President and CEO of Eclipse Engineering (Best Firm Structural #12 for 2018), a Montana firm that likes to have a little “phun.”
By Liisa Andreassen Correspondent
“When we identify an employee who fits just right into our organization, we find no value in making them wait around for 20 years to consider ownership,” Fortune says. “Everyone is on their own journey and sometimes that journey takes a little longer, but it makes zero sense to me to eliminate someone because they are not old enough.”
A CONVERSATION WITH JESSE FORTUNE.
The Zweig Letter: Do you tie compensation to performance for your top leaders?
Jesse Fortune: Compensation is tied to performance for every single employee at Eclipse – from new graduates to principals. In our opinion, rewarding poor performance is the same as asking the top performers to write the company a check at the end of the year.
TZL: Do you share base salary or bonus amounts with your entire staff?
JF: The football coach, Bill Parcels said, “You are what your record says you are.” In that vein, we work to individualize salaries and bonuses as much as possible. This makes sharing base salaries or bonuses of a group, especially based on some uncorrelated variable like years of experience, difficult to do.
TZL: How many years of experience – or large enough book of business – is enough to become a principal in your firm? Are you naming principals in their 20s or 30s?
JF: In 2001, 28-year-old Theo Epstein was named the president and CEO of the Red Sox, ultimately leading the organization to the first World Series championship since 1918. My point is this: when we identify an employee who fits just right into our organization, we find no value in making them wait around for 20 years to consider ownership. Everyone is on their own journey and sometimes that journey takes a little longer, but it makes zero sense to me to eliminate someone because they are not old enough.
TZL: Internal transition is expensive. How do you “sell” this investment opportunity to your next generation of principals? How do you prepare them for the next step?
JF: A long history of strong financial performance balanced with a culture of mutual respect sells itself. In addition to traditional mentoring and professional continuing education, we have an internal program called Leadership Eclipse. This is an evolving program and it currently has modules in:
- Financial management
- Sales and marketing
- Legal and insurance
In addition to this, we send them to a two-day boot camp for AEC principals.
TZL: When did you have the most fun running your firm, and what were the hallmarks of that time in your professional life?
JF: Every stage is fun for different reasons. Our response to the financial crisis of 2008 is something I’m very proud of. Our business, like many others, was hit very hard. We had to let go of some very talented employees. Those of us who were left, took significant pay-cuts. We saw many of our close friends out of work or worse. Our team responded with incredible grit. We developed niches and dug for opportunities to add value for our clients which ultimately grew our company during a very difficult economic period. It was and continues to be a defining moment for our current leadership and company.
TZL: Describe the challenges you encountered in building your management team over the lifetime of your leadership? Have you ever terminated or demoted long-time leaders as the firm grew? How did you handle it?
JF: Eclipse is a small engineering firm. The challenge is in asking a good engineer to do something that she/he has no formal training in, experience in, or, in many cases, no desire to do. You have this crazy scenario where your best engineers are assigned to a management position (remember the Peter principle?). It’s perceived as a promotion and we usually get (and expect) a pay raise even though we’re doing a job that we’re less qualified to do. We often under deliver while reducing the amount of time we’re spending at what we are paid to do. It’s a major hurdle to growth. We are a relatively young company. To this point, we have handled it so far by encouraging large doses of self-study to refine our skill sets; and putting a lot of onus on each employee to manage themselves.
TZL: In one word or phrase, what do you describe as your number one job responsibility as CEO?
TZL: What happens to the firm if you leave tomorrow?
JF: Our CFO, Rolf Armstrong and I work very closely and discuss all strategic decisions. He is more than equipped to handle all my responsibilities until a new CFO or CEO is selected.
TZL: With technology reducing the time it takes to complete design work, how do you get the AEC industry to start pricing on value instead of hours?
JF: I’m not convinced that technology has reduced the time it takes to complete design work. I recently reviewed a calculation package that was 95 pages. I’ve seen old-timers complete this same work by hand in three pages. That’s 92 pages of calculations that added no value. To get paid for more value, we need to first deliver more value.
TZL: If the worker shortage continues, do you see wages increasing to encourage more talent to enter the AEC space, or will technology be used to counter the reduced work force?
JF: It’s likely to be a combination. I believe the role of the technician will go away while the wages for those with other skills will go up. Those with programming aptitude, people and management skills, and creativity, will be highly sought after. They will see higher wages and more opportunity. Those without these skills will be replaced over time with technology.
TZL: Engineers love being engineers, but what are you doing to instill a business culture in your firm?
JF: We review and discuss the financial metrics of the firm on a monthly basis with the full team, regardless of their role. As experience is gained, more specific training is given for accounting, legal, and other business-related expertise.
TZL: The seller-doer model is very successful, but with growth you need to adapt to new models. What is your program?
JF: Churchill commented, “Democracy is the worst form of government, except for all those others that have been tried.” The seller-doer is similar. Even on large scales, I believe the client is best served by having the person who sells the work deeply involved throughout the life of the project, hopefully lending expertise in the subject matter. Because of the psychological attachment associated with the personal relationship to the client, the doer becomes extremely “bought in.” They are motivated to do their best for the client and that, in turn, is good business.
TZL: Are you currently pursuing the R&D tax credit?