Tag Archives: The Zweig Letter

Civil Engineering Professions See Growth, High Ranking As ‘Best Jobs In America’

Press Release: April 21, 2011

FAYETTEVILLE, Ark. (April 21, 2011) – Population growth and an overhaul of existing infrastructure are making the civil engineering profession popular, said American Society of Civil Engineers President-elect Andy Hermann, echoing a national survey that predicts strong growth in the profession.

“One of the reasons the civil engineering professions are listed in the Best Jobs in America report is the satisfaction received from seeing civil engineers’ work become reality and actually improve our social, environmental and economic condition and protect the public,” Hermann told The Zweig Letter, ZweigWhite’s weekly management publication. “The median income of a civil engineer is $85,000, according to BLS. The anticipated growth also is a reflection of the backlog of demand in the infrastructure sector based upon the economic slowdown and the focus on residential and commercial sectors.”

The report by MONEY and compensation experts PayScale.com used Bureau of Labor Statistics growth forecasts for 7,000 jobs, identified industries with the biggest increases in jobs requiring bachelor’s degrees, and ranked them by 2008-18 growth and pay.

Civil engineers are expected to have employment growth of 24 percent between 2008 and 2018, according to the report. 

Environmental engineers are also expected to have growth higher than the average for all occupations, 31 percent over the next decade, according to BLS figures. Environmental engineers ranked number five on the report.

Jeremy Clarke, ZweigWhite’s director of executive search consulting, feels the environmental engineering profession is seeing significant momentum worldwide because companies want to be branded as good stewards of the environment.

“Sustainability is today what dot-com was in the late Nineties, and the job market reflects that,” he said.

Hermann said ASCE’s internal data also suggested the increasing need for engineers. The ASCE’s Report Card for America’s Infrastructure, an assessment by professional engineers of the status of the nation’s infrastructure, assigned an average grade of ‘D’ for 11 of 15 categories of infrastructure.

“Civil engineers are needed in all 15 categories…. With 11 ‘Ds’ and four ‘Cs,’ there is a lot of room for improvement,” Hermann told TZL. “In addition to water and the environment, transportation and energy are also categories that need improvement.

“Many civil engineers work in the public infrastructure area—designing, building and maintaining roads, rail, pipelines, water and sewer treatment, etc.,” he added. “With our growing population and considering that much of our infrastructure is aging and overused, there is a demand to repair and replace this infrastructure. This will be accelerated in the near future as the economy recovers (because our economy is fueled by our ability to move goods and people and provide adequate water). Over the past two years, with tax revenue down, infrastructure projects have been put on hold in many places, so there is also a latent demand. Once revenues start picking up, so will the infrastructure work.”

For more on The Zweig Letter, please visit www.zweigwhite.com.

ABOUT ZWEIGWHITE

Twice named to the Inc. 500 list of best firms, ZweigWhite is the nation’s leader in enhancing business performance for architecture, engineering, and environmental consulting firms. The ZweigWhite team consists of experts in business planning, mergers and acquisitions, business valuation, ownership transition, human resources management, finance, marketing, market research, project management and project delivery methods who collectively produce a comprehensive suite of products and services, including investment banking, consulting, newsletters, controlled-circulation magazines, industry reports, executive training, business conferences and more covering virtually every aspect of firm management. The firm has offices in Chicago, Ill., Durham, N.C., Fayetteville, Ark., and Natick, Mass. ZweigWhite is owned by investors Eli Global, BIA Digital Partners and MZ Ventures, with management including Mark Zweig and Ed Friedrichs. For more information, visit www.zweigwhite.com or call (479) 582-5700.

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Service as a Commodity Has Engineering Professionals Concerned

Press Release: April 14, 2011

   

FAYETTEVILLE, Ark. (April 14, 2011) – Many design industry services are becoming highly commoditized, with builders and architects often treating certain types of engineering services as merchandise, practitioners proclaim in the April 11 issue of The Zweig Letter, ZweigWhite’s weekly management publication.

 

Most agree that technology is perhaps the biggest culprit, with services that once required a specialized hand now easily performed by non-technical—and often outsourced—workers.

 

Gregory DiFrank, president of consulting engineering firm River Consulting, LLC in Columbus, Ohio, told TZL that while parts of the engineering field are already commoditized, others will never be. “I view the engineering industry as a continuum of services, an ‘engineering food chain’ if you will,” he said, “with lower value services at one end and higher value services at the other. At the low end, we have basic CAD drafting, manpower augmentation, single discipline detail design, and other services that have been offshored for years.

 

“So how do you fight commoditization at the lower levels of the food chain?” he continued. “You can start with service and value.”

 

Others told TZL that they believe the industry is becoming increasingly commoditized, often by its own design.

 

“Structural engineering has become a commodity in many people’s minds, largely through the actions of our own profession,” said Joshua Carney, president of Carney Engineering Group in York, Penn. “Through delegating of responsibility to others, and unwillingness to be accountable for the quality of the work we do, the structural engineering profession has hit rock bottom. The level of expectation is so low that anyone, including outsourced and international low-cost firms, can provide essentially the same finished product.”

   

Economic pressures are also to blame, says Stuart Jacobson, president of Stuart K. Jacobson & Associates, Ltd., a consulting structural and forensic engineering firm in Northbrook, Ill. “Our experience of the past few years is that the general public, as well as many architects and developers, are looking to buy engineering services based upon low ‘bid’ alone,” he said. “Except when there are two low ‘bids’ that are close to one another, they will consider past relationships and qualifications secondarily. Being a very slow time in the construction industry, engineers and architects as well as contractors are shopping the bottom line on almost every project.”

 

For more on The Zweig Letter, please visit  www.zweigwhite.com  .

 

ABOUT ZWEIGWHITE

Twice named to the Inc. 500 list of best firms, ZweigWhite is the nation’s leader in enhancing business performance for architecture, engineering, and environmental consulting firms. The ZweigWhite team consists of experts in business planning, mergers and acquisitions, business valuation, ownership transition, human resources management, finance, marketing, market research, project management and project delivery methods who collectively produce a comprehensive suite of products and services, including investment banking, consulting, newsletters, controlled-circulation magazines, industry reports, executive training, business conferences and more covering virtually every aspect of firm management. The firm has offices in Chicago, Ill., Durham, N.C., Fayetteville, Ark., and Natick, Mass. ZweigWhite is owned by investors Eli Global, BIA Digital Partners and MZ Ventures, with management including Mark Zweig and Ed Friedrichs. For more information, visit www.zweigwhite.com   or call (479) 582-5700.

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Editorial: Put your CEO back to work

By Mark C. Zweig

I may make many folks mad at me with this week’s editorial. But too bad. I never wanted to be one of those CONsultants who tells his clients what they want to hear and hopes he never gets fired. I am much more interested in being an INsultant who tells his clients what they need to hear. And what a lot of CEOs of firms in this business need to hear right now is, “Get back to work!”

I’m not saying we don’t have many fine, smart, well-intentioned leaders out there at the top in the majority of firms in the A/E and environmental business. Most of these people put in long days, too, that don’t stop when the sun goes down or the weekend arrives. They work— but they are not working on the right thing. What many need to do may sound completely counterintuitive. They need to spend LESS time on top management, and more time doing the work of the business. By “work,” I am talking about working on more projects, selling more jobs, meeting more clients, working alongside employees who are working, and really getting into the nitty-gritty, nuts and bolts of it all. 

Too much “top management” stuff is making them out of touch. Too much top management stuff is hurting their credibility with clients and employees. Too much top management stuff is not making the firm any money. Too much top management stuff is making them disconnected with what clients really want and with what their firm’s employees are good at and not so good at. These CEOs need to get back out there and get back to work. 

Maybe you should take a look at the next 20 proposals going out. Maybe you should go on the next 20 business development calls. Maybe you should attend a project meeting for 20 jobs your firm is currently working on. Maybe you should personally sell, do, and deliver some projects this year. There’s nothing like good, honest work to help pay the bills— and more importantly, to learn from. Instead of spending 10 hours reading Good to Great, make a project great yourself. Make a presentation great. Make a project team great. Do something great instead of just reading about it and telling others what to do. You may find out it isn’t as easy as you thought but then again, you may just reaffirm your belief in yourself and your power to make a difference in your firm.

If you are the CEO, you need to ask yourself if you should get back into it. I can tell you from personal experience that when I failed to do the work of the company, things went off course. The wrong people got hired. Proposals that didn’t really sell the right things went out to clients. Projects were done that could have been better. And I felt removed from who was good in the company and who wasn’t because I wasn’t working with them.

Editorial: What it really takes to be an effective consultant

By Mark C. Zweig

What does it really take to be an effective consultant? This is a question I am constantly being asked as well as asking myself.

We are all in the consulting business. Whether it is architecture, engineering, environmental services or even management consulting, the attributes that make for a successful consultant are pretty much the same across the board.

I have been doing this stuff for 31 years now— both inside consulting firms and as a consultant to consulting firms. Here are some of the characteristics of an effective consultant:

* Knowledge. Consulting starts with knowing something your clients don’t know. That means knowledge about your discipline, for sure. But it really needs to be more than that. Broad, wide-ranging knowledge of the field you work in, of your industry, and of current happenings in the world are all critical to your credibility and success.

* Perspective. You need perspective that comes from experience. No one will hire a consultant who is “perspectiveless.” They are hiring you because you have experience they don’t have themselves. They want to benefit from your perspective.

* A point of view. There’s a big difference in point of view vs. perspective. You can have perspective without point of view. A point of view means you can take a stand. You have an opinion— an informed opinion— and aren’t afraid to state it.

* Confidence. Confidence is what makes it all work. Without confidence, you could have knowledge, perspective, and point of view, but not be able to share it with anyone. All that is all useless without confidence!

* Intelligence. If you know anything about intelligence (I was once married to a psychologist who did IQ testing), you will know that there are many elements to “I” (depending on the test you are using). But let’s face it, without some basic smarts, people cannot learn. That is unacceptable for a consultant! They will also tend to be argumentative and unreasonable, two very big problems if you want to be a success as a consultant!

* Political savvyness. To be a successful consultant, you have to be able to quickly assess the political landscape and know who you really have to please. This political savvyness is needed not just for how to win the job— but most importantly, how to end up with a successful project and a client who will rehire you.

* Communication skills. No amount of knowledge, perspective, confidence or political savvyness can make up for a lack of communication skills if you want to be ultimately successful. You have to be able to get your thinking across. The good news is communication skills CAN be taught.

* Integrity. Integrity to me means that you do the right thing. It’s not always easy— and it may even cost you a project or a client— but you need to have it.

How do your top consulting folks stack up on these requirements? If not so great, some (not all) weaknesses may be addressed by training.

In other cases, you may just need to change horses. In the immortal words of my first boss in the professional world, the late Mike Latas, “You can lead a horse to water, but first you have to have a horse.”

Lack of Ownership Transition Plan Puts Design Firms in Peril

Press Release: April 5, 2011

Lack of Ownership Transition Plan Puts Design Firms in Peril

FAYETTEVILLE, Ark. (April 5, 2011) – A crisis could descend upon many design firms because aging baby-boomer owners have not taken the necessary steps to assure their companies will go on after they exit.

A staggering 63 percent of A/E/P and environmental consulting firms don’t have an internal ownership transition plan, according to ZweigWhite’s 2011 Merger & Acquisition Survey, which is comprised of comprehensive merger and acquisition statistics and transaction data for the architecture, engineering, planning and environmental consulting industry.Ownership transition drives the M&A market, and selling as an exit strategy ranked as the main goal among potential sellers responding to the survey.

This lack of an internal ownership transition plan is dangerous, noted Jeff Clark, managing director and principal of the M&A team for ZweigWhite, a premier management consulting, publishing and training firm for the A/E/P and environmental industry.

“If you don’t have an internal ownership transition plan in place,” he said in the April 4 issue of The Zweig Letter, “your second-tier management could be seen as a red flag, and the perceived value of your firm may very well be diminished in the eyes of sophisticated third-party buyers.”  

Stuart K. Jacobson & Associates, Ltd., an engineering outfit in Northbrook, Ill., is a prime example of the dilemma facing many in the industry.

“I am looking to retire shortly and current employees—some of them here for more than 20 years—are not interested in buying me out,” Jacobson, the firm’s president, told TZL, ZweigWhite’s weekly management publication.

ZweigWhite Principal Hobson Hogan urged baby boomers like Jacobson to act fast. “An average ownership transition plan takes five to seven years to complete,” he said. “It becomes difficult to implement a plan with people in their mid- or late-50s, because by the time they complete the purchase, they have to turn around and sell. You need five to seven years to buy, and five to seven years to own shares before you begin your sell down.”

The recession delayed many ownership transition plans, said James Boyer, vice president and CFO with David Miller/Associates, Inc. in Lancaster, Penn.

“Our firm is currently in the middle of an ownership transition that has stalled due to the economic downturn,” he said. “I still think now is a good opportunity for buyers who are confident that their firm is moving in the right direction, but the outgoing shareholders need to be flexible and realistic regarding the stock value.”

For more on The Zweig Letter and ZweigWhite’s 2011 Merger & Acquisition Survey (ISBN: 978-1-60950-019-1, $445), please visit www.zweigwhite.com.

ABOUT ZWEIGWHITE
Twice named to the Inc. 500 list of best firms, ZweigWhite is the nation’s leader in enhancing business performance for architecture, engineering, and environmental consulting firms. The ZweigWhite team consists of experts in business planning, mergers and acquisitions, business valuation, ownership transition, human resources management, finance, marketing, market research, project management and project delivery methods who collectively produce a comprehensive suite of products and services, including investment banking, consulting, newsletters, controlled-circulation magazines, industry reports, executive training, business conferences and more covering virtually every aspect of firm management. The firm has offices in Chicago, Ill., Durham, N.C., Fayetteville, Ark., and Natick, Mass. ZweigWhite is owned by investors Eli Global, BIA Digital Partners and MZ Ventures, with management including Mark Zweig and Ed Friedrichs. For more information, visit www.zweigwhite.com or call (479) 582-5700.

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Multidiscipline Architecture and Engineering Firms Cope Better in Shifting Markets

Press Release: April 1, 2011

FAYETTEVILLE, Ark. (April 1, 2011) – An expected resurgence in private spending in 2011 means that diversified architecture, engineering, planning and environmental consulting firms will be better poised to benefit from the economic recovery, say economists in the March 28 issue of The Zweig Letter, ZweigWhite’s weekly management publication.

While many design firms tried to change gears quickly in response to the American Recovery and Reinvestment Act, firms that were able to keep their links to the private market intact during the recession are now better positioned, Kermit Baker, chief economist with the American Institute of Architects, told TZL, and those are likely multidisciplinary, one-stop-shop type firms able to operate in several market types and geographic areas.

“You need to diversify; you need to keep your feet in several markets,” Baker said.

Six months of positive Architecture Billings Index scores show that the private market for design and construction activity is starting to pick up—namely the commercial and industrial sectors. The federal market, however, is heading in the opposite direction—92% of the federal stimulus package has now been allocated.

“Federal spending is at a plateau from which it may drop pretty steeply in the next year,” said Ken Simonson, chief economist with the Associated General Contractors of America.

David Sherrill, president of Sherrill Associates, an Edwardsville, Ill.-based land surveying, engineering and planning firm, echoed Simonson’s forecast. “We have state department of transportation work, which will be drying up at the end of this year,” he said. “I would expect all design firms will take a hit in this sector— at least two to three years.” 

Sherrill pointed to activity in the private market as a potential bright spot. “We expect moderate growth in the private sector as long as the financial district stays strong and dollars remain available to stable investors,” he said, while cautioning that he hasn’t seen any evidence of strong growth yet. “I don’t see a boom in the private sector while the public sector realignment takes place. Hang on to your pants. I’m afraid we’re still in for a rough ride for a couple more years while the entire country realigns itself to the country’s debt reality.”

For more on The Zweig Letter and to see subscription details, please visit www.zweigwhite.com.

ABOUT ZWEIGWHITE

Twice named to the Inc. 500 list of best firms, ZweigWhite is the nation’s leader in enhancing business performance for architecture, engineering, and environmental consulting firms. The ZweigWhite team consists of experts in business planning, mergers and acquisitions, business valuation, ownership transition, human resources management, finance, marketing, market research, project management and project delivery methods who collectively produce a comprehensive suite of products and services, including investment banking, consulting, newsletters, controlled-circulation magazines, industry reports, executive training, business conferences and more covering virtually every aspect of firm management. The firm has offices in Chicago, Ill., Durham, N.C., Fayetteville, Ark., and Natick, Mass. ZweigWhite is owned by investors Eli Global, BIA Digital Partners and MZ Ventures, with management including Mark Zweig and Ed Friedrichs. For more information, visit www.zweigwhite.com or call (479) 582-5700.

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From the Chairman: Referrals – What are people saying about you?

By Ed Friedrichs

In a fascinating recent book, Fred Reichheld asks The Ultimate Question (also the title of the book), “On a scale of 1 to 10, how likely are you to refer __________ (fill in your firm’s name)?” His rating scale sets a high standard, indeed. If the person questioned answers 9 or 10, he or she is a loyalist, very likely to give you a positive recommendation. A 7 or 8 means you’re vulnerable. Your firm might receive a positive nod, but so might another firm. 1 through 6, take a deep breath— the answer will probably be, “Anyone but you.”

Have you checked your references lately? Do you know what people are saying about you? A piece of advice: It’s far less expensive to recapture a bad reference than it is to create a new positive one. And that bad reference will keep haunting you no matter how many wonderful, positive ones you’ve nurtured. So, it’s in your best interest to be asking The Ultimate Question on a frequent basis.

But it’s not just client referrals you need to worry about in the building professions. We have a large number of stakeholders in the work we do and many of them are out there talking to your prospective clients— sometimes before you’ve even identified them. So, it’s very much in your best interest to cultivate a strong referral preference among every one of the people who can be influencers on the decision to hire you. Your goal is that anyone who is asked about architects mentions your name first because they know you care about their issues. Make a list of anyone who might be one of these influencers and take him or her to lunch, for a cup of coffee or for a beer after work. Get to know them personally. Understand what irritates them about other architects or engineers (or about you and your firm). Share what you learn with others in your office and adjust your work practices and attitudes accordingly. Doing this on an ongoing basis will make you a better professional. Here are some ideas about who these people might be:

1. Contractor: Meet with a project manager and find out what you can do to make their life better. Is it to be more responsive? To meet with them personally when you’re issuing a new set of drawings or a change? How about a field superintendent? This is where the rubber meets the road. They know what information needs to be on drawings and what is extraneous. The person who negotiates with subcontractors and buys out your project is a key influencer about your firm within the contractor’s office. Are your intentions clear in your documents? Are there formats that help them package your work better for subcontractor bidding? You see, your reputation is built a piece at a time. The owner of the construction firm may be the one a client asks about you, but he gets his information from his people, no matter how many rounds of golf you’ve shared.

2. Subcontractors: The person who prices your project for the general contractor, the person who details your work in shop drawings, and the person who installs it in the field are all influencers on your reputation. And remember, these folks are out in the market looking for their next assignment. They may have called on your prospective client before you even knew about the job.

3. Manufacturers and suppliers: Treat the sales people who visit your office with the greatest respect. Deal with them as “partners” in the work you do. When your project is being built, they can make it go well … or not, based on the way you’ve dealt with them. Always return their phone calls, even if you’re too busy. If you set a meeting with them, give them your full attention— don’t take phone calls or scan your e-mail while they’re giving you their “pitch,” and don’t blow them off if you’ve set a meeting and something else comes up. Don’t make unreasonable demands for samples or mock-ups; anticipate your needs and give them as much lead-time as possible. Remember, they probably have more “feet on the streets” than you do and often sniff out new prospective work before you. If the client they call on asks about architects, whose name do you want them to pass along? I’ve gotten some wonderful referrals over the years from manufacturers and suppliers because I truly did work with them as partners.

4. Engineering consultants: As an architect, work with them as partners. Meet with each engineer you know and find out how they would like to work with you in a way that will give you the best and most creative value. That’s what makes their work fun. They may also know about upcoming work before you hear about it.

5. Government officials: Wouldn’t have thought of this one, would you? But I got one of the most important referrals in my career from a city manager asked by a client about a firm that would work well with the city and the community on a particularly sensitive project. He quizzed his staff and our name came up at the top of their list. Meet with the plan checker long before you submit your documents. Get their advice on issues you have questions about. Treat them as partners with a mutual interest in public safety. It’ll also speed your plans through plan check.

6. Lenders: Your new prospective client will need money and may have the same lender that funded your previous project. Trust me, they will ask about your firm. Throughout every project you do, take the time to understand the priorities and concerns of the financially responsible party. Make sure you’ve addressed them. Whenever you have a project presentation, touch base with this person and review with them how your solution has addressed their issues.

Are you getting the idea?

Editorial: Not-so-great management practices that won’t die

By Mark C. Zweig

We have come a long way in the A/E/P business over the last 30 years. Not only is it OK to market to clients, we even have computers on every desk and auto attendants to answer the phone when the receptionist isn’t there.

While these things may sound “normal” to our younger readers, they were subjects of great debate in A/E/P and environmental firms at one time.

But there are still some other archaic management practices in our business that refuse to die— but need to. Here are a few of them:

1) No open book. With all the research out there on this subject, it’s hard for me to understand why every firm does not share its numbers with employees. The more familiar people are with the gauges that reflect the firm’s performance, the better. Open book firms grow faster and are more profitable. Trust your people have the capacity to understand the numbers and share them.

2) Annual bonus. The majority of firms (over 90%) pay bonuses (or potentially pay bonuses) once a year. Why not more often? This is too long to wait if you really want firm performance linked to pay. Monthly or quarterly bonuses are so much better.

3) Salary tied to performance appraisal. Tying pay to job performance as indicated by the formal performance appraisal seems to make sense on the surface. But in practice it’s quite a different story. Doing this pretty much ruins any discussion about performance with the employee. All they care about is whether or not they are getting a decent raise, not what your criticisms are of their performance. Also, there are many factors that go into pay. Scarcity of talent, how critical a specific individual is to the firm, longevity with the firm, ownership status, subjective factors, etc., all can impact pay and cannot be ignored.

4) Book value stock sales. Why firms still use book value for internal valuation is beyond me. I don’t see how it makes any sense to value a firm on its assets minus liabilities when its real value lies in its future earnings stream, its brand and name recognition, and its people. Not to mention the fact that book value for internal stock sales encourages your owners to strip profits every year. Who wants to leave a dollar in the till today just so you can get a dollar back in 20 years? Makes no sense at all.

5) Mass brochure mailing. Why do firms send out brochures with no call to action? I have heard more than once from a firm when I suggested a postcard series or design bulletin series that they would rather do “one good piece” and send that out instead of having a multi-pronged, direct-mail campaign. This just does not work! It would be like Coca-Cola saying that they won’t waste their time with all those little commercials and instead buy all ads on the Superbowl once a year. Won’t work too well. Learn from other industries that know how to market!

6) Timesheet sign-off. Huge waste of time. Do you really think your managers know how much accumulated vacation their people have? Or do department heads really understand what Sue did on PM Joe’s project for four hours that week? Nothing happens with this process other than time wasted. Send the timesheets directly to accounting and review reports later to make changes if needed.  

7) All internal BOD. Not having any outsiders on the BOD is normal for firms in the A/E/P and environmental business. But it makes no sense! How can the BOD hold the CEO accountable for firm performance when that very CEO is most likely their boss on a daily basis? It’s impossible. Outside directors are one of the ways you can bring in the expertise and marketplace connections you need and could not attract or afford on a full-time basis at a super-low price.

8) No smartphones for ALL employees. It is hard to believe that in 2011, there is still resistance to this idea. The IT people tell you it’s too much trouble. The bean counters tell you it’s too expensive. But they are both wrong. If giving a smartphone with e-mail on it to everyone costs you $150/month per employee and your average billing rate is $85/hour, you will make the cost back in less than two hours a month.

I could go on and easily come up with a list three times this size but I am out of space. The bottom line is that we have come a long way in this business but still have a long way to go. More movement into our business from others outside this industry is needed. We’re too inbred.

Editorial: Why do they use the other guy?

By Mark C. Zweig

We’ve all been through it. We have a good, old client; someone we have done a lot of business with over the years. The decision-maker with the client is someone we consider a friend— perhaps not a close friend, but a friend nevertheless. We make them a proposal to do some work, at their request. And then we get the news through the grapevine, or via letter or e-mail— they hired another firm.

How could this happen? Why did they use the “other guy?”

It is a sick feeling, almost as if you got sucker-punched in the gut.

But don’t kid yourself. There was a reason beyond the fact that you angered the Gods for some minor infraction, such as road rage on the way to work that morning. Let me provide insight on some of the reasons your client hired the other guy and how you can mitigate these in the future:

1) Your relationship with your client was not as tight as you thought it was. Maybe you are taking him or her for granted. Not enough “how goes it?” calls or inquiries about family members. Or maybe you aren’t seeing the client at meetings anymore, since your underlings are doing all the work. You stopped hand-signing those holiday greeting cards. Whatever the case, the client just doesn’t feel as close to you as perhaps they once did. Maybe you need to inject yourself back into more relationships NOW, before more get away!

2) You (or someone who works for you) did something that upset or angered the client and made them say, “I’m done with those guys.” This is a biggie. I just fired the HVAC contractor I had been using for more than six years in my redevelopment company. Problem is the number two guy. Not only is he a smart aleck who talks condescendingly to everyone because they don’t know what he knows about HVAC, he is also a guy who will text you from 8 to 4 Monday through Friday but will not pick up his cell or text back any time after that or on weekends. I expect people to be responsive— especially when I am their biggest single client. Maybe something similar happened in your case? The point is you need to find out what happened and make sure it never happens again. Probe, and probe, and probe— until you learn the real problem that made the client upset with you. In my case, the contractor doesn’t have to pull it out of me. I told him that I will not be able to work with them and why.

3) Your client is no longer the decision-maker. There are other people in the client organization who have either taken over the selection process or hijacked it for some reason. This can happen and it may not be within your control. But what IS within your control is that you need to understand who is the decision-maker and strike up a relationship with that person as quickly as you can. It won’t happen without making a real effort. Everyone is super-busy these days and has little time for new “friends,” but if you are smart and persistent you can probably make it happen.

4) Your pricing has gotten out of line. This, too, can happen— especially if you have a client who is very accommodating and who likes you and trusts you— to a point. But sooner or later, if you have been over-charging it will come to light. And then you will look bad if you have been too greedy. I will let people work for me on billing rates UNTIL they prove to me that they aren’t honest or efficient and then I am DONE with them. No second chances. Constantly check the validity and reasonableness of your pricing to avoid getting caught like a kid with her hand in the cookie jar.

5) Your client doesn’t think you can perform— either on this assignment or what is coming after it. This can be a problem. We lost a small consulting project recently and this was the reason. The client had a larger and more complex engagement that would follow the project we proposed on and even though our price and proposal were great on the first project, he didn’t want anyone to have to relearn his needs on the second one. So he hired a competitor. Problem is, we are as qualified or more so than the competitor. We didn’t get that across. He didn’t really understand our capabilities. Shame on us— we got too complacent and thought that he understood where we had come from and where we are now.

6) Your client has been wooed by another firm and either pressured or cajoled into trying them. This, too, can happen in a competitive marketplace like we are in today. Your only response can be that you will be there, ready to serve them, should it not work out for them like they hoped. But it also points out the need to never stop marketing to anyone— including PRESENT clients.

7) You lost a key person. The client saw that person as the one who was really serving them, as opposed to your firm. This is very common in the A/E/P and environmental business, because firms don’t do a good job maintaining multiple relationships with people in various levels of their client organizations. Don’t rely on one person as your sole contact, especially with larger client relationships. It is just too risky! And if you do lose a key person, take immediate steps to let the client know who their replacement is and, beyond that, that the rest of the team who serves them is all still there working away productively, waiting to serve them again. It really gets me how lackadaisical firms are about this. They act like they have all the time in the world, when they are extremely vulnerable!

8) Your client has a basic belief that they should switch providers every so often to “keep you honest” and get some fresh thinking. There isn’t much you can do here other than to keep adding value, bringing the client new ideas, fresh thinking, and finding new ways to help them. And don’t overcharge or give them any other reasons to switch providers.

There are undoubtedly more possibilities on why they are using the other guy, but my experience tells me these eight comprise about 90% of the cases.

Take a look at this list— discuss it with your key people— and make sure you are doing what you can do to not hear those painful words: “We’re going with a competitor.”

From the Chairman: Welcome to the global marketplace

By Ed Friedrichs

There is no “right” or “wrong” about where work gets done today. Work and ideas flow freely across the planet. The marketplace will buy from the source that provides the right service or product at the right price, no matter where it comes from. Consumers will only choose to pay more for benefits that are important to them and are becoming increasingly blind to the geographic source.

American A/E firms have been outsourcing production work to India, China, and the Philippines for several years and the entities that they work with— whether they are service bureaus, partner firms or wholly owned foreign subsidiaries— are thought of and used primarily as low cost, back-office production staff. The work has been by and large an electronic extension of a U.S. team delivering service in the U.S. or elsewhere. As in the software industry, it’s been a quest for cheaper labor with comparable skills; and the skill levels today are at a pretty high standard in those three countries. This is still a small percentage of overall work produced by U.S. firms, though. Managing the client and contractor relationship work takes place close to the client and the construction site.

As people in these three countries become increasingly skilled and knowledgeable about American design standards, technology, and practices, and as design talent evolves “at home,” we will see the emergence of Chinese, Indian and Philippine-based firms that can design as well as produce. What’s lacking? Only the skill, talent, and ability to provide a physical presence close to the project. We’re seeing Chinese firms with a full array of skills starting to do work in China (or India, or elsewhere in Asia) and I suspect we’ll see the same soon in India and eventually, the Philippines and elsewhere in Asia. They won’t need the Western brand and “Good Housekeeping Seal” for much longer.

So, what’s next? Do these entities start to reverse the relationship, start to compete head-to-head with U.S. firms on our own turf, hiring American firms to represent them at the project locale? Do they acquire a small U.S. practice to do so? Or, do they simply set up their own wholly owned foreign subsidiary to round out their client management and service delivery capability? It’s coming and, I believe, this direction is going to evolve rapidly. Why not? There are lots of bright, highly energized and entrepreneurial folks there.

I believe that over time, projects of significant scale will move toward global or most efficient/cost effective sourcing of work and talent, just like the software industries. While this is an interesting trend to consider, the more fascinating one is: How much conventional “production” work will be done in the future with the advent of BIM (Building Information Modeling) and IPD (Integrated Project Delivery)? These shifts in project information assembly and process are leading to more collaboration between the parties to construction (which are also becoming, if not yet global, certainly national). I think the nature of the entire AEC industry is at the beginning of a quantum shift in how work will be done. So the concern about whether Asian competitors, and any cost advantage to a firm outsourcing production work to Asia, might become irrelevant as the entire process of doing our work evolves.

Architects’ and engineers’ roles are being recast as participants in a collaborative design/construct team through the migration of the construction process to BIM, a single, integrated project model co-created by the architect, engineers, the contractor, subcontractors, and suppliers. IPD eliminates discrete formal document issue packages (except, perhaps, to the building department, although online plan check or a move toward more self-certification due to constrained public budgets— they’ll collect the fee but won’t do the work), revising or obviating the documentation and delivery process described in AIA documents.

This will force architects to redefine what their role is in the design and construction process. Where can they offer the highest value to their client, the contractor and all other parties to the construction process? How will an architect make the case for his or her relevance as part of the team? Will the architect be merely another vendor to the contractor, contributing design ideas only?

Or will the architect be the leader and integrator, taking the client and project through the definition process from project inception to feasibility, defining how the project can enhance the client’s enterprise performance goals? Will the architect lead the engineering team to integrate architectural and engineering systems to find highest value in initial construction and on-going operating costs? Will the architect lead the project through the public approval processes, both discretionary and codified? Will the architect lead the project through commissioning and occupancy over time to assure that the value to the client is optimized?

So, am I worried about a firm undercutting their competition’s fees by farming out construction documents to a Chinese, Indian or Philippine-based service bureau? I think not. In fact, I suspect that construction documents as we know them won’t be necessary in the very near future. What use are they today? Buildings are built from shop drawings and submittals already. On large, complex projects, contractors are building from elaborate 4-D sequencing documents that they prepare, not the architect’s construction set. The approved plan check prints are on the job site to satisfy the building inspector, not to build from.

I have no preconceptions about whether architects will own contractors, contractors will own architects or whether we’ll have a long period of settling in through partnerships, joint ventures and alliances.

I do know that that we’re going to have to do a lot of thinking and leading in the definition of how we as architects and engineers add value to the process, or we’re going to end up as another subcontractor to the GC.

Alternative Project Delivery Methods Threaten Design-Bid-Build Model

Press Release:  March 16, 2011
 
FAYETTEVILLE, Ark. (March 16, 2011) — The design-bid-build delivery method may still rule the construction industry, but it is quickly loosing favor. In the March 14 issue of The Zweig Letter, the weekly management publication from ZweigWhite, several industry leaders indicated that the traditional delivery method will be supplanted by approaches that favor collaboration and integration.

“Design-bid-build has always been problematic in that the successful low bidder is usually the firm that made the biggest mistake,” said Geoffrey Butler, president and CEO of Butler, Rosenbury & Partners, a multidiscipline firm in Springfield, Mo. “Then, after they get the job, they spend the rest of the time trying to cover their mistake and to protect their margins. This creates an adversarial relationship with the architect and owner.”

According to ZweigWhite’s 2010 Project Management Survey, 43 percent of all projects are delivered through D-B-B. But Design/Build, an increasingly popular delivery method, already accounts for 27 percent of projects, according to the survey. The Design-Build Institute of America also estimates that design/build now accounts for 45 percent of nonresidential construction— same as D-B-B— in the U.S.

Several leaders told TZL they believe that more collaborative methods, including Integrated Project Delivery, will eventually become the mainstream.

Said Cyrus Izzo, co-president at SH Group in New York, “The integrated project delivery system is definitely going to impact the future of our industry, and we will see it utilized in conjunction with the public/private partnership model.”

Janice Stevenor Dale, president of JSDA, an interior design firm in Pasadena, Calif., also favors more collaborative methods.

“Design-bid-build has never been the way if teams wish to work collaboratively and in a positive work environment where team members have mutual respect for one another,” she said. “Negotiating with the right general contractor to add him/her to the team early in the process is the far better method and represents best practices for all non-governmental projects.”

All is not lost for D-B-B, though, and many still consider it a dependable a project delivery method.

“I still believe in the design-bid-build process for most projects,” Ramesh Gunda, president of Gunda Corporation in Houston, Texas, told TZL. “However, there is no universal solution for delivering projects.

For more on The Zweig Letter and to see subscription details, please visit www.zweigwhite.com.

ABOUT ZWEIGWHITE

Twice named to the Inc. 500 list of best firms, ZweigWhite is the nation’s leader in enhancing business performance for architecture, engineering, and environmental consulting firms. The ZweigWhite team consists of experts in strategy, mergers and acquisitions, business valuation, ownership transition, human resources management, finance, marketing, market research, project management and project delivery methods who collectively produce a comprehensive suite of products and services, including advisory, consulting, newsletters, controlled-circulation magazines, industry reports, executive training, business conferences and more covering virtually every aspect of firm management. The firm is headquartered in Fayetteville, Arkansas, with additional offices in, Chicago, IL, Durham, NC, and Natick, MA. ZweigWhite is owned by investors Eli Global, BIA Digital Partners and MZ Ventures, with management including Mark Zweig and Ed Friedrichs. For more information, visit www.zweigwhite.com or call (479) 582-5700.

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Editorial: Buying A/E firms in today’s market

 By Mark C. Zweig

There is a lot of interest in buying and selling firms these days. We are even having six seminars/conferences on M&A this year. Our investment banking group at ZweigWhite has never been busier!

Contrary to what some folks think, however, every firm is NOT for sale. There are some firms actively looking for buyers— but they are mostly small firms. Mid-size and larger firms that want to sell are just sitting there waiting for someone to approach them. Most owners are either too scared to actively look for a buyer (someone may find out, after all!) or unwilling to spend a few bucks on it to make it happen. So… nothing happens for them unless someone like us happens to call them.

Other interesting observations I can share:

1) Many buyers start out around 50% of NSR (net service revenue) for a valuation of potential targets, then adjust that up or down depending on the balance sheet, profitability, dependence (or lack of dependence) on one or two major clients, revenue growth trends, strength of second tier management, and more. I have seen values as low as 7% of NSR (yes— that is low!), and as high as a little more than one times revenue.

2) A good third party negotiator can do a lot with terms of the deal, even if the price is pretty well agreed to. There is so much more to it than price— employment agreements for principals, how much of the price is to be paid in cash vs. a note paid over time vs. stock in the going concern, and so much more. The negotiator can also help insulate the buyers from the negotiation process and perhaps avoid damaging the future working relationships of buyer and seller. I find it annoying when either a buyer (or seller) tries to negotiate the deal without us. We’re getting paid anyway— and we can help get it done!

3) If you do work with a third party to help you buy, be sure they have experience in our industry. But also be sure they have some creativity (that may come from working on deals OUTSIDE the A/E business), along with the spirit it takes to get one of these deals done. By “spirit,” I mean some guts, some moxie— so you don’t get run over by the parties you are buying from. And look for a firm to help you, not a one-man band. You need someone who can not only develop prospects and help you negotiate, but also help with due diligence, integration planning, and appraisal, among other things. A single source is just going to be more efficient and improve communications throughout the process.

4) Most critical if you are buying— really (deeply) understand the motivations of the sellers. Do they want to get out— all or just one or more than one? Are they warring with each other? Do they want to stay in? Are they looking for liquidity or really thinking about what is best for their company and their employees? Do what it takes to understand their motivations and it will make your job structuring an offer that gets accepted that much easier.

5) Use the one-page LOI (letter of intent) or a one-page term sheet to find out if your sellers are realistic about what kind of deal they can get from you. Don’t waste too much time with the sellers before getting them an LOI or term sheet.

Like most things in life, the more firms you buy (or attempt to buy), the better you will get at it. Practice makes perfect (or closer to perfect).

Finance Insider: Accounting methods may mask performance

By Tracey D. Jeffers

Cash and accrual methods each have their pluses and minuses.

Editor’s note: This is the second of a two-part series. In her first article (The Zweig Letter, Feb. 21, issue 899) Tracey Jeffers wrote about how successful banking relationships require having a good understanding of financial statements.

Business owners who are using an income statement to track financial performance may be misleading themselves when it comes to actual cash available. More than once I have heard from business owners bewildered by the fact that their income statement says they are making a profit but they never have any cash in the bank. It may be due to the accounting election chosen.

With accrual-based accounting, the income is recorded upon the generation of an invoice to a client as an indication that the revenue has been earned, even though the payment may not be received for several weeks to months. The same is said for expenses. If you enter a bill into your accounting system that is due mid-month, accrual based accounting records the expense at that time, even though you may not pay the bill until the first of the following month.

Cash basis accounting does not record the revenue until the check or cash is actually received by the business and expenses are not recorded until checks have been cut to pay the bills. Cash in, cash out. Pretty simple, right? Maybe. Cash basis accounting provides an owner much less of a full-blown financial picture than accrual based accounting. If you are showing a profit on your cash basis income statement, that may be because you have a pile of bills to be paid and haven’t paid them yet. A pile of bills netted against that income statement may result in a much different financial picture, so be careful.

Lastly, it is easy to get confused about what shows up on the various financial statements. So, here is a brief list of some items that are all related and appear on the various statements. Just remember that each statement has its own purpose and they should be read in total to have a good understanding of firm performance.

* Loans. Balances of loans will show up on your balance sheet and each time you make a payment, the principal portion is reduced by that amount. The principal portion of a loan payment will not show up on your income statement, but the interest portion is deductible and will be reported on the income statement. The cash flow statement will show both the principal and interest payments together.

* Assets. If you purchase a new asset for your firm and it is going to be depreciated over time, the cost of the asset will not appear on the income statement at the time of purchase. The cost of the asset will be recorded on the income statement in increments known as depreciation. The new asset will appear on the balance sheet at its cost and any depreciation is recorded against the original cost. Any cash that you might have expended to purchase a new asset will appear on your cash flow statement.

* Depreciation. Depreciation is a non-cash expense that is deductible for tax purposes. It will show up on your income statement and reduce taxable net income. It also shows up on the balance sheet, reducing the value of company assets on an incremental basis using life expectancy of the asset. So, remember that the net income on your income statement does include depreciation. If you have a sizeable amount of depreciation, it can have a big impact on the bottom line.

Having financial statements to provide to your lender at their request is important to fostering a good banking relationship. Likely one of the most important things to remember about your statements is that good, clean statements make lending decisions go much smoother. Jumbled, messy statements are more difficult to read and analyze. Your financial statements are not only the measure of your firm’s performance; the appearance of those statements is a representation of your firm. If you are trying to forge a new banking relationship, in particular, be sure your financial house is in order in all aspects before the first meeting occurs.

TRACEY JEFFERS, MBA, CBA, CMEA, is a principal in ZweigWhite’s Financial Advisory Services Group, where she oversees valuation services. Contact her at tjeffers@zweigwhite.com.

F&A Advisor: Don’t get stuck in the middle

 By Hobson Hogan

I recently attended a conference on alternative investments for asset managers and investors. The attendees were mostly representatives from large institutional investors, endowments, hedge fund managers, and corporate bankers. The conference focused on the outlook for hedge funds and real estate funds in the future. I was interested in hearing what some of the top investors on Wall Street think about the overall market and real estate in general. I would like to say that I came away from the conference with some good news for the North American market. However, that was not the case. The fact of the matter is that many of the structural issues that led to the busting of the real estate bubble are still present and in many cases are worsening, not improving.

When it comes to real estate, the news was dire. Fundamentals have not improved and, while some asset values have increased due to the lack of “solid deals,” the market has become binary— simply made up of winners and losers. Binary markets are not relegated to real estate properties; much of the economy is becoming characterized by firms making a choice on how they want to compete on price or service, and building an organization to fulfill that strategy.

While business is not likely to improve on any broad measure, there is no need to jump off a bridge. Business will not stop; it is just going to be ultra-competitive because demand will continue to be constrained. In an industry where there is likely too much capacity and competition, it is often helpful to glean lessons from other industries that have dealt with bouts of oversupply, such as airlines, retail, and energy. Here is a sampling of how other industries have faced tough times and how they successfully navigated the storm:

1. Gained efficiencies through consolidation

2. Aligned cost structures and strategy to market realities

3. Leveraged information technology to improve efficiencies of the inputs

The first lesson can be one of the more powerful catalysts for change. In the last oil bust, several major oil companies merged, including Exxon-Mobil, BP-Amoco and Chevron-Texaco. The resulting organizations cut out tremendous costs from their organizations and added additional scale to their businesses. The Exxon-Mobil merger, argued by some to be one of the most successful mergers, squeezed $2 billion in cost savings in the first year alone. These firms were able to eliminate redundant costs in accounting, human resources, and operations, saving the shareholders billions. When properly managed, scale can have immense advantages in lowering costs of services per unit of input.

Some academics have argued that in today’s world there are only two strategies: win on price or win on service. There is a lot of truth to that observation, especially if you look at retail. Successful retailers have either created highly efficient distribution channels to bring you goods at low costs, such as Wal-Mart, Target and Costco, or they have created high service models, such as Nordstrom and Neiman Marcus. Gone are the days where you can succeed in the market by offering mid-range products with mid-range service. Could Wal-Mart attract Nordstrom shoppers by simply hiring a piano player? Not likely. Nordstrom would not likely be able to undercut Wal-Mart on price with grand pianos and marble floors in the cost structure, either. In a binary world, you have to make a choice and structure your firm around that reality.

If you have purchased computer hardware lately or looked at back office software, there is very powerful hardware and software available to even the most cash-strapped start-up. Expensive accounting systems and other back office support is no longer a competitive advantage, as cloud computing has delivered high functionality for little upfront capital. The cost of connectivity has also dropped dramatically. This can allow boutique firms with specialized practices the ability to compete over large geographies without having to invest tremendously in infrastructure.

In no way am I suggesting that engineering, architecture or environmental consulting is like selling an airline seat or a pair of shoes. However, it is becoming more evident in our economy that getting stuck in the middle is a bad thing. Every firm, if it wants to thrive, needs to be world-class at something. However, to be truly successful, a firm needs to adopt the proper strategy to fit its market reality. That may mean acquiring competitors and eliminating costs to provide value to your clients. Conversely, you may need to refocus on client service and stop trying to win in “commodity” type markets with gold-plated resources. There is no one prescription for success in the industry and not likely one strategy that will lead to success for a firm. However, if you find your firm is “stuck in the middle,” neither big nor small, neither specialized nor broad, then one thing is certain, history is not on your side.

Editorial: Revitalization of the firm

 By Mark C. Zweig

 

So many people today in this business are just getting tired of the grind. The last three years haven’t been fun— with more competition, reduced profitability, delayed or cancelled projects, stalled ownership transition plans, and layoffs of good people being the norm. 

We went through the same thing here recently at ZweigWhite. It’s time for revitalization. Here are some ideas for you: 

1) Come out with something new. I cannot over-emphasize to all of you how critical this is. What services are you subcontracting out? Can you bring them in house? Maybe you should buy the firm or firms you are already working with. Save money on consolidated overhead and joint marketing efforts. But even if you don’t buy, maybe you can repackage something you already do in a new and innovative way that allows clients to get a taste of your service and expertise at a low cost. This “taste” could lead to a much bigger project later.

 2) Hire some new, experienced people. There is nothing like getting some new people in who are known in the fields and markets you serve— people at the top of their game, with a solid reputation. It can shore up your ability to get work in a soft market real fast. Experienced people are more willing than ever to make a move. Don’t get cast offs— get those who are still working but dissatisfied by directly recruiting from your competitors. If someone does decide to join your firm, they will be doing so for the right reasons— not because they HAVE to— and will last longer on the job.

3) Hire some smart, inexperienced people. New people, fresh out of school, who are smart and motivated, will put the pressure on you to give them meaningful opportunities. That’s good! It means they will expect you to grow your business. Young people bring energy and enthusiasm, and represent your future stars. Plus they have no bad habits that you will have to undo, unlike some experienced staffers. Get them young and mold them in your hands. 

4) Move. New surroundings can be motivational to all. Get into a space that has more stuff close by. Everyone will appreciate it. Find a space with more windows and better gathering areas. I never understood design firms— they should know better— not providing space with natural light to their employees. Gathering areas are also critical. Is there a space other than the conference room where employees can meet for lunch or coffee? There should be.

5) Discard archaic systems and processes. Whether it is the non user-friendly accounting system, the marketing database that only one person in the firm knows how to use, or the ridiculous expense report submission process. Dump it. Ditto for meetings you have always had but no one wants to participate in because they have outlived their usefulness. Dump ‘em. Bureaucracy is a huge demotivator to busy people who have deadlines set by external clients. Eliminate it everywhere you can.

6) Share successes and celebrate all victories. Whether it is a bell you ring when you get a new project or a thanks that comes in from a client that you send on to all employees, don’t underestimate the importance of reinforcing successes. Share company performance numbers also. People need to know every day that what they are doing makes a difference AND that they are part of a successful organization that bolsters them.

New AIA President Addresses State Of Architecture Profession

Press Release: March 8, 2011

FAYETTEVILLE, Ark. (March 8, 2011) — Architecture enhances people’s lives, and the emerging recognition of this effect is earning the profession newfound respect, says Clark Manus, the new president of the American Institute of Architects (AIA), in the March 7 issue of The Zweig Letter.

In a wide-ranging interview in the weekly management journal published by professional services firm ZweigWhite, Manus said that more than ever architects are seen as “problem solvers.” As such, he said he relishes the role of being part of increased dialogue and dynamic about the importance of design and the importance of what design can do.

“The biggest importance is really being the voice and the face for the profession,” Manus, who is also CEO of Heller Manus Architects in San Francisco, told TZL.

Manus brought up the fact that the economic crisis has impeded the ability of many projects to take hold, which is the main challenge facing the profession. He sees the continued evolution of Building Information Modeling and the growth of collaborative approaches such as Integrated Project Delivery as the biggest trends in design, which he believes will generate a “greater benefit in the delivery of projects.”

The emergence of the International Green Construction Code, in which the AIA has been closely involved, also will shift the baseline for the design profession, he says. A model IGCC code is expected by the end of 2011. Climate change and how design professionals can help craft solutions to deal with the alterations already underway is another major trend he identified. “We’re really talking about building efficiencies,” he said.

In the interview, Manus argued that architects need to enhance their value propositions to survive and thrive in the new economy. Concepts such as evidence-based design and lifecycle analysis will consequently become more common. “The fantasy of not having quantifiable data,” he said, “is a denier of good design.”

ABOUT ZWEIGWHITE

Twice named to the Inc. 500 list of best firms, ZweigWhite is the nation’s leader in enhancing business performance for architecture, engineering, and environmental consulting firms. The ZweigWhite team consists of experts in strategy, mergers and acquisitions, business valuation, ownership transition, human resources management, finance, marketing, market research, project management and project delivery methods who collectively produce a comprehensive suite of products and services, including advisory, consulting, newsletters, controlled-circulation magazines, industry reports, executive training, business conferences and more covering virtually every aspect of firm management. The firm is headquartered in Fayetteville, Arkansas, with additional offices in, Chicago, IL, Durham, NC, and Natick, MA. ZweigWhite is owned by investors Eli Global, BIA Digital Partners and MZ Ventures, with management including Mark Zweig and Ed Friedrichs. For more information, visit www.zweigwhite.com or call (479) 582-5700.

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From the Chairman: KM & TL

By Ed Friedrichs

What, you may ask, is this all about? A few days ago I began a blog dialogue (I feel like I’m finally entering the 21st century when I participate in a blog conversation) following on my article in The Zweig Letter back on Nov. 15 (Issue 887) titled “Two Degrees of Separation,” where I wrote about accessing expert knowledge. The deeper subjects, of course, are Knowledge Management (developing a firm’s body of expert knowledge and making it accessible to the entire firm) and Thought Leadership (developing new and innovative ideas through research and application and sharing those ideas in a way that improves the profession and the industries we serve). Thus, KM and TL.

This dialogue revolved around a concern that fee pressures and survival instincts were combining in firms to discourage or stop investment in KM and TL. “It’s all about billable hours,” resounded in the conversation. “Who has time to invest in KM and TL? How can we convince our CEO to resume shut funding for this sort of thing and continuing education as well?” I was concerned about what I was reading because I believe that successful firms create and sustain a culture of knowledge management and thought leadership despite economic conditions. In fact, KM and TL never work if directed or assigned. So, I chimed in, “If the CEO needs convincing, get rid of the CEO or join another firm.” Well, that seems to have stirred a hornet’s nest, so I kept adding to the dialogue.

Knowledge comes from passion. You search out deep knowledge about something because you’re passionate about it. You connect yourself with others who share your passion. The proliferation of knowledge in a firm and access to it comes as a result of a culture in which people share their passions. When passions are broadly known in a firm, you know whom to ask about what; whom to talk to in order to gain knowledge about your problem and place your question in context.

Knowledge assets are not assembled. It’s not worth the time to build an elaborate database of knowledge. What takes time is building a culture and structure through which everyone knows how to connect with the person who has the knowledge and facilitate (no, lubricate) that connectivity. This is not about spending money, it’s about developing a culture of rich networks that share and collaborate.

Likewise, thought leadership is the outcome of a passionate commitment to a subject. People become thought of as leaders because they are constantly gathering knowledge about a subject that fascinates them so compellingly that they never stop gathering data and talking to people who are also deeply engaged. It’s not a matter of expending otherwise billable time. Thought leaders just can’t help themselves. These are people who make time to pursue their passions. If someone is asking for permission to spend time on something, they’re either not passionate enough or you have a very oppressive culture in your organization. Your culture must support people’s passions, encouraging them, creating a platform (print, speaking engagements, membership in related organizations) for them to expose their thought leadership.

If no one in your organization is passionate enough about something to evolve into a thought leader, go out and find some passionate people (always my first question on an interview— What are you so passionate about that you’re always sneaking time from other obligations to work on it?). And if your CEO doesn’t get this and is not a thought leader, see my advice in the second paragraph.

If you have to pitch your CEO to resume your focus on TL and KM, why aren’t you the CEO? He or she has clearly lost their way. I don’t care how tough the market or the economy are, the CEO’s role, through thick and thin, good times and bad, remains the same:

1) Lead client relationships— for sales, for referrals and for satisfaction.

2) Create an atmosphere where people want to work collaboratively with you and each other to do work that makes your clients successful.

3) Contract for services and manage their delivery in a way that generates profits.

4) Lead innovation through thought leadership and knowledge management.

5) Create a collaborative atmosphere with all stakeholders (contractors, subcontractors, suppliers, manufacturers, building officials, lenders, everyone) in order to bring the best and brightest resources and work effort to bear on your clients’ matters.

The CEO has to attend to the above (and not necessarily in that order) to be worthy of carrying the mantle.

Design Professionals Grow Leery Of “Green” Promises

Press Release: March 2, 2011

FAYETTEVILLE, ARK. (March 2, 2011) — Legal claims over sustainability promises vs. performance of certified green buildings are beginning to mount—and so are warnings to A/E/P and environmental consulting firms, The Zweig Letter reported in its Feb. 28 issue.

In February, insurance broker and risk management firm Ames & Gough issued warning urging design professionals to consider carefully the contractual language regarding “standard of care” and “scope of services” in addressing projects that pursue the U.S. Green Building Council’s LEED certification.

One of the most critical provisions in any contract for professional design services relates to the standard of care under which the design professional will be required to render its services. In the absence of contract language to the contrary, a design professional will be held to a common law standard of care commensurate with that of other professionals providing the same services to a geographically similar community.

“However,” Manhattan-based construction and real estate attorney Stephen Del Percio told The Zweig Letter, ZweigWhite’s weekly management journal that caters to the design industry, “on a green building project, an owner may seek to hire a design firm specifically because of its sustainable design expertise. Accordingly, it may attempt to hold the design professional to a higher standard of care than that which prevails in the industry. The standard of care has shifted.”

“In the spectrum of liability,” Del Percio continued, “legal challenges to green construction are making people more careful in what they’re promising.”

 Contractual wording that stipulates attaining certain levels of LEED certification and guarantees of specific percentages of energy reduction “can be affected by owner and contractor decisions, or otherwise beyond a design professional’s control,” said Dan Knise, CEO of Ames & Gough.

Performance-based language such as “this design will achieve a LEED Gold rating” or “will reduce operating costs by 50%” in a standard of care provision may be problematic if the insurer believes that the design professional has provided the owner with the equivalent of a warranty or guarantee.

Said Del Percio, since professional liability policies generally exclude coverage for claims arising out of the breach of a warranty or guarantee, owners and design professionals should review language in their construction agreements for provisions that could potentially be construed by an insurer as the equivalent of a warranty or guarantee.

ABOUT ZWEIGWHITE

Twice named to the Inc. 500 list of best firms, ZweigWhite is the nation’s leader in enhancing business performance for architecture, engineering, and environmental consulting firms. The ZweigWhite team consists of experts in strategy, mergers and acquisitions, business valuation, ownership transition, human resources management, finance, marketing, market research, project management and project delivery methods who collectively produce a comprehensive suite of products and services, including advisory, consulting, newsletters, controlled-circulation magazines, industry reports, executive training, business conferences and more covering virtually every aspect of firm management. The firm is headquartered in Fayetteville, Arkansas, with additional offices in, Chicago, IL, Durham, NC, and Natick, MA. ZweigWhite is owned by investors Eli Global, BIA Digital Partners and MZ Ventures, with management including Mark Zweig and Ed Friedrichs. For more information, visit www.zweigwhite.com or call (479) 582-5700.

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Editorial: I can cut your costs if you won’t

By Mark C. Zweig

Sooner or later one comes to the realization that the answer doesn’t always lie in growing revenue. It may just not be possible with the time you have to fix the problem.

Sometimes, you have to cut costs.

Back in my younger days, I used to be known for my ability to go into an A/E or environmental firm, quickly assess the situation, and then, without a shred of doubt, tell the owners what they needed to do to cut costs. I was pretty good at it. The firms I worked for usually did much better afterward and had me back year after year to help them with their annual budgeting and business planning.

Some firms wouldn’t do what it took. I once quit the BOD of a company that would not cut out $1.6 million in unnecessary costs. Got tired of talking about it and decided I would start with the $50K they were paying me at the time, getting them down to “only” $1.55 million needed to go!

Gradually, as the ’80s and early ’90s ended and times got more and more prosperous for firms in our business, there seemed to be less interest in cutting costs.

But there’s been a whole new level of renewed interest in cost cutting in the last few years in this business. I’m getting more calls again. Here are some of the things I look at when I go into a firm to help them find where they can cut costs:

1) Labor. It’s always the biggest cost. Too many companies cut from the bottom during this last downturn. Principals and top management are probably where you need to look. It may help to have someone like me, who isn’t afraid to confront your owners to point out where the real problems are. It can be hard to do from the inside.

2) Office space. Firms just have too much of it. It’s time to cut back, compress, renegotiate your lease, get out of your old lease, and anything else to cut back on costs. Office space is cheap now pretty much everywhere in this country and there are deals to be had. And while you are looking at space, look at entire offices. Some that have been struggling for years may just need to go now.

3) Unnecessary overhead items. This is stuff like sports tickets, condos, expensive business developers who are on contract, institutional ads that aren’t helping, outside web hosting services, professional society expenses that don’t help create business or do projects, and more.

4) Benefits. People are paying more of their insurance costs today. It’s not a great situation but the reality is companies cannot do what they used to. Ditto for 401K matches. They have declined. Companies are starting to figure out that the way most plans are written, the company can renege on it if they can’t afford it, even if there is a match. Again— a grim reality of life in this business today.

5) Outside service providers. You have to look at the attorneys, accountants, recruiters, marketing consultants, web hosting companies, e-mail blasting companies, and more. All of these providers need to be shopped, talked to, and negotiated with. All of their prices tend to go up over time.

6) Other stuff. Unnecessary training expenses. Using outside recruiters before trying to fill the job on your own. Too many internal meetings— especially those requiring travel. Expensive company cars. Partners taking big lunches on the company credit card every day. Outside consultants who are supposed to be doing “business development” for the public and charging big bucks but getting no results all need to go.

Again— it may help to get some ruthless outside assistance here. Relationships with people, fear of change, and an almost limitless ability some folks in this business have to delude themselves about things getting better, all get in the way of cutting costs. But if you do get outside help, don’t hire someone who is related to your principals!

Clark’s Corner: Social media for consultants

By Jeff Clark

From a personal viewpoint, I often wondered in the past what I would say, and with such frequency, on this celebrity-glamorized and ego-centric platform called Twitter.

I’m not John Mayer and if I tweet that I’m going for a run down to Santa Monica Pier, I won’t be mobbed within minutes by a host of female admirers.

It’s not that my life is boring or uneventful. Perhaps I simply like my privacy and don’t want the whole world following my every move. Or perhaps you are shy, and your life is boring, so who is going to follow you anyway?

Fear of not having any followers and fear of being followed sound like good excuses if you want to be an introvert or a firm without any clients.

How about we set aside the fears of social media and look at the positives?

From a business perspective, whether you are a contractor building homes, or an architect designing commercial buildings, Twitter works to help grow your business if used properly, like any other marketing mechanism.  

Eric Howerton, COO at ZweigWhite, summarized to me his belief in Twitter and social media in general: “Social media as a whole is more about listening than speaking. The people you follow are your ears, allowing you to listen to what they want or need to know. Your followers are your mouth, allowing you to give the advice people want to hear. If you can treat this environment like a personal interview with clients, you will see success. Success in the form of understanding client needs, building relationships and credibility and offering advice that is truly wanted and needed.”

Another convincing example came from our CEO, Mark Zweig: “Not only have I gotten actual work from being on Twitter, I have also been much better informed about news and other happenings in our industry.”

With Eric’s and Mark’s encouragement, today (Feb. 10) is my first day using Twitter to listen and learn more about the A/E/P and environmental consulting space and to understand what’s happening in the markets where my clients are most active.

I’m going to first start following some of the top 50 design firms. Here’s what some of them are saying:

CannonDesign: “How do we make kids care about architecture and history?” http://ow.ly/3TTGN. That’s always a good question to ask.

KlingStubbins: “High performance starts with integrated design and energy modeling.” http://bit.ly/gQ0YbC

DLRGroup: “DLR Group to design new conference center in Jefferson City, Mo; voters approve lodging sales tax to help fund project.” http://bit.ly/hqVykI

HNTBCorp: “In SacBee, HNTB’s Barry McCaffrey and Rob Vining share the way forward to sustain Sacramento-San Joaquin Delta.” http://bit.ly/fpX55z

It appears that on average less than 10% of the large design firms have their company set up to tweet. This is an amazing opportunity being lost! What it also means is there’s an even greater opportunity for small and mid-sized firms to take advantage in this medium by filling the void with their own communications. Below are some of the tweets by others on mid-sized firms we’ve had the pleasure of working with. This is what you really want: a credible third party retweeting your company’s press releases and positive communications for you. There’s nothing better:

RAImagazine: “Finley Engineering to design repairs for Florida bridges after deadly car accident.” http://ow.ly/3ROJH

SMPSNational: “Thanks to Perkins + Will for hosting ‘The Basics of Business Development’ today in Atlanta!” http://yfrog.com/hsfq7gpj

In addition to following firms, make sure to follow the people within those firms. This way they will begin to follow you as well. This is the etiquette on Twitter. In general, if you spend an hour a day on Twitter adding a few contacts to follow, you will build a huge following for your tweets when you are ready to communicate.

How often should I tweet and what should I say?
Therein lies the rub. If you are extremely knowledgeable and in touch with a lot of people in your space, you can retweet their tweets, which is good etiquette as noted, in addition to sending out tweets every day on your own.

Daily is recommended. You work, you live and you communicate with others every day, so why not tweet for free and see what good things come your way?

In my first day of tweeting, I am following 40. When this article is published, I plan to be following over 400. If you like, follow me @DealGeneration. It’s fun and it works!