Why Your Company Structure Is Killing Flow
Here’s something most construction companies get completely wrong: they organize their teams around departments instead of value streams. And that single decision creates more waste, more conflict, and more inefficiency than almost anything else they do. Let me explain why this matters and how to fix it.
Most construction companies structure themselves the same way. Business development. Estimating. Preconstruction. Construction operations. Construction services. Finance and accounting. Human resources. Legal. Maybe safety and quality as separate departments. Everyone has their own leader. Everyone has their own budget. Everyone has their own metrics. And everyone optimizes for their own department’s efficiency without caring whether the overall flow is working.
That structure creates what Nicholas Modig calls “little islands with their own Kings and Queens.” Each department becomes a kingdom that fights for resources, protects its territory, and measures success by how efficient it is internally rather than how much value it delivers to the customer. Estimating cares about hit rate. Preconstruction cares about design coordination. Operations care about schedule. Closeout cares about punch lists. And nobody cares about whether the handoffs between these kingdoms actually create flow.
The Pain of Department Thinking
The real construction pain here is value getting destroyed at the handoffs between departments. Estimating builds a budget based on assumptions that preconstruction never validates. Preconstruction creates a plan that operations can’t execute. Operations make field decisions that closeout has to clean up. And at every transition, information gets lost, decisions get questioned, and delays get created because nobody is accountable for the end-to-end flow from sale to substantial completion.
The customer doesn’t care about your departments. The customer cares about getting a building delivered on time, on budget, with quality. But your departments are optimized for internal efficiency, not customer value. Estimating is efficient at producing estimates. Preconstruction is efficient at producing coordination models. Operations are efficient at managing daily work. But the system as a whole is wildly inefficient at delivering value because nobody is optimizing for flow across the departments.
And it gets worse. Because departments have their own leaders and their own metrics, they start competing instead of collaborating. Estimating blames preconstruction for missing details. Preconstruction blames operations for not executing the plan. Operations blame closeout for being too picky. Everyone points fingers at everyone else because the system incentivizes individual department performance instead of system performance.
The Pattern That Creates Silos
The failure pattern is organizing around functions instead of value. We group people by what they do rather than what they deliver. We create departments based on skill sets rather than customer outcomes. And then we wonder why coordination is terrible, why handoffs fail, and why projects feel fragmented even though everyone is working hard.
Traditional department thinking creates change points everywhere. Every time work moves from one department to another, there’s a handoff. And every handoff is an opportunity for waste. Information doesn’t transfer cleanly. Priorities shift. Standards change. The context that made decisions make sense in estimating doesn’t exist in operations. The field reality that operations deal with never makes it back to estimating. And the system keeps producing the same problems because nobody is looking at the end-to-end flow.
Department thinking also creates wrong incentives. If you measure estimating by hit rate, they’ll bid conservatively. If you measure preconstruction by coordination issues found, they’ll over coordinate and slow down the schedule. If you measure operations by safety incidents, they’ll under report. Every department optimizes for its own metric at the expense of the system. That’s not a people problem. That’s a structure problem.
What Value Streams Actually Are
Here’s the framework. A value stream is the end-to-end flow of work that delivers something the customer actually cares about. Not what a department produces. What a customer receives. In construction, a value stream might be “multi-family residential projects from sale to occupancy.” Or “tenant improvements from lease signing to move-in.” Or “senior living facilities from concept to certificate of occupancy.”
The value stream includes everything required to deliver that customer outcome. Business development, estimating, preconstruction, procurement, construction, closeout, warranty. All of it. And instead of organizing people into functional departments, you organize them into value stream teams where everyone is accountable for the same outcome: delivering value to the customer through that specific type of work.
I once worked with a company that organized this way. Instead of traditional departments, they had what they called silos though I don’t love that word because silos usually mean something negative. But their concept was brilliant. Each value stream had its own team with business development, preconstruction, construction, and services all organized around that type of work. They had dedicated people who understood that market segment deeply. They could create flow efficiency because everyone was aligned toward the same customer outcome.
The leaders were called silo leaders, and they were accountable for the entire value stream from sale to warranty. Not just one department. The whole flow. And because they owned the whole flow, they cared about handoffs. They cared about whether estimating assumptions were realistic. They cared about whether preconstruction plans were buildable. They cared about whether field decisions were setting up closeout for success. They had to care because their performance was measured on the end-to-end outcome, not individual department efficiency.
How This Changes Everything
When you organize around value streams instead of departments, several things happen immediately. First, people start thinking about flow instead of just their piece. They can’t optimize their department at the expense of the next one because they’re all on the same team measured by the same outcomes. Second, handoffs get cleaner because the same leader owns both sides. Third, specialization increases because teams get really good at specific types of work instead of trying to be generalists across all project types.
Fourth, accountability becomes clear. If a multi-family project fails, you don’t have five departments blaming each other. You have one value stream team that owns the result. Fifth, continuous improvement becomes natural because the team can see the entire flow and identify waste across the whole system instead of just within their department. Sixth, customer relationships strengthen because the same team handles the project from start to finish instead of passing it through disconnected departments.
And most importantly, flow efficiency replaces resource efficiency as the organizing principle. Resource efficiency asks “are people in this department busy?” Flow efficiency asks “is value moving smoothly to the customer?” Those are fundamentally different questions that lead to fundamentally different decisions.
Geographical Thinking on Projects
This same principle applies within projects. Instead of organizing field teams by discipline structural, MEP, finishes organize them geographically. You’re in charge of the podium. You’re in charge of the skin. You’re in charge of the tower. You’re organizing around a value stream when you structure by geography.
Why does this work better? Because now someone is accountable for everything that happens in that zone from start to finish. They can’t blame structural for leaving a mess that MEP has to clean up because structural and MEP are both part of their zone team. They have to coordinate handoffs. They have to think about flow through the zone. They have to deliver complete, finished work packages instead of just completing their scope and walking away.
This is zone and phase thinking. You’re literally adding value to the work package within a zone for the crew from start to finish. Everyone is aligned around delivering that zone successfully, not just completing their individual tasks within it. The incentives shift from “did I finish my scope?” to “did we deliver value in this zone?”
What You Can Do With Value Stream Organization
Here’s what becomes possible when you organize around value streams. First, you can map the value stream end to end and see where waste lives. You can’t do that when work crosses five department boundaries because nobody owns the whole flow. Second, you can eliminate waste along the value stream because you have authority to change processes across the entire flow, not just within one department.
Third, you can organize teams around customer outcomes instead of functions. Fourth, you can create actual flow through the value stream by optimizing handoffs and reducing change points. Fifth, you can build repeatable systems around each value stream. Multi-family projects flow differently than tenant improvements. When you have dedicated teams for each, they can build systems that match the specific requirements instead of trying to force one generic system across all project types.
Sixth, and this is crucial, you can shift performance metrics from measuring individual departments to measuring value stream functioning. Instead of asking “is estimating efficient?” you ask “are we delivering multi-family projects on time and on budget with happy customers?” Instead of asking “is preconstruction hitting coordination milestones?” you ask “is the value stream from sale to substantial completion flowing smoothly?”
Real Results From Value Stream Thinking
Let me give you an example of what this looks like in practice. In the airline industry, Air Canada used to have around 73 employees per plane. WestJet, in its early days when it operated more like Southwest, had around 42 employees per airplane. That’s a massive difference in efficiency. And it wasn’t because WestJet had worse service. It was because they organized around value streams getting passengers from point A to point B instead of organizing around functional departments that created handoff waste.
When you organize by value stream in a lean way, it’s not that fewer people have jobs. It’s that people in jobs are more effective and the company can expand. You get real flow thinking. You eliminate the waste that lives in the handoffs between departments. You create systems where everyone is aligned toward customer value instead of department efficiency.
This comes from The Lean Turnaround, a fantastic book if you want to learn more about this concept. The principles apply perfectly to construction even though the book isn’t construction specific. Value streams exist in every industry. The question is whether you organize around them or fight against them.
Common signs your company needs value stream organization:
- Constant finger pointing between departments when projects fail
- Estimating assumptions that operations can’t execute
- Preconstruction plans that ignore field reality
- Closeout discovering issues that should have been caught earlier
- Customers frustrated by disconnected handoffs between departments
- Metrics showing individual departments are efficient while projects still fail
Building Companies Around Flow
This connects to everything we teach at Elevate Construction about creating systems that respect people and deliver predictable results. When you organize around value streams, you align everyone toward the same outcome. You eliminate the structural dysfunction that makes people fight each other instead of collaborating. You create clarity about who owns what and who’s accountable for results. If your project needs superintendent coaching, project support, or leadership development, Elevate Construction can help your field teams stabilize, schedule, and flow.
Respect for people means not putting people in structures that force them to compete when they should collaborate. When estimating and operations are separate kingdoms, they fight. When they’re part of the same value stream team, they work together because their success is tied to the same outcome. Structure determines behavior more than individual character does. Build the right structure, and good behavior follows.
A Challenge for Leaders
Here’s the challenge. Look at your company structure. Are you organized around functions or value streams? Do you have departments optimizing for their own efficiency, or teams optimizing for customer value? Can you map the end-to-end flow from sale to warranty for a specific project type, or does that flow cross six department boundaries with no one owning the whole thing?
If you’re organized by departments, start exploring what value stream organization would look like. Pick one project type maybe multi-family residential or tenant improvements and map the entire value stream. Identify every handoff, every change point, every place where value gets lost. Then ask what it would take to organize a dedicated team around that value stream who owns it from start to finish.
You don’t have to reorganize your entire company overnight. Start with one value stream. Test it. Measure the results. See what happens when people are aligned toward the same customer outcome instead of competing for departmental efficiency. I’m willing to bet you’ll see dramatic improvements in flow, coordination, customer satisfaction, and profitability. And once you see it work, you’ll never go back to department thinking.
Stop organizing around what people do. Start organizing around what customers value. Build value streams, not kingdoms.
On we go.
Frequently Asked Questions
What’s the difference between a department and a value stream team? A department is organized by function everyone does similar work. A value stream team is organized by outcome everyone contributes different functions toward the same customer result. Departments optimize for internal efficiency. Value stream teams optimize for flow and customer value delivery.
How do I handle support functions like HR, finance, and legal in value stream organization? Support functions can remain centralized while value streams organize the core work. HR, finance, IT, and legal serve all value streams. But business development, preconstruction, construction, and closeout get organized into dedicated teams around specific project types.
Won’t this create duplication and increase headcount? Not if you right-size your value streams. Yes, you might have estimators dedicated to multi-family and separate estimators for tenant improvements. But you eliminate the waste of handoffs, competing priorities, and context switching. The net result is usually fewer total people needed because flow efficiency beats resource efficiency.
How do I measure value stream performance? Measure end-to-end outcomes: projects delivered on time, on budget, with quality, with happy customers, with profit. Stop measuring departmental metrics like estimating hit rate or preconstruction coordination issues. Those are inputs. Value stream metrics measure outputs that customers care about.
Can small companies organize by value streams? Absolutely. Even a 20-person company can organize into two value stream teams around different project types. The principal scales from small firms to large enterprises. What matters is organizing around customer outcomes instead of functional departments, regardless of company size.
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Discover Jason’s Expertise:
Meet Jason Schroeder, the driving force behind Elevate Construction IST. As the company’s owner and principal consultant, he’s dedicated to taking construction to new heights. With a wealth of industry experience, he’s crafted the Field Engineer Boot Camp and Superintendent Boot Camp – intensive training programs engineered to cultivate top-tier leaders capable of steering their teams towards success. Jason’s vision? To expand his training initiatives across the nation, empowering construction firms to soar to unprecedented levels of excellence.
On we go