There are 10 things practically every firm in this business should do but won’t. If you do try these things, your firm will be more successful.
Forty years. That’s “four zero.” And it’s how long I have worked in, owned, studied, and observed A/E firms. It’s a long time.
Over that time, I have given out lots of advice to literally thousands of firm owners and managers. Anyone who knows me will tell you that I don’t provide “stock” advice. I never liked boilerplate and every situation is different. That said, there are 10 things practically every firm in this business SHOULD do but won’t. If you would just listen to me and do these things, I have no doubt you and your firm would be more successful. These are NOT things that most firms are doing and there will be lots of reasons you and your partners can tell me why they won’t work. But trust me – you are wrong!
Here are those 10 things:
- Overhaul your bonus program. Most bonus programs in this business are purely subjective. It’s also conventional wisdom that “good” people get more bonus money than duds. Makes sense on the surface – give your best people the most and your worst people little to nothing. But what that really accomplishes is it lets your managers off the hook. The real problem is someone isn’t performing, not that the rewards are going to the wrong people. They need to do their jobs as managers. By having a formula-driven plan that rewards everyone for the firm’s cash basis performance, the rules are clear. If you are there (working for the firm) you share in the spoils. If you get a share and don’t deserve it, you either reform or get run off. The goal is a high performing staff – period.
- Pay out bonuses monthly or quarterly. Once a year is not often enough for the program to motivate people. There’s too much time between the action and the rewards. The less time that elapses between the performance and the rewards, the better. Understand this and listen to me!
- Throw out your performance review process. Performance appraisals are generally awful. No one likes them – not the employees who are the recipients, nor the managers who have to do them. What does it tell you when an employee has a 5.9 out of 7 on “attitude?” Nothing. And you cannot tie salary changes to performance appraisals. Everyone knows that if you do tie raises to appraisals, what the raise is or isn’t is all the individual employee cares about. They hear little else. Plus there is a lot more to raises than how someone performs in their job. The best performing janitor is only worth so much but the worst performing California SE might be worth a great deal even if they’re not a great performer. Be honest about it and admit you can’t set salaries strictly based on performance reviews. And by the way, your reviews are not helping you when it comes time to fire someone. In fact they are typically so positive they only give fuel to the idea that the employee was wrongfully let go.
- Share your financial information and other business metrics with every single employee. No, I am NOT suggesting everyone knows what everyone else is earning. That would be a disaster. But there is little else they should not know. Certainly seeing all the financials and learning how the business makes or doesn’t make money is critical to training a future generation of managers. And studies have repeatedly shown that when you don’t share financial performance information with your employees, your people will always think you are either doing much better than you actually are or much worse than you actually are.
- Get the input of every single employee for your business plan, and share it with everyone. The business plan should not be a secret. And the people who actually “do” the work of the firm need to be consulted and listened to. It just makes sense. Yet most firms won’t do it. And by the way, if your plan “gets out,” does it really matter? I think not.
- Fire the bottom ranked 5 percent of your staff. If you want a high performing team you must accept the fact that not everyone who wants to be is going to be on the team. The lowest performers literally define the least acceptable standard in your firm. Why not move some of them out and take a chance on someone new who could end up being a top performer? And while you are at it, get rid of most of your job titles. The more titles you have the unhappier everyone will be. Simplify!
- Make all new owners pay for their ownership and deduct the payments from every paycheck. Many companies still give their ownership away which is a horrible idea. People don’t appreciate it nor act like real business owners when it doesn’t cost them. But if you do make your people pay for their ownership you probably make new owners pay for their ownership out of bonus payments. But that is not what I advocate. I’m talking about deducting ownership payments from every single paycheck to make those payments. The problem with ownership payments being tied to bonuses is that if the firm is not performing, management will most likely allow those payments to slide. That’s a big mistake.
- Double or even triple your marketing budget. When it comes to marketing budgets, I don’t talk percentages of net service revenue like most people do. The reason is that percentage will vary widely based on the type of A/E firm. Structural engineers who do all their work for architects will have a very low marketing budget. High design firms that do a few landmark projects will spend three times what the interpro engineers do. But here’s my point. If your value is tied to revenue and more specifically, revenue growth rate, it is completely unrealistic to expect to do better than all of the other firms while spending the same amount on marketing and promotion that they do. That’s why I advocate making an off balance sheet investment of two or three times what the average firm in your market sector and discipline typically spends. Do this for a year or two and tell me if it didn’t help you.
- Share every single sale of new work with all employees as they come in. This is so important yet almost no firms will do it. Ring a bell. Bang a gong. Send out a company-wide email. Don’t tell me you are doing this and then I find out it is only on a monthly marketing report that is only available to top management. That is NOT the same thing as frequent reminders that new work is coming in and a wide variety of people are responsible for it and deserve recognition!
- Stop requiring managers to review timesheets. It’s a huge waste time. Slows everything down for no good reason. Most firms have so many jobs and so many people charging to them that reviewing a weekly timesheet will tell them nothing. Even if all they care about is time off, do they know how much PTO each employee has banked? I doubt it. They probably don’t even have access to that information. Just because you always did something doesn’t mean you should keep doing it. Managers can always review job reports or other reports that show much more relevant info about where time is going. Have them do that instead.
I could add to this list of things you should do but probably won’t. Prove me wrong and do them! Then come back and I will give you 10 more things to do that will help make you more successful.
Mark Zweig is Zweig Group’s chairman and founder. Contact him at firstname.lastname@example.org.Click here for this week's issue of The Zweig Letter.