Managerial Economics - Term Paper Example

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Gildrock Construction is a real estate and general construction company and a member of the Golden Enterprises Group of Companies (Goldec). Goldec is comprised of a total of seventeen companies in real estate, entertainment, manufacturing, and hospitality. The company employs a total of 1,700 employees on a permanent basis and contacts with hundreds of companies. Started twenty five years ago as Golden Publishers, the company has grown in leaps and bounds, merging and acquiring competitors and other interests to build a respectable portfolio of services and products industries. The groups General Manager- also the founder of eight of the companies under the Goldec umbrella- owns 62% of the total company shares. Another four board members own 23% while 1456 employees account for a total of 15%.

The organization structure of the Goldec constituent companies such as Gildrock Construction falls under the Human Relations model as described by Miles, Snow, Meyer, and Coleman (1978). In this model, employees are regarded as the most important aspect of the business, and the management has made numerous efforts to recognize the crucial role their employees play in ensuring their survival. One of these programs is the employee shareholding offer that has seen a total of 15% of the companys stock set aside for the employees. The company also maintains the impetus of employees at all levels (from executive officers to the subordinate staff) by offering work recognition benefits. Employees are thus imparted with a strong sense of ownership and belonging, creating an empowering and enabling environment for them.

The organization of the constituent companies is influenced in a huge way by the organization structure of the parent company. Allocation of work roles depends on the size of the company, the diverse environment in which business activities are conducted, and the high level of technology used to run operations. To ensure proper coordination between the head office and the individual company such as Gildrock Construction- Gildrock has a structure that varies substantially from that maintained at Goldec. A representative is placed in the CEO office to liaise between the two in terms of policies and execution. While each individual company retains an independent structure depending on its industry and specialty, the head-office (Goldec) maintains the supervisory structure of an investment firm. Policies are made at the company level and approved or vetoed down at the head office, with decisions that affect the entire organization requiring a board vote.

There are three types of agency problems as stated by Armour, Hansmann, and Kraakman (2009). They include conflict between owners and the managers, between the majority and minority shareholders, and between the company and its partners. At Gildrock Construction, the problem of conflict between the owners and the management arises from the parent companys insistence on imposing their will on the decision-making process of the company. The CEO, who also controls the greatest stake of the business, is the main perpetrator and cause of the conflict. With the parent company holding the veto power on what projects are executed, the managers resent the shooting down of projects that they term as crucial to their operations due to bottom-line concerns of the whole company. The fact that the majority shareholder- the CEO of Goldec Group of Companies- owns companies whose operations he does not understand makes his supervisory role harder to execute and often lead to conflict. Minority shareholders also resent the imposition of the majority shareholders will on all voted decisions, and the lack of a vetoing mechanism in instances where the interests of the company hang in the balance and the minority and majority shareholders advocate for opposing opinions.

Another problem facing the company is that of conflicts between Goldec Construction and the partners with whom it conducts business (Jerzemowska, 2006). Conflicts have previously resulted from some managers relationship with the suppliers and contractors who work with the company. This has exposed them to accusations of colluding to reward tenders and contracts to their preferred candidates rather than the deserving ones.

The problems experienced by the constituent companies under Goldec can be solved by allowing them more autonomy and freedom of operations. More autonomy in Gildrock Construction would allow the executives to make decisions such as partners to associate with without interference from the parent company. The decentralization of authority to the individual companies can increase their profitability and thus the success of the whole group of companies. The conflicts between the majority shareholders and the minority shareholders can be avoided by giving the minority shareholders a route by which they can veto decisions opposed by the majority, for example by voting unanimously twice.

The dimension of the activities an employee participates in the course of their work depends on their role in the company. According to Cheng, Li, and Fox (2007) the task, the management, and employees all determine the job dimensions. The division of labor at Gildrock Construction is very specialized. Due to the technical nature of most of the economic activities the business engages in, only the best qualified people are offered employment there. The current human resource management design at Gildrock stresses the employment of the most sufficiently trained individuals for the job. However, the cooperation between the different departments is rather weak, with projects being fragmented and assigned in blocks to planners, architects, construction crew, and marketing departments with little operational collaboration. Decision-making during interdepartmental projects is also slowed down by the long process of holding consultative meetings. This role-based human resource design often leads to losses and project derailment, which affects the bottom-line of the company.

Big projects require that all participants cooperate in the execution of various tasks. For Gildrock, fragmentation of project activities into compartmental groups affects the overall performance, as exchange of ideas is hindered. The management should establish taskforces to execute projects in a unified manner rather than segmenting activities. In this way, not only are the projects well executed by individual players, cooperation ensures that problems are identified early and affirmative actions are taken to avoid losses to the company. Therefore, a change of the design of the human resource to a task-based one can help mitigate the situation. Not only will projects be executed better this way, the cooperation between different departments will also improve the bottom-line.

The compensation for workers in a business plays a central role in ensuring that operations run smoothly and that the company is able to earn a profit from its activities (Osibanjo, Adeniji, Falola, & Heirsmac 2014). Payment is done in the form of salaries and bonuses, incentives, and fringe benefits. Other non-monetary benefits include job training, recognition, and the job environment. At Gildrock Construction, salaries are rewarded depending on the experience of the employee and quality of their work. Benefits include health coverage, cheap housing financing from the real estate department for all employees, and job recognition for various departments in a bi-annual event. Executives receive a basic salary agreed on during recruitment, traveling, housing, and responsibility allowances, and an annual bonus based on the performance of the company. Benefits include comprehensive car insurance, life insurance, a pension plan matched dollar-for-dollar on their contribution, and a two-month paid vacation at a destination of their choice. Other employees receive a standardized basic salary based on their job qualifications, traveling and housing allowances, and an annual bonus. Their benefits include comprehensive health insurance, company contribution to their pension plans, and a month-long paid vacation. All employees have the option of cashing in on their vacation time.

The non-monetary benefits such as work-life balance and workplace environment are areas that require some effort to improve. Apart from performance benefits based on the execution of set tasks, the company should initiate a program that recognizes efforts by employees that seek to extend its domination of the market, such as innovations. The workplace ought to be made friendlier for cooperation by employees of different departments. As much as more cooperation allows projects by the company to be run more professionally, it also creates a friendly environment for all employees to build their portfolios in terms of experience and job exposure. Gender balance is also an issue that needs to be addressed. Fewer female employees hold management positions compared to men. The gender wage gap is also a few points below the industry average, it requires to be improved to avoid alienating female workers.



Jerzemowska, M. (2006). The Main Agency Problems and Their Consequences. Acta Oeconomica Pragensia, 14(3), 9-16.

Osibanjo, O. A., Adeniji, A. A., Falola, H. O., & Heirsmac, P. T. (2014). Compensation packages: a strategic tool for employees performance and retention. Leonardo Journal of Sciences, 1(25), 65-84.

Tran, Q., & Tian, Y. (2013). Organizational Structure: Influencing Factors and Impact on a Firm. American Journal of Industrial and Business Management, 3(1), 229-236.

Armour J., Hansmann H., & Kraakman, R. (2009). Agency Problems, Legal Strategies and Enforcement. The Harvard John M. Olin Center For Law, Economics, and Business

Miles, R. A., Snow, C. C., Meyer, A. D., & Coleman, H. J. (1978). Organizational strategy, structure, and Process. The Academy of Management Review, 3(3), 546-562.

Cheng, E.W. L., Li, H., & Fox P. (2007). Job Performance Dimensions for Improving Final Project Outcomes. Journal of Construction Engineering and Management, 133(8), 592-599, DOI: 10.1061/_ASCE_0733-9364.



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