Association of Management Tools with the
Financial Performance of Companies:
The Example of the Slovenian
Construction Sector
Peter Friedl
Roberto Biloslavo
The research problem dealt with in this article addresses the association
of management tools with the financial performance of companies in
the Slovenian construction sector. The aim of the quantitative empir-
ical survey is to collect data on five of the most relevant accounting
scores and indicators in the construction sector for the studied period
2001-2005, and to analyse their correlation with the management tools
of Slovenian construction companies. The analysis of the relationship
between quantitative indicators and scores with the dimensions of the
factors in choosing management tools proved no strong correlation.
The results of the analysis show that the dimensions of undesirable con-
sequences of transformation and the financial performance of the com-
panies are essentially unrelated. A comparative study of the arithmetic
mean of the indicators and scores with the disadvantages in introduc-
ing the management tools, however, indicated that there is a certain
relationship between them.
Key Words: indicators, scores, financial performance, construction
industry, Slovenia
jEL Classification: L20, M20
Introduction
With the transition from the self-management to the market economy,
companies in Slovenia have been exposed to the rules of the market. This
is why, in order to be successful in the long run, companies have to take
into account the situation on the market, adapt to it and incorporate in
their development strategies elements of efficient management, which
are frequently unpleasant for the employees. The companies which have
Dr Peter Friedl is a Corporate Marketing Assistant in the Gradis
skupina G, Slovenia.
Dr Roberto Biloslavo is a Vice-Rector at the University
of Primorska, Slovenia
Managing Global Transitions 7 (4): 383-402
been adapting to this situation at too a slow pace found themselves in
trouble or simply ceased to exist. Ownership transformation of the com-
panies, strategic capital concentration with the aim of preserving healthy
business cores and improved cooperation, as well as takeovers and merg-
ers of the companies can also be observed. Considering that Slovenian
companies are likely to put special emphasis on the implementation of
strategic mergers and growth strategies, such as development of the mar-
ket, diversification of products and markets and conglomerate diversifi-
cation (Buble et al. 2003), it is also expected from construction compa-
nies to look for their strategies within this framework.
Regardless of all the difficulties and problems the construction sec-
tor was facing in the last decade, construction companies were more or
less in line with other Slovene companies, which achieved 50% growth
in business performance (companies undergoing bankruptcy were not
included) while, simultaneously, the number of the employees decreased
by 20% (Uršic and Mulej 2005). In the last ten years, efficient and com-
petitive have companies continued to replace those which were less ef-
ficient (Bojnec and Xavier 2004), leaving the impression that relatively
steady conjuncture cycles tend to appear every three to four years (Jagric
2003).
However, the still ongoing problems, which are more or less known,
should be pointed out: a surge in the prices of reinforcing bars and non-
ferrous metals on the world market, which have to paid primarily by
constructors, the increasing oil prices, fierce competition among con-
struction companies, because of which some of them accept contracts
under the limit of profitability, as well as liquidity issues and shortage of
workers.
The introduction of the article describes the situation on the mar-
ket to which Slovenian companies have to adapt. The inclusion of the
elements of efficient operation in development strategies of companies
has also been emphasised. This is followed by theoretical starting points
with an emphasis on the main findings of previous relevant surveys
from the area of company transformation management and identifica-
tion of the key weaknesses of the construction sector. The third chap-
ter defines the purpose and key goals of the survey. Methodological
tools, the sampling frame, limits of the survey and the realised sample
are defined in the fourth chapter. The fifth chapter presents the results
of a quantitative survey. The sixth chapter contains an analysis of the
influences of management tools on companies' financial performance.
The conclusion of the article contains a substantial interpretation of the
findings.
Theoretical Bases
The transformation of a company can ensue from spontaneous, intuitive
managerial actions, which is possible in simple and transparent compa-
nies with stable external environments (Cešnovar 2003). In companies
with more complex external and internal environments, an intentional,
planned and formalized process of transformation is more appropriate,
based on established rules for the transformation of processes, structures
and systems, and which can also be considered as a method or 'approach
to transformation' (Strebel 1992; Champy 1996; Nohria and Berkley 1996;
Rigby 2001b; Mintzberg 1996; Mintzberg, Ahlstrand and Lampel 1998;
Grint 1997; Drucker 1995). Globally, the scientific literature lists up to 65
different approaches to transformation (Rigby 2001a). There is substan-
tial pressure put on generating new approaches, since Grint (1997) states
that at least one new approach to transformation has emerged every year
in the last forty years. Regrettably, there are not many methodologically
substantiated scientific research cases in a position to give advice to se-
nior management on choosing the right method, what kinds of posi-
tive and negative effects a particular method introduces, which methods
complement each other and which oppose one another, what the neces-
sary initial knowledge is, and last but not least, what the appropriateness
of that individual method is in relation to the existing culture and the
coalitions of interest in the internal and external environment of a com-
pany ((Cešnovar 2003; Rosenzweig 2007).
In 1988, the construction industry, as a whole, operated profitably for
the first time in a long period - thanks in great part to the flourishing
motorway programme. However, we can still talk about the business en-
vironments that are not open enough, about the lack of financing mech-
anisms for smaller companies as well as the lack of financial discipline
which typically affects smaller companies and subcontractors in partic-
ular. Aside from heavy competition, enormous increases in the prices of
wire rod, non-ferrous metals and oil, other key restrictive factors in the
construction industry are a chronic deficit in workforce and high ma-
terial and labour costs (taxes, contributions, etc.). However, the latter
should decrease with the introduction of new economic reforms. The
following weaknesses have been identified in the development strategy
of the Slovenian construction sector:
•	Insufficient productivity and insufficient gross added value gener-
ated, which are the consequences of inefficiently reducing the cost
of current operations;
•	Poor structure regarding the qualification of employees, which is
reflected by the low level of education, further reflected in the in-
sufficiency of personnel in different professional areas (construc-
tion technicians) and at the management level (developers, tech-
nologists, marketing professionals);
•	Insufficient understanding of foreign markets and achieving com-
petitive price brackets due to the low level of usage of external
knowledge (research and development, education, counselling,
etc.);
•	Improper assurance of quality concerning the starting materials
(questionable use of total quality management) and the expensive
purchase of starting components.
All of the above-stated shortcomings show that the Slovenian con-
struction industry is in critical need of transformation and adaptation to
the new requirements of the business environment which is increasingly
open to global competition. Long-term positive business operations may
only be successfully solved and ensured in 25% of cases, after crisis in a
company has already started (Slatter 1984).
The research problem discussed in the article examines the relation-
ship between management tools (mostly the methods of transformation
of companies, the factors involved in their process of selection, short-
comings in their introduction and in particular the undesired conse-
quences of transformation) of Slovenian construction companies and
the most relevant accounting scores and indicators of financial perfor-
mance of those companies. Examined methods of transformation of the
companies are the following:
1.	Shortening of Flow Times
2.	Strategic Planning
3.	Total Quality Management
4.	Creating a Vision and Mission
5.	Outsourcing
6.	Benchmarking
7.	Vertical Integration
8.	Creating Crucial Competitive Advantages
9.	Measuring the Level of Customer Satisfaction
10.	Growth Strategy
11.	Business Process Reengineering
12.	Cost Optimisation by Business Process Activities of (abc method)
13.	Customer Relationship Management
14.	Knowledge Management
15.	Strategic Alliance
16.	Balance Scorecard
Choice factors are considered to be the factors created by the exter-
nal and internal company environments which could have impact on
choosing the management tools. In creating the factors, we considered
the characteristics of the internal environment (structure, processes, sys-
tems, culture, the source of the company, etc.), the characteristics of the
external environment transformation, the concepts of the company's re-
sponse to environment transformation, and models for analysing the sit-
uation in the companies in relation to the external environment.
In relation to the disadvantages and barriers that can occur while in-
troducing the management tools to companies, the notion of substantial
disadvantages is not referred to as a negative connotation, but as devia-
tions from theoretical norms and guidelines. The panel of possible neg-
ative consequences that can occur after introduction of the company's
management tools is also an integral part of the research.
The Purpose and the Aim of the Survey
The aim of the quantitative empirical survey is to collect data on the
five most relevant accounting scores1 and indicators2 in the construction
sector, and to analyse their relationship with the management tools of
Slovenian construction companies. The average value of the individually
chosen scores and indicators will be calculated for the period 2001-2005.
The main aim of the survey is to verify the hypotheses and to deter-
mine:
1.	The differences between the arithmetic means of the five account-
ing indicators and indicators of participating and non-participating
construction companies in the survey.
2.	The existence and the strength of influences caused by the size of
companies, in accordance with Article 55 of the Companies Act
(zGD-i), on their financial performance, expressed with five ac-
counting indicators.
3. The existence of influence and strength of connection (correlation)
of the five accounting indicators with Management tools (methods,
factors, deficiencies and unwanted consequences of the transforma-
tion).
Definition of the Research Method
In designing and implementing this empirical research, we used an ap-
propriate combination of research methods, namely:
•	Descriptive Statistics for ranking the findings according to the set
criteria;
•	Contingency tables with the Chi-squared test, which is used to es-
tablish whether two categorical variables are related to each other
or not;
•	Student's t-test for testing statistical differences between average
values of scores and indicators of the financial performance of the
cooperating and non-cooperating companies in the research to test
the representative value of the acquired sample;
•	Principal Component Analysis to search new latent (immeasurable)
dimensions which are common to a larger number of variables;
•	Variant Analysis, Correlations and Multiple Regression Analysis.
In the context of data collection, the empirical survey can be divided in
to two parts. The first part, which is not subject to detailed discussion in
the article, relates to the survey questionnaire intended for the collection
of data on the impact of the factors in choosing management tools on
the performance of the transformation of companies in the Slovenian
construction industry. Using a questionnaire that comprised four sets of
closed-ended questions, we established the intensity of usage of sixteen
methods of management tools, measured the frequency of usage of thirty
factors that influence the choice of individual management tools, and
detected the occurrence of twenty-one disadvantages of introducing the
methods, as well as nine undesired consequences of transformation in
the company.
In the context of clarity and comprehensibility of the questions asked
and to avoid potential duplication, we pilot-tested the survey question-
naire before starting the research, using a control group consisting of six
senior managers that were included in the research.
The second part of the survey, which represents the main focus of this
article, refers to data collection on the financial performance of the com-
panies for which data on the methods of choosing and introducing the
sixteen methods of management tools by the companies were collected in
the first part of the survey. After the initial consultation with the financial
experts in the field of construction business, we chose the five most rele-
vant accounting scores and indicators for all of the examined population
units in the period (2001-2005) from the iBON (2006; data on business
operation of Slovenian companies and private entrepreneurs and insight
into business credit rating between 1994 and 2005) and from the ajpes
(2006; Agency of the Republic of Slovenia for Public Legal Records and
Related Services), namely:
1.	Equity as a category of result.
2.	Return on equity is an indicator which reflects the ratio between
net profit and equity. It gives the company the information on how
many cash units of net profit it created per one cash unit of equity.
This is one of the most summary indications of company perfor-
mance and is also comparable between sectors. It is particularly im-
portant from the owners' point of view. It explains how a successful
management staff manages the assets of the owners.
3.	The financial (in)dependence indicator (ownership of financing) re-
flects the ratio between the equity and the assets of a company. The
higher the ratio, the greater the borrowing opportunities a com-
pany has, but only if it is able to cover the interest from the profit
and loss. Financing through borrowing affects the financial risk and
profitability of an undertaking.
4.	The horizontal financial structure indicator borrowing indicates the
level of indebtedness, i. e. the portion of a company's equity fi-
nanced by the companies' long-term and short term liabilities and
not by their own resources.
5.	The added value per employee indicator measures the created value
over a certain period. This means that the return (on production
and/or services performed) is diminished by the inputs of other
business systems (materials, goods, etc.). It is the gross added value,
a gross return (a sum of income and change in inventories of fin-
ished products), diminished by the costs of material, goods and ser-
vices as well as other costs (but not depreciation).
While processing the survey results we considered the values of scores
and indicators from the period 2001-2005. The choice of the period is
substantiated by the fact that certain companies featured in the sam-
ple did not have data in the iBON before 2001. The 2001-2005 period
is also appropriate because, in that time period, the same accounting
standards were in force (before that period, there were no unified stand-
ards).
sampling frame
On 1 January 2005 (Ramovš, Žemva and Gržinic 2006), in the registry of
the Chamber of Commerce and Industry of Slovenia (2006), according
to the criterion 'number of employees' there were 85 companies3 with
more than 50 employees according to the Standard Classification of Ac-
tivities (sca) from sectors 45.210 - General construction work and 45.230
- Construction of roads, railways, airports and sports utilities.
Five of these companies were 'undergoing bankruptcy' and were elim-
inated from the survey. This means that the survey included 80 compa-
nies, which at the same time represents the extent of the examined popu-
lation. Based on the average number of workers, net income on sales and
the extent of assets at the end of the business year, the criterion in Arti-
cle 55 of the Companies Act (zgd-1) classifies the commercial companies
into micro, small, medium-sized and large enterprises. Taking into con-
sideration the criteria of Article 55 zgd-1, the examined population in
the research comprises 18 small (22.5%), 32 medium-sized (40.0%) and
30 large enterprises (37.5%).
limitations of the survey
For the purposes of research work we chose companies with more than
50 employees, which assures equal presence of commercial companies
according to the criterion of Article 55 of the zgd-1. For the purpose of
commenting on the results of the empirical survey, it should be noted
that the survey was implemented in a branch that was in a crisis during
the examined period (Ramovš, Žemva and Gržinic 2006) and is classi-
fied among the least profitable industries in the Slovenian economy in
general.
Due to the limitations of the survey regarding the examination of fi-
nancial performance of the companies, the five-year period (2001-2005)
and the Slovenian construction industry, the results cannot be inter-
preted as a general rule of financial performance.
REALISED SAMPLE
In the process of questioning, it turned out that one small company was
winded up (2005) and one small company went bankrupt, which led to
two units that could not be used in the survey. Four companies declined
taking part in the survey. As a result, 78 companies took part in the quan-
titative survey. We received 74 valid answers, i. e. we achieved a 94.87%
response rate. While examining the structure of the realised sample ac-
cording to the size of the construction companies, it can be observed that
15 small companies (83.33% response rate), 30 medium-sized companies
(93.75% response rate) and 29 large companies (96.66% response rate)
took part in the survey, which means that the highest response rate was
achieved among large companies.
REPRESENTATIVE VALUE OF THE SAMPLE
The population was divided into two groups (companies taking part in
the survey and those not taking part), and arithmetic means of the scores
and indicators of both groups were calculated for the period 2001-2005
(table 1).
Certain differences were discovered between both groups of compa-
nies; namely, the non-collaborating companies were better in four out
of five indicators (net profit in the business year, return on equity, finan-
cial (in)dependence and borrowing rate), while the collaborating compa-
nies were only better in the added value per employee indicator. The only
substantial deviance is the return on equity indicator, representing one
of the most summary indications of company performance. The non-
collaborating companies are obviously companies where the manage-
ment staff manages the owners' equity more successfully.
We can only guess that the reason why these companies were not will-
table 1 Arithmetic means of scores and indicators of the collaborating and
non-collaborating companies
Scores and indicators	Collaborating	Non-collaborating
Net profit in the business year*	33,148.34	82,268.5
Return on Equity**	0.05950	0.32575
Financial (in)dependence**	0.29770	0.31500
Borrowing rate coefficient	0.95280	0.83000
Added value per employee*	4,785.61	4,449.25
notes *Amounts are in sit 1,000. ** Values are in percentages. Source: ibon 2006.
ing to participate in the survey is the fear of revealing those character-
istics of the company that represent the source of their competitive ad-
vantage. However, since their total share of gross income in comparison
to the total population is negligible, the influence of the deviation in this
indicator can be neglected. On average, the non-collaborating compa-
nies have fewer employees (125) than the collaborating ones (233). Due
to the small number of non-collaborating companies (only 4), there is
no need to confirm the statistically definitive differences - using the Stu-
dent's t-test is not reasonable. Notwithstanding the fact that there are
certain differences between the companies, it can be confirmed that the
sample is a representative one because the deviations are insignificant.
Presentation of the Survey Results
THE MANAGEMENT TOOLS
In the period 1995-2005, the examined Slovenian construction compa-
nies used on average somewhat less than 9 different management tools,
which represents over a half (54.90%) of all 16 methods examined in
the survey. The results do not differ significantly according to the size
of the company, since both large and small companies used 9 methods
on average, while the medium-sized ones used somewhat more than 8 of
them. The most frequently used method of transformation was Formal-
ized Strategic Planning, used by 77.00% of all companies in the survey.
factors for choosing management tools
The interviewees used a five-grade Likert scale for deciding from 1 (com-
pletely insignificant) to 5 (very important) to evaluate the significance
of thirty factors that affect the choice of the methods of management
tools of construction companies. The factors were designed on the basis
of the interpretation of data, collected using preliminarily implemented
interviews, and a control group of six senior managers. Due to the in-
sufficient number of units in the sample, using the Principal Component
Analysis statistical method was not feasible for the set of all thirty fac-
tors in choosing the management tools; hence, we divided them into two
groups according to the subject matter key. Following this, we imple-
mented the principal component analysis separately for each one in the
two groups.
The first group produced six dimensions, and the second group pro-
duced three dimensions, meaning that we created a total of nine dimen-
sions of choosing factors for management tools (table 2). The values of
table 2 Average values of the dimensions of factors in choosing management tools
Dimension of factors for choosing management tools in construction companies	(1)	(2)	(3)
Employees	3.2760	3.4270	3.3730
Indirect economic interests	2.9655	3.1583	2.9667
Conformity with the company's strategic orientation	3.7356	3.4778	3.3778
Direct economic interests	4.0345	3.9000	3.5333
Social-economic and political interests	2.5517	2.3000	2.1000
Tendency towards planned turnover	3.6207	3.6500	3.5667
Senior management	3.6138	3.5333	3.2133
Popularity of management tools	2.6667	2.8222	2.5556
Parameters available for introduction of transformation	3-2414	3-5167	3-4333
notes Company size according to the zgd-1: (1) large, (2) medium, (3) small.
Cronbach coefficients (Ferligoj, Leskošek, and Kogovšek 1995) are accept-
able (above 0.60), except for two dimensions which are merely composed
of two statements. Due to substantive reasons, the mentioned dimen-
sions cannot be combined with any of the other dimensions.
disadvantages in introducing the methods of
transformation to the companies
Here, the average levels of agreement in relation to the enumerated prob-
lems and disadvantages are presented, which were encountered by the
companies while introducing new methods of transformation. The eval-
uations of agreement ranged on the scale from 1 (I completely disagree)
to 5 (I completely agree). Due to strong positive correlations between
the disadvantages and the consequently high value of the Cronbach co-
efficient (0.92), a new combined variable, disadvantages, was generated,
representing the average of all evaluations of agreement on the listed dis-
advantages (table 3).
All the companies in general partially agree that they faced disadvan-
tages upon the introduction of changes (2.97). Small companies faced
table 3 Average values of the disadvantage dimension upon introduction of methods
Disadvantages dimension upon introducing the methods (1) (2) (3)
of management tools
Employees	3.0049 3.0444 2.7270
notes Company size according to the zgd-1: (1) large, (2) medium, (3) small.
table 4 Average values of dimensions of undesirable consequences to transformation
Dimensions of undesired consequences of construction companies' transformations	(1)	(2)	(3)
Decrease in worker's performance	2.0000	2.1667	2.0167
Decrease in workers' confidence in transformation	2.6034	2.6000	2.0667
Hindered management process	2.6379	2.8000	2.5000
Redundancy	2.1379	2.5667	1.4000
Average of undesirable consequences dimensions	2.3448	2.5330	1.9960
notes Company size according to the zgd-1: (1) large, (2) medium, (3) small.
fewer disadvantages (2.73). One of the possible reasons for this derives
from the fact that small companies tend to be more flexible and are in a
position to implement the desired changes more rapidly.
undesirable consequences of construction
companies' transformations
On the scale from 1 (completely disagree) to 5 (completely agree), the
companies evaluated their level of agreement with the nine undesir-
able consequences of transformation. The interviewed companies did
not face many undesirable consequences upon the introduction of new
management tools since the average combined mark totals to only 2.31.
Based on the statistical method of the Principal Component Analysis,
nine statements were combined into four dimensions whose average val-
ues are presented in table 4.
The values of Cronbach coefficients are acceptable (above 0.60), ex-
cept for the dimension hindered management process which is merely
composed of two statements. Due to substantive reasons, this dimension
cannot be combined with any of the other dimensions. The redundancy
statement could not be classified in any of the dimensions due to its low
correlation with the other statements, and was handled as a separate di-
mension.
Analysis of the Influence on Companies' Financial Performance
In this chapter, different influences on companies' financial performance
in the Slovenian construction industry are analysed. In the course of
analysis, we were restricted to only the influence of the dimensions of
transformation of companies, the influence of disadvantages upon their
introduction, and the influence of dimensions of undesirable conse-
quences of transformation, while any influence analysing the effects of
table 5 Correlation matrix between the dimensions of undesirable consequences of
transformation and the scores and indicators of construction companies'
financial performance
Indicators1	Trends
		1	2	3	5	1	2	3	4	5
(a)	r	-0.018	-0.080	0.051	0.018	0.004	-0.162	-0.004	0.149	-0.066
	a2	0.878	0.500	0.665	0.879	0.971	0.168	0.975	0.205	0.575
(b)	r	-0.088	-0.206	-0.022	0.031	-0.032	-0.067	-0.023	0.165	-0.047
	a2	0.457	0.078	0.853	0.791	0.789	0.573	0.844	0.161	0.693
(c)	r	-0.040	-0.076	0.086	-0.111	-0.054	-0.008	0.065	0.081	-0.145
	a2	0.736	0.520	0.467	0.346	0.648	0.944	0.584	0.491	0.217
(d)	r	0.107	0.084	-0.082	0.233*	0.065	0.184	-0.026	0.136	0.328**
	a2	0.364	0.477	0.488	0.046	0.583	0.117	0.829	0.247	0.004
notes Dimensions of indicators: (a) decrease in workers' performance, (b) decrease
in workers' confidence, (c) hindered management process, (d) redundancy.
1 Average accounting scores and indicators of companies in the period 2001-2005.2 Dual
test. * Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at
the 0.01 level (2-tailed).
these factors would not be reasonable from the methodological point of
view; in case these influences do exist, they can only be circumstantial.
Based on the five-year time period (2001-2005), the related trends for ac-
counting scores and indicators of financial performance were calculated.
While examining the relation of accounting scores and indicators from
the period 2001-2005 with the methods, factors, disadvantages and un-
desirable consequences oftransformation, the quantitative indicator bor-
rowing rate proved inappropriate since it should be handled in the con-
text of other indicators, such as return on equity, for example. In simple
words, in case a company shows a high profitability rate, it can afford
a higher borrowing rate in return - without jeopardizing its business.
Since the mentioned indicator only partialy reflects the economic inde-
pendence of a company, it was eliminated in the further stages of the
survey and the trend of the indicator borrowing rate was maintained.
The correlation analysis of the association of quantitative indica-
tors with the dimensions of the factors in choosing management tools
showed no strong connection between those mentioned. The results of
the analysis show that there is essentially no connection between the di-
mensions of undesirable consequences of transformation and the com-
panies' financial performance (table 5).
The relation between the redundancy dimension and the trend added
table 6 Descriptive statistics of scores and indicators according to use of method 12
	(1)	(2)	(3)	(4)	(5)
(a)	Yes	54	76,747.518	128,369.899	17,468.9306
	No	20	-84,569.45	369,641.082	82,654.2587
(b)	Yes	54	0.07872	0.238133	0.032406
	No	20	0.0076	0.282181	0.063098
(c)	Yes	54	0.3048	0.18091	0.02462
	No	20	0.2785	0.18164	0.04062
(d)	Yes	54	4,943.35	3,180.387	432.796
	No	20	4,359.7	2,320.741	518.933
(e)	Yes	54	29,222.944	61,996.8812	8,436.70693
	No	20	-67,907.85	299,136.003	66,888.8437
(f)	Yes	54	-0.02057	0.191891	0.026113
	No	20	-0.0559	0.13349	0.029849
(g)	Yes	54	-0.0054	0.09945	0.01353
	No	20	-0.028	0.0709	0.01585
(h)	Yes	54	-0.1291	0.93368	0.12706
	No	20	-0.04	0.1464	0.03273
(i)	Yes	54	639.96	1,250.081	170.114
	No	20	14.85	698.204	156.123
notes (1) use of method, (2) number of units; descriptive statistics: (3) average, (4)
standard error, (5) standard error of the average. Scores and indicators: (a) net profit in
the business year (in sit 1,000), (b) return on equity (%), (c) financial (in)dependence
(%), (d) added value per employee (in sit1,000), (e) net profit in the business year trend
(in sit 1,000), (f) return on equity trend (%), (g) financial (in)dependence trend (%),
(h) borrowing rate coefficient trend, (i) added value per employee trend (in sit 1,000).
value per employee should be mentioned (r = 0.30, a < 0.01), where it
is a fact that by discharging redundant workers, the added value trend
increases. Based on the t-test, which we used to test the difference be-
tween the financial scores and indicators and their trends according to
the usage of the chosen method of transformation, the difference cannot
be confirmed for fourteen methods. In these cases, methods which in-
dicate the effect of introduction in the long-term accounting period and
in other fields of business are in question. The two remaining methods
of transformation are of explicitly financial nature. These are: method
12 (optimisation of costs by activities of business process) and method
16 (balance scorecard). The latter two proved to be directly linkable to
construction companies' financial performance. Those companies (54)
that did use method 12 do not show in terms of financial performance,
a statistically significant difference in relation to the companies (20) that
did not use this method; however, their trend in the economic indicator
'financial structure added value per employee' is growing more rapidly
(table 6).
Based on the 5-year trend, we can expect added value per employee in
these companies to increase by sit 639,960 (eur 2,670.51) every year,
contrary to other companies where increases in added value per employee
can be expected to amount to only sit 14,850 (eur 61.97). The difference
is statistically significant in the case of 0.05 level (t = 2.11; a < 0.05; Sig.
(2-tailed) = 0.04).
A difference in trends is also evident in the first economic indicator,
return on equity (a = 0.07). In the case of companies that did introduce
method 12, it can be concluded from the 5-year trend that their return
on equity would increase by sit 29,222,944 (121,945.19 eur) every year,
while return on equity in companies that did not use this method would
probably decrease on average by sit 67,907,850 (eur 283,374.44 ).
Those companies (20) which did use method 16 do not differ in regard
to the four accounting scores and indicators statistically significant from
the companies (54) that did not use this method. A statistically significant
difference (table 7) is indicated only in the trend of the third indicator
financial (in)dependence (ownership offinancing).
Based on the 5-year trend, it can be expected that the ratio between the
equity and assets of those companies which did use method 16 (balance
scorecard) would increase by 0.03 every year in favour of equity, which
normally increases borrowing possibilities. For the companies that did
not use this method, it can be predicted that their ratio would decrease
by 0.03 (t = 2.17; a < 0.05, Sig. (2-tailed) = 0.03). Studying the associ-
ation of arithmetic means of the accounting indicators and scores with
the disadvantages of introducing the management tools for the period
2001-2005 indicated that a connection between them does exist (table 8).
On the basis of the correlations analysis a conclusion was made that
if the number of disadvantages diminishes the first indicator equity (r =
-0.25; a < 0.05; Sig. (2-tailed) = 0.03), the second indicator return on
equity (r = -0.23; a < 0.05; Sig. (2-tailed) = 0.05) and the trend of
the first indicator equity (r = -0.26; a < 0.05; Sig. (2-tailed) = 0.03)
would increase. In the reverse direction, by increasing the number of dis-
advantages, the trend of the fourth indicator, borrowing rate, increases
table 7 Descriptive statistics of scores and indicators according to use of method 16
	(1)	(2)	(3)	(4)	(5)
(a)	Yes	20	41,193.95	84,555.24504	18,907.1275
	No	54	30,168.481	264,632.7222	36,011.9521
(b)	Yes	20	0.0679	0.259577	0.058043
	No	54	0.05639	0.249908	0.034008
(c)	Yes	20	0.2865	0.16129	0.03606
	No	54	0.3019	0.18803	0.02559
(d)	Yes	20	4,681.2	4,112.547	919.593
	No	54	4,824.28	2,463.866	335.29
(e)	Yes	20	12,465.7	44,308.90808	9,907.77305
	No	54	-545.037	194,344.2953	26,446.9087
(f)	Yes	20	-0.0478	0.24471	0.054719
	No	54	-0.02357	0.14807	0.02015
(g)	Yes	20	0.026	0.14583	0.03261
	No	54	-0.0254	0.05901	0.00803
(h)	Yes	20	-0.006	0.07687	0.01719
	No	54	-0.1417	0.93511	0.12725
(i)	Yes	20	621.9	1,381.421	308.895
	No	54	415-13	1,071.998	145.88
notes (1) use of method, (2) number of units; descriptive statistics: (3) average, (4)
standard error, (5) standard error of the average. Scores and indicators: (a) net profit in
the business year (in sit 1,000), (b) return on equity (%), (c) financial (in)dependence
(%), (d) added value per employee (in sit1,000), (e) net profit in the business year trend
(in sit 1,000), (f) return on equity trend (%), (g) financial (in)dependence trend (%),
(h) borrowing rate coefficient trend, (i) added value per employee trend (in sit 1,000).
table 8 Correlation matrix between the disadvantages upon introduction of
management tools and the scores and indicators of companies' financial
performance
	Indicators1				Trends		
1	2 3	5	1	2	3	4	5
(a) r -0.249* a2 0.032	-0.232* 0.055 0.046 0.643	-0.175 0.135	-0.257* 0.027	-0.105 0.375	-0.044 0.711	0.332** 0.004	-0.149 0.207
notes Dimensions of indicators: (a) disadvantages upon introduction of the meth-
ods. 1 Average accounting scores and indicators of companies in the period 2001-2005.
2 Dual test. * Correlation is significant at the 0.05 level (2-tailed). ** Correlation is signif-
icant at the 0.01 level (2-tailed).
(r = -0.33; a < 0.01; Sig. (2-tailed) = 0.004). This can be interpreted
by the fact that it is inevitable for the companies to finance the elimina-
tion of disadvantages that occurred upon the introduction of individual
management tools, which, as a consequence, forces them into additional
borrowing.
Conclusions
For the purposes of the second part of the survey which was discussed
in this article4 in detail, data were collected on the five utmost relevant
accounting indicators and scores for the construction industry. The anal-
ysis of the companies' business performance indicated that in the period
2001-2005, somewhat more than a fifth (21.60%) of the companies had
negative average equity, which is expected to grow with the size of the
company. Almost one fourth (24.30%) of the examined companies has
an average return on equity, with small companies prevailing (49%). A
solid fifth (21.60%) of all companies achieved up to a 0.12 mark offinan-
cial (in)dependence.
The highest share is once again indicated among small enterprises
(33.30%). Medium-sized enterprises have the highest share (26.70%)
among the companies with the value of this indicator above 0.47. One
fifth (20.30%) of construction companies have a borrowing rate above
1.07; and among these, small enterprises have the highest share (26.70%).
Added value per employee increases with the size of the company. Almost
one third (31.00%) of large companies attain over sit 6,300 thousand
(eur 26,289.43) added value per employee. The share among small enter-
prises amounts to 6.70%.
While examining the relationship of accounting scores and indicators
from the period 2001-2005 with the methods, factors, disadvantages and
undesirable consequences of transformation, the quantitative borrowing
rate indicator proved inappropriate since it should be considered in the
context of other indicators, such as return on equity (roe), for example.
In simple words, in the case that a company shows a high profitability
rate, it can afford a higher borrowing rate in return without jeopardizing
its business.
Since this indicator only partially reflects the economic independence
of a company, it was eliminated in the further stages of the survey, and
only the trend of the indicator borrowing rate was maintained. The anal-
ysis of the association of quantitative indicators with the dimensions of
the factors for choosing management tools showed no strong connection
among those addressed. The analysis shows that there is essentially no
connection between the dimensions of unwanted consequences of trans-
formation and the financial performance of the companies. The relation
of the redundancy dimension with the added value per employee trend
should be mentioned, where the fact exists that by discharging (redun-
dant) workers, the added value trend improves. Based on verification
as to whether the difference between financial scores and indicators and
their trends differs according to the usage of the chosen method of trans-
formation, the difference cannot be confirmed for fourteen methods.
This case, namely, is about methods, the introduction effect of which
is shown in the long-term accounting period as well as in other fields of
business. The other two methods of transformation, the 'optimization of
costs by activities of a business process' and the 'balance scorecard' are of
explicitly financial nature. The latter two proved to be directly related to
the financial performance of construction companies.
Studying the association of arithmetic means of the accounting indi-
cators and scores with the disadvantages of introducing the management
tools for the period 2001-2005 indicated that a connection between them
does exist. The survey results indicated that with the increasing number
of disadvantages, the first indicator, equity, the second indicator, return
on equity, and the trend of the first indicator, equity, tend to decrease.
In the reverse direction, by increasing the number of disadvantages, the
trend of the fourth indicator, borrowing rate, increases. The reason for
this lies in the fact that it is inevitable for the companies to finance the
elimination of disadvantages that occur upon introduction of individual
management tools, which, in consequence, forces them into additional
borrowing.
Notes
1	According to the Slovenian Accounting Standard no. 29 (Slovenski racuno-
vodski standard 29 2002) a score is an absolute number predicting or in-
dicating the situation, or pointing out the development of something; it
is, normally, a piece of accounting data and differs from the indicator.
2	An indicator is a relative number, acquired by the comparison of two mag-
nitudes; it holds a cognitive power which enables the creation of an opin-
ion about business operation. Considering the nature of the compared
magnitudes, it can be an index, a coefficient or a rate of participation
(Slovenski racunovodski standard 29 2002).
3	Considering the selected number of construction companies in the sur-
vey, the construction companies in the 2001-2005 period on average
posted net profit for the financial year of 148,837.09 eur, net return on
equity of 0.073%, financial independence of 0.299%, borrowing rate co-
efficient of 0.947, and added value per employee of 19,898.01 eur. The
non-participating companies (4) in the survey have fewer employees on
average (125.25) than the participating companies (233.53).
4 The survey studies only: (1) the existence and strength of influences caused
by the size of companies, in accordance with the criterion referred to in
Article 55 of the Companies Act (zgd-1), on their financial performance;
(2) the existence of influence and strength of connection (correlation) of
the transformation process (methods factors, deficiencies and unwanted
consequences) with quantitative financial indicators - substantial conse-
quences and results of these influences are therefore not a subject of the
study.
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