AECOM (ACM) Earnings Call Transcript & Summary

Hi, everyone, and welcome to this fireside chat. I have a couple of guests with me. So I have Gabor Varjasi; and Dale Sinclair. If you'd just like to do a quick introduction. And Dale, do you want to go first?

Sure. Good morning, everyone. I'm Dale Sinclair, I'm a Director of AECOM international consultancy. I'm the Director of Innovation and I lead a team in London.

And Gabor?

My name is Gabor Varjasi. I'm working for BP in the GBS part of global business solutions, and I'm heading the finance from HR perspective.

Good. Well, welcome. So thank you for joining us. And actually, we have a bit of an international crowd. So I'm in Scotland just now; Dale is in England; and Gabor is in Hungary, in Budapest.

So Gabor, working with BP, it's a global organization, how have BP phased into the challenges of COVID? And what have been the major impacts from your point of view?

Yes. So it's a big and complex question. But getting to the point of it, it was a quick shift from -- moving from office to work remotely, all and everybody. In our case, it was 5,000 people in GBS move within 2 days into remote working. So that was the biggest challenge. We were in the -- just heading to the quarter close, as you can imagine as a finance people, how much collaboration is made in that period of time. So it was very crucial to establishing the connectivities, how we are catching up with our stakeholders, how we are bonding the teams. And then after, we had a lot of ambiguity around the stability of the IT systems, and I can tell [ everyone ] that we are very proud of our IT guys. So every software and everything in the cloud worked well. So we have no issues with that. And then after a couple of weeks, we started to worry about the mental health of our people. So we created a lot of opportunities for mindfulness trainings, online meditation sessions, trainings for leaders how to remotely managing teams. So that was a fast-forward adaptation to the new situation from BP perspective.

And what about the usage of space? Obviously, you -- what -- has anything happened to your properties? Or have you just completely left everyone working at home?

We completely left as a first step all the buildings, and everybody started working from home except from the assets, obviously, on the rigs and refineries. We're still having people and working since the end of February. But the office people, majority of them, are still at home and offices are empty at the moment. And in China, we slowly are starting to get back and some of the offices are open since a couple of weeks now.

So that's quite a change in property usage and strategy. So Dale, given that you -- we've met before at one of the previous ISG summits, and you mentioned to me part of your firm's role is to design and anticipate the property usage of 20-plus years down the line. So given you now have this world where such a, I'll say, simple thing has a massive impact such as COVID or another type of pandemic, what are you seeing in terms of impacts on property usage or requests? Is this trend that Gabor mentions [ on that ]? Or where is AECOM seeing this from?

Well, certainly, what we're seeing in London is that there was such a huge pent-up demand that we're not seeing that development is going to stop. So I think it's been a good thing from that perspective because it will, well, hopefully, slowdown that demand. I mean from our perspective, we think that we'll get more people into our buildings now because obviously, not everyone will be in the office full time. And I would see that trend working across a number of organizations, that people sweating their assets a bit harder. I'm not sure if we'll see people giving up space yet until the new normal once we go back to work kind of emerges. But certainly, that could be the case as some people downsize further their estates. But the demand is there for new clients to come in. So I don't think overall it will slow down development. I mean from our perspective, the biggest demand into the future is all around data. I mean as [ architects ] and designers, we're used to delivering geometry, not really data. So the last few years, we've been starting to get our heads around asset data. But again, the asset management industry is not really geared up for handling that data. And of course, we're on the cusp of IoT technologies coming to play, and I don't think the current procurement structures are really fit for purpose for delivering huge data lakes of information that can be used for analytics, and IoT technologies will drive huge savings in asset management. So for me, the big challenge is how do we get the sensors in the building that are required by the clients when we've disintermediated the whole process of the shell and core and the fit-out. So I think that's the biggest challenge that we're going to have and the integration of all that sensor data into BMS systems and so on. So -- and of course, I'm going to be talking about that in a few minutes anyway, so I don't want to say the spoiler.

But if you are and when you're talking about that, a [ little ] of interest, it's to know how new sensors and new IoT type of sensors will work from a health perspective or integration with wearables, all that kind of stuff. If you have an infected person, you have to shut off part of the building. I'll leave the chat for later, but -- so I guess both of you, what are the main issues that you see or have faced? So I can imagine things at home working. So conversations I've been having are around people who have inability to connect with good bandwidth -- or have the ability. Like now, we've got high-usability broadband. So we have video. But in terms of access to broadband or access even to ability to work at home, how are you seeing trends? I mean you talked about 5,000 people there, Gabor, who had to all of a sudden work at home. What were the main issues?

So the main issues were basically different because some of the people living are now having different life situation and, therefore, having family around. So it was a distinguishing factor. So some of the people were struggling to manage the family itself because of the home schooling, without kindergartens, how to splitting their time between their kids' education, support and doing the daily job. So some of the work shifted to night in that cases, and it's required a lot of flexibility from the line managers to accept this. What was very common for all of the 5,000 people in GBS is the lack of office staff at home. Health and safety is an imperative and an important factor at BP. So we really made a lot of surveys to understand what chairs they are using, what -- do the people having the screens and so on and so forth. So we created the opportunity to buying this kind of stuff, screens and whatever is needed for home in $300. So this is now available for all BP staff working from home continuously.

$300 for all working-at-home staff?

Yes. Yes. So we're really doing all kind of surveys to understand that how we can do more. Regarding the home schooling, just one solution, what we created. The learning and development team immediately put together a learning platform, and there's all the sources for parents how to educate kids and how to support them. So it was amazing, quickly available for all employees.

Okay. And Dale, from AECOM's perspective, how have you managed?

I think the technological side has been fairly straightforward. A few hiccups, I guess. But, I mean, the biggest issues have really been social. I mean people are missing not being together in the studio. And there's a limit to how effective having a coffee on Teams is or even having a can of beer in the early evening. So I think the kind of -- that's probably the biggest thing, is social. And I think the other major point is around the younger people in the office because a lot of them are in flat chairs for -- it's incredibly difficult for them. I mean Gabor has spoken about the issues with families. But for the younger people, they've got different challenges when they're in small bed sets and they're sharing with people that are -- again, got different demand. So that's where the biggest points are. And obviously, as an architect, our biggest challenge is that we're used to sketching, drawing things, and that ability to comment face-to-face is missing. And again, for the mentoring of the younger team, the younger people in the team. So those are the biggest challenges. But we've been trying lots of technologies again to -- on the sketching front, marking up. I guess what I would say is that the take-control button in Teams is not exact way of collaborative kind of moment, especially if the boss has taken control. It's not exactly convenient, kind of. So again...

Yes. It's -- we know that.

Yes. So just those kind of strange kind of scenarios that we're having together [ all of ].

Good. So just to expand on that, and how -- from adaption (sic) [ adaptation ] perspective, how have -- because you're saying like a highly collaborative -- I would struggle to imagine how you would adapt and create remotely. So how have you been running projects? Have you designed new things collaboratively remotely? How has the experience been different?

I'm leading the design of a GBP 400 million hospital in London just now, and it's actually been fairly seamless because we had already moved to -- I mean, most people work from home occasionally anyway. So we already had teams mobilized. We all had laptops. So I run VR on my laptop. So most of the people running some of the more powerful platforms have already got the processing power. So that was fairly seamless. We have had a few people wanting additional screens in their flats, but, I mean, that's pretty much been [ rare ] recently. So yes, it's fairly easy because we were already kind of set up. I think some teams weren't really exploiting some of the cloud-based technologies that we use for our drafting. So the people or their documents [ and service ] a tougher challenge. But, I mean, we were already up and [ running most of the time ] anyway. So we found it fairly smooth. And as I say, the main thing is -- I guess the main thing is being stuck with a headset on hair is pretty tough, and it seems to get longer and longer. So yes, I think the challenges are definitely not technological at this point other than those few kind of minor use cases around sketching and not just part of that creative process.

Okay. So have there been any -- and I'll bring the Gabor back again. Have you seen any behavioral changes? Or -- I'm thinking specifically around performance management at home managers have to expect as a way of working. They have to be cognizant of people who have families. Like you said, Gabor, the fact that BP have put out an educational program on [ accelerating ] platform for how to educate kids. So have you seen any -- what have been the main behavioral challenges? Because that's one of the things I think we have to embrace in the new future.

Yes. I think it's an excellent question, Iain. And to connect to what Dale said, I think technology is not a blocking factor at the moment. It's providing all the opportunities. It's the ability of the people, especially the leaders, how fast we can adapt ourselves to the new realities and how fast we can accept the fact that we are not certain on most of the things and we have the ambiguity on our own and accepting the fact that as leaders, we need to learn new things and admit it to our people that, yes, we are not aware of everything, every solutions and be more open up towards the guys, what they're suggesting like reverse mentoring type of exercise because we have younger population. So obviously, one of the first thing I have made in my team is to reach out then, the guys? What do you suggest -- you're more educated and more in the use of the technologies -- what I should do as a leader to connect better and what I shouldn't do? So first, I established almost every second day catch-up meetings, and they said it's too much, it's enough. We are entire day on the meetings. We don't need you that much. So we know that you are there. So we're chatting more frequently and still try to find the best balance between connectivity and giving space for recharging. Because one of the big challenge we see, and it's a tendency, that people having longer working hours because they feel like, okay, I'm at home, I'm not commuting, I can invest even more time to work. But in the long run -- and we are in the long run because since March, it's a long period of time -- people can get closer to -- not burnout because it's a big word, but getting closer to a little bit having more frustration around work it's necessary should have. So we're kind of asking people to take the day offs because we have seen that people aren't taking day offs because they have nowhere to go. So we manage that, guys, you really need to have some relief from work.

So just expanding that, is that paid time off? Are you granting extra? Because that's really...

No. It's just utilizing the day offs, but they're already there. But it's -- you cannot imagine how many days and leftovers we have for the rest of the year. So...

I imagine managing vacation will be quite [ difficult ].

Yes. It's a big deal. So it's going to hurt us twice because, first, people were not, as you -- answering to your question, that's a danger that can -- jeopardizing the effectiveness as people performance [ maybe lower on that ]. And the second [ to come ] we are around the year-end, and we have still 70% of the holidays.

Holiday left? Okay.

Yes.

That's a bit -- but I was -- Dale, what about you guys?

Well, I mean, from our perspective, I mean -- and I'm sure you're noticing digital transformation comes at different rungs of the ladder. So I think the great thing about the crisis is the people that weren't even on the ladder have now managed to jump on. But I think it's fair to say that there are some people that think that now that they're working from home using Teams, that they're -- they've jumped on the digital kind of bandwagon. And of course, as we all know in this call, that is absolutely not the case. It's -- well, let's -- we could argue all day whether it's even the first rung of the ladder. So it's great that we've managed to get people using some of these technologies that were resistant. But now I guess the goal is to keep driving that adoption of different technologies and try and get people moving up the ladder and acknowledging that this is just the starting point. It doesn't mean that you've completed your journey. You've just begun the very, very beginning of that digital journey. So I think that's a big change. And of course, I think our biggest fear is that when we go back to the office, everyone just reverts to their normal behaviors. And, I mean, you can see that in every aspect. The roads in London, you're trying to get more people cycling. So I think across the globe, that gives us -- because I offer the [ bane ] of society and the environment and so on. So I guess everyone's fingers crossed that when we go back, that we can make that happen. And certainly, I asked my team. I said, "So, come on, guys. You know it's going to be different when we go back. What's the minimum number of days you think you need to be in the office?" And I'm not sure if I was encouraged by this, but a few said 1 day, which was good. A few said 3 days, which is still less than 5. So if we average that out, then I'm still below half the week. So I can still double my team for the same desk space. So I think that's encouraging. And I guess the challenge into the future is that once we go back to the office, it's just making sure that we do not allow people to revert to that traditional behavior of what they did before. I think -- I'm sure everyone's anticipating the return just to see what happens.

Yes. I think those are actually a few really good points. So just a bit of an add there. So I think you're absolutely right in terms of the digital transformation rungs. And one of my sort of much older relative just got themselves an iPhone 11 and I'm now like a tech bar. Every night, I get a call about how to use the thing. So it's -- just because you have something doesn't mean you are digitally transformed. And therefore, the ability to use and understand these use cases, I think, is what [ I’ll provide ]. So 2 points then just to sort of open the discussion on -- one of the things I was saying in the session just before was really around assessing and organizations who should really be understanding what the needs of -- the strategic needs of the organization are from a people, property and a technology perspective and, like you say, Dale, just going back to the old normal. Well, everyone just suddenly gets in a car and sits on the M25 or -- in [ the center ] just to queue in, say, [indiscernible] for an hour and go and sit in office to email. Those days, I think, have gone. And management and strategic direction cannot, just underline, cannot, go back to that because that was a wasteful area. How do you address that? Have you polled the organization? Because one of the key things we do when we're speaking to clients is we go and we're actually [ aligning ] and using survey and poll with the employee base. Just like you said, do you want to see how do you want to work? And we take that want, so the supply and the demand, versus how they can work and then we redesign property, people and technology [ to work through that ].

Well, we sent a number polls. And certainly, 2/3 of our staff said that they would be open to continuing some form of homeworking into the future because of the benefits that they're seeing from a family side of thing. And of course, people saying, wow, I used to commute for 3 hours. I have 3 hours every day now. So yes, I mean, people are seeing huge benefits. And of course, the big conversation is around whether there will be that trend for people to move out of town to bigger properties, places or better schools and that whole thing. And I think for me...

So remove congestion in the large cities to become further commuters if they have to commute? Or...

Well, if you're not commuting every day, then the argument is if you're coming in 2 days a week, maybe you can afford to then go further out and come in for, say, 2 days and maybe even stay overnight. So maybe it will create a new demand for hotels. And I think amongst the younger people, there was a kind of a trend for kind of community based kind of -- so the build-to-rent market was just picking up in the U.K. That was a trend that we were seeing. Quite a few funds coming into London with significant sums of money. So shifting away from homeownership to renting, I guess, because the younger people can't afford properties. But a lot of these new schemes had like community podiums, for example, and maybe those podiums start to get designed so that when there is another situation, those people don't have to sit in their bedrooms. So I think there's -- I think we'll see a number of markets responding in different ways, which I think is really exciting that the new norm will be different homes. Well, even residential developers building in some form of homeworking kind of facility and just regular houses and apartments because that might become a selling point. So I think we'll see all sorts of trends coming out of this, which is great.

Yes. Okay. No, that's really interesting to know. So -- and Gabor, what about you guys?

We're having the same figures. We're frequently tracking the willingness to come back and work from home. In the past 3 years, for the 5,000 people, we achieved the level of at least working from home 1 day per week. And now, based on the surveys we did, the -- it's exactly the same figure. 2/3 would like to have more, much more. So we have the global rules, how the office should look like post COVID, the distances of tables, all the protections, and we're taking this together with the numbers and the willingness to work from the office. And I think decisions will be made very soon during the autumn time that -- how to manage the office spaces and how to utilize better what we have in that perspective because certainly, it can be a win-win situation for companies and the employees, too. And I do believe this is something that won't go away. It's -- there is no time to debate whether it's effective to working from home or not after doing it successfully for 4 months. So it's really time to make a decision around office spaces.

Okay. So if I can just move on perhaps to the last bit. We've got a couple of minutes left in the conversation. So really, 3 things just to bring in from each of you. So what do you think have been, a, the kind of fad or the thing that will disappear? We had to do it and it's just been temporary? B, the thing that's been temporary that may stick? And c, the thing that will have to change forever more? What do you think are those 3 things, let's say? Dale, we'll come to you first.

I think Teams and Zoom, all the news has been on these facilities. I can't see them going away. But I think in the future, there will be less emphasis on this. And certainly, I'm using VR more often. So what we've been doing during the virus is actually using VR to join, come together. So we're all inside the buildings we're designing but in a virtual reality environment, and I think that's incredibly exciting. And I can see more VR kind of meetings in the future for sure. It's a more engaging process. I think the temporary situation, of course, will be working home with the kids because the kids will go back to school. And I think that's a new normal, that a lot of people haven't thought of it. My daughter went back to school on Monday, and it's eerily quiet in the house the last couple of days. So yes, I mean, I think that's a new -- the first new normal is the kids going back to school and realizing actually, it's not quite as social when the kids are not here. So I think there's a number of new scenarios that we'll react to. But I think that temporary kind of love of being in the house with the whole family, I think that will wear off a little bit, and maybe that's part of that balance again. Maybe we're 50-50 home-office. Who knows what that might be. But I'm talking about an intermediate space and the talk I'll be doing in a few seconds. So again, I don't want to give that away. But I think what's not going to last forever is really just that whole working in the office 100%. And I guess building on that last question, I think the big question there is, why do those 1/3 want to be in the office full time? I think that's, well, the real question making this occur because what we can't have is our offices clogged up by the 1/3 that want to be in the office 100% because they're not using up 2/3 of my desk space. So I think that the -- it sounds like most staff are absolutely on board with this whole new normal. So the question is, how do we -- is that a generational thing? We just need to figure that out. And I think that's a challenge. And then break down the behaviors and habits of those that are resistant to doing that kind of mix.

Okay. And Gabor, your [ take ]?

Yes. I can only echo this. So let's start what is the misery that will disappear. I think the willingness to do everything remotely and try to underline that it's possible. No, it's not possible. There are some of the things, when it's possible, it's better to sit down and discuss it among ourselves. So it's a misery that we can't do everything online. It will disappear. What will remain with us is basically working more in this style and what we need to do in order to do it in a better way to understand the VRs, to understand other tools to use in order to bit more productive in terms of creating new agendas because I think it's very good what we are doing when we have processes in place. You don't need to reinvent something. But if you need to have thought process, I still see a development areas there.

Okay. Well, thank you very much. That's been a really useful chat, and I've got some things to think about, too. But I look forward to Dale's conversation in a minute. But thank you all. Thank you.

Yes. Thank you so much.

Cheers.