Ray O'Rourke informs staff by email of need for 'tight rein on controllable costs' and start of consultation process

Laing O’Rourke is set to make a “significant” number of redundancies at its UK and European business as the effects of the downturn take hold at the country’s largest private contractor.

In an internal email sent to staff today, seen by Building (see full email below), chairman and chief executive Ray O’Rourke told his 11,756 staff that the job cuts would ensure the company has “a tight rein on controllable costs to compete effectively in winning work.”

News of the planned redundancies comes in the same week that speculation mounted over the future of Tony Douglas, the former Heathrow airport boss brought in as chief operating officer in July 2007.

Despite being widely tipped to succeed Ray O’Rourke in the top job, there have been widespread reports he was poised to leave after becoming frustrated at not being given more responsibility.

The company refused to comment on the suggestions and Douglas was still on active company duty this week, being sighted at the Conservative Party conference in Manchester.

Senior industry figures have said that he may be moved sideways as part of a wider restructure of the company’s operations. One source familiar with the situation said this week: “Whatever way you look at it, Douglas has lost his power base.”

The email from Ray O’Rourke said the company would begin a consultation process in the next few weeks to decide where the cuts would come.

He said: “We propose that a large proportion of the roles falling away will be within the support functions and management layers across our business units, the corporate centre and as a result of projects coming to a natural end.”

Ray O'Rourke's email to staff sent out today

Dear Colleague,

Over the next few weeks, we will be consulting with employees across Laing O’Rourke’s European Hub on a proposal to re-organise specific areas of our business in line with our ‘Find, Win, Deliver’ business priorities. It is likely that this proposed reorganisation will result in a significant reduction in the number of roles required across the business.

Through a combination of re-deployment, the removal of vacant positions and the use of fewer temporary and agency staff we will, to the greatest extent possible, minimise the number of people who will leave the Group as a consequence.

Today’s announcement has been prompted by the fact that the construction sector lags the global economic cycle in coming out of recession – the industry’s most challenging period is still ahead and all companies will have to respond accordingly. Therefore, it is now more pressing than ever that we bring forward the proposed transformation of the European Hub, to establish a more sustainable cost base while fully realising the benefits of our vertically-integrated delivery model, as we broaden our client offering across the value chain.

These proposals are a critical step in future-proofing our business, as contract pricing has become the most influential factor in many clients’ decision-making process - we need to ensure we have a tight rein on controllable costs to compete effectively in winning work.

We will review and consolidate activities within our European functional and technical support activities. As a consequence, we propose that a large proportion of the roles falling away will be within the support functions and management layers across our business units, the corporate centre and as a result of projects coming to a natural end.

With your help, the suggested changes will create a more efficient and effective organisational structure with the appropriate levels of professional resource necessary to achieve our current and medium-term business priorities. This will also deliver a substantial reduction in our annual operating costs, improving our competitiveness and business performance.

The other two hubs that comprise the Laing O’Rourke Group- Middle East and South Asia (MESA) and Australasia – are unaffected by today’s announcement. MESA has already re-organised its operations to safeguard the business from the impacts of the downturn in the region.

I know that this announcement will raise many questions and create uncertainty. You have my assurance that we will be fair, consistent and transparent throughout this period, communicating the suggested changes in an open and timely manner. You will hear further details on how the proposals affect your business in the coming days.

If you have any immediate concerns you should talk to your team leader or HR partner in the first instance. Useful information, including frequently-asked questions and answers plus HR policies relating to the re-organisation and the consultation process, is also available on iGATE.

We must constantly challenge ourselves to be more efficient in everything we do to improve service delivery while reducing our cost to serve. By anticipating the tougher trading conditions over the next 12 months and taking decisive action now, I believe we will create a resilient set of businesses better equipped to ride out the current storm and emerge in a stronger position.

Ray O’Rourke

Chairman and Chief Executive

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