Is Your House in Order?
Apr 18, 1994
Ever been house hunting? No matter what you can afford, it’s never enough. Especially with the appalling things some people will do to their homes.
I’m not just talking about starter homes (here in Boston, that’s loosely defined as anything under a quarter-million dollars!)— I’ve seen plenty of expensive houses that look as if the owners have done absolutely no planning for how their house will be used or decorated. They deal with each room in isolation of the others. They use no particular color family throughout the house. An eight-room house might have seven kinds of carpeting. Some woodwork may be painted and some stained (in the same room). Colonial-style hardware is hung on contemporary kitchen cabinets.
Then there’s stuff like 10-foot high bushes planted 12 inches from the foundation. Or three upstairs bedrooms sharing a half-bath, while downstairs has one bedroom and two baths. Or furniture placed in such a way the house has the appearance of a miniature golf course because there are so many obstacles in it. I could go on, but you get the idea— the people who own these houses had no grand scheme, no master plan to follow as they made improvements over the years. Houses end up like this because the owners’ needs change and they just react.
Too many of us approach the development and growth of our businesses the same way we deal with our houses. We don’t plan or think about where we want to go. Then, as the internal and external conditions change, we react to the latest demand or crisis. The result is that we sometimes end up with a firm that is vastly different from the one we originally set out to build.
That’s why I like strategic planning. It’s more than an intellectual exercise. It helps you control your destiny and reduce stress. When I talk about strategic planning, I’m not talking about things like figuring out how big the total U.S. market is for HVAC projects through the year 2014— that kind of data means little to me. Just about every market served by our industry is big, and it’s rare to find a company that has even one-half of one percent of any of them. I’m more interested in philosophy and implementation.
Philosophy for the firm is defined by articulating the mission (why the company exists) and strategies (how will you go about doing business in marketing, accounting, operations, human resources, ownership transition, etc.) for the firm. Once the mission and strategies are agreed upon, implementating change is a snap.
Firm owners, like home owners, get into trouble when:
They don’t define what the firm is all about. For example, “Do we want a full-service A/E firm or a high-design architectural firm?” This is analogous to, “Do we want a colonial-style or a contemporary-style house?” Leaving important questions unresolved creates the potential for arguments over every single minor decision that follows— whether it’s about purchasing, the kind of training to invest in, or keeping an unprofitable branch office open.
They don’t plan for the growth. Everyone wants to grow, but little attention is paid to how to do it. Why open an office in Smallsville, Kansas? Is that really the kind of growth the company wants? Why buy that cheap database program when everything you put into it will be worthless in two years? It’s like when the home owner turns the garage into a den in the spring and doesn’t have anywhere to put his cars when winter arrives. Not planning for growth could lead to arguments over issues like the amount of capital that should be retained versus the amount that should be paid out in stockholder bonuses. Or how much space should be leased. Or whether to invest in a new computer system.
They don’t think about the firm in its totality. Whether it’s home planning or business planning, I always try to consider how changes in one area will affect other areas. For example, a new marketing program might require a lot more personal selling from technical people. Getting that additional effort may require a new incentive compensation plan. This, in turn, might require different accounting to figure out who is doing what. And capturing the sales information might require a new project initiation procedure that is enforced through operations. They are all linked.
They haven’t considered a future move. Just like houses, firms or an individual’s interest in a firm will probably be sold some day. Proper planning takes that into consideration. The fact is, some firms are worth a lot more than others— they’re the ones with strong balance sheets, good internal management, offices in the right locations, and niche positions in hot markets. Proper planning leaves an asset that is desirable, whether the stock is sold to internal buyers or to an outsider.
Originally published 4/18/1994
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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.