Seeds of Destruction

Oct 07, 1996

There’s truth to the old adage that “the seeds of destruction are sown along with the spoils of success.” We see it all the time, but that doesn’t make it any more palatable. I’m talking about principals working in successful firms who blow it all because they forgot what made them successful in the first place. If you and your company are doing well right now, I want to bring you back to reality. Consider the following: Are you successful because of the way you run your business or because the economy is supercharged? I can’t tell you how many times principals in A/E and environmental firms have been burned by this one. They have a great year and make a 20% profit, and the next thing you know, their formula for running the company is considered “Grandma’s recipe.” In reality, their success is in spite of, not because of the way they run the company. Then, when Grandma’s recipe really needs to be tested, it fails to produce a salable cookie. Have you thought about what happens if the market goes in the tank? Since I started working in the A/E/P and environmental industry, I lived through two oil crises, survived 18% interest rates in the early 80s, the Texas recession of the mid 80s, and the New England recession of the late 80s and early 90s. I learned that nothing lasts forever— there will be another recession. There always is. Yet so many firms seem to forget this, staffing up more than they should, getting excess office space, and failing to spend time trying to diversify their clientele from a geographic standpoint. Then, when the economic clouds arrive on the horizon, first they’re shocked and then they’re paralyzed. And they don’t know what to do to turn things around because they never thought things would change. Plan on it. Are you doing what it takes to keep from becoming obsolete personally? Although I don’t know of one that would verbalize it, too many principals seem to want to get completely out of doing technical work, dealing with clients, or managing anyone. This is their idea of “making it” in our business. Some even accomplish their goal, and end up as full-time paper pushers with no real responsibilities and fat, six-figure compensation packages. This is fine when the firm is making money hand over fist without trying. But when the party ends, these people will certainly be targets for fellow principals and employees who are vying over a limited pot of rewards. In a worst case scenario, they may even end up without a job. And when these people do get run off, they are often the most ill-equipped to find another position. Their pay is too high, no clients want to hire them, and scuttlebutt through the employee grapevine is that they were dead weight. Are you setting a good example for your employees? Good times bring on a festive feeling that often translates into long, leisurely lunches, early afternoons at the golf course, the hiring of friends or relatives to fill non-essential jobs, lackadaisical fee collections, and S-class Mercedes or 7-series BMWs instead of lesser company cars. None of this sets a good example for the production engine that is out there on the floor helping to make these good times possible. And management literally risks it all by not being sensitive to it. Are you keeping spending in check and not making long-term commitments based on short-term success? New offices, big acquisitions, company airplanes, and high-level hiring decisions all seem to come along with success. Some of these expenses are necessary to cash in on opportunities, while others are just plain excessive and do nothing to help the firm grow or be more profitable. The other temptation when times are good is to chase too many opportunities at once and use up operating capital in an attempt to avoid missing out on any opportunity. Good times and bad times alike require a careful hand on the company’s purse strings. Are you really worth what you pay yourself? Sure this is a sensitive subject. And I certainly wouldn’t like it if anyone here questioned how much money I make. But I also make darn sure that I do my best to earn my keep every day through selling work, doing consulting projects, and contributing to products that create revenue. Too many people at the top of A/E/P and environmental firms don’t worry as much as I do, and they suck out huge paychecks while making everyone else fight over the chicken feed. Watch the tendency of principal-level paychecks to get out of hand when you are making money. Pay reasonable salaries, but make sure that your extra pay comes from company-performance-driven bonuses and stockholder-related compensation, instead of from fixed payroll obligations. I’m not so naive as to think it’s always easy to do the right thing. We can all rationalize our own irrational behaviors, especially when we are successful. But you have to fight your tendency to be overly optimistic, your need for ego gratification, and your desire to reward yourself for years of sacrifice every day if that success is to be lasting. Originally published 10/07/1996

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