-sum bidder. Thus, the owner can
begin arranging financing earlier and construction (and occupancy) can begin sooner.
TIME IS MONEY IN CONSTRUCTION’’
Turner’s senior
vice president
 Major Markets and buyers
Commercial

Health care Turner Public

Hotel/residential

Real estate developer

Commercial:
Corporation building a new heardquarters

Health care: Total hospital construction expenditures were expected to

continue increasing ( due to financing through municipal bond offerings)
 The Selling Process
Winning a contract involved several activities:

1. To locate prospects and create awareness of Turner’s capabilities in that building

category; ( in hospital construction, potential building was public knoledge and
presentations at hospital associations were a common means of maintaining
awareness of Turner’s services; in commercial construction, contacts with
developers and architects are crucial)

2. To meet with the decision makers (architect or owner); at this meeting, the
territory’s business development manager sought information about both the
specifications and the people involved in a project

3. To send a proposal and references

4. A 30- to 45-minute presentation to a board or development committee; this

presentation also covered preconstruction services such as cost estimates and
scheduling

5. Ivolved pricing, where lump-sum versus a negotiated fee contract was often a key
issue
 The Project Selection
Selecting a project meant judging future demand and potential opportunity costs:

1. Type of contract : lump-sum or negotiated

2. The job’s size: bigger can be better, but large projects take years and carry risks
concerning the availability and perfomance of subs during that time

3. The owner: some developers will chisel away your margin, and some existing
relationships take precedence over the other criteria mentioned

4. Required staffing

5. The level of business in the territory: often determines whether we commit to

pursuing a job

6. Whether it’s a client we want to get to know

 Project Management
Complexity of projects
(purchasing, scheduling, fabrication, inventory control, shipping, coordinating of subcontractors)

Project executive = key Turner person during construction Scarcest resource

Territory manager had spent several years as project executive

Local knowledge is
fundamental

Most projects required changes during construction lead by

Fast changes in technology (Hospitals) Changes in owners mind

Key words: Executive manager have to manage the owner proprerly with daily meetings

«There are networks at each phase»

 Organization
Until 1973

Home office

Branch office 1 Branch office 2 Branch office 3

Home office in charge for executive selling and for estimating/purchasing for large projects

Starting from 1973 we had a reorganization of the Organization Chart…

 Organization
Turner corporate organization, 1984

Turner Corp.

Construction Subsidiaries International industries

company

Northest region
New York (1902), Boston (1910), Philadelphia (1920), Pittsburgh (1975)

Southeast region
Washimgton, D.C.(1978), Miami 1980

Central region
Chicago (1948), Cincinnati (1955), Cleveland (1965), Columbus (1965), Houston (1972), Detroit (1975)

Western region
Los Angeles (1964), Denver (1976), San Francisco (1972), Seattle (1978
 Organization
Turner Territory Organization
Territory general
manager

Terrotory operations
manager

Safety
Cost and project
control
Equal employment
Financing
opportunity

Special project
Purchasing
division

Estimating scheduling

Business Project executives

development

Preconstruction support Project management

 Organization
Turner Typical Project Staffing

Project Executive

Estimating

Purchasing

Project
Project engineer
superintendent Cost engineer Project accountant
Assistant engineer
Assistant superintendent
Organization
 Organization

Territory GMs had been with Turner for 20 to 25 years with experience in estimating,
purchasing and project management

GMs reported to regional VPs who reported to Kupfer

GMs and VPs were measured on annual sales and earning goals
 Recent developments
Kupfer became executive VP in May 1983, previously he held the position of
International Industries’ president and senior VP for eastern region.

He was responsible for corporate marketing and sale, contract administration, and
strategic planning

Two long-term development setted by him:

 Product specialization

 National accounts
 Product specialization
Hospital market:

Turner had lost share in recent years to a new company (Park).

Park is considered a «hospital construction specialist», it operate from corporate offices

Ability to bring national resources to a hospital project

«The core of precostruction service’s Parks is software that provides a fancy checklist of
cost and design estimates»

Park’s presentations are very professional

 Product specialization

Similar competition in correctional and high-tech industrial market

In response to this competition Turner established in 1983 a «Management Consulting

Service, M.C.S.» to standardize service among territories

Some GMs welcomed these groups, wile others considered their involment redundant.

What do you thing about this new function at the corporate level of Turner?
 National accounts
Various factors had increased the national scope of construction work

Nationwide expansion of large regional developers and major architectural firms

National insurance companies beginning to assume development as well as financing

tasks in JV with developers

Large retailers and manufacturers had expanded into national companies.

IN 1978, Turner estabilished a National Account Program (N.A.P.)

Objectives: develop a network for early detection of new business opportunities

In 1984, corporate management was disappointed with this program

National firms are not pursued aggressively or proactively

In your mind, why the N.A.P. is not working well?

 National accounts
Recommendations concerning N.A.P.

•Granting a territory some percentage of the operating fee if it performed “work of

substance” in generating a project for another territory

•Placing one or two senior managers as full-time NAP rappresentative at the

corporate level

•Developing Turner’s product-specific capabilities beyond the MCS stage by

establishing national groups for hospitals and correctional facilities.
 Today’s Decisions
Commercial building project in territory A

Turner had not previously worked with this owner but it had worked with DA
(Design Associates) for 30 years.

All key staff available in territory…

(not really it the three previous proposal were successful)

Project’s starting date suggested a tight schedule

Hospital Facility Group

Turner had not built an hospital in territory A in the last decade and had not worked
with HFG

Kupfer believed the hospital market would be increasingly important and that the
commercial-building market, while currently strong, was vulnerable to overcapacity
in the near future.
 Today’s Decisions
Call from business development manager of Territory B

He reported a possible contract of renovation ($50 million) for Goodnight Hotels

national chain

A senior VP of Goodnight Hotels request a uniform standard of service and fees

through the United States