Up or Down? You Make the Choice

Feb 23, 2004

It’s kind of funny. I was out visiting a firm the other day— a rapidly growing, multi-office, multi-service firm— that is apparently beating the pants off of its larger, more established competitors. I’ve seen it countless times before. One company in a particular area or market suddenly becomes the “it” firm. The company grows faster than everyone else. Everyone is talking about the firm. It becomes the place to work. It has the best offices and technology. It’s on the rise and everyone else is on the decline. One of the owners of the particular company I was visiting in this case summed it up as an upward spiral. Everything just keeps going up. It’s almost hard to stop it. But he also added that the same can be said for a downward spiral. Some firms are going down. It seems almost impossible to stop that as well. Whether firms are on the upward spiral or downward spiral is, as much as anything else, a function of the choices they have made (and are making still). Here are eight things that I see firms wrestling with right now that I think are fairly good predictors of where they will be 10 years from now: Integrated management information systems. Just about every single company we work with has either made the decision to go this route or is pondering making the decision. Some are deciding to wait another year. My question is this: Will it ever get easier or cheaper? Waiting may make things worse. And you will never be able to accurately determine the ROI for these systems. You could do a tactical implementation and convert your data to a new system and get the exact same output you have at present. The ROI there will be very bad. Or, you could change the way you do business and really make an effort to fully use the tool. That could be a very high ROI for you in the long term. Open-book management. Many companies are struggling with this one as well. How much information should they share with all of their employees? The answer to this question is also critical to long-term success. To do this in the short term you will spend money. Your accounting systems may need to change and your people will need to be trained in what the numbers mean. But, in the long term, you will be rewarded with a large staff of people who understand what the firm does to make money. This is another one of those areas with an unclear ROI, but a lot of long-term gain potential. Ownership transition. Many firms are trying to decide how much stock they want to sell and when they want to sell it. The truth is, it is always easy to defer those decisions another year. But what if you lose your key people because you wait too long? Believe me, it happens. Staying off the downward spiral may require giving up some equity or control to make it happen. There are significant short-term costs of an ownership transition program which will hopefully be more than offset by long-term gains. A large (and growing) group of committed people with a vested interest in the firm’s long-term financial success can play a huge role in getting your firm on an upward spiral and keeping it there. Recruiting process. If you don’t want to grow and just want to control what you already have in the way of work and people, don’t pay any attention to recruiting. But that will also put you on the downward spiral. Every company needs new blood. On the other hand, if you figure out what your total hiring needs will be for the coming year, multiply that by about $7,500 a head (average), and commit this level of resources to your ongoing recruiting program, my guess is that this will get you on the long- term upward spiral. Brand-building marketing activities. Firms that see marketing costs as an expense to be minimized, or those that insist every single marketing expenditure be justified in terms of the immediate work that comes directly from it, will most likely find themselves on a downward spiral. Firms that overfund marketing and spend the budget they have, regardless of short-term results, will probably find themselves on an upward spiral. One of the keys to the upward spiral of revenue growth and profitability is driving demand for your firm’s services beyond your ability to meet the demand. Those are the cases where firms are chronically understaffed and everyone works a little extra— one of the keys to profitability in this business. It’s also the time to raise prices and tighten up credit. Client surveys. Firms that never take the time to find out what clients really think of them— and those that do, but don’t share this information with their staff— will hasten their movement toward the downward spiral. Those that see client feedback as one the keys to developing the right offerings for the market will move toward the upward spiral. Employee gatherings. Firms that cannot justify gathering their people together for a monthly meeting, business planning presentation, and/or parties at one time or another are those that are probably heading for the downward spiral. People need to interact if you want to foster a sense of belonging and teamwork throughout the company. Firms that see these costs as an investment in fostering those relationships are more likely to get on the upward spiral. Office facilities. Once again, if the office is just a cost, and viewed as a place to house people who are producing something, then my guess is, long-term, the firm’s image will suffer, with both clients and candidates. Firms on the upward spiral realize the power that great facilities give them. They see it as an investment that brings longer term dividends in the marketplace. Bottom-line time— where are you on the spiral? Going up, or going down? Why don’t you discuss this at your next gathering of top management and see if it causes you to question some of the decisions you might be making right now? Originally published 02/23/2004

About Zweig Group

Zweig Group, a four-time Inc. 500/5000 honoree, is the premiere authority in AEC management consulting, the go-to source for industry research, and the leading provider of customized learning and training. Zweig Group specializes in four core consulting areas: Talent, Performance, Growth, and Transition, including innovative solutions in mergers and acquisitions, strategic planning, financial management, ownership transition, executive search, business development, valuation, and more. Zweig Group exists to help AEC firms succeed in a competitive marketplace. The firm has offices in Dallas and Fayetteville, Arkansas.