The surprise exit of two of its leading lights this month has rocked the contractor but what long-term impact will the departures have on Skanska’s London pipeline and client relationships?
The departure of the driving forces behind Skanska’s London commercial business this month shocked the construction industry.
Within the space of two weeks, the company’s building operations executive vice-president Paul Chandler and London commercial managing director Paul Heather had quit, creating two gaps in the business that urgently needed to be plugged.
During their time with Skanska, they have helped deliver iconic projects such as the Foster and Partners-designed 30 St Mary Axe, known as the Gherkin, and one of London’s tallest buildings, the Heron Tower.
The duo have a reputation for being close to clients and have continued to rack up wins in London this year, including the second phase of the Bower, Helical’s £250m mixed-use scheme in Old Street, and the 9,800 sq m Copyright Building – Skanska’s first job with Derwent London.
Skanska UK has attempted to reassure all concerned by quickly announcing Mr Heather’s successor, promoting commercial director Steve Holbrook to the role.
However, questions remain over how well prepared the contractor was for their departure, what measures it is putting in place to reassure nervous clients and who will be taking on Mr Chandler’s role.
Sudden and surprising
“It was very quick in reality for me to get my head around where things are going now,” Mr Holbrook tells Construction News.
Skanska’s Steve Holbrook
A chartered quantity surveyor by background, Mr Holbrook has been with the company for more than 20 years – the last five of which he spent as commercial director reporting into Mr Heather.
Skanska’s UK building business is split between the London commercial operation, now led by Mr Holbrook, and its national construction business, headed up by managing director Terry Elphick. Above the two MDs sits Mr Chandler’s as yet unfilled role, which in turn reports directly to Skanska UK chief executive and president Mike Putnam.
“It doesn’t look like there’s been an easing out or it’s been predetermined and there’s an easy succession”
Mr Holbrook and Mr Elphick say the news broke quickly, with both of them finding out just 24 hours before the company and the wider public. “Without a doubt it was a shock,” Mr Holbrook says, while Mr Elphick describes how he also felt “a bit of disappointment” upon hearing the news.
Senior-level figures outside the business also admit to being surprised. “It looks as though it was out of the blue,” one contractor source says. “It doesn’t look like there’s been an easing out or it’s been predetermined and there’s an easy succession.”
Another contractor source says Mr Chandler had been looking for a new challenge, and that moves to offer him an international role within the Skanska group hadn’t appealed.
Could the departures create a void in the business and put a dent in its London reputation? Mr Elphick insists not: “We’re a big business, we’ve got around 5,500 employees and people come and go. But we’ve got a lot of very good people to fill in and Steve [Holbrook]’s one of those.”
“We try to make sure we have got a good pool of talent so when things like this happen we can move very quickly to fill the gaps”
Terry Elphick, Skanska
Mr Holbrook joined the business as a trainee quantity surveyor through a graduate sponsorship programme and worked his way up to the sudden promotion last week to lead Skanska UK’s London commercial business.
“We do a lot of talent and succession planning,” Mr Elphick says. “For all of the roles in the business, all the way down the organisation, we try to make sure we have got a good pool of talent so when things like this happen we can move very quickly to fill the gaps.”
The search continues
Of course, one gap remains very much open.
Skanska is on the hunt for Mr Chandler’s replacement as buildings vice-executive president – a role which Mr Elphick hints he has his eye on, saying it could “possibly” be one in which he’d be interested.
He says the process could take a couple of months, adding that it would “almost certainly” be an internal candidate that bags the job, given Skanska’s reputation for promoting from within the business.
Mr Elphick would certainly fit the bill. He’s been with the company 27 years, having initially joined the contractor’s London commercial business. He’s worked for a number of Skanska’s divisions, including its M&E company SRW and its PFI business, and for the last seven years he has been part of Skanska’s senior management team.
“It’s extremely odd and very coincidental that the two most senior people are leaving at the same time”
There’s no question there are experienced and talented members within the company. Despite this, some clients remain concerned, with questions over why there was not one but two senior departures in the business at the same time.
“It’s extremely odd and very coincidental that the two most senior people are leaving at the same time,” one client mused.
But for Mr Holbrook, while sudden, their departure wasn’t that surprising. “Because our staff are highly in demand [from head-hunters] you prepare yourself occasionally for something that might happen,” he says.
The team is sought-after, with many clients getting on well with Skanska’s senior management.
The company has picked up some major jobs over recent years, including the mammoth second phase of Battersea Power Station, the contract for which is currently worth around £1.15bn.
It replaced Bouygues on Great Ormond Street’s £65m Zayed Centre for Research project in June, was one of six longlisted for a new NHS hospital building programme in September, and is bidding for Sellar Property Group’s retendered Fielden House scheme.
Mr Holbrook says he and UK chief executive Mr Putnam have already visited several of their biggest clients to assure them “it’s business as usual”.
However, inevitably both clients and contractors are asking whether there could be anything more at play.
Mr Elphick is quick to dismiss this, saying the timing of the departures was “completely coincidental”. “The fact they are going to two very different businesses confirms that. If you’re alluding to underlying issues in the business, I’m certainly not aware of them. It’s just one of those things,” he says.
“Yes an individual has left, but the teams behind still remain stable and strong, and we’ve shown that over the last five years that we are able to deliver in that period”
Steve Holbrook, Skanska
Skanska reported an increase in pre-tax profit for the year to 31 December 2015 to £40.6m, from £38m the year before. It is also one of the few contractors with margins of 3 per cent, which – for an industry where 0.5 per cent margins are not uncommon – is seen as an impressive achievement.
Mr Holbrook adds: “Yes, an individual [has left] but the teams behind still remain stable and strong, and we’ve shown over the last five years through the recession that we are able to deliver. We’ve got teams on all the jobs and the way we tender and look at the opportunities we ensure that we’ve got teams available.”
Loyalty in the spotlight
Mr Chandler and Mr Heather racked up more than 50 years between them and are both well known and respected in the industry.
“The Skanska guys have got a very loyal ring around them and are difficult people to pull out…” one source says. “So now that [Mr Chandler and Mr Heather] are gone, will they feel less loyal [when faced with] any future approaches from a third party?”
“No,” Mr Holbrook says bluntly. Both managing directors seem unfazed by this. “Look at the loyalty and service that [our] people provide,” Mr Holbrook adds. “I don’t think two members from a 5,500-strong company leaving is going to set hares running and people running to other companies straight off.”
But what about Skanska operation directors who have worked with Mr Chandler and Mr Heather for years – could they be tempted to join their old bosses?
“[Both Pauls] were very loyal to Skanska. Yes they have decided to leave it, but they are going to new businesses and need to understand what’s in front of them,” Mr Holbrook says.
Mr Chandler is moving to Wates as the managing director for its construction business, replacing stalwart Dave Smith, while Mr Heather has joined Sir Robert McAlpine to head up its London regional business.
“Who’s to say they won’t have good teams at McApline and Wates?” Mr Holbrook asks. “I don’t see that as a risk.”
For him, the two departures – however senior or sudden – certainly won’t rock the business in the long term.
“You pick yourself up, you carry on and you move on”