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Growth Engine

Steve Morriss took over as Aecom’s European chief executive two years ago. He has since spent much of his time creating a business that can deliver more than the sum of its recently acquired parts. Antony Oliver reports.

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“In many areas we are starting to punch above our weight”

It is with clear disappointment that Steve Morriss, chief executive of global consulting firm Aecom’sEuropean business, admits that he hasn’t actually visited the recently completed Halley VI station which the firm has built over the last five years for the British Antarctic Survey.

Located 16,000km from Aecom’s London office, the unique new mobile research facility went fully operational this week on the Brunt ice shelf in Antarctica. Since the design competition in 2005, the project has provided the firm with some substantial engineering challenges, working on the coldest, windiest, driest and most remote continent on earth.

Yet, while Morriss is visibly excited at the firm’s involvement in this unique project he is equally excited about Aecom’s role tackling future engineering challenges, not least having just secured the coveted High Speed 2 (HS2) phase two contract to develop feasibility design for the Birmingham to Manchester section.

“It’s a very real contract for us,” he says in response to the stock “do you think it will ever happen?” question. Certainly there is a long way to go for a project like this, Morriss says, the whole HS2 project is a very welcome long term investment for the UK.

“Winning HS2 was a great example of how we were able to take the best skills from across the company”

“It is good to see the government making decisions. Making good decisions is even better - and this is a good one,” he says.

Morriss’ challenge since joining from Mouchel in January 2011 has been to manage the integration and refocusing of the growing collection of firms acquired by Aecom.

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Just over a decade ago it bought Maunsell and Oscar Faber. More recently it has snapped up planning specialist Edaw and quantity surveyor Davis Langdon and poached the renowned Arup sport design division. It has also bought two European divisions of project manager Bovis Lend Lease.

Morriss accepts that boosting the firm’s skills through acquisitions was, and remains, core to its growth plan. But he points out that, having got the firm into the right shape, the focus will now switch more to organic growth on something like a 75:25 ratio to acquisitions.

With acquisitions, he says, the challenge is always how to bring separate companies and separate cultures together so as to add value to the partnership. This can prove tricky. The Davis Langdon acquisition prompted the departure of many staff andbrought plenty of sniping from the side lines, not least from former Davis Langdon boss and one time chief construction advisor Paul Morrell.

Morriss explains that, two years on, the business has moved to a better place - although clearly the latest Aecom results, which posted a £37M loss for the financial year ending 30 September, included a major write-down for the UK business, highlighting the fact that this process of integration was not without cost.

“The prioritising effect means that we have now got more capacity to build our capability “

“We have spent the last couple of years really creating single teams from what was a portfolio model, he says. “Winning HS2 was a great example of how we were able to take the best skills from across the company disciplines and integrate them to find solutions.”

It is this ability to draw on in-house expertise and integrate skills which, he says, now gives the firm competitive advantage and the ability to properly service clients in a way that, perhaps, in the past it failed to really leverage. Morriss also points to the fact that the integrated planning, sport design and commercial team that delivered the London 2012 Olympics masterplan is now busy helping to prepare the Rio Games, as another example of this focus on integrated team paying dividends.

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Halley VI: Going into action in the Antarctic this week

But he adds that the firm’s breadth of skills and new ability to leverage them is also helping to rejuvenate traditional activities. “The result is that in many areas we are starting to punch above our weight,” he says, pointing specifically to recent contract wins in the water sector as evidence of the changed approach.

“Two years ago we were very much a middle ranking firm in the water sector. We asked ourselves what it would take to be a market leader,” he explains. “After many, often brutal, conversations we established a plan, hired the people andbrought the skills together. The result is that we have seen 25% growth in that sector in the last year.”

Working with key clients such as Thames Water - for which it is working alongside Murphy and Kier as one of two consortiums designing the massive Deephams sewage treatment works in north London - and United Utilities underlines the need for modern consultants to refine their business models away from the commodity of simply reacting to client needs towards the development of a real understanding of a client’s business, says Morriss. Such an understanding enables innovative solutions to be offered, perhaps solving problems the client didn’t realise it had.

Over the last couple of years, focus on client need has also led Morriss to carry out a fundamental review of who Aecom is actually working for and the size of the deals it is now chasing.

“We had a huge long tail of clients two years ago,” he says, highlighting the typical problem of more than 80% of work coming from fewer than 20% of customers.

“Understanding more about your client needs enables you to win the big deals,” he explains, adding that, as a result, the intensity of the business goes up, so does the reward.

With the strategy of working closer with clients comes the need to think, act and invest for the longer term, says Morriss: “Screwing the client is not a good long term business model.”

While the UK market is tough, as public spending remains very tight and clients’ expectations continue to rise, Aecom’s UK business is growing and is now more profitable. “Public procurement in the UK has never been a walk in the park,” he adds with a smile.

The result of the new business focus means that Aecom now has fewer, happier clients, across just 10 key sectors. Recent successes, such as an eight year highways maintenance contract from Transport for London in joint venture with Conway, demonstrate that new focus and understanding of client need.

“The prioritising effect means that we have now got more capacity to build our capability,” says Morriss. “We are on the march in water; transportation is a work in progress but is already in great shape; energy is making progress; and the commercial sector is taking shape.”

The latter activity, he adds, was buoyed last year with new project management skills via acquisition of Bovis Lend Lease’s eastern European businesses. This addition will, he says, complement the former Davis Langdon business and, again, provide the core of the integrated services that modern clients now demand.

Growth in activity in Russia can be seen with work such as the Moscow-St Petersburg highway and the Spartak Moscow stadium, and Morriss predicts further wins from the region plus others in Romania and Azerbaijan.

Despite Morriss’ role being focused on the UK and European market he does find his business operating and utilising its skills around the world, including the burgeoning Hong Kong and Middle East markets - particularly Qatar which, as for so many consultants, is a growth region as the nation develops its infrastructure in preparation for the 2022 Fifa football World Cup. The firm recently picked up a £50M contract to provide engineering consultancy services for local roads and drainage projects in the south of Qatar.

Two new contracts are on the horizon as part of government client Ashghal’s massive £8.7bn programme to develop infrastructure, local roads and drainage, a process Morriss describes as the “systematic transfer of knowledge” as Qatar grows and develops as a global power. The result of all this business is that Aecom is investingin its staff and skills. The firm took on 175 new graduates this year, compared with just 25 in 2009. It and has stated its commitment to drive training and push salaries. As a result, Morriss says the firm’s ongoing staff surveys are now starting to record more contentment.

It is a start, he says, but quickly points out, remains very much a work in progress. One that he clearly looks forward to progressing.

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