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A Business Analysis of the Fluor Corporation

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A Business Analysis of the Fluor Corporation

Maria A. Kithcart

LEAD 730

August 12, 2011

Robert Cannon, EdD

Introduction

Fluor Corporation (FLR) is a FORTUNE 500, publicly traded company specializing in construction, engineering, energy solutions, and industrial and infrastructure both in the United States and abroad (Annual Ranking, 2011). Also acting as a government contractor, Fluor has a global presence with over 300 project sites in the world, including those in the Middle East and Africa. In addition, Fluor maintains a network of offices across six continents, providing "fast and efficient service delivery to any part of the world" (Fluor, 2011). Founded in 1912 as a construction company, Fluor became known as the go-to company for their excellence in the emerging petroleum industry (Fluor, 2011). Their reputation and innovative spirit have driven them to become a world leader in contracting in remote parts of the world. This research will focus on the strategic opportunities for corporate growth.

Organizational Structure

According to their website, Fluor Corporation operates as five divisions: energy and chemicals, industrial and infrastructure, government, power, and global services. Pearce and Robinson (2011, p. 300) state, "A divisional organizational structure is one in which a set of relatively autonomous units, or divisions, are governed by a central corporate office but where each operating division has its own functional specialists who provide products or services different from those in other divisions." This type of arrangement allows management to delegate authority to the distinct entities therein, which enables decision making to take place in an expedited fashion (Pearce & Robinson, 2011). Divisions provide several strategic advantages to the corporation. First, this structure forces coordination and authority further down the hierarchy. Next, a divisional structure frees the CEO to address broader strategic planning (Pearce & Robinson 2011). Another strategic advantage is the increase in focus on products and markets along with quick response to ever-changing conditions. Last, this structure allows leaders to focus sharply on accountability and performance (Pearce & Robinson, 2011).

In addition, Evans and Richardson (2008) research writings discuss the importance of an organization's structure, which is crucial in not only supporting, but driving, the strategic plan. They write, "Clearly, the effectiveness of the organizational structure will affect inter-personal and inter-departmental relationships, with appropriate structures aiding communication and efficient process flow" (Evans & Richardson, 2008, p. ii). Essentially, leaders of strategic plans must examine the existing organizational culture to decide whether it is consistent with the demands of the strategic plan (Evans & Richardson, 2008). Fulmer (1990, p. 1) concurs and posits, "human resource management is a factor that can, or at least should, play an important role in the development and implementation of effective strategic plans."

Although there are significant advantages to Fluor's divisional structure, there are some drawbacks of which the corporation should be made aware. Pearce and Robinson (2011, p. 301) outline these in their text as follows:

1) Fosters potentially dysfunctional competition for corporate-level resources.

2) Presents the problem of determining how much authority should be given to divisional managers.

3) Creates a potential for policy inconsistencies among divisions.

4) Presents the problem of distributing corporate overhead costs in a way that's acceptable to division managers with profit responsibility.

5) Increases costs incurred through duplication functions.

6) Creates difficulty maintaining overall corporate image.

All in all, this type of organizational structure is likely to produce a very political environment in which divisions compete for allocation of resources as well as authority. Since this is a tendency in this arrangement, it behooves leadership to "keep a finger on the pulse" of activities in each division to ensure that business objectives are being met.

Organizational Culture

Regarding the organizational culture of the Fluor Corporation, there are several factors that can deeply impact performance. First, Halkos and Tzeremes (2008) state that shared management including a considerable influence from both the local and the foreign partner positively impacts joint venture performance and the acquisition of knowledge. Conversely, studies show how incompatible corporate cultures of the parent firm and the multinational component negatively impacts performance (Halkos & Tzeremes, 2008). Understandably, Hoecklin (1995) suggests that multinationals should not "create cultures which are substantially different from the cultures of the countries in which they operate" (Halkos & Tzermes, 2008, p. 407). If there is a cultural difference between the two entities, then this conflict has been shown "to increase frictions within the firm and consequently to exacerbate agency costs arising from conflict between headquarters and subsidiaries" (Halkos & Tzermes, 2008, p. 407).

Regarding work teams involving multiple cultures, it is important to determine whether the foreign culture is collectivistic as opposed to individualistic, which is the primary culture in the United States. Gibson and Zellmer-Bruhn (2001, p. 275) explain, "Collectivism has been positively associated with self-efficacy for teamwork and people's receptivity to teams and team-based rewards." Working in teams may come naturally to collectivists because they typically hold a greater receptivity to team-based functions and rewards. In highly individualistic societies (such as the United States), there are weaker connections between team members, and these teams experience more conflict and are more competitive in nature (Gibson & Zellmer-Bruhn, 2001). In teams consisting of people from various nationalities and cultures, members "are likely to have different expectations for how the team will be managed" (Gibson & Zellmer-Bruhn, 2001, p. 300), as well as what is acceptable behavior.

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