Identify two commercial problems that BRE have as a newly privatised business – explain your choice.

Building Research Establishment: case study for Assignment 1

Background of BRE

Several years ago BRE (Building Research Establishment) used to part of central government employing all its staff as civil servants but was privatised (completely separated out of Government) in 2017, and became an entirely stand-alone engineering consultancy firm. The privatisation was led by the current CEO Martin Blake. It has charitable status with a board of trustees but operates in a business-like way and needs to cover costs and make a surplus (profit). It has to compete for work with other commercial firms and then deliver value for its clients to their specific standards. Due to the terms of its charitable status, BRE must conduct relevant research using the surplus generated from its’ commercial projects. Typical projects would be fire certification on new complex buildings or testing Eurostar trains. Research may cover such things as new materials for building design and environmental sustainability.

While it was part of Central Government, BRE was seen as providing the impartial and authoritative voice of the building industry. It was also known for ‘excellence’ and its scientists prided themselves on their thorough and high-quality work as the BRE group was started in 1917.  Because of this, and its government status, there was a perfectionist element in the culture and also a slight arrogance. Both scientists and lower level admin staff would often be quite discourteous to outside requests. Identify two commercial problems that BRE have as a newly privatised business – explain your choice. There was a sense of “We’re good, we’re important – we’ll fit your work in when we can – we’ll tell you when we think the results can be released”.  

THE SITUATION IN 2020

The firm consists of 17 research centres, each with a Centre Director and about 8-12 staff.  Overall staff is around 220 split between 4 sites in the south of the UK, Head office in Watford. The CEO, Martin, is a tough talking, impatient man, irritated by ‘boffin’ type scientists in old jumpers and old cars.  The COO, Greg, a more subtle character, was hired from an international construction firm to bring commercial discipline to BRE and help change the culture.

BRE has seen slow falling revenues since 2017 with the falling off of government contracts and the increased need to compete on a commercial basis with other science/engineering consultancies. Revenue was £44 million in 2017, £42million in 2018 and £40 million in 2019 (total costs are around £39 million). The trustees of the charity and the CEO are concerned about this trend and about the reducing research output, which justifies its charitable status.

As they get to grips with being a truly independent organisation they have been feeling the pressures of becoming commercial. For example, the value of contracts from Government is falling and these links are weaker and more transactional.  Also whilst they have had some success in gaining new commercial contracts and clients, Greg feels this is still a hit/miss affair with poor logic and they need to be much better at this.  Whilst BRE has a good reputation its competitors (such as Mott Macdonald) also have strong established positions in the market and are well practiced at convincing clients of their value.

The UK and European market for engineering consulting is generally stable, medium competition intensity, with low growth. Now private firms are competing for Government work that BRE would traditionally have simply been given. 

Clients are often concerned about issues of cost, timing and appropriate quality and expect to be treated as important. BRE has a history of taking longer to produce the best answer with poor cost control.  

People issues

BRE has around 220 staff in total. The Senior management team is made up of the CEO, Martin; his COO, Greg, and 5 MD’s who each have several research centres to look after, each with their own Centre Director (which is a new role). About 2/3 of the 17 Centre Directors were Research directors when it was still part of Central Government.

Even after privatisation, many BRE senior people still consider themselves to be science researchers with a quality inspection role in the industry.  One Centre director, when interviewed became angry and said “I know we have to do all this business stuff now but I’m a scientist not a bloody accountant”. Around 1/4 of centre directors have been hired recently from other firms and have a full set of the required competencies as well as years of commercial experience. These new commercial hires are very different from the ex-civil service people and they often do not work easily together. Amanda, in particular, in her 2 years at BRE, has acquired a reputation of being ‘capable but abrasive’. The new role of Centre Director is still causing some confusion and not fully accepted.

There is a small HR team – 1 manager and 2 admin assistants. It is very traditional mostly dealing with hiring, firing and basic issues such as pay, appraisals and contracts. The HR manager, Kevin, has been in the construction industry a long time but is not up to date in his professional knowledge – and is quite a weak character.  He was hired by Greg, the COO, who worked with him at another company.  Most line managers are reluctant to do much ‘people management’ and complain about HR being not much help.

Recent Developments - The Centre Director

BRE wish to recover revenue and create stronger commercial capability in the future. The key role in the organisation is the Centre Director. This role was created in 2017 and is responsible for business development, project and people management, and research. The majority of Centre Directors were already research directors before privatisation – some are commercially aware – some are less comfortable with this. BRE have made some external hires into the Centre Director role from commercial firms with some mixed success. The COO has noticed that many of BRE’s projects are not as profitable as there appears to be a lack of accurate pricing of contracts and cost control.  This is essential now they are an independent commercial entity.

Recently the board (CEO, COO plus 5 MD’s) carried out an assessment centre for all of its’ centre directors and some other senior managers (about 20 people in total) using a small firm of business psychology consultants (water4fish). The purpose of this was to assess directors’ competencies in terms of the future needs of BRE. Identify two commercial problems that BRE have as a newly privatised business – explain your choice. The competencies used were those with a proven link to success in commercial engineering environments.

This all seemed like a good idea until the results showed that over half of the Centre Directors did not do well on competencies of leadership and commercial awareness, which are critical. There were a lot of frayed tempers following this exercise with a lot of anger directed at the consultants and 2 directors threatening to resign. One of the MD’s, Alison Mayer, was furious at the consultants - “how dare they tell me my team is no good…..it’s ridiculous”.

Your role

Clearly BRE has some problems – both as a new business and in terms of its HR situation. Use the course materials and ideas/concepts to analyse and evaluate these problems. Consider yourself a consultant offering advice to the CEO and the board of BRE.

You will be formed into groups in week 3 of the term where you will work together on the case study. You will prepare an individual 1200 word business report on the BRE case study and a 300 word reflection on your group work, answering the following questions.

1. Identify two commercial problems that BRE have as a newly privatised business – explain your choice. (400 words)
2. Identify 2 strategic HR issues and explain their importance to BRE (400 words)
3. Outline your 2 key recommendations to the BRE Trustees on how the change could be handled differently. (400 words)

You should adopt a professional approach to this report, since you are writing it as a report to the Board of Trustees for BRE. You should use concepts/theory from the seminars in term 1 so far.

Please see the Module Handbook for the full assignment details.

Appendix A: Centre Director role profile– key result areas

• Generate future business/projects for the Centre in order to meet required revenues of £2 million per year and profitability targets
• Contribute to creating a successful commercial culture in BRE
• Manage all current projects for successful client outcomes, within agreed budgets
• Lead the Centre staff with specialist assistance from HR
• Ensure the conduct of some appropriate research related to the Centre’s expertise (wood/concrete/fire safety)

High levels of leadership, commercial awareness and interpersonal competencies required

Appendix B: Results of the Assessment exercise for BRE centre directors

Name	Leadership	Results focus	Commerciality	creativity	Influence skills
John	Low	High	Medium	High	Low
Amanda	High	High	High	Medium	medium
David	Low	High	Low	High	low
Martin	High	High	Medium	Medium	high
John S.	Low	Medium	low	high	low
Marek	low	Medium	low	high	Medium
Oliver	low	Medium	low	high	low
Naresh	medium	High	medium	high	low
Murray	high	medium	medium	medium	medium
Graham	high	medium	high	medium	medium
Jonathan	medium	High	low	medium	low
Derek	low	medium	low	high	medium
Nadia	high	high	medium	medium	high
Andy	medium	medium	low	medium	low
Christophe	low	high	low	high	low
Derek	medium	medium	low	medium	medium
Jason	high	Medium	medium	high	medium
Manfred	Medium	high	high	medium	low