Laing O’Rourke’s new chief operating officer Tony Douglas has just completed his first 100 days with the company.
When Tony Douglas announced in July he was quitting as chief executive of Heathrow Airport to join Laing O’Rourke, there was a collective construction industry intake of breath.
Why was he going? And more importantly, why was he leaving one of the industry’s leading clients to work for a contractor?
Admittedly Laing O’Rourke is a great contractor but wasn’t he giving up a position where he held a lot of sway and authority to become just one of the guys who did others’ bidding?
Well, 100 days into his new role as Laing O’Rourke, chief operating officer Douglas is happy to explain his thinking and reveal some of his new employer’s plans. And not surprisingly, the plans involve holding a great deal of sway in the future.
With the buying power of Laing O’Rourke’s 8.3bn forward order book and a reputation for quick on their feet innovation, Douglas intends to turn the business into an operation to rival and even eclipse politically influential giants like Bechtel.
It had to be an ambition like that to tempt him away from BAA and its new owner Ferrovial - even to work at all.
At only 44, a successful business career means he doesn’t actually need a job, he says. “But I’m not wired that way. What I do have though is a degree of liberty that allows me to do what I want to do rather than what I have to do.
“I could have been the CEO of a number of publicly listed companies of scale and repute. Or I could have stayed with BAA in an environment I loved with a passion,” he adds. “But I wanted to be in an environment where I can truly innovate and be entrepreneurial.”
Sir John Egan hired Douglas into BAA to be his muscle in getting the construction industry to adopt the principles of Rethinking Construction. Most of those, he says still elude everyone.
“There is an opportunity here to say: ‘right, how do we become the real innovators in UK construction? How do we continue to drive an agenda that brings a real edge and makes a difference?’” he says. “Is it a crusade? Yes probably.”
Douglas got to know Laing O’Rourke and its chairman Ray O’Rourke while working on the Terminal 5 project where he was managing director for three years. He liked the qualities of the business and they were instrumental in his decision to move over to run the company in the UK and Europe.
“It is important to me what the environment feels like. Laing O’Rourke feels like a very special environment. It has, I believe, the UK’s best Innovation centre. That’s one of many things that convinced me this is an organisation that has the capacity to be different,” he explains.
“Laing O’Rourke is a very different business to BAA. Ray is inspirational and there is a very different business model. I call it the Power of Now!” says Douglas. “The only other place I have seen it is McLaren Mercedes. There is such an energy and a purpose in the business that if you decide to do something, you do it.”
Is that because Laing O’Rourke is still in private hands and not in hoc to the City? “Yes, that’s an influence,” he says. “But I think if you have the right values and confidence, that should not be a limiting factor. Ray, and I and the senior team have high level strategic discussions about the business and our customers. If we decide to do something, five minutes later we’re on it.”
In many businesses, he says, if you want to instigate change or start something new, you have to go through the rigmarole of committees, board papers, long discussions. At the root of that is the fear of risk he says.
“But risk is a function of competitiveness. It’s always there,” he explains.
“Lots of businesses are in denial about risk. They put in all sorts of complex processes and endless levels of review but at the heart of it they haven’t embraced risk.”
He says that as a client he saw this behaviour all the time and watched businesses with no appreciation of the risks they were taking on go to great lengths to protect themselves, nevertheless.
“I embrace risk,” he says. “Once you’ve done that, the important thing is how you manage your organisation to deal with it.”
There are a few issues on the risk agenda at Laing O’Rourke at the moment. Top of it Douglas says, is talent - the same problem everyone has, particularly in the competition for engineers.
“We harbour huge ambitions in terms of the scale and quality of our earnings. And we will compete with and outperform our competitors in getting the best talent to achieve them,” Douglas affirms. “We have the biggest graduate sponsorship programme by a country mile; strategic alliances with 12 universities; and our graduate intake this year was 249, largely anchored in engineering, predominantly civils.”
Laing O’Rourke’s involvement in the CLM consortium which is programme managing the London Olympics is a big help in attracting good staff, Douglas points out.
“There is a huge depth of talent that wants to be associated with the Olympics,” he says. “It is a massive opportunity now, a great vehicle for bringing people into the company.”
Douglas is one of three on the CLM board and not surprisingly the 2012 Games are also on his risk list.
“It’s an amazing project, mission critical for the UK. It will open on time and it will set out what we can do. So does it cause me sleepless nights – no.”
His firm’s involvement in CLM is an obvious signal of an intention to move the business up the construction food chain. Over the last three years, Douglas points out that there has been dramatic change in the projects Laing O’Rourke has taken on.
“Our forward orders are at 8.3bn and we have complete or significant design responsibility for much of that,” he says. “We are a strategic business provider. We want to understand our clients’ businesses and deliver a good solution.
“We are no longer a conventional contractor. If we were still that business I would not have been sat here.”
He explains that the goal is to move upstream to get more involved in design where he reckons 80% of the cost is locked, most waste is created and where the value of opportunity exists.
“I want clients to start with me, not put effort into working with others and then engage us in a two stage bidding process that is a complete pantomime,” he says.
“It’s not the Bechtel model. It’s more sophisticated. Does it inhabit their space? Yes it does.”
Laing O’Rourke has a reputation of keeping as much of the work as possible in-house and the plan is for that to continue, but with some strategic framework alliances in place.
“We are more vertically integrated than most, yes,” Douglas agrees.
“That’s key to the Power of Now! We have a great number of skills to call on from M&E to concreting to piling. You want it, I’ve got it.”
To fill in the gaps, the company has established formal strategic alliances with key consultancies in a process called Building Constructive Relationships by Design. Firms like Arup, WSP, Gifford and soon Halcrow are in the family.
“Construction is too reactive at the moment. We struggle to have the big conversations with our clients,” Douglas says.”
That is because we are always at the back end of a conversation someone else has had, working on an idea someone else has hatched. Not anymore. Well not at Laing O’Rourke, he says.
Tony Douglas CV
August 2007: Becomes chief operating officer Laing O’Rourke
2006-2007: Chief executive officer, Heathrow Airport, member BAA board
2003-2006 Managing director, Terminal 5 for BAA
2002-2003: Group technical director BAA
1998-2001: Group supply chain director BAA
1998-2001: Non executive director, Kenwood plc
1996-1998: Group manufacturing and logistics director, Kenwood plc
1990-1996: BAe. Roles included product process director and manufacturing director, regional aircraft
1979-1990: General Motors - rose from apprentice, to industrial engineer and eventually industrial engineering manager at Delco Electronics