Meet the new boss

If your company is in the throes of restructuring and the threat of redundancy hangs over your office, the chances are that you have recently been blessed with a chief executive or chairman from outside the construction industry. This has been the story for Carillion, WS Atkins, Wates, Wilson Connolly and Wimpey. All are of different sizes, with different markets, but all (with the exception of Wates) are in the middle of a programme of job cuts and reorganisation; and all are being led by men who are new to the job and the industry.

Amen to that, said the City, clients and much of the industry itself. There have been many voices in the past few years calling for outside influence to be brought into construction. New men with new ideas, the theory went, would make companies bold enough to do what was necessary to improve shareholder value and so attract investment. Otherwise, construction would be stuck forever in the same rut. "The industry had the reputation that it was moribund and needed new influences," says one analyst. "So some companies looked outside for the boss."

But are skills from outside industries easily transferable to the complexity of construction? Or is it that the newcomers wreak too much change without knowing enough about the companies they are trying to run, unsettling employees and shareholders alike?

Now that the new men have had time to settle in – it is nearly a year since the first of them, Wimpey's Peter Johnson, took charge – their impact can start to be assessed.

The actual results across the listed companies have been mixed, but the balance of opinion seems to be against the newcomers. Measuring the impact of outsiders is hard to do so early in their reigns, but a look at their firms' performance on the stock market helps. Their share prices all jumped soon after the appointments as the City applauded companies that took its prescribed medicine. However, only Carillion and Wimpey's shares are now worth more than before the appointments.

The response to the changes from investors, analysts and industry insiders ranges from concern – at Allan Leighton's tenure at Wilcon – to a wait-and-see approach.

"It's been a mixed bag. Some of the things they have done are good, other bits not so good," says Mike Foster, construction analyst at stockbroker Granville Baird. "They definitely shake things up but whether that is a good thing is too early to say. It's not a simple story."

Despite being sceptical of the wonder-working abilities of outsiders, Foster does admit that the companies that brought them in were in need of a shake up, suffering from sluggish management and no clear direction.

BT propositions development manager Ian Smith believes the change was needed and has paid off. He says: "For too long the industry was content to stare at its own navel. These outside influences are positive and are changing how things are done."

Last Wednesday, Carillion chief executive John McDonough faced the City with his first set of results since he took over in January. Profit was down on last year but, more importantly, he went to the briefing armed with a plan to cut the construction business back. He announced that four hundred jobs were to go at a cost of £10m.

The plan is risky and expensive, and, as with the other outsiders who have announced similar schemes, his job will be at risk if it fails to raise profitability and investor returns.

McDonough, who came from US facilities management giant Johnson Controls, has already attempted to stamp his mark on the group. In May, he axed two main board directors to create a flatter command structure, a move that was widely welcomed by the City. But this latest plan is yet to convince the financiers or his competitors. "I'm not sure I'd be doing the same thing if I was in charge at Carillion," says the chief executive of another construction company.

Wimpey boss Johnson, formerly of materials group Rugby Cement, took even less time than McDonough to decide to make sweeping changes. Within two months he had announced a restructuring and 450 jobs were lost after Wimpey Homes and subsidiary McLean Homes were merged.

Overall, I believe the construction industry has not benefited from outsiders yet

Mike Foster, analyst with stockbroker Granville Baird

Again, his first move was largely welcomed, but then last month he stunned the City by paying £460m for Alfred McAlpine's housing business. The general consensus is that the deal is better for McAlpine than Wimpey.

WS Atkins' chief executive Robin Southwell joined the superconsultant in April from defence supplier BAe Systems. Southwell, who believes he got the job because the board wanted a fresh perspective, announced a restructuring that will cut 150 jobs. He is creating 15 operating divisions to target key markets such as rail, health and education.

Like the others, there is some concern that the moves will not pay off. "His plans seem to be raising more questions for Atkins than they are answering," says an analyst.

It seems that the City likes some change but not too much. Suffering more than most is Wilcon Homes, which took on Allan Leighton, the former boss of Wal-Mart Europe, as chairman at the start of the year.

His complete lack of experience in the sector did not stop him almost immediately announcing that Wilcon would reshape housebuilding by building more and more prefab houses. A new management IT system was introduced and Wilcon forked out £132.5m for Wainhomes. An enthusiastic start, but making the changes work will be harder.

Earlier this month, Wilcon announced that the IT system was on hold and 250 jobs would be shed to cut ballooning costs. The shares have fallen but Leighton says he will lead the recovery plan despite being the "new boy on the block".

These setbacks were probably met with discreet satisfaction and a quiet "told you so" in some quarters of the industry. Some industry veterans argue that you need 30 years on building sites before you have the knowledge needed to lead a construction firm. To be expected to turn a company around without years of construction experience is, they say, too much to ask.

Carillion and Wimpey have gone a step further and appointed their finance directors from outside the industry, meaning that people without an intimate knowledge of construction fill two of the three most important posts at the top.

Peel Hunt analyst Stephen Rawlinson says that in some respects, who is FD is more than important than who is chief executive. "I'm always a bit more nervous when an outsider becomes FD. Construction is complex and accounting for a construction company is unique," he says.

But Morgan Sindall chief executive John Morgan believes that a lack of experience in the sector is not necessarily a bad thing. It should not matter – as long as experienced and talented insiders surround the newcomer. "Nobody has asked them to build an office block. They've been brought in to grow businesses. It's about having a balance in the top team."

Morgan, who is seen as one of the most innovative businessmen in the industry, believes the influx of outsiders has had a positive effect. He points to the ideas, structures and management processes that construction can learn from other industries.