It Really Works
Aug 29, 1994
We give out a lot of advice to our clients. Some of it’s free, but we get paid for most of it. In our business, just like yours, clients are usually happy when you first finish the job. But the real value of all of this stuff is how well it works over time.
Fortunately, we have a number of longstanding client relationships. Based on our experience, here’s a short list of management ideas we know are working in a wide variety of firms throughout the A/E/P and environmental industry:
Widespread sharing of financial information with all staff. This is one of the most important keys to building a successful firm without management having to constantly exert its influence over what’s happening. Sharing summary financial data on utilization, multiplier, sales, revenues, profits and backlog with all staff gets them doing what they need to before a problem gets out of hand. It also provides employees with badly needed feedback that shows they are doing something right when the numbers look good. Not providing this information to your staff is like asking them to fly an airplane without knowing their airspeed, fuel level, altitude, or whether or not their landing gear is down!
Formularized incentive compensation for salaried people. The bigger a firm gets, the more important this is. One important point— I don’t believe that people who are paid by the hour should get big bonuses. They aren’t taking any risk with their extra hours like a salaried person is when they work overtime. But the salaried people should know what they need to do to get their bonus. It shouldn’t be a mystery. We have clients who are publishing accrued bonuses monthly, then paying them out quarterly. And they’re getting fantastic productivity gains.
Open office environments. Private offices hurt communications. Ditto for partitions that are too high (more than four or five feet). With an open office, there’s much more awareness among team members about what’s going on with their projects or with their clients than there is when everyone is locked away. People also learn faster in an open office environment.
Strong marketing support groups. Paid business developers— by and large— do not succeed in our business. And most technical people won’t make cold calls. The future of marketing for A/E and environmental firms lies in having a strong marketing support group. Direct mail, original research projects, informative communications that help position the firm as experts in a market sector, getting free press— all of these things are best done by people who have the know how to do them. Not engineers, architects or scientists who rose to their level of incompetence and who make two or three times as much as someone better qualified who has the training and experience to succeed in the role.
PC networks and databases. Just about anything progressive that you want to do today requires a network and a database. Whether it’s online time card entry, continuous project management reporting, E-Mail, moving work around between work groups, sharing standard specifications and reports, centralizing electronic project filing, or widespread sharing of information on clients, you’ve got to have a network and a database.
Opportunistic acquisitions. We have had six deals close in the last 60 days! Because the marketplace is as inefficient as it is, there are tremendous opportunities for buyers and sellers. Payback periods on acquisitions of less than one year are possible with the right deal. For buyers, the key is knowing what you’re buying, and paying the right price. For sellers, it’s finding the right buyer— one who sees synergies from combining your operation with his.
Team organization structures. Standing teams or studios, small work groups, and single person reporting all lead to more accountability, less meetings, better communications, improved quality, better service, higher utilization, and higher profits. This was all reinforced to me recently when we did a second management audit of a firm we helped reorganize from a matrix to the team concept more than four and a half years ago. Not only has the firm doubled it’s staff and increased it’s revenues almost threefold since then, but everyone knows who they are working for, there are less conflicts over workload scheduling, and people are happier.
Ownership incentive compensation tied to percentage of stock held. Forget internal ownership transition if you don’t deal with this one. Any firm that ties all owners into the same perks, privileges, and bonus opportunities, regardless of the percentage of stock they own, is on a crash course. As the firm’s value climbs, and older owners with major blocks of stock get out, they will be replaced by five or six or ten other owners with all their associated overhead. That kills profitability. The stock has to be such a good investment that buyers will be willing to make sacrifices to get more. That increases their commitment level. The only way that happens is if profits are paid out in some fashion as a disguised dividend through the incentive system.
Originally published 8/29/1994
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.