I have worked in this business nearly three decades (how can I be that old??). And I can tell you with certainty that our managers have a real tendency to be overly optimistic. I have witnessed the problem SO many times. The recession of the early ‘80s. The Texas oil economy recession of ‘86-’89. The banking crisis recession in New England in the early ‘90s. The dot-com bubble bursting recession or 9/11-driven recession of 2001. And now we have the residential real estate recession of 2007 to ?, plus the “stock market correction” (as the financial industry likes to call it when I lose a quarter of my IRA) in early 2008. Here’s what is happening right now. We are clearly ending an incredible 10-year-plus run of increased construction spending. The residential sector is the first to go and the hardest hit. One out of three jobs in this country is somehow related to real estate and construction. There will be fallout for design and environmental firms. Does that mean every firm will necessarily suffer? No, of course not. I would never say that any specific firm cannot do well at the expense of their competitors. That can and does happen and will happen during our next downturn. But that won’t happen for MOST companies. Most firm principals are now comfortably lulled into a false sense of security, particularly their managers of revenue-generating business units. And the problem I am speaking of is they will get completely caught off guard by project fall-off and declining workloads, and fight any attempts of senior management to put the brakes on a bit while we head into the blind corner ahead. I don’t want to be too hard on these “unit” managers (they could be running an office, discipline, department, or market sector). You have to look at things from their point-of-view. Getting work has NOT been a problem. DOING it has been a problem. Finding the people who can do it HAS BEEN a problem. This is where their heads are. The last thing they want to do is pass up the chance to hire a strong player or, worse, cut staff when they have been working so hard for so long to build their team. But this may, in fact, be precisely what needs to happen. However, without good data on the number of clients calling in or otherwise contacting the firm with new potential projects each month, or without good backlog data, or without a thorough analysis of proposals made and hit rates, the only thing top management has to go by is their instinct. I don’t want to diminish the value of instinct— it could be good. But even if it is, the unit managers don’t want to listen. They have their own instincts and theirs are telling them to keep their foot on the gas pedal. But their instincts, due to their positions in the firm and perhaps fewer years of experience, coupled with less experience as a manager during recessionary times, may not be as good as those of senior management. You need the data. You must fix your accounting and lead tracking. And you must not ignore the instincts of your top people at this time. I can remember going through this in every firm I’ve worked for. You can smell that the winds are turning for the worse yet delay in taking action to correct the problems for 6 to 12 months. You don’t want to run roughshod over the people you’ve entrusted with your profit centers. I understand that desire. But you may end up paying dearly for that decision in the years that follow because losses— in real dollar terms and in psychological and motivational terms— take a long time to make up. So what is your gut telling you about the future of your firm? Better yet, what is your data telling you? And are you acting on what you see, or hoping, wishing, and praying that all will continue to be rosy? If you see problems but don’t act, who can you blame but yourself? Sometimes Father DOES know best. No one’s job is secure if the company isn’t strong financially.Originally published 2/11/2008
About Zweig Group
Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.
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