Balfour Beatty rolls out Build to Last transformation plan

After a tumultuous couple of years, peppered with various profits warnings, Balfour Beatty is now working to turn itself around to bring itself up to “industry-standard performance levels”.

Under the code name Build to Last, the programme aims to promote continual improvement across all businesses.

While a couple of the key elements – rationalising the supply chain; a staff ideas scheme – sound like squeezing suppliers and putting a suggestion box in every office, a spokesman explained that it was rather more sophisticated than that.

In a statement, the company said:

“In its initial phase, Build to Last will target bringing each business unit to industry-standard performance levels by focusing on four key areas:

• Lean – Deliver rapid performance improvement by strengthening financial controls and transparency and simplifying the organisation with detailed indirect cost reduction plans, plus the launch of the My Contribution productivity initiative (metric: operating profit and operating cash generation)
• Expert – Ensure the attraction, retention and development of key employees and sub-contractors by investing in training and talent to enhance engineering, project management and delivery capability (metric: engagement survey)
• Trusted – Strengthen the successful execution of projects and services through disciplined stage-gated bidding, contracting and risk review processes (metric: customer satisfaction)
• Safe – Prioritise safety at all levels and for all employees, sub-contractors, customers and communities (metric: zero harm).”

It added that certain steps have already been taken, including (quoting directly from the company's statement):

• Creation of the Build to Last programme office with UK and US workstreams and a benefits tracking system
• Following strengthening of the board, new appointments to the senior leadership team in targeted areas, including IT, commercial and project execution,  and business process re-engineering
• Alignment of all leadership incentives to key programme goals
• Consolidation to leverage key UK functions to remove duplication and improve efficiency, resulting in significant reduction of layers and cost (subject to consultation) in areas not related to front line delivery
• Rollout of a cash generation drive through planning and training to project level in the UK and the US
• Detailed procurement initiatives commencing with key suppliers and areas of direct and indirect spend, with the potential to deliver meaningful and growing savings over time
• Streamlining the group property portfolio to reduce costs.

Not being fluent in management jargon, The Construction Index asked what it all meant. A spokesman said that more details would be provided at the group’s preliminary results on 25th March but that the My Contribution productivity initiative was an ideas scheme that will give those staff members who come up with good ideas the resources to see them implemented. The benefits that accrue will be tracked he said. The spokesman explained that it this and other elements of Build to Last have been run successfully by chief executive Leo Quinn at other companies previously. He joined Balfour Beatty at the beginning of January with a specific brief to rescue shareholder value and save the business.

The spokesman denied that the procurement initiative was simply about squeezing subcontractors and suppliers to drive down prices.  Rather, it was a group-wide programme to rationalise the supply chain.

Commenting on the launch of Build to Last, Leo Quinn said:  “The group’s recent trading makes it imperative to gain early momentum in our transformation plans. Whilst further challenges remain, there are clear opportunities to achieve improvements in cash generation and profitability in the near term.

“Balfour Beatty has great strengths across its portfolio – not least in its Investments division, where recent transactions underline the ongoing ability of this business to create value.  I continue to believe all our operations should achieve industry-standard performance against what appears to be a beneficial market environment.

“Longer term, we will shape a group with leadership in key markets, driving best-in-class performance from a platform of strong capability, leaner processes and robust execution.”

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