Break out of your compensation rut

Screen Shot 2016-05-03 at 9.14.25 AMEnd-of-year bonuses and evaluations are obsolete. Try monthly or quarterly perks for your staff.

It’s clear to me that A/E firms are all in a huge rut when it comes to how they pay their people. The typical firm reviews salaries once a year ‎after doing some sort of cumbersome performance appraisal system. Then the employee gets a raise – sometimes within the constraints posed by an arbitrary salary range for someone in that specific position, say “Engineer 4″ – and sometimes not.

Bonuses are handled similarly. The principals/partners decide who gets how much with little or no information to work with beyond what the employee got paid last year in the way of bonus and maybe their utilization data. The money is paid out once a year, either right before Christmas or on the last day of the year.

If you think paying people this way motivates them and enables you to hire and attract the best talent, then I probably can’t help you. If you think there HAS to be a better way, keep reading.

Here’s what I suggest‎ – and many of you will think this is too radical:

  1. Get rid of your annual evaluation process. No one likes to give or receive these reviews. They take a lot of time and are demotivational. And they also frequently provide the plaintiff with all they need to prove a wrongful termination case. The only feedback that really matters to most employee is the money anyway. Just get your managers used to the idea of providing instant feedback to their employees – both good and bad – as close to the incident as they can. It saves time and money and is much more effective.
  1. Dump your fixed salary ranges. You aren’t a government agency. Stop trying to put people in boxes. Who says these ranges make any sense anyway? Where did they come from? How often are they adjusted? Why do you need them? People are all different even if they work in the same job category.
  1. Change salaries for people as often as necessary. Once a year is not enough for really young people unless you want them to be recruited away by your competitors. Give individuals a raise when they need it based on your assessment of their value to your enterprise. You don’t really need‎ any set schedule. That is self-imposed. You know who is worth more than someone else. Pay them accordingly with no delay.
  1. Implement an open book financial reporting system. Show everyone how much money the company is making or losing, where you stand on collections, working capital, proposals, backlog and more. Tie the bonus pool to the actual cash basis profitability. Set the percentage to go to the all-employee pool, the management/key person pool, and the owner pool each year as a part of your business planning process. Tell everyone what pools they participate in.
  1. Start paying bonuses out monthly or quarterly. Once a year is way too long to wait. If there’s a loss, make up the loss before paying out any bonus monies. Let everyone see where the money is coming from based on the open book report. ‎Pay the individual bonuses based on the employee’s salary as a percentage of total salaries of people who make up that pool. For example, if the company makes $150K cash profit for the month, and 20 percent of that goes to the “all employee” pool, that is $30K in bonuses to be paid that month. If an individual employee has 3 percent of the total salaries of those in the pool, he or she would get $900.

You can disagree with me about how to pay people if you like, but I know what works over the long haul to attract, motivate, and reduce turnover. Doing these things makes life better. People will be happier. You’ll keep more folks as you’ll have some tools to keep them there. You’ll spend less time on it all. There will be more trust in management. People will better understand your business and feel the company is fair. And you’ll be encouraged to weed out the duds because they are getting bonus money they don’t deserve. All of this bodes well as it relates to improving the value of your enterprise – one of the primary objectives of an entrepreneurial venture.

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

This article is from issue 1145 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.

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Ready to sell?

Screen Shot 2016-04-28 at 9.29.11 AMAvoid these common M&A mistakes, which happen a lot when firms try to close a deal without the guidance of a seasoned pro.

When we talk to sellers in this industry, we often find that they have minimal experience with M&A. There’s nothing wrong with that. The problems arise when firms either seek to go at it themselves, or use inexperienced M&A professionals. This is a short list of four common mistakes made by sellers in our industry that we hear about on an all-too-regular basis. Mistakes made in these four areas during the M&A process reduce the final consideration you receive for selling your firm, and, unfortunately, can kill an otherwise tenable deal.

  1. Underestimating the time commitment. An external ownership transition is not an easy process. Successful M&A transactions are incredibly time consuming for the seller. From preparation to meetings, negotiations to due diligence, sellers will have to devote considerable time to the M&A process. M&A transactions usually take between six and nine months to close in our industry. Even with a team of experts (see item three, below, for more on that!), every seller feels exhausted – but hopefully relieved – at the end of the M&A marathon.
  1. Not organizing information ahead of time. The sheer volume of information that will be requested by a company interested in acquiring your firm is staggering. Everything from financial statements to contracts, employee information, corporate organizational documents, insurance information, and more will need to be shared with a buyer. Firms that gather the information ahead of time and either create a virtual data room, known as a VDR, or otherwise have these documents in an organized place, communicate to the potential buyer that they are serious and methodical about this process.
  1. Not hiring the right external team. This may sound self-serving, but as someone who works with business brokers on a regular basis, I can tell you that using a knowledgeable consultant with industry experience is the best way to assure a prompt transaction and a high price for your firm. I recently worked across the table with a general business broker, a firm that sells every type of company. They sent me a standard glossy prospectus with over twenty pages of bright charts and graphs – that had very little information that is actually relevant in our industry. For example, the prospectus didn’t disclose that the company was an MBE/DBE, and didn’t include net service revenue! In addition to a consultant, you’ve got to hire an M&A attorney with industry experience. Your regular corporate attorney does not know how to close an M&A deal.
  1. Having an unrealistic price expectation and misunderstanding of deal components. To avoid having an unrealistic expectation for the selling price of your firm, you need to understand true industry comparables. Do not tell a prospective buyer that you should be worth the same earnings ratio as Apple. You’re not Apple. In our industry, we see net service revenue, or NSR, and book value as the two consistent metrics that often correlate to the final sales price. Also, don’t slam the door on a prospective buyer based on the sales price discussed verbally. Remember that earn-outs, salaries, stock options, bonuses, and what is being acquired (Are you keeping cash? Receivables? Those can be tremendously valuable – and liquid!), are also critical parts of the deal.

The M&A process is challenging, time-consuming, and risky. But when two firms come together to create value, expand opportunities, and develop a growth trajectory greater than either could on its own, firms on both sides of the table tell us that it has been worth the pain. If you are considering selling your firm, the best thing you can do is begin the process with open eyes, and have industry experts in your corner to help you navigate.

Jamie Claire Kiser is Zweig Group’s director of M&A. Contact her at jkiser@zweiggroup.com.

This article is from issue 1145 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.

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Three things owners do that hurt their businesses

Screen Shot 2016-04-26 at 1.32.58 PMA lot of A/E/P firms complain, but in fact, they’re not really trying to grow.

As an executive in residence teaching entrepreneurship in the Sam M. Walton College of Business at the University of Arkansas‎, I get to learn a lot about entrepreneurial small business ventures in the state and region as a whole. And as a management consultant to the AEC industry working in this same field for more than 36 years, as well as founder of a company that will do more than 25 research studies on the A/E industry this year – I get to learn a lot about A/E/P firms.

People often ask me where business owners go wrong in the A/E world (and elsewhere). I can tell you it is in three things:

  • First problem. The owners take too much money out of the business and don’t reinvest enough back into it. Whether salaries are too high, bonuses are too large, too many relatives are on the payroll, or any number of other things, the result is the same – the company does not have the capital it needs to grow. Therefore, it gets stuck. Meanwhile, demands for cash from profits are high. Owners have lifestyles that were perhaps established while working in other jobs and they are not psychologically equipped to make the sacrifices necessary to really get the business to a position of strength where it is better able to survive any blows that may have occurred.
  • Second problem. The owners don’t do any marketing. There are many reasons for this. They don’t believe it really works, don’t have time, and don’t value anything but architecture or engineering. They think the marketing budget should be tied to revenue, and that it should decline if revenue declines. No matter what is, there’s no real marketing expenditures or activities. Sure, they’ll call their friend in a client organization if they think it will help win a job, but that’s not the kind of marketing I’m talking about. I’m talking about branding and positioning, doing unique research and publishing it, using direct mail, email, PR and social media, creating original communications and sharing them with a very targeted audience. Most companies do none of this!‎ Then they sit around and talk about how “word of mouth” is their most effective marketing. No one can give you word of mouth if they don’t try you in the first place!
  • The third problem. The owners take their people for granted. If you don’t believe me, pick up an A/E firm’s business plan and read it. Just look at how many references there are – substantive ones – about how they’ll make their firm a great place to work. Unique organizational structure? Structured training program? Open book management? Special rewards programs tying pay to overall company profits? Rotating board seat for a member of the rank and file? So much of this just ISN’T there. The implicit assumption is they just pay the least they have to so everyone doesn’t just quit and that should be sufficient to keep everyone motivated, engaged, and thrilled about providing outstanding client service. Guess what – it won’t be!! You cannot take your people for granted and then expect them to “Wow” all your clients. Just won’t happen!!

These three things – not a “lack of capital” or “being a mid-sized firm” – are what kills companies‎. Fix these three problems – ALL three of them – and you cannot help but be more successful!

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

This article is from issue 1144 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.

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It’s not personal. It’s business.

Screen Shot 2016-04-22 at 3.50.03 PMIn the AEC marketing world, proposals are usually treated as business as usual, but I believe we need to make them personal.

I will be celebrating my 20th wedding anniversary on June 1, 2016, (I married young, by the way). My love, loyalty, and commitment to my wife is confirmed, without a doubt, by the fact that I have sat down with her to watch (and enjoy, but let’s keep that a secret), the 1998 Warner Bros. hit, You’ve Got Mail, more than 25 times. Tom Hanks’ character is the head of a multimillion dollar bookstore chain that drove Meg Ryan’s local, independent children’s book store out of business. While trying to court her, Hanks’ character explains that what happened wasn’t personal, that it was business. She replied with: “Whatever else anything is, it ought to begin by being personal.” This piece of dialogue has always stuck with me.

In the A/E/C marketing world, proposals rule the land. They are usually treated as “business as usual,” but I believe we need to make them personal. One of the best, tried and true techniques to tailor proposals is the IFBP process (Issues, Features, Benefits, Proofs). In the IFBP process, benefits is the coveted “so what?” moment in which we drive the content to talk about the client’s goals. After all, we are always reminding practitioners (and ourselves) that “it is about them, not us.”

Client benefits have multiple layers, including: project (solution to a particular problem), business (cost savings and/or set-up to make money moving forward), department (improve standing within the corporate structure), staff (professional development), and a big picture “ultimate” goal (financial, social, sustainable, environmental, etc.). It is this “ultimate goal” that often gets lost in the shuffle and becomes a wasted opportunity to make the submittal personal.

Take, for example, a high school renovation/expansion project. A sample of the client’s benefits could be listed in the following levels:

  • Project. Modernization and expansion of aging facilities (problem solved!).
  • Business. Innovative engineering methods led the client to save money in overall project costs (good investment!).
  • Department. The Office of Facilities and Construction Management had been under scrutiny after the last two construction projects went severely over budget (great positioning for your firm moving forward!).
  • Staff. The recently appointed Chief Facilities Officer’s first completed project was a huge success (cultivate this relationship and it will last forever!).
  • Big picture. A community of over 5,000 students, previously under served, now has access to state-of-the art classrooms and ancillary facilities. The athletic fields adjacent to the school will be part of an extended-hours program that will benefit the community for years to come.

Even though we should weave all the benefits listed into the submittal, this “big picture” benefit should be our guiding light when preparing our proposal. As Vince Lombardi once said, “Success demands singleness of purpose,” and the only purpose for modernizing and renovating this high school was to better serve the students and the community. That is something everyone can get behind and relate to. It makes it “personal.” Don’t you want every kid to pursue their education at the best facilities we could offer? Drill down this message throughout your submittal because, at the end, we are all working towards the same goal.

Winning proposals are typically the result of having cultivated great relationships and submitting outstanding proposals. Reviewers that can easily understand our proposed approach and how we are working with them to achieve the “ultimate goal” will feel good about selecting us. The relationship will go to another level because we made it “personal.”

Who knows, maybe we can meet at the 91st Street Garden at Riverside Park in New York City as the main characters in You’ve Got Mail did and then we… Sorry, I seriously need to watch a superhero movie!

Javier Suarez is the central marketing and sales support manager with Geosyntec Consultants. Contact him at JSuarez@Geosyntec.com

This article is from issue 1144 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.

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Getting the best from each other

Screen Shot 2016-04-20 at 10.05.11 AMToday’s workforce is multigenerational, so those with experience and seniority must learn to understand, and teach, younger colleagues.

I was born in 1944, a couple of years before the Baby Boom. But my values and my approach to relationships align pretty well with that generation. My challenge as a young professional was to communicate with “the greatest generation,” who didn’t always understand where I was coming from.

In my career, I’ve worked with Generation X, Generation Y, and now I’m working with Millennials. It’s been an interesting journey, as each generation has some unique characteristics. The success of our work and our firms is deeply dependent on our ability to communicate well across generations. Here are a few thoughts on what I’ve learned and observed on this topic.

I’ll start from a point early in my career. In 1972 I was assigned to work as the tenant development coordinator for the Oakland City Center. Both the developer and contractor asked that I attend the Owner/Architect/Contractor meetings each week so I would be familiar with the technology and operations of the building when meeting with tenants. This turned out to be a graduate course in how to take a complex project through design, bidding, buying, and into construction.

The project executive from the contractor became a role model for the balance of my career. One of the most important lessons he taught: not everything is urgent, so don’t treat every task the same. Some items were brought out to get everyone thinking about them, with a long-range date by which an answer was necessary.  Others, sometimes brought up at the spur of the moment, were urgent and needed action within an hour, a day or two days. I learned that in project leadership, you must understand this and not run a fire drill unless it’s necessary. He also gave me a feel for how a project proceeds.

I was also privileged early in my career to be within walking distance of a number of projects that I was working on. This offered me the opportunity to visit a project during the lunch hour, introduce myself to the subcontractors on the job, and ask them what they thought of our drawings. I wanted to know if our drawings communicated clearly our intent and, if not, how we might do them better. Once again, I was privileged to learn from seasoned professionals, who, because my inquiry was genuine, always took the time to guide me.

I’ve tried to model my experiences and what I learned as I’ve gotten older. Here are a few thoughts about how senior members of your firm can convey the wisdom they’ve gained over the years with younger staff:

  • Share willingly what you’ve learned. Don’t just tell a person what to do, tell them why to do it that way. Don’t lecture them; share what you know in a positive and collaborative way.
  • Listen well; ask a lot of questions. Don’t just jump in and give them an answer.
  • Don’t be patronizing or condescending in any way. Show the younger person respect. It will encourage them to continue to seek your advice and to show respect for others.

So what should this younger generation be aware of about themselves as they begin to develop in their careers?

Once I was talking with a technology executive from Germany during a TED Conference break about how dramatically both our professions had changed with the rapid advancements in technology. I expressed a concern about the difficulty of critiquing the work of my younger colleagues. Rather than a floor plan on a large sheet of paper, allowing me to look at the entire project in context, I was dealing with a colleague who had only a small window into the project on the computer screen. That made it impossible for me to comment with any sense of context.

I was amazed by the young employees and their ability to “see” in their minds the entirety of what they were working on while only being able to see a fraction of the drawing. Perhaps this came from hours of playing complex, multi-layered computer games, a direct simile for what was going on.

My German colleague said, “That’s nothing. I have a more severe problem. These young kids don’t know how to solve a problem as a team. I was frustrated last week when people sitting right next to each other sent text messages back and forth. In frustration, I called them all into a conference room, sat them down and said we’re not leaving until we solve this together. Within five minutes they were all screaming at one another and charged out of the room to continue with their way of solving a problem – by texting.” They clearly never learned the fine art of face-to-face negotiation.

So, for you as a young professional, on your way into a leadership role, here are some thoughts:

  • Learn to interact with your colleagues, young and old, by inquiry as opposed to command. Find out together what the right answer is. Learn to negotiate.
  • Take advantage of your more seasoned colleagues. They can make you look good.
  • Learn from their hard-earned people skills (those who actually took the time to gain them). A major part of your career path as you develop is your ability to boost morale, and make a decision about whether a conversation should take place face-to-face rather than via email or text.
  • Learn how and when to say “congratulations” on a job well done. Each of your colleagues reacts differently. Some appreciate recognition in front of others; some are more comfortable if it is delivered in private.

Being aware of and working through your inter-generational communication skills is worth the effort.

Edward Friedrichs, FAIA, FIIDA, is a consultant with Zweig Group and the former CEO and president of Gensler. Contact him at efriedrichs@zweiggroup.com.

This article is from issue 1143 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.

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The entitled ones

Screen Shot 2016-02-12 at 10.31.22 AMFor most of my career, I have defended the “new generation,” i.e., those just getting out of school and starting their careers. The older people have always complained about the group coming in behind them, saying they don’t work as hard or have the commitment level that they had. After all, they walked six miles uphill in snowstorms both ways to school when they were kids. And they all started in the mailroom for $1 an hour and worked their way up. The cycle of bashing your successors continues from generation to generation.

My defense has frequently revolved around the idea that every generation DOES do this, and, young people, if given the right environment AND inspiration, will do whatever it takes and work their tails off to do a good job. And for the most part, I think ‎I was right. I think I still AM right – just not AS right as I used to be.

The newest generation does include some unbelievably diligent and intelligent workers who are willing to dig in and get the job done. We feel extremely fortunate to have a number of them working for us at Zweig Group and I would put them up against anyone for work ethic and willingness to do whatever has to be done to meet a deadline or fix a problem.

That said – I have seen and heard some examples of entitlement from millennials that blew my mind recently. As many of our readers know, I teach entrepreneurship at the undergraduate level at the University of Arkansas. During one class in the last year or so I asked my students what their plans were after college. One young woman who keeps a rather low profile in terms of class participation said she wanted to be a Fortune 500 CEO. I thought, “Great – she’s very ambitious.” Then I followed up with, “Awesome! What do you want to start out your career doing?” Her response: “I’m willing to start out as a COO.” I was so shocked I was nearly speechless! And she wasn’t joking.

Another example came to me from a local design/build firm. A young, degreed but not registered architect in their employ did some work on a set of plans for a former fellow employee – a project manager – who was fired a few months earlier for working on his own projects on company time. Not only that, the plans were prepared BY the firm a few months earlier but the former PM stole the project away from the firm before he was fired, and the employee knew all about this. In spite of the guy’s complete lack of ethics, the young architect refined the plans for the PM while on the company payroll. ‎The only reason the company learned about it was a contractor called them to warn them about potential litigation surrounding the project! When confronted, the young architect said he felt justified in his behavior because his “rent was due” and he “hadn’t had a raise” in too many months. He was “owed the money” he made working for a guy who stole from the company. Mind boggling!!

Yet another example was brought to me from a large engineering firm in the southeast. When interviewing a young engineering graduate for a potential position in their firm, the cocky fellow stopped the discussion and told them he would “not work one minute more than 40 hours per week and possibly four hours on Saturday,” or he “would not work there.” Hey, his time was his time, period! Guess what? He was right – he didn’t work there!

I could go on and on. There’s just too little respect for the senior people, too much of an attitude that the company owes someone a living because of their degree or just because, and too little willingness to do the crappy jobs that lead to better jobs. Again – not to put EVERY millennial in this pot – but there are too damned many of them who act like this.

Why do they act like this? There are many theories. Here’s mine: In a nutshell, life has been too easy on them. They’re living in $3,000 a month apartments as university sophomores instead of $100 a month mobile homes. Mom and dad are going in debt to pay for their degrees instead of them going in debt with student loans. They drive new Denalis and Tahoes and GT500 Mustangs, not $200, worn-out, six-cylinder Biscaynes. They don’t work in school but if they do, it’s only in a (relatively) highly-paid internship instead of the local service station or burger joint for $2 an hour. And don’t worry about living on Banquet pot pies and three-for-a-buck Swanson “Swiss Steak” dinners, or Kraft Mac N Cheese – go out for sushi on Mom and Dad’s credit card, or better yet, get the surf ‘N turf at a fine dining establishment. We created these monsters, folks, as the coddling parents and oft-spoiling grandparents of this new generation. And as their employers, we will undoubtedly pay the price for it.

But fellow baby-boomers out there – don’t despair. And please don’t work too hard this week. Life is short. And finally, as always, send your comments and feedback to me at mzweig@zweiggroup.com.

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

This article is from issue 1143 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.

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Newest Zweig Group Spotlight Survey examines mobile devices

1451492543-CellPhonesurveycover_webThe inaugural Cell Phone & Mobile Devices Spotlight Survey of A/E/P & Environmental Consulting Firms was released April 6 by Zweig Group, the architecture, engineering, planning and environmental consulting industry’s go-to resource for management research, publications and consulting. After several years of including information about firm-provided cell phones in its Policies, Procedures & Benefits Survey of A/E/P & Environmental Consulting Firms, Zweig Group took the opportunity of its new Spotlight Surveys series for a more in-depth analysis of issues related to mobile device usage in A/E/P and environmental consulting firms.

“It almost goes without saying that firm-provided cell phones are almost a given in many architecture, engineering, planning and environmental firms, and we have the data that show that increase in popularity over the past several years” said Andrea Bennett, Zweig Group’s research and publications manager. “With this Spotlight Survey, we wanted to take it a step further: Who gets phones; how are they selected and paid for; how often are professionals using them? What about tablets and other devices? Have any firms jumped on the smart watch bandwagon?”

The results, provided by almost 100 A/E/P and environmental consulting professionals whose job titles most commonly include words such as “manager,” “director,” and “president,” show that, though firm-provided cell phones are definitely commonplace and tablets are becoming more common, other mobile devices have not yet caught on among most firms.

“The fact that smart watches and similar mobile devices are still in their infancy, both in terms of development and in their adoption by the A/E/P and environmental industry, is actually really exciting, from a research standpoint,” Bennett said. “Because we’re asking these questions now and will continue asking them in future editions of this survey, Zweig Group will be able to track in almost real-time how quickly these devices are implemented by the industry and for what purposes.”

Though 97 percent of survey respondents reported having a cell phone that they used for work at least some of the time – 49 percent using those phones “very frequently” most commonly to “answer emails/communicate with colleagues” – only 54 percent said that their firms provided those cell phones and cover the monthly bills. Similarly, 79 percent of respondents said they had a tablet, but only 44 percent said their firms provided it. However, for other mobile devices, the data trend in the opposite direction: Though only 17 percent of respondents report using a mobile device other than a cell phone, tablet or laptop, 20 percent said that their firms will pay for such devices.

The 2016 Cell Phone & Mobile Devices Spotlight Survey of A/E/P & Environmental Consulting Firms is a full-color, digital-only publication and can be downloaded here. More than 20 survey questionnaires for 2016 are currently open for participation, and respondents receive either 50 percent (for participating in a Spotlight Survey) or 65 percent (for participating in a full-length survey) off the purchase of any Zweig Group survey product. For more information, call 800.466.6275 or email research@zweiggroup.com.

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The power of the relationship

Screen Shot 2016-04-14 at 9.04.54 AMPeople want to do business with people they like, so make as many meaningful connections as possible if you want to grow your business. 

There are two instances where a powerful relationship with a client can lead to marketing success with little or no cost – Indefinite Delivery/Indefinite Quantity contracts and discretionary assignments.

ID/IQs allow you to visit a client and convince them to assign their current need to your contract rather than going through the effort of a full-blown solicitation process. The agency doesn’t add to staff workloads with selection committee assignments, and you don’t have the expense of proposing and presenting before adding the assignment to your firm’s backlog.

It’s a win-win situation for both the agency and your firm.

In 1996, while working on my first proposal for a U.S. Army Corps of Engineers (USACE) ID/IQ contract vehicle, I learned what I believe is the most important thing about ID/IQ contracts: An ID/IQ contract is not work; it is not a project. It is more like a license to hunt.

There is a guaranteed minimum fee if there are no assignments, but that fee is a tiny portion of the contract’s potential value. If you wait for the contracting officer to assign a project, you won’t realize more than a small fraction of the contract’s potential revenues. If you’re not marketing the ID/IQ contract, agency staff with projects and funding won’t know you are there, capable, and ready to work.

When an agency’s project manager or contracting officer mentions a possible project, you can tell them the work can be done under your ID/IQ contract. In most cases, they will be happy to give you the work and avoid the time and extra work of a full-blown solicitation process.

So the best way I know to get new tasks under an ID/IQ vehicle is to visit the client’s office, and talk with end users and/or project managers. Once you are in the agency’s or end user’s office, make the most of your time. Meet as many of their project managers and contracting officers as possible, and make sure they all get information on your contract. If you can, get everyone you already know to introduce you to someone else they think you should know.

In a previous employment, one of our environmental leaders wanted to increase the revenues from a USACE environmental ID/IQ. He visited a local Air Force Base every week, and always came away with a new contract. His complaint was that every new assignment was $25,000 or less, and he wanted to increase the “burn” on the contract.

I suggested that, until a larger assignment came along, he should visit the base three times a week and have every agency project manager with whom he worked introduce him to another project manager or contracting officer.

More visits with more project managers creates more relationships, and that equates to more business.

The second instance has to do with a client being able to give out work on a discretionary basis, with no formal selection process. Generally, these contracts must be for less than a specific dollar amount.

If you have a strong enough relationship with the person who gives out those assignments, many of those discretionary projects can come your way. It’s all about the value you bring to the person who makes that decision – whether the value is professional or personal – especially if it’s a value he or she can’t get elsewhere.

Here is a great example. A previous employer of mine did a lot of work for a major airport located near one of our offices. On one regular visit, our project manager commented on a picture on the client’s wall, showing a teen-ager with a tennis racquet and a trophy. The client explained that his 16-year-old son was a nationally-ranked player who had difficulty finding a local opponent good enough to give him a good challenge.

Our project manager, a strong player, offered himself as a partner, and the client accepted. The first game between teen-aged son and project manager turned into a once-a-month meeting. The son was happy. So the dad was happy. So we wound up on the receiving end of a lot of smaller projects for the airport without competing. So our project manager was happy, as were his division and office managers.

We know that, all other things being equal, people like to give work to people they like. So you have to develop relationships with multiple agency/client staff, and make them real friendships, not just people you greet when you pass them in the hall.

Personally, I subscribe to what a friend called the “Velcro theory of relationships,” where many people in your organization have relationships with many people at the client/agency. I think this approach helps people make relationships that are real, strong, stand the test of time, and bring value to all the people on both sides of the equation.

Bernie Siben, CPSM, is owner and principal consultant with the Siben Consult, LLC, an independent A/E marketing and strategic consultant located in Austin, Texas. He can be reached 559-901-9596 or at bernie@sibenconsult.com.

This article is from issue 1143 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.

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Filling in the gap

Screen Shot 2016-04-12 at 8.32.54 AMFirm leaders often think they know what the company needs, but in reality, are looking for answers in the wrong places.

I receive a lot of phone calls from firms inquiring about many of Zweig Group’s educational offerings.  Oftentimes, I’m asked about a specific program, such as our project management or recruiting seminars, and after a short discussion, it becomes apparent there is a gap.

You know the gap. You realize your firm needs something, but you’re not quite sure what you need. It’s that standing-in-front-of-the-refrigerator-with-a-blank-stare gap. You want something or think you want something, but you can’t quite put your finger on what it is you want.

Some companies try to cover their performance gaps with assumptions, such as “What we need is more training.” I hear that one quite often. A performance gap may not be caused by a lack of training, but by something less visible. What they’re really looking for is process standardization.

Our survey data indicates only 26 percent of firms have a project management manual, so how would a new project manager know what a firm expects of them?  In that same survey, 76% of the respondents stated their firm relies on on-the-job training and mentorship for the necessary training. It’s difficult to accelerate a firm’s project management capabilities when a project manager’s training is left to the discretion of a mentor, or worse, as one firm told me, “our project managers are left to fend for themselves.”

Those are internal policy gaps that must be closed before a training program can truly be effective.  Finding and closing gaps is not as difficult as it may seem, but it takes a little effort.

  • Define success for your firm. What results do you wish to achieve? Let’s say you decide you want your firm to be more entrepreneurial. If so, you need to define what the term “entrepreneurial” means to your firm. Does it mean you want to expand your client base, or does it mean you intend to transform your firm into a high-energy, high-growth titan in the industry? Those are two very different definitions on different ends of the spectrum.
  • Close the gap by clearly stating the direction in which your firm is heading and the resources required to get there. Ensure everyone on your team understands both. That will drive their decisions and close the gap between what they’re doing and what they think they should be doing.
  • Communicate with and empower your staff. Ensure everyone is aware of your goals. I speak with a lot of human resources directors who tell me what they believe their firm needs. After talking through their challenges and discussing possible solutions, they usually end the conversation by telling me they need to talk with “the Principals” before they can make any decisions. There’s another gap. Some HR directors are treated as simple information hunter-gatherers. They’re instructed to find a solution to a vague problem and then report their findings to someone higher up in the organizational structure.
  • Arming these professionals with a clear understanding of the firm’s long term goals, as well as the authority to make decisions regarding training programs (which they are usually expected to manage), will expedite the process and ensure the training is completed in a timely manner.  Instead, companies waste precious time endlessly debating whether or not a program is right for the firm.
  • Identify the underlying issues, not the symptoms. When a firm says they’re having a problem retaining talented people, one assumption is that they’re simply hiring the wrong people. They lament that their internal recruiting staff had failed to find the “right” people. In an attempt to close the gap, some leaders believe that better recruiters will solve their talent-bleeding problem. The gap here is the chasm between the perception about why talented people leave and the actual cause of the brain drain.
  • Perhaps the firm has a much deeper problem. Perhaps the problem is rooted in the firm’s culture or pay and reward systems. An expert recruiter, no matter how talented she is, cannot overcome a weak firm. Who would want to stay with a firm that’s infected with passive-aggressive types or rewards longevity over performance? Of course, your best and brightest will leave; they’re miserable!
  • Spending time to uncover the underlying issues is vital to your firm’s long-term health. An unbiased assessment of your entire firm may be necessary to find that root cause. Only after you’ve uncovered it can you begin to discuss solutions. Rubbing ointment on a rash will do nothing for you if the real reason for the rash is an allergic reaction to a medication you’re taking.

We all have gaps we don’t recognize. We think we have the skills needed to perform at a higher level, but the reality is that we often have some limitations. Those gaps can be overcome by ensuring your team clearly understands your vision, by empowering them to make decisions based on your vision, and by spending time uncovering the root causes of your gaps. Like getting a new pair of eyeglasses, you’ll be amazed at what you’ve been missing when you can see more clearly.

This article is from issue 1143 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.

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New Zweig Group publication shows what’s in a name

1452694312-zg-jd-cover2Job Descriptions & Organizational Charts offers two resources for price of one.

Zweig Group’s newest managerial resource, Job Descriptions and Organizational Charts for A/E/P & Environmental Consulting Firms, second edition, aims to help architectural, engineering, planning, and environmental leaders answer that all-important question: What’s in a name (or job title)? And, the publication takes it analysis a step further, offering dozens of organizational, office and departmental charts depicting where those titles should fall in a firm’s overall hierarchy.

“Architectural, engineering, planning and environmental firms are living organizations,” said Andrea Bennett, Zweig Group’s research and publications manager. “Ongoing advancements in materials and technologies require evolving companies to create positions that can serve the needs of increasingly advanced client-bases. This second edition includes updates to Zweig Group’s original A/E Job Descriptions (2003) with job titles such as BIM CAD manager, BIM coordinator, BIM manager, and BIM specialist. Our hope is that the inclusion of these technologically specific positions will help readers determine the positions that they might need to add to best serve their clients.”

The book is divided by disciplines, including architecture, computer aided drafting, clerical and administrative, construction and inspection, engineering, environmental, finance and accounting, human resources, information technology, interiors, landscape architecture and planning, marketing, operations, project management, surveying and GIS, and top management. Each job description lays out the duties; experience; education; and knowledge, skills, and abilities that are required and/or preferred to successfully complete the work.

“Three major features that really set this publication apart are its specificity to the architectural, engineering, planning and environmental consulting industry, which is, of course, inherent in everything Zweig Group does,” Bennett said. “In addition to that, we have denoted each discipline by tabbing the pages, so that readers can easily find the information they need without returning to the contents page. Lastly, Job Descriptions and Organizational Charts offers readers another piece to the HR puzzle by providing the most recent average salaries, as determined by respondents to Zweig Group’s 2016 Salary Surveys, for several positions within the book.”

In addition to more than 300 job descriptions, Job Descriptions and Organizational Charts for A/E/P & Environmental Consulting Firms, second edition, also includes more than 60 organizational charts for firms, offices and departments, denoted by discipline and staff size.

“Once readers know the positions they need and about how much they should pay them, this book also serves as a benchmark for determining where to place them in the organization and/or its offices and departments, and it’s important to note that all of the listings and charts are used by real-world firms. The inclusion of all of this data really does make for a comprehensive publication.”

Job Descriptions and Organizational Charts for A/E/P & Environmental Consulting Firms is available now for $250 (print) or $150 (digital) at zweiggroup.com/books.php. For more information on this or any Zweig Group publication, email publishing@zweiggroup.com or call 800.466.6275.

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Some finer points on M&As

Screen Shot 2016-04-06 at 2.04.38 PMDon’t just get a good lawyer. Get one who knows the M&A industry, and don’t let minor, personal stuff derail the transaction.

I’ve been in this industry for 36 years now. That’s a long time. And I have to say that the amount of merger and acquisition activity in the A/E and environmental business has never been higher – at least that’s how it appears from my perspective. Our phone is literally ringing off the hook, and email boxes are jammed from all of the projects and inquiries from buyers and sellers. It is beyond insane!

That said, not everyone – certainly not the sellers and a lot of the buyers – has a lot of experience in this stuff. Here’s a few points that might be helpful to those of you who are currently involved in a merger, acquisition, or sale:

  1. Hire a good attorney. Time and time again we have the same issue. The buyer (or seller) gets their “usual” business attorney to work on papering up the deal they (think) they have negotiated with the other side. Big mistake. This is a very specialized area and you need to be dealing with someone who is very knowledgeable, not just in how to negotiate and write contracts for firm sale/merger transactions, but also someone who is familiar with the peculiarities of our particular industry.
  2. Get your attorney talking to their attorney. Whether you are a buyer or seller, have the attorneys do the difficult stuff. The reason is simple – you will have to live together in one way, shape, or form post-transaction. Don’t mess up that relationship arguing personally with the other side over sometimes minor stuff!!

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

This article is from issue 1142 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.

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Dear Christy

MGBQ17CX9FDear Christy,

I have a son who is in engineering school. I’d really like to have him join our firm and eventually succeed me in running this business. How do you suggest I make that happen? — Getting Old in Omaha.

Dear Omaha,

I know from personal experience that working with family members can be very tough, but it happens relatively frequently in the A/E industry and many firms are able to do it successfully.

I’d start with your son. Is this something he is interested in? Firms can grow and change, but if your son really wants to go into earthquake mitigation work and your firm has done mostly local street design and residential plans, it may not be a good match. Additionally, if you want your son to take over the business he also has to have the personality to effectively manage people and the desire and ability to market and sell your firm’s services. Basic business skills like accounting, organization, and an eye for detail don’t hurt either. If your dreams do align, I’d recommend the following:

  • Make sure your son does an internship or works elsewhere for some amount of time. Coming straight out of school and into the workplace can be an eye-opening transition for many people. If your son works elsewhere he inevitably will learn things from management approaches to technology that will improve your firm. If you’re lucky he will appreciate the work you’ve put into creating a good environment and be thankful. An outside perspective will be invaluable in the future.
  • When your son does come to work at your firm, don’t immediately give him the nicest office, extra privileges, and a company car. Make sure he is held to the exact same standard as everyone else, particularly other people who have had similar tenures at the firm and experience in the industry. When I started working for my father here at Zweig Group, he counseled me early on that I had more to prove than other employees and should be the first person to arrive and the last one to leave.
  • Make sure your family members don’t out number other people in the rest of the organization. If you want to have a successful firm that grows and thrives, don’t hire every family member who wants a job. It will become impossible to manage in an unbiased way and may create an environment that is awkward and un-inclusive for other employees.
  • Make sure your son has full support of the leadership and management team of your firm. Trust takes time to build. You will destroy your organization from the inside out if you place your son at the top of the org chart and immediately have senior people reporting to him.
  • Keep the work at work and the family stuff at home. It’s harder than it seems, but your workplace and family will thank you for it.
  • Don’t immediately publicize your desire to eventually hand the reins over to your son, especially at a finite date.
  • Have a backup plan. Make sure you have other leaders in the firm that are interested in ownership opportunities in case your son decides it’s not in his or the firm’s best interest for him to take over. Even if he does take over, he will need good support and leadership.

My final piece of advice: Thinking about ownership transition is something that many firm owners don’t do until far too late. Passing ownership to a family member can be a viable and successful option, but it requires as much planning and cooperation (if not more), than other options. Don’t consider letting your son take over lightly or use it as a last resort.

Christina Zweig is Zweig Group’s director of research and marketing. Contact her at christinaz@zweiggroup.com.

This article is from issue 1142 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.

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Think before you hit “send”!

jamiekiser_hoverA few weeks ago, I wrote a short article about how important it is for firm owners to understand the value of their business. The point of the piece was to address the real threat to firms that have no idea what they are worth or what drives their value. The issue that we see in M&A all too often is the firm owner that throws out a value with no basis in reality, effectively slamming the door shut on what could be a very happy – and lucrative – union. It’s completely avoidable, but yet it occurs time after time. So I wrote a brief piece with a few examples, and we sent it out via email.

The article I’m writing today isn’t about M&A or valuation, though. I want to talk about what happened after we hit “send.” The emails were sent from my account, and all responses were directed to my inbox. After wading through hundreds of “out of office” notifications, I started to receive actual feedback. Some recipients read the email and provided comments or questioned my analysis. Others, perhaps assuming that there wasn’t a human behind the email, or maybe emboldened by the indirect nature of digital communication, took the time to fire back scathing critiques or rude remarks.

Plenty of the nastier comments were funny, sure, but I was surprised that emails sent to professionals would garner so many, well, unprofessional responses. As a consultant to this industry, I’d like to recommend thinking twice before sending something out into the World Wide Web.

It’s not only responding to emails (sent from your company’s email address!), which are just a forward button away from the rest of the universe. When you post a snide remark, share a politically-charged opinion, or upload a picture from your friend’s bachelor party on the internet, the ripple effect can have real consequences for your reputation and your firm’s reputation.

This point is especially important as more Millennials – people who have grown up with the internet – enter the workplace and take on management roles. Although Millennials are by no means the only ones guilty of online indiscretion, they do tend to have less concern over privacy settings and to utilize more outlets to potentially embarrass themselves or their employer in social media. That combination is a liability in an industry that relies on sound judgment calls. It’s hard enough to stay on top of projects, reach revenue projections, land new clients, find great employees, and close M&A deals without adding one more “risk factor” to the equation!

Jamie Claire Kiser is Director of M&A Services. She can be reached at jkiser@zweiggroup.com or Office: 800.466.6275 | Direct: 479.435.6521

 

 

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The entitled ones

photo-1448932223592-d1fc686e76eaFor most of my career, I have defended the “new generation,” i.e., those just getting out of school and starting their careers. The older people have always complained about the group coming in behind them, saying they don’t work as hard or have the commitment level that they had. After all, they walked six miles uphill in snowstorms both ways to school when they were kids. And they all started in the mailroom for $1 an hour and worked their way up. The cycle of bashing your successors continues from generation to generation.

My defense has frequently revolved around the idea that every generation DOES do this, and, young people, if given the right environment AND inspiration, will do whatever it takes and work their tails off to do a good job. And for the most part, I think ‎I was right. I think I still AM right – just not AS right as I used to be.

The newest generation does include some unbelievably diligent and intelligent workers who are willing to dig in and get the job done. We feel extremely fortunate to have a number of them working for us at Zweig Group and I would put them up against anyone for work ethic and willingness to do whatever has to be done to meet a deadline or fix a problem.

That said – I have seen and heard some examples of entitlement from millennials that blew my mind recently. As many of our readers know, I teach entrepreneurship at the undergraduate level at the University of Arkansas. During one class in the last year or so I asked my students what their plans were after college. One young woman who keeps a rather low profile in terms of class participation said she wanted to be a Fortune 500 CEO. I thought, “Great – she’s very ambitious.” Then I followed up with, “Awesome! What do you want to start out your career doing?” Her response: “I’m willing to start out as a COO.” I was so shocked I was nearly speechless! And she wasn’t joking.

Another example came to me from a local design/build firm. A young, degreed but not registered architect in their employ did some work on a set of plans for a former fellow employee – a project manager – who was fired a few months earlier for working on his own projects on company time. Not only that, the plans were prepared BY the firm a few months earlier but the former PM stole the project away from the firm before he was fired, and the employee knew all about this. In spite of the guy’s complete lack of ethics, the young architect refined the plans for the PM while on the company payroll. ‎The only reason the company learned about it was a contractor called them to warn them about potential litigation surrounding the project! When confronted, the young architect said he felt justified in his behavior because his “rent was due” and he “hadn’t had a raise” in too many months. He was “owed the money” he made working for a guy who stole from the company. Mind boggling!!

Yet another example was brought to me from a large engineering firm in the southeast. When interviewing a young engineering graduate for a potential position in their firm, the cocky fellow stopped the discussion and told them he would “not work one minute more than 40 hours per week and possibly four hours on Saturday,” or he “would not work there.” Hey, his time was his time, period! Guess what? He was right – he didn’t work there!

I could go on and on. There’s just too little respect for the senior people, too much of an attitude that the company owes someone a living because of their degree or just because, and too little willingness to do the crappy jobs that lead to better jobs. Again – not to put EVERY millennial in this pot – but there are too damned many of them who act like this.

Why do they act like this? There are many theories. Here’s mine: In a nutshell, life has been too easy on them. They’re living in $3,000 a month apartments as university sophomores instead of $100 a month mobile homes. Mom and dad are going in debt to pay for their degrees instead of them going in debt with student loans. They drive new Denalis and Tahoes and GT500 Mustangs, not $200, worn-out, six-cylinder Biscaynes. They don’t work in school but if they do, it’s only in a (relatively) highly-paid internship instead of the local service station or burger joint for $2 an hour. And don’t worry about living on Banquet pot pies and three-for-a-buck Swanson “Swiss Steak” dinners, or Kraft Mac N Cheese – go out for sushi on Mom and Dad’s credit card, or better yet, get the surf ‘N turf at a fine dining establishment. We created these monsters, folks, as the coddling parents and oft-spoiling grandparents of this new generation. And as their employers, we will undoubtedly pay the price for it.

But fellow baby-boomers out there – don’t despair. And please don’t work too hard this week. Life is short. And finally, as always, send your comments and feedback to me at mzweig@zweiggroup.com.

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

This article is from issue 1143 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.

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Negative energy and your brand

Screen Shot 2016-03-30 at 9.34.19 AMTroublemakers within a firm can do a lot of damage, especially if they are tolerated.

Every firm has these people to some degree. The naysayers, the skeptics, and the gossips. These people are holding back firms, inhibiting performance, and are a toxin to the firms they work for just like a poison running through the veins of your body. The negative energy these people create can have a profound impact on any organization. No matter how big or how small their role is, they can be a very destructive force. Professional service organizations must be extra vigilant in the crusade against negative energy as it has a deeper impact on them than other industries. The reason is we are a people business. We sell people and client service. When we poison a team or an entire company, it dramatically affects the product we are selling – our people. A few defeatists on your staff can do more damage to your brand than the positive effect of all of your other staff combined.

This is a big problem in the AEC industry. When you get behind the closed doors of firm leaders, you realize how much time is spent dealing with people problems. They take valuable time away from executing strategies to grow and develop the firm. I am continuously impressed with how many high-level strategy sessions get derailed by conversations about bad apples. All that valuable time that could be used to discuss growth and new ideas is instead used to talk about one or a few troublemakers.

When you want to remediate a toxic environment, you need to understand that people have three basic psychosocial needs: the need for control, the need for security, and the need for recognition. The reality is that many employees do not feel like they have control in the workplace and that combines with the feeling of not receiving adequate attention, acknowledgment and recognition. As a leader, you have the ability to create an environment that fosters all of those needs. You must first recognize that the company on the outside reflects what’s on the inside. Get serious today about fixing your people problems with these critical actions:

  • Get rid of negative people. Assuming you have had the appropriate discussions with them and tried to remedy the situation, it is time to part ways if no improvements have been made. Too many firms tolerate those who ruin the team and its brand. You cannot sell a fun environment to new recruits or high quality services to clients if you retain people that exude negativity.
  • Give your people more control. If you have appropriately dealt with the people that are negative and cannot be trusted, you should have no problem eliminating some of your policies that create bureaucracy and slow down decision-making. Dependable people thrive on freedom, yet so many firms have too many processes that are designed to control people and results. This is especially a problem as firms grow larger. When you have the right people on the team, you should be able to trust them and therefore offer them more control.
  • Give people security. I don’t mean unconditional job security. I mean security in the sense of feeling good about the company, its direction and their role in that direction. Have a clear vision for growth with a strong commitment to opportunity everywhere. Share more information with all employees using an open book management philosophy. Demand that all leaders have an ongoing, open dialogue with their people about how they are doing as a team and as individuals. Try to break free from the “once-a-year career development discussion” that is often aided by forms and meetings that accomplish little. True security is gained by reasonable transparency and confidence in the future.
  • Recognize your people. Getting rid of negative people tells everyone else we like what you are doing and we do not like what they were doing. Taking that a step further is recognizing performance and excellence as it happens. Again, resist the standard approach of talking to employees once a year about performance and offering raises and promotions at that same time. Offer raises throughout the year when deserved. Positive reinforcement is more effective when offered in response to the desired actions as opposed to a schedule. At the end of the day, paying at the top of the market and offering promotions are the recognition that employees need. If you have built your company like a sports team and only have the right people on the team, this should be easy.

Negativity is one of the greatest enemies of your brand, both internally and externally. Tolerating it is a big problem in the AEC industry, especially right now as the market for talent is tight. You must decide if you are going to focus on building a company around needs or around ideals. A company built on needs grows and shrinks based on the market. They tolerate poor performance and negativity because they employ people to fulfill a need. They lose high performers to other companies that have strong ideals and better fulfill their basic needs of control, security and recognition. A company based on ideals and focused on positivity flourishes in all markets and does a great job of providing for the pyscho-social needs of staff. If this article resonates with you, you have some hard decisions to make. It’s these hard things, though, that create prosperity. Good luck!

Chad Clinehens is Zweig Group’s executive vice president. Contact him at cclinehens@zweiggroup.com.

This article is from issue 1142 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.

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Looking for Inspiration?

Screen Shot 2016-03-25 at 9.09.13 AMWhile success and security are good things, they can also zap your energy, so find something new.

Chances are, if you’re reading this, things have gone pretty well for you. The company is doing well and you’re making a great living. You’ve probably got a nice house and decent vehicles – maybe you even have super cool vehicles! Your kids go to good schools or are already through school and into college or beyond. You aren’t worried about paying for their college. You may even have been on a nice vacation in the last 12 months and have another one planned. In short, you’re living pretty darn well.

That said, you may be unmotivated at work because it’s all going so smoothly. You’re bored with your choice of local restaurants, agitated by the upcoming elections, and feeling that your vote or opinions are futile in the scheme of things. As a result, you are uninspired. So here are my suggestions to get you back into inspired mode:

  1. Start another small business with your spouse or one of your kids. It may get you re-enthused about business and what you’ll learn can be applied to your primary business to make it more successful.
  1. Whether at the college level or in some other capacity, teaching keeps you fresh and keeps you learning. Young people have an energy and sense of possibility that hasn’t been beaten out of them yet. This is infectious and will help you.
  1. Go on a trip with a friend. Do something you haven’t done in a long time. Motorcycle ride through the Rockies? Tour the historic Route 66 in a 1970 Chevelle SS 454 with cowl induction?
  1. Machu Picchu? Float trip on the Buffalo River? Do something you don’t normally do with someone you don’t normally do it with.
  1. Join a new group. Whether it’s the Sierra Club or the Girl Scouts or Habitat for Humanity – try something different and start getting into it. It may be inspirational for you to do something that has what you consider to be worthwhile cause.
  1. Pick up a new hobby. Model trains. Skeet shooting. Needlepoint. Pot throwing. Archery. Collecting egg beaters (yes, I had a client who was a very successful A/E firm CEO who actually did this). Oil painting (my sister-in-law picked this up in her 60s and has been able to sell her art at surprisingly high prices).
  1. Pick up a new sport. Do something physical. Distance running. Yoga. Mountain biking. Diving. Doing something like this may be what it takes to get you more centered and back to your old inspired self.
  1. Read some books. Great works of literature may be inspirational. Or true stories of those who have overcome obstacles to be successful at doing something. Get your mind out of the newspaper and Yahoo.com and Facebook and instead fill it with something useful.

The point is this – there are a lot things you can do if you need inspiration. Any of these will conceivably help you become re-energized personally and that is going to help you be more vital to your firm. Better get to it now – time’s wasting!

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

This article is from issue 1141 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.

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Assessing insurance and risk in M&A transactions

Screen Shot 2016-03-23 at 2.23.45 PMThe checklist is long, but with meticulous attention to detail, a firm can avoid unpleasant surprises after closing the deal.

Merger and acquisition activity among A/E firms continues to heat up.  When planning to buy, sell, or merge with another firm, you need to understand and evaluate various risk and insurance issues that can affect the success or terms of the transaction.

Two of the most important steps are to:

  • Start early and make sure that risk management and insurance issues are being addressed throughout the process; and
  • Gather all the necessary information to allow a complete understanding of the issues and opportunities.

With regard to gathering information, we usually suggest asking the entity being acquired to provide the following:

  • Summary of insurance policies carried for each of the last three years (often called a schedule of insurance).
  • Copies of all current insurance policies.
  • Insurer loss runs or claims history for at least the last three
  • Details of any open claims or circumstances that might give rise to a claim; and
  • Summary of risk management policies and procedures.

Be sure the information provided includes not only professional liability policies, but also all property/casualty and management liability insurance policies.

Claims information can provide valuable clues. Claim information, in particular, can be a critical indicator of future problems or management issues that you will want to factor into your acquisition terms and conditions. For larger firms, you’ll want to go back further than 3 years and obtain loss runs for five or even 10 years. The focus should be on any open professional liability, general and auto liability, property and other claims. Review all large claims and flag any circumstances that could turn into claims.

The claims-made nature of professional liability insurance policies heightens the need to understand any potential circumstances and the to-be-acquired firm’s risk management practices.  Under a claims-made insurance policy, even errors that occurred years ago are paid by the insurance policy in effect at the time the claim is filed. Making this even more of an issue is that unlike general liability policies, PLI policies have an overall aggregate limit, which includes all claims expenses (including defense costs).

Extended reporting periods can assist. One solution often utilized is for the selling firm to purchase an extended reporting period, or “tail” coverage, as an extension to its last claims-made policy. Most ERPs extend for one, two, or three years. While the insurance limit usually remains the same, it applies for the entire ERP period vs. a single year when a PLI policy is typically renewed. This restricts the monies available to pay claims and could increase the risk of uncovered claims.

To help determine an appropriate duration for tail coverage, some firms check the statutes of limitation and statutes of repose in states where they have current or completed projects. Statutes of limitation define the maximum timeframe after an event or accident that legal proceedings may be initiated. They vary by jurisdiction and may, under certain circumstances, be extended.

Statutes of repose specify the maximum time after completing an act, such as completion of a construction project, that legal proceedings can be initiated. Some state statutes provide more than 10 years of liability.

Unfortunately, most ERPs will not extend for such longer periods and buyers and sellers will have to evaluate other options including whether or not the seller’s liabilities can be rolled into the buyer’s PLI policy.

Other claims-made policies need attention too. Speaking of claims-made policies, it is important to keep in mind that there may be other claims-made policies beyond PLI that require tail coverage. These include directors and officers liability, employment practices liability, fiduciary liability, and employee benefits liability (under the commercial general liability policy).

During a merger or acquisition, EPLI coverage can be critical; eliminating staffing redundancies may require terminating employees, which can lead to employment-related claims. Be sure to understand your policy’s coverage, tail and claim reporting provisions and requirements.

Check workers’ compensation. Sellers with elevated accident or injury rates can have profoundly negative effects on an acquiring firm’s business. Workers’ compensation insurers use a rating system based on an employer’s loss history to set that entity’s insurance premiums.

Significantly, the rating, known as an experience modifier, is among criteria project owners and managers use to evaluate design and construction firms working or bidding on their projects. A poor rating can disqualify a firm from a bid or retaining a client. So, be sure to assess whether and how the seller’s workers’ compensation loss experience might affect your business.

Key considerations in other coverages. With regard to commercial general liability and other related property/casualty insurance policies, it’s common to add the acquired firm to the acquirer’s CGL and other policies as an “additional named insured.” In a merger, the combined entity should have both predecessor companies as named insureds in its CGL policy to address any current occurrences arising out of the combined operations.

For property and other insurance policies, be sure to have a process in place to identify coverages carried by each firm, ensure continuity of needed coverage, and cancel redundant policies.

Insurance and pricing. In pricing M&A transactions, many buyers employ a two-year earn-out or escrow fund to address contingencies arising post-closing. This fund should also contemplate insurance-related costs, such as those for audits related to workers’ compensation, general liability, and automobile liability policies, as well as for deductibles and self-insured retentions, which can be $25,000 to $500,000 or more per claim under some policies.

Successful mergers and acquisitions require careful due diligence, which should include risk and insurance issues. Be sure to reach out to your insurance broker and tap their experience and expertise with merger-related insurance and risk management issues.

Dan Knise is president and CEO of Ames & Gough. Contact him at dknise@amesgough.com.

Ames & Gough are sponsors of the 2016 Hot Firm and A/E Industry Awards Conference. Want to learn more? Meet us in Phoenix on September 22-23 and spend some more time in person with an Ames & Gough representative.

This article is from issue 1141 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.

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2016: New year, old ways? You decide

photo-1451653500993-04a9a6368221Here are some tips to help you make positive changes for your A/E/P or environmental consulting firm in the new year. 

The year has dawned and as many of our clients report, it has started with a bang. Lots of work that has carried over from 2015, and more opportunities for the firm with new proposals and new projects.

As financial managers and project managers embark on planning and executing the work, will you fall back on the old ways of approaching your business, or will you integrate new ways of thinking? Will you create energy, fresh ideas, and opportunities for new efficiencies that will translate into higher profit for the firm? Or will you remain stale?

How can we create more profit with the same fee? Oftentimes, as project managers, there is a set way of doing the work – firm-wide standards of care, of approaching tasks, of delivery in projects, and execution of effort. Are you open to transforming the work process in favor of potentially higher profit?

A case in point might help illuminate this. A client did drawing tasks with an extraordinary level of documentation and detail, which chewed up the fee. The financial manager asked a simple question to the project manager and team: “Do you have to commit that level of detail on the documents or can the documentation be streamlined, and can the firm save time, money, and increase profit?”

The question stimulated a pause in the action, and the PM was able to reflect on the possibility of streamlined documentation while still maintaining rigorous standards. The PM met with the contractor. They created a more efficient set of documents, reduced the schedule, and the PM was able to go back to the client with a shorter schedule. On a fixed-fee project, that was of great value to the client. When there’s a strong degree of trust in a design-build relationship, there’s plenty of opportunities to review the process and achieve the client’s goals.

Can we approach the project differently and create greater opportunities for profit? As a Managing Principal of an architectural firm, our office provided a line of business that supported real estate professionals, and we were doing “test fits” for potential tenants. The fees were highly competitive, and the project manager who had the client relationship often complained that it was very difficult to make a suitable profit for this kind of work.

From a financial perspective, we wanted to drive most project types to 20 percent profit, including this line of business. I challenged the PM to come up with a way to approach these projects. He, along with two architects-in-training, were given eight hours to devise a way to transform this line of business. Skeptically, the PM went off to brainstorm this process. Eight hours later, the two trainees had created a way to transform the older approach through technology and process to provide the “test fits” at a 20 percent profit. New ways of thinking might not always be popular because they challenge old thought processes. But by creating a new approach, we re-energized a line of business.

Create a new perspective and energy! New thoughts, new approaches, and a new perspective might be as simple as altering your view, turning your seat around, looking at the work effort from a different vantage point, and creating in a different method. Routines sometimes afford us a comfort level, but they also inhibit creativity and the flow of creative energy. So examine what you do each day, when you come into your office, how you engage with staff, how you run your meetings, and what your day-to-day routines might be doing to stifle or stagnate your thinking.

Integrating the financial management staff into the way you approach your project plans might create a new approach to the work. Just because they play with numbers all day does not mean they aren’t able to offer a bit of “non-constrained, creative thinking” that could be transformative.

Implement “Creative Tension” into your operation by asking each staff member to prepare a 10-minute presentation on a project, and to deliver the presentation in front of the entire office. After their presentation, colleagues can comment on the presentation, the work, the design, the approach, and in this safe environment, all comments are OK. During these weekly sessions, colleagues offer solutions to the problems that were found.

What do you gain in this process? The presentations can shed light on areas where someone might need help. This exercise also shows how staff responds to criticism, and how they respond to hearing solutions. In the process, your staff improves, and that’s good for the client.

So it’s a new year. What are you doing to energize your firm and increase its profitability?

Ted Majiejka is a Zweig Group financial and management consultant. Contact him at tmaziejka.com.

This article is from issue 1140 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.

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Inaugural ‘Work Travel & Reimbursement Spotlight Survey’ Released

1452648221-WTandRsurveycover_webDigital publication shows who will, and won’t prepay for employees’ personal travel.

Zweig Group has released the first of its Spotlight Surveys series, Work Travel & Reimbursement. This full-color digital product offers an in-depth look at firms’ policies related to business-travel reimbursement at a fraction of the cost of Zweig Group’s full-length survey products.

“The Spotlight Surveys series is a little more reader-friendly, I think,” said Andrea Bennett, Zweig Group’s research and publications manager. “Not only is the information more targeted, meaning that the topics covered are more succinctly linked, but also the digital format allows us to create a full-color product, which makes for a more pleasurable reading experience, in general.”

“We’ve also used this inaugural Work Travel & Reimbursement Survey to implement some new data breakdowns that readers of other surveys have requested,” she said. “For addition, readers will be able to look and see the exact percentage of respondents that offer specific engineering services, in addition to firms’ broad markets within the industry.”

Among the most interesting findings of the Spotlight Survey relates to firms’ willingness to provide front-end coverage of employees’ personal travel costs conducted in conjunction with business travel, with either the expectation of repayment or the deduction of the costs from the employees next paycheck.

“It was striking to me how many firms – about 16 percent – said that they would prepay for employees’ personal travel expenses when that travel is conducted in conjunction with business travel. To me, that says that A/E/P and environmental firms really trust their employees, especially the almost 11 percent that allow the employee to repay them at a later date, versus deducting the amount from their paychecks, which happens at about 5 percent of firms.”

Firms in the architecture/interiors (67 percent), single-discipline engineering (20 percent) and multidiscipline engineering (11 percent) are most likely to prepay for employees’ personal travel expenses with the expectation of being repaid later. They are most likely to be based in the Middle Atlantic (100 percent), North Central (7 percent), and/or South Atlantic (13 percent) regions and to have less than 50 (61 percent) employees.

“Though it’s interesting to note where these practices are taking place, it’s almost more interesting to see where they aren’t,” Bennett said.

For example, no fast-growth firms (those that have experienced an annual revenue/staff growth of 20 percent or more over the past three years) report prepaying for employees’ personal travel expenses, and only 14 percent of very high profit firms (those with an annual net pre-tax, pre-bonus profit on net service revenue of 15 percent or more over the past three years) report doing so.

“We can only report on correlation,” Bennett cautioned, “but these numbers seem to indicate that growing firms are less likely than firms overall to extend this ‘prepay option’ to their employees. But, of course, each firm must make its decision based on what’s best for it and its staff.”

The inaugural Work Travel & Reimbursement Survey is available for purchase at zweiggroup.com/survey.php for $250. Professionals who participate in a Zweig Group survey questionnaire are also eligible for a 50 or 60 percent discount on the purchase of a survey of their choosing. For more information, call 800.466.6275, email research@zweiggroup.com, or visit zweiggroup.com/survey.php.

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Handling employed job candidates

Screen Shot 2016-03-15 at 2.05.08 PMUnderstanding the nuances of a Happily Employed Job Candidate can boost your ability to hire the best people.

I recently received an email from a client who was in the middle of arranging an interview with a candidate that we presented to them about two weeks prior. The client sent us the conference call instructions and then asked for the candidate to fill out an employment application.

My colleague, who had recently started working on the search with me, asked if the client was joking.

I told her I wish they were, but they were all too serious about getting that application filled out before speaking with our candidate. They had done it for each of the previous candidates we sent to them.

Never mind the fact that we had sent a resume and our profile, which gave an in-depth review of the candidate, their background, and skill set. They wanted to see a filled out employee application.

Now I’m going to say this one-time:

Candidates who are not actively looking for a new job should not have to fill out these applications at any time before determining that a firm wants to hire them!

They are happily employed candidates for a reason. In most cases, they are taking a meeting with you, whether on the phone, via videoconference, or in person, based on our ability as a recruiter to get them to hear about another opportunity even though they may be in a great job situation.

That’s the challenge of a recruiter today. A lot of the good candidates are currently employed, and we have to cajole, convince, and sometimes coerce (only half joking) an individual to speak with our client. Unfortunately, a majority of our clients don’t understand this concept, acting as if the candidate came in off the street to apply for a job. This situation couldn’t be further from the truth. A “not actively looking for a new job” candidate shouldn’t go through the same hoops that an employed job applicant or unemployed candidate does.

While you need to treat all candidates with dignity and respect, you need to understand the motivation of a “Not actively looking for a new job” candidate before you raise the hiring bar. A good recruiter can convince even the most engaged employee to consider other options if you frame the opportunity and the client firm. As recruiters, we get cut off at the knees when we have to go back to these job candidates and ask them for a completed employee application. For some, it can be a humiliating request.

Here are some thoughts for firms that find themselves in this position. First, go into the interview with as much anecdotal evidence as you can find out about the candidate. This may or may not include a resume, and maybe some social media and online research. Remember, happily employed candidates may not have an up-to-date resume or CV. Not everyone in our industry needs to have a current resume unless they are selling work and need to keep an updated CV to attach to job proposals.

Don’t get bent out of shape when a candidate tells you that they have to “dust off” their old resume and update it. We hear that all the time, which is why we present a complete profile to our clients which includes work history, accomplishments, education, professional licenses, if any, salary and benefits info, future expectations, and some observations based on our conversations with them.

How much more information do you need to determine whether the candidate is worth a call or a meeting?

The design industry has a tight labor pool and you sometimes only get one bite at the apple. This is why you need to act as if the candidate is doing you a favor by talking to your firm even if you don’t feel that way.

Think about when you go to buy a car. Do you expect the car salesmen to treat you with contempt and act as if they are nice by showing you a car and taking you out for a test drive? No one asks you to fill out a credit application the minute you walk into the showroom. They try to show you a car and take you out for a test drive. They do everything they can to make you feel like you made the right decision by coming to visit them.

The recruitment process isn’t much different than that. Don’t worry about all the paperwork, just get the candidate on the hook by selling the features and benefits of working with your company. The other stuff will work itself out. I know some of you are probably saying, Randy, we hire people for federal projects, and there is always a certain amount of paperwork involved. I understand, but when dealing with “Not actively looking for a new job” candidates, that paperwork can wait until you’ve got them on the hook and they are totally interested in seeing where this opportunity may end up.

Lack of a cohesive recruitment process is one of the biggest hurdles we see to hiring “not actively looking for a new job” candidates. With a little practice and understanding, you can go a long way to having success hiring the right people in a challenging employment market like the design industry.

Randy Wilburn is Zweig Group’s director of executive search. Contact him at rwilburn@zweiggroup.com.  Want more recruiting advice? Check out the Becoming a Better Recruiter Seminar

This article is from issue 1139 of The Zweig Letter. Click here for to get a free trial of The Zweig Letter.

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