Where principals go wrong

Many AEC firm problems are self-inflicted, driven less by market conditions than by weak management and unclear leadership.

If you ask me, principals in AEC firms seem to keep making the same mistakes, and most of them are not mysterious. They are self-inflicted. They come from poorly-defined roles, weak accountability, bad management habits, and an unfortunate tendency to confuse activity with progress. For example: 

• They build bad organizational structures and then act surprised when people are confused. I have seen too many matrix organizations where nobody knows who really has authority. The project manager is supposed to lead, but the people they need to keep their commitments don’t really report to them. They report to a discipline or office leader instead. That’s a recipe for all-around frustration under the guise of a beautiful org chart.
  Dual reporting lines are one of the dumbest things in this business. If one person has two bosses, then one of those bosses is going to be disappointed. Maybe both. It is hard enough to get work done without having to negotiate every decision with multiple chiefs.
• They confuse titles with leadership. Giving somebody a bigger title does not make them a better manager. It just gives them a nicer signature line on their emails. Real leadership means responsibility, decision-making, and follow-through, not just a seat at the table. In my experience there are often too many who fall into that category (sitting there but not contributing).
• They hand out roles without defining them. Too many firms have principals, associates, associate principals, senior associate, partners, vice presidents, senior vice presidents, and other “leaders” who all sound important but cannot explain exactly what they are supposed to do. My favorite role is “director of special topics.” Too many titles are a cancer. If nobody can clearly describe the job, then the job doesn’t really exist.
• They act like ownership and management are the same thing. They aren’t. Being a principal does not automatically make you a good manager, and being a shareholder or member in an LLC does not mean you understand how to run a business. A lot of firms get into trouble because they let ownership status substitute for actual capability and performance.  Some firms actually require a “principal” to head up every department, discipline area, office, or market sector. Why?
• They make growth more complicated than it needs to be. Real growth usually comes from doing the basics right. That means marketing that makes the phone ring, good people who respond, clear expectations for what the firm will do and what it will cost, sensible technology investments, good accounting, rapid billing and collection, strong accountability, and disciplined execution every single day. Little of that is glamorous. 
• They accept mediocrity because it is the norm in our business. A lot of principals reflect on their experience and either consciously or unconsciously decide that average is good enough. It is not. If your firm looks, sounds, and behaves exactly like everybody else’s, do not expect clients or talented employees to get excited about working with you.
• They let marketing become bland and forgettable. Too many AEC firms’ websites, marketing materials, and presentations sound like they were written by a committee afraid of offending anyone. Safe, vague, polished language may make the principals feel comfortable, but don’t make the firm memorable. Pretty brochures, nice photos, and polished presentations are fine. But if the firm has nothing original to say, all the polish in the world will not help. Substance wins in the long run. If you want attention, say something useful, maybe even controversial. 
• They ignore cash flow until it becomes a crisis. Revenue isn’t cash. Nor is profit. “We have work booked” is not cash. A lot of principals learn that lesson the hard way, usually when payroll is due and the bank account doesn’t have what they need there to make it.
• They rely on heroics instead of systems. If the firm only functions because a few key people are working ridiculous hours and fixing everybody else’s mistakes, then the firm doesn’t have a functional business model. It has a survival habit.
• They forget that people are the business. The best firms keep good people engaged, challenged, and appreciated. The worst firms act like talent will stay forever just because it should. But it rarely works that way. Good people have options, and they know it.

Most of these problems don’t require another consultant, retreat, committee, or 47-page strategic plan. They require principals to lead, make decisions, hold people accountable, and run the firm like a business. It really isn’t that complicated. If it is, maybe the problem isn’t the business – it’s the principals.

Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.