The absence of emerging figureheads is one of the critical concerns facing the construction industry as it starts the 21st century. Where are tomorrow’s Frank Lampls, Neville Simms or Martin Laings?
One contractor says he is not the only one worried that finding the next generation of people who will make an impact in the industry will be a “real problem”. He says: “There are lots of guys out there who are very good at running a project, but I see few coming through who have genuine vision. It is easy enough to predict where the business is going for the next 10 months, but not many can judge where it should be going over the next 10 years.”
One management consultant who works closely with the UK construction industry thinks it is 20 years behind other sectors in locating and training its next set of leaders. He says: “Manufacturers that have woken up and invested in their leaders of tomorrow have survived, but the rest have disappeared.”
The issue is a worry for the City, too; the retirement of a successful chief executive can send a share price plummeting if an equal or better successor is not in place. Mike Betts of analyst JP Morgan says he can think of at least six contractors that have no obvious successor for their current chief executives. “You don’t see many dynamic people in their 40s coming through,” he says.
“It looks like, once again, contractors are trailing behind materials suppliers. You don’t see the likes of the chief executive of Blue Circle, 44-year-old Richard Haythornthwaite, emerging in contracting,” Betts says.
So, how has this worrying situation come about? Mike Roberts, technical director of BAA, thinks the cyclical nature of contracting has contributed greatly to its short-termism. “The traditional rollercoaster by which the client commissions work one year and doesn’t the next does not encourage contractors to look at long-term succession strategies.”
Manufacturers that invested in their leaders have survived. The rest disappeared
This should be less of a issue in the current sunny economic climate, but overheads are being squeezed tighter than ever in contracting. Businesses are still not being encouraged to invest money in expensive training for their top talent.
Another critical factor is the strong family roots of many contracting firms. Institute of Management research shows that only 15% of family companies survive into their third generation. Construction has seen numerous cases in the industry of the oppressive father figure overshadowing his offspring. The sons of Peter Birse and Peter Costain both chose different career paths to the succession plans they were expected to accept.
And even those family firms that have looked outside their kin for leaders have been unwilling to completely let go. When Sir Fraser Morrison ousted his managing director Keith Howell in January to resume his role as chief executive of Morrison Construction, analysts said it was because of “increasing frustration” that the firm was not going in the direction he wanted.
Bill Tallis, director of the Major Contractors Group, says another reason is that regional directors are often extremely busy. He says: “Construction is like many other sectors in that, immediately below the top jobs, you have people in very busy operational roles that do not allow them space and time to learn about strategy or guiding the company’s decisions.” It’s no surprise, then, that they feel out of their depth when they are suddenly thrown into the cauldron of the boardroom.
JP Morgan’s Betts agrees: “People have struggled to move from the detailed expertise needed on site to become regional and then national managers because they don’t get the financial training.”
Mobility is another issue. With very few top managers coming from outside the industry, fresh ideas are scarce. But simply parachuting in greenhorn managers into construction’s top levels is not necessarily the answer. Taylor Woodrow’s appointment of former BP and Marley director John Castle as chief executive was a six-month affair that ended acrimoniously.
Most construction firms prepare you for leadership by sending you for a day running around a moor
Ian Sprigings, Connaugh
Betts says: “Tomorrow’s managers need hands-on construction experience, as well as financial and leadership skills.”
Two construction firms that are making moves to meet these needs are privately owned Mansell and Alternative Investment Market-listed Connaught. Mansell has sent its 51-year-old chief operating officer Philip Cleaver to Harvard University for a £35 000, 10-week course in advanced management. And 41-year-old Ian Sprigings, commercial director of Connaught Property Services, is currently studying for a postgraduate diploma in leadership studies at the Business School of Exeter University.
The school has taken managers from all sectors of industry since the course began in 1993, but, tellingly, Sprigings is the first with a construction background.
“Most construction firms think it is enough to prepare you for leadership by sending you off for a day running around a moor and crossing raging rivers with a ball of string and two pieces of wood,” he says. To get the best entrepreneurs, firms will have to attract top graduates, as well as training existing staff. Miller Construction chief executive Keith Miller says he has little problem attracting highly skilled graduates because of a targeted recruitment programme.
But he is one of only a few bosses who can say that. Jennie Price, chief executive of the Construction Confederation, says it is a real concern that many civil engineering graduates are being tempted to work for large accounting firms after they leave university.
In the USA, big construction firms make big efforts to lure the best graduates with design skills and intellectual nous. In the UK, such students tend to end up within architectural practices.
The question is, what will be the next major move? Who is going to lead it?
Mike Betts, JP Morgan
But perhaps things are not as bad as they seem. The MCG’s Tallis believes that the best people will continue to come through because, in any industry, there tend to be a few people who go on to make an impact on the whole sector. “Do I think the industry will throw up leaders? Yes, I think it will.”
Indeed, one City analyst thinks that “the better contractors” are now much better at grooming their successors. He also believes that the new breed will be less entertaining than their forefathers but far more successful at creating profit. “The cigar-toting field marshals of old managed to destroy billions of pounds of shareholder value with their misguided empire building that led to massive write-offs during the mid-1990s.
“Cocktail parties are going to be less fun, but at least the new bosses will have more managerial ability,” says the analyst.
However, the personable, high-profile players pictured on page 19 have all made an impact on the industry precisely because of their massive personalities. And while their successors will need different skills, they will need the same ability to put into place the kind of new ideas that Sir Frank Lampl did with construction management and Paris Moayedi with rail maintenance.
“The next lot of leaders will need to be less macho and more polished financially than the current crop,” says one analyst. “At the moment, their successors are neither.”
JP Morgan’s Betts thinks there is a gaping hole for a new movement in construction: “A lot of the leaders in their 50s are all trying to get out of construction as quickly as possible and are piling into rail and FM. It’s the classic herd instinct this industry has always suffered.
“And it is really escaping from one problem (low margins) into another. In all these areas, facilities management, rail and even partnering, the margins are coming down.
“But the question is, what will be the next major move? Who is going to lead it? And how will they make it sustainable?”