It’s time to take a good hard look at what everyone in your business is doing for you.
One byproduct of the incredible success most AEC firms have enjoyed for the past decade or more has been the piling on of non-billable (overhead) staff in just about every corner of the business.
It’s not that some of these people can’t make great contributions to the firms they work for. They can, depending on the specific individual’s personality and capabilities, and what area of the business they work in. In-house recruiters can find the people the business needs to grow. Good marketing people can drive new clients to the firm. The best financial people can collect your money faster and give everyone the numbers they need to responsibly run their areas of the enterprise.
But it doesn’t always work out that way. Sometimes, when companies find themselves with more business than they can handle and more profits than they are used to making, they will look for ways to spend it on things they think they “should” be doing. For example, some principals may think that they are so busy, and get so many calls and emails, and have so much busy work, that they should hire an administrative assistant. That’s all well and good until it results in emails sent to the principal on Friday not being responded to until next Tuesday. Or how about all of the admins who get dragged into doing personal errands such as buying birthday presents for grandchildren or picking up their boss’s dry cleaning? I can’t say it wouldn’t be a nice luxury to have such a person doing whatever I wanted them to do, but how does the addition of this person truly help the company?
Marketing departments have certainly grown like mad in the last decade. It’s no longer good enough for AEC firms to have a few highly motivated, diversely-skilled marketing coordinators who can write, edit, and make documents and presentations look good. Now it seems like everyone employs full-time social media managers, full-time videographers, full-time podcast producers, and full-time CRM system managers. It’s $70K here, $95K there, and then another $125K or more annually for the manager who corrals all these people and attempts to get them to do their jobs.
And there are many other purely overhead jobs larger firms have created in this industry over the past several years. Heads of strategic planning. Special IT people who are supposed to train design and technical staff on how to use the latest software. Facilities people who manage furniture purchases and field complaints about the HVAC. “Director of special projects” has always been one of those titles for people you don’t know what to do with, but don’t want to fire, either.
Don’t even get me started on the insidious erosion of the amount of time the typical firm principal spends working on billable projects. While I don’t have the exact data here in front of me, I have worked in this industry for 42 years and would guess that principals are about half as billable now as they were when I started out my career. Some people may think that’s great and that we have come a long way. I see it as the opposite – principals are getting further and further away from what their firms actually do for their clients, and that does not bode well for the future.
What I am suggesting is you take a good hard look at what everyone in your business is doing for you. That includes adding up all of their costs – not just for labor, but also benefits, computers, space, etc. – and comparing that to the revenue they bring in (that the firm wouldn’t have gotten otherwise), and the money they save for you that you would have otherwise spent. If there isn’t a positive difference, you may want to consider dealing with the problem(s) before we find ourselves back in the midst of a slowdown. While I am VERY bullish on the long-term future for companies in this business, I’m not sure we won’t have periodic recessions to contend with. Rising interest rates, reduced consumer confidence, lower tax revenues, supply chain woes, and wars, could all contribute to creating another recession that will affect us. I hate to give up any ground taken during the good times just because we didn’t plan for the not-so-good times!
Mark Zweig is Zweig Group’s chairman and founder. Contact him at firstname.lastname@example.org.