Transformation for BAA

Take-off at Terminal Five

Norton Bertram Smith interviewed by David McAra

Norton qualified as a quantity surveyor in his native South Africa.  He thrived in Britain where the breadth of his training gave him an edge over his British colleagues.  Where they had specialised, he had the capacity to take on a wider variety of work and to engage a whole project.  Here he is remembering some of his formative experience during the 1990s, working on the new passenger terminal at Heathrow Airport. Sir John Egan, who led the project, was bringing new thinking from the automotive industry.  

Breakdown before breakthrough

DM: I think you know what we’re interested in, Norton.  I’ve had this repeated, disappointing experience where you come across an idea that you expect to transform the world and somehow the system finds a way to fight back. 

NBS: Even if you’re Donald Trump! 

DM: Well yes.  Isn’t it interesting? How long can he carry on without any visible sign of self-doubt? “I’ve signed a decree.  Just make it happen!”

NBS: It’s a bit like what we’re speaking about but in reverse.  The system does need shaking up, doesn’t it?  It does need transforming from being so non-representative of the people but does it need to be turned so completely upside down? 

DM: Well maybe it does.  Perhaps we can hope that the system gets stretched to breaking point and something more effective emerges.  

Learning from the automotive industry

NBS: What’s the expression?  You have to have complete and utter breakdown in order to breakthrough.  That’s why Sir John Egan was chosen from the British car industry for BAA.  The industry had had its breakdown and was on its knees.  The Japanese came along - Honda and Mazda, I think it was - to help Ford and Jaguar and Rover, introducing a collaborative way of doing business.  The result was a real, integrated supply chain to replace the old, adversarial procurement process.  So he brought all that experience with him to BAA - smart, strategic, supply chain thinking - and said, “That’s the way we’re going to design and procure and build Terminal Five.”

That was quite a change in direction for two or three hundred technical services staff, born and bred in the adversarial way of government procurement and schooled in compliance by years of working inside the regulatory regime of the European Union.

“Hang on, guys!  You need to completely change your approach or Terminal Five will fail.  It’ll go down like the Channel Tunnel Rail Link, two or three years late and triple the price.  We can’t afford that.  It’ll bankrupt the company.” 

Non-adversarial working

So we set out to learn a non-adversarial way to work together, integrating the whole design and construction of Terminal Five through integrating specialists from the BAA development team into the supply chain.  There were a few lucky breaks such as a three-year delay waiting for planning permission which allowed relationships to develop.  But I’m starting at the end.  

BAA chose people who they believed could handle the necessary mind-shift, to realise that everybody should be treated as a customer, including suppliers.  There were a lot of people who had been there a long time and couldn’t handle it.  They were let go.  A few of us went to Cranfield to understand strategic supply chain management.   That was the mid-90s when industry was turning away from ‘procurement’ to ‘supply chain management’, recognising the importance of long term relationships over point to point transactions: sharing information, thinking long-term, encouraging suppliers to bring their best people, their best kit and to coordinate their internal resources with the needs of the project.  

We also went to Unipart - huge player in the automotive industry supply chain.  They had a programme called 'Ten(d) to Zero'.  Under headings of: cost, time, quality, safety and environment, there was a ten-point scale for rating performance and monitoring improvement: zero time delays, zero quality issues, zero safety incidents, etc.  Every supplier was measured to make sure that the whole supply chain was continuously improving and it was all based on establishing sound relationships.  

The MD of Unipart was friendly with Sir John Egan and allowed all his BAA supply chain people and construction people to sit, open-mouthed at the back of the classroom, thinking "Gosh!  You can do this in a collaborative and non-adversarial way but still keep it hard and business oriented!”  So we took that back into BAA and called it 'Strive for Five', with a zero to five score rather than a ten down to zero but the same idea.  We worked with every supplier, in construction, design and project management, working through a behavioural programme with all their managers trying to establish sound relationships.  

Learning to dance 

My analogy here is learning to dance.  Our internal programme started us on changing our thinking from adversarial to collaborative and we started putting together five-year framework agreements for all the suppliers.  We went through a whole tendering process, looking for people we would be able to form long-term relationships with.  In those days - 1995 - Terminal Five was going to start in 1998 and in the end, it started in 2002 or 2003 because of the delay to the public inquiry.  

So we had time to develop these five-year framework agreements; completely open book, fully reimbursable, sharing the risk, learning and improving together.

Similar framework agreements are being set up here in the North Sea now but these are still based on reams of contractual risk mitigation, missing the whole point Sir John was making.  We have to do this in a way that is non-adversarial or we will come unstuck.  Anyway, that’s part one, BAA is learning to dance.  

Children are taught some dance  Vladimir Vyatkin (1979)

Training our dancing partners

Now let's look at the pavement contractor.  'Pavement' is the runways in airport speak.  So we agreed a five-year contract to build all the runways for all of BAA across the UK and started working together to get the unit price for a square metre down from 100 to 50 or whatever.  Now the first hurdle was that the contractor didn’t have a non-adversarial way, especially not in those days.  Everything was done on contractual, lumpy tendering and standard forms of contract which we were going away from.  

DM: Bid low to win and make your money in conflict.  

NBS: Exactly, in change, in conflict, in claims and all the rest of it.  That was their mindset then.  So along came all these people, moving into BAA’s offices, starting all this integrated working together and they just didn't know what to do, didn't know how to behave in this non-conflict arena.  There was no such thing as a claim because you got reimbursed for whatever you spent but it was measured in terms of ultimate product cost which was 100 and now it’s going down to 95 or it’s going up to 105.  

It was fortunate that in BAA, we had a really wise head of that department who properly understood the new relationship which needed to exist.  This was remarkable considering that, just post-privatisation, BAA was still vertically integrated and did all its own design and construction.  So the focus was on continuous improvement: how do we take out the waste from the design, from the construction?  Eventually they got it.  We sent them off to Unipart and to Cranfield so they could learn to dance too and to understand what it meant to be non-adversarial.  And that worked, so then we had a dance partner.  

The dancing begins … and spreads

At the time, there was lots of project work around BAA.  We were spending about £1 million pound a day on capital expenditure and we had to show the regulator that the airlines were getting value for money.  So it was a godsend that there was all that work to practise on during the planning delays and by the time Terminal Five kicked off we'd learned a lot and were much more efficient. 

We came to the next hurdle about three years later.  All these non-adversarial contractors, embedded into BAA offices, were starting to forget where they came from and wanted to get back into their own company which, at that stage, still had a completely adversarial approach.  So a staff rotation process began and guess who walked through the door as replacements?  A whole new team of adversarial folk. 

At that time, in the contractors’ own offices, you might walk up the stairs and turn left to the adversarial, claims department or right into the partnering team.  Can you believe it?  That must’ve caused some schizophrenia internally.  But change happened steadily over the next 5 to 10 years and if you look at the company now, they would say they're almost 100% committed to the long-term partnering approach and don’t do any of the old stuff.  

Not just techniques

Sir John told a story about a team from Honda who came to Jaguar for a visit.  "We understand you’ve introduced just-in-time, strategic supply chain, long-term relationships, total quality management, all these things we told you about and we’ve come to see how you're doing."  When they walked into the manufacturing plant, nothing had changed and it was like, "Hang on!  You’re still doing all the old ways.  You told us you were adopting it!” and Sir John said, "Yes, we're doing it in the corner of the shop over there behind those curtains," and there it was, in the corner.  Behind the curtain it was all sparkly clean and efficient and quiet and shut off from the rest of the world.   That’s when he and his colleagues at Jaguar realised that you couldn’t have half an organisation with one mindset and the other half with another.  

DM: So that was like the dawning experience for Sir John? This isn’t a project this is a whole new way of understanding business. 

NBS: Absolutely, yes!  You can’t be half pregnant. 

All or nothing

So all these lessons slowly made their way back to the pavement contractor.  We can’t be half adversarial and half partnering.  This was a huge challenge to the way contractors work.  But the consultants had to change too and the quantity surveyors and the project managers, the engineers, the architects were all being treated the same way.  All had to integrate, build relationships, open up to each other, share their thinking, help with each others’ decisions – check with the steel specialist downstairs to make sure your design can actually be built. There was massive change, a lot of new thinking and thankfully, because of the delay in the public enquiry, we had the time to wrangle, pilot, experiment and iron things out. 

DM: You’re right in the heart of it here, Norton.  What I’m hearing is, if we went to the automotive industry, for example, we’d find that the transformation has been sustained, perhaps as a result of their near-death experience in the 1970s and 80s.  The question I’m left with, your pavement contractor has one client who likes to do partnering.  What about the others? 

The slow transmission of learning

NBS: So what happened was - Have you heard of the Latham report (1994)?  Latham was a guy who had to rewrite the relationship between all the consultants in the construction industry to make things easier to do business.  And Sir John, after he stepped down as chief executive at BAA, wrote the Egan Report (1998) about how to do non-adversarial and partnering work.  These reports were rolled out across the industry, so other clients, other big spenders would adopt the same practices.  

But you’re right, there’s still going to be an adversarial arm to deal with the guys around the corner that are still being adversarial clients.  The change in thinking wasn’t instantaneous but remember, there were also a lot of quantity surveyors, construction engineers, architects, project managers - all manner of specialists and consultants - who were being exposed to and immersed in the non-adversarial way.

But it was a long, slow push and we saw that, unless we can build the internal capacity of the whole supply chain to shift their own mindset, we’d be repeating the whole training and culture change process every three years which - back to your point - isn’t sustainable.   It wasn’t just the supply chain people either.  BAA were just as bad when things got tough.  Under pressure, many of us reverted to putting up the fists and getting adversarial.  So the process of learning to dance with a real partner was long and difficult and took much more than knowing the steps. 

Another interesting thing, it still came unravelled in 2001 or 2002.  Even once Terminal Five moved beyond concept design and all the Tier One contractors and consultants were sitting together - strangely enough - right alongside the terminal itself.   The board brought Cranfield back in and said, “Hey, guys!  What’s going on?  It’s not working!”  There were still people just out for themselves on both sides, BAA and the supply chain, working at feathering their own nest and winning the game.   So Cranfield facilitated a big two-day conference. 

It’s all about relationships

It turned out that they hadn’t realised you had to work on building and maintaining trusting relationships.  This was the underlying piece, the foundation.  You had to put effort into building those relationships.  They don’t just happen.  We built a model that I still use: you can aspire to the possibility of partnering and non-adversarial working but the whole must be underpinned by trust and trusting relationships.  So the senior leaders of all the Tier One contractors were brought together to look in a mirror and see that they were still - almost 10 years on - behaving in an adversarial way, still not really putting effort into building and maintaining trusting relationships.  That’s the key skill set.  The human dimension still hadn’t been fully addressed and couldn’t be taken for granted. 

DM: That’s still, to my mind, an optimistic spin, Norton.   Even after 10 years, the new thinking is still not embedded and yet 10 years on, the pressure is still being applied.  The faith is holding. This is a better way to do business.  None of my transformation experiences came close to a decade of sustained effort.  They produced their little flourishes and breakthroughs but crumbled as soon as the teams that brought them about moved on. 

Redrawing the boundaries

NBS: Well, Sir John left in 1998, I think, and the new guy (Sir Mike Hogkinson) was from Land Rover.  So he still had that automotive experience of the integrated supply chain and there wasn’t much of a twist to the game plan in the whole approach to securing Terminal Five but he still had a change of management style.  Once Mike Hogkinson left, a more professional type of chief executive was brought in and his approach was more strategic.  He asked questions like, “Where is the organisation going?  What does ‘post Terminal Five’ look like?” and interestingly, in this wider perspective we saw that we were still paying lip-service, that the culture of BAA still hadn’t changed.  This was mainly because, in BAA, the team that runs construction is separated from the team that runs the airport by a 10 foot high electrified fence and the guys on each side think the others are a complete waste of space. 

DM: How astonishing that there is all this deep learning going on in one part of the organisation while this rather blindingly obvious fault line still goes unrecognised! 

NBS: That’s because the guys who run the airports are the clients of the construction teams.  The terminal managers in Heathrow would make their plans for development and kept their distance from the construction guys (“All they do is build things.  They don’t understand airport operations.”)  That’s what I was involved in, creating an interface between the business and the construction teams, to help them interpret each other’s needs.  It became the whole development arm to span the interface between the operational guys, the terminal managers, the retail guys, the property guys.  “What are your needs?  How do we interpret them so the construction guys build what you want?”  So it did cross eventually, when we built up this whole development arm between operations and construction.  

Le Terminal 5 de l'aéroport de Heathrow Citizen59 (2012)

Is conflict still the default setting?

DM: I’ve been looking at everything Sir John has done since.  He was appointed by Nick Clegg, apparently, to work on sustainable communities.  So he’s obviously an interesting man and his vision for transformation has been sustained.  Do you think, if we went to the automotive industry now we’d find inspiring workplaces, creative, inclusive, engaged, humane? 

NBS: I think so.  It’s been 10 or 15 years since I was in that space but it would be interesting to see how they have moved on because now you’ve got BMW owning Mini and a lot more.  The landscape has changed quite a bit. 

DM: So is my deeply rooted pessimism misplaced?  There would seem to be significant chunks of industry where huge learning has taken place, yet I still feel the old assumptions prevail.  The interests of buyer and seller are in conflict.  The buyer is a skinflint and the seller is a cheat.  Caveat emptor!  Trust?  You must be joking!   

NBS: I agree with you.  Everything I am exposed to up here in the offshore industry reflects that adversarial approach.  Even though the operators have five-year framework agreements with their contractors, if you read them, they are still based on a hard, risk-mitigating, contractual adversarial approach.  They still don’t trust each other.  I was going to facilitate a workshop between a contractor and their client on how to get the best from their five-year framework agreement as they were already a year in and still at each other’s throats.  

But what is the bigger play here? 

What is the call for the non-adversarial approach?  From a meta-organisational perspective, what’s being called for here?  How are we to continue this work, breaking down barriers and silo mentalities, enabling empowered, engaged, safe workforces?  If you have an adversarial boss or an adversarial client, what can you do?  It’s risky to open up and contribute your thinking.  You can only either submit or challenge and then, if necessary, be ready to walk away. 

So there is a huge gap in understanding.  There are firms that recognise the human dimension and harvest a massive advantage but Darwin and Newton are still rooted in our psyche, despite all our learning about how connected we are.  Humans have evolved and prospered because of our ability to cooperate.  That has been the core of our survival, collaboration, not fighting for our place.  Love came out of hate.  It’s quite amazing but that science is not yet on the radar. 

DM: I wonder about business schools.  What are they teaching managers?  How many managers are trained or educated?  How many just rely on instinct? However they learn it, they seem to arrive thinking, “I must take charge. I must get things under control.”

NBS: Up here we have a working group on collaboration and the ECITB (Engineering Construction Industry Training Board) has produced a collaboration project toolkit but it’s basically a whole lot of old thinking.  “Now you have your toolkit, you can start to collaborate.”  It’s bizarre.  We seem to think we can do something differently while still using the old ways.  That human dimension, the Terminal Five experience at BAA is my case study when I talk to people.  The results didn’t come from the project procedures but from learning how to work together, how to connect. 

DM: By your account, Norton, it took a decade of sustained effort to get that culture change at BAA to some degree embedded.  Now that sounds impossibly costly but the project came in on budget.  So the value of that time spent on thinking was incalculable.  Thinking time is cheap compared with the cost of correcting poor decisions once the concrete is being poured and the steel welded.  

NBS: Presence (Senge, 2004) and Theory-U (Scharmer, 2008) were coming out from about 2000, recognising that you can’t use the old ways of thinking that have created the distrust, the conflict and inefficiencies.  What’s the Einstein thing?  We can’t solve a problem with the thinking that created it in the first place.  And that’s what we’re trying to do!

DM: This is quite an optimistic conversation really, Norton.  It’s not hopeless.  It just takes longer than I expect.  I’m interested in what you said about BAA in those early days, choosing the people who could handle the shift to new thinking … and they didn’t always get it right.  For experienced individuals to change their way of thinking is very challenging and not be underestimated. 

NBS: The outcome of Terminal Five, I think it was finished six months early, which is quite a feat when you think the baggage system is the size of Wembley Stadium – and not a day lost over labour disputes. 

DM: I was struck by your comparisons at the start.  You quoted Sir John saying, “We can’t afford to be the Channel Tunnel.” 

NBS: That’s right!  “Failure is not an option!”  Was it the Channel Tunnel Rail Link that went from £2B to £7B and three years late?  There were some big capital project screw-ups at that time and the pressure was immense: ‘value for money’, ‘public interest’, ‘stakeholders’ (regulator, shareholders, passengers, airlines).  And the spend on Terminal Five was the size of the whole company so the project could easily bankrupt us. 

DM: Of course the builders of the Channel Tunnel Rail Link couldn’t afford it either but somehow there wasn’t the same imperative.  I guess it was public money. 

NBS: Yes it was underwritten by the public purse.  They had to find more money from elsewhere. 

DM: But even if we know we can’t afford it, that doesn’t guarantee we learn the right lesson.  We might draw the wrong conclusions.  “Management wasn’t competent.  Control was not tight enough!”  As Deming said, “It isn’t necessary to change.  Survival is not mandatory.” I suppose that’s why Sir John’s experience in the car industry was important.  

NBS: And that’s exactly why he was chosen. 

DM: And very interesting and challenging theme, the importance of individuals and individual relationships Sir John and his colleague at Unipart also seems to be a key component. 

NBS: And the guy he appointed as head of the technical services division and the relationship that they had was so important to making the whole thing work.  

But the cultural change piece … it’s still not recognised that that’s what this is all about. 

DM: Or that the culture of an organisation is really its most important feature. 

NBS: And that’s something I’m struggling with because if I go and talk about collaboration as a culture change programme, I’ll be out of the door in seconds!  Who’s going to listen?  But fundamentally, that’s what we’re doing.  We’re changing some big mindsets around collaboration as opportunity, as aspiration and that’s a cultural change. 

DM: And it’s a change of heart you’re asking of experienced and successful people that goes right the way back to school.  You’ve got to be a winner!  

NBS: This is what will happen if you keep trying to be the winner all the time, recognising that cooperation is a lot deeper, a lot more successful than the overly competitive threat based response to everything. 

References

  • Egan, Sir John (1998) Rethinking construction: the report of the Construction Task Force. [The Egan Report] Department of Environment, Transport and Regions and HMSO, London, UK. http://www.leanconstruction.org/media/docs/lcj/2009/LCJ_08_010.pdf
  • Latham, M., 1994. Constructing the Team. Final Report of the joint government/industry review of procurement and contractual arrangements in the United Kingdom construction industry.
  • Scharmer, O. (2008). Theory U: Leading from the Future as it Emerges. San Francisco, CA; Berrett-Koehler Publishers
  • Scharmer, O. (2004). Presence: Human Purpose and the Field of the Future.  (with P. Senge, J. Jaworski, B.S. Flowers) Cambridge, MA: SoL Press.
  • Wolstenholme, A. (2009) Never Waste a Good Crisis A Review of Progress since Rethinking Construction and Thoughts for Our Future, London: Constructing Excellence. http://constructingexcellence.org.uk/wp-content/uploads/2014/12/Wolstenholme_Report_Oct_2009.pdf

Images

About the interviewee

Norton is the founder of On Purpose Ltd. His own story started when he realised that life didn’t always turn out the way you planned it, including climbing up the career ladder, getting to the top and realising he’d lost himself along the way.

Having held senior positions including that of Managing Director of Aberdeen Airport and General Manager of ARUP (Hellas) Norton knows only too well, what it’s like to lead when you are being authentic and when you’re not.

Norton now dedicates his time and expertise in working with leaders to connect to their ‘authenticity’ and lead from a place of integrity in a way which inspires and motivates others to do the same. 

He can be contacted through On Purpose: http://www.onpurpose.co.uk/.  

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