Until 2002, Murray & Roberts offered the construction market a host of semi-independent regional operations, each vying for business through its own geographically specific structure complete with executive team and staff. The inevitable result was that while some operations thrived, the overall group was inefficient as capacity could not easily be shifted to where it  was needed most.

More than 75% of Murray & Roberts’ activity is directed into the construction economies of the less developed world, yet because of the fragmentation, this core activity failed to live up to expectations.

In January 2002, Group CE Brian Bruce appointed Stephen Pell to commence a process to merge all of the construction entities into a single national operation and disband regional offices. Administrative and executive employees were redeployed elsewhere within the group. Savings identified at the time  have now been largely achieved.

“The nature of this stage of the transformation process was more physical than cultural, so we proceeded with great alacrity and completed the entire exercise in six months,” says Stephen.

What emerged was a new structure with a mix of governance policies and procedures. The principles of a unitary Murray & Roberts were implemented and this created greater consistency internally and more certainty for clients.

“We started focusing on fundamental issues such as the logic of how we go about getting business and how we ensure that we understand the nature of our clients.”

Construction activities are so systemised around the tender process that it is easy to lose sight of who the ultimate client is. Previously there had been limited differentiation in tender pricing to take account of the creditworthiness of the client. “Now, we have developed processes which ensure that we manage our risks very carefully. We are more thoughtful and strategic in the pre-tender phase.”

For a while, Stephen was responsible for managing the entire construction business. But, running the Middle East operation out of Johannesburg proved impractical. “I would spend my weeks in South Africa and fly to Dubai to manage the Middle East business on Saturday and Sunday.”

In 2004, a decision was taken to restructure Murray & Roberts along global lines. South Africa and SADC became a single geographic business, Australasia another and the Middle East a third.

At the same time, the opportunity was seized to take a further step towards a unitary Murray & Roberts by integrating several allied businesses, namely roads and MEI.

This phase involved more complex issues about how the businesses should ultimately fit together.

Working teams were appointed for each major overhead to identify duplications and wastage among staff, processes and logistics. The outcome has been the creation of a shared services environment which will be fully operational later this year.

One of the most important results  of the transformation is that employees are now focused on value creation to increase margins and create a more sustainable business.

Construction is now positioned to take on opportunities more efficiently than before and employees should enjoy increased job security. In the past, local operations expanded and contracted to mirror local work volumes, whereas in future capacity will move wherever the work is and employees will be relocated.

While the process is far from complete – that will take until the end of 2005 – it has advanced far enough to enable Murray & Roberts to take a superior business proposition to the market.

“An industrial project typically involves three activities: earthworks, concreting and mechanical works, each of which is separately put to tender. The biggest headache for a client is managing the interface of these separate contracts. Projects seldom proceed exactly as planned and changes in one contract impact the other two – yet the individual contractors do not often communicate with each other,” says Stephen.

“We can now integrate all three, so that when one aspect of the project is changed we automatically adjust the other two components. Integration can be taken a step further if we take ownership of the design process.

“We do not always do the design itself, but appoint the best designer and manage the process,” he adds. “This enables us to challenge the design to ensure that it is the best possible and to get peer reviews.”

To test the validity of this concept, Murray & Roberts is undertaking client research and has appointed a chief engineer.

Design-build has long been the European model of construction, unlike the UK model which South Africa has followed. But that is changing as the world increasingly adopts the design-build model.

This is the format for public-private partnerships such as toll roads and it is the difference between getting the whole picture and looking at a tender in isolation.

Now that the internal transformation is well established, the focus of Murray & Roberts Construction is shifting to new markets. The appointment of Sean Flanagan as the corporate executive responsible for Construction, bodes well in this regard. Sean developed a successful model for exploring new markets and developing relationships with major clients during his tenure at Murray & Roberts Engineering Solutions and he will extend this experience to Construction.

After a fairly slow 2004, Stephen says that prospects are improving as the market shows signs of changing. “We have been awarded a fair amount of civil work in the past four months and our order book is looking healthier. In addition, major projects postponed by the platinum industry last year may be back on stream and some long-anticipated infrastructure private-public partnerships appear to be imminent.” BY EAMONN RYAN