Hot Firms in a not-so-hot market
Nov 16, 2009
As I begin to write this article I am sitting at “The Tournament of Kings” show at The Excalibur in Las Vegas with my two oldest daughters. Earlier today we finished off the 10th annual The Zweig Letter Hot Firm Conference— which we then promptly followed up with a trip to Las Vegas Motor Speedway for the Las Vegas NHRA Nationals— an amazing display of raw power with quarter-mile dragsters that turned in sub four-second times at over 300 mph.
Back to Hot Firm— I was the emcee of the show this year as I often have been for the 10 years we’ve been doing it. I bought a new suit and even got a new cummerbund and tie for my tux, and was there for every minute of it.
The theme of this year’s event should have been “Hot Firms in a not-so-hot economy.” The fact that we were in Las Vegas, a town filled with endless distractions and devoted to instant entertainment, made it difficult for us to keep our crowd in meeting rooms all day.
Here were some of my other observations:
The economic recovery is on shaky legs. We had three economists there talking about architecture, engineering, construction, and the environmental services industries. Just about every single market sector is down, with some being way down. All geographic areas in the U.S. are down about the same amount. Unemployment in architecture is three times the national average.
The bright spots are very small— nuclear being one. Solving problems related to global warming could be a huge future market. The commercial real estate devaluation that has occurred and is still happening will lead to record foreclosures in the coming years.
Cost-cutting without ruining the firm was something people were interested in. Nearly everyone had done some cost-cutting. Benefits cost sharing, elimination of unnecessary office space, and trimming staff and staff hours are all tactics that many companies have used. At the same time, many younger staff who have not been through recessions have a hard time understanding why they didn’t get raises.
Offshoring and international work. One strategy that has kept many of our hot firms hot is doing work in other countries. One great strategy for doing that successfully was presented by gkkworks, a California-based firm that started a production office in India some years back, but then turned that office into a “real” office doing work in India. It was, in my mind, a really smart way to go.
Leadership transition. It was interesting to hear so many stories of leadership transition. One CEO just forced it by going on half-time (along with half pay and benefits). Several were into a process where they took a couple years to hand over the reigns to someone who was effectively a “CEO in waiting.” Several others sold their firms to larger and more experienced operators. Many others were still pondering how best to do something they knew they had to do but didn’t know how to do.
Maintaining pricing levels. There was a lot of discussion about how firms in our business have a tendency to cut prices in times like these and yet how that may very well be the worst thing you can do.
Having creative and innovative people. Several of the CEOs there felt that a lack of creative talent was hurting their firms. It is difficult to let people go in a different direction. The balancing act between keeping the best of what made them successful while still adapting to a changing world seemed to be a common challenge.
Dealing with a younger generation. Old folks like us don’t seem to get younger people. “They don’t want to work as hard.” “They want a personal life.” “They want to make more money.” Can you imagine that? What do you think the Depression-era survivors said about us Baby-boomers? The same thing!
Recruiting. It’s critical even now to only let the best people “on the bus” (a statement that is rapidly becoming the most overused cliché in business today!). Recruiting is enhanced when top management is involved in the process and specialized talent is hired to run it.
Being differentiated and uniquely positioned. This is always key to success, good times and bad, but especially in bad times.
Responding quickly. Being faster than the other guy— while hard to do today— is a crucial success strategy. But, so is responding appropriately.
So, that’s about it. While I left Las Vegas about $100 lighter than I should have, the wealth of information gained was invaluable. I hope to see more of you at our conference next year, wherever that might be!
Originally published 11/16/2009
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.