Prospering in the provinces
Led by husband and father Chris, the Russell family are pulling together to prove there’s a future for companies like theirs. It’s a mighty challenge. BY GAVIN RILEY
There’s often a price to pay for the honour of being president of the New Zealand Contractors’ Federation. If the president heads a small-to-medium-sized business, his company will almost certainly suffer a considerable monetary loss during his term of office by being deprived of his talent, time and energy.
But Chris Russell, director of Napier-based Russell Roads, reversed that trend during his 2003-05 presidency.
“I went through a particularly bad time in the federation’s history, and it probably took a little bit out of me, but my company was fortunate enough to go very well – probably the best years I’ve had in business,” he says.
“Maybe I got lucky…or somebody was smiling on me.”
Or maybe Russell’s life and industry experiences gave him the skills and judgment to structure a company that not only thrived during his frequent absences on industry duty but is as well prepared and motivated as any provincial contractor to face an uncertain future.
Russell came from a Hawke’s Bay family of 10 children, in 1969, at the age of 19, was working for the New Zealand mission at the United Nations in New York, married Lee (who had joined him in the Big Apple) in 1974, then returned home to work for Russell Asphalts, the company founded two years earlier by his brother Ken.
In 1984 the company won a Contractors’ Federation construction award – and high praise from the Ministry of Works – for its widening and sealing of a stretch of the notoriously difficult Napier-Taupo road (SH5). In 1987, however, the brothers sold the company to Higgins Contractors and turned to a variety of other business ventures, including developing an apple and grape-growing block.
In 1990 Russell returned to contracting, founding Hutchins & Russell after being approached by former Russell Asphalts foreman Vic Hutchins. The company carried out earthmoving, road construction and sealing until 2002 when Hutchins went overseas. Russell then became the sole owner and reconstituted the business as Russell Roads.
Amid a changing roading-industry climate that favours big companies carrying out big contracts, Russell Roads has survived by undergoing a transition which has seen its staff double to 30 and in which versatility of skills has been pivotal.
Despite its title and preponderance of roading work, Russell Roads is an all-round civil-engineering business.
“To survive in the Hawke’s Bay market you’ve got to be geared up to do a number of things,” Russell explains.
“Our philosophy is that we’re able to take on a contract and do as much of it ourselves as we can. We have our own crushers on the river right through to our own bitumen sprayer. It’s quite unusual for a smaller-sized company, but we try to maximise what we do.”
Between 40 and 50 percent of the firm’s workload is carried out for Hastings District Council, a similar amount for Transit New Zealand, and the remainder for Napier City Council (“we’ve just won a million dollar contract from them”).
Another key to Russell Roads’ resilience is the knowledge its director has taken on board not just from his Contractors’ Federation presidency but from his seven-year presence on the executive (which followed six years as Hawke’s Bay branch chairman).
A presidential visit across the Tasman saw him return with details of the Australian contractors’ quality-management programme which he not only introduced into his own company but for which he gave the federation $30,000 to develop and promote in New Zealand under the name of QEST.
“I put my money where my mouth was. I’ve pushed hard to see it develop and I think it’s now in about 40 companies in federation out of about 120 prequalified to do Transit work,” Russell says.
“We hope QEST can maybe go into other industries to get the scale of uptake it needs. We’re getting to the point where it’s going to be on the internet, which will make it even easier for companies to use.”
He says QEST has helped Russell Roads because “we’ve had to try to walk the talk”, and he credits the programme with playing a key role in the company being judged Hawke’s Bay’s large business of the year in 2006.
The previous year the company lost narrowly to Farmlands, an enterprise with a $300 million turnover, and Russell had to be persuaded by the judges to try again.
“On the night [of the 2006 awards] the judges said they were so impressed when they came to interview us because a couple of our employees sat in on the interview, a truck driver and a roller operator, and spoke passionately about Russell Roads and what we’d been doing and how they felt about the company.”
That passionate involvement extends to Russell’s own family, much to his surprise.
Wife Lee, a former teacher, is the human-resources manager and has learned so much about QEST that she is employed by the federation to travel New Zealand to explain its benefits to members. Elder son Andre, who has a BA honours and an MA in history and English, has returned from working in Washington to become Russell Roads’ project manager. Younger son Jonathon, who has followed up his NZCE with further study as a surveyor, is involved in hands-on roles on projects. And daughter Sharon looks after the company accounts as part of her work as an associate principal with a firm of Hastings accountants.
“It’s become a bit of a family thing, which I honestly thought would never happen,” Russell says.
“At times we have our debates, especially having a son who’s come from overseas.”
Another key staff member is Angus (Gus) Wilson, the 2007 Shell modern apprentice of the year, who at 28 is now the operations manager and, according to his boss, “is going to be a star”.
Added to this mix of emerging talent is Russell’s 30-plus years’ industry experience and his ongoing search for smarter ways of doing business. At the age of 57, and notwithstanding his duties as chairman of the Contrafed Publishing Co, he is enrolled in Auckland University’s Icehouse owner-operator management programme. It entails his attending five three-day sessions in Auckland, where his 27-strong group is addressed by academics and experts from different industries.
Russell says: “It’s a fantastic course. There are some very successful people there and I’ve learned a lot from mixing with them. I wish I’d done this years ago.”
But even for a versatile provincial contracting company with burgeoning talent and an owner with a thirst for knowledge, the going can be tough in the 21st century and the future a major challenge.
Nothing illustrates this better than the testing Transit pavement recycling contract Russell Roads won two seasons ago. The $2.1 million contract lasted 18 weeks and encompassed an area from north of Wairoa to Takapau (west of Waipukurau).
“It was a significant coming of age for Russell Roads in that the contract had only been done previously by the big players,” Russell says.
“When we won it, we’ve been told, Transit and the consultants were very nervous. The other competitors thought we couldn’t do it because it’s a pretty tricky operation. But we won a lot of fans when we did it.
“We were told [by Transit] about halfway through the contract that our work was up to if not better than any other contractor that had done the work. We felt that was something we could build on.
“But”, and here comes the complaint, “we had to beat the opposition by about 15 percent, something like $200,000 – they had a $200,000 head start on us before Transit would consider our tender. We had to go in at a low number to prove ourselves, and that only puts pressure on companies such as ours. It worked out for us, but it was a pretty risky situation. It’s not a good system, in my view.”
Because Russell Roads considered its own equipment too slow for the job, it employed Auckland company Hiway Stabilizers on the project to gain access to a big milling machine (a Komatsu road stabiliser). It has since bought its own machinery but hasn’t been able to win the contract again.
“Because we did the job and did it well, we don’t have such a big financial penalty on us,” Russell says.
“But because the oppposition saw we could do it well, they’ve sharpened their pencils big time. Transit has saved probably $300,000 a year since we did it.
“However, we’re still definitely in the market to do that work.”
He pauses, then adds: “I’m probably lucky…I saw what the trends were and started developing these [management] systems in my company. But at the moment Russell Roads is too small. Somehow we’ve got to make use of these systems to match the competition. It’s either do that or just be eaten up and go by the way because that’s the way the industry seems to be structured now.
“At the same time, Transit has to be very mindful when it does its procurement strategies that there’s a clear path for companies to grow. Instead of saying, ‘You’ve got to prove yourself and reach this level before you go into the mix’, Transit should actually have a system where you can go and do a bigger job, perhaps with more control and guidance, so it creates a growth path, instead of merely having big and sophisticated contracts.”
Russell says he fears for the future of the federation if the industry doesn’t have medium-to-large family-owned companies, which are becoming fewer.
“If you roll everything up into one big contract, at best they can only become a subcontractor, employed by the big contractor. And that doesn’t tend to allow you to have the ability to grow.”
In recent times Russell Roads has carried out a near-$4 million reconstruction of Havelock North’s central business district and rebuilt 17 kilometres of road for Wairoa District Council. It’s a level of momentum Russell wants to maintain.
“I enjoy the opportunity to be the main contractor. I enjoy taking on the risk,” he says.
“I’m very conscious all the time that if you go too much into a market where there’s very good competition, all you do is drive the prices down. On the other hand, by us staying in the market here in Hawke’s Bay we’ve created terrific value at times for the client.
“The big threat for a number of us is that the market may become strangled or too restricted. There’s got to be work available for a large range of contractors, not just the large contractors.
“For the sake of a healthy industry we really need to keep pushing that message.”
Contractor Vol.32 No.5 June 2008