All aboard the merry-go-round

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Wates, Mowlem, Costain, Lend Lease … The management whirligig has been picking up speed over the past few months, as construction companies across the land undergo corporate restructuring – or just nab each other’s top staff.

it is a truth universally acknowledged that a talented senior manager in a successful company must be in need of tougher challenges, fresh responsibilities – and a fatter pay packet. And although this is true of any industry you care to name, it has special implications for construction. Not to put too fine a point on it, firms in this sector have long struggled get hold of top-class executives, either by nurturing their own talent or by recruiting it from others. The result is that the limited number of outstanding performers tend to get pulled into a management merry-go-round – as soon as one is poached, the next is sucked into the resulting vacancy.

All change...

This merry-go-round revolves faster or slower depending on the economic weather and the extent to which firms are regrouping. At the moment, it is being propelled by retirements and a burst of corporate restructuring. Simon Vivian, the former chief executive of Hanson Building Materials Europe has replaced John Gains at Mowlem, and Andrew Wyllie has been poached from Taylor Woodrow to become chief executive of Costain. Paul Drechsler, the chief executive of Wates, was a rare exception to the merry-go-round principle: he used to be executive director at ICI.

Elsewhere, the drama looks set to intensify. In the past two weeks, Adrian Chamberlain, chief executive of Australian developer Lend Lease’s E E European, Middle Eastern and African (EMEA) operations, has resigned from the company, and Steve Bowcott was sacked as Amec’s construction managing director in acrimonious circumstances.

The fashion for restructuring has two main causes. The first is that contractors have made mistakes. According to Drechsler, “people were taking on too much risk and some of the shake-ups of late have happened because companies misjudged that risk”. This can certainly be said of Jarvis, and also of Mowlem and Gleeson – which is in the process of selling its building division to the management team after the company made a £16.6m loss for the second half of last year.

Other companies, such as Lend Lease and Wates, have reorganised after strategic reviews that were part of the normal business cycle. This is a case of preparing for more difficult times in the cycle, or the need to take evasive action against corporate predators. Although Hanson has been on the acquisition trail in recent months, rises in its share price can be partly explained by City speculation that it is a takeover target – it is the last UK heavy building materials firm to have escaped capture by a foreign company.

“There is a lot of bidding activity going on generally in the industry,” says Howard Seymour, analyst at Bridgewell Securities. “If you’ve got to keep looking over your shoulder all the time, it is going to keep you focused and you are going to want to make sure you are running a tight ship.”

People took on too much risk and some of the shake-ups were because companies misjudged that risk

Changes in government policy, as well as a more demanding client base in the public and private sectors, are also driving change. In the same way that Ikea has been forced to develop social housing in return for permission to build stores, so construction has tried to organise itself to take on mixed-use developments. And changes at Lend Lease have been in part a response to changes in client demands: this was an underlying factor in its purchase of regeneration specialist Crosby from Berkeley Group last month.

“Clients are looking for more comprehensive and detailed solutions now,” says John Stokoe, director of corporate affairs at Lend Lease EMEA. In that respect, government policy, which now includes the 2012 Olympics, is shaping industry change. The industry is also preparing itself for the future by diversifying into the support services sector. “It is a fundamental, long-term transition, but maybe it is now accelerating,” says Seymour.

Company restructuring can, of course, create opportunities for a new generation of leaders.

But this returns us to the problem of there being so few of those entering the industry in the first place. Although it often makes sense for the industry to appoint experienced men to lead the top companies, a fresh approach to the same old problems may be a good thing. “Getting in a fresh pair of eyes can be a benefit,” says Seymour, “but there is less risk with home-grown leaders.”

And so the merry-go-round continues …

All change …

Andrew Wyllie
Wyllie had spent his entire career with Taylor Woodrow, and had risen to become managing director of its construction business. In April he accepted the role of chief executive of Costain, where he is expected to carry on the work of Stuart Doughty, who returned the company to profit. Tim Peach has replaced Wyllie as managing director of Taylor Woodrow Construction.

Simon Vivian
Vivian took over from Sir John Gains as chief executive of Mowlem six months ago, after leaving the position of chief executive at Hanson Building Materials Europe. In 2005, Mowlem reported its first pre-tax loss in a decade. Vivian’s arrival was applauded by the City, and he has already restructured the business by dividing construction services into Mowlem Building, Mowlem Infrastructure and Mowlem Engineering. He has also created the role of director of group risk.

Andrew Lezala
In April, Lezala left Jarvis and all its troubles behind as he quit as chief operating officer and became chief executive of the London Underground maintenance company Metronet. He landed the Metronet job after its five shareholders asked his predecessor John Weight, who was chairman and chief executive, to resign for being too slow to implement change. Lezala now has his work cut out, as Metronet is facing costs for missed deadlines …

Adrian Chamberlain
Chamberlain joined Lend Lease as chief executive of its Europe, Middle East and Africa business two years ago. He had come from Cable & Wireless, appointed by his former C&W colleague Greg Clarke, now Lend Lease chief executive. Two weeks ago he resigned from Lend Lease after it was restructured into a global business divided by sector. Chamberlain has parted on good terms, and will stay on until September. He wants to remain within the construction industry.

Steve Bowcott
Bowcott was sensationally sacked as Amec’s construction managing director two weeks ago, for allegedly covering up a relationship with a woman, now his wife, to whom he had granted about £250,000 of public relations contracts. He was poached by Amec from Mowlem three years ago and is now rumoured to be in line for the chief executive post at regional contractor Osbourne (although Osbourne says nobody has been appointed).

Lend Lease: Going global

Lend Lease, the Australian developer and parent of Bovis Lend Lease, has abandoned its regional structure in favour of a global approach. Nine months ago the board, led by Greg Clarke, the group chief executive, embarked on a strategic review to decide how best to respond to the changing market.

The conclusion was that Lend Lease’s structure should be sectoral rather than geographic. So, instead of being divided between America, the Asia Pacific region and the rest of the world, it should be divided into retail and communities, construction and PFI – that is, Bovis – and investment management.

The main reason for adopting the global sectoral model was to give the board a better overview of group activity. John Stokoe, director of corporate affairs at Lend Lease EMEA, says: “What the board didn’t have was a global view of risk or a pipeline of investments. Now we have got a global business in place to share knowledge and capability. It gives greater transparency to the board.”

As a result of the changes, Adrian Chamberlain, the chief executive of the EMEA side of the business, resigned. Despite the fact that he was offered the role of chief executive at Bovis Lend Lease, Chamberlain decided it was time to move on because he was not willing to take on a role that required as much international travel as head of Bovis inevitably would and because he was “very committed to the regional model”. He says: “I didn’t agree with the global model and I was therefore unable to take on the role of global head of construction. I’ve got four young kids and so from a personal point of view I said no.”

He adds that the restructure is part of an industry trend: “There is a lot of looking at existing models relative to where the market is going. What we are experiencing is a challenge to the traditional developer–builder split. It is about taking existing models and combining them better.”

Chamberlain has agreed to stay on at Lend Lease until September, and has yet to take on another role.

Wates: A fresh pair of eyes

When Paul Drechsler became chief executive at Wates in September 2004 it was something of a step into the unknown for the 110-year-old family construction business. Drechsler joined from chemicals company ICI – a rare example of a construction firm trusting outside managers to operate in its highly idiosyncratic industry.

Although it is usual for finance directors to come in from other industries – for example, Paul Mainwaring joined Mowlem from logistics company TDG two months ago – it is rarely the case for chief executives.

Alastair Stewart, an analyst at Dresdner Kleinwort Wasserstein, comments: “There has not been much evidence of outsiders coming in. Generally you only have an outsider if a company is in a bit of a state, to get a fresh pair of eyes in.”

Wates, it must be said, was in a healthy financial state when Drechsler inherited it, but the outsider theory still applies. Since Drechsler’s appointment, Wates has moved away from the traditional public and private sector divide and instead created four sector business streams in construction, affordable housing, retail and interiors. At the same time, he added four board members to the management team, thereby stripping out a layer of middle management that he considered unnecessary. The changes were put in place and explained last week in a series of roadshows across the UK.

One of the difference that the fresh pair of eyes spotted is the amount of work that is done before a job starts. “In the chemical industry, you did not start unprepared,” he says. In construction, by contrast, work can start on site before the design has been finalised. He also believes that there should be more long-term analysis of the industry over a period of 10 years – something that was lacking when he joined Wates. Drechsler also has proposals for improving safety records, including the compiling of a league table of the performance of all Wates’ project managers.