President and CEO of BKF Engineers (Hot Firm #44 for 2016), a 415-person engineering firm based in Redwood City, California, with 13 offices primarily in Northern California.
“It’s easy to get a job, but more difficult to find new friends,” LaVelle says. “If you help them build friendships at work, it makes people want to stay.”
LaVelle first joined BKF in 1988 as a senior project manager/assistant office manager for the San Jose office. He became president and CEO in 1996.
A CONVERSATION WITH DAVID LAVELLE.
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?
David LaVelle: There are many ways to win the talent war, just as there are many ways to lose it. We make sure we incentivize our top talent in a clear way so they know how to advance. Part of it is tied to compensation and internal stock ownership. We also work diligently to capture the highest profile projects in our region – the kind they can tell their friends about at cocktail parties or football games. That is a big draw on some level. We offer attractive and functional office space and try to give key people opportunities to be seen in the firm as experts in a certain market or region. All of these things are part of our brand and culture.
TZL: The A/E market is great right now. What are you doing to cushion your firm in the event of a downturn?
DL: We have a broad base of client types and work products. We have specifically designed the mix so that our market segments don’t follow the same up and down cycles. We follow a wide spectrum of informational sources to gauge future market conditions, and talk with clients often to understand where they believe their market segment is headed. This approach served us well in the 2000 and 2009 downturns, both of which we survived with less than 20 percent staff reduction. Many similar firms lost 30 to 50 percent of staff.
TZL: In the event of failure, how does your firm react?
DL: We don’t fail often, but if we do we immediately look for the best way to mitigate the failure and fallout. If it’s an internal failure, we analyze the causes so we can capture any “lessons learned” and document them for the future. If it’s an external failure, we’ll make sure the client is whole at the end, including paying to fix mistakes if that seems appropriate. It has only happened a few times, but it has gained us intense client loyalty when they know we stand behind our work. The feedback we receive is that some design firms don’t.
TZL: Monthly happy hours and dog friendly offices. What do today’s CEOs need to know about today’s workforce?
DL: It is an “all volunteer” army! You need to give them a reason to volunteer again tomorrow. Part of that is being dog-friendly, creating a comfortable environment, and creating fun social situations. It’s easy to get a job, but more difficult to find new friends. If you help them build friendships at work it makes people want to stay. Figure out what will make your staff volunteer again tomorrow and build your business to provide those things to the most possible extent.
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?
DL: We do regular performance appraisals to track employee progress. If someone is identified as underperforming, we’ll advise them of their status. If no progress is made after a few months we will build a 30- to 90-day development program. We then work through the program to see if they can adjust their performance level to meet expectations. If it works out – great. If it doesn’t, we inform them of termination. We do it as painlessly as possible, but it’s part of the business. Usually the rest of their team is relieved because everyone knows if someone is not pulling their weight, they all feel the drag. It’s better to have 15 happy people than 16 unhappy ones.
TZL: Firms that have principals and firm owners who 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?
DL: We look at the needs of the firm and adjust accordingly. We have some set ranges of investment in the firm’s infrastructure that come first to keep the firm healthy. Next, we consider special initiatives or other investments to address any areas of need and spend accordingly. Fortunately, we have been a high-performing firm most years and we don’t have to decide between paying well and hiring that extra person in accounting.
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?
DL: An organized marketing effort is a big part of our success. We have a solid base of repeat clients, but we still compete for a lot of projects through a formal process. We have a great business development/marketing group that helps us stay competitive and creates a positive image in our markets. We are content with our efforts, but our markets continue to demand more from us to compete in the process – more information, better graphics, shorter schedules, and tighter organization.
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?
DL: Public speaking. The ability to communicate effectively is a huge success factor in so much of what we do. It’s very important to convince people, including some who don’t have a technical background, that the logic behind your design is sound. It flows into our ability to win work, our success in the approval process, and also the ability of our leaders to motivate their teams.
TZL: What’s the greatest challenge presented by growth?
DL: Maintaining corporate culture. Growth makes it more difficult to give people the “shared experience” of the firm. Multiple offices means you have to work harder and communicate smarter in order to keep everyone rowing the ship in the same direction. I am a firm believer that “culture eats strategy for lunch.” A healthy culture will enhance work ethic, improve retention, and improve client service – all major factors in a consulting firm’s success.
TZL: What is the role of entrepreneurship in your firm?
DL: It’s a huge factor in our success. We encourage our management to push the envelope in our areas of influence and client base. We incentivize them to do it. We support well thought-out extensions of our technical abilities. If someone is willing to invest the time to enter new geography, or expand our market segments, we support and reward them. The opportunity for entrepreneurship drives our key people and our firm to overachieve.
TZL: What’s your prediction for the rest of the year and for the next five years?
DL: Last year, we had a nice 7 percent bump in total billing volume from 2016. I am comfortable that 2018 will be as good as 2017 which has been great. I would forecast some expansion in the first half of the year and a little retraction the last half of 2018. I think the economy will cool a bit in 2019 and 2020, and then start to expand again in 2021. If the government passes meaningful tax reform we could have a little more expansion, but I wouldn’t bet the house on that.
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