Profile: Skanska and change management
The construction firm has entered a period of change and restructuring, but plans to tackle job losses and talent shortages head-on
As Friday afternoon activities go, watching Harvey Francis respond to entreaties from HR magazine’s photographer to “loom powerfully” over her camera is a fun one. It’s endearingly clear that domineering power poses aren’t Francis’ thing.
“I guess it’s just not the Skanska way,” the executive vice president and group HR and comms director muses later in our interview – something immediately apparent as soon as HR magazine arrives to find Skanska UK’s CEO just behind where Francis is being shot, working unassumingly at a bank of desks in the Rickmansworth HQ’s open-plan office.
This is clearly not a business with strict hierarchies and an unapproachable leadership. Francis puts this down, to a large extent, to the construction firm’s Scandinavian roots.
The business started life in a fishing village in southern Sweden more than 125 years ago, expanding into Poland, the Czech Republic, Slovakia, Hungary and Romania, and becoming a leading player in the US in the construction and public-private partnerships market.
It was in 2000 that the firm acquired Kvaerner Construction and Skanska UK was born, with key projects for the 6,000-employee-strong UK arm including London’s Gherkin and Heron Tower, Paddington and Bond Street Crossrail stations, and the widening of the M25.
“That Swedish influence has a very positive effect,” muses Francis, citing the company’s global purpose of ‘building for a better society’. “Skanska’s quite a conservative company. We have very strong corporate governance and are prudent about how we take profit and bonuses for example – and that’s quite Swedish. What we say is we want to be here for the future. It’s making sure we have a business over the long term.”
Which, as recent headlines show, is no mean feat in construction. “The challenge for the sector is not so much the recession itself but what happens afterwards,” explains Francis. “What happens in a recession is that some companies bid for work almost at zero margin in the expectation that they can then increase it.”
But what then happens is a post-recession rush to develop, meaning scarcity of resources and labour and so increased prices. “So then of course the assumptions you made when you bid for the work in the recession don’t come to bear,” he explains. “The margin becomes a negative… Which is why we’ve always said we would only bid for work at sustainable margins.”
Not that it’s all been plain sailing. Skanska announced a €200 million global restructure in January, cutting around 3,000 jobs, to turn around a £90 million loss in 2017. This marked the firm’s decision to leave the US energy sector, with problems on projects in Poland also cited.
In the UK this has translated into a restructure to create, in Francis’ words, a “narrower simpler” organisation. When HR magazine visits in mid-May, the news that Skanska UK plans to sell its piling and foundations business has just been announced. More widely the restructure means the firm’s two building divisions being merged, and its mechanical and electrical services business and facilities management business being brought together, entailing around 100 job losses.
The most significant jobs fallout concerns management and support functions, explains Francis: “We’re about to enter into the collective consultation process just to make sure the roles we’ve got and the number of people we’ve got, particularly in the enabling functions, are the right number to provide robust but cost-effective support; because we work on really thin margins.
“In the construction sector pre-recession 3% was the magic target margin. The majority of the large contractors now haven’t had anywhere near 3% for many years. So the resource we have on the support side translates very quickly into profit or loss.”
The key amid such potentially unsettling upheaval is clear, consistent communication, says Francis, who oversees comms as well as HR. “Whatever happens, people must never read about changes in the press first,” he says. “We do a lot from a corporate comms perspective. Each of the units has a communications business partner.”
He adds: “A couple of people said when we were doing the collective consultation meetings: ‘why on earth are you still doing the employee survey?’ I said: ‘that’s not just about the good times’. I’m as interested to know where people are now; it’s even more important. People said ‘but the results might not be good’.
“But all the things we’re asking [people about in the survey], you ramp those things up in times of change: you need more communication, more line manager engagement, more opportunity to talk about concerns…”
The restructure and management job losses are just the most readily visible parts of a wider change programme, Francis explains.
“We fared very well through the recession but last year we did identify some under-performing contracts, which meant that we took a write-down in the summer,” he reports. “So we did what any prudent organisation would. We did a complete fact-based analysis on what the contributory factors were, and as a result set in place a targeted change programme in the third quarter of last year.”
The focus of much of this has been to encourage the right kinds of sustainable, non-risk-taking (again: Swedish) behaviours. “An example would be: we take a lot of risk on design in construction,” says Francis. “In almost all cases when you start on site the design is not complete… so there’s massive opportunity for design change. The trick is making sure you get paid for every variation.
“The important thing is we manage the design and only take on risks we can manage. We’ve also revamped our forecasting so we forecast every quarter. We’ve looked at the makeup of our project teams and made some changes in how we get the right blend of skills and experience.”
He adds: “A lot of people who work in construction have an inherent optimism bias… you do need that to some extent when you’re taking work on at necessarily very low margins. But without a plan it’s wishful thinking. So it’s making sure we focus much more on realism.”
It’s during such change management particularly that Francis’ background of starting out in HR in organisational development really comes in, he feels. Francis started life in retail; he didn’t go to university because he felt he “was kind of done with education”, and had an “itch to get out into business.”
It was when working as a regional manager and then national training manager at BT that Francis made the switch, when someone he was working with on an Investors in People project persuaded him. “I’m slightly ashamed to say I was like ‘why would I do that?’” says Francis. “But there was a new HRD I’d seen speak and was very impressed by… I remember sitting there thinking ‘that’s something I could aspire to’.”
He adds: “I spent the first six months feeling like a fish out of water and at quite a disadvantage. But I had another eureka moment when I was having coffee with someone from HR, who said: ‘we’d kill for what you’ve got’, which was a commercial background.”
Francis qualifies that there are plenty of great HR people – including in his own team – who have only ever worked in HR. But commercial acumen is still a must. “The HR people we hire have to be really interested in the business, how the money is made,” he says.
“HR only exists within the business. And, in the private sector, the business only exists because of the shareholders. So we’re about profit with purpose. We should never be ashamed of making money for our shareholders… we just have to do it ethically and safely. Once that gets out of balance that’s when you run into problems. That’s my key job: keeping that seesaw in balance.”
Another key tenet Francis has transferred over from retail is the importance of the customer. “I always think if you treat people decently in most cases they’ll extend that courtesy to your customers. That’s one thing I learned in retail, and it’s no different in construction.”
For Francis a critical part of treating employees well is creating inclusive environments – with success in doing so a key reason Skanska UK fares impressively for its sector on attracting women. The sector average is around 12% female representation, whereas Skanska UK boasts 29% across its white-collar professions for example, with 35% of all hires last year female. This is particularly impressive when you consider that only 16% of civil engineering and built environment graduates are female – a stat unchanged for at least 10 years.
Francis puts the firm’s success down to a range of efforts. “We’ve worked really hard over the last six years on that,” he says. “There’s no magic bullet.” Factors include “a lot of work on unconscious bias”, a two-day interview training course for hiring managers, firm insistence on diverse shortlists, flexible working, enhanced maternity pay, a returners bonus and a returnship scheme.
But perhaps most important has been a ‘if you build it, they will come’ mentality. “People talk abut D&I but I think it’s the I before the D,” says Francis. “Otherwise you hire a diverse workforce and the cultural climate isn’t ready. Typically what happens is the culture will then wring and spit out people that don’t fit. So we spend a lot of time on inclusion.”
There’s still much work to do, however, with the urgency of attracting a broad cross-section of talent only intensifying in the face of Brexit. Francis was involved last year in an All-Party Parliamentary Committee on the impact of Brexit on the construction sector, contributing to a report that recommended a “transition and tapered” arrangement that allows the construction industry to develop the skills it needs before “the EU labour supply is switched off,” in Francis’ words.
“We said that the primary issue is, because the sector has historically patchy visibility of its pipeline, with work getting cancelled – and because it works on very thin margins – a lot of people haven’t invested in apprenticeships and skills development,” says Francis.
He adds: “When you have had a steady supply of labour the danger is companies get lazy. I don’t think they set out to be lazy, but that’s what happens when you’ve got lots of other things to worry about… We worked out that broadly speaking it would take 10 years [for construction to build sufficient talent pipelines].”
Francis is personally confident that the stakes are so high for the government to keep infrastructure and the economy going, through keeping the construction skills pipeline open for now, that “common sense” will prevail.
He’s also confident that – backed by an HR strategy that’s delivering 1% off world-class engagement levels – Skanska UK will weather its recent difficulties and emerge from its restructure fitter and ready to thrive.
“I don’t think you can ever firmly draw a line from an HR intervention to business metrics,” he muses. “I’ve never yet read a convincing book on that. Lots of people, including Ulrich, have tried. But I read that and thought ‘there’s still that final leap of faith’. Because there are so many things going on. But you can certainly draw some correlations.”
He adds the importance of sticking at change programmes, and not expecting immediate results. “Sometimes people don’t give the change long enough to stick. I’ve seen that in previous organisations. Sometimes you just have to keep your shoulder to the wheel; there’s no substitute for bloody hard work.”
And there’s no substitute in Francis’ mind for a prudent, ethical and sustainable approach to business… one that is about as far from power poses as you can get.