CEO of ISG (Mankato, MN), a multi-disciplinary design and engineering firm that has growth in its DNA.
By Liisa Andreassen Correspondent
Growing up in the industry, Surprenant has had a ground-level understanding of engineering from the time he was six. He worked in the family business throughout high school and college. After college, he joined his parents’ 10-person engineering practice. Over the next several years, he helped ISG leaders grow the company by adding people and services.
“Recently, we moved an acquired office from the suburbs into a fresh, redeveloped downtown spot which resulted in better morale from current staff, greater ability to hire elevated talent that may have been previously inaccessible, and providing our current and prospective clients a completely different and positive view of ISG,” Surprenant says.
A conversation with Chad Surprenant.
The Zweig Letter: What are the three to four key business performance indicators that you watch most carefully? Do you share that information with your staff?
Chad Surprenant: We operate as a one-firm profit center to keep emphasis on markets, not just geographical areas or service groups. Each market has an active strategic plan where market-specific items are tracked; however, from a general business perspective, we use the following performance indicators given that cash is king:
- Current cash position and current break-even status. Cash on hand, fixed-term notes, shareholder notes, line of credit activity, etc. We realize that these are not all truly “current cash position” items; however, we would rather steer clear of leaning on banks too much, so we try to stay cash positive and nimble. In line with current position, we also ensure there’s an understanding of our true break-even expenditures to keep the firm moving forward. As with any AEC firm, there is seasonality to our work, although it’s somewhat more balanced to market diversity. We focus on understanding which months may be cash burn months, but also which must be cash positive. This information is shared in an appropriate manner with market and office leaders, and with Shared Services leaders. . Functioning as a 100 percent ESOP, myself and our firm president, Lynn Bruns, share high-level snippets of performance and firm position during quarterly firm-wide ISG University sessions (broadcast live) and InsideISG Newsletter.
- Recent months’ invoicing and utilization rate. Knowing current cash position, prior months’ invoicing, and a nominal 60-day average on receivables, we can predict near term future cash positions. Couple this forecast with an understanding of how busy we are (utilization rate and direct discussion), we can really look forward and understand future increases in work flow and general firm position. While we track utilization rate and use it in the above analysis, we do not base individual rewards on this figure. The core firm focus on making better decisions faster, and also focusing on results versus stale metrics, guide our firm. To be accountable, we must be directly in tune to the items above but do not hold the figures as a basis for all firm decisions. Such figures are always accessible to firm leaders, which include those responsible for department, service group, market, and office management. However, it’s not a KPI that is pushed to the individual performance level, other than being cognizant of their impact.
- Marketing and market activity. Analyzing and assessing how much activity is out there, focusing on proposals, capture plans, work won, competitive climate, etc., remains a core firm focus. Coupled with general market awareness and engagement (i.e., industry trends, changes, focal areas), we work to provide market leaders and others with the necessary tools to truly understand pipeline, potential, and, in turn, where to continue focus and energy. Again, while less of a clear lens, the above items predict potential cash even further out, in addition to identifying competitive advantage elements and relationship trends. At a high level, this information is highlighted in firm communications (e.g., ISG University, newsletter, weekly/monthly communications), but in a more robust manner through interactive dashboards and tools for firm and market leadership, including ISG’s Shared Services team (talent engagement, marketing, finance and accounting, and IT).
TZL: How much time do you spend working “in the business” rather than “on the business?”
CS: As CEO, this fluctuates. I spend very little time truly designing specific projects; however, I am spending more time with our leaders, firm-wide, to develop and implement quicker/better design procedures from an empathetic/client perspective.
Recently, we’ve focused on adding additional horsepower to our true business development arm, and while I am no rock star there, I’ve been realizing that my contacts from more than 25 years in the industry are getting better and better, and therefore can be leveraged.
As we constantly seek to empower and train the next generation of leaders, team-building, strategy, market-approach, and prodding on operations all are on my future focus list. By emphasizing these areas and focusing on mentorship of individuals accountable for movement in such categories, it will be imperative that I add value by setting the tone and providing insight into vision and emphasis areas.
TZL: What role does your family play in your career? Are work and family separate, or is there overlap?
CS: I was listening to a sports talk radio show yesterday, and a former professional athlete was talking about how the best/most important business decision you will make is with whom you will partner yourself. In my case, I think that is absolutely true. My wife is the stable, consistent, level-headed balance to my own personality (which has gotten less up and down) and what this job can bring in variability. There are things that I bring home, and she can help by listening and offering advice or support, but there is also a beauty in knowing that she also provides a safe-haven where I can check things at the door. Short answer, there are a lot of people who are impacted by decisions I make and influence, and it would be unfair to them for me to “call it a day” as soon as I get home.
TZL: Artificial intelligence and machine learning are potential disruptors across all industries. Is your firm exploring how to incorporate these technologies into providing improved services for clients?
CS: ISG has always been pretty quick to embrace new technologies throughout our existence; most recently with drone, dynamic and static virtual imagery, videography and interactive tours, portable scanning, etc. We also believe there will be a day when the delivery of our work product will be very different than it is currently. For a long time, the definition of technology in our industry was simply trying to develop a better way of creating the same old documents; 3D modeling was the first big step to a new deliverable. We are eager to get in front of the next technological shift, so much that we’ve selected some of the firm’s most passionate “ingenuity” leaders to propose continual advancements and solutions in this area – ISGenius. While it’s directly focused on my role, as well as other leaders’, this added layer of insight helps keep the firm in front of future discussions and impact.
TZL: How are you balancing investment in the next generation – which is at an all-time high – with rewards for tenured staff? This has always been a challenge, but seems heightened as investments in development have increased.
CS: This truly is a challenge, and one that likely doesn’t have a perfectly equitable solution. We see demands from younger staff as well as a practical necessity to get people into leadership roles more swiftly than ever before. Growth cures some of these issues with more senior staff encouraging less experienced staff to take on more. Hoarding information and knowledge is not rewarded nor accepted, but growth is a continual part of our DNA. Growth requires individuals to take on more, whether it is internal leadership, technical expertise, market knowledge, or winning work. From a formality perspective, we work to utilize firm platforms such as ISG University, firm message opportunities (e.g. newsletter, firm communications, office meetings), and a unique annual event, ISynerGy, as just a few of the ways we can ensure focus and alignment, and find opportunities to mentor and grow.
TZL: What novel approaches are you bringing to recruitment, and how are your brand and differentiators performing in the talent wars?
CS: For one, we invest in active, core areas that are desirable for working. Nearly every one of our offices is in a core, urban environment. Recently, we moved an acquired office from the suburbs into a fresh, redeveloped downtown spot which resulted in better morale from current staff, greater ability to hire elevated talent that may have been previously inaccessible, and providing our current and prospective clients a completely different and positive view of ISG.
We also utilize our ESOP as a differentiator to hire and retain people. Investing in yourself and things which you can influence is way more rewarding than simply seeing how the stock market may fare. We seek to share this message and impact frequently.
Couple the above items with dedicated talent engagement leaders within our Shared Services team, focused on talent engagement both inside and outside the firm with intimate links to marketing resources; our efforts are not fleeting.
TZL: Does your firm work closely with any higher education institutions to gain access to the latest technology, experience, and innovation and/or recruiting to find qualified resources?
CS: We’re working more closely with a greater number of higher education institutions than ever before. By far the greatest resource we have seen from those partnerships is talent; however, we are also testing a few advancements for how we do things. We’ve also worked hard to connect at the elementary/high school level with externships and learning tours/events – an Elevate the Industry effort of sorts to create a pipeline, interest, and engagement for all roles within the AEC industry.
TZL: When you identify a part of your business that is not pulling its weight in terms of profitability or alignment with the firm’s mission, what steps do you take, and what’s the timeline, to address the issue while minimizing impacts to the rest of the company?
CS: We believe in “better decisions, faster” and “if it’s a good idea, don’t waste time.” Those are true for both implementing tactics to seize an opportunity, but also to correct our course. Like everyone, we have been in position to do tough things: close offices, scale back staff, manage cash differently, etc. Decisions need to be made and action taken for the good of the group, not just for a few individuals. Thus, we focus on knowing who we are, taking an objective view of the situation, identifying solutions, and acting swiftly. Problems don’t typically get better on their own. They need solutions, resolution, and action. We don’t shy away from this plan.
TZL: Is change management a topic regularly addressed by the leadership at your firm? If so, elaborate.
CS: We don’t necessarily think of it in terms of “change management,” but at our core, we change frequently. For 25 years, we have grown nearly 20 percent per year compounded annually. In essence, every three years, we grow nearly 7 percent. That requires a willingness to invest cash or keep cash in the firm, recognize that positions will change, and develop new structures frequently. Yesterday can look like today, and today can look like tomorrow, but when you look at things over the course of two to five years, you recognize quickly that things are dynamic, not static. For example, our ownership has changed significantly from a closely-held family business to several shareholders, and now, a 100 percent ESOP. Similarly, we have gone from a board that was a formality, to a board that represented the shareholders, then a board that represented geographies, to now a soon-to-be board that will have more external members with a strategic, less operational focus.