Background and challenge
A major U.K. construction contractor was underperforming and wanted to understand the root causes at both a micro and a macro level. L.E.K. Consulting was engaged to examine the reasons behind its poor profitability, to provide a clear view on market trends and to develop a strategy to drive profitable growth.
Approach and recommendations
L.E.K. conducted a market review, strategy refresh and performance analysis, assessing the business’s performance across a number of dimensions. The project included:
- A construction industry market assessment, providing an overview of the construction industry’s market conditions and evaluating the client’s position within it
- An in-depth analysis of the client’s project database, using an interactive data visualization tool to analyze factors influencing project performance across more than 8,000 projects
- A qualitative project review, interviewing directors from each division to establish internal best practices and ascertain root causes of poor performance at a more granular level
- An overhead review, including an internal/external benchmarking of overhead spend and an assessment of overhead functions and activities to identify duplication of tasks
- An organization review, interviewing key personnel across the company to obtain perspectives on the effectiveness and highlight areas for improvement
Our work indicated opportunities for growth within the market, but a need to pursue that carefully to protect margins. Furthermore, our analysis of the client’s performance at a project level indicated significant variations in profitability and project-level outcomes by division. High-performing divisions were consistently above average across all dimensions, suggesting a capability issue worthy of further investigation.
Working with the client, we identified capability gaps and reviewed a number of additional business units to assess their strategic fit within the group. We also assessed any overlap in functions and duplication of tasks between regional business units and headquarters, highlighting areas that provided potential for consolidation and overhead savings.
L.E.K.’s research and analysis provided the client with the necessary insights and clarity to formulate a fresh, five-year strategy. We worked alongside the client to establish more than 30 mutually exclusive improvement initiatives, which were assessed and prioritized in terms of impact and ease of implementation, and formed a change management team to drive the process.