Many Have Been Lulled…

Aug 13, 2007

The design and construction industries have enjoyed an unprecedented period of growth and prosperity. We have had a few hiccups along the way, but for the most part, the last 15 years or so have been amazing. The market has been strong and growing, and most of us have done incredibly well. Many fortunes (mostly small fortunes, but fortunes nonetheless) were made by owners of architecture, engineering, and environmental firms during this time. This is all good and great. At ZweigWhite, we exist to make our clients more successful, and to see you achieve that is how we derive our satisfaction. That said, your continuing success could be in jeopardy. Rising interest rates, declining tax revenues, and slowing growth in many markets could lead to an overall industry slowdown soon. There are already firms in our business— good firms— suffering the effects. I have always believed a bad economy is no excuse for poor performance. There are always things you can do. And NOW is the time you need to be doing them, BEFORE you have a problem. Most firm owners are fat and happy and won’t listen to my warnings. They have been lulled into a false sense of security by these good times. But for those who will listen, here’s what I would be doing right now: Think long and hard about any large office expansions or capital expenditures. The growth you are banking on may not continue. Why load up on overhead that will be hard to shed? Think hard about any benefits increases or big policy changes that will impact your labor costs over the long haul. Adding overtime pay for exempt staff, increasing the number of paid days off, and changing the match on 401(k) are all nice things that are easy to give, but darned difficult to take away. If times get soft, you cannot afford any long-term cost structure increases. Ramp up the marketing efforts. I keep saying this because too many companies have done the opposite— cut back on marketing. The reason is that it’s been easy to get work and hard to find the people to do the work. So why spend anything that you don’t have to spend on marketing? But the problem is, once you figure out you ARE in a slowdown, it’s too late. The marketing “pump” has lost its prime and it takes a lot of pumping to regain it— IF you ever can. Take a hard look at your managers. If you have marginal performers in any managerial roles and have been tolerating mediocre performance from them, NOW, not later, is the time to change out some of these people. It doesn’t mean you have to fire them, but get them into roles they are capable of handling and find someone else who has a better chance of getting good results. When times are good, we become too tolerant. This is when we sow the seeds of our later downfall. Do something about it. Fix your early warning systems now. Sailing into uncertain waters requires knowing what is happening out there with prospects for new work. You need to know whether prospective jobs are increasing or decreasing. The same goes for backlog. Many firms do not accurately track backlog, as easy as this should be to do. Finally, good revenue projections are essential. To be in this environment and not know with a high degree of certainty what you are going to be able to earn on your projects firm-wide for at least three months ahead is irresponsible in my opinion. I truly think any firm that will do these five things is going to come out of any slowdown— if one occurs— far better than a firm that ignores my advice. Originally published 8/13/2007

About Zweig Group

Zweig Group, a four-time Inc. 500/5000 honoree, is the premiere authority in AEC management consulting, the go-to source for industry research, and the leading provider of customized learning and training. Zweig Group specializes in four core consulting areas: Talent, Performance, Growth, and Transition, including innovative solutions in mergers and acquisitions, strategic planning, financial management, ownership transition, executive search, business development, valuation, and more. Zweig Group exists to help AEC firms succeed in a competitive marketplace. The firm has offices in Dallas and Fayetteville, Arkansas.