JIM NOLAN: We need to focus on training, we need to focus on safety, we need to focus on everything you can imagine to be able to even function. It's a journey in culture really, and I like to start with safety.
James Patrick Nolan. I go by Jim. I'm the President of Bechtel Equipment Operations, which is a subsidiary of Bechtel Corporation. We're in the business of supplying and supporting equipment, tools, scaffolding, rigging, and drones.
MANDY HENRY: Hey guys, welcome to the LITES Podcast. It’s Leadership in Industrial Technology, Education, and Safety where we interview thought-leaders in construction and heavy industries during this exciting time of rapid innovation. I’m Mandy Henry with ITI and in this episode, Pinky Gonzales sat down with Jim Nolan of Bechtel Corporation to discuss innovation within the company. Thanks for turning in.
GONZALES: How'd you end up in this industry, Jim?
NOLAN: In this industry? That's a good question. I'm a Civil Engineer by education and began my career right out of college. I got hired by a small contractor in Ontario, Canada, but I saw my immigrant owner boss doing strange things. He bought a sailboat, learned to sail it and started to spend winters down in Florida and left me to run the business right out of college. So, I concluded that this wasn't a long-term career opportunity for me. I reached out for other employers and Bechtel picked up my CV. In 1979 they hired me and I've been with them ever since.
GONZALES: Wow. That's a rare story to be anywhere for a prolonged period these days. What do you do for Bechtel?
NOLAN: Well, I'm the President of our Equipment Operations today. Historically I've had many different functional roles. I've not spent five minutes in engineering in Bechtel even though I'm a Civil Engineer, but most of my career has been focused on more the construction side of what we do. Started out in estimating and supporting various projects in Toronto. I told Bechtel that I wanted it to be on the first job that came through the door. Be careful what you wish for, I ended up a hundred miles south of the Arctic Circle building a goldmine. I went there in project controls. So, I was the most senior project controls person, although I'd never done it before. That's what happens when you send people to these remote places. So anyway, sink or swim, it was a great experience. So, I spent 15 months in that location.
Unlike today, I was working 45 days on and 10 days off. So the rotations were pretty severe. So, 45 days at 50° below.
GONZALES: What did you do for those 10 days?
NOLAN: I’d go fishing and things like that in much warmer and pleasant climates.
GONZALES: Oh my gosh man.
NOLAN: I'd fly most of the way across Canada back to Ontario and go fishing and hang out with my buddies.
GONZALES: Whatever doesn’t freeze you to death, keep you employed.
NOLAN: Exactly. So anyway, interesting challenge. Mining and metals and is a cyclical business and I was respected enough I guess I would say certainly after that experience to be useful on other things that we do. When the mining business goes down, one of the things that we're proud of over the years is having a portfolio in different businesses.
I was sent to a nuclear power plant for one year, a short temporary assignment and then I would come back. I left 5 1/2 years later with two kids and a dog. Did a lot of different things while I was there: Project controls again, field engineering, even got into the business of procuring nuclear spare parts before I left. Lots of different things, lots of different opportunities. Over the years, fossil power, coal fired, gas fired in different parts of the world. In construction, in startup. I got recruited into a team by a Canadian customer for mining and metals in Toronto and I started my efforts in Chile in South America. I went there first in 1992, and then over the next 26 years I spent 13 years of my career there building four projects.
GONZALES: Oh cool. Nice. So, what's a day in the life like for you right now?
NOLAN: Well, it's a very interesting role. As the president of BEO, I'm as much an internal and external marketing guy as anything. Basically, extol the virtues of Bechtel Equipment Operations in what we do and how it adds value inside our lump sum projects. So that's the internal marketing. Then on the outside to external customers. A discussion we had here just a moment ago is I spent a week and a half in South America talking to a mining customer about a very large project at high elevation.
What does BEO do? What value can we bring to a direct hire construction execution at 13,000 feet in the southern part of Peru for example.
GONZALES: I'm just curious, what are some of the challenges of dealing with high altitude, aside from people passing out?
NOLAN: Well certainly, the physiology part of it is a challenge. A number of people can't go to elevation at all. So that shrinks your pool of people that you have access to. Sometimes the expertise that you need on a project, in a senior person, for example, they can't come to the job site and they can't help you from the job site. So that's one of the challenges.
The simple challenge of weather, exposure, avalanches and things like that are pretty common in the Chilean Andes, but we excel at that. We have people in our organization who do very well in those environments. We know how to do it, we know how to put the jobs together, we know how to keep them together. There they have all kinds of different challenges from safety, food, transportation, weather and all that kind of stuff. It makes those jobs extraordinarily complex and extraordinarily very challenging.
GONZALES: So usually I ask this next question with some idea of what the answer would be, but in this case, I don't even know where to start, what is innovation to Bechtel?
NOLAN: Well, innovation to Bechtel is, it's an interesting thing that the data tells us, when I say the data I'm talking about from reputable sources like the Construction Industry Institute and our customer organizations, the owner organizations, that would hire us, that construction is the last bastion of innovation from their perspective. They see Apple and they see Microsoft and they see all these other things. They see Google and they look at us and they say, “what you're proposing is the same as what you proposed to me seven years ago. You're doing things in general the same way.” Maybe, and I'm talking about the industry, maybe even given some of the buzzwords that we hear, some lip service, but we don't really see the implementation of that on our projects. We took that pretty seriously, that feedback from our clients. As a private company, we have it within our means to put some serious money on the table to figure out how to do this and impact the way we do the work. What we have is our Future Fund and our Cost and Competitive Task Force that bring us ideas and then what we try to do with those ideas is take the best of those ideas and put them on a project as soon as possible and develop them.
Construction is an interesting environment where people are not known to hold back their thoughts, positive or negative. When we put those things out there, we hear what people think very, very quickly and then the key for us is that we take that seriously and the person who might be the customer in the case of some of this innovation is really the foreman, the guy that needs to motivate the craft to do something different or better. If we understand that, then we should focus on our internal customer, the foreman. And we've done a lot of that. So, many of the innovations that we have are focused on construction. Some of them are pretty interesting and are delivering some extraordinary value. Of course, we're looking at engineering and of course we're looking at procurement and the other elements of the EPC Business in the food chain, but the focus on construction and making things more efficient for construction, I would say is our highest objective.
GONZALES: How do you balance what innovation comes out of Bechtel versus what you might bring into or invest in? How do you approach vendor relationships in general?
NOLAN: Well BEO as an organization is a portal really for ideas and vendors to bring different innovations to the company. The reason for that is a lot of that innovation is around tools and around equipment and different ways of doing things in what we call our indirect space. Direct spaces are: striking an arc or cranking bolt or welding. The indirect spaces are: all the support efforts that go to providing the ideal opportunity for the craftsmen to get that well done quickly with high quality in a safe way. We have to bring them the material, we have to bring them the tools we have to bring them the commodities that they're going to install and I think that that is the least understood part of what we do. Probably historically the least mapped, the least analyzed part of what we do.
BEO’s place in all this innovation is primarily in that indirect space, making sure the equipment is running, it's available to you, making sure that it's being properly utilized so we don't have too much. If we have too much equipment, we spend too much money on mechanics. We spent too much money on parts, we spend too much money on fuel, we spend too much money on oil changes and all those sorts of things. So, monitoring those things in a more effective way has the potential to save considerable money in the execution of a project.
My assignment before being the President of BEO was the Project Manager on 2 copper concentrators in Chile back to back, 4 years each. These jobs are in the $2.7 - $3.7 billion range and the indirect cost inside that TIC of $2.7 - 3.7 is roughly 1/3 of the money that's spent. Our customers hate it because they don't feel like there's any tangible benefit to that cost, but I can assure you that you cannot do that weld, you cannot crank that bolt, you cannot weld on that pipe without that support. Optimizing that support, optimizing the cost is really what this is all about from a BEO perspective.
I think the industry as a whole has a dark spot there. The data one looks at, if you talk to the Construction Industry Institute and so on, is all about productivity and they're measuring the direct productivity. They're measuring the man hours per ton or the man hours per foot or the man hours per meter or whatever the case may be. All that other stuff that contributes is the unknown. When we look at the data, CII data and our own, we see that that direct productivity has declined continuously over the last decade. So, what is the driving force behind that? No question in my mind, the indirect support part is a contributor.
Oftentimes we say you get what you measure. It hasn't been well measured. That's my take. One of the things we're doing is improving also on the analytics associated with these different parts of the job and bringing the massive amount of data to a central place where people can take action around that data. That could be as simple as you're using your forklift 27% of the time and he's using his 62% of the time. Why is that? Maybe you can share and between the two of you, you can use one forklift 85% of the time. Just an idea.
GONZALES: Wow. It's really incredible. What do you think the big problems to solve for industry are today?
NOLAN: Well, I think first of all for us is getting that data in front of smart people who do this every day and exposing those performance gaps to them. Then they will solve it. So that's what we try to do. We try to bring them the data, we try to do our best on our own to do our piece. Our piece for in the case of equipment is to maximize the availability of the equipment. So, what that means is if the equipment is on your job site and it's available to you, then it's up to you to use it the most effective way. If it's failing too often or if it's down for extended periods of time, those kinds of things will impact your productivity. Our job is to keep it running. That's our primary job.
But in gathering the data around, keeping it running, we can also deliver to you the utilization piece so that you can take action yourself. That's adding value. And we can see with about 2 years of good, really well analyzed data, we're seeing improvements in our performance.
GONZALES: Nice. Excellent. You guys seem to have institutionalized innovation, you've made it a core focus of the company. Were you a part of the decision to do that or how has that come to be?
NOLAN: No, it started with our executive committee, or our operating committee of the most senior people in the company. They heard our customers too, maybe more directly than I did. They heard from the customers, “You cost too much. Your projects take too many people. When your projects take too many people, the camp is too big. I have to feed all these people, I have to bus all these people.” Again, it gets into this indirect space a little bit. So, the commitment from our senior management was, “We will invest in this because this provides opportunity for us and opportunity for our people to deliver more value to our customers. So, here's the money, let's figure out what we're going to do with that money.”
The money is really spent on, sometimes it's spent with third parties who have great ideas that can benefit us. Sometimes it's spent on internal resources who will take something to the pilot stage and help us test it on a job site. The money is available so that people that have a day job are not being asked to do too much so that we don't succeed, if that makes sense for you. In other words, we have people who their full time job is to help us innovate and help us take things forward. Then of course we need the receptors, I like to call them on the job site, the people that are willing to try something new and test it for us and give us the feedback. So, we need champions on the innovation team side and we need champions on the job site side and that's working.
GONZALES: It certainly seems to be from my view. We talk a lot about labor shortage and you guys have some of the most incredible numbers I've heard in terms of how quickly you need to onboard and get people up to speed. Can you give us: A) A Sense of what it means to hire thousands of people overnight and B) What you see in terms of the workforce right now, shortage or otherwise?
NOLAN: I'll reflect the most on my South American experience because that's where the big numbers are coming from. The productivity, just to give you some perspective on productivity in the USA versus productivity in South America. I'll generalize a little bit. Partly because we have more structure to our craft development in the US and partly because we've had more opportunity in the US over the last 20, 30 years than say a country in South America, because we're able to develop stronger people. The productivity factor on the same commodity is roughly 2 ½ - 3 times the hours in South America than it is here. The wage rates are lower and the development of those people is weaker.
Think about a quality weld and how many inches of weld I want to do. It takes three times as long to do the same weld, and it takes twice as many people because we're working at elevation and they work 15 days of 30 days a month. For every job we need 2 people. That's what drives those numbers. The productivity gets us to 7 or 8,000 and then we need double that to do the work. So, we're dipping into a relative weakness in the craft environment. So, we need to focus on training, we need to focus on safety, we need to focus on everything you can imagine to be able to even function, let alone function efficiently.
GONZALES: At scale, I think it’s one thing to see a best practice, a policy, a process and apply it to a small team. To apply it literally to thousands of people that aren’t coming from the board room, how do you literally get that many people going simultaneously?
NOLAN: It's a journey in culture really, and I like to start with safety. Many of the people that we took the elevation on my last 2 projects had maybe worked in construction before, but never had elevation in heavy industrial environment. They might have worked on building a skyscraper in Santiago, Chile. Those contractors that do that work are not nearly as strong safety wise as we are, so they had some bad habits they brought with them. Also at elevation with heavy equipment running around, there are risks that don't exist on that postage stamp job site in downtown Santiago. If you've never seen it, if you've never experienced it, how could we expect you to avoid it and, de-risk the project.
We worked really hard and continue to work really hard on schools of risk demonstration to people of the kinds of risks they're going to run into. We did it pretty much in the past with physical scale models and mock-ups and walk people around and talk to them and say, “You see that you're going to see that 966 loaders, that little thing there on the table, but when you go out there, you're shorter than the wheel. Right? So, think about the damage that that could do to you.” That's the kind of conversation we have or 50 people in a room, death by PowerPoint. You've got slide after slide showing you what you're going to experience. Technology today gives us the opportunity to experience it much more realistically. We're really excited about bringing that to those locales, such that we can teach people in a more human way what they're going to experience so that they really absorb it.
The other part of it is the equipment we'd take there is very expensive. We don't want the equipment broken. We don't want people hurt. So, we don't want to be flying people from thousands of kilometers away. Their CV looks good, but when they get there, they can’t actually drive that crane safely. So, technology allows us to test them at the hiring office so that we don't waste the money of flying them there, housing them, feeding them only for them to fail the certification.
GONZALES: Which I can imagine must have happened at some point in the past.
NOLAN: Thousands of times.
GONZALES: Really? Thousands?
NOLAN: Virtually thousands of times. There's an obvious waste that one needs to respect and deal with. I could go on and on about the benefits of technology in terms of what we need to do, but it's really about changing culture. It is really about teaching someone to think a different way. Teaching someone to care about the equipment, teaching someone to care about their brother in the workforce and those people in those environments come from a different background. So, we as leaders are out there every day, we're out there talking to people, we’re out there pointing out risks, we're out talking to them about how to avoid those risks, be those risks safety related, quality related, costs related, whatever they might be. It's a very human experience really to be a leader on a project of that size.
GONZALES: One of the interesting learning experiences for me and my time at ITI has been seeing how a company, in the case of ITI, they’ve been around for 30 years, they have a well-established in the industry reputation as a training company, they're producing a VR simulator for the purpose of training. While the technology is advanced to a point that people are still becoming familiar with it and may have misgivings about what it even is or let alone what it even does or how it compares to the real world. But all that is coming from my perspective, from the inside out, that this is an industry established company that is bringing new innovations. Meanwhile in Silicon Valley, we have kids in their dorm room somewhere making some new whizzbang thing that can change the world. How do you recommend a company or an individual that thinks they have a good idea for the industry? How do they bring in to the innovation group?
NOLAN: For me as an old guy and I haven't been involved in this innovation space, more so in the last couple of years. I'm all about trying to test it as soon as possible, deliver some value. So, the idea might be a spark in the Silicon Valley, but it has to add value at the job site before it's of any particular interest to me. I need to see that connection and then I need to find some people that start to believe that that’s going to deliver some extraordinary value.
As soon as we get it on the job site delivering a particular value, it's not unusual for someone to say, “You know what, that can do this as well and that can do that as well. That can do that as well.” Best example I could give you is our drone initiatives. Flying over the job site, it wasn't that long ago where some of our cynical project managers said, “I don't need more pictures of my job site.” It was that cynical. Today, we're showing them use cases by the dozen that are just blowing them away. A really simple example on one of my projects, both of them were quite isolated, the last two I was talking about, we'd have somewhere in the range of 250 to 300,000 cubic meters of concrete to produce and we're a thousand kilometers from nowhere. We have to bring the aggregate, the sand, the cement in large quantities to be prepared for the pour tomorrow, next week and the week after that. We send surveyors out there every day to keep track of it, and bring us the data back. Now, I can fly it with a drone every day that does eight things at the same time. It gives me the data without surveyors. Very accurate. That's a simple example of how technology helps us today.
GONZALES: Is there a particular problem you’d like technology to solve? Or you’re excited that technology is now solving after a long wait?
NOLAN: No, I don't think I have anything in mind that someone hasn't brought, you know, an idea related to it. But I think these things move along at a particular pace. That's a challenging one for our senior management as well. They put that money on the table and they're expecting results. As politically correct as I can be, I explained to them that our projects are 4 and 5 years long, they take 2 years or 3 years in gestation before we can actually even try it, let alone deliver results. So, let's just appreciate the timeline of some of this, but because we really need to use it at the workplace.
GONZALES: Anything left unsaid?
NOLAN: The excitement part is what gets me. I mean, our senior management can feel the benefits without being able to measure it just yet, and they get pretty excited about some of this stuff and if they get excited about it then the investment comes and we'll all be better for it. So, I think it's pretty good.
GONZALES: Awesome. Thank you Jim. We sure appreciate your participation in the show.
NOLAN: No problem. Hope it was useful.
HENRY: Thanks for tuning into LITES. It's leadership and industrial technology education and safety. See more at LITES.org.
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LITES is a production of Industrial Training International. Our guests today were Jim Nolan – President of Bechtel Equipment Operations at United Rentals, and Pinky Gonzales. Our producer is Michael Montaine. I’m Mandy Henry and we'll see you next time.