Analysis of CRH Plc. International Group

Introduction

CRH Plc. is an international building material group located in Ireland. They are operating in 3500 locations spreading over 34 countries and occupying total labor force of over 92000 people. Their vision is to become the market leader in the industry trough supplying quality products and services. Their core business is related to the fields of primary materials, value added building products and specialist building material distribution.

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Organizational Structure

Organizing is the basic function of business management. Organizing involves identification and grouping of activities, to be performed, and defining and establishing authority responsibility relations. A proper organizational structure is necessary for achieving enterprise objectives.

Organizational structure of CRH
Organizational structure of CRH

A departmental line organization structure is adopted by CRH Plc. The entire operation of the organization is under the control of a Chief Executive. Four divisional managers representing, Finance, Development, Human resources and Environment health and safety departments are directly responsible to the Chief Executive. They have to control and direct the functions of their department independently and contributing to the overall business growth. Company always maintains its operational improvement through its efficient and experienced management team. The regional management structure of the firm is supportive for attaining profitability and growth. The current organizational structure of the firm is ensuring further development of the organization. The organizational structure of the firm is designed accurately for empowering the growth and performance of the firm. Through this they attained markets in foreign countries such as USA and Russia.

CRH organization consists of four divisions representing different product group. Each division is under the control of small corporate head offices. Decisions relating to human resource management, financing and information technology introduction in each division are carried on the by the head office itself. Product based organizational division supports each group to develop their own business strategies independently. By sharing best practices among different division the entire business growth can be ensured. Through the adoption of product based division in the organization, CRH employs decentralization policy in managing the enterprise. Instead of concentrating the entire organizational control under one hand, authority and responsibility are delegated throughout the organization. Divisional managers have control over their divisions with individual responsibility. Each divisions of the organization consist of small to medium sized companies occupying market leadership in their product area. Product based strategic division of the organization provides advantages to the company in various ways.

Business Development strategy

Business combination is a better way of expanding business in highly competitive industries through which all the advantages of large scale business can be attained. Combinations can facilitate optimum utilization of economic resources. It provides maximum productivity and profits as well as all-round economic development.

Expansion strategy of CRH

For expanding the business operations on a global basis investment strategy is followed by the CRH Plc. A major part of the earnings from the business is reinvested for acquiring new capacity, developing new products and markets. Acquiring of well established business firms in the industry afford the company’s market share growth. As a part of their long term development strategy, acquisition of larger firms in the industry is under consideration of the firm. This will be effective for extending the business geographic area and new strategy for producing wide range of products.

Marketing Strategy

Properly formulated marketing strategy is the basic element of any successful business firm. It constitutes profitability to the business with market share growth.

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Marketing Strategy of CRH Plc

As a transnational company, CRH wants to adopt strategic marketing plan on a country by country basis for treating each region as a self contained market. In the transnational marketing strategy, company adopts the way of business collaboration with the local firms for carryout the business. They also adopt local brands for products in each region. The quality and product features are differentiating with the different market conditions. Because of this the standardization of products and services cannot be ensured by the company on its entire business world. When taking the case of a multinational or global business firm, it treats the entire business world as a single market place and thus business decisions are based on the global market environment. Thus standards and quality of entire products and services offered by the company are same. Due to the transnational policy, the demand for CRH product is only locally. So they have to prepare separate local business plans and strategies for getting profitability in each area of business place.

By concentrating on limited core businesses, CRH attains valuable synergies and performance improvement. Through attaining market leadership in each product area, business owners have financial stability and it contribute to the future growth of the business. Extension of geographical area of business over 22 countries with wide range of products, company ensures future growth of the business. By acquiring well established and technically advanced medium and large scale existing firms in the industry, CRH have significant opportunity for future growth. Balanced business portfolio of the organization over all of its business sectors keeping industry and economic cycles less affected.

Managerial strategy

Establishment of authority –responsibility relations among different managerial personal helps to realize proper management of the entire business. Business operations are directed by business goals. To avoid multi direction of business by various managers, CRH has established an interrelated managerial structure in which acquired business firms are incorporated. Through this organizational structure, each company in the organization has authority to manage their own business independently though contributing to the entire business growth. CRH adopts a dual business focus in which the individual firms can carry on their business according to the local market conditions while at the same time the overall objectives are set by the group and all of the local firms have to consider these goals while formulating adopting business policies. For each company in the group performance and return target are prefixed and the company required meeting those levels within the specified time limit.

CRH Plc’s organizational policy is based on the concept of social responsibility of its personnel especially of the managers. The organizational ethics committed its personnel of being responsible employers as well as responsible members of the community by following legal and social ethics in business. CRH Plc’s social policy is described as below:

Complying with the rules and regulations prescribed by the law applicable to the company, ensuring a socially responsible business practice in the industry. Business management must be carried on in a fair and equitable manner. The management has to ensure that they follow the industry best practice for achieving their business goals. Along with this equal opportunity by avoiding social discrimination in terms of age, gender and social class should not consider in case of recruitment and selection decisions. Code of Business Conduct of the firm should take into account while dealing with both suppliers and customers.

For the development of employees, employment policies are formulated and its implementation is effectively carried out by HR personnel. In the CRH Plc group, each individual company insisted on providing adequate training to its personnel.

Employee satisfaction is another policy of CRH Plc. It is ensured at each operating company level. For measuring the employees’ satisfaction, low absenteeism rates are taken as a basis. Management has to take steps to satisfy the employees through providing opportunity for improving the talent and income of employees.

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The successful growth of CRH Plc is resulted from the efficiency of its management.

Leadership Development programmes carried out at each divisional level of the CRH Plc, it ensures availability of leadership talent at each level of the organization for meeting the Group’s strategic objectives. Organisational culture is employed in all the levels of management. For exchanging the organizational culture and approach through out of the organization, meetings of selected senior managers are regularly conducted in the group level. Provisions in the Code of Business Conduct of CRH Plc. inhibit clear instructions on establishing supply chain and customer base suitable for operating the business in ethical manner. “These relate to compliance with local legal requirements, use of confidential or inside information, conflicts of interest, provision or acceptance of gifts and prohibition of any form of bribe or similar inducement.” (Our responsibility: Conducting business with our supply chain and customer base, n.d).

The responsibility of meeting the Code of Business Conduct and business policies of CRH is insisted on the management of individual companies. It is also ensured by their Internal Audit Team.

Community

CRH Plc treats the operating community as a part of their business process. As such they also become part of the community. For meeting the genuine needs of the local community, their ideas and views are also considered while formulating business policies and decisions. To support the well being of the community it provides educational support, environmental protection and employment opportunity to the local people. Reports on the support initiatives provided by each divisional group are submitted annually to the CRH Board. Thus the group ensures follow up of uniform communal policy by each company in the group. (Our responsibility: Conducting business with our supply chain and customer base, n.d).

Work flow interdependence among departments

An experienced management team is controlling the enterprise through following previous economic cycles. Individual authority and responsibility of each managerial personnel is insisted in its Business Code. The CRH Plc is organized in to four divisions; two in Europe and two in American region. Their material business includes cement, aggregates, asphalt and ready mixed concrete. Product business is related to the production of concrete products and other construction based products and services. Distribution business includes marketing and sale of construction materials in the construction industry. They also supply materials and products to the do-it your self market.

Analyzing the IT impact on CRH’s organization design

In the construction industry, there is an increasing trend of IT installation in all stage of the business by enterprises. CRH Plc is also adopting IT strategy in its business operations.

For interpretation of culture of CRH, Code of Business Conduct is formulated and it’s implemented in all segments of the business operations.

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CRH group follow decentralization policy in its management. By combining the experience of the business and individual together, it achieves prosperity and market leadership on a global basis. The successful strategies of the group are discussed below:

  1. Setting up of regional business leadership through accurate localization strategy.
  2. Continuous improvement in business operations with innovative technology.
  3. Developing new areas of business by acquisitions and introducing new products.

Business acquisition policy of the group is a relevant strategy for expanding the business in new geographical areas. For developing managerial talent, management development programs for mangers are given to the personnel in the materials division of Europe region.

Communication Strateg

Communication is a major issue in any transnational company. Effective communication methods are required for establishing strong business relation by exchanging information between different divisions and departments of the organization. CRH adopts communication strategy, concentrating on personal contact between different divisions. For this they use the different methods. For targeted and timely information and data exchange, video conferencing and email communication are adopted. CRH intranet is also used for information sharing. Publications of divisional internal newsletters and CRH group contact magazine allow communication through printed media. The magazine is published in six languages and thus sharing of information on divisional local languages becomes possible. For promoting the group wide business synergies, 12 Best Practice groups are formed. Conferences at the level of product group and business unit are organized regularly for discussing the operational performance of each divisions. The annual CRH Management seminar representing regional managers and it allows communication at the top managerial level. In the European region, Works councils are formed and in their annual forum, along with management consults, employee representatives are also attended.

Internal Financial Reporting System of CRH

For empowering the internal financial reporting, CRH group utilize IT based reporting systems. It facilitates timely and consistent financial reporting among the decentralized business divisions. Reporting of each operations units to the products group and overall group also becomes prompt and powerful through this medium. There exists difference between European and American divisions of CRH in the case of implementing IT system in communication and reporting.

In the USA, common and standardized IT system is adopted by each product group. Through this a common standard of reporting can be ensured among different product divisions. It facilitate cost effective and easy installation of IT system in newly acquired business firms. Whereas in Europe region, a cost effective IT system installation cannot possible due to the varying report requirements of each region. The product distribution division in Europe region is arranged on product line basis. Each business units in a particular product division operates on different languages, currencies and legal set up. Reporting is subjected to varying local standards related to legal, accounting, banking and taxation regulations, VAT and payroll requirements. Thus a standardized IT system installation cannot be possible among all of the business units. Financial system of each division is designed with the object of keeping optimum level performance. The Group’s reporting system of CRH is constituted in such a manner that capable of managing the differences in accounting and legal standards. By setting up of clear performance for each business units CRH ensures entire business growth on a timely basis.

Human resource management

For developing employee skills, internal training is provided in each business units. When developing the human resource skill, local and cultural differences are considered along with the group policies and standards. Setting up and application of strict Code of Business Conduct in the group ensures ethical and responsible business performance of its employees as well as managerial personnel in their business communities.

Human resource development programs

In the complex business environment, sharing, and exchanging of information and ideas are highly required for effective management of business operations. The CRH Plc provides qualified and effective managerial training to its personnel. Efficient management of the CRH is able to meet the changing business needs of the enterprise. For developing the managerial talent and leadership quality, training programs are regularly conducted by the CRH group. Management development programs involve training for improving the skills of technical competencies, management efficiency and customer servicing of the personnel in each divisions. Through the managerial training programs, sharing of business knowledge and skills made possible. Employees’ personal education as well as operational efficiency can be improved through these managerial training programs. Together with employee training programs, executive and leadership development programs are also provided by the CRH and it supports entire human resource efficiency development of the enterprise.

Financial strategy

For achieving better financial performance, well planned financial strategy is essential for business firms. CRH’s financial system is designed with the objective of building competency among different functional divisions.

Social Responsibility

Through their business operations in various countries, CRH Plc. contributes to the economic development of each of their operating regions. Through responsible performance and growth, CRH achieved shareholder value increasing at a rate of 18% compound annual growth in return to the shareholders between the periods of 1970 and 2007. In the year 2007, they spend €3 billion towards the wages and salary of their human capital. Their total purchase in 2007 is amounts over €10 billion. Their dividend payment in the year is over €318m (including €68m scrip). Tax payment is of €388m and interest payment is of €352m. These all constitute to the development of the economy in which they operate and thus social improvement is also ensured.

Code of business conduct

The company has a clear and fair code of conduct towards the people with whom it interacts in the discharge of day to day transactions. The company has been able to meet the local requirements, although it has global dimensions in its business. The company has been trying to meet the standards of corporate social responsibility and commitments towards the various stakeholders. The company firmly believes that unless it tries to maintain global standards in employee management and corporate responsibility, it may not be able to survive in the competitive environment. The following paragraphs give a brief explanation of the firm’s code of conduct towards employee management.

Contract of Employment

The company has not framed any distinct code for contract of employment. However, it has made a code of employment by incorporating the individual contract of employment and other local laws. The guidelines given in the code are applicable to all employees identically taking into account their duties and responsibilities. Anyone who violates the code is subject to appropriate disciplinary action. If the violation is a serious one, it may invite a prosecution under civil or criminal law.

Conflict of Interest and outside Interest

A conflict of interest is said to exist when an employee’s personal interest or opportunity for gain or profit are against those of other/group. The company has framed guidelines in this regard to minimize the likely conflicts within the organization. Following interests have been explained in detail for the proper understanding of conflict and its management.

Financial Interests

Financial interest is said to exist when an employee whose position in the company involves selection or vetting of customers or suppliers, or whose position allows influence over these decisions, has a financial interest in a customer, supplier or competitor.

Interest in Properties

When an employee has an interest directly or indirectly in real property, leaseholds, patents or other rights in which the group has an interest shall notify their employer immediately of any new conflict of interest arising.

Agents of a third party

An employee may act as an agent of a third party who may have some vested interest with the firm to acquire some assets or profit of the company.

Closely connected persons carrying out incomplete duties

When an employee and a closely connected person carry out functions which, collectively, cause a lack of division of duties affecting internal financial control, the company can take disciplinary actions against such person /persons who have indulged in such actions.

Employment salary and performance evaluation

When an employee is involved in these tasks relating to a closely connected person, he may be charged with violation of code of conduct.

Outside commercial or related involvement

Where an employee may have an involvement with an outside organization, such as a customer, supplier of goods or services, or a competitor, it may also amount to violation of code of conduct.

Other business interest

Where a commercial or government activities of a managerial or directorial nature are undertaken. Involvement in non-profit or charity organization is not regarded as a conflict of interest. Subject to the limitations imposed by these guidelines, as well as by any individual employment contract, employees are free to engage in outside activities that do not interfere with the performance of their job or otherwise conflict with the group interest.

Prevention of Bribery and Corruption

It is the duty of the management to ensure that all the transactions with the third parties are carried out in accordance with all relevant legislation. No payment and/or receipt which could be interpreted as bribe should be paid to or accepted to, an individual or organization with the express or implied condition of gaining commercial advantage or favor accruing to the company. The third parties include employees, agents of suppliers or customers. It is also restricted for employees of the company to seek or accept payment to favors for granting of contract, offers of employment.

Fraud

It is the deliberate deception or illegal, unethical, dishonest or improper conduct that can result in gain, profit or advantage to an employee or harm or loss to the company or another party. Engaging in fraud is a fundamental breach of the core value of honesty and companies should treat it as a most serious breach of trust.

Employee loans

The company shall not make any loans of their funds to employees or connected persons except in certain circumstances and subject to the company’s guidelines.

Human rights

As a socially responsible company, the management id fully committed to human rights. The company protects the human rights within our areas of influence including:

  • The protection of human rights of the company’s employees through policies on equal opportunity and non-discriminatory treatment valuing the diversity it brings to the business.
  • Supporting the application of fair and just remuneration
  • Considering the human right implications, wherever applicable in investment decisions.

Employment policies

The company believes that commitment of its employees to the company and its values is the secret of its success. Therefore, the human resource management must ensure that all the processes of recruitment and selection should be based on all relevant laws and conventions. Merit is the ultimate basis for recruitment and selection decision, management must ensure that they apply the principle of opportunity, valuing diversity regardless of age, gender, sexual orientation, disability, creed, sexual orientation, disability, creed, ethnic origin, pregnancy or any other classifications protected under applicable laws. All employees have a responsibility to ensure that there is harmony in the workplace and bullying or harassment will not be tolerated.

Human Resource Policy

The company is managing all aspects of employee relations such as pay, pension, benefits, hours of work, local code of conduct, agreement with union, discipline, recruitment, promotions etc in accordance with the local legislation and custom and practice. However, the principles relating to the treatment and respect due to individual as set out elsewhere in this code should be incorporated in local policy.

Health and safety

The company’s primary responsibility is to protect the health, safety and lives of people, who come to work at the office or any other locations of the company. The health and safety policies include:

  • Comply at a minimum with all applicable legislation and continually improve our health and safety stewardship towards industry best practice.
  • Ensure that the company’s employees and contractors respect its health and safety guidelines.
  • Ensure that our Companies provide a healthy and safe workplace for all our employees and contractors, and take due care of customers and visitors at our locations;
  • Require our employees and contractors to work in a safe manner as mandated by law and industry best practice.

The management of health and safety is a daily priority of line management. However, it is the duty of everyone to be careful of their actions at the workplace with other individuals. Employees are required to raise any concern they have regarding health and safety practices as a matter of urgency with their superiors.

Drugs and Alcohol

The use of alcohol, illegal drugs or prescribed meditation may seriously affect a person’s ability to do their jobs in a proper and safe manner. The consumption of alcohol on site is not allowed except on exceptional occasions and subject to the specific prior approval of the location manager.

Change strategy of CRH

Changes in the CRH Plc are usually based on improvement in products and services offered by them. For getting strategic advantage in the industry, CRH Plc adopts product differentiation strategy. Products and services offered by them are continuously improved with added features. Services rendered by the individual companies in the group are also changed with the application of new technology. Advanced technology based production and servicing is the main feature of CRH Plc.group. Thus with the advanced technology product quality improvement is carried out frequently in the organization. Together with changes in product features, its branding and marketing strategies also changed accordingly.

Organizational decision making model of CRH

Decision making process in CRH Plc is carried out mainly on the basis of the management science model. The decisions are always based on the analysis of its managerial aspects. For making accurate decisions, they follow the theories in management science. Decision making process is carried out at different managerial levels. Group decisions are usually taken by the top management consisting of CEO and Board of Directors. Decision relating to the individual company level is taken by each company management. They are independent from the group management while taking decisions. Through the application of management science model in the decision making process, the group ensures long term profitable growth of the enterprise.

Conclusion

CRH Plc’s departmental line organization structure seems to be effective for attaining business objectives. It also ensures better co-ordination and control over the entire business enterprise. Setting up of business combination with local business firms is an effective strategy for attaining large scale economy in operation. It s investment strategy is also supportive for business development on a global basis. Localization strategy in product marketing helps the firm to attain market acceptance with customer satisfaction makes the globalization process effective. The organizational concept of establishing proper authority-responsibility relationship, among each level of management in the organization is put in practice by CRH Plc through its managerial hierarchy. Communication techniques employed in the enterprise facilitating transfer of knowledge and business ideas among various business divisions effortless. Financial reporting system in the organization provides standardized and uniform reporting among all of the business divisions. The language services and human resource development program are effective for cross cultural communication and development of human resource skills of the enterprise. These all features and advantages of the firm contribute to the entire business growth on a long term and global basis with increasing market share. (CRH ranks among the top six in the building materials sector globally, n.d).

References

CRH ranks among the top six in the building materials sector globally. (2007). Web.

News and Media: CRH plc. (n.d.). CRH. 2008. Web.

Our responsibility: Conducting business with our supply chain and customer base. (n.d.). CRH. 2008. Web.

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