Big Firm Woes

Feb 06, 1995

Just about every A/E or environmental firm wants to grow. And there are a lot of good reasons for it. To paraphrase an old adage, “growth covers a multitude of sins.” When you are growing, banks are more likely to understand if every covenant on your line of credit isn’t kept. When you are growing, your real equity is probably growing, too, since market value is so directly related to fee volume. When you are growing, there are always plenty of new challenges and opportunities for the most ambitious members of your staff. The bottom line is that growth may not only keep you excited and gratify your ego, it can also be good for your pocketbook. But growth can have a down side. We work with a lot of large firms in this business (200 to 5000 or more employees), and many have serious problems to contend with. If your firm is large, or you hope it will be someday, there are a number of growth-related problems you should be aware of. Here are my suggestions for keeping those problems under control: COMMUNICATION BREAKDOWNS Problem— Large firms have more offices, more disciplines, and more people, so communication is more likely to suffer. People in satellite offices often don’t know what’s going on at headquarters. They may be unaware of what projects other offices are chasing, or what recent hires those offices have made. Large firms enact new policies no one seems to understand. People tend to think top management doesn’t know who they are, and doesn’t care about them. Solution— Move work and people around. Get top management out to the branches on a regular basis. Get branch people back to headquarters. Have company-wide meetings with people from a wide variety of locations/disciplines. Get satellite office managers involved in functions or activities that include people from other areas in the company. Have a company-wide computer network and E-Mail system. Give everyone information on how the firm is performing overall. Tear down hard walls and replace them with moveable partitions. Throw away office doors. Jam people together so they have to talk with each other. QUALITY BREAKDOWNS Problem— The firm cannot put out a well-coordinated set of drawings. Errors occur in the field that never should. There aren’t any standards, or standards that do exist aren’t used. The firm has difficulty tapping into the best resources it has to offer on complex multi-discipline jobs that require people from different offices and departments. This is compounded by greatly varying demands placed on the firm by different client types or different discipline areas. Solution— Change the organization structure so that the firm is oriented to client types, instead of geography or disciplines. Make sure the accounting system is modified to reflect this new emphasis. Don’t separate design staff from field staff by having different departments handle these activities. Get a computer network operational across all offices and all disciplines. Have a group of people decide what standards will be used and how information will be stored. Impose sanctions on those who do not follow the system. UNBALANCED WORKLOAD Problem— The firm can’t seem to get all eight cylinders firing at the same time. Hot and cool spots exist so that a few groups are very profitable, many are marginally profitable, and some are losing money. Solution— Once again, the organization structure should have an element that cuts across all company lines based on client type. The productivity and profitability data should be tracked to correspond with the structure, as opposed to strictly looking at it by office or by department. Office/discipline accounting leads to backlog hoarding by offices/disciplines. A director of operations may be needed to resolve situations in which work is not being handled in the overall company’s best interests. LEADERSHIP TRANSITION Problem— When the founder retires, dies, reduces involvement with, or otherwise leaves the firm, the company stagnates. No one can seem to make a decision on anything. Committees are established to fill roles formerly occupied by one person. Top management becomes a void that sucks information in, but that nothing comes out of. “Entrepreneurship” is a word that sounds good to most people, but that no one seems to understand. Solution— Change the reward system so salaries and bonuses aren’t based primarily on longevity. Start taking care of the best people regardless of their age or experience so they don’t have to leave the firm to get ahead. Invest in a comprehensive management training program. Share and interpret financial information on the firm’s performance with all employees so they become sensitive to the macroeconomics of the business. Get the founder or current CEO to name his or her successor well in advance of that person taking over. Build expertise and capability in second tier management staff through practicing meaningful (as opposed to menial) delegation. TECHNOLOGY Problem— Big firms are worse off than small firms when it comes to technology. Some members of top management have never even turned on a computer, much less used one regularly. A computer is not sitting on each employee’s desk, and different software is being used by different offices or work groups. Phone systems are antiquated. Paper is being used where electronic files should be. Everyone in the trenches wants technology that management isn’t moving ahead with fast enough. Younger people are actually quitting the company because the computers aren’t up to snuff. Solution— Get the CEO and other senior principals to start using computers immediately so they will learn first-hand how the business can benefit from new technology. Use games if necessary to get them used to operating a computer. Hire a capable person to be in charge of computers, information systems, and office technology company-wide, since the next change coming is one where your phone and computer could be one in the same. Spend less time worrying about what you can afford and more time figuring out how to get people what they are asking for— now. Build a company wide technology implementation plan that cuts across all offices, technical areas, and business functions. If necessary, extract less profits from the firm to invest in the technological infrastructure immediately. Lease equipment instead of buying it. FRAGMENTED MARKETING Problem— Different offices are chasing after the same project on different teams. Each office or unit is going off in its own direction. Marketing is a huge hole that money is poured into, but that gives back very little. No one seems to know what the firm wants to be when it grows up, yet there are plenty of mouths to feed. Every piece of marketing literature looks like it was created by a different firm. Solution— Invest in developing a good business plan that defines why the firm exists, what type of clients it serves, and what services it provides. Hire experienced marketing support people who have solved these problems through implementation of systems in other firms, instead of investing only in good sales or business development people. Build a computer infrastructure that provides a framework to share information on people, past projects, and current projects being chased. Design the entire organization around client types, and install a person responsible for building a business with that client type at the top of each unit. Be willing to refuse lousy work that doesn’t take the firm where it wants to be in the long term, and deal with any shrinkage that is required to make this move in the short term. The moral— There are no simple solutions to complex problems. This is all difficult to implement. But the fact is, the entrepreneurial, small firm is a real threat to the long-term survival of large firms. Large firms must take immediate action to remold themselves, because if they don’t, they could easily end up like some of the other massive creatures that once roamed this earth— extinct. Originally published 2/06/1995

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