CEO of Coffman Engineers (#62 Hot Firm for 2016), a 400-person virtual, multi-discipline firm with offices across the West Coast, Alaska, Hawaii, and Guam.
By Liisa Andreassen Correspondent
“Outside members can act like guests at a dinner table – they keep the rest of the family on good behavior,” Gardner says.
A CONVERSATION WITH DAVID GARDNER.
The Zweig Letter: What’s your philosophy on fee/billing and accounts receivable? How do you collect fees from a difficult client?
David Gardner: Early and frequent contact about payment prevents awkward conversations later. We consider collection and client contact concerning A/R as much the PM’s responsibility as accounting. Each corresponds with their client counterpart. It’s also key to invoice as early as possible, be sure of contract requirements, follow-up early and frequently. For example:
- Five to 10 days – Did you receive invoice?
- 30 days – Is the bill correct and approved?
- 60 days – When can we expect payment?
Follow-up every 30 days after this. We keep notes of who we talked to and when and then escalate to a higher authority as required.
Also, get a “pay when paid” clause in the contract. Holding of payment after receiving is grounds for breach of contract. We go after this issue aggressively.
TZL: What’s the recipe for creating an effective board?
DG: Get people who want to participate and who are actively involved, not just by seniority, title, or office staff size. It’s also important to mix younger generation owners with more experienced ones. I prefer to avoid domineering personality types who run roughshod over the group. Include outside board members. They bring a different perspective to the discussion and are less influenced by internal politics. Outside members can act like guests at a dinner table – they keep the rest of the family on good behavior.
I also believe that the board should be strategic, not operational. Move day-to-day operational tasks to an executive committee consisting of three to four board or non-board members to review operational requirements.
Our board membership changes periodically, but there’s no set term limit. We used to elect board members every year, but we’ve moved to a staggered board, with one-third of members elected every year for a three-year term (with no term limits).
We’ve had good luck with outside board members who were once our clients or business associates. We’ve also had several retired senior management architectural clients as board members.
Finally, don’t put your lawyer or banker on the board. They already give you advice. Pay them when you need them.
TZL: Is there a secret to effective ownership transition?
DG: Start early and have a plan. Coffman was started with the idea of a legacy company, with an orderly transition to the next generation. No one person has ever owned more than 40 percent of the shares. Our by-laws require all shareholders to begin selling their shares by age 60 and be fully divested by age 66-and-a-half. This doesn’t mean they must retire, but they can no longer be a shareholder. We didn’t want to get to the point where we had a bunch of original founders in their 70s and not have the means to financially buy out their equity.
Many financial and personnel surprises are eliminated when we know the timeline for shareholders selling shares and when new shareholders will be needed. After nearly 40 years in business, our founder is fully bought out, and the largest shareholder owns about 7 percent. Every shareholder has access to all company financials. We try to be as transparent as possible
TZL: How do you go about winning work?
DG: Nearly 80 percent of our work is from repeat clients, so keeping existing clients is important. We also track clients’ future needs. It gives us a longer lead time to prepare before the official notice hits the general public. The more intel we gather, the more specific our proposal. You have to be proactive.
Engineering is also a relationship-based business. All of our engineers are encouraged to develop and foster client relationships. They’re supported by our team of marketing and business development professionals, who primarily focus on developing relationships with clients and preparing proposals to win work for their local offices. Our marketing team strategically responds to qualification-based requests (i.e. responding to RFPs, rosters, and owner requests for information), that align with their local office goals and meet client expectations.
TZL: What’s the greatest problem to overcome in the proposal process?
DG: To write each proposal in a way that addresses the specific needs of the client. Too often, proposals are all about the consultant, serving as a “look at me” advertisement. We try to turn this around and specifically address how our experience can help the client. We constantly strive to focus our proposals on the benefits of working with Coffman as opposed to the features Coffman brings to the table. We have more success with proposals when we describe how our engineering solutions help make our client’s jobs easier.
TZL: Once you’ve won a contract, what are the “marching orders” for your PMs?
DG: First, we schedule a kick-off meeting with everyone involved with the project to confirm and clarify scope, schedule, and expectations. “Everyone” means the entire team. This includes project managers, engineers, designers, field personnel, etc. Everyone may not have full access to the total budget numbers, but they should know their portion of the budget.
The scope is fully explained so everyone recognizes the impact of changes on the project. This helps eliminate scope creep. The schedule is then fully developed and generally includes:
- Milestone submittal dates
- Model/background “lock-down” dates
- Internal review time budgeted for peer and principal review
- Incorporating changes due to Q/C reviews
- Printing and final check prior to delivery client
The budget, based on effort, is developed by submittal phase and by discipline. The budget is tracked based on earned value. It’s critical to communicate the remaining budget to every team member in a timely fashion so there’s time for corrective actions if a budget shortfall is detected.
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?
DG: Yes! We are content! Our marketing and business development team does a great job supporting our engineering staff. Their goal is to support and bring value to Coffman. They provide this support in a range of ways including proposal preparation, business development, internal and external communications, supporting the implementation of business processes, advising on market intelligence, supporting company culture, and maintaining our brand. Our marketing team is constantly helping us to become a more proactive and strategic company. They help us see the big picture by pushing us to base decisions on facts rather than emotion.
TZL: What has your firm done recently to upgrade its IT system?
DG: We’ve fully implemented Office 365 groups with web portal for sharing of files, calendars, and OneNote at department- or project-group levels. We have a cloud-based file system with 15-minute back-up intervals, file version control, and access to all project files from any office. Our recent security enhancements include mobile device manager for tablets and cell phones, two-factor authentication for remote login, and real-time threat analytics software. And, we’re beginning to use 360-degree video cameras to capture video and photos from a site visit or walk-through. The video can be uploaded to a virtual reality headset to create a virtual walk-through of any space.
TZL: What’s the best way to recruit and retain top talent in a tight labor market?
DG: We constantly focus on our employees – our greatest asset. We work hard to develop a great company culture where people want to work. We constantly test ourselves by submitting for “best place to work” awards. We have sizeable employee referral rewards for staff who bring new hires to the table. We also push our employees to leave reviews on our Glassdoor page. These reviews are an anonymous way for employees to rate Coffman and leave feedback. Our company president reviews and responds to our Glassdoor feedback on a weekly basis.
We strive for all staff to have a healthy work/life balance and we spend a lot of time crafting our job advertisements in a way that appeals to the generation of staff we’re looking to hire.
TZL: What’s the key benefit you give to your employees? Flexible schedule, incentive compensation, 401(k), etc.?
DG: No one key benefit stands out but our overall package includes a healthy 401(k) match, flexible schedules, paid (or comp time) for every hour worked, HSA health plan, PTO based on both age and years with company (which helps attract staff with experience), maternity/paternity leave, tuition reimbursement, and regular employee social events.
TZL: How do you raise capital?
DG: We haven’t needed outside capital. We are fiscally conservative with no substantial debt. Retained earnings and sale of stock to new owners has financed our recent growth and buy-back of retiring owners’ shares.
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.
DG: We have used both organic and M&A to grow. In the past three years, we’ve grown about 33 percent to a 400-person firm in 10 offices. One-third of this growth came from two small strategic acquisitions. The balance came from organic growth. When we consider an M&A opportunity, the number one requirement is it must be a cultural fit for Coffman.
TZL: What’s the greatest challenge presented by growth?
DG: Our greatest challenge has been and will always be maintaining our culture. Our culture has been built around local office autonomy and a relaxed, informal, family-oriented operation.
With growth, there is a tension between needing more controls (policies) for efficient operation and maintaining local office autonomy (guidelines) that allows for flexibility based upon local needs. Leadership has been very cognizant of this tension and we have worked hard to limit corporate influence and maintain local office autonomy as we have grown.
TZL: What is the role of entrepreneurship in your firm?
DG: “Entrepreneurial” is one of our cultural components in our mission, vision, and values statements. Most successful businesses are founded by an entrepreneurial-inspired person, so it makes sense to instill a similar value in all our employees.
We share personal ownership and responsibility for our company. This drives us to innovate and take calculated risks.
TZL: What’s your prediction for 2017 and for the next five years?
DG: We are cautiously optimistic for 2017. Our long-term growth planning process has resulted in a diversity of clients, markets, services, and geography that has and will continue to provide the balance and stability to weather local economic downturns.
Our longer term outlook is also bullish. We are planning for 7 to 10 percent sustainable growth and to further strengthen our diversity in all of our markets.