We’re Getting Soft

Aug 11, 1997

Call me any names you want. It won’t be the first time. But it doesn’t matter. I’m tough. I can take it. I have the power of my own convictions and conscience to get me through it all. What is he talking about? you may ask. I’m talking about what I perceive to be a dangerous trend in the A/E/P and environmental consulting business, and about the ridicule you subject yourself to if you propose hard answers to the problems. We are getting soft— real soft. And what scares me is that when things get tough, it’s going to be hard— very hard— on those who aren’t prepared. Unfortunately, most of us won’t do anything until we are forced to. Is that human nature? Perhaps. But it’s sad. Because you can either take your medicine now, in small doses that are barely perceptible, or take it later and perhaps choke on it. Here are some examples of what I’m talking about. Burgeoning overhead staffing. I have said before that high overhead isn’t necessarily a bad thing. If you can sell your time for great multipliers, you’ll more than make up for your high overhead. If you can’t, on the other hand, it’s not so great. Some A/E/P and environmental firms forget the type of work they do and the clients that they serve, so they overextend themselves by adding too many overhead and support people to improve the efficiency of the overall operation with essentially no way to recover these investments through better pricing or project management. That’s kind of silly! Years ago, we used to advocate that our clients cut the bottom ranked 5% of their staff each year just to force a re-evaluation. Maybe we ought to get back to that. Too much money coming out for the owners. This always happens when times are good. Everyone gets used to making a lot of money (over a boom period of several years), then when the economy dips and the firm’s performance falters, the principals’ income needs don’t decrease as fast as the firm’s ability to supply that income. They continue to extract (based on their needs, not the company’s) and the whole mess gets into hot water. Then they act surprised, get angry, and start to fight among themselves. Expenses for needless luxuries. The 300-square-foot exercise room housing $1,500 worth of equipment turns into a 3,000-square-foot facility with enough lockers and showers to let half the company bathe at the same time! The company retreat, which used to be held at the state-run park and lodge 50 miles from the main office, is now held at a Club Med facility in the Caribbean. The firm dumps its Chevy Cavalier wagon delivery car for a new Volvo 850 Turbo Wagon. These kinds of expenses for needless luxuries drag down the whole ship. Out-of-control salaries. When times are good, it’s not just the owners who reap the benefits. Most of the time, the employees get their share, and then some, in an A/E/P or environmental firm. We’re generous. We want to reward those who have been loyal and faithful. It’s hard to hire people when times are good. Why not give out an 8% raise instead of a 4%? The compounding effect of these excessive raises for a period of three or more years can create a labor cost disadvantage that a firm may never be able to escape. Inability to say “no” to any staff request. You’re making money. Double-digit profits and a growing top line, too. One of your valued people brings a request to you to go to an industry conference that will cost you $1,000 in registration fees, $1,600 in travel, hotel, and meals; and $2,000 in lost income from being out of the office for three days. What do you say to this $4,600 request, the outcome of which may be that your employee has three days to network and make contacts that will help his or her next job search? “O.K.,” if you’re like most companies in this business and are doing well. But it could be a mistake to continually grant such requests, when you consider the long-term impact they have on staff expectations and what else you could have done with the same money! Lackadaisical collection efforts. If you are feeling magnanimous, flush with cash, work under contract, and future prospects, it’s real easy not to get firm with a good old client who has owed you money for six months or more. After a while, it’s easy not to follow the established collection procedures for all accounts receivable, at 30-, 60-, or 90-day intervals— you’re in good shape, right? It’s all fine and dandy until the business climate changes. Then, it’s harder than ever to get the money that’s owed you. Inattention to established clients. When times are good, it’s easy to get excited about all the new clients streaming in and to forget about those that allowed you to develop the experience that’s helping you sell those new clients. Of course, when times get bad again, which they always will, you won’t see those new clients streaming in. Then you’ll be poring over your client list with a mad telephone campaign to reach all of your old clients, seeing what they have for you to do. But how charitable do you think they’ll be, if, in recent years you’ve treated them like someone who happened in off the street? Not confronting poorly performing principals. It’s human nature for nice people like us. We want to take care of our friends. Many times, that list of friends includes the people we have shared 10, 20, or even more years with, 8-12 hours a day, sometimes six days a week. These are our fellow principals. So when they start to slack off, come in late, leave early, spend more time on the golf course— or not make their PIC calls, not make their collection calls, and not do their portion of projects on time (or very well, for that matter), we may turn the other cheek. “We can afford to take care of So-and-So,” we say to anyone who complains. “It’s O.K.” But the dirty truth is, it’s O.K. for only so long. Once the good times end and we can’t take care of those who are earning more than their share, we’ve got a huge problem. But by that time, So-and-So is so far gone, has so many bad habits, and is so out of touch, it’s really too late to turn him around. Low management interest in cost control. I am every bit as guilty of this crime as some of our readers are. It’s no fun to say “no.” It’s no fun to keep the Christmas party costs down by holding it at the family-style restaurant instead of the downtown luxury hotel. It’s no fun to make your newest principal select the car with the vinyl interior instead of letting him or her get the one with leather. It’s no fun letting people go who work in service areas that clients no longer need. It’s no fun sitting in a $100 chair compared with what it feels like to sit in a $500 chair. But management cannot be so laissez faire that the costs for every little thing just keep going up, up, and up. Movement of management from managing people and projects, and dealing with clients, to philosophical “big-picture” issues. Over time, this results in a disconnection from what it really takes to do the work and keep a client happy. Then you end up with obsolete management. It’s hard— damn hard— to keep on the straight and narrow, especially if you have a chance to ride the sag wagon for a while (a boom economy). But it’s better to stay in shape just in case the wagon breaks an axle— then you can still walk!- Originally published 8/11/1997

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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.