The A/E/P industry is doing well right now, but you shouldn’t get too comfortable.
Right now, we're having some really good times. A/E/P firms are doing well – some of them are doing incredibly well. We've never seen higher growth rates and profit.
Our own firm had a fantastic year. Zweig Group grew by 31 percent in 2015. Our growth projections are 48 percent for 2016. While this is what everyone wants, my experience is the seeds of your future problems are being sown right now. You need to be careful instead of careless. Here's some of what I'm talking about:
- Watch out for indiscriminate hiring. When everyone is busy and overloaded, it's hard to find people who are really qualified for individual roles. So what happens is unqualified people get added because someone is better than no one, and you never know, they "might work out." This can be disastrous for the firm and the individuals hired for roles they shouldn't be in, and cause all kinds of problems down the road.
- Keep salaries under control. When everyone is working like mad, and the dollars are rolling in, the tendency for many A/E firms is to start throwing money at people. This can be terrible when things slow down! Rather than letting salaries get so high that you have to be knocking the cover off the ball every single month without fail, let your bonus plan do the work of rewarding people for their high performance. Sure, higher salaries are a measure of protection to keep good people from defecting to competitors, but you have to keep an eye on them during the good times and not let them get out of control.
- Beware of increasing benefits too quickly and too much. Benefits are "sticky downward" as my old boss, Irving Weiss of The Pickering Firm in Memphis, Tennessee, used to say. That means they go up easily but don't go down easily. So you have to be careful not to be too generous in the good times and create a cost structure you cannot support during the less prosperous times.
- Client service is crucial – don't take any of them for granted! It is during these good times – when it's easy to replace any client – that A/E firms start taking clients for granted. This is terrible, horrible, and cancerous in every way. Don't use your best old clients as a training ground for new people. Don't ignore client complaints, even when they don't seem serious. There are always warning signals and when you're busy it is easy to ignore them or rationalize why they can be ignored.
Mark Zweig is Zweig Group’s founder and CEO. Contact him at mzweig@zweiggroup.com.
This article is from issue 1137 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.