Survey of Millennials and Gen X reveals changing attitudes to workplace

Young people entering the workforce want to work for organisations that are socially-conscious and have progressive attitudes to work, including flexibility, a defined career path and strong training and development programmes. Workplace characteristics such as these, it appears, are more highly valued than pay. These are among the findings of a study of 2,700 global Millennials and Gen X employees undertaken recently by HBR Ascend, a division of Harvard Business Review.

The study reveals a generation that is more idealistic and expects organisations to engage with causes other than business. Some two thirds of respondents believed that their employer should take a stand on social issues, while a quarter felt that their organisation should take a stand on political questions. Only one in 10 believed that it was not appropriate for organisations to take a stand on either social or political issues.

Asked to define the key characteristics of their ideal employer, flexible work conditions and work-life balance (27%) and a clear career path with advancement opportunities (25%), emerged as two most valued requirements. These was followed by strong training and development programmes (20%), a clear vision of corporate goals and mission (20%) and passionate and engaging leaders (19%). 

Other characteristics mentioned included a sense of empowerment in teams across the organisation and honest communication and fairness. Significantly, all of these characteristics were rated above a competitive salary and bonus structure, suggesting that young employees are taking a more holistic view of who they want to work for. 

The respondents  placed a strong emphasis on continued learning to improve their employability, with learning technical skills (23%) at the top of their wish list, followed by strategic thinking (22%) negotiation techniques (22%), networking skills (21%), business communications (20%) and analytical thinking (18%). 

The respondents were generally highly active in self-improvement activities to make themselves more employable.  Asked about the tools they used to improve their knowledge, the most popular were online articles and blogs (39%) videos (37%), books, periodicals/journals and published research papers (32%) free online education programmes (26%) and talking to friends and colleagues (24%). 

There were noticeable regional differences in how people learn. While the vast majority of people around the world learn through articles, blogs and research publications, the majority in India (57%) and Southeast Asia (56%) prefer to learn by watching videos. 

Interestingly, respondents also placed more value on knowledge rather than educational credentials with around two-thirds saying that they would value a course even without certification. 

The threat of artificial intelligence was a major concern for many, with 61% believing that at least some of their tasks could be automated, while 6% felt that all of their work could be automated.

The survey also looked at barriers to high performance. Respondents cited office politics (27%), a lack of training and development (26%), unclear/changing job roles (22%), a restrictive work culture (20%), a lack of collaboration (18%) and excessive workloads (18%). Too many meetings and a difficult boss were also cited as problems for 11% and 17% respectively. 

In the United States, 40% of respondents identified office politics as their number one barrier to better performance at work. Just over one third said they were not clear about their job roles or that these changed frequently, and 30% said a lack of training and development opportunities was a barrier to performance. The data was similar for the UK on the European Union with 32% also saying that a restrictive workplace and excessive workloads were barriers to better performance. 

Worryingly, levels of engagement for respondents were low only 29% said they were engaged and excited to go to work every day, while 18% said they were engaged only when there is something really interesting to work on, with a further 8% saying they did not feel engaged at all. 

Turning to the issue of skills, nearly two-thirds of respondents expressed confidence in their technical and subject matter skills with one fifth stating that they were very confident. Some 90% were confident in their soft employability skills such as empathy, communication skills and the capacity to work with others. 

However, according to the survey authors, such a high level of confidence in relatively young workers about their hard and soft skills could indicate a blind spot for many respondents as other published research has highlighted skills gaps. The SHRM 2019 Global Skills Shortage report, for example, reveals that 75% of HR professionals who experience recruiting difficulties, say there is a shortage of hard skills for job openings and that 83% of respondents have had trouble recruiting suitable candidates in the last 12 months.

While there may indeed be a gap between the expectations of young people entering the workforce and how they view themselves versus the realities of their own shortcomings and what organisations can provide, the survey results do highlight changing attitudes and opinions that organisations need to factor into their thinking if they are to attract and retain young talent.

The New Perspective on Work – changing attitudes and opinions of young professionals about Work and the Workplace is based on reseach conducted among 2,700 global respondents in June 2019 by HBR Ascend, a digital-first learning platform for early career professionals and graduating students.

The secret to having an engaged and productive workforce is to have a master plan for developing employees at all stages of the learning curve. That’s the key message from leading US author and consultant Whitney Johnson. On a recent speaking engagement in Dublin, she spoke to Decision Editor FRANK DILLON.

It is almost a given at management conferences these days that a slide will appear at some point in the proceeding showing the appalling state of employee engagement in the western world. A Gallup figure of 15% is often quoted representing the minority of employees who say they are truly engaged with their jobs. The impact on productivity is clearly devastating.

This is the backdrop to author Whitney Johnson’s latest book, called Build an A Team (Harvard Business Review Press). For Johnson, the secret to tackling this problem is to have a master plan for employees at the three key stages of their career journey. Her Eureka moment was the realisation that the ‘S’ curve model for disruptive innovation as it applies to product life cycles, also applies to careers.

Johnson is well used to disruption. Graduating with a music degree, she stumbled into financial services and has not looked back. “Wall Street in the late eighties was exciting but it didn’t have many opportunities for pianists so I started as secretary at a financial services firm and took business classes at night. After a few years my boss, Cesar Baez, helped bridge the gap for me to become an investment banker and it laid the groundwork for my entire career.” Moving into equity research and analysis, Johnson proved adept as a stock picker achieving a high ranking by the industry journal Institutional Investor.

Have a master plan for developing employees at all stages of the learning curve

By 2004, she was hankering for a new challenge and struck out on her own. She co-founded an early stage investment fund with legendary Harvard Business School professor Clay Christensen called the Disruptive innovation Fund, that continues to enjoy success today. Christensen’s 1997 book, The Innovator’s Dilemma, famously proposed the theory of disruptive innovation by which start-ups can dislodge incumbent market leaders through leveraging new technology.

S Curve

It’s S curve model suggests growth is really slow at first, until a product or service reaches a tipping point of around 10-15% market penetration, the so called ‘knee of the curve’. This can be followed by rapid market growth where the product or service lies in a sweet spot. Finally, when market penetration reaches 90% or more, saturation is reached and growth tapers off.

Johnson was curious to see if the same principles could be applied to career lifespans and her research suggest that there was indeed a link. The three stages in this case are termed inexperience, engagement and mastery.

“The S curve model helps us understand the development and shifts in individual careers. S curve math tells us that the early days of a role, at the low end of the S, can feel like a slog. Cause and effect are seemingly disconnected. Huge effort yields little but understanding this helps avoid discouragement,” Johnson explains.

The S curve model helps us understand the development and shifts in individual careers

“As we put in days, weeks and months of practice, we will speed up and move up the S curve, roaring into competence and the confidence that accompanies it. This is the exhilarating part of the S curve, where all our neurons are firing, the sweet spot.
“As we approach mastery, tasks become easier and easier. This is satisfying for a while but because we are no longer enjoying the feel-good effects of learning, we are likely to get bored. If we stay on top of the top of the curve for too long, our plateau becomes a precipice.”

Johnson says that to have a healthy organisation, you need a good mix of people at different ends of the curve and that if you don’t have enough people at the lower end of the curve, you are not going to get innovation. All three stages of the curve are normal and legitimate. The secret is recognising this and having a strategy to manage each stage.

This starts with hiring policy. Johnson says risk aversion is a problem in many hiring decisions, with managers playing safe for risk of failure. Hiring an ‘Ivy League’ star may seem like a great move and many organisations crave these so-called A-list hires, but in many ways these are not always the sure-bets that they might first seem, she says.

“Firstly, if they know how to do the job, they are probably not going to be learning. Secondly, they are going to be really expensive to hire as they are considered premium talent, they have options to go elsewhere and thirdly, they are probably going to be bored very quickly so their shelf life is very short. The economic cost of hiring that person can actually be very high.”
As in the principle of nobody ever getting fired for buying from IBM, if that hire doesn’t work out the consequences for the one who has recruited them are limited. Hire someone with a so-called ‘second tier’ qualification, however, and the risk profile for the recruiter is greater.

“Managers will typically feel a greater sense of responsibility for the failure if that person doesn’t work out. We need to consider how do we make it safer as a manager to risk failure as we don’t deal with failure very well.”
She adds: “We need to hire people for potential not for proficiency. Yes you have to have people with the right credential to do the job but it is about more than that. Motivation is hugely important. Over time you will have a group of people who are much happier and the organisation will benefit.
The lower end of the curve is where the challenge is most obvious. Johnson has this advice:

“Discouragement is a real danger at the early stage and one that needs to guarded against. You need people to understand the ‘why’ of the organisation – why are we doing the work we are doing. You also you need to understand their own motivation. There’s a risk in doing that. What they are doing is showing you their hopes and dreams which is giving you a lot of power. You have to respect that. If you can see what they are trying to get out of the job, you can better manage them. You also need to be honest and tell them that they are at the lower end of the curve, how long they are going to be and what will happen when they move to the next part of the curve.”

Specifically, she advises giving new hires short-term tightly defined projects that provide feedback as in your first few weeks in the job, feedback is important.

The second or middle stage of the curve is where employees tend to have maximum engagement. They may be still making mistakes but learning and innovation are at their peak. It is vital for organisations to have lost of people at this stage of the curve. One of the dangers here is maintaining the growth mindset of this cohort so pushing and challenging this group is vital.

“The danger at the third or high end of the learning curve is that your people can get complacent and settled. Bored and complacent people don’t innovate. They are just dialling it in. They get disrupted. If you have too many people are at that stage of the curve you are in a dangerous position as an organisation,” Johnson cautions.

It is not always possible, or advisable, to hold on to people, Johnson acknowledges. “Sometimes people need to go elsewhere. You need to have conversation about what they want to do. One of the greatest gifts you can give is to help people jump to the new curve, ideally in your organisation but if not in a trading partner or a client. That’s how you build valuable networks.”

Skills Mix

Another interesting observation Johnson makes is that it is easy to assume that people know what their strengths are, when often they don’t. Usually, she notes, we have a tough time spotting our own superpowers because these are things we do instinctively well, so our strengths are often invisible and easily dismissed. “We sometimes hire people into the wrong roles because they include on their resume what they worked hard to do not what they do without thinking. You need to identify your reports’ strengths – their superpowers, their genius – and play to them.”

Diversity in skill sets is equally important and Johnson cautions against hiring too many people in your image. In the book, she cites an example of the entrepreneur Walter O’Brien, founder of Scorpion Computer Services. A child prodigy, who started programming computers at the age of nine, O’Brien initial hires were all like him, technology geniuses with high IQs. He soon discovered that when he puts two geniuses on the same project, they ‘tried to kill each other, all the while insulting the customer’.

Recognising that he needed to hire people who were strong in ways that he wasn’t, O’Brien started hiring single moms, elementary school teachers and psychologists – people with skills such as self-awareness, empathy and the ability to manage conflict. These high EQ (emotional intelligence) liaise between Scorpion’s high IQ technology specialists and its clients and are nicknamed ‘Super Nannies’.

Seven accelerants of growth

According to Johnson, managers need to know about seven accelerants of growth and learning

The right risks
Managers need to become talent developers

Distinctive strengths
Pinpoint employees’ talents and utilise them

Embrace constraints
Use time limits to motivate and hone focus

Battle against entitlements
Celebrate success and be generous in helping employees fulfil their potential

Step back to grow
Sacrifice short-term productivity to encourage curve jumping

Give failure its due
Let employees take on uncomfortable challenges and support them through failure

Be discovery driven
Shift players on your team as their skills and talents emerge

“Nearly every human being is looking for growth opportunities. If a person cannot grow with a company they will grow away from it. As with any rules, Johnson acknowledges that there are exceptions: “There are people who won’t grow no matter how you try to help them. Then there’s the issue of past high performers who are currently underperforming. If it is time to jump and they wont, you may need to give them a nudge.”

She likens the process to the leaven bread; a little bit is all that it takes for the whole mass of dough to rise but let it rise too long and it will collapse. The energy of the chemical reaction will have spent itself. The key is to capture the leavening at the right time, bake our loaves and reserve some ‘starter’ for the next batch.

The prize in getting performance management right is enormous and she feels that organisations need to incentivise their managers to

“If people are engaged operating margins go up and if they are disengaged margins go down. Let’s make sure that when we do performance reviews that people are developing talent and if they are it is linked to their bonus. If we really believe talent is important, then we need to put metrics around that.”

Creative disruption lies at the heart of Johnson’s message. “Managing people so that they can disrupt themselves honours the biology of change that is in our human nature. We each have a life cycle, made up of myriad smaller life cycles, beginnings and endings, growth and decline; we cannot stay the same.”

As Johnson concludes: “We can only rummage through the same rocks for so long and find diamonds. Eventually, its time to swing our picks into the solid wall of the unknown and begin the work of discovery anew.”

Dr Michael Smurfit’s legacy is secure. As he prepares to celebrate his 80th birthday, Ireland’s most consistently successful business leader can reflect on a career that saw him transform a small family-owned box-maker into Ireland’s first global leader in its sector. His defining role as the first Chairman of Telecom Eireann arguably created the infrastructure for Ireland’s multinational-based economy. Twenty years after appearing on the cover of the first ever issue of this magazine, he sat down again recently at the K Club with Decision Editor FRANK DILLON. PHOTOGRAPHY BY MARK MCCALL

Twenty years is a long time in the life of any individual so it unsurprising that Dr Michael Smurfit is a different man to the figure we interviewed 20 years ago. At 60, Dr Smurfit was a man in a hurry, building a phenomenally successful global corporation that now has revenues of over $8 billion.

The prospect of speaking to an eager young journalist at first seemed an irritant to him that day when we met at the company’s HQ in Beech Hill.

The frostiness soon evaporated. I didn’t grill him on the latest short-term developments in the publically quoted multinational, somewhat to his surprise. Instead, we talked that day in some detail about family, about culture and the values and strategies he believed made his company successful. He relaxed and opened up. Afterwards, he thanked his guest graciously for what he said was a very reflective and interesting discussion and wished me every success with my new publication.

There is less urgency when I meet him again recently. Casually dressed in his golf gear in the splendour of his home Straffan House at The K Club, Michael Smurfit is still an active business man, with close on 100 investments, he tells me. Though he stepped down as Chairman in 2008, he is still a major shareholder in Smurfit Kappa, and proud of the elevation of his son Tony to the CEO role last year.

The demeanour, however, is that of a man who has nothing to prove.

Dr Smurfit is excited at the time by the hosting of the Irish Open at the K Club that week. It represents a return to top level golf at the Club he established and now owns outright. It is 25 years since the impressive estate opened, 10 since it hosted the Ryder Cup that put it on the map of world golf and almost 80 years to the birth of Michael W. J. Smurfit in St Helen’s, Lancashire. After our meeting, Prince Albert of Monaco is due to arrive for a private visit coinciding with the golf tournament. They are well acquainted from Dr Smurfit’s role as honorary consul to the principality.

Getting to 80 is an achievement in itself, he says, one that previous generations of Smurfits didn’t enjoy. Mortality is something he thinks about periodically. “When you see your friends passing on or you consider a terrorist attack like the one at Brussels airport, you realise, that could have been you. No Smurfit made it past the age of 70. I’m blessed to have had good health, especially in my latter years,” he notes.

When a company is doing very well, all the owners see is a better year. Only when they see a downturn or a tech change are they are open to suggestions. You can buy many businesses but you can only sell them once

His life story is well documented in a weighty autobiographical volume published two ago entitled, ‘A Life Worth Living’. It was a monumental effort that involved a small team working for five years. It charts the family’s modest beginnings and struggles for viability in the Lancashire of the 1930s, the move to Ireland and the setting up of a small box-making company in Rathmines through to mega mergers at the turn of the last century and beyond. “We had to take some of the best bits out on legal advice. There were some nice stories we couldn’t run with because they were probably slanderous,” he smiles.

There’s a lot to be proud of in terms of business achievements along with some regrets in a life lived at a frantic pace. “I made a few stupid investments and I backed the wrong people from time to time, but clearly I made the right decisions a lot more often than I made wrong ones,” he says.

One source of regret is pushing himself too hard down a ski slope almost 20 years ago. The resulting injury means that he can no longer play golf and only got to play the K Club course on a small number of occasions. It was characteristic of his approach to life. “I think most successful people are like that, very driven in everything that they do,” he says.

Exercise consists of two hours a day of walking, maintaining a constant 75 kilos, the same weight as he was in his 40s.

The Michael Smurfit of his 40s was a difficult man, he readily accepts. “Up to my mid 40s, I didn’t like myself and I don’t think many people liked me either. I was so self-centred – I wasn’t a bully but I was self-centred. I couldn’t wait to wake up. I went to bed at night with a pen and paper as I had so many ideas. I must have been very difficult to live with. Family holidays always had to be cut short so I could attend to some urgent business,” he recalls.

The realisation soon dawned that to grow Jefferson Smurfit Corporation would require the development of a team. A cadre of hand-picked senior management figures like Howard Kilroy and David Austin were to help transform the fortunes of the Jefferson Smurfit corporation. “I realised that I needed to bring in management – I needed to motivate them. It took me time to realise that I needed to focus on key people. You don’t automatically get respect, you earn respect, so I changed my focus around that, which made a big difference to what we were able to achieve.”

For most of his time at the helm, Michael Smurfit remained very singly focussed on the task of building what he happily refers as a ‘dull, boring type of business’ – making cardboard boxes. In this, he differed from Dr Tony O’Reilly, a contemporary to whom he was often grouped with as one of the two great titans of Irish business from the 1970s onwards.

O’Reilly’s business career has not ended well, having filed for bankruptcy last year. Unlike Smurfit, O’Reilly’s interests ranged from newspapers to food to luxury goods and oil exploration amongst others, as well as deep involvement in philanthropic interests such as the Ireland Fund.

Dr Smurfit has huge sympathy for him.

“I went public about the decision of AIB to go after him. I was horrified by that decision. He didn’t deserve to have his career ended in bankruptcy. I wrote to him at the time and got a very nice reply. There but for the grace of God … I used to meet him at dinners and I remember worrying that he was trying to do too much. He must have had boundless energy. I stayed focussed. I put all my eggs in one basket and watched the basket.”

It is a sad decision made by the older generation of the population from which the ramifications for the younger generations will be felt for many years to come

One of the acknowledged attributes of Michael Smurfit is his capacity to make good deals. When buying a business, for example, finding a vulnerability on the part of a seller is the key to being able to extract value, he says. “When a company is doing very well, all the owners see is a better year. Only when they see a downturn or a tech change are they are open to suggestions. You can buy many businesses but you can only sell them once.”

Understanding the intimate workings of a business is crucial, a task that proved relatively easy for Michael Smurfit given his immersion on the shop floor of the business as a young man.

“I worked every machine, including working in a paper mill. I knew what made a good corrugated box – nobody could fool me. In the industry people knew that I knew this and I could tell a lot about a business from a visit to a plant.”

Successful acquisitions and mergers to produce scale and market dominance are commonly viewed as the key driver of the Smurfit business but the man who built it says this was only part of the story.

“That culture we installed back then of being the best was the real driver – to have the best product, best service, lowest working capital, best on-time delivery and lowest stocks etc. These were the parameters of running a world class business. We made 29% return on sales for 25 years. It just so happened we became the biggest by being the best.”

Diversity was also as important as scale. “One of the reasons I diversified out of Ireland was sheer fear, specifically because of the Anglo Irish Free Trade Agreement. I knew that all of our customers would go out of business and that’s exactly what happened. The shoe box and shirt box business all went to Asia. We had to get out of Ireland.”

The decision to sell to Madison Dearborn was the first stage in stepping back from the empire he had built over five decades and was ‘opportunistic’, he agrees. “When they came to see me I thought it would be about something else, they had studied the company and thought it would do well in a leveraged buyout. I went to the family, the board and finally the shareholders. That’s not an easy thing to do when you run a company the way I did but that’s the decision that we made. Fifty-four years was enough for me.”

Telecom Tribulations

The one major diversion that Dr Smurfit made from running the Smurfit corporation was taking up the invitation of the then Government to chair Telecom Eireann, the newly spun-off semi state company in 1983. Feargal Quinn, the driver of another successful family-owned business, Superquinn, took the chair at An Post, the other part of the old Department of Post & Telegraphs.

Leading Telecom Eireann is one of his proudest achievements.

“What we inherited was such a shambles, an unbelievable mess. Words couldn’t describe how difficult it was to get a phone. It was worth £500 extra on the value your house if you had one,” he recalls.

One of the first people that he spoke to was Tony Mullins, then chief technical officer. At the time the organisation had geared up for purchasing the latest analogue system to upgrade the network. Mullins briefed him on a more advanced option, they travelled to Sweden to check out the latest systems there and needing no further convincing, the new Chairman cancelled the order and specified that the future needed to be digital.

“To have someone like that and not take their advice would be stupid,” he observes. “We were one of the first countries to install a digital network. Had we not gone down that road I don’t think we would have been able to attract a lot of the foreign direct investment that came into this country later.”

Dr Smurfit’s motivation for accepting the offer of the Chairmanship was around ‘giving something back’ to the country, he says. He asked for a salary of IR£7,000, considerably more than comparable positions offered at the time. The Government were somewhat taken aback by this demand but agreed.

The rationale for this wasn’t around personal reward. This would have been small money to him. Rather it was around establishing the status of the office of the Chairman. “I never took a penny in salary or expenses from Telecom Eireann. I didn’t have a car or a secretary. I donated all of the salary to Camphill (a charitable trust working with people with special needs) but didn’t reveal that at the time.”

Dr Smurfit relished the role and played hardball with his political masters. “I just ignored the politicians. I told them that If you don’t like what I am doing you can fire me but I will do the best job I can, as I see fit.”

Smurfit believed that Telecom Eireann, then highly regarded for its state of the art telecom service, had the potential to grow an international business and to create high quality sustainable jobs. Building a new HQ on the site of the old Johnson Mooney & O’ Brien bakery in Ballsbridge was part of this vision but a controversy involving the circumstances of the buying of the site led to him being effectively forced out of the role in 1991.

In a radio interview, then Taoiseach Charles Haughey suggested that Dr Smurfit should step aside from his role until a full investigation was completed. “It was one of the most stupid things a politician could have said because it is not possible to step aside for a long investigation when you are leading an organisation. He should have said nothing.” In evidence before The Moriarty Tribunal in 2001, Dr Smurfit revealed how Haughey had solicited a donation from him in 1989 of Stg60,000, despite denials from the former Taoiseach that he had done so.

“Any money I was asked for was for the party – one donation didn’t go there but I didn’t know about that at the time… there was no way I could have known about it,” he says now. Despite this and deep annoyance and hurt about how he was forced from office at Telecom Eireann, Dr Smurfit says time has healed any wounds in relation to the former Taoiseach. “I have moved on and I think history will be kind to Mr Haughey. He achieved a lot. He was a fascinating man with many flaws but the side to him that came out in the Moriarty Tribunal was not the one I saw.”

He believes that Enda Kenny and Michael Noonan have also performed a great service to the country in restoring the economy to good health and was surprised that they were not re-elected decisively earlier this year.

“I thought that they would be a shoe-in. I don’t live here so I don’t understand all of the nuances, my understanding is that the Irish didn’t get the feel good factor. Balance of payments is not something the average person would give a damn about or the IMF outlook. We were getting all the kudos at the international level but the person filling up their car with petrol or getting their groceries wouldn’t have got a sense of that.” He is concerned that the minority administration will not be a secure one. “That’s not stability. A minority government is a licence for troubles ahead,” he says.

That’s all the more important as Brexit will be a huge challenge to this country. “It is a sad decision made by the older generation of the population from which the ramifications for the younger generations will be felt for many years to come. As a result of this the markets will remain very volatile and sterling very weak for some time to come.”

Begrudgery

Having built much of the success of the Smurfit corporation in North America, Dr Smurfit is well positioned to compare and contrast business and personal cultures. “Willingness to change was one thing that struck me. If an US executive had to relocate to the East Coast from the West or vice versa, for example, that is not a problem. In Ireland, moving between Maynooth and Dublin is a problem.”

A begrudging attitude to success has traditionally been a problem in Ireland too although that is now changing. “You know the Irish character as well as I do. It’s a trait we have and not an admirable one. The Irish were downtrodden for centuries, we’ve had an anti-authority attitude and have traditionally been a little suspicious of success. Only a very small number of Catholics made it to the top so that’s understandable.”

“In the US they look up to success, but then it is made of a people like the Irish or those from other parts of Europe who were dispossessed and Went there with the idea that they could make a success of things.”

Modern Ireland is a different place, however, and we have much to be proud of. “We punch well above our weight. We are an extraordinary nation. Just look at sport, despite the fact that we have our own Gaelic games to support, we also excel in areas like rugby and golf. We’ve hosted the Ryder Cup here. Then look at entertainment area, U2, the Corrs, Riverdance.

Graduate School

Another key legacy of Dr Smurfit is the UCD Graduate Business School that bears his name. One of the areas we discussed in our interview in 1996 was the absence of women in the higher echelons of the Smurfit organisation, something he was keen to put right. He believes that the School has played a role in this in general.

“One of the reasons I helped start the Business School was to see if we could get more trained women in the system. There wasn’t a pool then. I believe that the pool is much greater now. I don’t agree with gender quotas. That’s the wrong approach. It must be based on ability and your achievements. The Business School is now qualifying more female students than male in the master’s category according to my last conversation with the Dean there.

“I get great pleasure from the School and I read all the papers they send me,” he continues. “I’m very proud of it. When I had considerable resources I wish I had put some of those resources in the Foundation however I am planning to do so in the future.”

The Crash

So did the crash affect him badly? “Yes, I lost a fair bit in the crash although there has been a recovery – property, bank shares, Smurfit shares went under one pound. A lot of my investments tanked.” The bursting of the property bubble was one he anticipated although the toxic effect was one he had not reckoned on, he says.

“What I didn’t know – and I consider myself fairly astute – was how property had infected every aspect of our economy, the car industry, the advertising industry, the professions, the taxes the government was taking in from homes etc. I anticipated the property crash but didn’t understand how deep it had got into every fabric of the country, how it destroyed earnings. I regret not studying the thing in greater detail and understanding where this was going to end. It wasn’t just 50% off property prices, it was 50% off a lot of things.”

Could the Government at the time have done more to prevent it? “I don’t think so. Not when you had foreign banks coming in and offering people 120% loans. Banks were throwing money at people. One bank rang me up at the time and said we don’t have you on our books and we’d like to lend you €50 million. I said ‘no’. OK, what about €100 million then? they replied.

Dr Smurfit says he doesn’t borrow personally and doesn’t allow The K Club to operate an overdraft facility. “Early in my career I did borrow when interest rates were 15 and 20%. It’s easy to borrow, but harder to pay back.” Money is not a personal driver for him, he says.

“I have never been money conscious. Money was never a goal or to be famous. My goal was the make the company I was born into with my dad’s name respected. That’s what I set out to achieve and what I hope I have achieved. I have got a lot of honours from countries through the years, Italy, Spain, Poland, France, the UK and one of the reasons I accepted those honours was on behalf of my dad. This is what he should have had.”

One incident from the 1950s is highly significant in this regard and still rankles with him. Having produced a breviary for the Catholic church, a massive project at the time, Jefferson Smurfit Senior, a convert to Catholicism, was set to be awarded a Papal honour by the Vatican.

The Archbishop of Dublin, John Charles McQuaid, intervened to block it, however, on the grounds that he was born a Protestant. “My understanding is a Catholic is a Catholic is a Catholic. You have the same opportunities to enter heaven. My dad was very hurt by it.” Does that affect his religious outlook?

“I have a reasonable degree of faith. I had good instruction in Catholic teaching when I went to school in Clongowes Wood and for a year was giving thoughts to going to Maynooth. I know there is something there. What exactly I don’t know as nobody has come back and told me,” he concludes.

As he contemplates his life at 80, that’s one mystery he seems happy to park for now at least. D

JUSTIN COMISKEY finds that often quite simple energy saving measures can make significant bottom line contributions.

“There is a really compelling business case for companies to make energy savings today,” says John Walsh, who heads up the ESB’s recently established Smart Energy Division which brings the semi-state’s considerable suite of energy expertise to bear on reducing consumption. “Companies really don’t appreciate the scale of the opportunity that’s open to them to reduce their energy costs. It’s a big untapped opportunity to get a competitive edge.”

The ESB’s Smart Energy Division is working with around 50 firms at the moment and expects to reduce their energy consumption by 25 per cent. Typically, investing in energy saving measures pays for itself in 18 months to three years – well within the return on investment horizon of most companies. And, even if a client can’t foot the cost of introducing energy-saving measures, Walsh says they can fund the initial capital cost and let the energy savings going forward take care of the expense.

Many energy companies point to energy saving measures, rather than renewables, as currently offering the biggest bang per buck invested. Charlestown shopping centre in Finglas, for example, is bagging annual energy savings of €60,000 after introducing a range of energy-saving measures recommended by energy consultant SmartPower. These measures, after grants and energy credits were deducted, cost the centre €35,000 to introduce.

“The interesting thing about the Charlestown project is that the client got their money back after seven months, was €25,000 up after a year and can now look forward to annual energy savings of €60,000,” says Fergus Wheatley, MD of SmartPower.

Companies really don’t appreciate the scale of the opportunity that’s open to them to reduce their energy costs

“Getting an energy efficiency audit done really is a no-brainer. It’s mind-boggling that it’s not more widely known how much money can be saved by property owners and those leasing buildings.”

So how does an energy audit work?

At Charlestown, Wheatley followed the “excellent” EXEED process championed by the Sustainable Energy Authority of Ireland. This sets out a framework for identifying energy savings by challenging the initial energy design spec so it can be determined why energy is being used in an area and whether reducing this energy would still do the same job.

Once these questions have been assessed, the on-site energy equipment (lights, fans, air-conditioning, heating, pumps, etc) is investigated. At Charlestown, it took Wheatley about two weeks on site to work out how all the centre’s various energy systems worked and interacted with each other. “Then I could determine if, for example, the heating and air-conditioning systems were in competition with one another and using too much energy as a result?”

Dan O’Connor, centre manager at Charlestown, says EXEED was “very useful” in identifying energy efficiency projects. “One notable example was with the basement car park lights where we identified areas that needed light and areas that could be reduced. The outcome was a two-third saving in capital cost while nearly doubling the energy savings from an earlier proposal that we had from another vendor. We also identified that due to poor controls we were wasting huge amounts of energy heating hot water for the toilets, which were upgraded as part of the project.”

Among the key energy saving changes made at Charlestown were: installing LED lights in mall areas, car parks, loading bays and residential spaces (LED bulbs are up to 90 per cent more efficient than traditional incandescent models); fitting a new how water cylinder which reduced use of the district heating pump; introducing variable speed drives on the district heating pumps meant the pumps no longer had to work at 100 per cent during the summer months; and upgrading boiler controls allowed for more efficient use.

It was also found that rain blown onto sensors on the centre’s automatic doors caused them to open with consequent loss of hot air during the winter. This issue was resolved by installing rain covers over the sensors.

Another problem was that, as Charlestown’s mall roof is made of glass, the centre experiences significant solar gain on sunny days which then places increased demands on the air-conditioning system. By installing a new controller with rain and light sensors to control the roof vents, a “chimney system” to naturally vent the building is now used to reduce energy consumption.

David Willis, energy service manager at Electric Ireland’s Business Markets division, says they have worked with a variety of third-parties to provide simple energy saving solutions such as “energy monitors, smart heating controls and an analysis of bills” to identify areas for savings.

“We have assisted GAA clubs, shops, hotels and other Irish workplaces to install more energy-efficient lighting, heating, air-conditioning and refrigeration plant, and reduced their bills by €300,000 per year,” he says. “A typical small business, spending less than €25,000 a year on energy, might expect to save 50 per cent of their lighting bills by installing LEDs, save 20 per cent on their space heating bills by installing boiler optimisation and some insulation, and a further 5 per cent of their total bill through monitoring and good staff practices. This leads to a saving of about €7,500 a year and will likely pay for the work carried out in under two years.”

But, once a company is lean in terms of energy-saving measures, the next energy efficiency step is renewables where a  number of  energy technologies are about to happen, scale-up and offer Irish business a significant opportunity to reduce their costs and gain a competitive edge.

Bord Gáis Energy points to electricity-generating solar photovoltaic panels as becoming “more and more cost effective”. Solar energy is essentially a digital technology and, just as the power of computers is increasing exponentially, so is the output of solar panels while their cost of manufacture is typically falling by 5-10 per cent per annum. In fact, in many parts of the world it is now far cheaper to generate electricity from solar than fossil fuel sources and, as a result, traditional power utilities and oil companies are facing a wave of disruption. Solar is improving its cost position relative to fossil fuels so quickly that one leading energy expert, Standford university lecturer Tony Seba, believes it’ll all be over for fossil fuels by 2030.

Evidence of a shift to solar comes from Kingspan ESB, a joint venture between the ESB and solar panel manufacturer Kingspan to offer “Funded Solar”. This allows businesses to install, without any upfront capital costs, a state-of-the-art solar photovoltaic system to generate electricity and make productive use of otherwise idle roof space.

And Irish companies are moving into this space. Kingspan Insulation in Castleblayney, Co Monaghan installed what’s currently the largest solar PV system in Ireland of 300kW in 2015 while Butlers Chocolates is currently putting in an even larger 420kW system at Clonshaugh in Dublin.

The cost of installing renewable energy sources has plummeted in the last few years and we are now seeking a scenario where a solar PV installation will pay for itself within six to seven years

Cormac Mannion, energy services manager at Energia, says there are “quite a few options” for Irish businesses looking to engage with renewable energy. “These include solar thermal and solar photovoltaic panels, biomass boilers and combined heat and power units, and wind energy. Also, an interesting option that is available to businesses is heat pumps. However, it is important to realise that not all of these options are ideal for businesses and site suitability is one of the primary factors that drive such an investment.

“But the cost of installing renewable energy sources has plummeted in the last few years and we are now seeking a scenario where a solar PV installation will pay for itself within six to seven years. While this may seem like a long time for many businesses, the key advantage is that it can act as a hedge against a scenario where energy prices rise. That in itself makes the proposition far more attractive. Also, many of these technologies may become far more cost effective with the introduction of the Renewable Heat Incentive which is expected to be introduced before the end of 2017.”

While the range of energy-saving solutions can be bewildering and the jargon confusing, the bottom line is that energy-saving now contributes handsomely, and quickly, to a company’s finances. Choosing an appropriate renewable energy source can compound the energy-saving effect and give companies a strategic advantage going forward. D

The National Children’s Hospital is just the latest in a long line of public capital projects to suffer from a massive cost overrun. BARRY MCCALL asks what can be done to prevent this happening in future.

The maxim about those who do not learn from history is often attributed to Napoleon or other great historical leaders but it was actually first stated by philosopher George Santayana. And it wasn’t necessarily intended as advice, it was more a lament for humanity’s inability to learn from even the most painful of experiences.

Who knows what the great philosopher would make of Ireland and its public procurement systems? Cost overruns for capital projects has long been a systemic failing. Most observers attribute it to the natural tension between the parties in a system set up to be adversarial.

That’s the kind version. The less charitable one puts it down to a lack of honesty. Not in a corrupt sense but in the way that people often prefer to obfuscate the truth, particularly when politics are involved.

You begin with a public capital programme. Notionally, the projects included are there because of sound, objective reasons – they have undergone rigorous cost benefit and needs analyses and prioritised accordingly. Well, that’s the theory anyway.

The facts of the matter are somewhat less clear cut. Political geography usually trumps benefits and needs when it comes to project prioritisation. A minister’s constituency here, a marginal seat there, a vociferous lobby group in another place. But these projects aren’t included at the expense of other more urgently required pieces of infrastructure – they are added to an already excessively long list.

And that brings us back to quarts and pint pots.

When Taoiseach Leo Varadkar stood up in the Dail earlier this year and complained of “low balling” among contract bidders he should really have considered the mote in the government’s own eye first.

Contractors have to make money, or they wouldn’t stay in business very long and this leads to the claims game. The ink will barely have dried on a contract by the time the contractor is back with a claim for increased costs saying that provision hadn’t been made for any number of things in the specifications on which the tender was based

How do you get €100 billion worth of projects to fit into an €80 billion budget? Simple. You underestimate the cost of all of them by 20 per cent. Or, closer to reality, you underestimate the cost of projects near the bottom of the list very significantly and try to put more realistic prices on the ones which will take place soonest.

Indeed it is not unknown for government departments and others to underestimate the cost of projects in order to get them included on a list.

In one sense, there is not a lot wrong with this. In a system where everyone is doing the same thing there is little point in accuracy as it lowers the prospects of the project making the list. But one thing which should never be underestimated is the cynicism of politicians – it is wise always to take commitments to projects with a start date more than five years away with a very large grain of salt.

Those with long memories will remember not only the number of times Tallaght Hospital was promised but had start dates announced as well. The hospital climbed the priority list with extraordinary rapidity when Dublin South West became a five-seat constituency.

A few more Dail seats along the proposed route of the long promised and much announced Cork to Limerick M20 motorway might do that project the world of good.

So, cost overruns are inherent in a system which, charitably, takes an overly optimistic view of costs in first place. But there are other factors at play as well.

According to KPMG partner Michele Connolly the quality of the original cost estimate, regardless of political considerations, often leaves something to be desired. “How good was the process that went into the budget or programme or works plan?” she asks. “Very often it’s been done on the back of an envelope. I’m exaggerating for effect, of course, but quite often the cost estimates are done very early before projects have been speced up and designed in any detail.”

SIMPLE SOLUTION
She offers a relatively simple solution to this issue. “Take a €100 million project, for example. That cost estimate is based on an early and very broad spec. It’s probably too low. There should be a risk premium on top to reflect the early stage. But that doesn’t happen. The price is given as €100 million and then the next few years are spent on recriminations and arguments over cost overruns.”

And then comes the tender process itself. The mantra here is that the lowest tender will not necessarily be awarded the contract. But that is almost invariably the case nevertheless.

Connolly again: “In a lot of cases the tender process is very price focused. They might say price is only 40 per cent and quality is 60 per cent but in the end quality doesn’t outweigh price. This forces people to bid bottom dollar prices. That leaves very little scope to absorb variations if something goes wrong when you put a spade in the ground. They have no choice but to get into the claims culture and look for more money. The State is pushing so much risk onto contractors that it leads to an adversarial claims culture.”

The claims culture she refers to is a kind of cat and mouse game which is probably as old as public procurement. On one side of the equation is the custodian of the public purse looking for the lowest price possible and on the other side is a bunch of contractors bidding against each other for much needed work.

The Office of Government Procurement has over two hundred staff working on the goods and services contracts

Tendering is an expensive and time-consuming business and only a fool would go into a process without giving themselves the best chance of winning. That means going in with a bid that is barely profitable or indeed marginally loss-making. This is well known in the industry – the Construction Industry Federation frequently issues warnings in relation to below cost tendering.

The only thing that stops bidders going in with massively loss making tenders is the fact that they would be ruled out as unrealistic.
Contractors have to make money, or they wouldn’t stay in business very long and this leads to the claims game. The ink will barely have dried on a contract by the time the contractor is back with a claim for increased costs saying that provision hadn’t been made for any number of things in the specifications on which the tender was based.

Historically, this was an accepted fact of life. Negotiations took place and a figure was arrived at which both sides deemed acceptable. Various efforts have been made to eradicate the claims culture, but all have failed, mainly because of the nature of the system which places excessive risk with contractors while failing to reward them for taking it.

And this brings us back to the less than honest basis of the system. Both sides enter into the process in the knowledge that the eventual cost will be significantly different to the one originally estimated as well as the one agreed at contract stage. Most charitably, this is unrealistic.

But it is important to be clear. No one is cheating, there is no suggestion of corrupt practices, the people involved are all honest and doing their best. It is the system which needs to be changed.

Public procurement processes and rules for construction contracts are much more complicated than they need to be

SECURE VALUE
The public servants running procurement competitions are keenly aware of the need to secure value for money, according to Dr Peter Brennan, managing director of tender manager service specialist Bid Services. “They are incredibly protective of the taxpayer’s dollar”, he says. “If they do a business case for a €100 million project, they will pull it if the cost goes to €115 million and can’t be justified.”

But that still leaves the question of what to do about the broken system.

Shane MacSweeney, head of government and infrastructure with EY, stresses that the benefits of public capital projects have to be taken into consideration before reform is contemplated. “It is important to reaffirm the huge economic benefits that flow from delivering infrastructural assets”, he says. “Whether it’s a hospital, school, rood or a runway, it’s about stitching together the economy. The National Development Plan sets that out to 2040.”

He worked in Australia for eight years before returning to Ireland two years ago. He has also worked on projects in South East Asia and the Middle East. “I’ve seen what worked and what didn’t. You have to see it in the context of the massive economic benefits delivered. You are always going to have challenges with major projects. This is not unique to Ireland. What is crucially important is not to throw the baby out with the bathwater.”

COLLABORATION
But how can we do it better? “We need to broaden our choice of procurement routes”, he says. “Globally, the system has evolved into a much more collaborative approach. It’s not adversarial which you get in Ireland. The adversarial relationship between public and private sectors results in the variation game being played.”
The collaborative relationship he refers to is known as alliancing. “The government and private sector get into bed together and co-develop the design, sensibly share risks, and sensibly share pain and gain. They both work together to design out risk. It’s used a lot in Canada and Australia for water and transport projects. In the UK it’s used for water and is coming into transport now. They are using it for their Smart Motorway programme, for example. In Ireland, we have a couple of small examples in Transport Infrastructure Ireland where has successfully used it. There are some examples in Irish Water for smaller projects as well. It is now being mooted for Metrolink. That will be a massive example.”

EARLY INVOLVEMENT
The system has the virtue of early contractor involvement. “It gets the contractor into it earlier and has proved exceptionally successful. I worked on a rail project in Australia which came on time and within budget.”

It’s not necessarily suitable for absolutely everything, of course. “It’s best used for big large complex projects where risk is difficult to define.”

“One of the other major challenges is market capacity”, MacSweeney adds. “The volume of construction workers is not there. We can either take a risk on contractors who are not fully road tested or we can attract foreign contractors. In terms of delivering the pipeline ahead we need to promote Ireland inc in Europe and globally from a construction perspective. Other sectors go on trade missions. We do it for agri and so on very successfully. We should do a roadshow across Europe and globally. We should point to the project tracker for the next 10 years – it’s €116 billion. Worth of projects and we can’t deliver it by ourselves. There is an opportunity for overseas contractors. We can show a pipeline of activity that the industry can identify as an investment opportunity.”

This is not an entirely new concept. “We did it successfully in the early 2000s successfully for eight public private partnership projects. We need to go out to the market to bring the most sophisticated players into country.”

Peter Brennan points out that there is nothing technically wrong with the way major works contracts are awarded at the moment. “A bid is scored on different aspects and the contractor with the highest score wins. That is nearly always the contractor with the lowest price. That’s fair enough, they are the rules. But they don’t necessarily deliver the best value for money.”

He also believes in a form of alliancing. He argues that every project over a certain size, €5 million perhaps, should be subject to a different approach with a rigorous risk assessment and business assessment carried out before it ever goes to tender. The process he suggests is a competitive procedure with negotiation.

“You shortlist two or three tenderers for a contract like a bundle of schools worth an estimated €100 million”, he explains. “You then enter into a dialogue with the tenderers and their design and technical teams and negotiate over a period of two, three, four or even five months. You find out what the contractors can do, you talk about the design, the site, and various other aspects of the project. At the end you get a best and final offer. You get an agreed appreciation and understanding of what’s involved and an alignment of the parties’ requirements. That way you get best value for money.”

“There is a very strong argument that the competitive procedure with negotiation will produce much better results”, he adds. “It might delay a project slightly at the early stages but will deliver much greater cost certainty and value for money in the long run.”
It will also rule out the prospect of appointing a contractor who can’t do what the client needs. “They will drop out during the negotiations if the job is too much or too risky for them.”

Increased resources are also required for the procurement of works contracts. “Works contracts are three or four times more complicated to procure than goods and services”, Brennan points out. “The Office of Government Procurement has over two hundred staff working on the goods and services contracts and they do an exceptionally good job. But there is only a handful on the works side. They are seriously under-resourced. What’s there is excellent, but they could do with another 30 or 40 staff.”

“Public procurement processes and rules for construction contracts are much more complicated than they need to be and, in some cases, might not even be compliant with EU rules”, he adds. “They need to be overhauled.”

There are better ways to procure projects, the question is if there is the political will to adopt them. The government has committed to ensuring that all major projects will have to have a business case made for them before proceeding. This is a start but won’t address the cost overruns on its own. The procurement system itself must change.

GOOD REPUTATION
Notwithstanding that, Ireland does have a good reputation when it comes to the delivery of the projects themselves. “It’s not that we are very bad in Ireland at doing these projects”, says Michele Connolly. “Globally we are seen as very good. Where we are poor is at balancing risk with pricing. Other jurisdictions set up infrastructure delivery authorities. This takes the politics out of it. They leave it up to the professionals to tell the government what to build for the good of the economy. Projects are prioritised on the basis of bang for buck and on the basis of need.”

We have shown that this can work in Ireland with Transport Infrastructure Ireland and, despite its unfortunate experience with charges, Irish Water. Maybe it’s time to hand the National Development Programme over to an independent body which will employ best practice procurement processes and take the politics out of it.