Build Back Better: Construction Post-Covid

2020 was a tough for everyone. The construction sector is no exception having experienced a fall in output of c. 36% in Q2 when Covid hit and the UK was ‘locked down’ for the first time. However, the sector is made of tough stuff and, having experienced previous downturns, was able to adapt quickly and reopen sites faster than might have been anticipated, resulting in output growing by a record-beating 41% in Q3. This increase was driven by growth across all construction sectors, except for new public housing and work. Interestingly work in infrastructure recovered rapidly (surpassing pre-Covid levels) which, our clients tell us, was due to larger civil engineering sites being more easily adapted to social distancing measures than smaller sites.

Despite the positive news of increased output in the second half of 2020, with the implementation of another lockdown in early 2021, Covid will present significant challenges in the year ahead. Client insight suggests the construction sector will eventually see a slow and steady recovery over the next two years, returning to pre-Covid activity levels in 2022.

With the rollout of the vaccine alongside the Government’s commitment to ‘Building Back Better’ through further investment in infrastructure, we expect civil engineering projects disrupted by lockdown to recover in 2021. In addition, major projects like the Thames Tideway Tunnel and HS2 are expected to boost Great Britain’s civil engineering output over the coming years.

However, whilst things are looking brighter for the industry, there are still some challenges to overcome particularly around post-Brexit supply chains. If we do experience material shortages this may lead to an increase in costs resulting in a slow-down in future projects.

To protect themselves against these and any future challenges, we are starting to see a trend towards increased investment in improving the resilience of supply chains and digital & design solutions to help reduce time spent on site at both the pre-construction and construction stage of projects. This will help reduce the reliance of on-site labour, address the impact of any ongoing Covid restrictions, and tackle the challenges of hiring skilled workers.

At Norman Broadbent, we are currently helping our clients across the sector find solutions to these challenges in the following ways:

  • Future proof the business: we achieve this by deploying our Leadership Consulting Practice. They help clients understand the capability of their teams through the creation of success profiles (what good looks like), the assessment of individuals against these, and the creation of individual development plans to help raise the calibre of individuals, teams and the business as a whole.
  • Gaps in capability: we achieve this by deploying our Research & Insight Practice. They help clients understand the talent landscape giving them the evidence they need to make informed people decisions as well as to build evidence-based business cases to win budget allocation for growth.
  • Change and transformation: Our Interim Management Practice provides clients with experienced high-impact Interims and Independent Consultants to help build and deliver change strategies.
  • Strategy development: we achieve this by deploying our Research & Insight Practice. They help clients understand how other companies are structured and how they have achieved success. This Busines Intelligence is then used to support and evidence the creation of business strategies to tackle the challenges ahead.

If you would like to confidentially discuss how Norman Broadbent Group could help you overcome your business or people challenges, please contact Nick Behan on +44 (0) 0207 484 0106 or via nick.behan@normanbroadbent.com

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Building a Brighter Future

Since the Covid-19 outbreak and subsequent lockdown, the construction and engineering sectors have faced significant challenges. However, with lockdown easing and construction sites reopening, things are starting to get back to ‘normal’. It is apparent however that business as usual is not going to happen overnight. March 2020 figures showed the highest monthly drop in construction of buildings (-11.8%) and civil engineering (-13.7%) ever recorded in Europe. The road ahead is likely to be long and hard.

When talking to our clients and wider network in the sector, there are some common themes and key questions being asked. These include:

  • Our projects are still being cancelled or delayed.
  • Our supply chain is looking unreliable.
  • Do we have the right team in place to maximise the opportunity the ‘new norm’ will bring?
  • Our financial reserves are being stretched to the limit.

Considering this, I would like to share some examples of how we are helping our clients find solutions to these challenges, and answers to these questions.

Delays in project completions

With some surveys showing that construction sites have seen productivity drop by c.35%. This has resulted in a significant number of delays, in some instances of up to 8 months. Considering this, we are helping clients engage with highly experienced Interim Major Project Directors, Project Directors, and Construction Directors on a 6-18-month basis to help reduce these delays and get projects back on track.

Unreliable supply chains

With Covid-19 exposing the vulnerability of global supply chains, we have been helping clients strengthen their supply chain by using interim managers and independent consultants. Our experienced Interim Executives and Independent Consultant are helping clients assess risks to construction projects and their wider business. As not all suppliers will survive Covid-19 or be able to fulfil their commitments, our Interims can help clients build robust de-risked strategies providing continuity of supply moving forward. If asked, they can also help implement the strategy too.

Leadership and Workforce Challenges

This is one of the most talked about subjects. Most clients are looking to (or have already started to) assess the capability of their current leadership teams and their direct reports to ensure they have the best people in place to meet the challenges of the ‘new norm’. By deploying our in-house Leadership Consulting team, we can help clients better understand ‘what good looks like’, build a fuller understanding of current leadership capabilities against the current and future context thus identifying skills gaps, and implement processes/solutions to deliver effective Executive Team performance in the future. This approach includes the use of Leadership Assessment, the creation and delivery of both individual and team Development Plans and, where required, External Benchmarking.

Financial Stress

With a significant number of businesses in the sector suffering, and UK construction output expected to fall at best by 25% this year, the impact on cash flow and increased costs incurred due to project delays will create significant challenges. Against this backdrop, many of our clients are utilising experienced Interim Managers/Executives to undertake change and transformation projects. These have included projects focussing on reviewing back-office finance operations, automating processes through technology, and bolstering bench strength across areas such as business partnering and data analytics. Were this not enough, with the Brexit deadline looming, we are also seeing an increase in demand for Interim Managers in areas such as corporate tax and treasury …

If you would like to confidentially discuss how Norman Broadbent Group could help you overcome your business or people challenges, please contact Nick Behan on +44 (0) 0207 484 0106 or via nick.behan@normanbroadbent.com

 

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Getting Britain Building …

With projects worth £600bn in the pipeline, the Government announces a decade of building

A massive £600 billion investment for UK roads, hospitals, and schools was announced this week. The government’s National Infrastructure and Construction Pipeline Plan has revealed the vast scale of planned and current public and private investment, alongside proposals harnessing modern technologies to build infrastructure in a more effective, productive, and efficient way. Such an initiative will help create a high-quality infrastructure, which should boost global competitiveness, improve productivity, and enhance industry standards.

To ensure maximum efficiency, Ministers are encouraging greater use of more modern approaches in construction. This includes the manufacturing of components in factories using the latest digital technology before being sent for assembly on construction sites. The government has also committed to increasing the use of these methods in public-funded projects.

Despite significant contributions to the UK economy, the construction sector’s productivity is weak compared to other sectors, such as manufacturing. Applying modern manufacturing approaches to building projects can boost productivity and reduce waste by as much as 90 percent. For example, a project that typically takes a year to build could be completed in just over four months. With off-site manufacturing already being successfully used on a number of infrastructure projects, the government’s backing of the digital initiative is a timely and very welcome one.

We have already seen a number of clients review the type of Talent needed to lead and implement such change. With the support of our Research & Insight Practice, Norman Broadbent Solutions have developed a proven process to ‘de-risk’ hiring into these newly created roles via in-depth pre-search due diligence which takes place before commissioning recruitment activity. With a strong track record successfully supporting clients across their Change/Transformation programmes, we have worked across high impact functions such as Operations, Procurement, Commercial, Supply Chain, and Technology.

If you would like to hear more about our work, or discuss how we may help you, please do not hesitate to contact Tony Robinson of Norman Broadbent Solutions for an initial, confidential discussion at tony.robinson@normanbroadbentsolutions.com

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Construction + Digital = Innovation Shortfall?  

Having developed expertise across the Construction sector and Digital function, our experience tells us that the Construction industry is not only short on innovation, but also lacks the ability to challenge and change this.

From a digital perspective, the Construction industry seems to be falling way short of other similar industrialised sectors, such as Oil & Gas, Utilities, and Basic Goods manufacturing. These seem to be ‘holding their own’ against the heavily digitised sectors of ICT, Media, and Professional services. As most Construction firms are low margin businesses, and with many facing numerous challenges, even the largest firms are unable to innovate within the sector. Project planning, for example, remains uncoordinated between the office and the field, and a lack of innovation and ability to change sees many firms still running paper-based systems to manage processes and deliverables.

Is the technology in place to change this?

Innovative technology being used in the Manufacturing and Construction sectors is nothing new. Robotics, sensors, data analytics, and BIMs have already been implemented in process design. There has been small scale, almost ‘proof of concept’ projects implemented. IBM has been experimenting with wearable technology such as bio-sensing, GPS, Environment sensors, and accelerometers to transform Health and Safety within Construction. They have also been working with the Internet of Things (IOT) to make a cognitive and connected industrial machinery ecosystem. This allows for remote performance monitoring, predictive analytics on productivity, and cognitive assisted repair, resulting in improved safety, reduced maintenance costs, reliable availability and increased productivity.

However, it is apparent that in the Construction sector, there has not been the large-scale adoption necessary to fully manifest these changes. Even when there is a defined problem, it is difficult to make a business case. For example, despite the immense amount of data that is created by a complex build programme, there is very little adoption of a real-time data analytic backed dash-boarding technology. Conversely, this practice is relatively wide spread in other sectors like banking, insurance, risk, and technology.

We’ve seen that the innovation is possible and witnessed the fruits of its labour. Yet implementation remains an issue. If there is not a technology gap, is there something else missing?

Lack of Research & Development?

Norman Broadbent Solutions recently carried out research around this question. During conversations with respondents, we regularly heard about the lack of R&D within the Construction industry. The McKinsey Global Institute reported that R&D spending is 1% of revenue in Construction, compared with 3.5% and 4.5% in Auto and Aerospace respectively. The report went on to say that the world will need to spend $57 trillion on Construction to keep up with projected global GDP growth. This not only shows a clear lack of investment, but also a vast potential market for R&D.

When asked why there had been little investment in innovative technology, respondents cited historically low profit margins. Putting this into context, profit margins among the UK’s biggest contractors more than halved in 2015, with the average operating margin across the top 25 firms down to 1.2%.  EY predicted margins among the top tier firms would exceed around 5% by 2020 as companies diversified their portfolio of businesses. With a low margin environment expected for the next few years, firms need to work out how they can innovate under these circumstances.

We have seen several technology firms invest in R&D for the consulting sector (although this is in its infancy). It should be expected that with an advisory firm’s wide client base, proof of concept designs can be built, tested and refined faster than in an end user. However, if this is contrasted against other sectors (technology, retail etc.), Construction is lacking behind even advisory firms.

Respondents to our research argued that there is an innate risk aversion across the industry when it comes to implementing innovation in capital projects.  With the projects becoming larger in scale and more complex, firms have been unwilling to add another variable/risk by moving away from traditionally accepted technology. With new contracts wrapped up with increasingly stringent risk management clauses, it is argued that this is one of the factors holding back innovation. With a lack of risk sharing, more complex projects, and an air of caution, a culture of ‘tired, but tried and tested’ is prevalent.

Does innovation have a reputational issue?

Another factor respondents to our research cited was a reputational problem innovation has in the Construction industry. The memory of historic, failed innovations still lives on in some quarters, which in turn, have slowed the adoption of new technologies.  To add to this credibility problem, digital technology is not perceived to be ‘foreman friendly’. This goes some way to explain the lack of adoption.

What does the right person look like?

As the Construction industry waits for its moment of distribution, getting the human aspect right is crucial for businesses seeking to exploit this time of huge opportunity. Companies who attract and retain digitally minded talent, who in turn, can adapt, implement change and innovation, will have the advantage in a digitized world.

As available technology has not been adopted, R&D has been restricted, cross collaboration has been difficult, and innovation has a reputational problem. If we are able to adapt the profile of the individuals within the industry, we can go a long way to fixing these problems.

To adapt to new innovative digital technologies, a change in business climate must take place first. This can only occur through finding the right management team that can lead this significant and impactful change from within. For firms to change and adapt, leadership teams need to adapt and pave the way for long-lasting and sustainable change.

About the Author

Tony Robinson is a Director of Norman Broadbent Solutions and specialises in advising clients on a wide range of topics including Talent Acquisition, Leadership Assessment, Insight, and Succession Planning. He principally works with clients in the Construction, Project Management and Infrastructure space.

Contact Details:
tony.robinson@normanbroadbentsolutions.com
DDI: +44 (0) 20 7355 6930
Switch: +44 (0) 20 7484 0000

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