Conference call: Mike Munn
President and CEO of McAdams (Best Firm Civil #17 and Hot Firm #29 for 2017), a 180-person civil engineering firm based in Durham, North Carolina.
By Liisa Andreassen
“There are many challenges with growth, but they’re all mitigated by making sure only the right people are hired,” Munn says.
A CONVERSATION WITH MIKE MUNN.
The Zweig Letter: The talent war in the A/E industry is here. What steps do you take to create the leadership pipeline needed to retain your top people and not lose them to other firms?
Mike Munn: We don’t take this lightly. In fact, this is one of my primary focus areas. We believe the most effective retention tool (and growth tool for our firm) is in career development and the ability for our stars to grow and prosper in their careers here, while working on the best projects, and for the best clients. While I believe that 75 percent of a person’s development is dictated by the individual, we’re heavily focused on that remaining 25 percent to make sure our culture promotes and accelerates stars along an exciting career path.
Growth is a tenet of our firm, which creates lots of new and exciting opportunities for our teammates. In our all-hands meetings, I commonly cite that, going forward, each successive year will be “the best year ever.” Then I challenge them by asking if they’re stretching and growing to ensure that they are having the “best year ever” in their career. I am a poster boy, having risen from entry-level project engineer to CEO in less than 15 years.
Our leadership team understands, first-hand, how important it is to have personal engagement with their rising stars, helping each of them to envision a bigger future for themselves here at McAdams and then coaching and mentoring those rising stars.
As we identify shining stars, we have an incredibly successful ownership transition program that rewards our top performers and incentivizes them to increase the value of the company, while benefitting from real wealth creation. Today roughly 15 percent of our employees are McAdams’ stockholders.
In addition to career development and our ownership program, we have a great culture. Our HR team is deeply engaged and they pull out all the stops to ensure that our folks feel connected to the “McAdams community,” feel appreciated for their contributions, and are rewarded for their efforts.
TZL: Monthly happy hours and dog friendly offices. What do today’s CEOs need to know about today’s workforce?
MM: By-and-large, I believe the superstars in today’s workforce want the same thing that dynamic impact players of prior generations have always craved – opportunity to excel as an individual while being on a winning team filled with like-minded high performers.
This generation is more motivated and vested in understanding the purpose of their work and our company’s work. The sense of making a positive impact and contributing to a greater purpose is as important to them as their compensation, which is why we reinforce the personal nature our work has in the lives of people who will use the places we create.
We also talk a lot about “authenticity” for today’s workforce. We have to be who we are, and we have to be as open and transparent about where we want to go as a firm. If that doesn’t pair up with the candidate then we don’t try to make it fit. This generation, more than any, can tell a fake from a mile away. They’re looking for a place that’s transparent and honest … what they would say is “real.” While a leadership structure is important, they will not tolerate layers of bureaucracy that does not allow for streamlined communication, sharing of ideas and the opportunity for accelerated upward mobility.
TZL: In the event of failure, how does your firm react?
MM: We’ve been fortunate to not experience any events that we categorize as “failures.” However, as a growing company, we understand the importance of taking risks. Guided by our five-year vision and strategic plan, we’re doing lots of things simultaneously, and everything isn’t perfect. When we run up against challenges or adversity, we collectively assess what’s happening, adjust tact and get back to it.
What’s most important is that we’re unified and aligned about our goals throughout the organization. This makes it easier for us to overcome whatever obstacles may come our way.
TZL: The A/E market is great right now. What are you doing to cushion your firm in the event of a downturn?
MM: We’ve targeted office locations in growth markets where we strongly believe in the underpinning of their economic drivers. Additionally, we have a deliberate focus on delivering market sector expertise for a diversity of client sectors. For example, we’ve invested heavily into becoming experts within higher education, healthcare, energy and public sectors during this economic expansion to mitigate the effects of a slowdown in our residential or commercial sectors. We believe sector and geographic diversity are important, but we also believe that the best protection against the effects of a downturn in any sector is to be a definitive expert with a deeper understanding of the needs of each client, and a willingness to adapt to serve their specific needs.
TZL: How do you deal with underperforming employees? What are your steps for removal after they have proven to be ineffective, or even counterproductive, to your firm?
MM: Most times, our rigorous and deliberate hiring process helps us avoid this situation. However, when faced with it, we can’t let it go unchecked. Our managers work closely with our HR department to have those unpleasant conversations and to provide a very specific performance improvement plan for the employee. It’s reassuring to know that several times heightened communications and more specific expectations have resolved the problem. In other instances, it becomes clear to both parties that it’s not going to work and the employee usually decides to pursue something else.
TZL: Firms that have principals and firm owners that lower their compensation and invest back into the firm perform better, grow quicker, and have higher valuations. How do you balance owner compensation with investment in the firm?
MM: From the beginning, John McAdams created a culture that focuses on the long-term by maintaining company health and relevancy. Our culture fosters the benefits of growth for advancing our careers; for serving the best clients on the best projects; for advancing the careers of the up-and-comers; and for growing wealth in ownership. Growth requires cash, and there is no way to achieve that growth and ever-increasing stature of our firm if we sweep the profits out every year. We reward ownership, but we overwhelmingly leave the money in the firm to grow the firm and ultimately grow the owner’s equity when they become a divestor.
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?
MM: Marketing is instrumental to our current success, and increasingly more vital for our vision for the future. Our ability to effectively and attractively communicate our story to prospective clients (and prospective hires) is instrumental for our strategic initiatives in growth, diversification, and geographic expansion. We’re never content. As we continue to have success in new sectors and grow geographically, we will continue to increase our investments in marketing.
TZL: If there was one program, course, or degree program that you could take or recommend before becoming a principal or owner, what would it be?
MM: In addition to coursework in finance, a minor in communications would probably be the most helpful.
TZL: What’s the greatest challenge presented by growth?
MM: There are a number of managerial and analytical challenges that come to mind, but the single most important thing to get right is to hire the right people. If we get the right people inside our “boat” it ensures that we protect (or even enhance) our company culture; it means we protect our plan quality; and it enables growth of our current team. There are many challenges with growth, but they’re all mitigated by making sure only the right people are hired.
TZL: What is the role of entrepreneurship in your firm?
MM: It’s critical – especially for market sector leadership and geographic office leadership. We work to set ourselves apart from other firms because of how we get to know each client’s needs. What can we do differently for them? How can we help them achieve something great? These questions require entrepreneurial thinking.
TZL: What’s your prediction for the next five years?
MM: Right now we’re on track for 22-23 percent growth for 2017 – all organic. Our vision for the next five years is roughly 20 percent annualized growth through a combination of organic growth and acquisitions for geographic expansion.
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