There’s a lot to evaluate, and measures can be severe, but if fiefdoms form, or if turnover is high, it’s time to take action.
Are you frustrated because some of your teams, groups or offices are not hitting their financial goals or performing at their highest level? If you have groups that struggle to be profitable, have high turnover, or don’t embrace your firm’s culture, it can be difficult to pinpoint what the issues are and get them on track. Very often an office is opened or a new team assembled in order to accomplish one of the firm’s strategic goals such as entering a new market, geography or client. Depending on how the group was created – from breaking off from another successful division, to an acquisition, to a key strategic hire, many things can cause a group or remote office to underachieve.
A recent survey of our clients found that the average A/E firm has between two and six teams that are underperforming, and there are many different reasons for this. Options to confronting this problem include replacing team leadership, closing a remote office, or other severe measures. So how do you figure out what the primary problems are?
In measuring the performance of our groups or teams, we often look at revenue or profit goals, but it is also important to understand the other key metrics behind the scenes that are causing the group to miss their primary targets. A variety of key metrics, such as win-rate, backlog and utilization need to be evaluated, as well as other intangible factors including:
- Poor leadership
- Ineffective operational and business processes
- Winning enough business to sustain backlog and utilization
- Skills and talents of the team
- Types of projects and clients being pursued
- Failure to embrace the firm’s mission and culture
- Unsatisfactory client satisfaction
- Reporting and group compensation plans
It is important to analyze your organizational structure and compensation practices to determine if you are rewarding the type of behavior that will drive profitability. Remote offices or groups are often not incentivized to share staff, cross-sell or provide work to other offices or groups when measured primarily on their own performance. It is also common for bonus plans to be given on a discretionary basis which promotes individual performance over the best interests of the firm.
Another problem is failure of individual teams to follow company processes and use systems. These groups develop their own processes, use spreadsheets to manage projects, and don’t embrace the company strategy and vision. Silos form and remote offices are often referred to as “fiefdoms.” This is usually the opposite of the desired culture, and stems from a lack of training and oversight, as well as failure to hold staff accountable for performance and not adhering to company policies. This can have a substantial impact on profitability and limit the ability for your company to grow and thrive.
These issues are especially evident when another firm has been acquired, and has completely different systems, processes and values from the corporate office. It can take a lot of time and effort to integrate a completely new company into your mainstream business practices. And when resources are tight to begin with, this is an area that is often not given enough attention.
If possible, moving a key executive to a new office can have the best results. Bringing the discipline, values and knowledge of company practices to a new office or group is challenging, and having someone there from the beginning that already believes in your firm’s mission, follows established processes and embraces use of systems may get the best results. In addition I recommend:
- Conduct a business assessment to determine primary issues
- Get one-on-one feedback from staff
- Schedule regular meetings by firm leaders to all remote offices
- Include group leaders in regular corporate leadership meetings
- Evaluate whether organizational structure and compensation practices are encouraging desired behaviors
In some cases, you may try everything possible and discover that a group, team or office is just not working out. So how do you know when to cut the cord? Obviously you want to try everything possible to turn things around, especially if you have made a large investment in them, and have a lot of talented staff that you could lose. The final decision must be based on whether management believes that the team’s results will improve, as well as whether the team is contributing to or detracting from the overall company strategy.
If after all of these steps have been taken over a reasonable period of time, and results have not improved, then there may be no other option than to replace key staff or close an office all together. The key is to make improvements quickly rather than let problems fester and deteriorate. Real improvement can be made with clear communication, determination to instill accountability at every level of the organization, and swift action to stop the bleeding.
JUNE JEWELL is the president of AEC Business Solutions.
This article is from issue 1148 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.
About Zweig Group
Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.