The reasons for breaking up longstanding company structures vary. Amec has gone global and has split into three geographical divisions in the UK, Europe and North America. At Carillion, chief executive John McDonough is switching the group's activities from contracting to support services, while WS Atkin's Robin Southwell is currently reorganising the company into divisions based on markets rather than functions.
From the boardroom, the process of restructuring appears rational and straightforward, but on the ground the reality is often slow and painful. Restructuring offers the opportunity to cut overheads, which means cutting jobs.
Redundancy will each cost Amec, Carillion and WS Atkins up to £10m, and altogether about 650 will lose their jobs – many from managerial positions. This inevitably leads to a fall in morale among those left behind, just when companies need a highly motivated workforce to push though the big changes.
UK construction firms are creating leaner, fitter company structures to cope with growth as much as any impending economic slowdown. Carillion, for example, made changes because its management structure was ill-equipped to deal with the 6000 new employees it had gained in recent years. And Amec is restructuring partly to prepare for the expected takeover of French electrical services firm Spie.
For German construction giant Hochtief, however, restructuring has been the difference between life and death. Last year, it lost £36m in its home market where over 5000 building firms are going bust every year. In response it halved its workforce and sought work overseas. The strategy has paid off – only 9% of the group's turnover is generated in Germany now compared to 50% two years ago.
Restructuring is a risky business. Shareholders are suspicious of change, and if the positive consequences of restructuring take too long to feed through to the bottom line the chief executive's position will be under threat. But far worse is not to change at all. It's better to prepare your company for the possibility of growth than to stay put and await your fate in a stagnating market.
