CRH plc: Corporate Management.

Introduction

CRH is a global company involved in the business of producing and supplying building materials. Starting as a small company based in Ireland, CRH plc has extended into the global market. CRH was born by the merger between Irish Cement and Roadstone/Wood in 1970. CRHs expansion was acquisition led as it started buying smaller companies all around Europe. It entered the US market in 1977 and since 1990s, it expanded into the emerging economies (Case Study). Today, this company with its headquarters in Dublin, has 1000 subsidiaries in 26 countries and employs 80,000 people. The company has high market share in Europe and North America and is strengthening its position in the emerging markets including Latin America and Eastern Europe.

CRH and the Competitive Strategy

To analyse the competitive strategy employed by CRH, the industry environment in which the company operates has been considered in the following discussion.

The Building Industry and CRH plc The building materials industry is based on commodity business which is matured and fragmented in most of the markets. The cyclical nature of the business tends to require more capital investments and longer lead times to capitalise the business. The most notable feature of the building materials industry is that it is a commodity business with little differences between suppliers and the main basis of competition is the price. Another feature of the industry in which CRH operates is that the building industry is fragmented. The business is linked to the locations of materials, the variation in its value and the high transportation cost it requires. Moreover, the varied building regulations and building standards tend to make building industry more local in nature. And this resulted in

low barriers to entry. Thus, the success in such an industry is invariably linked to the level of local contact and operational control. Moreover, the products of this industry are also standardized, stable and similar across the markets. Hence the mode of production is also standard within the industry and involves unsophisticated processes. This provides little ground for the implementation of product differentiation strategy for the firms in this industry. These characteristics of the industry gave opportunities for many small sized firms to operate within it. However, since 1990s, probably because of increased globalisation and integration of the world market, several features of the building industry have changed and global companies have dominated the industry (Case Study). The markets for building materials have been more homogeneous and there have been more harmonisation of building regulations and product standards across nations.

The competitive strategy of CRH Given the nature of the business, with low chances of differentiation and intense competition due to low barriers of entry, the most suitable strategy for CRH is to diversify through market penetration. CRH initiated the competitive strategy of vertical integration in the domestic market and acquisition-led diversification overseas. This made it possible for CRH to diversify its risks and gain more opportunities. As the building industry is cyclical in nature, the downturn in the domestic market would be offset by the boom in foreign market and vice versa. Thus profitability would be maintained for CRH. However, the diversification strategy of CRH was not limited to geographical locations but it also diversified in its products. Initially, CRH was involved in primary products like cement. With time, CRH stepped into the production and distribution of other related products like concrete, glass, insulation, heating, lighting products etc. Thus CRH fully adopted the related diversification strategy though it did not diversify out of its core business into unrelated sectors (Case study). The main elements of the competitive strategy pursued by CRH can be summarised as follows: CRH has expanded through both organic and inorganic types of growth: organic growth using the internal resources developed over time and inorganic growth based on acquisition.

 CRH has grown in the market through pursuing relentless market penetration through acquisition-led strategy. It focuses on acquiring and growing mid-sized companies while committing in big deals as well.

Parenting: A formidable practice

The organization design is an oxymoron rather than art or a science for most of the companies. The organizational structures are rarely taken as the outcome form the systematic methodological planning but rather it has been shaped more by politics than policies (Goold & Campbell, 2002). This is a kind of resulting structure that fits and starts which can be hap hazardous in nature. This can be due to the constant frustrations to the senior managers or executives. Responsibilities are fragmented and unclear so most of the strategic initiatives go stalling. Opportunities may lack the attention from the management. This way the most top executives do know what is wrong with the organization but very few know how to solve the problem. Power plays and conflicts do make their way with the organization having design problem and turns out to be less strategic. This is where parenting in an organization is powerful. Parenting as the name suggests, corporate headquarters behaves as a parent and plays varying roles in the organization. If the activities are properly assigned to a parent who refers to the corporate headquarters they provide the real value to the overall business. The task may be narrow or broad or may start with an initiative. For example the most cases of nationwide ERP setup by the company have been effective with parenting and thus we can say parenting adds value to the company (Goold & Campbell, 2002).

Parenting in CRH and the value it created for the company

CRH plc is the parent company of an international group of businesses which are organized into six business segments as the Europe Materials, Europe Products, Europe Distribution, Americas Materials, Americas Products and Americas Distribution (CRH plc, 2010). This is due to the companys strategic decision to make overseas expansion. And thus the concept of parenting in CRH came from its growth led by acquisition. In these regions CRH has four headquarters including one in Ireland. To focus better on the local markets, the entire goals

and responsibilities were fragmented or devolved into operational mangers in different division. In this way the lean Group headquarters provides the guidance, control, functional expertise in performance measurement, finance, strategic planning, human resource planning, health & safety, corporate social responsibility, continuous improvement, product and innovation, quality etc. while the implementation of each of the areas is done by the six divisions of the organization. Because of the responsibilities devolved into its headquarters in the regions, CRH has been able to focus on the new products and the quality required by the geography. It has also been able to acquire more of the middle level businesses, suppliers and family construction businesses due to its domination in the specialized areas. The growth has been continuing as a result managers are increasing with mixed responsibilities. CRH has been able to provide a wide range of product mix in its target market. CRH senior managers have better ability to solve the problems created due to effective performance measurement. Products and business have been re engineered to obtain a better output using performance indicators resulting in better quality products and new innovative products. This has added a great value in CRH plc.

Corporate Level Management in CHR plc

As we know, the organization as built by series of building blocks. The responsibilities are grouped and divided logically into departments such as sales, production, marketing, finance, admin etc. The body responsible for decision making should be identified. The case study states that the CHR plc operates in the federal structure. Federal structure unlike flat structure is decentralized and flexible organizational structure (Harrison & Lock, 2004). CHR has developed by acquisition of small and medium sized companies. To be cost effective, CHR has assimilated the organizational structure which allows the company to group and manage its functions and business by itself at optimum level contributing to the overall business success. The business focus that CRH adopts is dual. The headquarter sets the overall strategies whereas the individual subsidiary companies can operate according to the local market needs. There is a clear focus on profitability and the need for each operating subsidiary to deliver stated performance levels and returns. However, the organisational structure is flexible enough to allow each subsidiary to operate according to the contexts of its local markets

conditions and culture so that competitive advantage through strong market positioning and knowledge of the local market can be achieved. The organisational structure of CRH is product based division with four divisions in Europe and the Americas: 1. Europe Materials 2. Europe Products & Distribution 3. Americas Materials 4. Americas Products & Distribution The product based organisation of CRH allows each of the divisions of CRH to focus on the development of its own business while sharing best practice in product and process technology and know-how. The case study shows that the management of CRH is based on a decentralised system. It means that there is a delegation of power and authority throughout the different levels of the organisation. The local managers are given a high degree of responsibility and autonomy. The managers are created internally by pooling from the owner-entrepreneurs of the acquired companies and managers who have advanced through the companies. Each product division comprises of small to medium sized companies who have been the market leaders in their own product areas. The management style of CRH is based on continual performance reviews, rigorous training programmes and networking. Motivation, opportunities and personal development are strongly emphasised. This has led to employee satisfaction and increased interest in work among CRHs employees. Similarly, CRH engages its employees in various training programmes and leadership development programmes in each of its divisions. Thus qualified employees are created and managers are developed internally at CRH. Performance and salaries are related and possibilities for job advancement are created within the company. Thus CRH has a record of continuity in its managers and staff and a broad base of internally generated knowledge. Management of a transnational company like CRH is a complicated. Besides, complications in communications and reporting within CRH Group arise. The differences in culture and language within the far-flung operations of CRH and the strategy of serving different products and sectors demand very effective methods of communication. Moreover, personal contact is given special emphasis at CRH. Hence, CRH has devolved a very effective system of communication system and means of communication (CRH plc, 2010):

Modern information technology is utilised. Video conferencing and regular emails are used for timely and targeted communication. Information sharing through the intranet of the company is another feature of its communication Many business units publish internal newsletters Conferences among product groups and business units are held on a regular basis.

The corporate management at CRH is executed by both the formal and informal methods. To promote group-wide operating synergies, Best Practice groups are established which are taken as internal benchmarks of performance. Similarly, to synchronise its business activities and management policies, annual management seminars are organised which are attended by managers from many regional divisions of the company. This makes it possible to share and exchange ideas that are generated internally and provides a platform of learning among managers. The corporate management of CRH employs intensive development programs for its managers. The courses include management development, technical competencies, operation management, health and safety and customer service. The courses focus on improving performance and building competencies for the future. They also allow sharing of best practices and develop operational expertise. Similarly, leadership development programmes are conducted at the central office for each division. And the executive development programs are designed for selected specific employees who are exposed to a one-year personal development programme.

Corporate-level Management Style at CRH

Management styles are important for generating motivation and productivity among the staff. Management styles refer to the modes of decision making and relating to the employees by the management of an organisation (Adizes, 2004). Basically, there are the following three kinds of corporate strategic management styles (Goold and Campbell, 2002):

The strategic planning style: the top level corporate management decides all the business strategy and its rationale. The business units have no say in the overall corporate strategy and lower level strategies are also set by the corporate office.

The strategic control style: in this style of corporate strategy style, the top level determines the business objectives, mission and vision of the whole company, whereas the business units set the specific strategies to gain these corporate objectives. The financial control style: this style of strategy by the corporate managers lays down the financial objectives of the organization while the business units develop their plans and strategies to achieve the financial level of objective.

The above classification emphasizes that the corporate parent has to make appropriate choice of how it is going to relate to its business units and to decide whether to opt for a centralized management or to decentralize decision making. This can be related to the basic human resource management style which have been discussed below: Theoretically, there are the following kinds of management styles:

Democratic management style

In this type of management style, there exists delegation of authority and decision making power to the lower levels of the organisation regarding the performance of their work. It gives a sense of belonging and increased motivation to the staff. However, the disadvantage of the use of this style is that decision making is often slow and there remain chances of some employees underperforming. Autocratic Management Style Autocratic management style refers to the style in which managers dictate orders and makes decisions without any engagement of the employees regarding all aspects of the organisation. The advantage of this style is that decision is fast. However, the use of this style results in decreased motivation and increased staff turnover. Consultative Management style The combination of the above two styles of management is a consultative management style. The manager consults the staff about their views and opinions about the issues but makes the final decision himself. Laissez Faire Management style (Adizes, 2004)

A laissez Faire manager minimally involves in organisational making. The staffs are given complete freedom to complete their tasks the way they feel proper. The manager acts like a coach answering questions and supplying necessary information. According to the case, the management style adopted by CRH can be called Consultative style of management. The pooling of managers from internal sources and the use of teams in operational level shows that CRH has a consultative management style in place. Though the ultimate business decision takes place in the corporate headquarter, the views and opinions of the employees are incorporated in the process. Challenges The challenge to such a system of corporate management at CRH is that it requires continuous involvement of the leader in the development of his people. The leader should invest more time in knowing about the needs and wants of the employees. Constant dialogue with the employees takes more of the managements time. CRH has to invest more in communication technology. Another challenge is to synchronise the goals and aspirations of the individual employees with the overall organisational goal. If the personal visions of the employees at CRH do not match with the organisational interests, consultative management is just a waste of time. CRH management should empower their employees and start more interaction with the lower levels of the organisation. Employee participation programmes should be launched and some system of collecting opinions and views of the employees from every level of the organisation should be designed.

References
Adizes, I., (2004), Management/Mismanagement Styles, the adizes publishing limited, China. Business2000, (2000), Understanding Organizational Structures, the Irish Times, 7th Edition, Ireland.

CRH plc, (2010), 2010 CRH Report, retrieved from http://www.crh.ie/ on September 14, 2011. Goold, M. & Campbell, A. (2002), Do You Have a Well-Designed Organization, Harvard Business Review, March Issue. Harrison, H. L., & Lock, D. (2004), Advanced project management: a structured approach, 4th Ed., Gower Publishing Limited, UK.