Watch out for upstarts

Jan 31, 2005

How many times have you seen it— one or more of the best people in either your firm or another local AEC firm quit their jobs and start a new company? By year’s end, word has it the firm is up to 10 people. By the end of the following year, they have 20 or 25. Then, in a couple more years, they have 50 or more people working there. How do they do it, these “upstarts?” And what lessons are there for the rest of us who have more mature companies? Here are my thoughts: These new firms make decisions much faster than established firms. It’s a disease that really affects almost all mature A/E and environmental firms— slow decision-making. It just doesn’t work to get everyone’s input on so many minor decisions. New companies are usually run by one or a few people with closely aligned ideologies. They make the calls, now. Mature companies are too often paralyzed by having a group that doesn’t necessarily share the same values and philosophy. They came together over an extended period of time. There are probably more of them. They are often older and more conservative, too, than their upstart competitors with little to lose when they start out. These new firms use the best new software, management philosophies, and more. They don’t have any sunk cost invested in outmoded stuff— whether that’s an accounting system that’s no longer supported, CADD from 10 years ago, or $350,000 they put into designing a TQM training program that they STILL insist all new employees get run through. With none of these burdens, new firms are bound to be more efficient. New firms have younger employees and higher staff utilization rates. Human resources managers help us keep turnover down in our companies, and that’s usually a good thing. But one of the downsides to having a more senior staff is that this group tends to have more vacation time accruing at a faster rate. The middle-aged and older workers also may not be quite as willing to work as many long hours with short notice. Both of these things tend to lead to lower utilization rates in mature firms versus upstart companies. Upstart companies have management with a burning desire to succeed. How much is this worth? I would guess an awful lot. There’s nothing like wanting to show your former employers or skeptical co-workers that you were right after all— and knew what it was going to take to run a successful business. Upstart companies have a clean slate and aren’t starting out with any known deadwood staff. This, too, is a huge advantage over mature companies in this business— most of which have 10% or more of their workers that management would honestly consider marginal performers. Upstart companies have a clearer business strategy. They are starting from scratch and, before taking that leap, will probably have thought long and hard about how they can make their new enterprise a success. Older firms may have been resting on their laurels for some time and relying on momentum to carry them along. I think the lessons mature companies can learn from these new upstarts can be summed up with the following simple statement: Old companies need to model themselves after new companies if they want to bring back the fun, energy level, decisiveness, and clarity in purpose and approach that upstart firms typically have. Originally published 1/31/2005

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