Cover story - Constant Evolution

Murray & Roberts is adapting to a new global business environment by building more critical mass in its key sectoral and geographic markets.

At Murray & Roberts change is the only constant and, once again, the Group is entering unchartered waters. At a time when so much is changing in the global economy, group CE Brian Bruce has announced plans for his own retirement in three years time.

But unlike many other succession plans which involve only the passing of the baton from one executive to the next, this one incorporates the development of a new strategic framework to ensure that the business continues to develop and thrive in the challenging times that lie ahead.

“No business can afford to plateau,” says Brian. “You have to constantly grow and acquire more critical mass, or you simply become attractive as an acquisition for a more effective predator. So growth has been our strategy for the past nine years, and is what we will continue doing. Corporate acquisitions will be looked at for the business as a whole, or to bulk up selected parts of the business.”

By 2012, it is expected that the Group will have a structure very different from that of today, and be well established to flourish in the post-Bruce era. As his final action, Brian plans to oversee the restructure of Murray & Roberts into about six core underlying businesses, each with revenue of R6 billion to R9 billion – equal to the size of the entire Group just five years ago.

Reframing Murray & Roberts

“We have termed this strategy ‘Reframing Murray & Roberts’ and it will involve reorganising and building critical mass in each business sector, introducing new leadership and getting rid of complexity for the stormy seas that lie ahead.”

Considering his longevity at Murray & Roberts, and his leadership of the transformation of the Group over the past decade, a key challenge in the years ahead will be to ensure that Brian’s succession is done in a manner that does not shake the stability of the Group. This is why planning has started more than three years ahead of his leaving.

Murray & Roberts will relentlessly acquire ever-greater critical mass in areas where it already boasts excellence, secure world class specialist leadership for those areas and build global capacity.

As was the case with many companies in South Africa over the past five years, management made some decisions that, with hindsight, were predicated on the belief that the economy would continue to grow, and that there would be unlimited security of employment.

Brian says that while the fundamental strategy of Murray & Roberts remains sound and will not be affected by any structural changes, “there is a different set of global economic factors today; the world has changed.”

“We made decisions based on an optimistic view of the future – but that future is not as secure as it once looked. Therefore, we will be re-evaluating many aspects of our strategy with a view to creating stability in the face of evolving global conditions, all the while ensuring that the Group remains fundamentally the same.”

To achieve this, Murray & Roberts will relentlessly seek ever-greater critical mass in areas where it already boasts excellence, secure world class specialist leadership for those areas and build global capacity.

The business is consolidating into three core sectors: SADC contracting and engineering operations, which “Our objective is to create stability for these business units to enable them to adapt to new socio-economic factors and continue to grow, and this in turn will require a rethink of our structure and leadership as the custodian of this stability,” says Brian.

Adapting to a new future

One example of this is the inevitable trend towards a nuclear future. Brian says, “there is no doubt any longer that domestic nuclear power will be a part of our lives, and a key element of our Group’s future strategy.

“Nuclear energy is core to the strategy of Eskom and Murray & Roberts needs to respond to this by recruiting high-level leadership with vast experience in the global nuclear industry. We have already identified such a person in Murray Easton who will shortly be brought into the Group, both at a senior leadership and a functional level.”

In South Africa, a decision was taken in June 2009 to create the necessary critical mass in the power sector by merging Murray & Roberts Engineering Solutions with the power related business of Murray & Roberts MEI, including the structural and mechanical erection contracts for the Medupi and Kusile power stations, where the two companies are already in joint venture.

To realise the great potential that lies north of its borders, South Africa must learn from the strategic approaches of China in particular, to Africa, and abandon the post-colonial bias that Africa is a dubious place to do business.

“At Murray & Roberts we’ve made the strategic decision to play a proactive role in developing a new model for interacting with Africa, involving strategic partnerships on the continent. The most likely partnerships will be with companies from China and India, the emerging markets most active in the exploitation of Africa’s resources and best prepared to invest in Africa.” Brian says “it’s still early days” in this search for a strategic partner, but the Group is negotiating with some interesting major Chinese organisations.

“To engage with such a partner will require us to release meaningful capacity from our current structure, which in turn demands succession planning and the bolstering of leadership resources.”

Murray & Roberts has made two further key appointments of high level executives: Trevor Fowler to lead the Group’s construction business and engage the Africa Strategy and Orrie Fenn to consolidate the construction materials and fabrication businesses. The latter portfolio of businesses is enjoying persistently strong growth on the back of the infrastructure rollout, but requires dedicated leadership.

Acheiving critical mass in international operations

Important strategic decisions will be made later in 2009 regarding the structure of the Group’s international business operations. In some of these, Murray & Roberts enjoys global critical mass, but in others it does not, yet.

The mining construction and development business serves the world’s main mining regions in Africa, North and South America and Australasia. In a recent development, Murray & Roberts established Cementation Sud America, an operation in Chile, to strengthen its presence in South America.

Reframing Murray & Roberts involves restructuring the Group into about six core underlying businesses, each with revenue of R6 billion to R9 billion - equal to the size of the entire Group just five years ago.

“We have to decide whether to form a single entity out of Cementation (the world’s leading underground mining contractor). If we do pursue that action, it would have to be based out of a global mining centre like London.” In what may be interpreted as a first step in that direction, Murray & Roberts has tasked its London-based executive, Peter Adams, to take executive responsibility for all the Group’s mining activities and support high level cooperation between the operations.

“Clough, on the other hand, lacks critical mass in its targeted upstream oil and gas sector. It must either become more global, in which case Perth (Western Australia) is rather remote, or it must remain an Australian-based contractor in which case it will require an Australian acquisition to develop local mass,” says Brian.

In the Middle East, the question currently under scrutiny is whether the Group’s construction and services operations there will continue to be independent or linked into the South African operations? Brian says the solution will be based on capacity and competency.

A final initiative will be for Murray & Roberts to respond to government’s call for the provision of affordable housing. While it is not a core business of Murray & Roberts, the Group has the expertise to play a vital role, and Brian says it has a process underway in partnership with the CSIR to offer a solution.

“It is a national imperative in South Africa, and we aim to project manage an innovative solution that looks at materials and logistics technology for high-quality high-density residential units. This is what developed countries did to resolve their housing crises 100 years ago, and those developments are still standing today as soughtafter addresses.”

21st Century leadership

Murray & Roberts is sensitive to the fact that acquisitions brought into the Group can have cultures and leadership that are not always compatible. This will not happen within the new structure, as the search for new people will involve a process of reinforcing the culture of Murray & Roberts as an ethical business with a strong focus on ethics, health & safety. “In future we will target people with a strong social conscience and experience in health and safety, because in the future construction industry this will be a key differentiator and driving force.”

A second characteristic of this new leadership is that it will be centralised at head office in Bedfordview.

Brian admits that the formation of business entities like Cementation into single entities may challenge their alignment with group culture and DNA but he says that care will be taken to ensure that they remain fully aligned.

Another feature of new management appointments is that they may not be long-term, but rather aimed at bringing deep experience and short to mediumterm stability to the business, thereby giving the Group time to develop internal succession planning and blood younger leaders.

“We’re looking deeper into the organisation to find younger leaders with future potential. I myself and those of my generation benefited from just such a strategy, but it is something that has not been done at Murray & Roberts for a long time.”

A key responsibility of current and future leadership will be to ensure trust, predictability and commitment among middle management. Brian cites the management of capital expenditure as an area in which trust is important. In the past year, the Group invested more in capex than it did during the first six years of its nine-year transformation to date. “We have to ensure that money is not too easily spent,” says Brian, “as those responsible for authorisation can easily leave the organisation before any accountability is sought.

“Trust is about predictability, so we tend to trust those whom we can predict from past experience, have shown success in what they do and how they do it.

“We will also be introducing a more stringent internal audit capability. This will include benchmarking and reporting on safety and health. We have to move beyond simply reporting on health and safety to driving it as a culture throughout the organisation – this is what we aim to change.”

Survival of the fittest

“I believe Murray & Roberts will continue to record superior performance, even in these difficult times, because we have correctly read the changes, and are ready to set free those businesses that are performing well, and dispose of those that aren’t. In this context, the fundamental character of Murray & Roberts remains consistent,” says Brian.

“The construction industry is going through a tough period, one that is so severe in some instances that some companies that have not thought about it may not survive, because their solution will be to simply cut prices to unprofitable levels. Short-term economic conditions may not support previous levels of business growth – but I believe we are still in a long-term upward trend of capital formation.”

EAMONN RYAN