Is the UK pricing itself out of the global construction market?

Just over 140 years ago in 1872, the Marie Celeste set sail from New York with a crew that was never to be seen or heard of again. It was in that same year that Yellowstone became the world’s first National park and it was also the same year that Louis Bleriot was born - the pioneer of the modern aviation industry.

However, believe it or not, it was also in that year that the Swiss Government set in place the first climate initiative by implementing the protection of migratory birds. This initiative was the first of many such agreements and initiatives put in place over the next 125 years which gradually changed from the protection of birds and fishes to the protection of the earth and culminated in the Kyoto Protocol in 1997. Has the implementation of these initiatives and awareness made any difference?

Despite steps taken to minimise the impact of man on the environment, in 1997, 125 years after that first initiative, the effects of the environment caused worldwide damage.

• Texas was hit by more ferocious tornados than it had ever seen.
• Great areas of Poland were flooded in areas never seen before.
• The continuing burning and de-forestation was seen as the contributory cause of the crashing of Flight 152 in Indonesia.

It is clear that back in 1872, we had no concept of the rate of increase in the world’s population. At present we are increasing the world’s population at about 1 billion every 12-15 years and it is estimated that the population will only begin to slow down in about 40 years’ time. At that point, the population will be more than 10 times that of what it was when that first initiative was put in place.

If not of greater significance, it is the enormous growth of the economy of the world. Not only has the population of the world ballooned beyond all expectations, a higher proportion of that  population uses more and more earth resources and produces more and more waste whether it is gas, inert or other forms of pollution.

And the question arises, at what point does the planet reach saturation point and the whole system close down?

The SternReview amongst others, presents a formidable argument for undertaking action now to not only minimise our emissions but to reduce them in order to slow the environmental clock down.

Introduction of financial incentives and penalties are suggested with the aim to effectively force polluters to take stock as corporate and social responsibility does not seem to have the desired effect. With regard to our own industry and current construction methods and building regulations, studies have shown that in the UK;

• Nearly 50% of carbon dioxide emissions are building related
• Over a quarter of CO2 emissions come from housing
• Approximately 10% of CO2 emissions are associated with the manufacturer and transport of construction materials and the construction process.

So what, in the construction industry, can we do?

In the great scheme of things – probably, not a lot. Yes we can provide better insulated buildings, more efficient heaters and adopt lean construction techniques but at what cost?

The UK forms less than 2% of the world’s CO2 polluters – are we expected to lead by example and possibly price ourselves out of the construction market or do we try and save the world?

Scale Fees & the Rise Of Computers

Was the abolition of the ACE ‘Scale Fees’ the catalyst for the use of modern design technology for Structural Engineers?

In comparison with the origins of the profession, it would appear that the least experienced, and often unqualified engineers, are undertaking designs utilising computer software to solve complex problems leaving the more experienced engineer to manage the business aspects of the company. 

With the Governments’ initiative to introduce Building Information Modeling (BIM) throughout the industry, are the days of the Chartered Engineer numbered?

Creative destruction, sometimes known as Schumpeter's Gale, describes the way in which new economic development arises from the diminution of some prior economic order by a reconfiguration of previous beliefs and systems. In 1987, the Office of Fair Trading (OFT) banned the use of the ‘Scale Fees’ after they ruled they were uncompetitive and did not reflect that computers and information technology made engineers more competitive. The consequence of introducing competitive fee bidding is estimated to have reduced the average consultancy fee by approximately 50%. Subsequently, in order to stay competitive and provide ‘added value’, there has been a need to provide a service at a competitive cost but without compromise to the underlying philosophy of the industry Institute's charters.

In the modern design office, there is a move by some, away from the experienced, senior engineer undertaking designs with this role now being carried out by a technician with computer software. Modern computer programs with their graphical interface and powerful analysis abilities allow a simple interface in which to ‘model’ buildings and the environment allowing easier ‘access’ by less qualified employees.The subsequent reduction in the overhead costs of salaries has reintroduced a monetary based competitive advantage as opposed to technical competence.

In 1818 the Institution of Civil Engineers was founded in London and received a Royal Charter in 1828, formally recognising civil engineering as a profession. Its charter defined civil engineering as:

‘the art of directing the great sources of power in nature for the use and convenience of man, as the means of production and of traffic in states, both for external and internal trade, as applied in the construction of roads, bridges, aqueducts, canals, river navigation and docks for internal intercourse and exchange, and in the construction of ports, harbours, moles, breakwaters and lighthouses, and in the art of navigation by artificial power for the purposes of commerce, and in the construction and application of machinery, and in the drainage of cities and towns.’

Much discussion is undertaken within the industry’s’ journals and forums over concerns regarding the improper use of computers and in particular their use by inexperienced staff with a recurring theme being “a good computer program does not make a good engineer, only a good engineer should use a good computer program”.

Should engineers protect themselves from the belief that computers are the replacement of ACE Scale fees in respect of economical benefits?

What makes a company successful?

In 2010, 323 construction companies went into administration and the numbers of building companies experiencing financial problems had risen 30 per cent (UK Construction News, 2011). Some of the larger companies such as Rok and Connaught no longer exist whilst other companies, like May Gurney and Mears, have managed sizable growth in revenue despite trading under similar conditions. So what makes some companies thrive and some die?

The basis of any organisation is the interaction of the people in order to achieve objectives and the success and effectiveness of the organisation will depend on their interaction and performance. ‘People’ is the one ingredient in a company where it is impossible to copy or clone to ensure uniformity. The objectives, structure and management of an organisation can be minutely defined and repeated time and time again but the actual execution of the operations of the company is invariably undertaken at a level where human interaction and behaviour takes place. It is this informal and unpredictability aspect which gives companies their uniqueness and ultimately contributes to the success in some and failure in others.

This ‘human factor’ was explored by Peter F Drucker who examined how humans are organized across the business, government and the non-profit sectors of society and focused on relationships among humans. He demonstrated how organisations can bring out the best in people, and how workers can find a sense of community and dignity in a modern society organised around large institutions. Drucker was intrigued by employees who knew more about certain subjects than their bosses or colleagues and yet had to cooperate with others in a large organisation. Although there is invariably a need for the structure of an organisation to change to meet new demands, technology and processes, the identification of such a need must come from the operators of the system. 

The provision of a good structure allows effective and efficient organisational performance and although a good organisational structure does not itself produce good performance, a poor structure makes good performance impossible. In whatever organisational form a company takes, and whatever ethos the senior management wishes to adopt, the execution of the operations will rely, time and time again, on the individuality of the ‘people’. Although the consequences of individual decisions can be reduced, limited or controlled through an organisation’s structure, at some point, those decisions will need to be made - at some point the manager will ‘make his call’. 

Ultimately, the success of a company is based upon the ability to effectively process decisions made by managers. A mediocre manager in a well structured company will contribute more to an organisation and its success than a ‘star’ manager whose decisions and actions are stifled in a poorly structured system. Clearly where there is the combination of a ‘star’ manager and a well structured organisation you will see even greater success. No doubt such a combination is present in those top performing construction companies such as May Gurney and Mears whilst Rok and Connaught may have had a more unfortunate combination. 

Which way do you want to go?

Are Managers Born Or Made?

Early 19th century researchers and historians such as Thomas Carlyle exalted the ‘Great Man’ theory of leadership citing history’s great and famous such as Julius Caesar, Napoleon and Abraham Lincoln as representing natural leaders taking control in tumultuous times. These leaders and managers of men did not have the benefit of modern management teachings and in many cases, such as Alexander the Great and Genghis Khan, achieved their leadership roles at an extraordinary young age.  Critics of the Great Man Theory identified that many of these leaders achieved these positions through their birth-right and were subsequently influenced by social, educational and opportunistic factors. Undoubtedly gender was a major factor in the progression of these early leaders and indeed, the recent Ambition and Gender Work Report (2011 Institute of Leadership & Management Development) still finds that nearly three quarters of Women believe that barriers to advancement still exist.

Dolly & Friends '9 to 5'

Early views on the achievements of leaders adopted the ‘Trait Theory of Personality’ identifying the broad dispositions of a person and the interaction of various unique traits of individuals. This identification of the ‘human factor’ in management has continued throughout the twentieth century with the development of management theories and studies from the initial Classical writers on to the Contingency view where more emphasis of human nature is taken. During the latter half of the last century, the role of the manager has now become open to the ‘masses’ reducing both the gender and class distinctions from where it originally evolved.

Nevertheless, there are people who excel in their managerial role -  ‘Management All-Stars’ with a desire to manage. Many relate this desire to manage to an early experience in life although clearly the trait of the person will dictate how such an experience is exploited and  although nurtured and fine tuned during life due to surroundings and stimulus, the basic traits are with you from birth. The Chess Grand Master, Bobby Fischer’s passion for puzzles was combined with endless hours of studying and playing chess. Born with this passion, Fischer became what he was and this was summed up by his rival, Garry Kaspsrov as ‘an innate gift’ .

So the answer to the question ‘Are managers born or made?’  -  they are made but the answer to the more pertinant question, are ‘good managers born or made?’ ; the answer is, without doubt, born.

Condensed extract from Paper

 presented by Daniel Staines

What Role Does Europe have in Shaping the Future of the UK Construction Market?

After 12 years of sustained growth, in the second quarter of 2008, the construction sector entered its worst economic downturn since the Second World War. This year’s Autumn Statement predicated economic growth to be -0.1%, down from 0.8% forecasted in the Spring budget and confidence in the construction business outlook is now the lowest for almost four years.  The CIPS Nov 2012 Index continues to show an ongoing subdued trend in output across the construction sectors of Housing, Commercial & Civil Engineering reflecting the UK economy as a whole. Furthermore, the UK Contractors Group (UKCG) have forecast output to fall by almost 6% over the next two years, before a return to growth in 2014/15 and identifies a bleak 12 month period ahead due to a lack of new projects replacing those recently completed; exacerbated by squeezed budgets and a rise in material and fuel costs.

Public new housing and public non-housing have been the worst hit sectors closely followed by the private industrial and private commercial sectors respectively with 49% of contractors reporting falls in profit margins.

The recession has already had a particularly large negative impact on the house-building sector with a fall from the £4.5bn in 2007/08 to approximately half this at the present time. Infrastructure expenditure, conversely, has continued to rise and is now approximately two thirds higher compared to that of 2007. Unfortunately, house building is invariably undertaken by UK firms whilst the larger infrastructure projects are undertaken by European or International companies. In addition, the UK sources £12 billion of construction materials from abroad whilst only exporting half of this – a net balance of £6 billion - 60-65% of this trade is with the Euro zone countries.

Clearly there is a need for the construction market to take advantage of any opportunities they can and whilst the Government are and, have been, implementing various initiatives and funding for the home grown market, the more robust companies at present are those who have looked to overseas markets. 

Compared to its European counterparts, the UK has suffered from a more pronounced decline in construction activity since the onset of the recession. In May 2011 the Cabinet Office published its Construction Strategy document. It noted that it was widely acknowledged that “the UK does not get full value from public sector construction” and that the Government had “failed to exploit the potential for public procurement of construction and infrastructure projects to drive growth”. 

The Government’s austerity measures have positively contributed to the confidence of the British Pound compared to the majority of the Euro zone but the UK economy remains fragile and the exposure of some of the major European suppliers with UK divisions adds an additional source of risk to any potential recovery.

In order to survive, the UK Construction sector must change and broaden its geographic horizons to prevent the North-South divide becoming a UK-Euro divide. If the government is to lift the economy out of recession quickly, it needs to ensure that it focuses clearly on public and private investment, rather than a series of announcements and initiatives that lead to very little activity. If it is to ensure that the path remains open to growth then it must encourage the industry to embrace the opportunities of Europe.

Success Breeds Success

There is graffiti on a wall in Pompeii dating back over 2000 years that says:

"Si quis stultus nihil aliud. Redderet enim" 

- If anyone wants something for nothing he is a fool. He should pay for it!-

Despite this early insight into the fundamental basis of monetary motivation the primary reason for the Empire's failure and entering the Dark Ages was a combination of a slave-based economy with a decentralized and inefficient trade system.

Human resources can be an organisation’s largest and most difficult to-control expense, but it can also be central to affecting organisational performance and as such is a key task for a company to manage in order to maximise productivity and enhance creativity whilst controlling costs.

High-performance work practices’ (HPWPs) include, for example, incentives, training, employee participation, selectivity, and flexible work arrangements. These HPWPs practices increase employees’ knowledge, skills and abilities resulting in greater job satisfaction, lower employee turnover, higher productivity, and better decision and subsequent increase in performance, all to the organisation’s benefit.  It can be shown that HPWPs improve organisational performance and studies have demonstrated that organisations can increase their performance by 20%.

The Organisation for Economic Co-operation and Development (OECD) has defined high-performance work places or organisations (HPWOs) as those that are moving towards a flatter and less hierarchical structure, where people work in teams with greater autonomy, based upon higher levels of trust and communication. It is the role of the HRM department to address these issues in the job design. A boring and monotonous job stifles motivation to perform well whereas a challenging job enhances motivation. Employee commitment and motivation have to be actively managed to ensure employees are attracted, motivated and retained and the old adage of ‘a fair day’s pay for a fair day’s work’ is no longer enough to gain a competitive edge. Reward system management is usually associated with monetary values in terms of salaries and bonuses and money is the most motivating factor among most employees. It can, however, include non-financial rewards such as recognition, promotion, praise, achieve,met, responsibility and personal growth.

Belbin identified eight team ‘roles’ including Company Worker, Shaper, Chairmen etc with each role required to act at differing times throughout the groups development. Individuals can perform more than one role and the team selection is crucial and in particular the leaders, who must take an overview, anticipate problems, create an environment for success, and provide direction and vision and, most importantly, motivation. The establishment of the right balance in a team is an essential factor for success. 

Summary

Mia Hamm once quoted "I am a member of a team, and I rely on the team, I defer to it, and I sacrifice for it, because the team, not the individual, is the ultimate champion". By establishing HRM high-working performance working practices for all; an organisation can increase its productivity and enhance creativity whilst lowering costs and improve employee's job satisfaction and as Mia Hamm also quoted; "success breeds success".

Summarised Extract of Paper Presented April 2012

by D Staines CEng MIStructE

Week Ending 8th July 2012

The Government has abandoned the pre-2010 policy of trying to encourage house building through regional house building targets and instead house building is being encouraged through the New Homes Bonus, allowing the local authority to retain revenue from the council tax of new houses for six years.

The Government published the final version of the National Planning Policy Framework (NPPF) in March stressing the need to encourage housebuilding but retaining the need for planning authorities to provide enough land for a rolling five years supply whilst adding the new requirement of an extra 5% "to ensure choice and competition in the market for land".

Although research in June 2011 suggested a major reduction in housing targets, especially in the South East And South West, here at JMS we certainly seem to be bucking the trend with the appointment for the design of the roads, drainage, foundations and superstructure on over 500 housing plots in June alone.

Planning has finally been achieved for the new hotel in Cambridge in which we carried out the preliminary designs at the beginning of the year. This hotel incorporates a large underground car-park and a concrete podium first floor deck with timber framing over. Due to the client's timetable, the design is being shared between our Midlands and Anglia office. This is the third hotel undertaken for this client with the first up to podium level in Ipswich and the Winchester project ready for tender.

Work load in the London sector is expanding faster than ever with a wide variety of work including three Synagogues, two mosques, refurbishment of the Muslim World League HQ building, new students bar for Anglian Ruskin University, two £5m+ houses in Hampstead Heath, apartment blocks, house extensions.....