The HS2 phase one contractors were announced earlier this week, and while the four successful joint venture companies are celebrating their contract awards right now, the hard work is only just beginning.
JV’s and alliances in major infrastructure projects are common place. For £500m+ contracts, major construction firms often form alliances to spread the risk, strengthen their strategic offering and gain access to a much wider pool of resources than they would be able to offer on their own.
But bringing together two or more fierce competitors under one umbrella can create some interesting dynamics. Joint ventures will always present some serious challenges that must be overcome if the allegiance is to be a success.
Here are our four golden rules for Joint Venture success:
1. Establish a common culture
Joint ventures come together to form one team, even if just for a limited time. People from different companies, with different values, objectives and cultures, will suddenly be thrust together to form one unit at the bid stage and hopefully continuing into delivery. If the project is to succeed, then a “them and us” culture needs to be minimised as much as possible.
This can be pre-empted to a certain extent by working with companies whose cultures are closely aligned with your own. However, this isn’t always possible – particularly when working with international companies.
Very early on in any joint venture’s creation, it is crucial to establish what the approach of the JV is and communicate why it has been created and most importantly what behaviours the client wants. Is it a one-off JV or will there be other contracts that the JV will bid together for? From there you can set up a shared vision for everyone within the JV, a common cause that everyone is working towards as opposed to individuals working only in the best interests of their parent companies.
2. Clearly define the management structure
Fostering trust between each partner is a momentous task. The leadership structure of the joint venture must be designed to meet the contractual commitments the JV made to the client and promote a governance of shared decision making between partners.
It is easy to split up the leadership roles by function and say “X Company is responsible for engineering/ commercial/ operations etc…” but this may not be in the best interest of the project as it creates silos. Individuals should be considered for leadership roles based on whether those individuals have the skillsets required to fulfil the project objectives rather than which JV partner has been allocated that function to fill.
Once leaders have been established, it is critical to set out clear lines of responsibility and liability. Infrastructure JVs tend to be complex structures that combine multiple disciplines, large supply chains and many interfaces. There is a lot that can go wrong.
A clearly defined organisational structure is key to understanding who is accountable to who and where liability lies.
3. A flexible recruitment process
Recruiting for a joint venture can sometimes be a challenge. It can be a tough job to convince the best talent from each of the parent companies that a move into the joint venture is the best decision from a career standpoint. Particularly if they are on a defined career track where they are.
One way to overcome this is to motivate individuals with greater opportunities for advancement upon their return on completion of the project.
Some positions will require external recruitment to fill, which poses a new set of challenges. Who is recruiting who?
Having a clearly defined management structure will go a long way to solving this issue, but sometimes being flexible on this point can be beneficial. Each candidate will have different motivations for wanting to join the joint venture and many will have a preference as to which parent company is actually employing them. The different partner companies may offer quite different financial packages and employee value propositions.
If you stick to rigid structures you may lose out on the best talent for the role because they may prefer to work long-term for one of the other companies in the JV.
With this in mind, it is advantageous to include all of the JV partners at the interview stage for key leadership roles. All partners should to commit to attracting and retaining top talent within the JV. Recruiting without input from the other partners can mean there is a lack of buy-in to the new hire.
4. Establish a common reward scheme
Having two or more different compensation structures can cause issues in a joint venture. Similarly, simply just merging compensations structures often isn’t practical, unless the JV forms a separate incorporated company.
Financial rewards, such as sign on or bid win bonuses are often required to attract the best talent to these teams, but it is important to create remuneration system that is aligned with the goals of the project and not simply adopt the bonus schemes of parent companies.
The strategic direction of the JV may be very different than that of the parent companies, and this difference needs to be reflected when setting goals and measuring performance. Having a shared JV project bonus scheme across all partners can work well.
If you are looking to recruit senior executives for projects within transport and infrastructure – whether they are joint ventures or not – click HERE to see how we could help.