Passing the Reins

Sep 08, 2003

Davis Grey was the new man at the top of Frinklemore-Datuna Associates. He had been hired by Charlie Datuna a couple years ago with an understanding that at some point, Davis would be in Charlie’s job. And while a few times Charlie’s constant desire to inject himself into every little thing was irritating, the old man did come through on his promise and on January 1, 2003, Datuna retired and named Grey the CEO. So there he was ... with the keys to a $40 million-a-year revenue company without the creator’s (creator of the company, that is) hand still on the controls. Frankly, it was a little scary for him. He wasn’t quite sure what to do or not do. On the one hand, there were a lot of changes that he had planned to make from the start. On the other hand, he didn’t want to mess too much with Grandma’s (or in this case, Grandpa’s) recipe. He changed the organization structure. Frinklemore-Datuna was a traditional firm that treated every office as a profit center. It did a lot of different things for municipal-type clients. Grey changed the structure from one where the offices were profit centers to one organized by service and project type. Transportation was a firm-wide function, as were treatment plants, as was general civil engineering, as was land surveying. This allowed the firm to move work across the units and smooth out the peaks and valleys much better than it could with its old system. He cut costs. One million dollars was quickly cut out of labor. There were a couple high-priced non-productive business developers, three secretaries, and a sacred cow structural engineer, along with eight others throughout the ranks that got let go on the same day. The firm also closed down its Livermore, California, office and stopped buying free lunches for all employees. He changed the incentive plan. They went to a plan that paid more attention to the firm-wide performance and less to the individual units. It was also a plan with a more frequent payout than the old plan’s once-a-year schedule. And they based everything on cash-basis profits instead of accrual— as under the old plan, managers were smart and over-accrued revenue to beef up bonuses with the firm finding out in the following months what happened. He shored up the balance sheet. That meant paying off some departing shareholders early at a reduced price instead of dragging it out for eight years as their buy-sell agreement allowed. They also paid down their credit line by a cool million bucks and sold another half million in new stock. The combined effect reduced the debt-to-equity ratio below 1.3 when it was 2.9. He implemented a new management report. One of the keys to getting everyone on the same page is showing everyone the same information and not holding back. Grey understood how motivational this could be and how not telling anyone what the real facts were was creating distrust for management. And he could not afford to continue with the mistrust if he was going to take Frinklemore-Datuna Associates to the next level. He needed everyone pulling the wagon in the same direction. He did a quick makeover and rearranged the main office. The company headquarters building looked pretty bad. Charlie Datuna prided himself on being frugal, and the office reflected that. The old walnut wood-grained reception desk and conference room furniture got sold off, and the company got some new stuff along with a lot of new paint, carpet, lighting, and artwork. The staff members also cleaned out all the junk that had built up in empty cubicles and offices and halls … and tossed everything that was not absolutely essential. The company put up a new sign and changed the landscaping. It got the parking lot sealed and restriped. It moved the CEO, CFO, COO, and marketing director to the same area in the building so they would talk more to each other. The place started to look alive, and the firm started to get back into inviting clients over to see the space. It also held an open house to introduce clients and the community to the “New Frinklemore-Datuna Associates.” He set up a regular schedule of meetings for those at the top. The executive committee composed of the CEO, COO, CFO, and marketing director was formed and they decided to meet every Friday at 3:00 p.m. to talk about the week ahead. It was good. Because until they started doing this, everyone pretty much kept to themselves unless there was a major crisis to attend to. Afterward there were fewer crises! Davis Grey was a lucky man. He was given a chance to do the job from his mentor, Charlie Datuna, and the firm he took over thrived under his leadership. Originally published 9/08/2003

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.