Soft Model Reflecting Developmental Humanism Construction Essay

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With changing business environment and implementation of modern business philosophies, organisations have started to adapt "soft model reflecting developmental humanism". Organisations have started to treat human resource as an important business asset that is critical to achieve competitive advantage. One the typical examples of changing business model can been seen in construction industry. Historically, construction industry followed hard model that sees human as a resource that can be provided and deployed to attain organisational objective (Druker, J., White, G., Hegewisch, A. and Mayne, L.,1996). However, with increasing role of Government Agencies in construction industry and high customer expectation, construction companies are forced to adapt soft model to survive in the challenging business environment. In addition, the publication of the report of the Construction Task Force Rethinking Construction (commonly known as the 'Egan Report') has considerably shaped the contemporary agenda for change in the UK construction industry (DETR,1998). The Egan Agenda places strong emphasis on the concept of "lean thinking" that is mainly employed in manufacturing industry. The concept of lean thinking includes continuous improvement, flattened organisation structures, teamwork, the eradication of waste, effective and efficient use of resources and co-operative supply chain management (CBPP,1998). As human asset is one of the most import resources of construction industry especially with shortage of skilled staff, human resource management plays a critical role in achieving lean construction objective as lean production is directly linked with HRM regime of control, exploitation and surveillance

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One of the pioneers in construction industries adapting "lean construction" model is Balfour Beatty Plc. Thus, I have selected Balfour Beatty for my project work. We will studying companies background, operating environment and critical HRM issues encountered by the organisation. Also, in order to investigate Balfour Beatty strategic and competitive position we will conduct SWOT analysis.

Company Background

Balfour Beatty PLC is a leading international engineering, construction, services and investment group. Balfour Beatty is ranked 19th in the international league table of construction contractors (http://www.balfourbeatty.com/bby/about/history). The Group is the largest fixed rail infrastructure contracting company in the world, a UK leader in roads, support services, electrical and mechanical engineering and other disciplines. It is heavily engaged in building and management of commercial properties and infrastructure development. It was formed in 1909 as a general and electrical contracting organisation and today it one of the world's leading construction specialist.

Balfour's Beatty long term strategy is to develop its business through international expansion and through acquisitions and disposals. It aims to be market leader by strengthening its value chain and building long term customer relationships. In order to achieve this objective, it requires a dedicated work force with competent technical skills.

Balfour Beatty has an explicit commitment towards human resource development. The long term success of its business is due to deliver of high quality technical competency and skills of its human asset. Thus, Balfour Beatty has been awarded Britain's most admired construction company in 2009.

Organisational Structure - (Annual Report, 2009)

Balfour Beatty Group Plc comprises of two distinct businesses; one, a substantial infrastructure investment specialist and the other an international engineering, construction and services contractor. However, the company classifies its business model in four core business sectors that is as follows

• Professional Services: Balfour Beatty Professional Services include Programme and project management, architectural services, project design, technical services, planning and consultancy.

• Construction Services: Balfour Beatty offers an extensive range of construction services that includes building, design, construction management, refurbishment and fit out, mechanical and electrical services, civil engineering, ground engineering and rail engineering.

• Support Services: Support services provide ongoing support for maintenance and operation of infrastructure assets like highway network management, facilities management, rail renewals, electricity networks etc.

• Infrastructure Investments: Balfour Beatty infrastructure investment mainly operates portfolio of PPP (Public Private Partnership) concessions project.

Market Overview:

The UK construction industry is one of the most important sectors for economic growth. It has high economic significance on account of its huge market size, estimated at £123.24bn in 2008 (Keynote, 2009). Financially, it is one of the largest sectors in the UK economy. Structurally, the construction industry is divided in three main groups of large companies. The first group are diverse construction companies with activities in several sectors, the second group is house builders and the third is building material companies. Balfour Beatty's will mainly be classified as first group of construction companies as it is mainly involved in infrastructure and commercial development.

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UK Construction industry is highly concentrated in nature. However due to the huge size of the market the market share held by the large companies are still small. The top 15 companies have a market share of about 20% of total market.

The UK Construction market demonstrates an upward trend in next few years. This is mainly due to Olympics 2012 that has forced the government regulators to invest in growth and development of infrastructure especially in South of England.

Competitor Analysis

The UK construction market is highly transparent and competitive. Most of the large companies target same projects. However, the selection of the final bidder is on MEAT analysis (Most Economically Advantageous Tender). Thus, most of the major construction companies have started participating in ECI (Early Contractor Involvement) projects in order to gain competitive advantage.

Also, there is an increasing trend of forming joint venture between competitors especially in infrastructure development projects. Companies like Balfour Beatty has partnered with Skanska on major projects like M25 Widening project, Carrillion on East London Rail Project. As this kind of projects are huge in nature and require enormous amount of resource and long pay back period, forming joint ventures helps in reducing risk and increase project management capabilities.

The main direct competitors of Balfour Beatty Plc are as follows.

1. Carilion Plc: It is one of the UK'S leading support, Public Private Partnership (PPP) and construction companies.

2. Costain Group Plc: It is an international engineering, construction and land-development group.

3. Kier Group: Kier Group PLC is a leading construction, development and services group, specialising in building and civil engineering, support services, public and private house building, property development and PFI projects.

4. Laing O'Rourke: It is a large, privately owned construction company with world wide operation.

5. Morgan Sindall: Morgan Sindall PLC is a construction and regeneration group with activities that span the UK construction market. The main sectors in which the company operates are commercial property, affordable housing, health, education, leisure, transport, utilities, retail and defence.

6. Skanska: It is an international company structured around construction, residential development, commercial development and infrastructure development.

SWOT Analysis

This section provides a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis, listing the

• Internal strengths and weaknesses of Balfour Beatty Plc.

• Opportunities and threats faced by Balfour Beatty due to the changes in the external environment (Political, Economical, Social and Technological Environment).

Strengths:

1. Market Leading Position: Balfour Beatty holds a strong market position in construction industry. It is one of the world's largest companies in professional services for infrastructure.its investments business is a leader in PPP markets.

Directional Policy Matrix

2. Operates in Low entry threat market: Applying Porter's five forces model, we can see that Balfour Beatty operates in a low entry threat market due to huge investment and geographic coverage. In addition, the tendering process for public sector projects is particularly cumbersome and can be seen as a barrier to entry for small players.

3. Capability to offer Integrated Service: Balfour Beatty has capability to manage nfrastructure assets across their entire lifecycle: from conception, funding, programme management and design to construction, systems integration, operation and maintenance. This is major strenghth for Balfour Beattys success in infratsructure market, as it can uniquely position itselde in major markets to benefot from the long term growth.

4. Experience of managing popular flagship projects: Balfour Beatty has undertaken complex construction projects like building Blackfriars Station to span the River Thames, modernising M25 the busiest road of UK, building schools for future etc. This projects has played important role in building balfour Beatty brand name in the market and maintaining its market position.

5. High Customer Satisfaction Rate: Balfour Beatty has high customer satisfaction rate. Due to high customer satisfaction rate and delivering high on KPI's, Balfour Beatty has generated repeat business from clients like Highway Agency, HMP, MOD, and Local Councils.

6. World Wide Operation: Balfour Beatty operates a world wide operation. This is major strength for companies like Balfour Beatty as it can transfer resources from one area to another. Also, Balfour Beatty operates in both emerging and developed economies thus it can strategically tackle external factors like recession to maintain stable business growth.

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7. Skilled Personnel. Balfour Beatty has availability and access to skilled and competent personnel. Balfour Beatty current human asset is highly skilled, competent and dedicated which is very important to achieve vision and mission of Balfour Beatty Plc. Especially in commercial market t, the clients demand for high skilled personnel who can deliver on KPI's. With its current human asset, Balfour Beatty is successfully able to satisfy and meet its customer demands.

Weakness

1.Diverse Range of product and service: Balfour has so many diverse product and service offerings could prove a weakness, as much of the management focus will be on maintaining and ensuring the quality of the services/products provided.

2. Subcontracting works: Due to Balfour Beatty's huge operation, it cannot conduct each and every activity in the infrastructure construction and development. Currently, Balfour Beatty sub contractors nearly 80% of the works to subcontractors. Thus, the sub contractors are not able to deliver on the KPI's of the project it will directly affect the brand reputation of Balfour Beatty.

3. Long Pay Back Period: As Balfour Beatty mainly undertakes huge projects in public sectors; they require huge investments in forefront. Generally, the clients take long duration to pay the final invoices. This restricts the cash inflow in the business and may affect the stability of the organisation.

4. Target market - Price Fighters: As Balfour Beatty mainly targets public sector organisations with high bargaining power, it is hard to maintain profitability and cost advantage in this market.

Opportunities

1. Procurement Trend: There is an increasing demand for suppliers like Balfour Beatty who can offer broad range of integrated services who can get engage in design, build, finance and operation (DBFO) projects.

2. Increasing population: The increasing population, changing demographics demands major investment in infrastructure development. The increasing number of population will result in increasing number of road users, demand for huge water treatment plants, overstress the capacity of power plants. (Keynote, 2009))

3. Ageing Infrastructure: In most the developed economies, most of the infrastructure is nearing the end of its service and must be restored. In addition, tighter regulations and increased regulatory standards in areas like environment, health and safety, there is strong impetus to upgrade and rebuild the current infrastructure. One of the recent project of ageing infrastructure is Thames Water investment of £1.2bn to improve and maintain ageing water pipes, sewers and other facilities over the next five years. This kind of opportunities is ideal for Balfour Beatty plc for growth and development. (http://www.thameswater.co.uk/cps/rde/xchg/corp/hs.xsl/10179.htm)

4. Non PPP market: As Balfour Beatty has extensive experience in the UK and US PPP markets, it can take these skills to the wider non-PPP market, particularly where there are attractive business opportunities to take management control and improve asset quality (Annual Report, 2009)

5. Increasing demand for sustainable solutions: Buying green is key priority for the UK Government. Public sector bodies in the UK spend over £220 billion on goods and services. Thus, it is a great opportunity for Balfour Beatty to build competency in sustainable solution and market to public sector bodies.

Threat

Shortage of Skilled Workforce: The construction industry faces a challenge in shortage of shortage of skilled work force. Some construction companies are now laying off workers, especially in the house building sector. If a long recession occurs, there could be a considerable loss of skills in the construction industry.

Off site Construction: As Balfour Beatty mainly specially in undertaking complex civil works , new construction techniques that aim off site off-site manufacturing of modules for assembly on site can threaten its unique selling proposition.

Failure of employees and subcontractors to comply with legislation: As SHE (Safety, Health and Environment) factors are key focus of construction industry, any SHE related accident by employees or subcontractors will strongly affect the goodwill of Balfour Beatty. It is a major threat for Balfour Beatty, as any such crisis can lead to termination of contract and a severe impact on brand reputation of the organisation.

Changing legislation: Balfour Beatty is greatly influenced by changes in political factor. The allocation of government budgets plays a key role in success of companies like Balfour Beatty. If the governments decides to divert funds to other sectors like manufacturing, IT, tourism etc., it can threaten the growth and stability of the organisation.

Linking business strategy with People Management