Building on Success : Despite worldwide expansion and an impressive stock price, Irvine-based Fluor plans to overhaul its management.
Fluor Corp., one of the most esteemed engineering and construction companies in the world, broke its own record last year for both earnings and revenue.
The $7.9-billion company is now putting up 80 oil and chemical refineries everywhere from Thailand to the Netherlands. Closer to home, Fluor has been cleaning up a closed uranium plant in Ohio--a $2.2-billion federal contract for the largest environmental remediation project yet. And a few months ago, the company landed the less lucrative but more glamorous assignment to build a Mercedes auto plant in Alabama.
Fluor’s stock recently has been trading at more than $50 a share--quite a leap from seven years ago, when the then-troubled company brought in half the revenue it did last year and its stock was languishing at $15 a share.
Yet, despite that impressive showing, Fluor plans to announce next week a major overhaul of its management team. The move begs the question: Why mess with success?
“If you try to stay level, you’re probably going to end up moving backward,” Leslie McCraw, chairman and chief executive officer of Fluor, said in an interview this week at the company’s Irvine headquarters. “So we are challenging our organization to think through how we can do better tomorrow what we do today.”
McCraw would not be specific about upcoming changes, saying only that the company will decentralize power by transferring employees to bases around the world in order to strengthen its presence abroad. Nearly half of Fluor’s $15-billion backlog of contracts is for projects on foreign land--compared to a fifth of its $5-billion backlog in 1987, the year after the company underwent a reorganization that set it on the road to recovery.
The latest restructuring comes within weeks of McCraw’s return to work after recuperating from surgery last month to remove a malignant tumor from his prostate gland. “I was very fortunate in that the tumor was closely contained and had not metastasized to the rest of my body,” said McCraw, 59. “I feel great.”
Q. Why now? Why tinker with the company’s structure at a time when you are enjoying such success?
A. Against a backdrop of considerable success, we’re asking ourselves how we can take it to the next level. How can we align ourselves even more closely with the marketplace?
Q. So even though the company has reached its height of success, you worry about hitting a plateau?
A. If you tread water, you’re not going to make progress. I set up a couple of task forces made up of senior executives to brainstorm while I was in the hospital and out of the office, and they came back to me with recommendations.
Q. What were those recommendations? What changes do you have in store for the company?
A. We want to flatten the organization, to take some of the hierarchy out and redirect it. I want to reduce the levels between me and the worker, and utilize our executives in a more focused way.
We’ll put more resources into regional offices than we have in the past. We’ll ask some people to move to Asia Pacific and other areas to strengthen our regional influence. We want to give these people more accountability, so they won’t always have to come back to headquarters to get an answer.
Q. Have you already informed the people who are slated for relocation?
A. No one has been notified. We’ve not made the final decision as to who’s going to be in what role. We’ll roll this out over a period of time.
Q. As I understand it, you are talking about a decentralization of power.
A. We want to put decision-making at lower levels--at locations close to the client so we can react faster. We want to set policy in a central way, but set execution in a decentralized fashion.
Q. How will you bridge language and cultural differences?
A. The concept of duality is important in a global marketplace. It is important to front the market with people who are very familiar with a particular (type of) project--we want automotive business people talking to automotive clients, petrochemical people talking to petrochemical clients and the like.
But you have to temper and support their knowledge of the business with an appreciation for the geographic influences. In other words, if we have a hydrocarbon project in China, we want to get Chinese people involved who know China well.
It’s very challenging to be a diversified global player. It’s not all that complicated to sell one product globally. But if you’re going to respond to a variety of opportunities, a lot of customized thinking needs to occur.
Q. As the CEO of a major corporation and a world traveler, what was it like to lie in the hospital for a week, then at home for another two weeks, after your recent surgery?
A. This is the longest stretch I’ve gone in a long time without making a trip someplace. My wife and I were sitting around thinking about that the other night--when was the last time we were together for two months every day and every night? Probably 1978. That’s just the nature of this business. The past two months were different for us, and fun. I think I can speak for her on that.
Q. Did your brush with cancer make you re-evaluate your life? Did it make you want to work a little less, spend more time with your family, retire earlier--anything like that?
A. Any normal person who has looked across the table at a doctor and heard the word “cancer” would look at life somewhat differently after that experience.
I was very fortunate that we caught it early enough to get rid of it. As we sit here and speak, there are many people living with prostate cancer.
Certainly, it does give one pause to think, to reassess values, and to go back and rediscover some truths and concepts we might have been taught in Sunday school or by our parents. It’s a time when your feelings toward family become stronger than before.
In many ways, it almost seems like a dream now--being diagnosed with cancer, then having an operation, and now it’s all gone and I’m back at work. It all happened in a pretty short time.
Q. You returned to the office just in time for the sale of your lead-mining subsidiary, Doe Run Co., two weeks ago. (Plagued by a glut in the lead market, Doe Run has lost $50 million since 1991, and Fluor put it on the market in late 1992.) Is that a relief for you?
A. Doe Run was a business that doesn’t provide a lot of compatibility with our core business. It’s a mining company, and we’re a service company. It’s capital intensive, and that’s just not our business.
Q. Last month, you became one of the first U.S. engineering companies to open trade offices in Vietnam after the embargo was lifted. Have you received much criticism for doing business in a Communist country?
A. We’ve received some letters. But I think we can learn more about MIAs on a business-to-business basis than we can from a strict standoffish position. Establishing lines of communication will allow us to break down barriers faster than trying to do it in a threatening way.
