Page 16 - Deconstructing risk
P. 16

Complex operating models in
a global business landscape

While construction firms relish the opportunities                                         the workforce. The counter argument
afforded by global markets, managing labor across                                         is that subcontracting can help
multiple territories remains fraught with difficulty                                      lay off certain risks, provide short-
                                                                                          notice resources and bring in expert
T he construction industry is a            operations remain complex and                  capabilities. It allows companies to be
          key economic driver and source   companies expand in to new regions.            more flexible, can make it easier to
          of growth. As urban population                                                  comply with local regulations, and can
centers boom, huge investments in          Complexity of the construction                 provide skills a company may not have.
infrastructure are necessary. New          labor market
megaprojects are announced virtually       According to Global Construction                  “We try to work with subcontractors,
every week. Construction companies         2030, the global construction market           as each subcontractor is a specialist
must ensure their capabilities develop     will reach $17.5 trillion by 2030, with        in their own field,” says Renaissance’s
in line with the rate of globalization,    an annual growth of 3.9 per cent.              Toroglu. “This is good because you
and that efficiency remains a top          While there are many factors at play,          get a specialized workforce for each
priority. But construction operations      a rise in the urban population leading         discipline. We also do direct hiring.
take on additional layers of complexity    to increased housing needs, aging              Sometimes you need it because you
as global networks develop and the         demographics and emerging markets              never know if the subcontractor is
workforce is increasingly spread           have considerably changed the                  going to fail during the course of a
across many sites. The results of          construction landscape. As the scale           project. Other than that, we also try to
our Risk Index show, however, that         of projects gets larger, companies face        maximize the local workforce in each
executives are less worried about risks    increasingly complicated and difficult         country that we work. This helps us
from complex operating models in a         demands for labor beyond what is               to transfer our know-how, increase
global business landscape compared         available from a direct workforce.             employment and help the economy.”
to the other megatrends.
                                              “Because of globalization, complex             More problematic for construction
   “The contracts that our customers       operating models are very much linked to       companies is determining the balance
are awarding are becoming ever larger,     talent,” says Daniel San Millan, corporate     between contract labor and direct
more complex and demanding and             risk manager at Ferrovial. “You have to        hires. “One issue that the industry is
that is exactly what we seek,” says        have a rough balance of how much talent        grappling with is the degree to which
Costain’s Bowen. “We deploy our highly     we have to send away to other countries.       the work is subcontracted or self-
professional teams and a controlled        That’s a key issue.” He adds that correctly    performed,” says Bowen. “That is a
environment to deliver the business        calculating resource demand is a major         risk, because we have teams of people
benefits out of this complexity – this is  struggle for companies. And resources go       trained by us, doing tasks repeated
our unique selling point.”                 far beyond mere headcount. Getting the         throughout the process, so we very
                                           right skillsets and skill levels at the right  much are taking back responsibility for
   The biggest risk in this megatrend      locations are equally critical.                the delivery of the outcome.”
is “complexity in the labor market:
dependence on subcontractors                  “With the current level of                     As operations gain complexity
or contract labor”. It is also ranked      infrastructure work,” says a major             and the industry becomes more
seventh for the industry overall and       Australian contractor, “a significant risk     accustomed to using contract labor,
made the top ten for the UK, North         is resourcing (capability, capacity and        the priority for construction players to
America and CEEMEA. Contract labor         workforce management). When you’re             streamline the management of their
carries its own set of risks, including    in buoyant times, pricing is more difficult    workforce has grown.
increased costs, new areas of safety       with employee and industrial relations
risks and a potential reduction in         risks also back on the agenda.”                      We seek complexity
overall skills and knowledge. But the                                                      because that’s our unique
construction industry has always              Subcontracting is a challenge to             selling point
relied on subcontractors, and will         effective management, making it
continue to do so as workforce             more difficult to maintain adequate                                      —Tim Bowen,
demands become more volatile,              productivity and quality levels and                                      	 Director of Strategy and
                                           reducing the degree of control over
                                                                                                                       Business Development, Costain

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