Many industries have undergone substantial change and the construction industry is no exception. The pandemic has highlighted structural problems throughout the supply chain, this has caused many within the trade, including FIS, to question industry norms and reconsider where and how firms could manage projects more effectively.
Within the video we explore:
- What they feel the key to survival during the pandemic was
- Examples of members managing to adapt and thrive during this time
- The key changes FIS made during this time
- Looking back, if they would have done anything differently
- Any tips and tricks they have found to share with the industry
- If they feel the uptake in digital and ease of access to information could help the industry move forward
- The response to the digital spine release
- If lack of understanding of digital could be hampering uptake
Surviving To Thriving: FIS Transcript
The construction sector has often been branded as slow-moving, outdated and reluctant to embrace change.
However, with technology emerging as a potential solution to the slow payment issues that have plagued the industry for decades, could the sector be warming up to change at last?
In the latest instalment of our Surviving to Thriving series, Iain McIlwee, Chief Executive at FIS, joins us to discuss the organisation's work, the changes they've seen in the industry and the lessons learned throughout a challenging few years.
Anthony Puma: Good morning, Iain. Thanks for joining the Payapps session, Surviving to Thriving. You're the Chief Executive of FIS. Would you mind giving me a bit of a background into the FIS?
Iain McIlwee: Sure, we're a trade association for the fit-out and finishing sector in the UK. As a supply chain organisation, we work with manufacturers, main contractors or speciality subcontractors.
We focus on improving quality in the marketplace and helping businesses effectively, and we're not for profit. So, I often think the best way to describe us is like a co-operative. Everybody puts some money in the middle, and we try and find a way to work better together.
Anthony Puma: The last two years have had a profound effect on the country, especially on construction. From your experience, what do you think the key to survival is?
Iain McIlwee: Business is always about risk, right? So the key to survival is understanding and managing your risks and staying informed.
One of the things we found most challenging, particularly as we look at the pandemic, is the sheer weight and availability of information - and also the amount of misinformation. One of the keys to surviving and thriving is ensuring that you have access to quality, authoritative and informed information and can validate that.
I think the other thing is that we don't fully understand the weight of the past couple of years - or its impact on people. But that sort of resilience people showed, making decisions in difficult times and keeping moving forwards, is important, particularly for business leaders.
And I think you need to know your limits. We've tried to help companies, particularly with the pandemic, price increases and the inflation we're seeing. We help explain what a business is capable of and where they're potentially overstretching. In the construction industry, it can be very easy to overstretch.
Anthony Puma: As a trade body working with several different members, can you think about any examples where specific members have managed to adapt and thrive?
Iain McIlwee: I'm incredibly proud of our whole community. I think there are people I draw attention to. For example, our president, Helen Tapper, ran her own business throughout the pandemic - yet she still found time to share information and understand exactly how things were impacting companies in the marketplace.
We are one step removed, so we rely on that coalface information. These individuals stood out, gave me confidence in the community and shed light on how valuable groups like FIS can be.
Construction was unique in the pandemic because we carried on working. In fact, so many businesses grew through that period despite facing difficulties. But, if you look at a thriving, it's not necessarily just about growth.
Some businesses have re-visited what was crucial to them - they've come out of the pandemic stronger but smaller. That's because they've decided, "I don't want to work for clients like that anymore", "I don't want to put up with that anymore", or "I don't think I'm making money doing that anymore."
Therefore, they've retracted and looked at how they operate. So thriving, I think, means different things to different people. As a society, sometimes we're obsessed with growth, but sometimes it can be about being better and often for businesses, it's about being more profitable.
Anthony Puma: What do you feel are the key changes that the FIS had to make during this time, and what impact do you think this had? Are there any changes that were made that are still in place?
Iain McIlwee: We've always had a fairly hybrid model. We don't have to be particularly office-based as an organisation - but we've always had a hub. Equally, we're never going to pay the highest salaries at FIS. Therefore, we need to attract people by being flexible, which was a lesson we'd already learned. If we want the best technical people, it's not necessarily ideal to have them based in Solihull.
Looking as an organisation, we've significantly improved our understanding of new technology like Zoom and Teams. Going into 2020, we'd hosted one webinar, and it had 40 people attending. Since the start of the pandemic, we've run countless. I've lost count, but it'd be well over 50, 60 webinars. And we've had something like 8,000 people attending - I think now we're starting to understand the blend.
For us, it's about if we've got one thing to talk about and we, we need quick - but not particularly in-depth feedback - we can do that well online. But, if we need to have a proper in-depth discussion, we know people need to see the whites of each other's eyes and do it face to face.
We're understanding where digital works, where it doesn't and how we can manage and blend our team and work together better as a community.
Anthony Puma: On reflection, is there anything that you would do differently?
Iain McIlwee: Hindsight and foresight, hey! Hindsight's a fabulous teacher, and I wish I had more foresight.
If we look at the last two years, the pandemic is the thing that immediately comes to mind because it changed and shaped all of our lives. Now, if you look at what we're facing as we emerge out of the other side, it's all impacting how we manage design liability through the supply chain; there's rapid inflation, the Grenfell Enquiry and building safety bills all coming through.
In wake of the new regulation, construction has three main risks: time, design, and price, and they've never been more intense, especially when it gets to the specialist subcontractor level as they are at the moment.
So we've seen design risk push through the supply chain because of insurance challenges. We've seen material inflation as we've never experienced before, with double-digit, or even triple-digit increases in some cases.
And, and we've seen through the pandemic that delays and time impact on start dates we've had. Brexit's also had an impact in terms of the availability of labour particularly, and I wish I'd given more thought to all of this during the pandemic, as helping people manage the price and risk in construction has been a real challenge.
We don't have a contractual structure that's equipped to deal with this kind of inflation. If we look at the sort of JCT contracts, they have fluctuation clauses, but as a sector, we don't really know how to use them effectively - we don't have the indices in place to support the effective use of fluctuations.
So, if I could have that two years back again, I'd spend a little more time focusing on the problems as we came out of the pandemic because I suspect we all misjudged how much work there would be this side of the pandemic. We all saw a recession behind the pandemic, but in actual fact, there's been a real wave of work coming through that's being caught up behind it, Brexit and things that are locked up.
So now, we're struggling to manage a growing pipeline with a dwindling resource in a high inflation market with design risk still being punted around like a football rather than managed effectively by the supply chain.
Anthony Puma: From a personal viewpoint, is there anything you could offer in terms of hints and tips for the industry?
Iain McIlwee: It comes down to working out where your risks are. We produced the FIS risk management toolkit. It's not perfect, but it gives people an example of how to look through and sit down with their business or colleagues and work out within the projects and within their business where the risks are.
Getting them down on paper is really important, so you need to have some kind of a system to monitor your risk, and then look at what you would do in the worst-case scenario and have a plan B in place - or at least know what to do if it hits the fan.
We get quite a lot of enquiries coming through the FIS, and the ones we love are things like, "I'm thinking of…", "I'm just about to…". So somebody's planning, thinking or trying to validate what they're about to do. They're moving their business forward.
The ones we're less keen on is, "Oh my God, it's just happened - what the hell do I do next?" It's much harder to deal with a crisis when you don't have a plan.
Risks catch us out, and I remember talking to a company a few years ago that resigned their membership because we gave them too much to worry about. They'd joined after a conversation and then were confronted by clear and present risks that they hadn't really thought about before and found them overwhelming.
That business is now a very successful one, and I believe they've got a better risk management process in place - or at least a better understanding of their risks.
Anthony Puma: One of the things about Payapps is exactly that - managing commercial risk, which is extremely important for businesses to survive. Considering how going digital and ease of access to information can help manage that risk and revolutionise how payments are undertaken, do you see it helping move the industry forward?
Iain McIlwee: From the bottom of my heart, I really do. I think that we need more transparency. Construction is an industry beset with trust issues and far too many adversaries as a supply chain. We've developed this culture of keeping our cards very close to our chest because we don't trust each other in the different elements of the supply chain.
And, and quite frankly, we don't behave sometimes to warrant that trust. We talk a lot about late payment, but also fair payment too. We know payment practices in the construction business, such as people obfuscating facts to avoid paying - we know all sorts of tricks are played on using quality as a reason not to raise an invoice.
We've done a lot of work with the small business commissioner about late payment, but late payment is actually when the invoice drops.
We'll do everything we can to ensure that the invoice doesn't drop through the variations or procedures that make it more difficult for people to actually claim payment.
Having a more efficient process is vital because that conflict is almost like a disease at the core of our industry. We have to behave better and respect the different tiers in the supply chain more effectively. I was reading over Christmas - dull as I am - the RIBA plan of works to remind me how, at the top of the industry or the very start of the project, how everybody thinks it happens. There's a huge reality gap between what we think is happening and what actually happens.
It's presented as a very linear process, but at the coalface of construction, we see the mess and the muddle.
We have to find better ways to communicate, share information, and more structured ways to resolve disputes. I see tools like Payapps emerging as a significant part of that because even though the technology doesn't change culture, it provides a catalyst for culture to change.
Anthony Puma: Absolutely. And you released the Digital Spine last year to aid the understanding of the language behind digital tools. Could you talk us through that a little bit, please?
Iain McIlwee: Productivity is a huge issue in construction. We get programmed wrong, we get designs wrong, and it costs us time - which cycles back to those three risks from earlier.
We're so focused on cost and what something's going to cost. The procurement process we adopt is about driving down the price, and we talk about value engineering a lot, but we don't talk about the time engineering that goes on as well, the accelerations and all of the stuff that throws us off.
If you think about our sector - finishes and interior - we're right at the end of the program quite often. Everything else has gone wrong, so already the time and the money had gone from the job, and they're trying to play catch up. Most of that happens through our packages, so I think this productivity issue is immense.
So then I roll back to the issues we now face, the price inflation, waste material is more significant than it's ever been in terms of the cost of its impact of it, you can't treat stuff like a commodity. We've got the most profound labour shortages we've ever known and sustainability net-zero - we understand that we have to do more as a sector as we've been too wasteful. I look at productivity to drive all of that.
17% of all dry line jobs are re-work, right? So we're wasting 20% of our labour and 20% of our material - give or take - so we must be more efficient.
Digital isn't something that's been done because it sounds good. It's because it drives productivity into our supply chain. And I think, again, our role as an organisation is to try and make it simpler for people and more accessible.
When I look at how digital is presented to the construction sector, it's often somebody who's got a solution they're trying to impose on us instead of looking at the problems we've got and working out how to apply technology to them.
So the point of our Digital Spine is to make or provide simple explanations as to what artificial intelligence actually is and contextualise that to how it's currently working in construction. It's still early days, and we're working with a technology partner with more expertise in the actual technology business to build the examples and the case studies.
We're running a series of workshops and webinars every couple of months focused on different aspects of it. We've just done construction management software. The next step is point scan laser scanning and how we can generate information that we can use more effectively in the construction process.
Really it's about translation and simplification because we're being confronted with overwhelming information, often an acronym and language that we don't understand.
The Digital Spine is really a simple explanation of what technology is and how it's applied in our sector.
Anthony Puma: In some cases, there is a resistance to adopting digital approaches. Is that down to a lack of understanding and how this works instead of reluctance to change the process?
Iain McIlwee: Yeah, we really don't believe construction has a particular resistance to change because I think everything we've demonstrated over the past two years shows we're an incredibly flexible industry.
Flexibility is at the core of what we do, as almost every job is different. But part of our problem is also that every job is different.
I think managing change is something we do daily, so I'm not sure that's a resistance to change. Often, it's difficult to invest because construction is a very finite business.
We have lots of stuff contained within a project that is costed back to the project. Most of our work is procured on a one-hit basis. So how do you make something pay over five jobs? We got a thin veneer of business over a relatively deep well of a project.
So, there is an investment and a time problem attached. People often ask, "how do I find the time to step out of the projects?" or "How do I find the money to step outside of the projects to invest in something that will make my business better?"
That's where we have the biggest challenge. Beyond that, there are so many solutions. We've got so many moving parts in the construction sector, and you're supplying so many different customers and clients with varying systems or environments.
It feels like you're watching a skipping rope go around, trying to work out where to jump in. Because if you buy the Betamax and everyone else goes with their VHS, you've made a bad investment.
Also, some of the problems have been around training. So, where people have invested, they haven't fully understood what they're investing in, or the training hasn't been good enough. Therefore they've bought technology that they don't make the best use of, then they get a little bit sort of burned by that and become resistant to further investments.
So I guess it's a combination of lots of things, poor investment in the past, combined with the inability to invest outside of the project and a lack of understanding about some of the values that these things can all lead to reluctance.
Anthony Puma: Iain, I've enjoyed our chat today. Thanks so much for taking part.
Iain McIlwee: No problem at all. I really enjoyed it. Thank you.