President of JBCI, a small, but venerable, repair and restoration firm based in Philadelphia.
By Liisa Andreassen Correspondent
In 1984, Allen Roth joined JBCI as a project engineer. He advanced to vice president in 1992 and then became president in 2015.
“Our hiring model is to select a graduate student and train them into our culture and engineering model,” Roth says. “This has proved successful. Our principals and senior management team have been with us for 25, 13, 12, and 10 years. While there are always hurdles, we promote a creative, fun atmosphere that allows for a work/family balance, flexibility, and, ultimately, employee stability.”
A conversation with Allen Roth.
The Zweig Letter: What are the three to four key business performance indicators that you watch most carefully? Do you share that information with your staff?
Allen Roth: Our business relies heavily on the business development process and converting proposals into contracts to grow. We’re achieving significant growth in our employment and net revenue over the past five years. We watch and monitor the backlog per full-time equivalent/pipeline per full employee, time equivalent, proposals by project manager, and the proposal conversion rate. We must monitor project financial performance on a recurring basis through the current project effort versus budget. This information is shared with the principals on a monthly basis.
TZL: How far into the future are you able to reliably predict your workload and cash flow?
AR: Being a small firm, it’s very important to closely monitor our workload and cash flow. Our business is evolving through new initiatives to increase proposal, contract, revenue, and, ultimately, cashflow generation. We’ve generated new customized financial models/staffing models for up to four years into the future, but we use this as more of a guide than for actual decisions. We can reliably predict our workload and cash flow a maximum of 12 months based on our historical performance and financial metrics.
TZL: How much time do you spend working “in the business” rather than “on the business?”
AR: Being president of a small professional services firm requires time management balance. I think I spend about 85 to 90 percent of my time “in the business” although only 20 percent of that is within the engineering design or technical support area. The remainder of time is on internal business operations, responding to client requests, and generating proposals. I now enjoy the business side more than the technical side. Maybe 10 to 15 percent of my time is on business development and client relations, but this is changing. Upper management now has more authority and I want them to begin running our company on their own. Through this initiative my “on the business time” will increase.
TZL: What, if anything, are you doing to protect your firm from a potential economic slowdown in the future?
AR: Through more than 50 years of building relationships, a high majority of our business is from referrals. Our main engineering focus is on the repair, restoration, and maintenance of existing buildings. A very low percentage is dedicated to architect or developer work that can be greatly impacted by an economic shutdown. This strategy has helped us in the past. During the ’08 and ’09 recession our workload was steady for seven employees. It will be challenging now that we have 13 employees.
TZL: It is often said that people leave managers, not companies. What are you doing to ensure that your leadership are great people managers?
AR: We’ve been very fortunate with our dedicated staff and our employee turnover rate is very low. This is no accident. Our hiring model is to select a graduate student and train them into our culture and engineering model. This has proved successful. Our principals and senior management team have been with us for 25, 13, 12, and 10 years. While there are always hurdles, we promote a creative, fun atmosphere that allows for a work/family balance, flexibility, and, ultimately, employee stability.
TZL: How are you balancing investment in the next generation – which is at an all-time high – with rewards for tenured staff?
AR: This has always been a challenge, but seems heightened as investments in development have increased. I have tried very hard to understand the needs and desires of the next generation. This has taken some time and lengthy discussions. As a result, we’ve taken initiatives to promote improved remote access, flexible work time, and allow staff to adjust their schedules to achieve a better work-family balance. We have also improved our maternity/paternity leave benefits and promote educational and professional growth seminars. Through all this, they understand the project deadlines and have responded very well to these policy changes.
TZL: Is change management a topic regularly addressed by the leadership at your firm? If so, elaborate.
AR: During the first 45 years, company growth was under the leadership of our founder, Joseph Callaghan. He brought stability and professionalism to our firm and clients, but was a classic first generational owner – holding things tight to his chest. Rarely were there any discussions about ownership transitions. Since I became president in 2015, I saw such potential and wanted to push his philosophy to another level. I‘ve worked with a business strategist to coach and encourage me to improve our firm and grow the business. This experience has provided me with exposure to many experts in the business end of our industry. I have taken this experience to our leadership team and openly discussed my transition intentions.
We historically have been a flat organization, but needed to change to promote growth and better management. Our team has now created a more organized, corporate structure. We’re committed to addressing and updating our management structure.
TZL: How often do you valuate your firm and what key metrics do you use in the process? Do you valuate using in-house staff or is it outsourced?
AR: We valuate our firm on an annual basis and it’s done internally. When we move ahead with stock options and transition, we will obtain a more independent company valuation.
TZL: What financial metrics do you monitor to gauge the health of your firm?
AR: We monitor many financial metrics internally as indicated to predict areas of needed improvement as follows:
- Utilization rate – Our business model relies on a specialized niche with specialized skills. We need to ensure all of our resources are being deployed to productivity and any indirect time needs to be directed toward increasing value or productivity for our future.
- Net labor multiplier – We strive for a high net labor multiplier. Our business is about generating revenue dollars for dollars invested in labor. We monitor this closely to ensure our dollars are being utilized effectively.
- Operating profit on net revenue – We use this metric for a quick comparison versus prior fiscal years and fiscal periods (monthly, quarterly, annual) of operating profitability. This is a great indicator of effectively utilizing resources.
TZL: Ownership transition can be tricky, to say the least. What’s the key to ensuring a smooth passing of the baton? What’s the biggest pitfall to avoid?
AR: The most important key is transparency. Over 52 years there have only been two presidents. Our founder did not openly discuss transition and as a result we lost several key employees. I want to provide as much experience, education, and knowledge that will allow for the continued success of our firm. I must be transparent with my intentions, time frame, transition options, and the financial options. I try to avoid the “water cooler” talk that may become toxic and, most importantly, incorrect.
TZL: You want high utilization for profitability, but that means employees are fully loaded with assignments. How do you balance growth, utilization, new clients, and new hires?
AR: Always promote forward-thinking and the long-term success. This means the staff must have the freedom and encouragement to promote client relations and career growth. There will be times when the utilization rate and revenue is low, but this should be a result of promoting the business, generating proposals, and client relations. This will provide long-term benefits and growth. Being a small firm, this must be monitored regularly and if the revenue and backlog are dropping significantly, adjustments must be made.
TZL: They say failure is a great teacher. What’s the biggest lesson you’ve had to learn the hard way?
AR: Learning to write better, as I failed my first college thesis. This forced me to better understand the English language. Our firm generates many reports, studies, and correspondence. Over the years I’ve forced myself to improve my writing technique. I have impressed this requirement on my staff through writing seminars and encouraging them to self-critique their work.
Another lesson learned is understanding the need to be upfront with clients, even if a project is going south. The client will respect you more in the long run. I have had times when I did not want to disappoint the client and held bad information too long. This led to a bad situation.
TZL: Research shows that PMs are overworked, understaffed, and that many firms do not have formal training programs for PMs. What is your firm doing to support its PMs?
AR: This is constantly discussed during our leadership meetings. When creating our new organizational structure, we realized the need to hire younger staff to support our upper management and reduce their workload. The goal is to train them to be productive earlier in their career. We recently hired three graduates and are now focusing on our new on-boarding program. This has me taking an active role and I’m personally involved in the process. I spend at least one hour per week discussing experiences, what they’ve learned, and technical issues. Over the past three months our PMs have seen a drop in their workload, which is good.
TZL: How many years of experience – or large enough book of business – is enough to become a principal in your firm? Are you naming principals in their 20s or 30s?
AR: Yes, we are naming employees in their 30s as principals. The minimum experience is 10 years with our firm. Since the new principals started with our firm at a young age, the 10-year tenure is achieved within the 30s. In combination with their experience, potential principals must show management capabilities, leadership qualities, and revenue production.
TZL: In one word or phrase, what do you describe as your number one job responsibility as CEO?
TZL: What happens to the firm if you leave tomorrow?
AR: My ultimate goal is for the company to be successful without me; we’re making great progress. My objective is to train and share experiences with the team about the business operations side so they can manage and grow the company on their own. I am planning for my retirement and transition. I have retained a business consultant to better understand the transition process and the options. It’s an exciting time.