If I were in your boots …

Mott MacDonald is one of a new breed of multiservice providers. Multidisciplinary practices have not been around for long. It took humankind 450 generations to develop a basic straw-and-mud construction industry – hunting and gathering is such a simple way to make a living – and it is only in the past few years that the large-scale multidisciplinary practice has arrived. Previously, such multifarious design and engineering skills lay only in the genius of a Michelangelo or a Brunel.

Before I begin, I should declare a partiality to Motts: I have dealt with the firm most of my working life, and once participated in an internal management conference. I had the pleasure of working with it on the Tsing Ma Bridge in Hong Kong (one of the 20th century's greatest engineering feats); it is as talented as can be, and has a professional approach to everything.

What does Mott MacDonald offer?

• The company has 5000 technical staff, half of them in civil and structural design. I challenge anyone to complain about its size.

• World-class design talent. Some of its solutions are groundbreaking (several pictured above) - especially in complex structures.

• World-wide reach. The firm is truly international. Half of its turnover is in the UK, the rest is in Europe, the Middle East, North America, South-east Asia and Africa. A formal tie-up with Connell in the Far East and Australasia has just extended this reach.

• A good reputation as an employer. It came 86th in The Sunday Times' 100 Best Companies to Work For survey in March.

• A blue-chip client list, including advisory roles for governments on environmental issues. This will be an important area in the coming century.

• An professional approach throughout the organisation that verges on the pedantic. Motts can be a frustrating partner for some clients, as it never makes a hasty decision. But it can be relied on to deliver a working solution – that is central to the Mott MacDonald brand.

This is all good stuff. Top clients, top service, top project. They are also free of any "great disaster" projects – no wobbly bridges in its closet.

So what's the problem?
The problem is this: for the year to 31 December 2002, the firm's operating profit was £11m on fee receipts of £401m; this is a margin of 2.7%, which is not much better than contracting, and almost exactly the same as Arup. But White Young Green, a smaller, lower-key firm made a 9% margin on fee income of £64m. The comparison between these three multidisciplinary consultants is instructive, and not just because of the differences in profit margin. For example, Richard Brayson, the chief executive of White Young Green, is not an engineer and runs the whole organisation as a business from top to bottom. Motts is still led by engineers.

What should it do? Mott MacDonald needs to consider three key business drivers (four, when one takes the vital staff element into account).

• First, cash will become increasingly critical. Motts does have low-geared borrowings but White Young Green and Arup have more money in the bank. Clients are tougher bargainers these days, and that will put pressure on cash. Settlement periods now extend at least 14 days after previous terms, and professionals will not be immune from the trend. Then there is the strain on funds imposed by expanded services and wider geographical coverage, acquisitions and at risk pre-engineering costs on developing schemes.

• Second, there must be some opportunity for large cuts in administration and support costs. Administration expenses at Motts have climbed from 25% of turnover to 30% in the past three years. This seems high to me, and may indicate a failure to integrate all operations within one set of systems and shared facilities. If this can be achieved – without lurching into an Atkins-style IT meltdown – you can achieve tremendous synergies. Other acquisitive industries have done it, so surely Motts can be similarly ruthless?

• Third, there is marketing, the subject I spoke on at the aforementioned conference. Given the breadth of skills on offer, it is a challenge to put them in a single package and then sell that package to the client. How much of the work is multi- and not single-service? Do the individual operations produce "pull through" work for one another? What percentage of the work obtained is repeat business on a non-competitive basis? Are these issues logged and KPIs applied? How much does the firm rely on reputation rather than trying to reach new customers? All these are customer awareness issues and I believe Mott MacDonald has a great deal to do in this area.

The bottom line is that the Motts of this world are going to have to get more into business and less into engineering. A ruthless management approach is not best served with too many shareholding directors. Mott MacDonald Limited's operating board used to have 20-odd executive directors; cut that number, please.

Long-term survival
Ultimately, Motts will have to consider a change of identity. The UK's multidisciplinary consultants have excellent elements, and all have won international awards for structure design, process and architecture. But they are dwarfed by the US process–programme managers such as Bechtel, Fluor Daniel and Jacobs Engineering – and unlike those firms, they do not usually take on construction or even programme risk. They have retained a "professional" approach but broadened their services.

What I am concerned about is the benefit that the client receives from a bundled services approach. I can see it may have some merit for "trophy" schemes, for developing new standard construction products and for providing strategic advice to governments and so on, but I can see little attraction for most product delivery. The bigger the bundle, the more interfaces there are to manage, and the more unwieldy the company.

I can illustrate this point with reference to another industry. Remember the Big Bang in the financial services industry in the late 1980s? Here, across-the-board deregulation led to a spate of takeovers as the big banks rushed to turn themselves into financial supermarkets offering everything from pensions to stockbroking. The beasts that evolved became too big to service run-of-the-mill clients. Now we have the backlash: the rebirth of the specialist niche operators across all financial services.

I predict that a similar narrative will emerge in construction. First, we have the engineers who have taken over large quantity surveyors. Atkins did it to Faithful & Gould, and Mott MacDonald took over Franklin + Andrews last year. Can anybody rely on the independence of a QS that is owned by another member of the project team? Atkins felt this problem on Jumeirah Beach in Dubai, where it was acting as architect and having numerous changes forced upon it, while still being held to account for budgeting. Was Atkins paid its due for that? I doubt it.

Second, multidisciplinary firms tend to retain their small-firm identity. They often have deep professional roots and complex partnership or profit sharing structures. I think that normal business drivers must apply to the way these businesses are structured, and they should become much more accountable. Roles should be more defined and the objectives and strategy should start to take a quantifiable form.

Motts will need to work hard to make the synergies happen – even allowing for their enviable reputation for professional excellence.