President and CEO of Larson Design Group (Best Firm #5 Geotechnical and Best Firm # 29 Multi-discipline for 2017), a 300-person firm based in Williamsport, PA.
By Liisa Andreassen Correspondent
“One person alone can’t make significant change happen,” Kuzio says, who joined the firm in 1992 as an engineer with the company’s bridge group.
A CONVERSATION WITH KEITH KUZIO.
The Zweig Letter: Zweig Group research shows there has been a shift in business development strategies. More and more, technical staff, not marketing staff, are responsible for BD. What’s the BD formula in your firm?
Keith Kuzio: Over the past four years, LDG has shifted from dedicated BD reps to more of a seller-doer model, although several business units still maintain dedicated BD staff. We’ve conducted extensive BD and sales training that has helped our technical staff understand where their strengths lie in the spectrum of business development activities that include:
- Frontiersmen/women. Seek to sell new services in new geographies
- Hunters. Sell existing services in new geographies
- Farmers. Sell existing and new services to existing clients
We’ve also redesigned incentive programs to better align with our overall goals and offer rewards for achieving benchmarks in all types of sales.
TZL: The design-build delivery model appears to be trending upward. What are the keys to a successful design-build project? What are the risks?
KK: Solid business ethics, trust, and candor between the contractor team and design team are a must. The designers working on the project also need to understand contractor motivations and how they differ from what an owner/client might focus on in the development and delivery of projects. Designers need to provide alternative solutions that align well with the means and methods that a contractor can deploy efficiently and effectively on each project. That’s how design-build teams can be competitive in pursuing and winning work. As for risks, there can be many, especially if the design team has limited experience with the contractor. We’ve always seen the biggest risk being responsibility for quantity cost over-runs when we don’t have detailed information prior to bid on-site conditions and are asked to make general assumptions to develop quantity calculations for such items as foundations and suitable material. We are cautious in contract terms what we will accept or reject in such instances.
TZL: There are A/E leaders who say profit centers create corrosive internal competition for firm resources. What’s your opinion on profit centers?
KK: I tend to agree – five years ago, LDG shifted its position on profit centers from company-wide to office and region, as we were rapidly expanding geographically, hoping that it would help promote more transparency and accountability for results. However, it created more territorial behaviors and noise in the company than good, so we’ve migrated back to a much more company-wide focus.
TZL: What’s your policy on sharing the firm’s financials with your staff? Weekly, monthly, quarterly, annually? And how far down into the org chart is financial information shared?
KK: As an ESOP company, for many years we’ve shared the company’s financials with all employees. Managers have access to real-time dashboards. Project reporting is available to managers on a weekly basis, and business unit and company financials are shared monthly. We encourage employees to ask questions about our financials at any time, and we typically provide monthly video updates on financial performance on our company intranet, and twice a year at town hall meetings, we take a deeper dive into financials along with the company’s progress on strategic planning and annual business planning goals.
TZL: 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?
KK: I believe that a strong leadership pipeline starts with a strong commitment to values that resonate with people. When this is combined with a compelling vision for growth and development, this sets the stage for a platform where people can excel and test their skills. Also, current leaders must walk the talk and be all-in on the values and vision/direction for the firm, otherwise you will alienate potential leaders. Unfortunately, we’ve learned some of this the hard way over the years. We’ve tried to improve our leadership development efforts by being better listeners and channeling the energy of our high potential staff in change management activities that help the company achieve its goals while allowing these people to satisfy a desire to contribute significantly to our transformation into a nationally-focused firm. We’re also working with consultants to develop a multi-tiered leadership development program that addresses leadership development through the various stages of their careers.
TZL: As you look for talent, what position do you most need to fill in the coming year and why?
KK: Given the tight talent market, we are more focused on succession planning and internal development of technical staff and managers. Experienced technical leaders and seasoned project managers top our list. We’re also focused on a larger, more diverse internship and co-op programs that bring additional entry level talent into the company.
TZL: While plenty of firms have an ownership transition plan in place, many do not. What’s your advice for firms that have not taken steps to identify and empower the next generation of owners?
KK: Start conversations as soon as possible to gauge both leadership and ownership interest of top company performers. At LDG, we have a hybrid ownership model consisting of individual shareholders and an ESOP. This gives us options on how to transition our ownership over time. I believe that potential future leaders should be educated on the various approaches to transitioning ownership, including potentially selling the firm, so that they can understand the pros and cons of each approach at a company and personal level. I also believe that the board should provide insight and guidance on succession planning and ownership transition planning at routine intervals, at least annually, to assure that shareholder interests are adequately addressed through ownership and leadership transition events.
TZL: Diversifying the portfolio is never a bad thing. What are the most recent steps you’ve taken to broaden your revenue streams?
KK: We’re currently investing time and resources into entering the federal, civil, and building market. We’ve also invested significantly in CNG fueling and other alternative energy/renewal fueling technology capabilities such as RNG, H2, and EV charging.
TZL: The list of responsibilities for project managers is seemingly endless. How do you keep your PMs from burning out? And if they crash, how do you get them back out on the road, so to speak?
KK: Our leadership team is more focused on being better listeners and trying to eliminate hassles, obstacles, and noise that distract our PMs and staff from an outward focus on clients and projects. We’ve assessed whether our processes are working, and more importantly, whether they add value in selling work or delivering client value on projects. In many cases, we’re simplifying and/or eliminating some processes altogether. We encourage all leaders to be on the watch for burnout, to understand their managers’ coping mechanisms for stress and to encourage them to apply those mechanisms when they’re approaching burn-out. I’ve also asked leaders to be good examples themselves in disconnecting from the business when they take time off and to delegate responsibilities, so that their team feels comfortable doing the same.
TZL: What is the role of entrepreneurship in your firm?
KK: Historically, LDG has been a very entrepreneurial firm, growing from six people in 1986 to nearly 300 today. However, as we made a big geographic push and opened four new offices in four new states about five years ago, we became quite inwardly focused, and lost our external focus on emerging market opportunities. We recognized that about 18 months ago and have made major changes to simplify our business approach, remove barriers, and bring in new talent to help rekindle that spirit.
TZL: In the next couple of years, what A/E segments will heat up, and which ones will cool down?
KK: With the economy continuing to do very well in the U.S. through an unprecedented period of expansion, I believe that federal investments in core infrastructure programs will continue to improve. We’ll also see more opportunities in alternative energy and renewable fuels. I’d say those that will cool down will most likely be tied to uncertainty associated with rising interest rates and those sensitive to international trade and tariffs that are currently being imposed here and abroad. Potential for technology disruptions also add complexity to predictions and future forecasting.
TZL: Measuring the effectiveness of marketing is difficult to do using hard metrics for ROI. How do you evaluate the success/failure of your firm’s marketing efforts when results could take months, or even years, to materialize? Do you track any metrics to guide your marketing plan?
KK: It’s challenging to come up with hard metrics. We’ve settled on a couple. Proposal spend effectiveness is a measure of the costs put into proposals as a percentage of total sales won (2.5 percent). We also track total BD effectiveness as total marketing and BD spend as a percentage of total sales won (5.5 percent). We have numerous metrics around hit rates based on numbers and dollar value, but one specific area that we’ve focused on is content. In an age of differentiation through thought leadership, we’re challenging all employees to be more involved in generating marketing content – so we track the backlog of content pieces that our marketing department has in the queue for development, the number of pieces published, and the number of media channels published in. We also see the number of “shares” and reposts of our content as important indicators of marketing effectiveness.
TZL: They say failure is a great teacher. What’s the biggest lesson you’ve had to learn the hard way?
KK: I’ve created a leadership presentation for emerging community leaders around many lessons learned through mistakes made over the course of my career. One that sticks out in my mind has to do with leading a transformational change effort in a public service setting. I thought I had a team of supporters with me, but when put on the spot, I was wrong. You need to be sure that you have a strong committed team that supports the vision for change with shared values and motivations. One person alone can’t make significant change happen.
TZL: While M&A is always an option, there’s something to be said about organic growth. What are your thoughts on why and how to grow a firm?
KK: A past executive coach of mine, Bob Rogers, described growth as a means of maintaining or enhancing a business’s degrees of freedom – growth allows for the continued inflow of resources that enable strategic options to be executed as markets evolve or change. I have come to learn over my career and through several M&As that to extract meaningful value out of a deal, the acquirer should be confident that they’ll be able to organically grow what it has acquired after the ink dries. If the post-acquisition plan isn’t clear and easily understood and compelling enough for staff of the acquiring and acquired firms to get passionate about continuing with organic growth, it’s likely to result in poor outcomes and loss of talent.
TZL: Do you use historical performance data or metrics to establish project billable hours and how does the type of contract play into determining the project budget?
KK: We use both historical performance data and certain rules of thumb in developing fee proposals that are competitive and meet our profit objectives. The type of contract does play a part in determining a project’s budget, but it can vary based on the project type and client.
TZL: What’s your prediction for 2018?
KK: A year of growth (double digit) and higher profitability for LDG and for the industry.Subscribe to The Zweig Letter for free.