Entrepreneurship is all about seeing and doing things differently from everyone else, so maybe you should be more questioning of the status quo.
When it comes to business – more specifically the AEC business – there are certain things that people say or do that are rarely ever questioned. We just do them because they are generally accepted as good practice and “normal.” The problem is entrepreneurship is all about seeing and doing things differently from everyone else. So maybe you should be a little more questioning of the status quo.
Here are a few of these common management practices that just don’t get questioned often enough in my opinion:
- “Bonuses should be paid out annually.” Why is that? If you do any research on it you will find that higher frequency is better. It’s better to tie payments more closely to performance. Objectors to higher frequency of payment will say the amounts won’t be large enough. So what? I would rather have people see them go up and down and come to the realization that more is better so they work to make every month good.
- “The way to make this company profitable is to get our utilization rate up to X percent so we will stress utilization rate.” This belief is so commonly held it will be hard to change. But my experience is that if all you do is push utilization, you will get it. But the price you will pay is budgets will be overrun and labor multiplier will erode. You can’t just push utilization without also tracking labor multiplier. That’s why I am a fan of revenue factor – utilization times multiplier, or net service revenue divided by total labor.
- “Managers should do annual performance appraisals for each of their employees.” Who says these do anything for you? More frequent feedback, both positive and negative, is far more effective in terms of guiding behaviors than a formal once a year appraisal that both the managers and employees alike dread. Not to mention the fact that these appraisals rarely show performance problems that need correction, and provide evidence of wrongful termination more often than they provide evidence of prior attempts to correct performance problems.
- “Board of directors members should all be owners of the firm.” Why is this? Sure it’s common practice, but are the firm owners necessarily the best people to provide guidance on policy, growth, and unplanned liability problems? Maybe someone who isn’t a principal – or maybe someone who doesn’t even work for the company at all – would be in a better position to contribute.
- “Board of directors members should represent various disciplines our firm provides or geographic regions the firm works in.” Once again, where did this idea come from? Who says disciplines or offices should be “represented” at the BOD level? I find this practice leads to perpetuation of disciplines or offices even if the marketplace is telling the firm to do otherwise. It also can lead to the wrong people being on the BOD who are not necessarily “big picture” thinkers.
- “Statements should be sent to all clients showing how much money they owe us as a part of our billing and collection process.” This one is so common and it needs to be questioned. Who says clients pay “statements”? They pay invoices. If they owe money from the prior period, the total of that prior bill and what is owed should be reflected on all subsequent invoices. That will get you paid faster.
- “It’s best if our proposals don’t get too creative because we are conservative engineers and don’t want to scare our clients.” This is really bad thinking. The way to win jobs is through differentiation from your competitors versus conformity. The alternative is looking like everyone else and “waiting your turn.” What sounds better to you?
- “Recruitment bonuses for existing staff who make referrals are the way to go.” This is very typical thinking. I don’t like recruitment bonuses and never have. For starters, why wouldn’t happy employees want their friends who they think are good at what they do to work for the company anyway? If they need to be paid to help get them on board and help make the company more successful something is wrong. On top of it, my experience is when you end up with two candidates – one coming through an employee and one not – if the company hires the one that wasn’t an employee referral, the employee is demotivated and feels ripped off. Why would you want that?
There are other aspects of how we tend to do things in this business that should be challenged. What else needs to be added to this list? Let me know your thoughts!
Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.
