Rethink Your Construction Heroes and Role Models 1

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Wednesday, August 19th, 2015
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A glaring example of this nation’s twisted psyche was put on display recently with the passing of Alan Bond.

Terms such as “national treasure” and “state icon” have been bandied about, including interviews and well wishes from no less than Bob Hawke himself.

According to the mass media reports on the event of his demise, here was a working class lad made good, with a great heart, a huge appetite for entrepreneurial risk, a capacity to borrow that became legendary, and who committed Australia’s largest corporate fraud on the way down.

The engineering and construction industry is rife with so-called legends who play hard then promptly crash and burn, always taking the most vulnerable with them on the long and dark slide into oblivion.

Yet before the final reckoning, how many of these legends are seen swanning around in their fancy cars, eating at fancy restaurants and living the high life, whilst the vulnerable wait for the scraps from the administrators and liquidators to be doled out?

It’s not difficult to understand why some players, who perhaps lack proper education and good sense, find these legends to be role models. I mean, if they can get away with it, so what? At least they gave it a go. They tried their best and failed. Construction is a rough game, played by tough players.

What absolute rubbish! Nothing could be further from the truth, and if you’re sitting there nodding you head at the thought of such people being heroes, you urgently need to rethink your heroes and realign your role models.

The construction and engineering space in Australia has the highest number of financial failures and bankruptcies of any industry. It also has had the highest number of enquiries, royal commissions and ministerial reports into the financial failures and bankruptcies, all of which return the very same result as the previous ones – Einstein referred to this phenomenon as insanity!

It would seem that the construction sector, when it comes to good governance and good business ethics, treats these beneficial terms with utter contempt, citing “socialist risk averseness,” yet it holds fraudsters and thieves in high esteem.

It is manifestly wrong, on all levels, to have the attitude of “go hard, play hard” and damn the consequences.

Yet every week I have clients who are about to sign a contract which will return to them a seven or eight per cent gross remuneration, from which five per cent as a minimum will be retained by the upstream contractor for the privilege of doing the work.

How do you live on two per cent return? In simple terms, you don’t. There is absolutely no way that anyone can foot the wages bill, not to mention servicing the overheads and material accounts when four-fifths of your income is held back from you.

So where does one look for guidance in the festering pit of vipers that is construction and engineering projects in Australia? Are there actually any individuals or companies within our industry that actually have good ethical governance that extends to all reaches of the enterprise, especially balanced contractual values which add value, rather than impose draconian penalties and hinder productivity?

Is the mantra of “the principal imposed it on us, therefore we pass it down onto the subcontractor” valid? I mean, is this acceptable to reasonable people? I personally do not accept this “back to back” bollocks that shows nothing more than laziness and disdain from the upstream entity. If the main contractor did not do their own due diligence and negotiate a more balanced contract with its principal, it does not go to follow that such incompetence should be foisted on the subcontractors.

With project management being taught at both diploma and degree levels, including inclusion as a module in most post graduate business degrees, the argument that the industry is below average when it comes to educational level is fast becoming obsolete. With most decision makers having some formal academic and tertiary qualification, it does not automatically make them amenable to change, nor to having ethical governance attributes, but they will at least have the knowledge as to what is right and wrong. It’s a start.

Look at the way successful corporates and their prominent directors operate. Australia has an unbelievably high participation rate of its citizens in its stock market, so apply the same diligence and studies that you would do with your stocks and bonds to your next prospective contract.

Have a look at some of the management models of the Top 100 companies. All of them have robust and ethical governance models, all of them practise robust due diligence with minimum return on investment acceptance levels – or they discard the opportunity.

Successful corporates become successful corporates because of exceptionally good governance and ethics, not because they screwed their subcontractors and suppliers along the way.

As always, risk safely!

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  1. Clayton - Brisbane

    Excellent article Mervyn. I think your words have captured the atmosphere of the construction industry quite well. There is a pervading sense of "screw or get screwed" that continues on a downward spiral to the lowest common denominator. And the further down the food chain you go, the more desperate, frantic and vicious the screwing gets. There are a few beacons of light in every industry, but they're getting harder to find.