The Fundamental Laws of the A/E/P Business

By Mark C. Zweig I thought it might be fun to reflect back on my 30-plus years of working in this business and assemble a list of fundamental laws none of us can get around. Here they are: 1) To do the work, first you have to GET the work. There’s no way around this. It is the reason why people who can sell and do will always be more valuable than those who can just do. 2) No matter how glamorous the project, you cannot spend more on the marketing effort to get it than the fee it brings in. Seems obvious but some people forget it. The only exception to this rule is if doing this project leads to 20 more just like it that will be profitable because they have no marketing costs associated with them. 3) You make your money on junior people who work many hours. Think about it. These people don’t waste time sitting in unproductive management meetings. Everything they do pretty much advances the project. When they are salaried, and work many hours, their hourly cost rate plummets, which jacks up their effective multiplier. It is not uncommon to see real raw labor multiples of 4-6 on junior people who work 50-60 billable hours a week. 4) You lose your money on senior people who don’t sell, do, or manage (effectively). They cost a lot to start with, and then when they aren’t productive or doing the selling or management jobs we are paying them to do, you lose even more. On top of it, they kill morale for the junior folks, who are expected to work their tails off. 5) If you don’t open the books, your employees will be wrong about how successful (or unsuccessful) the business is. They will either think you make more than you do and are ripping them off or they will think the situation is so bad that someone is going to come and lock the doors any minute. Neither is in your best interests. Transparency in the books is the only answer. 6) Those who read too many management books may be more dangerous than those who read none. The “management junkies” are always pushing for one more meeting or one more committee to study something that they learned about while reading their latest management “flavor of the week” book. The problem is that none of these things ever turn out to be the panacea that those who advocate them build them up to be. That destroys management’s credibility and the ability to lead the firm. There’s a reason for the popularity of Dilbert and The Office. 7) You can’t train people to be honest or ethical. If someone proves to have no ethical compass, no matter what, you aren’t going to fix them. Move them on before they move up to a higher post and get into a position where they can do even more damage. 8 ) Your name is your most important asset, not your people. Many folks don’t like it when I say this but it is a fundamental law. You can have the best people in the world, but if your reputation is damaged you won’t be successful. If your reputation is intact, you can run out of money, or work, or good people, but rise again to play the game another day. 9) Without good people, you can’t provide good service. Good service is the cornerstone of any business that competes with other businesses that do what they do cheaper. It is the only antidote to price competition. Plus, it is essential to keeping a good name and getting repeat work. You cannot afford to get all new clients all of the time. 10) A/E firms are best run by people who do what the firm sells. That means that they are run by architects and engineers and planners and scientists who also happen to be business people as opposed to business people who aren’t any of these things. There are a few exceptions to this law but they are as rare as hen’s teeth! 11) You cannot motivate people to do what they aren’t naturally inclined to do. You can demotivate them, however, by bad manners, bad management practices, too much bureaucracy, and leaders who set a poor example in the areas that they are pushing other people to handle properly. 12) Overhead is neither good nor bad in and of itself. Overhead that makes you more competitive— recruiting capabilities, IT, marketing, etc., can be good. Overhead that costs you— too much/too luxurious office space, vacation houses, boats, planes, fancy cars, season tickets that go to employees vs. clients, etc., is bad. Want to hear more from Mark Zweig - and each week? ... Read more.