At first glance, Jacques Lamarre is a guy’s kind of guy. He is a big, powerful man in a Tonka-tough job. Indeed, as president and CEO of Montreal’s SNC-Lavalin Group Inc. (TSX: SNC), Lamarre runs Canada’s largest engineering and construction outfit. His company designs, builds and operates manly things like bridges, subways, highways, smelters, oil platforms, refineries and hydro dams.
But believe it or not, Lamarre is nothing like the stereotypical male engineers who wreak havoc every spring at universities across North America. You know the type ? those swaggering Fred Flintstones, with their testosterone-based wit and hard hats that hold beer, who can recite all of John Belushi’s Animal House soliloquies and win belching contests. The engineering executive, of course, is no left-leaning wimp. One of his favorite non-fiction reads is The Lexus and the Olive Tree by New York Times columnist Thomas Friedman. That book attempts to explain why globalization generates backlash among certain populations. But it certainly isn’t a Top 10 with the coffee shop Marxist crowd.
When not running SNC-Lavalin, Lamarre chairs the Conference Board of Canada and serves as a director for Canadian Pacific Railway. Make no mistake: he’s a capitalist ? one good enough to increase his company’s 2002 earnings by 667% and generate a 48% return for investors over the past three years. Nevertheless, he has a visible artsy streak. Which makes sense once you get to know the man.
Eighth born in a family of 11 kids, Lamarre got professional experience early in life, working with his six brothers and four sisters on a chain gang for their father, a building contractor in rural Quebec. “My father had access to free labor and was able to beat any price,” Lamarre recalls. “We were all there on his construction sites, summer and winter.”
That childhood experience, plus a slew of construction toys, planted the seed that grew Lamarre into a professional engineer. But before following in his father’s footsteps, he finished a humanities degree at Laval University. Studying classical civilizations made him philosophical enough to conclude that an ideal world would breed more engineers like Leonardo da Vinci ? luminaries with an ability to understand how all things work together, not just in isolation. “We know how everything works,” he told engineering students at Ryerson University in Toronto in 2001. “But we don’t always have a good enough overview.”
But Lamarre doesn’t live in Utopia. He knows engineers have disappointed humankind ever since that first ambitious individual promised to build someone else a shelter or dam a river. The very nature of original projects, he says, means they’re never completed perfectly. That’s why he thinks the trick to being a good engineer is learning from errors. And he freely admits, with more than a little twinkle in his eye, that he’s learned a hell of a lot over the course of his storied career. “I’ve made a few mistakes,” Lamarre says.
He laughs, but he’s not kidding.
Jacques Lamarre joined SNC-Lavalin in 1991 after SNC acquired the engineering assets of archrival Lavalin Inc., the legendary engineering empire founded by Lamarre’s older brother Bernard. According to industry watchers, Lavalin was doomed to fail by high debt ($228 million), overexpansion and plain old executive ambition, which led it into areas, such as aircraft leasing, that went far beyond its core engineering expertise.
But back in 1979, when Lavalin was still the pride and joy of Quebec Inc., the then-35-year-old Lamarre was taught a major lesson in life, when he got caught up in Montreal’s Olympic Stadium fiasco. Indeed, as a still-budding engineering executive, he was called before a provincial inquiry to explain why costs on the Big O spiraled out of control while he was managing construction of the doughnut-shaped stadium in 1975 and 1976. “Sometimes a snowstorm would start and blow open the shelters, allowing the cement to freeze, so we would have to break the cement and start over again,” he calmly explained to the inquiry in 1979. “As well, we were pouring cement 150 feet off the ground in some cases.” That took about 100 cranes ? 94 more than builders expected. Heating cement so it would set properly in the cold weather took four to five days and cost an extra $34 million, an explanation that appeared to disgust Mr. Justice Albert Malouf, who headed the investigation.
Anyone who knows anything about engineering will tell you that costs go up when delays force you to build something planned for summer in winter months. Still, Lamarre admits the controversial stadium project could have been managed much better. At the end of the day, however, many of the problems ? such as delays in the production of building plans by a third party ? were beyond his control. Someone else, with political connections but no project management skills, was also calling some big shots. And Lamarre quickly learned there is nothing worse than working for someone who doesn’t bother knowing all the details. “I was not the boss, not God,” says Lamarre. “I was dealing with all kinds of people, stuck in the middle, trying to make it all make sense. Sometimes I feel that I was the only one trying to make sense.”
The stadium fiasco is old news. But Lamarre didn’t mind being the guy who had to supply answers. He still doesn’t. “I like to explain, to put things in context, make them black and white,” Lamarre says. After all, he adds, in construction ? especially the global construction business ? trust is everything, because you can’t rely on international law to protect your contracts. “So I always make sure people who meet me leave knowing exactly what I stand for, what I’m thinking and what I’m not thinking,” he says.
And that’s one reason why industry analysts think Lamarre is a great CEO. “I don’t know him personally,” says Richard Stoneman, a Toronto-based analyst with Dundee Securities Corp. “But I can tell you that the SNC-Lavalin record has been very good ? superb, in fact. And Lamarre runs a business where you need to build consensus between assets that walk on their feet, governments and customers.”
Other stockpickers gush over Lamarre’s conservative accounting and strong balance sheet. Some even call Lamarre Canada’s ambassador to the world, since his 15,000 employees speak 50 languages, represent 80 nations and work in at least 100 countries. They say he learned a lot from what happened to his brother’s company. “After what happened at Lavalin, Lamarre decided never again to take any bad risks,” says another financial analyst. “Today, SNC-Lavalin does a lot of financial engineering to make sure most projects are cash-flow positive from Day One.”
The 59-year-old Lamarre bats away most flattery ? he thinks his annual pay (salary and bonus alone topped $1.2 million in 2001) and title are more than enough. After all, he absolutely loves being CEO, and not just because he was a middle child. “It’s the best job in the company,” Lamarre insists. “You sit in a room and everybody likes you. Everyone wants to please you. You have power, challenge and information. Anyone who complains about being CEO is not honest.”
Lamarre likes to think his brother’s company might have survived if things played out less ambitiously back in 1991. But now, he tries to use the mistakes he has made as examples for employees of what can go wrong when you take risks. In fact, it’s fair to say Lamarre fixates on negative outcomes. “When things are going well, I tell my people not to talk to me about it for too long,” he says. But he has all the time in the world for horror stories, which he collects with a passion. When he meets with company chairman John Cleghorn, he always repeats everything he’s heard about troubled projects. “I must say, John always looks a bit discouraged,” Lamarre says. “But I tell him not to worry because I just told a few bad stories out of 2,000 projects.”
As a perfectionist in an imperfect world, Lamarre is never totally satisfied with SNC-Lavalin’s performance. But he’s proud of his company’s growth and likes to point out its lack of significant goodwill (intangible assets that often prop up other Canadian balance sheets). He trusts his employees, which is why anyone working for SNC-Lavalin can call him from anywhere in the world, anytime, even when he is on vacation with his wife, Céline (his best friend). He believes in “distributed leadership,” and welcomes advice from his team.
As for analysts, Lamarre doesn’t mind being challenged and will take time to explain his reasoning to the market. But he’ll never listen to industry watchers when they disagree with his company’s strategy. “I am the expert,” he says. “It’s my job to be better. If I’m not, it would be catastrophic. So I won’t do something to please the market. I’ll do something because I feel it is good for the company, whether the market likes it or not.”
That’s not just ego talking. Lamarre remembers taking significant flack in 1999 for paying roughly $175 million for a 27% interest in Ontario’s 407 toll highway. He sold just a quarter of that last year for about the same price. And for the record, he expects his gutsy acquisition of Enron’s power-station building assets in 2002 to eventually prove early critics wrong, as well.
Getting the last laugh has become a habit for Lamarre since 1996, when a few naysayers questioned his appointment as CEO. “Jacques knows the business,” insisted former CEO Guy Saint-Pierre, a onetime education minister in Robert Bourassa’s Liberal government who successfully merged SNC with Lavalin. According to Saint-Pierre, making Lamarre CEO had nothing to do with the fact that his brother founded Lavalin. Lamarre “is a hard worker,” he told reporters in 1996, “someone with an acute business sense who knows how to get maximum value.”
True enough. When Lamarre took over as CEO in 1996, SNC-Lavalin’s revenue was just breaking the billion-dollar mark. Last year, sales jumped 48% to $3.4 billion ? largely thanks to a $145.8-million gain on the 407 sale. Net income soared 667%, to $202.5 million ($3.95 per share), up from $26.4 million in 2001.
Lamarre joined Lavalin in 1968, shortly after graduating. But two years earlier, his first job was a pure research stint with the National Research Council of Canada in Ottawa. “I was good at school and thought I might become an academic,” he says. The straight-talking civil engineer would like to say he has fond memories of doing theoretical studies on the best way to build snow fences. But that’s only because he doesn’t like to offend. The truth of the matter is that he hated the idea of working in a theoretical environment his whole life. He wanted to build real things. “I prefer to have others do pure research,” he admits. “I’ll do work.” To be fair to researchers, however, Lamarre points out that his boring time studying snow fences in Ottawa actually came in handy years later in Africa, when he was constructing a road and had to figure out a way to keep sand off the project.
At the end of the day, you could say that Lamarre is hard to peg. He is a guy’s guy, though he prefers the company of women ? which he admits might have something to do with having so many sisters. But if anything, his willingness to break stereotypes has only helped him build a career in a gritty business. So hats off, engineers. Just don’t spill the beer.