If companies are to navigate through the downturn and out the other side, they need to make some crucial strategic and staffing decisions. Building asks some of the most forward-thinking firms where they’re heading and how
Amid the blizzard of alarming economic forecasts and revelations of public spending cuts, it’s easy to forget that UK construction is still a £100bn-a-year market.
Of course, the danger is very real: the Construction Products Association (CPA) is forecasting that construction output will fall next year by 3.6% as a result of plummeting public sector activity combined with subdued private sector construction. Public sector output in particular will drop 11% in 2012 with activity in education, roads, social housing and PFI work set to reduce sharply.
However, construction will be growing in a number of significant areas over the next few years - notably, rail, energy and sustainability. Rail construction, for example, is set to rocket 78% by 2014. Noble Francis, economics director at the CPA, says: “The next 18 months are likely to be extremely tough for the majority in the construction industry but for those who are flexible and clever, there are some key areas where you can win millions of pounds of work.” And it is also likely to be these “flexible and clever” firms that will have a head start when construction recovery does occur, currently forecast by the CPA for 2014.
So how should businesses be positioning themselves to ensure they are best placed to capitalise on opportunities now and in the coming three years? We asked forward-thinking employers how best to line up staff and create lean structures to succeed in the current market conditions and follow the market into recovery. Below are the seven top tips that emerged.
1. Hire graduates and trainees
While few firms have been able to avoid lay-offs, as counterintuitive as it may seem, now is the time to hire graduates. Mott MacDonald, the UK’s second largest engineering firm according to Building’s 2011 Top 200 Consultants rankings, with 2,505 chartered employees in the UK, has taken on more than 100 graduates this year.
Kevin Stovell, group strategic development director, says that this is about half the peak intake of 2008, reflecting the downturn, but fresh talent is still deemed essential. “After previous recessions there were sectors where hardly anyone had been training staff - we are not going to get caught out that way.”
The recruitment strategy does take account of market conditions, however, with a greater number of graduates being channelled into the busiest sectors, which for Mott MacDonald are rail, power and water. This recruitment policy will continue into next year, when the firm plans to draft in a further 120 graduates.
2. Cut back where it’s needed
Falling workloads mean that lay-offs are unfortunately unavoidable for many firms but it’s vital to make cuts in the right areas. This may mean reducing numbers in slow geographical regions - as Balfour Beatty and Bam Construct did in October when they entered into redundancy consultations with some staff in the North-east.
Alternatively, if the business has too many high earners, lay-offs may be needed at senior management level, as is under way at Davis Langdon, which is cutting about 30% of its 175 directors.
All three firms have pointed to the need to be more lean. Stovell warns against going too far, however: “We do have fewer staff in the UK than in 2008 and have reduced in sectors such as buildings and highways but I can’t think of an area where have reduced to the extent we do not have significant capability to operate in a sector. Where appropriate we transfer employees between sectors and even countries, if this appeals to them.”
3. Reward your staff
It may be tempting to reduce employee benefits in the downturn as part of an economy drive, but ring-fencing benefits is a simple way of retaining the best employees. While it will not save the company money per se, neither does it add to costs. With other companies cutting benefits, you’ll be ahead of the competition simply by maintaining your firm’s status quo.
Mace, the contractor building the Shard, has adopted this strategy, maintaining existing deals on pensions, health and life cover, and even improving the package by upping the company’s pension contribution. Kath Knight, human resources director, says: “We wanted a very competitive pension offer because we know pensions are increasingly important to people and we realise that employees do have a choice about where they work, even in this environment.”
Mace also tries to offer benefits other companies tend not to, such as “Mace days”, which are days off for dealing with problems at home or a sick relative. Knight says: “You can book a Mace day at short notice and it doesn’t come out of your holiday. It’s about making people feel good about working here.”
4. Plan for growth
Believe it or not, forward-thinking firms are gearing up for a surge in demand. John Stanion, chairman and chief executive of the UK contracting arm of Vinci, Europe’s largest contractor, says: “I’m very optimistic, especially regarding the medium term. Consider the government’s National Infrastructure Plan [the second phase of which is expected to be announced this month]. This will require huge numbers of skilled people. Nuclear new build at Hinkley Point power station alone will require a management team of around 1,000.”
For this reason Vinci UK has some 200 vacancies and it is also working overtime on training existing staff, whether sending them on management courses or up-skilling them in Vinci’s various training “academies”, such as the Vinci Energies Academy, Montesson, France. Stanion says: “We’re giving people the best training so we can maximise the opportunities coming up.”
Neither is the approach only for big players. Margolis Office Environments is a 40-strong, £18m-turnover office design and build firm based in London. Managing director Geoff Andrew says: “We recently decided that as the market is tough we should stop aiming for growth and focus simply on surviving.” Andrew swiftly changed tack, however. “We realised that if you don’t have a growth objective you make different decisions, such as focusing solely on existing clients.
“If you are trying to grow you have a healthier approach, including proactive marketing to win new clients. Whether we get to our objective is an interesting question but the point is that we have growth plan and that energises the business.”
Stanion believes it will be critical to invest in innovation in the coming years, even if money is tight. “We will not survive unless we innovate, as it is the only way to progress. Look at Steve Jobs [the late co-founder of Apple]. He achieved a revolution simply by radically improving technology that was already there.”
At the heart of Vinci’s UK innovation drive is its Technology Centre, which researches and offers services in all aspects of construction and engineering, from sustainability to rain noise testing and building pathology. In Paris, where the firm is headquartered, its think tank The City Factory is researching the future of the world’s cities. Vinci also promotes sharing ideas in within its business through in-house innovation awards, which had 170 entries this year.
6. Be twice as sustainable
As firms position themselves for the coming years, they should take a dual approach to sustainability: it can be sold to as a service to clients and also implemented internally, saving money and improving corporate social responsibility, which can help to attract investment.
It is worth investing up front too, with a view to a longer term pay-off. Margolis, for example, hired a sustainability consultant. Andrew says: “Despite some capital costs like installing an energy meter, we have halved the paper we use and we all turn off our PC screens, so - while I don’t have the numbers yet - this is clearly going to pay off. It’s good for the environment but it also makes pure business sense.”
Meanwhile, firms from Vinci to 85-strong consultant John Rowan & Partners are underpinning all client services with sustainability. Echoing the strategy of a growing number of the sector’s more innovative firms, Stephen Gee, managing partner at John Rowan, says: “We’re positioning ourselves so that sustainability is a key part of everything we do for clients - not a standalone service.”
7. Go international
More than ever, overseas work is crucial. Consultant Gleeds, which employs 644 staff in the UK, plans to grow its international business from 30-35% of turnover to 50% within three years. Stuart Senior, managing partner, says: “We think the UK market will be stagnant for up to 10 years, so you can choose to stay there and face rising costs, which will diminish your business, or go for some of the wonderful opportunities abroad.”
In line with this, Gleeds recently acquired US consultant ProjectConsult, which is based in New York and Sao Paulo and plans to buy more firms in Australia, the Far East and Central Europe. It is also on a huge recruitment drive for its existing offices outside the UK, with plans to hire about 200 people in India and China.
Neither is international growth a strategy for larger firms alone. John Rowan & Partners works in Paris and Prague and began working in New Zealand in June after forming an alliance with Miles Construction Group to work on rebuilding the city Christchurch following the February earthquake. The firm is even looking at a job in Democratic Republic of Congo. Gee says: “Although we are medium-sized, we have to be as flexible and ambitious as a bigger firm.”