TZL 1359 (web)

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NEW FROM ZWEIG GROUP

2020 FEE & BILLING SURVEY REPORT Zweig Group’s 2020 Fee & Billing Survey Report of AEC Firms is the standard guideline for AEC industry firms looking to benchmark fees, billing rates, and billing practices, and evaluate productivity and utilization. Data was collected from an online survey of architecture, engineering, planning, construction, and environmental consulting industry professionals. The 2020 edition includes data on fee structures for every major market type in the AEC industry, billing rates and chargeability statistics for 33 levels of employee (ranging from clerks to principals), statistics on consultant fees and reimbursable expenses, and a variety of statistics related to payment collection methods and experiences. The 2020 Fee & Billing Survey Report of AEC Firms includes the following fee markets:

❚ ❚ Commercial development ❚ ❚ Corporate facilities ❚ ❚ Education (K-12) ❚ ❚ Education (higher education) ❚ ❚ Healthcare

❚ ❚ Marine ❚ ❚ Transportation ❚ ❚ Entertainment ❚ ❚ Federal/state/municipal ❚ ❚ Industrial facilities

❚ ❚ Multi-family residential ❚ ❚ Single-family residential ❚ ❚ Religious ❚ ❚ Environmental – public ❚ ❚ Environmental – private

Click here to learn more.

CHRISTINA ZWEIG NIEHUES, from page 1

undisclosed conditions” lead to a change, the situation is murkier, but can still be handled with adequate and timely communication. Here are a few communication tips: 1)The mandatory weekly check-in. A lot of firms do this, but many don’t. You have to be religious about timely and regular check-ins with clients and any project stakeholders. Everything that could cause a future issue or conflict needs to be discussed. This can be a phone call or as simple as an email. Most importantly, it builds trust – which will help you out in spades if conflicts arise. 2)Share information internally – preferably at least to all members of the project team. According to the 2020 Fee and Billing Report of AEC Firms , 78 percent of firms allow all firm members to see the firm’s billing rates and 77 percent allow everyone to see project fees. Make sure anyone who is working on the project knows what is included in the contract –and what’s not. 3)Share your fee breakdowns with clients. Fee transparency on the client side is remarkably less – just over half (56 percent) do this on a case-by-case basis. Fifteen percent of AEC firms always show a client what goes into their fee, and 8 percent never divulge what goes into a project’s total fee. 4)Avoid discounts, and when they are given, explicitly state them in the contract. Zweig Group data shows 78 percent of firms discount project fees, most often by discounting the final price (69 percent) but also by providing lower billing rates/ multipliers. This is important because if another similar project is undertaken at a later date without a discount, the client needs to understand why. It’s not all chaos out there, but it’s more important than ever to maintain project profitability, repeat business, and ensure timely payment. Zweig Group’s Q3 Impacts of COVID-19 on the AEC Industry Survey (post July 2020) asks firms to rank how much certain aspects of their business are impacted by the virus on a 1-5 scale (1 being little to no impact, 5 being impacted very negatively). It was surprising to see that ability to finish current projects within budget (2.32) and ability to finish on time (2.21) were ranked relatively low compared to collection period/accounts receivable (3.0) and ability to obtain new work (4.05). In my particular situation, the entire issue could have been avoided with a single text message, Oftentimes, even on large projects, it really is that easy! Good communication shows compassion to your client – something that’s likely to be returned back to you. CHRISTINA ZWEIG Niehues is director of marketing and media at Zweig Group. Contact her at czweig@zweiggroup.com.

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Chad Clinehens | Publisher cclinehens@zweiggroup.com Sara Parkman | Senior Editor & Designer sparkman@zweiggroup.com Christina Zweig | Contributing Editor czweig@zweiggroup.com Liisa Andreassen | Correspondent landreassen@zweiggroup.com

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© Copyright 2020. Zweig Group. All rights reserved.

THE ZWEIG LETTER AUGUST 31, 2020, ISSUE 1359

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O P I N I O N

Unlocking opportunities

When it comes to M&A, stay flexible and remember that it takes drive, determination, and the ability to connect people and ideas to achieve remarkable results.

T he ECS Group of Companies is one of the largest and most rapidly growing engineering and consulting companies in the U.S. Our growth is a natural outcome of our commitment and dedication to the success of our clients and employees. As a culture of doers, we roll up our sleeves and use our skills to help solve problems. We hustle. This commitment allows ECS to grow in each market we serve organically and through strategic acquisitions.

Tony Fiorillo

Over the last five years, ECS has acquired five companies throughout the U.S. with two being in the first quarter of 2020. In this article, we will discuss the key factors ECS focuses on for a successful mergers and acquisitions program. 1)Define strategic objectives. When ECS is looking for opportunity for growth, we begin by defining our objectives. Objectives could include market share, talent, specific technical expertise, or technology. In addition to growth, this is a good time to consider any specific operational concerns around capabilities that may need to be maximized or minimized. Depending on the strategy, acquisitions may serve as a way to achieve objectives quickly and effectively. 2)Conduct preliminary research on potential acquisition candidates. Our first step in a

selection process is to develop a long list of potential acquisition candidates. Search criteria could include candidates based on: ❚ ❚ Sector/industry ❚ ❚ Competitive position within the industry ❚ ❚ Revenue/size ❚ ❚ Market capitalization ❚ ❚ Location of operations After creating a list of potential acquisition candidates, we go back to the previously defined strategic objectives. This helps us to effectively narrow down the list of candidates.

See TONY FIORILLO, page 4

THE ZWEIG LETTER AUGUST 31, 2020, ISSUE 1359

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ON THE MOVE MERRICK WELCOMES NEW PROJECT MANAGER, DERON FRAILIE Deron Frailie, Colonel, USAF (retired), has joined Merrick & Company as Project Manager for its High Performance Facilities business unit. He will support the firm’s business growth in the Huntsville, Alabama, area and Gulf Coast, as well as throughout the Department of Defense and aerospace markets. “We are thrilled to add such a well-rounded professional as Deron Frailie to our team of project managers, technical leaders, and business development professionals that are anxious to build our consulting business in the

Huntsville area. Deron has the right attitude to do just that,” said Tammy Johnson, senior vice president, HPF. Frailie brings more than 23 years of experience in planning, design, construction, environmental, real estate, and lifecycle operations and maintenance. He retired from the United States Air Force at the end of June where he last served as Vice Commander of the 75th Air Base Wing at Hill Air Force Base, UT and supported the Air Force’s second largest installation by population and geographical size.

He holds a bachelor’s degree in architecture from Louisiana State University and a master’s degree in architecture with a building construction emphasis from Virginia Tech. Merrick & Company, an engineering, architecture, and geospatial solutions firm, serves domestic and international clients in the energy and chemicals, national security, life sciences, and infrastructure markets. The employee-owned company maintains 23 offices in the U.S., Canada, Guam, Mexico, and the United Kingdom.

TONY FIORILLO, from page 3

Our marketing team works alongside the mergers and acquisition teams to create (internal and external) messaging that ensures communication and our level of service remains consistent throughout the transition. Additionally, marketing materials like business cards, letterheads, logos to website and social media content, and communicating early and often is key to establishing and maintaining our brand. “The ECS Group of Companies is one of the largest and most rapidly growing engineering and consulting companies in the U.S. ... Over the last five years, ECS has acquired five companies throughout the U.S. with two being in the first quarter of 2020.” 5)Understand and integrate culture. We focus on humanizing the merger by addressing the communications needs of employees through each phase of the integration. This helps address potential culture issues and makes for a smoother integration process. In addition to communication, gaining an insight of the acquired organization’s culture helps us develop an effective plan. Four steps to consider: ❚ ❚ Understand the acquired organization’s operating style ❚ ❚ Determine the future operating style of the merged organization ❚ ❚ Develop a plan to narrow the gap ❚ ❚ Implement solutions and monitor progress With each merger or acquisition, we learn something new to build upon for our next opportunity. We have learned to stay flexible and that it takes drive, determination and the ability to connect people and ideas to achieve remarkable results. While challenging, the opportunities to collaborate and think outside the box are endless. TONY FIORILLO is president of ECS Group of Companies. Contact him at afiorillo@ecslimited.com.

3)Prioritize synergy. Put simply, synergy is either the “revenue enhancing” or “cost savings” achieved by integrating the companies. An initial part of due diligence is identifying potential synergy opportunities between candidates and ECS (the buyer). Synergy opportunities can be analyzed early in the integration process to build momentum and credibility amongst internal and external audiences. Focusing on the high-end, quick-hit projects to create momentum by creating a plan to monitor results. Some types of projects include talent retention and financial planning. Talent retention: ❚ ❚ Understanding people concerns ❚ ❚ Retaining key talent

❚ ❚ Redundancy and severance Financial planning and design: ❚ ❚ Finance and administration integration ❚ ❚ Engaging external service providers

In 2018, ECS acquired GEM Engineering, Inc. to not only expand our footprint into a new state, but also to increase our technical capability. GEM and ECS were an ideal match and created unprecedented opportunities for our employees and our clients. 4)Communication. Throughout the acquisition process, communication with different messages are required for different stakeholders involved. Key stakeholders of each company may include current and prospective customers, employees, business/professional organizations, news media, and regulatory bodies. By developing separate messages and delivery formats (e.g. open forum meeting, official letter, memo, email, newsletter, and media), effective communications can be achieved. A few critical factors to a successful strategy include communicating: ❚ ❚ Early and often ❚ ❚ Openly and honestly ❚ ❚ Consistently, both internally and externally

❚ ❚ Proactively ❚ ❚ Face-to-face

© Copyright 2020. Zweig Group. All rights reserved.

THE ZWEIG LETTER AUGUST 31, 2020, ISSUE 1359

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change

diversify celebrate

promote educate

VIRTUAL EXPERIENCE

&

Symposium

beginning

SEPTEMBER 30, 2020

You’ve asked. We’re answering. The Elevate AEC Conference can now be ex- perienced 100% virtually. That’s right—the same world-class experience, but no travel required. The 2020 Elevate AEC Virtual Experience & ElevateHer Symposium will be an eight-week long event , providing attendees mean- ingful content and networking opportunities from afar, highly produced with live interactions. This virtual experience will include daily doses of keynote speeches, Ted Talks, breakout sessions, virtual social mixing events, awards celebrations & more! The ElevateHer Symposium will include presentations of our 2020 ElevateHer™ Cohort’s research findings. This is one of the most exciting and requested events of 2020. The safety and well-being of our loyal clients, friends and family is our number one priority. That is why Zweig Group has decided to switch our Elevate AEC Conference & ElevateHer Symposium to a 100% Virtual Experience!

TWO REGISTRATION OPTIONS

PREMIUM: $995

FREE

Includes: ElevateHer Symposium, ALL key- note speakers & learning sessions, Zweig Group seminars, roundtables & more!

Includes: ElevateHer Symposium, certain keynote speakers & learn- ing sessions

THANK YOU TO OUR SPONSORS

QUESTIONS? For group discounts or if you have any questions, contact Olivia Thomas at 479-713-0429, othomas@zweiggroup.com or visit zweiggroup.com. REGISTER NOW

Everything we do is in pursuit of elevating the AEC industry, bringing awareness of the incredible impact that engineers, architects, environmental professionals, survey- ors, planners, landscape architects and related professional service providers have on the world. Empowering organizations with the resources they need to perform better, grow and add jobs, pay better wages and to expand their impact on the community, Zweig Group exists to advance the profession.

Page

THE ZWEIG LETTER AUGUST 31, 2020, ISSUE 1359

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P R O F I L E

Change: Nancy Ludwig President and senior principal of ICON Architecture (Boston, MA), a women-owned, SOMBDA certified firm that’s staffed over 50 percent by women.

By LIISA ANDREASSEN Correspondent

L udwig focuses on sustainable urban projects that create new paradigms for city living, and range from transit-oriented development to innovative adaptive reuse, and from low-rise to high-rise construction. She has contributed to the design and construction of more than 15,000 housing units throughout New England. Her projects have been case studies for nationally distributed books on sustainable housing, published by the ULI, Harvard University Press, and Global Green, and honored by multiple national awards. “When staff can tell us succinctly what they want to do, we make our best efforts to keep them engaged and help them move forward,” Ludwig says. “This could mean pulling them onto another team where they can learn a desired skill, or sending them out for training for a specific topic, or keeping them first in line for the next project type that they want to explore. Our senior staff are very good at helping engaged junior staff grow into new positions by letting them shadow the work that they do.”

A CONVERSATION WITH NANCY LUDWIG. The Zweig Letter: How far into the future are you able to reliably predict your workload and cashflow? Nancy Ludwig: At ICON, the “projections” are an important tool to help us understand both workload/ staffing as well as cashflow. We monitor every project, update fee spent versus overall fee, and project fee to be expended over our contract time period. Along with our controller, I meet with each project manager to forecast their project needs over the forthcoming year as best we can. We then review the projections monthly with our business management team, with everyone in the room, so that all managers understand overall firm project needs and all staff assignments. Managers often share staff and it’s important for them to understand how much time of a staff member that they can access. We are organized in three focus areas of the practice, so each practice principal is also involved in the process. This is a critical

THE ZWEIG LETTER AUGU

7

part of our business planning, and overall communication. We have perfected our “homegrown” spreadsheet, and it has proven fairly accurate over the years. It also allows us to see if principals and associate principals are meeting their business development targets. TZL: How much time do you spend working “in the business” rather than “on the business?” NL: I am blessed to be able to do project work – and can often be found sketching early design ideas and approaches to projects. I am lucky to have a trusted group of project managers who work with me, and we understand each other’s working styles. While I don’t spend time drawing on the computer (that would not be cost effective!), I am able to review design progress with staff on “screen,” and adapt design details through our design software programs. I also enjoy meeting with clients and city officials in the permitting of our work. I am project billable more than 60 percent of my time. That said, I do enjoy the business as well – the numbers are direct and clear cut, while designing buildings is very subjective. I also enjoy developing concepts for existing and new clients, helping them bring ideas into vision as part of our business development strategy. TZL: Are you using the R&D tax credit? If so, how is it working for your firm? If not, why not? NL: We are absolutely using the R&D tax credit! Our accounting firm has made this an integral part of our firm finances. Our firm has a long history of innovation with sustainable building technologies – the R&D tax credit seems to have been put in place for just our kind of efforts. TZL: How are you balancing investment in the next generation – which is at an all-time high – with rewards for tenured staff? This has always been a challenge, but seems heightened as investments in development have increased. NL: We find that people across all ages need to feel engaged, and will self-select where they want to focus their energies. If staff members want to take courses for higher certifications, establish organizations, or travel to conferences, we encourage them and generally pay for the events. We do extensive in-house training, often led by staff themselves, helping them to grow in their presentation skills. Our younger staff appreciate this level

of engagement. We do our best to make sure our tenured staff work on the kinds of projects that motivate them, and give them responsibility to focus their growth. We have been able to reward all staff with generous bonuses and retirement account contributions over the last couple of years. TZL: What novel approaches are you bringing to recruitment, and how are your brand and differentiators performing in the talent wars? NL: Over the years, we’ve employed recruiters, LinkedIn, ads on industry websites, and attended job fairs at local colleges, etc. But we have also attended conferences, participated in events that draw students, and lectured at colleges and universities to find talent. We are lucky to have great architecture programs in Boston, and taking part in their intern or cooperative education programs has netted us many grads throughout the years. Our brand is grounded in deep caring about the environment and housing, and that tends to draw people to our practice. “Fruit Tuesdays/Thursdays,” “Bagel Fridays,” and many teaching, training, and group activities throughout the year keep our staff very engaged. TZL: When you identify a part of your business that is not pulling its weight in terms of profitability or alignment with the firm’s mission, what steps do you take, and what’s the timeline, to address the issue while minimizing impacts to the rest of the company? NL: We’ve established performance metrics for each principal, and their practice areas. These metrics are evaluated on a quarterly basis. If the principal cannot meet basic billability requirements and bring in enough work to support the staff in that practice area, we act immediately to reduce costs for that practice. Over the years, this has included reducing salary for that principal, reassigning staff, and/or reassigning work to shore up the practice area. TZL: Ownership transition can be tricky, to say the least. What’s the key to ensuring a smooth passing of the baton? What’s the biggest pitfall to avoid? NL: ICON named our next generation of leaders almost two years ago, and these six new shareholders are already in their second year of stock buy-in. When I became the managing shareholder of ICON more than 10 years ago, I

HEADQUARTERS: Boston, MA

NUMBER OF EMPLOYEES: 45

employees

YEAR FOUNDED: Founded in 1979

as Lane Frenchman; became

ICON Architecture in 1997

NUMBER OF OFFICE LOCATIONS: 1

ICON’S MISSION: Live. Learn.

Renew. ICON is motivated by

design’s ability to positively

transform, empower + restore.

It delights in collaboration

+ commitment to ongoing

dialogue + discovery. It

champions innovation to

strengthen communities + create

enduring value.

NUMBER OF DESIGN AWARDS

RECEIVED: 79

NUMBER OF LEED-CERTIFIED

BUILDINGS DESIGNED: 90

NUMBER OF LEED PLATINUM

See CHANGE, page 8

BUILDINGS: 10

© Copyright 2020. Zweig Group. All rights reserved.

UST 31, 2020, ISSUE 1359

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CHANGE, from page 7

changed the mandatory “sell” year for our three current shareholders to age 62 – so that we would be working to help earn profits and clients to assure a smooth transition. We have laid out a five-year transition timeframe. We have quarterly retreats with the new shareholders, exploring various topics. We are currently engaged in an eight- week management training course, taught by an outside consultant, to build communication and management skills within this group. We have established business development targets for each new shareholder and evaluate them on an annual basis as part of our annual review. We are working to help everyone understand the roles they will grow into over time. I believe the greatest pitfall to avoid is ignoring performance issues, just because they are new owners. We have been clear and concise about expectations, and each new owner understands performance is tied to financial success. TZL: Is change management a topic regularly addressed by the leadership at your firm? If so, elaborate. NL: Our firm has been around for 40 years, and we are now evolving our third-generation of owners. So, change has been a discussion for at least the past 15 years. We refer to my generation as ICON 2.0 and our rising shareholders as ICON 3.0. The firm has evolved from an urban design and planning practice, to a multi-family architecture practice, and now have sectors focused on learning environments and renewing buildings. Change is always in the air here. TZL: How do you handle a long-term principal who is resting on his or her laurels? What effect does a low- performing, entitled principal or department head have on firm morale? NL: Everyone is different, and we have worked with senior principals to step back from the firm with dignity. Having established performance metrics, that are clear to all, we have allowed senior principals to reduce their time in the office to meet the workload that they bring in. TZL: How often do you valuate your firm and what key metrics do you use in the process? Do you valuate using in-house staff or is it outsourced? NL: We work with an outside accounting firm to value the firm each year. This is a process that we set up 10 years ago and consists of averaging value based upon five different and commonly accepted valuation strategies. The share value is derived from this, and allows us to buy/sell shares as we transition the firm to a new generation of leaders. TZL: How many years of experience – or large enough book of business – is enough to become a principal in your firm? Are you naming principals in their 20s or 30s? NL: ICON has named a principal in his 30s, although he has been with ICON before he even graduated from architecture school. Principals achieve that position due to many factors – but in this case, he was an integral link to several important, repeat clients. And, of course, he is meeting all his targets!

ICON staff partipated in the ICYCLE spin-a-thon event, which raises money to end homelessness in Boston.

TZL: What happens to the firm if you leave tomorrow?

NL: My job right now is to step back and let the next generation lead forward. While I hope they would miss me, I’m positive that they would carry on developing this practice. I fully expect the firm to change and evolve even before I am gone. The new generation needs to follow its passion. TZL: A firm’s longevity is valuable. What are you doing to encourage your staff to stick around? NL: My partner and I sit with each and every employee for an annual review. At the review, we ask staff how we can help them succeed – noting that we cannot script their plan, they need to. When staff can tell us succinctly what they want to do, we make our best efforts to keep them engaged and help them move forward. This could mean pulling them onto another team where they can learn a desired skill, or sending them out for training for a specific topic, or keeping them first in line for the next project type that they want to explore. Our senior staff are very good at helping engaged junior staff grow into new positions by letting them shadow the work that they do. TZL: Diversity and inclusion is lacking. What steps are you taking to address the issue? NL: ICON is a women-owned firm and is SOMBDA certified. Our staff is over 50 percent women, and we actively seek to diversify our staff, recruiting minorities and persons of color at a percentage similar to that of the profession. We often take on interns, work with them during their training, and stay in contact as they finish their schooling with the intent that we want them to return to ICON as they start their professional career. We encourage all staff to get involved with great organizations outside the office to give back – and we financially support these efforts. We also pay for our staff to get registered as architects, and encourage study groups within the office to support our staff as they make their way through a multi- year registration process.

© Copyright 2020. Zweig Group. All rights reserved.

THE ZWEIG LETTER AUGUST 31, 2020, ISSUE 1359

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O P I N I O N

E very entrepreneurial architect, engineer, planner, or land surveyor who is an owner in their own design/consulting business knows they can make one of these companies profitable. But the majority – in my experience – fail to understand how much value they can create in their companies IF they make the right decisions. Many owners fail to understand how much value they can create in their companies if they make the right decisions. The truth about building value in your firm

culture, there is a double-dose of keep the value low. Not to mention the mentality that book value internal valuation methodologies are always preferred by ultra-conservative accountants and financial managers who worry about the firm’s ability to buy back ownership stakes from departing owners as they leave or retire. Over the last 40 years working inside and outside A/E firms as a consultant or board member, I “I have seen many firm owners build incredible wealth in their ownership stakes that they may not have originally thought possible.”

Mark Zweig

Part of the reason for this failure to understand the real opportunity one of these companies represents is the the fact that most firms’ principals have spent their entire careers in one or two firms, and odds are those companies were run in such a way that ownership was viewed as an “income club.” In other words, the only value of the ownership is that you can make more through your share of the profits. The ownership may have been given to them or sold to them with payments tied to bonuses. And then when they move on they basically give it to the next person down the line, selling it for a fraction of its real value and getting paid overtime. Another reason for this failure to understand the real value of their businesses is the accountants they get their advice from. When minimizing tax obligations is combined with the “income club”

See MARK ZWEIG, page 10

THE ZWEIG LETTER AUGUST 31, 2020, ISSUE 1359

10

BUSINESS NEWS CONSTRUCTION TO BEGIN ON NEW OSU ACADEMIC FACILITY AT THE CENTER FOR HEALTH SCIENCES Dewberry , a privately held professional services firm, announced that the new North Academic Building at Oklahoma State University’s Center for Health Sciences campus is now under construction and is expected to open in Fall 2022. Dewberry completed initial programming and conceptual design for the new North Academic Building and the Office of the Chief Medical Examiner in 2018. By relocating and upgrading services from multiple buildings currently in the center of campus, this new building is the first phase of a master plan focused on health and advancement in research and education. Once complete, the ME office will be one of just a few nationally that is directly and physically connected with an academic health center.

The design of the ME autopsy laboratory is unique to Oklahoma, and has raised the bar internationally for safety, workflow efficiency, and evidence preservation. When completed, this office will be among the most technologically advanced in the world specific to advanced postmortem diagnostic imaging. This new building will also house the Center for Rural Health, Center for Health Systems Innovation, and dedicated anatomy and neuro-anatomy laboratories. Additional amenities will include classroom, conference, study, and administration areas. The firm’s designs incorporate a similar material palette in the interior and exterior as the A.R. and Marylouise Tandy Medical Academic Building, completed in 2017, and expand the aesthetic connecting the new and older parts of the campus.

“As OSU continues to provide top-tier education and training for students across a variety of subjects, the Center for Health Sciences has an opportunity to set the university apart as a nationally ranked health care training institution,” says Dewberry Principal and Project Manager Bruce Henley, AIA. Dewberry is a leading, market-facing firm with a proven history of providing professional services to a wide variety of public- and private-sector clients. Recognized for combining unsurpassed commitment to client service with deep subject matter expertise, Dewberry is dedicated to solving clients’ most complex challenges and transforming their communities. Established in 1956, Dewberry is headquartered in Fairfax, Virginia, with more than 50 locations and more than 2,000 professionals nationwide.

MARK ZWEIG, from page 9

6) Backlog. The bigger the backlog under contract, the more certain the future revenue stream is. That increases value. 7) Lack of client concentration risk. Firms that have too many of their eggs in one basket – meaning too much of their business coming from a single client – will not get the same value as an equivalent company whose business is spread out over a whole lot of clients. Not saying the firm needs to be in a zillion markets – just that spreading risk out over a lot of clients increases value. 8) Management depth. Everyone in the firm needs to know who their second in command is and who will take over for them if they leave or get sick. Having those “number twos” in place, and then having number twos for number twos will undoubtedly increase the value of the business because it will be more likely able to weather any turnover-related problems. 9) High quality staff. The better your people are – and we all know what that means – the higher your value will be compared to other similar firms. Recruitment and training, like marketing, are what I like to call “off balance sheet investments” that can yield huge dividends. 10) Clean books – preferably audited. Comprehensive and accurate financials again reduce the risk of the business and anything that accomplishes that goal will increase the value of the business. And even if it saves you on taxes, get all of your personal vacation homes and other luxuries that don’t do anything for the company off the books. 11) Codified processes for everything. I’m talking about good recruiting processes, RFP response systems, PM systems, good document storage systems, a well-developed intranet, and a decentralized and up-to-date CRM (client relationship management) system are all critical to building value in your business. These things take time and money to develop and are critical to your ability to scale your business as it grows. So how are you faring on these 11 points? Are you doing what you need to be doing to build your value? And if not, why not? MARK ZWEIG is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

have witnessed not only the conscious decision to make a firm more valuable, but the outcomes of most all of those efforts over that time. And I have seen many firm owners build incredible wealth in their ownership stakes that they may not have originally thought possible. What a learning process this has been! So how can you really build value in your business – value that far exceeds what you can extract from your company each year? Here are my observations: 1) Develop and share a plan for growth. It starts right here. If top management doesn’t publicly state they want to grow and have a plan for it and they won’t lay out specific goals and share them with everyone, good luck making it happen. 2) High revenue growth rate. Your growth trajectory has more impact on your value than any multiple of EBIT no matter what anyone tells you. High growth rate – especially if the firm has good cash flow and any profits – is the best recipe for value creation. 3) High productivity/high margins. Any firm in this business with better than normal labor multipliers and higher than normal staff productivity (utilization) will have higher value than those whose key performance metrics look like the bulk of other firms in this business. Those high multipliers indicate that the marketplace values what they do. And those high productivity numbers show that the culture is healthy. 4) Be willing to reinvest in the firm. That means retaining some earnings versus paying it all out through bonus to minimize tax obligations. And it also means investing in things such as IT, recruiting, training, and marketing, so the firm can support and manage its growth. 5) Brand name/top of the market position. Any business that is in the top five firms for what it does in a particular market will be more valuable than the other firms. Having a brand that is recognized and highly thought of is one of the key elements of value creation in this industry.

© Copyright 2020. Zweig Group. All rights reserved.

THE ZWEIG LETTER AUGUST 31, 2020, ISSUE 1359

11

O P I N I O N

Employee retention

It comes down to respect and providing for your employees. If you do these two things, your people will quickly become your biggest cheerleaders.

M any firms like to boast, “It’s the people that make our company,” but how often do we really check in with them one-on-one or recognize them for a job well done? The day-to-day grind of pushing out emails, visiting job sites, and getting invoices paid can quickly put us into a spiral of “just getting it done” without giving much thought to the well-being of our staff and colleagues.

Kim Fowler

When it comes to improving employee retention, consider the following: ❚ ❚ Check in often. Some people may not have the gumption to approach their superior with a question or concern on their own. But, if you are proactive in checking in with your staff on a regular basis, this provides an opportunity for them to open up. Use an approach that makes them feel comfortable, and make it known that their opinions matter. Tip: Conduct “stay” interviews. A “stay” interview is an informal discussion between an employee and their superior and/or HR to understand what the company could be doing better from the employee’s perspective. These interviews should be done separately, but in addition to a yearly performance review. ❚ ❚ Recognize your employees in front of their peers. It’s important that we recognize our

employees for their unique talents and contributions to the company. This recognition should not only be one-on-one, but also in front of their peers. Peer- to-peer recognition not only drives motivation, but builds a culture of camaraderie and support among teammates. Ideas for employee recognition: ❚ ❚ Recognize employees who go above and beyond via annual awards. ❚ ❚ Give bonuses for referrals, certifications and licensures, serving on an industry board, etc. ❚ ❚ Distribute firm-wide emails recognizing specific individuals for a job well done. ❚ ❚ Spotlight an employee via your internal newsletter.

See KIM FOWLER, page 12

THE ZWEIG LETTER AUGUST 31, 2020, ISSUE 1359

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BUSINESS NEWS WARE MALCOMB ANNOUNCES COMPLETION OF L’OREAL PULP RIOT OFFICES IN ENCINO Ware Malcomb , an award-winning international design firm, announced construction is complete on L’Oreal’s new Pulp Riot offices located at 16501 Ventura Boulevard, Suite 400, in Encino, California. Ware Malcomb provided interior architecture and design services for the project. Pulp Riot is a professional brand of hair color known for its portfolio of cutting-edge products featuring bold and vibrant colors and a dedication to artistic expression. Their new 6,600 square foot office space includes a hair demo salon, conference rooms, open offices, flex offices and a photo studio. The space serves as a training facility for stylists throughout the country who frequently visit to learn how to create innovative hair styles with Pulp Riot’s wide array of coloring products. “This is a company with a very distinct brand, and we wanted the interior design to showcase that brand and tell a story throughout the space,” said Alicia Zaro, Director of Interior

Architecture & Design for Ware Malcomb’s Los Angeles office. “In working closely with the team at L’Oreal and Pulp Riot, we created an environment where the company’s branding could speak for itself in a space that inspires innovation and creativity for employees and visitors alike.” Ware Malcomb selected materials that used simple textures in contrasting ways. Black, white, and greys were paired with simple white walls to allow blank canvases for the company’s branding, creating huge statement walls. Darker ceilings were incorporated to allow for a deep contrast with the pops of colors on the walls, which were provided by a graffiti artist who had also worked on Pulp Riot’s branding and packaging. The conference rooms were designed around the names and color tones of Pulp Riot’s popular hair color products. Each one is unique and reflects a specific brand. Acoustical clouds were dropped in the main conference room with organic flowing carpet to create a grand entry for the space adjacent to the demo salon. Ware Malcomb

also selected furniture colors that tied into the overall branding concept. The general contractor for the project was Pinnacle . Established in 1972, Ware Malcomb is an international design firm providing planning, architecture, interior design, branding, civil engineering and building measurement services to commercial real estate and corporate clients. With office locations throughout the United States, Canada and Mexico, the firm specializes in the design of commercial office, corporate, industrial, science and technology, healthcare, retail, auto, public/educational facilities and renovation projects. Ware Malcomb is recognized as an Inc. 5000 fastest-growing private company and a Hot Firm and Best Firm To Work For by Zweig Group. The firm is also ranked among the top 15 architecture/engineering firms in Engineering News-Record’s Top 500 Design Firms and the top 25 interior design firms in Interior Design magazine ’s Top 100 Giants.

KIM FOWLER, from page 11

❚ ❚ Build trust and respect. Perhaps the most important attribute to employee retention is earning their trust and showing them respect. If you do not have a sense of trust with and among your employees, you are doomed from the start. Building a culture of open and honest communication will evoke this trust mentality. Ideas for developing a culture built on trust and respect: ❚ ❚ It’s important that you do not hold your employees on a tight leash and give them opportunities that illustrate they can be trusted and valued as an employee. If an employee cannot be trusted, don’t worry, it will become apparent. ❚ ❚ Don’t reprimand your employees for trivial mistakes, as it could lead to detrimental mistakes. ❚ ❚ Example: Let’s say a junior employee loses a specific tool while on the job and is hesitant to tell their supervisor, because they think it may cost them their job. So, they compromise by using another tool that can get the job done, albeit it is not standard procedure. Because the employee did not make their supervisor aware of the situation upfront, and an inappropriate tool was used, your company could face serious consequences if the structure or design proves to be faulty. ❚ ❚ Create an “open-door” environment that fosters growth. When your employees feel comfortable coming to you with feedback or expressing a concern it is all for the betterment of the company. Employees that don’t feel seen or heard within the organization will leave – it’s only a matter of time. In a nutshell, employee retention all comes down to respect and providing for your employees. They will quickly become your biggest cheerleaders! KIM FOWLER, CPSM is the marketing manager at Falcon Engineering, Inc. She can be reached at kfowler@falconengineers.com.

❚ ❚ Celebrate big wins and recognize those who made it happen via a verbal announcement or on the company intranet. ❚ ❚ Recognize employee milestones, whether it be with a card, a cake, or a plaque on the wall. ❚ ❚ Have some fun and be flexible. We all know that corporate culture is an important piece of the pie when it comes to employee retention, and an all-work no-play environment can put a damper on morale. Keep spirits high by incorporating a little fun into the workday. You may feel like you’re losing valuable, chargeable time, but giving your employees permission to “check out” for a few hours will only benefit you in the end. Ideas for building a fun and relaxed work environment: ❚ ❚ Create a “fun” area. In other words, create a space in your office that complements what fun means to your employees. Does it include a TV, a ping pong table, comfy chairs, a bar with beer taps? The list could go on. No matter, create a space where your employees can convene for parties and celebrations that is away from their desks and working environment. ❚ ❚ Celebrate holidays. Whether it be dressing up at Halloween, giving your employees a sweet treat on Valentine’s Day, or sharing your favorite dishes at Thanksgiving, make sure you are leaving room for activities that encourage your staff to come together for non-work activities. ❚ ❚ Be flexible. Here in the South, college sports can be a big deal. Give employees the opportunity to watch their favorite team during March Madness or treat them to pizza during the Thursday night football game. Sports aside, be flexible with your team so they may have time to do the things they enjoy outside of work.

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THE ZWEIG LETTER AUGUST 31, 2020, ISSUE 1359

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