Balfour Beatty plots business transformation

Balfour Beatty has launched its recovery programme under the title “Build to Last”. The intended transformation in the business involves strengthening financial controls, holding on to valuable expert staff and tightening up on project and risk management. Efficiency savings through streamlining some of the business processes and working with the supply chain to cut costs are also on the agenda.

Jackie Whitelaw
17 February 2015

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Instigation of the programme has followed a fresh £70M profit warning in January following a review of its UK construction business by KPMG. 

New group chief execuctive Leo Quinn outlined an action plan to turn the business round at the time of the latest profit warning and today has revealed more detail of what it involves.

In its initial phase, Build to Last will target bringing each business unit to achieve 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)

Balfour Beatty said that a number of steps have already been taken across the UK and the US to give the programme rapid traction, including:

• 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 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.

Further details on the programme and an update on progress will be provided at the group’s preliminary results on 25 March.

Commenting on the launch of Build to Last, Quinn said:  “The group’s recent trading makes it imperative to gain early momentum in our transformation plans. While 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.”