Investigative Report on the Operation Functions of Mouchel Group PLC

Investigative Report on the Operation Functions of Mouchel Group PLC

1.0 Introduction and Methodology

The key aim for this report is to develop an understanding of the context within which Mouchel operates; to realise an examination of the operational functions used within the company and ultimately how this is affected by the current management restructuring. Focusing on the construction sector within the UK, an overview of strategy and the influence of the current changes will be objectively compared to theoretical models to analyse the risks the company and perceptibly the engineers may face in the future. The selection of data has come primarily from the company itself through annual reports, although other sources such as journals and articles have been utilised to offer theoretical models and analysis to further the investigation.

2.0 Company Overview

As an international consultancy based organisation, Mouchel operates substantially in the construction and development sector, and consequently has had to meet the concept of sustainability; both with relation to the external projects it completes and the internal company environment. This has resulted in many operational changes and mirroring the growing trend towards a ‘service economy’(15) in the UK, has established in contribution to its core product(14), a greater service output. The majority of the core projects the company undertakes are considered high variety, low volume; however it can be argued that through the segregation by divisions within the company, projects have a lesser variety component.

2.1 Company History and Events Leading to the Current Changes

2.1.1 Early History and the Influence of the Private Sector.

Founded in 1897, Mouchel has been predominately concerned with delivering engineering projects. However the increasing current involvement of the private sector in UK projects, shown by the introduction of the Private Finance Initiative (PFI) in the 1990’s, has required Mouchel to develop an advisory role(1), in order to compete in the many government sectors which are affected by the use of this procurement method. The initial work with local government is the first point where delivering a service rather than simply an engineering product is most clearly seen.

The market within which construction projects are moving from the public sector to the apparently more stable private sector(10) is now at risk of saturation(6). Therefore Mouchel has to militate against the risk of other competition entering the market. The difficulty stems from the ability to maintain company growth rather than simply surviving(6) in the current climate and this is achieved through focusing on core services. A substantial market share(2) in highways and water has enabled the company to maintain a strong position that will ensure progression.

2.1.2 Recent Mergers

The merger with Parkman Group plc in 2003(2) combined the expertise from similar consultancies to maximise presence within the government sector. The merger resulted in many acquisitions which diversified the company’s range of services and promoted the necessary organisational growth; thus increasing staffing levels considerably. More recently the acquisition of HBS in 2007(5) further reinforced the outsourcing division and combined with rebranding, demonstrated that Mouchel were keen to reinstate a transition into the business sector of construction.

2.2 Current Operational Landscape

As Mouchel has faced the recession and there has been an apparent suspension of investment in construction projects, service divisions such as outsourcing, have overtaken as a key priority; altering the strategy of the company overall and inherently transcending the operations management. The integration of manufacturing and providing services within the company brings further implications; the implied concept of service output being superior to the production of projects(15), presents difficulties when considering processes in the company. On a global scale the legal and cultural differences also need to be ascertained in order for coherent communication of information; this is most widely seen in the current management restructuring taking place.

3.0 Management Restructuring

3.1 Change in Company Structure

3.1.1 Cost Savings and Efficiency

As a result of the change in market and type of projects being undertaken, Mouchel is currently carrying out a large scale restructuring exercise(3) with the aim of reducing base costs and maximising the structural organisation of the company to ensure efficiency. This has been achieved by substantially reducing the senior management tier by 20%(3). This combined with the significant investment in new systems, emphasising the importance of technology in engineering firms, has demonstrated the dedication to providing the same standard of services but using less resources. Here the role of innovation in the transformation stage(14) is evoked and is vital to the validity of this linear model to produce the same level of output.

It is estimated that the restructuring will provide a yearly cost saving of ?25 million and this may be indicative of the ‘gap based’ approach(6) to process management, where what is required by the company has been measured against current achievement and consequently modification of the infrastructure, in terms of staff, has been used in order to achieve it.

3.1.2 The Role of Engineers within the New Structure

Here efficiency has driven the restructuring through the analysis of job roles and the contribution they add to the company. This evokes the idea of expertise and value added management(6) as a break to more traditional management techniques, where structural hierarchy(15) was emphasised. The functions previously completed by the senior management tier now have to be transferred to engineers, distorting the priorities of staff. With some management roles being made redundant, other grades of management have been ‘rationalised’(9) so that they possess greater responsibility. This questions the range of skills required by the management team and if the way in which future projects will be managed will maintain the same level of organisation or if areas less obviously associated with service will be neglected.

3.1.3 Replacing Staff through Innovation

Innovation is of high priority in order to achieve efficiency targets set by the company(14) and clients and is key in increasing productivity of workers(15).The recent hard shoulder project on the M6(2) shows the use of a more service based solution, where more traditional construction techniques would have been previously used. This conveys the difficulty to consider empirically the operations of this division as a process where innovation is utilised; the concept at its base level is to move away from standard techniques(14), undermining the traditional nature of processes.

3.2 Impact on Projects

3.2.1 Relationships between the Company and Client

The widening of skill sets required by the restructuring emphasises the development of interpersonal skills(9) as a key priority as the engineers will have a greater customer facing role. These implications will require further development of human resources and a change to the recruitment process within the company. However considering Garvin’s perception(9) of the types of processes in a company, it appears the more administrative processes have been most reduced, which while they are not customer facing, do have a vital function and suggests that possible control throughout the company may suffer as a result. This also widens the gap between product and service as effectively the ‘boundary spanning function’(14) has been removed.

Network theory(13) can then also be applied to the restructuring to consider the dialectic relationships within the company. By altering the people and processes involved in the management of projects many more risks beyond that of efficiency are applied. The restructuring tends to horizontal organisation(14) where expertise is more highly valued than the chain of command.

3.2.2 Communication and Project Control

The radical redesign of the management structure within the company defies many of the theoretical perceptions of process control(8). Rather than improving the existing process, they have implemented a new one in which there is no existing benchmark(6), and therefore no empirical measure of its success in the short term. This is further complicated with the contribution of innovation and the attempt to consider the success of restructuring through cost effectiveness(3). This contradicts the move to a sustainable company, as the idea of risk is evident and while restructuring may prove successful there is an increased chance of failure that in an incremental quality movement approachcould have been managed more easily.

4.0 Sustainability

4.1 Company Strategy

Mouchel claims three core areas for consideration of sustainability(3) ,making many commitments within these areas, most falling into the PESTLE model(Fig 1) of thinking, and substantially addressed by the social, environmental and economic parameters with an appreciation of the political and legal limits. The pressure to evolve to a sustainable company is the most challenging and the effect the management restructuring will have on this goal requires consideration of Corporate Social Responsibility (CSR) policy(3).

4.1.1 Divisions and Technological Strategy

The more traditional technical engineering divisions are contrasted with the development of strategy services and have shown a move towards commercial commitment. These new macro transformation operations have shaped the company but also developed many new issues. The definition of output as a product or service(15), is clearly seen in the regulated industry division where the decline of operations in the Middle East, has resulted in the company providing energy assessments to commercial utility suppliers(1) in the UK in order to maintain a profit. A previously technical role has been transformed to a more service based product and emphasises clearly the resource risks. The resource now being transformed is not obtusely materials but information(14), especially with the increased use of technology requires a different strategic process. The use of technology(6) is an important structural decision that compliments restructuring, although there is little consideration of the effect this will have on the key engineering roles.

4.1.2 Retention of Staff

Retention of staff is of paramount importance to the company’s sustainability demonstrated through the rigorous personal development process and its commitment to the ‘never stop improving’(3) scheme. However the recent restructuring that has occurred has instilled perceived disharmony(5) with the more experienced employees and has been seen as a main priority to address within the coming year. However, what is seen as hollowing out(2) of management functions is intended to provide greater opportunity for mobility and communication. This promotes the ability to progress a career within the company, hopefully developing in the long term a more committed work force.

4.2 Project Management

4.2.1 Client Relationships

Across all divisions there has been a need to extend boundaries in order to maintain productivity within the company; often to a more commercial client base as previously shown. The company has always relied on long term relationships(4).This has been challenged by the restructuring to focus on retaining relationships as well as acquiring new clients as the infrastructure of the company changes.

The high bid win rate previously established by Mouchel(2), promoted a successful reputation for superiority, in part synonymous with its structure and organisation, which provided strength when competing for new tenders. This same reputation informs the current strategy to extend its services into other sectors, where the same principles can be applied but modified to different client bases; although the impact of restructuring on this reputation has not yet been realised.

4.2.2 Project Hierarchy and Line Management

Considering the management of clients in the perceived use of long term relationships, the larger clients are assigned account managers(2) to ensure satisfaction with the company. This adds another layer to Naylor’s perception of the typical managerial structure(15) and develops a rather more web like arrangement, where the project and account management overlaps. In this case it is difficult to determine accountability and responsibility, and may lead to difficulty with communication within the different facets of the project delivery. Project success is largely measured through the use of financial KPI’s(2) and the use of remuneration of less easily quantifiable targets conveys a distortion of true value. The role of engineers in this web may also get lost and the communication between the different divisions of the company is vital in ensuring information is not lost or misinterpreted.

4.3 Long Term Projection

4.3.1 Defining Principles and Mission Statement

Considering how the strategy of the company is portrayed through the defining principles expressed by the mission statement, the culture and intentions of the company can be determined,

‘At Mouchel we improve day-to-day life for millions of people. We help to transform essential public services and to sustain vital infrastructure…’(2)

This is the primary function stated by the company and conveys a sense of top down strategy(14) which, as an apathetic mission statement, is aspirational without committing entirely to the processes that will be used to achieve this. The construction sector is strongly evoked and the influence of sustainable design can be clearly seen, however the main issue raised by this statement is the association with public services. The private sector’s influence on government projects will have a continual affect on the ability to meet this goal, and defines the need for change within the company. The principles also address the working ethos of the company;

‘At Mouchel, above all else, we show a passion for success, a spirit of adventure, and have integrity at heart.’(2)

Again it can be argued that the statement is vague, however it clearly depicts the operations management style of the company. However when compared to Kast and Rosenzweig’s(11) concept of the external business environment, it can be interpreted that the lack of definition of goals(Fig 2) demonstrates that the transitory nature of the company conveys uncertainty as to its future output. This may also suggest that there are overlooked uncertainties within the company’s key processes.

4.3.2 Rebranding of the Company

The recent rebranding as Mouchel is consistent with restructuring, although conveys the reputation of the company as one of the empirical risks associated with change(8). As part of the support strategy the stakeholder map and categorisation matrix(Fig 3) must be established early(15) to ensure they can be well managed; especially those considered adverse to the proposed changes while maintaining high influence within the company. This is achieved by focusing on communication between all divisions and levels, especially externally with stakeholders and clients.

4.4 Supply Chain Management

4.4.1 Core facilities and Wider Network

Mouchel aims to maintain core facilities within the company(2), looking to forward integrate projects(14), so that they evolve through restructuring to a customer facing organisation. However to reduce the possibility of a ‘closed system mentality’(12) Mouchel recognises the benefits for both themselves and the clients through the use of supply chains to maximise projects. Although suppliers remain outside the ‘boundary of control’(10) the ability to select contractors based on competitive factors(2), ensures relative reliability without commitment for Mouchel, and shows a flexible network(7). However through this demand based process(14) the loyalty of the supplier is not obtained and therefore limits the dependability of the relationship between the company and supplier.

4.4.2 Network Monitoring and Quality Control

There are more than 1000 first tier suppliers and contractors(2) in the external supply network as well as those inherited through joint venture projects, which is managed through the use of an approved vendor database(2). This establishes the most qualified supplier for each subcontract, and it can therefore be assumed that quality of the service they provide is high; the competition between contractors has been further driven by the sustainability focus of the company with the introduction of sustainability criteria to the assessment(2).

4.4.3 Issues Associated with the Network

The holism(10) of this kind of network is substantially determined by the way in which the parts of the chain interact. Considering the long term projection of the supply chain as a function of success, it substantiates an approach opposed to the paradigm of silo thinking(10), where all parts of the network are linked together. However this is contradicted by the way in which the divisions of the company are relatively isolated, which stereotypically occurs substantially in the construction sector. By redesigning the structure of the company it creates greater capacity of the in house processes to consider the scope and the wider achievements of the project, through improved communication.

5.0 Conclusions

5.1 Impact of Current Restructuring

As the salient cause of change within the company, the restructuring has implemented many new processes and technologies that have been put into place in order to develop a company which will survive the recession and growing pressures of CSR, however there is little evidence of consideration of all the long term effects that may arise as a result. While change may be unavoidable, the structure which personifies the company has been radically altered, and may cause issues associated with reputation and consistency, as well as internal aspects associated with its own workforce. While the company appears to be financially viable for the future, the softer side of the analysis has been neglected and may cause a dichotomy between strategy and implementation.

Furthermore, it is clear that long term relationships are the epitome of the company, which develops the importance of account management and adds another conflicting dimension to the company’s operations. In order to meet the expectations of the client, communication and feedback is essential and with the increasing service output of the company it is important to predict the impact that the restructuring will have on these relationships. It is also vital to consider the apparent mobility of the company structure and if it will manifest a culture of innovation, which is clearly required in order for the company to maintain growth, or a sense of instability that will damage the bond of these long term relationships.

Looking at the future of the company, Hayes and Wheelwrights stages of operations appears to suggest Mouchel is in the transition stages of 3 and 4(14). The increasing impact operations management has within the company is driving the success of projects, however it remains to be seen if the company is redefining the industries expectations(14) or just that of its customers. The transition between service and product delivery is not clearly defined, and it is questionable as to the consideration of the contributions of operations management over this change.

5.2 Final Conclusions and Recommendations

Therefore Mouchel can be seen as an aspirational, innovative company, challenging the perceptions of the traditional construction sector consultancy; opting for diversification and control through in house processes to advance the progression of the company. However it remains to be seen if the instigating factors for change and the recent required optimisation of operational strategy, have evoked the necessary consideration of all aspects of the company that will be transformed. A holistic and rather human analysis would suggest that the difficult nature of relationships cannot always be predicted though theoretical models or forecasting in the long term. For Mouchel the different stratum they inhabit centre on relationships, both externally with clients and internal with staff and suppliers, and is therefore uncertain. It will be interesting to see how this will develop and to assess the future role of engineers within this new arrangement, due to the new dexterity that will be required of them. Expanding this to the construction sector as a whole, it is possible that the restructuring of consultancies in this way, may alter the core perspectives of the commercial industry and conceivably the fundamentals of engineering.

References

(1) Interim management statement, Mouchel group plc (2010)

(2) Annual report and accounts, Mouchel group plc (2010)

(3) Sustainability report, Mouchel group plc (2010)

(4) Reports and accounts ‘building great relationships’ Mouchel Parkman plc (2007)

(5) ‘Mprint’ in house publication (2007)

(6) Schmenner.R.W & Swink.M.L, ‘on theory in operations management’ Indiana University (1998)

(7) Cravens.D.W & Piercy.N.F &Shipp.S.H, ‘New organisational forms for competing in highly dynamic environments: the network paradigm’ British Journal of Management (1996)

(8) Bateman.T.S & Zeithaml.C.P, ‘Management: function and strategy’ Irwin (1990)

(9) Garvin.D.A ‘The processes of organization and management’ Sloan management review (1998)

(10) Prokesch.S, ‘The sustainable supply chain’ Harvard business review (2010)

(11) Kast.F.E &Rosenzweig.J.E ‘general systems theory: applications for organisation and management’ academy of management journal (1972)

(12) Thompson.J.D, ‘organizations in action’ McGraw hill, New York (1967)

(13) Mitleton-Kelly.E, ‘complex systems and evolutionary perspectives on organisations’ emerald group (2003)

(14) Slack.N & Chambers.S & Johnston.R, ‘operations management’ Pearson education 4thed (2004)

(15) Naylor.J, ‘Introduction to operations management’ Pearson education 2nded (2002)