16 MAKING DECISIONS IN VOLATILE CONDITIONS

16.1 THE EFFECTS OF MARKET CYCLES

One of the most elusive management skills in the construction industry is using market cycles and changes in volume as an advantage (Figure 16.1). It can be a lot like learning to juggle while going up and down stairs.

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Figure 16.1 Economic Cycles Are Inevitable And Companies Must React to Them.

© iStockphoto.com/Gloszilla

Construction is extremely cyclical; however, the cycles are rarely analyzed to understand their fundamental conditions or symptoms. Another challenge is that management often cannot react correctly to the cycle the company is faced with because the organization is usually still reacting to the last cycle the company experienced, while simultaneously attempting to anticipate the actions needed to be successful in the next cycle.

For example, if the company has just been through a fast growth stage where good people were hard to come by, management may be hesitant to let go of the productive workers even though the company can't keep them busy. This is especially true if management feels that the normal volume of work is coming back soon.

Similarly, if a company that has been through a long cycle of stagnation or decline and has cut back its overhead severely, when the market rebounds they will be slow to add the overhead back because it was so painful to reduce it. A growth stage ...

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