President of Environmental Partners Group, Inc. (Hot Firm #22 for 2017), a 55-person firm based in Quincy, Massachusetts.
By Liisa Andreassen
“Their problems need to be your problems,” says Gabriel, referring to the client-firm relationship.
A conversation with Paul Gabriel.
The Zweig Letter: What’s your philosophy on fee/billing and accounts receivable? How do you collect fees from a difficult client?
Paul Gabriel: We communicate as clearly as we can and include a brief work summary for what was completed during that billing period. Inadequate or no explanation of services being invoiced only slows down the cycle on the client’s end. We typically invoice monthly and include a summary of unpaid invoices from previous months. On our end, we expect our project managers to monitor client processing and invoice payment and to follow up on any unpaid invoices after 60 days.
TZL: What’s the recipe for creating an effective board?
PG: This year we will begin the process of implementing a board of directors to be drawn mostly from our current management team. I expect it to be five members, one of which will be an outside member. I want the board to focus on what are truly apex strategic issues for the firm, such as ownership/leadership transition, strategic direction, finance, and risk management.
TZL: Is there a secret to effective ownership transition?
PG: We founded Environmental Partners on a concept of shared ownership with key employees. From the outset, we were committed to sharing risk and reward, and incentivizing key employees to think and operate as an owner, and to stick with the company for the long haul. Heeding the advice of multiple management consultants in our industry, all of whom stress the need to begin the ownership transition process at least five years before you think you should, we began actively transitioning ownership about five years ago.
A number of critical factors come to mind when it comes to effective ownership transition:
- First, the company needs a shared vision of the future – one of growth, diversification, and prosperity. For us, entrepreneurship is a vital part of that vision.
- You need steady growth to maintain enthusiasm and opportunity for new and existing owners.
- Along with the steady growth, you need to be fairly profitable to provide sufficient resources to distribute to the junior partners, which they can then use to buy more stock.
- Demonstrated ability to grow and remain profitable makes for a worthy investment option for existing and prospective owners. In addition to attracting new owners, the existing owners should want more stock.
- There needs to be a broad group of owners willing to buy into the company. Ideally, that group should include both second- and third-generation owners, covering a broad age spectrum. This provides continuity and sustainability for a continuous ownership transition process well beyond the second generation of owners.
- Owners are partners, and each of them need to believe that the other owners hold the larger company interests paramount.
TZL: How do you go about winning work?
PG: Our philosophy has always been to build relationships of trust and confidence in our firm’s capabilities. This takes patience, time, and the willingness to be active in client-oriented professional organizations. Another key is to understand the client’s ongoing and upcoming needs so that you can anticipate and prepare for opportunities coming down the line. Perhaps the most important element, though, is to do your utmost to communicate with clients and be responsive to their pressures and concerns. Their problems need to be your problems. That means establishing partnerships with your clients. If you are truly their partner, follow-on assignments and tasks will come along the way, and that can account for more than half of a firm’s revenues.
Of course, you also need to have the senior staff resources that can win work with their expertise, and also develop and maintain client relations. That means employee retention has to be a high priority.
TZL: What’s the greatest problem to overcome in the proposal process?
PG: Learning about the opportunity as early as possible so you can develop the most comprehensive and responsive approach to the client’s issues. Being innovative and creative in developing that approach often takes considerable thought and time commitment.
TZL: Once you’ve won a contract, what are the “marching orders” for your PMs?
PG: Listen to the client, stay on or ahead of schedule, use all company resources to develop solutions, and stay in regular communication with the client. Pay particular attention to project changes or developments that impact budgets and cost projections, and communicate these as soon as possible. Avoid surprises at all costs.
TZL: How does marketing contribute to your success rate? Are you content with your marketing efforts, or do you think you should increase/decrease marketing?
PG: The industry has always been competitive, so marketing must be continuous. It cannot be underfunded in corporate budgets if management seeks to grow and diversify. We believe our marketing efforts have contributed significantly to our growth and success, and they will continue to be a high priority.
TZL: What has your firm done recently to upgrade its IT system?
PG: This is another area that requires continuous improvement and upgrades – especially as a firm grows rapidly. You can’t think about keeping up with technology; you really need to stay ahead. So, for the past 10 years, we’ve used an outside firm to manage our IT system. It’s one of the best decisions we’ve ever made.
Virtually every engineer and scientist has a laptop or notebook computer, and servers and software are upgraded on what seems to be a continuous basis. Our Deltek accounting system is cloud based, and we are deploying many advanced modules to increase efficiency and reporting accuracy for our project managers, and to speed up the invoicing cycle. We’re also undertaking a complete overhaul of our website.
TZL: What’s the best way to recruit and retain top talent in a tight labor market?
PG: A few key recruiting elements for us are:
- A solid reputation among clients and peers
- Growth, longevity, and stability
- Diversity of services, including projects of the scope and scale that are the envy of our larger competitors
- Salary and benefits packages that are competitive or leading edge
- The real opportunity to become a meaningful owner
- Employee retention factors include all the recruiting elements, as well as:
- Interesting and diverse projects to work on – the results of entrepreneurship
- A culture that promotes mutual respect and a work/life balance
- Flexible schedules
- Multiple offices that reduce commuting challenges
- Respected mid-level and senior level managers
TZL: What’s the key benefit you give to your employees? Flex schedule, incentive compensation, 401(k), etc.?
PG: I believe that the entire spectrum of benefits are important to employees, since each employee has their own individual or family priorities and needs. For some, the top consideration may be salary and bonuses; for others its flex schedules that allow them to manage child care needs.
I also maintain that a key benefit is the entrepreneurial spirit the company has always had. We are a smaller company that wins large projects, and manages them very successfully – effectively “punching well above our weight class.” This provides significant career growth opportunities for younger staff and a sense of energy and excitement in the firm.
TZL: How do you raise capital?
PG: Profitability, efficient invoicing with relatively low average collection periods and retained earnings.
TZL: What’s your preferred strategy for growth, M&A or organic? Give us a synopsis of how your firm effected growth in the recent past.
PG: So far, our only source of growth has been organic. Many of the factors discussed above have allowed us to recruit aggressively and minimize employee turnover. We fully subscribe to the co-op program at Northeastern University, which is the best approach to recruiting entry-level staff.
TZL: What’s the greatest challenge presented by growth?
PG: The challenges that have been most evident to us include keeping a good handle on overall operations management – especially among the mid-level and senior project management staff. A significant element of that challenge lies in the branch office management bucket. Supporting branch offices with marketing and business development activities, and maintaining good communications between offices are essential.
Other notable challenges that come with rapid growth include maintaining a solid QA/QC structure, and making sure the administrative staff grows appropriately to support the line staff functions – especially marketing and accounting.
TZL: What is the role of entrepreneurship in your firm?
PG: We were built on entrepreneurship. It continues to fuel our growth and development. The firm has won numerous industry design awards for projects that many would see as out of our weight class. For example, this year we’ll receive our second American Public Works Association Top 25 National Project Award in three years. The award this year is for a $130 million water system that Environmental Partners Group designed for the small town of Eastham on Cape Cod – a community that had no public water supply system. We’re now managing the construction of the system over a six- to eight-year timeframe.
TZL: What’s your prediction for 2017 and for the next five years?
PG: So far 2017 has been a very good year for the public works engineering community, and the prospects for the future appear to be bright in light of the infrastructure bill being debated in Washington. Given the heightened awareness that America’s infrastructure has not kept pace with the public demand for safe drinking water, a cleaner environment, and more efficient and modern transportation systems, I am optimistic about the next five years.