This is Tom Jarman’s fourth and final blog in this series, which is collectively all about outcome and value.  Ultimately, Tom’s aim is to give readers confidence that procuring projects based on outcome and value, rather than lowest initial capital cost and minimum regulatory standards, has traction and momentum within a key construction client, HM Government.  He wants to emphasise that it is sustained, and increasingly becoming a criteria for access for dialogue and tender opportunities, and therefore worth investigating, aligning with and potentially investing in to create differentiation.  He wants to highlight that it is, after a long, dark, cold winter, starting to make commercial sense to invest in outcome and value.

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So why have I chosen client leadership as the subject of #4, this final blog?  Let’s go back two blogs, in which I talked about Procuring for Value (PFV).  In that, I wanted to highlight the principles that sit behind PFV.  As I often say, I don’t care whether you call if PFV or not, if you are procuring projects that are client-led, value-orientated, outcome-based and long-term, then you’re in that space.  Client leadership picks up the first principle and looks at organisational culture.

I am personally convinced that operationalising the principles that sit behind a ‘procuring for value’ approach is a cultural, not a process or technical, challenge.  I agree with Drucker; culture eats strategy for breakfast.  Although value and outcome won’t work without the right processes or technical skill (hence PFV Skills and Value Structures in blog #3), client leadership is what achieves the transition to a value-oriented culture, where client choices are predominantly active and sophisticated as opposed to passively defaulting to minimum capital cost and regulatory standards.

This thought is also useful to understand the challenge financially and in terms of leadership.  Commissioning better buildings and infrastructure doesn’t by default absorb more capital when whole life cost is considered (although the spend profile is likely to change, and depending on how you are funded this may create a significant barrier).  But creating a client leadership position will require investment in teams, people, skills and your digital capability and capacity – and it will require determined and sustained leadership.

creating a client leadership position will require investment in teams, people, skills and your digital capability and capacity

So client leadership therefore isn’t so much leadership in the upper quartile sense (although actually operating in accordance with a client leadership culture would make you pretty unique).   Client leadership is the deliberate choice to create a culture in which outcome and value are understood, intent is maintained throughout the whole procurement cycle from inception and into operation, and learning is used to deliver outcome and value consistently and effectively, based on experience.

Client leadership is important because the construction sector responds to signals from clients; if we have a dysfunctional construction sector, it is because clients are, by and large, asking for poor quality projects delivered in a dysfunctional manner.  This may sound harsh, but if clients are consistently signing contracts of the basis of lowest initial capital cost and basic legal compliance, then they’ll create supply chains that gear up accordingly.  Within that commercial environment, it doesn’t make sense to invest in people, skills, performance, innovation or resilience, because this pushes up tender costs.

The quality score in a tender is a poor differentiator within this context.  Most companies won’t tender for a project unless they can score towards a 9 within the quality element, and many large contractors have specialists whose role is to score high in the quality section.  This effectively levels out tender submissions such that cost, in reality, remains the measure by which bids are assessed.

What do I think Client Leadership looks like?

The graphic below is how I capture it.  But this isn’t gospel; your version may look different. Or you may take elements and run with them, or you may use it as a point of comparison with what you think client leadership looks like.  Or you may choose one or two points from the graphic, develop them, and see what else you need to structure and develop around them.  Whatever your response, I’d argue you need a client leadership position if you want to transition to procuring on the basis of value and outcome.

Client Leadership

 

I think a lot of the above is fairly self-explanatory, so I’m just going to cover the slide briefly and not touch on every point:

–       The forward view of your programme is about pipeline.  This gives the supply chain much more to organise around over time than individual, cost-focussed potential contracts, which will reinforce short-term behaviours and lack of resilience.  The recent commitment from L&G is a great example, as is this example of Local Authority leadership in Norwich;

–       Client ambition will stretch supply chains in terms of their skills and capabilities, including creating the commercial logic for them to invest in performance and innovation.  But it needs consistency, as confidence to invest is not going to come from one-off projects.  Do you really need a pilot, and if you do, what are you really trying to understand?  Too often, pilots feel like a diversion to justify business as usual, and I have seen them structured in a way that reinforces BAU.  They aren’t the same as consistent, sustained ambition;

Too often, pilots feel like a diversion to justify business as usual

–       The ‘great supply chain’ quote is from Steve Crake at Northumbrian Water.  Its spot on, and has translated into productivity, efficiency and customer outcomes for NWL.  But they had to have the confidence some 6 years ago to focus their discussions on how the supply chain could help them achieve their outcomes, and only discuss cost once they had understood which potential supply chain members could work effectively and collaboratively towards those outcomes.  They have also had to put in place structures and skills to make this work – in other words, these are active and deliberate client choices.  Anglian Water operate in a similar way;

–       ‘Aggregate’ acknowledges that as a construction client you probably have similar requirements to other clients, and in any case most of what you are supplied has a fairly similar core (eg traditional construction house types from a volume builder are pretty much the same product with some tweaks).  So where do you need to differentiate and add value?  And where can you group with others to create the financial capacity you need to support the areas where you really want to pull value through?

–       DFMA; Design for Manufacturing and Assembly.  This is a distinct discipline, so you need to understand it.  Even better, think Smart Construction; industrialised, digitised, whole-life costed.  But this requires partnership, and is unlikely to be successful if an approach is taken based on the familiar lowest capital cost approach.  So straight away the world clients are moving into requires ditching a well-known, established, transactional approach, which is why I’m not fussed how you structure client leadership, but I am fussed that it is given due consideration; and

–       The final point to expand on is BIM.  The power of BIM is in the data, and any clients whose objectives are naturally aligned with value and outcome should be very interested in data.  Properly defined, structured, gathered and linked, it can be enormously powerful and make a critical contribution to operational cost-effectiveness (and therefore future financial capacity) and risk mitigation.  BIM is a carrier for this outcome for long-term asset owners (eg here).

Summary

“In my view, the simplest way that outstanding projects will be delivered is if clients demand outstanding projects, and to do this they need to know what an outstanding project is and how to demand it!”

Ann Bentley, CLC Board Member and Procuring for Value lead, and Global Director, RLB, in Ryder Reinvention (2018), p21.

That quote from Ann gets to, in my view, the heart of the problem.  Clients need the construction sector to deliver the outcomes it wants, but too many clients engage in practice that at best undermines, and at worst actively mitigates against, the likelihood of achieving them.  I frequently hear this issue being externalised (typically, the Government should…), but at the end of the day this series has always been about a call to action for clients.

Another quote, Alistair Dryburgh this time: ‘“Schumpeter famously talked about ‘creative destruction’, but let’s not forget that for every person turned on by ‘creative’ there are 10 turned off by ‘destruction’.”  The journey towards a value and outcome culture is a process of change, and therefore requires vision, ambition and determination.  Cost is very heavily hardwired into client culture and the industry response; it is hard to underestimate how deeply it is sanctioned by familiarity, and therefore the energy and leadership that it will take within organisations to create a different culture.

The journey towards a value and outcome culture is a process of change, and therefore requires vision, ambition and determination.

So what is your client culture now?  We can do some crude self-assessment; looking at the key points below, how would you rate your organisation in practice?

Client leadership

An organisational culture which means you are procuring value-based outcomes over the long term.  It is based on active and sophisticated choices that create and maintain the culture, and establish effective mechanisms to learn and improve.

‘Procuring for Value’ Skills

The organisational capability to understand value and the links with input cost and outcome, including how individual investments and decisions flow through the organisation and how they perform at the operational stage.

Value structures

The structural elements that are put in place so that the organisation can act as an active and sophisticated client.  They work with PFV Skills to operationalise client leadership.

I don’t have a scoring system to hand, but you’ll know already whether you are operating for the long-term, and whether you should be focussing on value and outcome even if circumstances such as key influencers are making this difficult in reality.  And from the three points above, you should be able to form a view on where your organisation stands in terms of culture, skills and structural capability, and whether this is where you want to be.

Being a cultural challenge, its harder to advise a handy or immediate next step.  There are tools emerging that can help understand value and translate it into back into outcome, and yes, cost, because ultimately you’re going to have to talk about cost when scoping a project.  The Construction Innovation Hub is at the forefront of developing tools for value.  The Supply Chain School has an established history of building skills and capability using collaboration, openness and forward-thinking.  And it’s worth looking at the Project 13 resources.

But it seems to me that the starting point is accepting that value and outcome have traction and momentum, and are worth talking about internally.  If you are in the supply chain, consider developing a commercial view.  If you are a client, do you understand what holistic value and outcome mean to you?  This might be developing delivery skills if you are in the supply chain, or starting to build skills and understand the future shape of your projects and how to maintain intent if you are a client.  If value and outcome can displace the dominance of a procurement culture that has consistently failed society then that is truly transformational for all of us.  And it can’t be externalised; it starts with positive internal decisions that exploit the available room for manoeuvre within an organisation.  I haven’t met anyone yet who comes to work to avoid breaking the law at lowest cost.  We can do better – so let’s do better.

I haven’t met anyone yet who comes to work to avoid breaking the law at lowest cost.  We can do better – so let’s do better.

Read other posts in Tom’s series

New Road Ahead

Procuring for Value

Does Construction have the Foundations for Fundamental Change

Tom Jarman

Tom Jarman is Director of Low Carbon Journey, a consultancy based in North East England that specialises in helping clients and their supply chains understand outcome, value and resilience.  He has worked in housing for 15 years, including project development, project and programme management, sustainability, Planning, newbuild, retrofit and Building Information Modelling.  This extensive client-side experience has informed his views on client leadership, organisational risk and resilience, and procurement, particularly how organisations can invest in outcomes, performance and quality, and maintain a clear line of sight from project inception to operation.

Tom is a member of the Construction Leadership Council, where he is engaged in the Procuring for Value and Innovation in Buildings workstreams.  He is on the Advisory Board for Constructing Excellence in the North East as well as IC3, the International Centre for Connected Construction.  He is a Certified Member of the Chartered Institute of Housing, and his professional commitment includes writing, blogging and presenting on key construction and clienting issues.  In 2019 he received the CENE Award for Outstanding Achievement.

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