Ten Trends Future-Oriented Leaders Should Watch
Nov 20, 2006
As 2006 winds down and planning gets underway for 2007, I frequently find myself being asked about what the top trends are for our industry that future-oriented leaders need to be aware of.
Where do I get my information, you might ask? In addition to serving on a number of firms’ boards of directors and keeping up with the research conducted by ZweigWhite, I just got back from speaking at The Zweig Letter Hot Firm 2006 Conference in San Francisco, California.
All of these sources— and more— help corroborate my conclusions:
Finding and keeping people is the number-one problem, yet most firms still aren’t being very creative about how to attract new people. There’s a huge talent shortage that is getting worse and worse. Schools are not and will not turn out enough talent to satisfy demand. One civil engineering program at a Midwestern school supposedly has one recruiter for each of its upcoming graduates! Firms are looking at offshoring as a way to supply talent and not just as a cost-saving device. Firms are buying other companies just to get the bodies they need to do work. Most sought out are mid- and lower-level staffers. Providing housing for young people is one way a few firms have addressed the problem of high local housing prices. “Farm offices” in cheap-to-live areas is another. Salary compression is a big issue as entry-level people are commanding starting salaries as high as or higher than employees five years out of school.
Open-book management is more and more common. You just don’t hear the objections that we used to hear from firm principals when we would suggest they share their financial performance with all employees. Smart people today have a better understanding of the business and how the firm’s performance affects their careers. They want and need to know this information and firms are responding. Thanks to better data coming from integrated systems from dominant players Deltek and BST, better graphic presentations, and more progressive-thinking management, most mid- and larger-sized firms offer some form of open book management today.
BIM (building information modeling) is being required more often on more projects. Unfortunately, for firms in our business, no dominant software provider has emerged, resulting in some companies training different employees in as many as five or six different packages so they can comply with client requests. BIM is changing the way we work faster and more radically than CADD did in the 80s and early 90s. Some of our older employees may have a tough time with the switch.
There are more and more mergers and acquisitions. Prices are high, but the desire of many firms to grow is even higher. Smaller, tuck-in acquisitions are often cheaper on a pound-for-pound basis than larger, high-growth, professionally managed firms. Inside companies, there are (thankfully) a whole lot less people out there asking why their company should be pursuing growth. The benefits at this point are obvious. Growing firms are more profitable, provide better exit opportunities for their owners, better careers for their employees, and are more fun to work for than their slow- or no-growth firm peers. The sustainable internal growth rate for mid- and larger-sized firms that are fast-growth companies is thought to be about 15%. Higher growth than that usually requires acquisitions to be part of the strategy.
There are more highly profitable firms these days. By “high profit,” I am referring to companies that routinely do 20%-30%, pre-tax, pre-bonus bottom lines. There may still be only a couple handfuls of these firms in our business, but a lot more than there were as little as three years ago. How these companies do it usually involves using most or all of the following strategies: higher prices than competitors, industry focus specialization, commitment to growth, higher-than-normal utilization for everyone (including principals), higher than normal marketing budgets, extra investment in IT, and a culture that says “we value our employees.”
Firms are trying to add new services, either on their own or through acquisitions. Non-traditional services such as IT consulting, strategic planning, web design, graphic design, financial consulting, and more are all being added to traditional A/E/environmental firms. Of course that doesn’t mean firms are giving up on natural line extensions either, such as architects adding engineering, or design firms going into design-build, or all firms pondering program management.
Internationally, China, Dubai, Brazil, and Puerto Rico are where a lot of the action is or thought to be heading. Firms getting into these kinds of markets would be wise to consider sending someone there from the mother ship who is originally from that country. Having local partners with an equity stake is another common practice. Both of these steps can be helpful to understanding cultures and legal/regulatory environments that are radically different from our own.
Sustainability and green building are becoming household words. LEED (Leadership in Energy and Environmental Design) certification is being widely sought out by employees at all levels and from all types of different discipline areas. Wal-Mart is embracing this concept in a huge way and bringing a lot of attention to it that is bound to create opportunities for firms in our business.
Responsiveness is key to client service and satisfaction. This is confirmed over and over again in the client surveys we see. Yet, few firms in our business are getting serious about providing Blackberries and remote access for all, even though the payback period for Blackberries from increased productivity according to one study is less than a month! Firms who give one employee in 10 a Blackberry are looked up to as being progressive. The whole debate reminds me of the time in the late 80s/early 90s when A/E/P firm principals argued with me in planning meetings about why I thought it was important that everyone in their firms have their own computer!
Continuous client satisfaction measurement is gaining popularity. The once-a-year survey of clients comes too infrequently to keep service-providing employees on track. Companies are responding by hiring outside firms to regularly poll their clients and then report back to the entire firm about how they are doing from the clients’ (or potential clients’) perspective. Firms not doing this are often discovering too late that they aren’t giving their clients what they want.
Originally published 11/20/2006
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