As Mark Farmer suggests, the demise of Interserve is confirmation of an outdated and inefficient method of construction and procurement. They became, as others in the same sector have and seemingly will continue to do, businesses that chased turnover at the expense of profitability, hoping that things would even out in their favour.
For those that don’t know, Interserve started it’s life as a proper construction company – RM DOUGLAS. They built the M42, the Convention Centre in Birmingham, the NEC and many overseas projects including complex projects in the Falklands and Saudi Arabia.
It’s founder, Sir Robert Douglas, must be spinning in his grave.
He was a builder through and through. He started quite literally as a man with a shovel and a barrow. His innovative break came when he borrowed heavily to buy the first mechanical digger. Whilst his competitors were pricing digs based on manual work, he consistently under cut and out performed because of his investment in technology.
But they were contractors. Not Management Contractors. As most business owners will know, the moment you stop watching the pennies you are doomed. He would check every invoice by hand. He would challenge every price increase. He made sure that everyone cared and worked as hard as he did.
They had a joiners yard. They owned their own plant and machinery. They employed everyone directly. They were contractors that managed, not management (or main) contractors.
When he handed the reins over to his son, things began to change – largely because his son didn’t share the passion. An “Executive Staircase” was installed at their Head Office in George Road, Birmingham so that the “elite” no longer had to walk through the main offices where the work was being done. Out went the staff canteen where everybody mingled and in came an Executive Suite.
Assets were sold and accountants, not builders, took over the business. It was acquired by a Dutch entity (Tilbury Douglas) and then in due course morphed into Interserve following a subsequent sale. No longer did it own plant. No longer did the people running the business have a background in construction. I challenge you to look and find someone on the Main Board who has any history of the industry.
And so Interserve entered the same foray as others (Carilion, Kier, Mitie and so on) who chased guaranteed turnover (with hopefully secure profit margins) in order to delight and appease their shareholders.
And then they ceased being a construction company. They became a management company. They cut grass instead of building buildings. They won projects and contracts based upon only their purported expertise in being able to manage both processes and contracts.
The have become the latest in the line of Management Contractors who have failed because the can do neither of those two things. They could not Contract and they most certainly could not Manage.
This blog was written by our CEO, David Stapleton.