Modelling the dynamic performance of a construction organization

Abstract

The Asian financial crisis has adversely affected many of the domestic construction organizations in Malaysia, bringing some organizations to the brink of insolvency. It demonstrates that a construction organization's performance is sensitive to the prevailing economic conditions. This paper seeks to model the dynamic performance of a publicly listed construction organization in Malaysia. First, a diagrammatic model consisting of two interconnected causal loop diagrams is developed to represent the organization's capacity and its financial balance sheet. The diagrams provide a clearer understanding of the interactions between the country's construction market and the organization's financial, technical and managerial capabilities. Next, the causal loop diagrams are converted into a mathematical model using specialized software. Simulation results from the model are validated against historical time series data. Graphical plots of the simulation model and results from sensitivity analysis indicate that the model is capable of replicating the general behaviour of the organization.