From a geographically to a market-based firm

rmassey
So many companies have done it but there are many more that still haven’t – morphing from a geographically-based to a market-based firm.

Why is this so crucial? There are many reasons, but first and foremost is the fact that most clients increasingly want to hire experts who specialize in serving clients like them, and A/E and environment firms need to be in a position to provide the best talent to those clients, wherever they may be located.

The typical barriers to making this major shift from offices as profit centers to vertical markets as profit centers include questions such as:

• Who will manage the costs of the local offices?

• How is overhead distributed?

• Who will the local office staff report to?

• How will we ever be able to get the names in the boxes?

• What do we do about projects that don’t t into a vertical market?

• And many, many more …

With respect to whom will manage the costs of the local offices, typically that would fall on the CFO and COO of the firm. They ought to be smart enough to negotiate all leases and decide how much space is needed at any location. Consolidation of responsibilities for managing facilities costs will improve your accountability and profitability.

How overhead is distributed isn’t difficult either. I would roll up all offices, IT, F&A support, etc. (everything but marketing) and then dole it back out to my market sector groups as a percentage of raw labor. Easy, clean, simple – and doable. I would treat marketing as an internal service provider to the market units. The market units would “buy” what they need from marketing at cost or go outside the firm. Business development staff (if any) would reside in the market units and be part of their cost structure. This keeps everything simple.

Who will the local office staff report to? They report to the head of the market-based unit OR that person’s second lieutenant, wherever he or she may be located. No, they won’t necessarily be local – but so what? Many people report to supervisors who don’t have an office in the same building (or state, or country, for that matter).

How will we ever be able to get the names in the boxes? Take your time. Don’t rush. Don’t come up with boxes without considering existing staff/management resources to fill them. Ask the people involved what they really want to be doing, too. They should be consulted. Ultimately, the COO and CEO should decide who the market unit-based unit leaders are, though. No committee needed. Not a board role. Not a role for all shareholders or principals!

What do we do about projects that don’t fit into a vertical market? You have many options. You may decide not to do them (gasp!) if they don’t really advance the firm. Or you may just do them with whoever is available if any one market sector unit-based leader decides it is in his or her best interest to do the project.

No matter what you do, I find that generally, it’s best to decide in advance what to do, then allow time for everything to sink in and for the politicking to occur. It is never easy to make this change – although it will likely be necessary!

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