Summary of the Master Thesis. Implementation of Business Ethics in International Construction Projects

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1 Summary of the Master Thesis Master s Degree International Project Management (Building, Real Estate and Infrastructure) Implementation of Business Ethics in International Construction Projects The Perception of German Project Managers Submitted by: Dipl.-Ing. Katrin Mahler Student Matriculation No.: Tutor: Prof. Dr. Friedrich Hensler University of Applied Sciences Stuttgart Dr. Robert McClelland Liverpool John Moores University

2 INTRODUCTION In the last decade business ethics has turned into a buzzword. A number of multinational corporations have been involved in scandals, some of which lead to a closure of business. In the course of globalisation ethics enjoys an increasing significance, which is reflected in corporate codes as well as training programmes. Many German companies focus their international activities on the BRIC countries. They are building facilities in locations abroad, mostly with the help of German construction professionals. In host countries, there is often no willingness to adhere to legal regulations and ethical standards are frequently lower than at home. Working abroad thus presents challenges for German construction professionals with regard to the implementation of ethical standards. Previous research revealed that the construction industry is particularly susceptible to ethical misconduct. Construction related unethical behaviour can cause serious damage to humans, the environment and the companies involved. A study conducted by Transparency International in 2005 showed that the construction business is the most corrupt economy sector worldwide. 2. RESEARCH QUESTION AND METHODOLOGY The purpose of this study is to identify barriers and constraints of ensuring ethical behaviour in international construction projects, to determine the best practices and to give recommendations to practitioners as well as academics. Therefore the following research question has been formulated: Why does ethical misconduct occur in international construction projects and how can German companies ensure ethical behaviour in such projects? Only a limited number of studies on ethics in the construction environment have been conducted so far. The existing research focuses on ethical theories and lacks a connection to the working environment. This work thus concentrates on the practical implementation of ethical standards and the awareness of the issue among

3 - 2 - professionals. The subject is examined from the perspective of German construction project managers with work experience in the BRIC countries. Since the objective of this study is to understand the attitude of professionals towards the implementation of ethical standards in the construction industry, the researcher chose a qualitative approach and used semi-structured interviews to gain in-depth empirical data. To verify the results, the data was compared to corporate codes and the existing literature. 3. MAJOR FINDINGS The analysis of empirical data indicates that all participants are aware of the importance of business ethics and the existing conflicts regarding ethics in international construction projects. The major findings were summarised in three sections: Structural Organisation Understanding of Business Ethics Ensuring Ethical Behaviour For foreign projects, most companies send a German director with long-standing experience abroad who is supported by predominantly local employees. Thereby foreign professionals with a German education are favoured. The major constraints regarding the structural organisation of international projects are the availability of qualified resources, local market knowledge and lacking network. A further constraint mentioned is the limited scope of influence of a project manager regarding government approvals, tendering and awarding as well as site supervision. Most participants regard common values and social interaction as the key factors of business ethics. The main ethical conflicts refer to tendering, awarding, invoicing, building quality, HSE (health, safety and environment) and corruption. These conflicts have serious consequences on cost, time, quality and reputation. Some German project management companies reject work in certain markets because of the ethical conflicts and thus have disadvantages on the global construction market. The methods suggested to ensure ethical behaviour are based on codes which are adequately communicated and continuously controlled. The codes are written on a

4 - 3 - general level, considering neither country nor construction-specific details. Although the participants agreed on the necessity of codes, they argued that the extent of regulations is exaggerated, more flexibility and tolerance are needed and that they complicate professional work. Additional training is required for internal as well as external stakeholders, particularly the locals abroad. The interviewees also pointed out the importance of personality and relationships between stakeholders to create trust and mutual understanding and thus a foundation to ensure ethical behaviour in international construction projects. 4. DISCUSSION AND CONCLUSION Four major themes emerged from the analysis of findings and subsequently lead to the developed theory (comp. Figure 1): 1) Applicability of Codes in International Construction Projects 2) Dilemmas of Ethical Conduct in International Construction Projects 3) Vulnerability of Stakeholders concerning Ethical Misconduct 4) Significance of Structural Organisation and Stakeholder Selection Most corporations have installed general codes of ethics but they are hardly applicable in international construction projects. Quite the reverse, participants indicated that regulations which are designed for the domestic market are hindering construction performance abroad and have a limited influence on external stakeholders. The methods which German project managers apply to ensure ethical behaviour are mostly based on basic human sense rather than written regulations. Participants addressed the dilemmas arising from a strict enforcement of ethical conduct and the resulting impacts on time, cost and quality. The powerlessness towards public authorities and the government was thereby pointed out as a major predicament in the BRIC countries. German Project Managers showed a high awareness of ethical issues in international construction projects. At the same time they indicated that consciousness among themselves does not suffice to ensure ethical behaviour due to the multitude of stake-

5 -4- Figure 1: Research Path - Emerging Themes and Developed Theory Master Thesis - Abstract International Project Management Katrin Mahler 2013

6 - 5 - holders and the project managers limited influence on and control of them. In this context the upper management positions and local external contractors were identified as most vulnerable to ethical misconduct. Participants furthermore emphasised that an insufficient structural organisation and inadequate specifications encourage unethical behaviour in international construction projects. In addition the stakeholder selection and the development of relationships were pointed out as particularly important to ensure ethical conduct in global business ventures. Recommendations The overall aim of the study was to understand human behaviour, contribute to knowledge but also to derive recommendations for professionals. The following points thus present suggestions for companies operating abroad and conclude with a conceptual framework (comp. Figure 2): Develop an organisational strategy based on the future markets and the availability of internal resources. Establish long-term partnerships with specialist companies to ensure knowledge, mutual trust and availability of external resources. Exchange best practices with other companies who execute international construction projects. Define an overall corporate code of ethics and allow for the set-up of detailed project-related regulations considering the country and construction-specific requirements. Set up the organisational structure and the operational structure at the project start and establish a behavioural organisation as well. Communicate and implement the codes and regulations at an early project stage. Offer training to internal as well as external stakeholders regarding cultural as well as professional aspects. Enforce regulations and processes comprehensively and draw consequences in case of non-adherence.

7 -6- Figure 2: Conceptual Framework for Professionals Master Thesis - Abstract International Project Management Katrin Mahler 2013

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