Tough Questions, Tougher Answers

Aug 21, 2006

With this branch office special focus issue of The Zweig Letter, I thought I’d take the opportunity to answer some of the recurring questions I get on this topic. Tough questions and even tougher answers follow... “Why don’t the people who work in our branch offices feel like they are part of the parent company?” There are a whole host of reasons as to why this may be the case. It could be that they get no benefit from being part of the company. For example, if the office has to sell all its own work, and the compensation of the office employees is based entirely on how their office does, there’s no reason for them to feel like they are a part of something bigger. Where the people in the office came from is another factor. Were they a separate company that was acquired but never really integrated into the whole? If so, don’t expect them to feel any different than they did before selling out. And if none of the employees or even more importantly, managers, ever worked in the main office, this too can be a factor. “Why can’t each office have its own name, identity, and way of doing things?” There’s no reason they can’t— they can. This is called having separate companies and going your own way! If you want to run a company that’s set up like this, what’s the advantage in being together? The savings in shared overhead will never make up for the time and money spent dealing with personnel, morale, and marketing territory issues! “Isn’t having the principal/top manager make periodic visits to each office critical to keeping up morale and communications between the headquarters and branch offices?” NO! Yet this is always the universal answer to branches feeling like stepchildren. It costs too much. Lost revenue and expenses for these trips are crazy unless they are combined with doing something billable or a real business development effort. Let me repeat— you cannot afford a bunch of non-chargeable trips to see the people in branch offices. Consider the example of a small office that does $1 million a year in net service revenue and makes $100K a year in profit. If one unbillable visit is being made to that office by a principal each month, these trips will probably cost the firm anywhere between $2-4K each, totaling $24-48K per year. That’s 25-50% of the office’s annual profits, all in the name of improving morale! “Our branch office managers bristle when we call the main office our headquarters. Why does any office have to be called the headquarters and the rest called branches?” My response to this one is “too bad.” If there is a main office (headquarters) then that’s what it is! If you don’t like it go work in the main office or for another firm that’s based where you are. I never understood why people got so upset about this. It usually stems from a marketing issue. The managers in the branch have been working for years trying to convince their clients that they are a local firm. Then any piece of marketing material that shows a headquarters somewhere else gets the people in the branch all riled up. Most clients couldn’t care less if the office that’s providing services to them is a branch. They just want good service and accessibility from people who care. And by the way, no office has to be a headquarters IF that’s the way you choose to set yourself up. I am aware of many companies in this business who have decentralized corporate functions (and function heads), each working in different cities. “We always seem to have branch offices that need work. Shouldn’t offices be able to generate all their own work?” Of course, no firm starts or buys an office somewhere thinking “great, now we can send these people work we sold in the main office.” That said, it could be entirely necessary to do just that at one time or another if you want to have a profitable firm. Some firms get all hard-nosed and I think too rigid about this issue. If you made a strategic decision to be in a particular location that tells me that you think there’s a long-range reason to be there. Act like it and support those offices with work long enough ‘til they can get all their own work (if that ever happens). And if the prospect of propping up a particular office forever doesn’t sound good to you, close it, sell it off, or radically downsize it. Those are your options. “One of our office managers seems to use hate for the headquarters office as his primary motivational tool. The problem is he’s a good manager, his people love him, and his office is profitable. What should we do?” The CEO and/or COO need to confront this person. That is completely unacceptable behavior and it cannot be tolerated. My experience with this type of branch office manager is that they will eventually either leave and take all their best people or stage a revolt from the inside and try to secede from the union. Either of these eventualities is better dealt with on my schedule and terms than the office manager’s so it’s best to do it now, not later. Originally published 8/21/2006

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