November 10, 2009

Leaders 2009

Building things that matter

Vince Versace

As Aecon’s brush strokes continue to paint Canada ‘Aecon red’ it relies on an unwavering set of values that are integral to every facet of its work.

“We have a series of core values and safety is the top one,” says John Beck, Aecon’s chairman and chief executive officer. “When you talk about safety it sounds like motherhood but it isn’t. It is a culture by which everyone does things by thinking about them first. When you get used to this culture of thinking ahead, you do that for everything else that you do.”

Since the days of Prefac Concrete Limited, founded in 1957 in Montreal Quebec under the guidance of Beck’s parents, Aecon has relied on such values as it built project after project and expanded both its experience and industry reputation. When it was chosen by Hewitt Associates and the Globe and Mail as one of Canada’s top 10 employers in 2009, it was proof that keeping to your core is a must as you move forward, says Beck.

“We are proud about being one of the top 10 employers in Canada. That is about caring for the employees because when you do that, they care for you and your company and develop a sense of team.

“This sense of excellence goes from one to another,” explains Beck. “We strive for excellence and innovation and are always thinking of doing things better and in a more creative way. You are always building on the experience.”

With the four central company divisions of buildings, infrastructure, industrial and concessions, Aecon finds itself in a strong and broad stance to both pursue excellence in the field and still navigate rough recessionary waters, says Beck.

“The combination of our diversity of activities, a mix of private and public clients and geographic diversity, that we now have, has allowed us to absorb a few shocks without too much damage,” he says.

Aecon had approximately $2 billion worth of construction underway during the past year. In 2008, its project backlog sat at $1.25 billion, with the divisional breakdown composed of buildings at 43 per cent, infrastructure 37 per cent and industrial at 20 per cent.

“The big advantage we had in getting through the recession is that we have a diversity of activities and they operate in different cycles. Look at the last 12 months, our activity in oil sands and industrial dried up but our infrastructure group picked up,” Beck says. “On the social infrastructure side, such as universities and hospitals, we had a tremendous level of activity.”

This diversity in activity also contributes to Aecon’s success as an employer, providing added opportunities for employee engagement which strengthens retention rates, notes Scott Balfour, Aecon’s President.

“Organizationally, we get a lot out of having happy clients. Our vision is to be the company people go to for building things that matter,” Balfour says.

“Our people have been the key part of that success. The focus and loyalty is there and over the last four years we have focused on investing in our people and developing a learning culture.”

Balfour, who until last month was also Aecon’s Chief Financial Officer but gave up the role to focus on his duties as president, says the contractor’s 5,000 employees proudly work under the Aecon banner, increasing its innovative abilities and pedigree of experience.

As the construction industry evolves, incorporating new elements and standards such as LEED (Leadership in Energy and Environmental Design) and BIM (Business Information Modeling), Aecon’s workforce strives to be leaders, he adds.

For Beck, Aecon’s expertise in LEED is a prime example of how it invests in education and training of its employees to be leaders, thus making the company a leading contractor in this area.

LEED may still be relatively new but it is becoming less unique and more mainstream. If projects are not being done to some LEED standard, people begin to wonder why.

“More people are getting used to it,” Beck says. “For us, it was about training, education and being as far ahead of the curve as we could be.”

Balfour says while Aecon is growing its workforce organically or through acquisitions, the responsibility to its shareholders does not waver.

“As a public company, looking to build meaningful wealth for stakeholders is also important,” he says. “The diversity of what we do is meaningful to many clients and shareholders. Our abilities to self-perform work is stronger than anyone else in the industry.”

Aecon is unique because on its own, it can do the utility locates, move the utilities if need be, produce aggregate, pour asphalt, install lights and do concrete and fabrication work if a project requires it, says Balfour.

“That all gives us the ability to better control schedule, costs and quality in a way which adds value to our clients and helps our competitive position,” he says.

While the Aecon brand came on the scene in 2001, the firm’s strategic partnerships and roots of acquisition can be traced back to 1877 when Adam Clark, a Scottish immigrant, established a plumbing and gas fitting business in Hamilton, Ontario.

Through some recent acquisitions Aecon has shown it is always trying to further expand its ability to both self-perform work and grow its corporate footprint across Canada.

In 2008 Aecon acquired South Rock Ltd., an Alberta-based company which added depth to its roadbuilding capacity and gave it access to important aggregate products in that province, explains Balfour.

In 2009, Aecon acquired Lockerbie & Hole Inc. for approximately $220 million. Lockerbie’s abilities from module assembly to civil construction services added depth to Aecon’s mechanical and water and wastewater capabilities, including a strong presence in Western Canada.

Beck says acquisitions are not things done haphazardly and that they are more about relationships, existing partnerships and long term understandings between two parties.

The 1999 acquisition of BFC Group was a significant acquisition of a firm four times Aecon’s size at the time. BFC had been an Aecon partner for close to seven years and they had worked together on building Highway 407, a tollway in Southern Ontario.

“When we actually completed the transaction it was a continuation of long term relations with an already established shared culture and philosophy on how to operate,” explains Beck.

The success or failure of acquisition depends on the “commonality culture”, Aecon’s CEO adds.

“The way people think and behave with one another is central to it. We always want to make that up front and if it is not, we don’t do it. I think culture is more important than price.”

The acquisitions in Alberta will now enter a consolidation and rationalization phase since Aecon believes more stable and long term growth is emerging in the province.

“This year will be a consolidation of the acquisitions. It is time to consolidate, perform and position ourselves both from a human resources and financial resources point of view,” says Beck of the firm that went public in 1971 and is now Canada’s largest publicly traded construction and infrastructure development company.

“We expect extremely strong years.”

Both Beck and Balfour admit it is easy to point to the major landmark projects in Aecon’s portfolio to showcase its talents and expertise. From the St. Lawrence Seaway and CN Tower to the Revelstoke Power Plant and Dam or the Cross Israel Highway, the resume is impressive. However, smaller projects such as utility work; from gas and water distribution to fibre optic cable are still the company’s “bread-and-butter” projects.

“You need that base, that core base of activity year after year, because larger projects can be bumpy,” believes Beck. “The more of these smaller projects we do and do more efficiently, the more we develop new relationships and clientele.”

With stimulus projects picking up steam across Canada and Aecon growing its integrated services and technical expertise nationwide, the company is positioned well to endure what is left of the recession.

“We do have our bumps in the roads, like everyone else, especially in our business which can be a tricky business fraught with risk. But all in all, things have gone well for us,” says Beck.

“The future of the construction industry and infrastructure development in Canada has never looked brighter than it is today. These are interesting times; with this very large pipeline of work we are going to focus on Canada for the foreseeable future, we will be ready.”

Balfour has been with Aecon since 1994 and came into its fold during the early 1990s as Armbro Construction’s banker. During that time he gained an appreciation of the strength, loyalty and passion that existed in Aecon’s predecessor and that remains to this day.

“There are so many industries and businesses that may feel what they do is not that tangible,” says Balfour. “What we do, it really is a bricks and mortar business. There is a real legacy to what we do and what we build for clients.

“You get to drive by structures with your kids or grandkids and say ‘Daddy’s company built that.’ People get a lot of satisfaction out of that.”

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