John O’Shaughnessy, Managing Director, Clancy, talks to Barry McCall about the leadership challenges that the construction industry faces.

Clancy is firmly established in Ireland’s construction Top 50 with a turnover of €40m and 100 direct employees.

“We have a strategy to double our turnover over the next three or four years,” says John O’Shaughnessy. “There are many opportunities out there. We have a growing economy and a growing industry, albeit coming from a very low level. The National Development Plan is worth €116bn over 10 years, and that’s going to bring a lot of opportunities providing that the Government implements the plan.”

The challenge is to deliver on the plan, he adds, conceding that there are probably issues around resources.

Persuading People to Return

“As a sector, we went from employing 300,000 people to 100,000 in a very short period of time,” John O Shaughnessy points out. “A lot of people left our industry, and many of them might not come back. The challenge is to persuade people who have gone overseas to come back. We also have to entice people to come back from other sectors.”

John O’Shaughnessy accepts that the industry suffered from the onset of the recession. “If we are to deliver the NDP in the coming years, we need resources, and we need tradespeople. We must show that there are sustainable and rewarding careers for people to pursue in the sector. We need to get more second-level students to take construction related third-level courses along with those not considering third-level to consider an apprenticeship as a career option. However, this is proving to be a considerable challenge. The CIF has focused on this area for the past number of years.”

John O’Shaughnessy sees parental influence is a challenge the Industry needs to address. “Parents are encouraging their children to go for all sorts of careers other than construction. I spoke to children at Ballingarry Community School recently, and I asked how many of them were considering a career in construction and not one hand went up.

“A lot of people thought they had good careers ahead of them, but when the crash came that changed and the industry lost many good people during the recession. But, I think we can attract people into the industry, and we have made a lot of headway in showing how exciting a career construction is, but more needs to be done.”

Opportunities

The industry is well positioned to take advantage of the market opportunities in the right circumstances.

“Everyone is talking about housing as an area of opportunity, but there are still a lot of blockers to the delivery of housing – land, finance, input costs. There is a huge opportunity for housing. What disappointments me most is the Government’s policy of using PPPs for housing. PPPs have their place for large projects, but I don’t believe they are suitable for housing or education.

“PPPs take costs off the Government balance sheet, but that’s all,” he continues. “They end up more expensive at the end of the day. Small local contractors are locked out of social housing by the PPPs. I am very disappointed by that.”

The NDP is another tremendous opportunity.

“The last national plan failed in my view because Government Departments were all working in silos. The Government is saying they have a structure to prevent that happening this time,” says John O’Shaugnessy.

“The Construction Working Group is an essential part of that. We need strong representation from the industry on that. Ultimately, we are the people who will deliver the NDP.”

The Future

Looking to the future, John O’Shaughnessy says firms have to manage growth and costs.

“We learned a lot in the recession about how things can go so badly wrong. Now that we are back in a growth phase I am not so sure we have learned all the lessons from before. Below cost tendering remains a major issue, for example. We have learned not to chase turnover at Clancy. We won’t chase projects where the risk is too high. We have a clear strategy in terms of where we are going and how we are going to get there. We communicate that to the whole team.”

John O’Shaughnessy is very positive about the industry generally and for Clancy’s future. “Clancy has an excellent team, and we invest in our people and processes, which gives us a competitive advantage, and that is an ongoing process.

“I am very positive about the economy, as long as people behave reasonably and don’t do stupid things,” he says. “You’ve got to manage what’s in front of you and keep an eye on the future.”

Costs

Costs have always been an issue in the industry and as a business manager John O’Shaughnessy is continuously reminded of this.

“People took pay cuts during the recession, and now we are in a growing market economy once more. The industry is growing again, and we are seeing rising expectations and wage inflation pressures. But the returns are not there from the market. The margins are not there. Materials costs are rising, and so are other input costs. Another part of the equation is the race to the bottom for State contracts. The focus is on the lowest price. Net margins of 1% to 2% are not sustainable. It is inevitable in my view that we will see business failures as a result of this. The current State contracts strategy needs to change if we are to deliver on the Governments NDP.”

Meeting these challenges will see the Clancy management team take a measured approach.

“We are looking to increase turnover,” says John O’Shaughnessy. “But we are not doing it at any cost. We are not chasing turnover for the sake of it. We will not get involved in the race to the bottom. That’s not sustainable. We believe in taking a partnership approach with stakeholders. A key element of our strategy is to switch from the Public Sector to the private sector. It’s now at 50/50, that’s down from 80/20 a few years ago, and we will get to 40/60 in the near future.”

People

Attracting the right people is a challenge Clancy shares with the rest of the industry, but the company won’t try to compete on price. “If someone quotes an unsustainable salary figure, we won’t go for it. We think about more than salary. We look after our staff with wellness programmes and other programmes. It’s not all about money.” Employee engagement is key.

“All of our management staff have a large say in what we do as a business,” John O’Shaughnessy continues. “We run employee awards schemes and encourage educational achievement. We want our people to be the best they can be and achieve their goals in life. We support continuing professional development, and we set out clear career paths for our people and support them in pursuing them. That’s one way of meeting the challenge. Competing on pay is unsustainable, and we can’t let that happen again. We offer more than a wage; we offer a career.”

“The Industry is very innovative and is quick to adopt new technology to become more competitive.”

A Strong Industry

John O’Shaughnessy believes that the industry has emerged from the recession stronger than it went into it. “It was the worst recession in the history of the State,” he says. “It was a horrendous time, but the Industry diversified, restructured, battened down the hatches, and rode out the storm. We adopted new technologies. Lean construction methodologies, BREEAM and BIM, were embraced very quickly. We proved how adaptable we are. You now see drones on site for surveying. The industry is very innovative and is quick to adopt new technology to become more competitive.”

The search for competitive advantage is crucial. “You have to ask what’s different? Blocks are blocks and foundations are foundations, we need to offer something different. Back in 2012, we saw BIM as a way of gaining a competitive advantage. Now it’s the norm. It’s a different industry now. It’s much more efficient and productive. Irish construction companies are much more adaptable to their environment. But we still account for only 8% of GNP. We need to get to 12% for a sustainable growing economy. Therefore, we have some way to go yet.”

First published in ‘Construction’ Top 50 CIF Contractors Special Issue