Jan 16 2018

Carillion’s liquidation: another PR disaster for UK construction

Carillion logoAs news of Carillion’s liquidation exploded yesterday (see previous post), I provided a short comment for the Chartered Institute of Public Relations, in my role as chair of CIPR CAPSIG, and was subsequently asked to provide a longer opinion piece for PR Week, which was published earlier today. Below is my original draft (a little bit longer than the version published by PR Week).

Carillion’s liquidation is another public relations disaster for the construction industry which, to quote the title of an October 2016 report, must ‘Modernise or Die’, both in its behaviours and in its communications.

Modernise or DieMany construction projects are delivered late, over budget and with quality issues. Mark Farmer’s report on the construction labour model identified low margins, adversarial pricing models and financial fragility, plus poor industry image, among ten symptoms of the industry’s poor performance.*

Such symptoms have been repeatedly identified. During the 1990s, for example, I was head of PR for Tarmac Professional Services (shortly before it became part of Carillion in 1999) when two earlier reports – Latham in 1994 and Egan in 1998 – sought to reform construction’s structures and procurement and contractual processes. But the reports were barely acted upon. Farmer says this is partly because the industry and its clients have a deep-seated cultural resistance to change.

As a result, contractors like Carillion still work on thin margins, even engaging in ‘suicide bidding’ to win work and maintain cash flows; late payment of suppliers is common; they are conservative in adopting new technologies, and are short-termist and reactive in their approaches to training, to R&D, and to PR and other communications.

Indeed, communication is often regarded mainly as a tactical or reactive discipline (I have heard construction marketing described as “the colouring-in department” while PR is often equated to ‘promotion’ or ‘spin’) rather than as a strategic advisory role.

Public relations brings the outside world in to organisations. It should create a dialogue that challenges entrenched practices – like excessive bonus payments amid failing contracts – to change potential outcomes before they become something that an organisation’s stakeholders may instinctively disagree with.

Adopting a more professional approach to communication will be difficult. The construction sector’s poor image is a logical consequence of all its other symptomatic failures, of its ‘macho’ culture, attitudes and behaviours (as I wrote in April 2016, To change the image, first change construction).

Carillion’s reputation had already been coloured by the Consulting Association blacklisting scandal (Wikipedia article) and 120-day payment terms for subcontractors and suppliers. Criticisms grew as its debts and pension deficit increased, and as its contract failings multiplied. It was pilloried for continuing dividend payments to shareholders, and awarding and protecting bonus payments to key executives. And HM Government has been denounced for awarding contracts despite Carillion’s profit warnings.

This is not unusual in an industry where contractors take on ‘loss leader’ work as a way of keeping cash flowing and hoping bottom line losses are offset by a future upturn. In short, Carillion’s Micawber-like business culture is typical of many construction contractors, and is indulged by many of its clients

Small wonder construction is stereotypically portrayed as dirty and dangerous, dysfunctional and outdated. Carillion’s disappearance won’t detoxify an industry where many businesses exemplify the same behaviours and attitudes. Changing this industry’s image requires an overhaul of its structure and culture – as Andrew Wolstenholme says in the foreword to ‘Modernise or Die’: “this is a challenge for all – the industry, its clients, and government”.

* I was a contributor to discussions with Mark Farmer in the development of Modernise or Die, and remain active in Constructing Excellence (Mark is now a CE co-chair), the main industry organisation agitating for industry change. Thanks also to Phil Morgan, CIPR’s deputy CEO, for helpful comments on the PR Week submission. 

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