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Tyler signals Balfour’s best way forward

Ian Tyler has maintained Balfour Beatty’s position as the UK’s leading contractor but his decision to go on a shopping spree for regional contractors has turned heads.

Not so long ago, whether Balfour Beatty was the UK’s biggest contractor was debatable. After two years in the chief executive’s role, Ian Tyler can reflect on Balfour’s unassailable position as the industry’s top player.

“We are the largest construction company in the UK but not the largest in Europe but I don’t think either matter,” he says. “We are not looking to be number one in the UK or the largest in Europe. We have to produce value for our customers and our shareholders of course but what is fundamentally important is that we are a leader. When you are a market leader, you have the capacity to sustain that position because, first and foremost, you have the ability to attract the top managers and be more attractive than smaller players. You can also attract the best players in the supply chain and get the best access to your clients.”

A change of tone

That sounds like so much City-speak and is not dissimilar to what his predecessor Mike Welton would say. The pair worked together for nine years but Mr Tyler is a far easier interview candidate than Mr Welton, who would never digress from his script.

“We are very different. For a start Mike loves Chelsea and I don’t know the first thing about football,” laughs Mr Tyler. “Mike came from a very different background to me but we shared a similar view to how the business should be run and business in general. There was a lot of similarity in approach and what makes a successful management team.”

Those similarities are why the handover between chief executives was so smooth as to be hardly noticed. Mr Tyler’s style has turned heads though as Balfour moves firmly onto the acquisition trail. Birse was snapped up for its regional civils arm then the big move for the contracting arm of US group Centex. Six months on, Mr Tyler’s focus has returned to regional contracting and maintaining a market leading position.

He adds: “That was why we bought Mansell in 2003, which this year will turn over £800 million. UK regional building is a good market. There are genuine differences between companies at that level and companies get very close to their customers. We’ve gone the same way in civil engineering. That’s why we bought Birse. It’s less exciting for the national media but it’s some of the best performing parts of Balfour Beatty. I feel confident we’ll see further acquisitions in building and civil in the next few months.”

Mr Welton would never have made such a claim. Mr Tyler is certainly more open than his forerunner and, though not indiscrete, is happy to discuss his smaller peers.

He is aware that Balfour’s position is not guaranteed and in sectors such as commercial the firm is an also-ran. He says: “If you talk to a major property company, their focus is not on social housing [where Balfour is a big player through Mansell] but on the London commercial market, and the big players there are the likes of Sir Robert McAlpine or Bovis.”

Risk versus reward

Balfour’s absence from that market is on purpose. He explains: “What’s the right margin is at the core of our industry and I often talk to our non-executive directors about what is an acceptable margin. It depends on the projects but the commercial market is where the return against the balance of risk is the most out of balance. You have to ask yourself: ‘Do you have the right outlook on risk?’.”
Mr Tyler is confident Balfour has and he will not be rushing the business into risky projects or situations. He wants to distinguish Balfour from its challengers by allowing those beneath him to do their jobs. This, he says, cannot be done with a rod of iron.

He explains: “Individual managers come and go. We have to manage that and create an environment where they want to stay and where we can develop a cadre of managers to help us meet our clients needs.”

That is how he intends for Balfour to retain its position as a market leader – a tag that Mr Tyler prefers to being number one.

He adds: “Managers work best in our industry when they can make the decisions that they think best. We are a central management team and have to be brave and allow our managers responsibility to make these decisions. We have to set the boundaries but if I set the tone and unnecessarily limit what our managers need to do, we will not be successful. Within the limits of our organisation, we have to have the freedom to be ourselves.”

Wide appeal

After a rare but brief pause for reflection, he adds: “I think we’re a pretty broad church. All our managers have to be strong but some of our managers are still introvert and some extrovert. They don’t all come out of the same mould. As a company, we need a strong financial framework and a competent management team. Everything else is about assembling that process. What we are is a financial framework.”

Mr Tyler feels Balfour has flourished since its old parent, cable operator BICC, was sold in 1999. He adds: “Balfour was reasonably independent within BICC but never able to fulfil its potential. We were only able to develop a longer-term vision for Balfour when we were free of BICC. It’s not just relevant to contracting but if there is one dominant party and one less dominant party, the less dominant party will struggle to survive.”

After its divorce, Balfour became the industry’s biggest player but Mr Tyler is not concerned that having reached the top he could be axed for any mistakes he makes – he will not need to be shown the door if he does, adding: “Any competent manager would be able to recognise if there is someone else that can do their job better.”

Mike Welton stepped down of his own accord two years ago and Mr Tyler wants to do the same but, still in his forties, he plans on being in the hot seat for some time yet.