Slimming down a giant

In broad terms there are two motivations for a corporate restructure. The first is reactive, usually designed to deal with a shortfall in revenue through cutting overheads. The second is proactive - a firm re-organising itself around delivering a vision of its future self in three to five years.

This week, Balfour Beatty’s Mike Peasland, detailing for the first time the outcome of the root and branch review he’s been undertaking of the construction behemoth’s UK building business, is keen to assure us his restructure falls under the latter category.

In truth, it’s a bit of both. This week’s announcement - examined in detail here and here - has been 12 months in the making. And for those staff affected this process is far from finished - all the redundancies won’t be finalised until the middle of next year, while the roll-out of new centralised processes and IT may take even longer.

The vision of the future that the organisation is setting out is one of fewer business units, fewer offices, and more integrated teams, which are organised around regions and customer markets, rather than technical competencies such as building or civil engineering work. As when Morgan Sindall merged its construction and infrastructure businesses two years ago, in part this is a realisation that the firm’s biggest and most lucrative customers, such as BAA, need a combination of all the skill sets Balfour Beatty can offer, delivered seamlessly.

Balfour Beatty’s vision is one of fewer business units, fewer offices, and more integrated teams

Peasland says the business needs to be agile to succeed in a more competitive UK market in future, and it’s hard to disagree. Meanwhile for group chief executive Ian Tyler, this is about sending a message to the city that he can maintain profit margins at a time when revenue growth is scarce.

But, however long in the making, part of this week’s announcement is also reactive. According to analyst house Cenkos, revenue at this part of Balfour Beatty will have dropped from nearly £4bn a year at the height of the boom to £3bn by 2014 - a huge shift which has to be reflected in staff numbers. So Balfour is cutting the number of business units, reducing the confusing plethora of legacy brands, cutting regional offices, and centralising back-office functions like HR and IT.

This will be sad for staff brought into the company with the acquisition of well-known industry names such as Dean & Dyball and Cowlin, but overall it’s hard to avoid the feeling that Balfour is getting to this a little late. Much of this looks just like the kind of corporate housekeeping that a giant like Balfour Beatty, after engaging in a spending spree in the 2000s, should have been doing with its acquisitions as it went along.

Occasionally the firm, due to its unrivalled size, can feel institutional; certainly the length of time Balfour Beatty has taken to get to this stage of its restructure, with all the attendant uncertainty for its 12,000 staff, hasn’t helped it portray an image of agility and fleetness of foot.

Either way, many of the most difficult decisions have been taken and the time to implement the changes has arrived. As the UK’s largest and most successful construction company, there is nothing in its past history to suggest it will fail to do it.

Joey Gardiner, assistant editor