TZL 1342 (web)

T R E N D L I N E S A p r i l 2 7 , 2 0 2 0 , I s s u e 1 3 4 2 W W W . T H E Z W E I G L E T T E R . C O M

Principals’ compensation

Lessons learned from conversations with industry leaders about separation anxiety, empowerment, and calm confidence. Talk it out

In Zweig Group’s 2020 Principals, Partners & Owners Report of AEC Firms , principals were asked to provide their current compensation data. Shown are the base salaries of all principals in the survey sample by median and mean value. Over the last five years, we’ve seen a steady increase in base compensation among principals in the AEC industry. While bonus pay has flatlined over that same stretch, shareholder distributions have also increased in that five-year span.

W hen I sat down to write this article, I had every intention of focusing on what I am seeing in the M&A world in the current transactional environment. But this isn’t the time for that commentary. This week, I’m going to write about my least favorite thing: feelings. Because, though we may all prefer talking about multiples, over the last couple of weeks, I have had more conversations with industry leaders that have dovetailed from their original purpose into something more important: acknowledging how much this really is impacting many of us. Here are a few themes I’ve picked up from the conversations that I have had recently: ❚ ❚ Separation anxiety. It’s not just how leaders have shared that they are coping with isolation, but a yet-more crippling feeling of anxiety from being separated from the teams they lead. I have a great deal of respect for the leaders who know that their energy is felt even from afar. I will also add that most of the brilliant people that AEC firms employ would prefer a leader who is forthright over one who is charismatic – we conduct management interviews for all of our strategic planning engagements; no one is nearly as cunning at concealing their true feelings as they give themselves credit for. ❚ ❚ Empowerment. I’m frequently reminded of and inspired by a comment from our 2019 Courage in Leadership Award footage describing Paul Greenhagen of Westwood Professional Services as someone who (to paraphrase) “bought us all computers during the recession. That might not seem like a big deal, but he cared that we had the tools we needed to do our jobs well.” In our firm, when conversations about what to cut have been raised, I have tried to espouse the same mindset: Will this limit someone’s ability to be effective? Applying the “Greenhagen Paradigm” has, I think, already helped our staff feel confident speaking up instead of applying duct tape and making do. It’s unfair to expect our team to offer white-glove service without reciprocal investment from our company, and there’s no way I can expect them to charge appropriately for our expertise when they don’t have best-in-class resources. ❚ ❚ Calm confidence. An oft-repeated concept that resonated with me is controlling what you can control and building “plateaus of confidence.” Maybe you cannot do something that you’d really like to do, for example, maybe you’d normally go to lunch with a client, but you can do something else to stay connected, and that is an accomplishment. Noting that accomplishment, and then building from there to something else that you can do to take control of the situation, can be a helpful way to build a foundation when so many of the “rules of engagement” that have helped us be effective in our roles have to be entirely re-written. ❚ ❚ Utter powerlessness. I’ve also heard the question of how we can

Jamie Claire Kiser

Participate in a survey and save 50 percent on any Zweig Group research publication.

F I R M I N D E X Deere & Ault Consultants, Inc................12

Schnabel Engineering. ..........................12

Wallace Engineering................................6

Ware Malcomb..................................4, 10

MO R E A R T I C L E S xz JOHN BRAY: Use this time Page 3 xz Work together: Tom Hendrick Page 6 xz MARK ZWEIG: Ten questions for you to honestly answer Page 9 xz JOAN DELOREY & JARED MAXWELL: Update on professional liability insurance Page 11

See JAMIE CLAIRE KISER, page 2

T H E V O I C E O F R E A S O N F O R T H E A E C I N D U S T R Y

COVID-19 IMPACT AEC INDUSTRY OUTLOOK & RESPONSE TO COVID-19 PANDEMIC

4/16/2020

This document contains data gathered by voluntary respondents to a survey administered by Zweig Group since 3/12/20. Updates to these results will be provided as necessary to account for the fluidity of this situation. Please contact research@zweiggroup.com for further information. is document contains dat gathered by voluntary respondents to a survey administered by Zweig Group. This version of the report was run on April 16, 2020 with 207 respondents. Click here to view the full report, or contact research@zweiggroup.com for further information.

IMPACT ON TRAVEL POLICIES

% 

Business travel is to be conducted on a case-by-case basis All business travel has been suspended No impact Voluntary business travel has been suspended Business travel is limited to or prohibited from certain locations Other

39% 32% 11%

7% 6% 4%

BUDGET DECREASE PERCENTAGE

IMPACT ON BUDGET

% 

Median Mean

My firm is considering changes to the 2020 budget No changes have been made to my firm's 2020 budget and none are currently planned My firm has altered the 2020 budget due to COVID-19

55% 32%

20%

11% 21%

13%

REVENUE DECREASE PERCENTAGE

IMPACT ON REVENUE

% 

20%

Median Mean

17%

The impacts of COVID-19 will likely cause a decrease in my firm's revenue by this percentage compared to the previous year COVID-19 will not likely impact my firm's revenue in any way COVID-19 will likely cause my firm's revenue to increase

70%

10%

28% 2%

IMPACT ON EDUCATIONAL EVENTS & TRAINING

% 

Employees at my firm are not allowed to attend business conferences and trainings My firm supports employees individual decisions to not attend events or trainings but has not issued a change to formal policy

41% 26% 14% 12% 7%

Business conferences and trainings are approved on a case-by-case basis No changes have occurred to my firm's policy on educational events and trainings Other

IMPACT ON CLIENT ENTERTAINMENT & NETWORKING %  My firm supports the decision of employees to refrain from public networking but has not issued a formal policy My firm has mandated that employees refrain from entertaining clients in social public settings (restaurants/bars/events) No change Other My firm is considering asking employees to refrain from entertaining clients in social public settings (r stau ants/bars/events)

40% 39%

JAMIE CLAIRE KISER, from page 1 mitigate the damage raised. And the response is so consistent: “What can an interior designer do to solve a global pandemic?” Or “I’m just a business developer, what can I do when it’s really hard to develop business?” If I may offer an alternative construct: if you define yourself by your profession, redefine yourself as a leader, as a mentor, as a teacher, as a thinker. If you can channel your talents and your energies into something, you will realize that your profession is not the same as your purpose, and when that moment hits, physical distance is no impediment. My final feeling: gumption. We will get through this. Make the decisions today that you are prepared to be held accountable for decades from now (shall we start with hoarding toilet paper?). JAMIE CLAIRE KISER is managing principal and director of advisory services at Zweig Group. Contact her at jkiser@zweiggroup.com. allow only certain employees to telecommute currently. My firm allows for any employees to telecommute at any %  47% 16% 15%

1200 North College Ave. Fayetteville, AR 72703 Chad Clinehens | Publisher cclinehens@zweiggroup.com Sara Parkman | Senior Editor & Designer sparkman@zweiggroup.com Liisa Andreassen | Correspondent landreassen@zweiggroup.com 13% 5% 3% Email: info@zweiggroup.com Online: thezweigletter.com Twitter: twitter.com/zweigletter Facebook: facebook.com/thezweigletter Published continuously since 1992 by Zweig Group, Fayetteville, Arkansas, USA. ISSN 1068-1310. Lower Quartile Median Mean Upper Quartile Tel: 800-466-6275 Fax: 800-842-1560 Issued weekly (48 issues/year); free electronic subscription at thezweigletter.com/subscribe © Copyright 2020, Zweig Group. All rights reserved. 1/1 83% 72% 99%

WHAT PERCENTAGE OF YOUR FIRM's WORKFORCE CAN EFFECTIVELY WORK FROM HOME?

IMPACT ON TELECOMMUTING & WORKING REMOTELY COVID-19 has changed my firm's policy on telecommuting to allow any employee to telecommute at any time. COVID-19 has changed my firm's policy on telecommuting to time and has not changed its policies in response to COVID-19. My firm allows for telecommuting for certain employees and has not changed its policies in response to COVID-19. My firm does not allow for telecommuting and has not changed its policies in response to OVID-19.

0% 20% 40% 60% 80% 100%

50%

14%

A MESSAGE FROM ZWEIG GROUP’S PRINCIPALS Click here (or visit youtu.be/TwGbB-X8tc4) to view a message from Zweig Group’s principals, Chad Clinehens and Jamie Claire Kiser. 8%

THE ZWEIG LETTER APRIL 27, 2020, ISSUE 1342

O P I N I O N

Use this time

Connect with your people and bolster your business so you come out of this pandemic stronger on the other side.

T he days are running together. Nights are mornings. Weekdays are weekends. You have daily updates to ensure the health and safety of loved ones. A new day, a new fire to put out at work, and new information being delivered to your phone or television seemingly by the hour. In these bizarre times we are all living in, it is easy to get caught up in the negative. What will the stock market do tomorrow? When will this project continue construction? I miss my standing desk at the office. And so on…

John Bray

While it is good to keep an ear low to the ground and be aware of what is going on in the world around you, it is also counterproductive to waste time spinning in your own head about what could possibly happen next in these times of uncertainty when, in reality, none of us really know for sure. True leaders are made during challenging times, and there are undoubtedly other people at your firm who could use strong leadership right now. Instead of keeping yourself up at night worrying about things you cannot control, you should be using this time to take advantage of this situation and get things done that maybe you wouldn’t have been able to otherwise. Here are some ideas to help you connect with your people and bolster

your business to come out of this pandemic even stronger on the other side: 1) Survey your employees. There may not be a better time to get valuable data and feedback from your employees than right now. Without travel or the hustle and bustle of an office, you will find incomparable response rates and honesty from your employees. Find out what works and what doesn’t about working from home. Ask them what they like and don’t like about working for your firm. Whatever information you can use to make your company better now or in the future should be considered. If you don’t have the time or acumen to do this yourself, hire an advisor to do it for you.

See JOHN BRAY, page 4

THE ZWEIG LETTER APRIL 27, 2020, ISSUE 1342

ON THE MOVE WARE MALCOMB ANNOUNCES PROMOTION OF JIM STANARD TO STUDIO MANAGER, ARCHITECTURE FOR IRVINE AND INLAND EMPIRE OFFICES Ware Malcomb announced Jim Stanard was promoted to studio manager, architecture for the firm’s Irvine and Inland Empire offices. In this new role, Stanard will help manage the team and assist with the architecture studio with business development and operations throughout Orange County and the Inland Empire in Southern California. Stanard brings over 40 years of architectural experience to Ware Malcomb, including work on a wide variety of project types such as retail, office, industrial, healthcare, retail, restaurants, and education. He joined Ware Malcomb in 2018 as a senior project manager for the Irvine Architecture group and quickly became an

integral part of the team, working on several large, complex projects with local and national clients. As a licensed architect, Stanard leads projects from initial master planning and design stages to successful construction completion. “Jim is a devoted team member who cares about our clients, our people, and our culture,” said Tom Myers, regional vice president of Ware Malcomb. “His strong technical knowledge, keen attention to detail, and excellent client service have been a huge asset to every project. We look forward to his continued contributions in his new role as Studio Manager,” added Greg Spon, Director, Architecture. Stanard is a registered architect in the states of Arizona, Colorado, Idaho and Washington. He holds a bachelor’s degree in architectural

engineering from Arizona State University, as well as a technical degree in architectural drafting and design from the Phoenix Institute of Technology. Stanard is also a LEED Accredited Professional. Established in 1972, Ware Malcomb is an international design firm providing planning, architecture, interior design, branding, civil engineeringandbuildingmeasurement 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 a Hot Firm and Best Firm To Work For by Zweig Group.

JOHN BRAY, from page 3

is unacceptable – why would you set lower expectations for your clients than you set for yourself? Look at your collection process and A/R to create a follow-up process that fixes this issue and gets your firm the cash it needs faster. 6) Contact people you haven’t talked to in a while to see how they are doing. Reach out to clients or former colleagues just to check in without trying to sell them anything. Lots of people right now just want someone they can level with and talk to on a personal level. Maybe you can offer some advice from your own experiences that could help them out. Maybe they are uncertain about their own future and could be a valuable addition to your team later this year. You never know unless you pick up the phone. 7) Find out if there are certain clients or activities that can be handled remotely to help save time (and money) in the future . Is there a client who has taken a particular liking to video calls? Is there a meeting that you now realize can be handled via email? Are there employees who actually don’t need to be in the office every day? Use this time to find out how you can be more efficient in your processes as well as where you can offer more flexibility to your employees. 8) Learn how to use Slack or Google Hangouts effectively. You’d be surprised how much more efficient than email these can be if used appropriately. 9) Learn how to use LinkedIn effectively. Social media, especially LinkedIn, is seeing heavy traffic right now. Using this tool effectively can not only establish you as a thought leader in your field, but even get your firm some new proposals as well. 10) Perform stress tests on your finances so you can be prepared for whatever the future may hold. What would happen if your interior design studio saw a 40 percent decrease in revenue this year? What if your healthcare projects get put on hold for six or more months? Figure out what your business will look like in possible situations so you can be prepared to communicate with your employees and guide the ship like a true leader when they need you the most. It could be the difference between layoffs and getting to retain your staff. JOHN BRAY is an advisor with Zweig Group’s executive search and recruiting team. Contact him at jbray@zweiggroup.com.

2) Host a sponsored webinar. This is an opportunity for you to stand out as a thought leader amongst your competitors by delivering original, relevant content in a new way. You can also take this time to strengthen existing relationships with your sponsors and build new ones as well. Get them involved in what you are doing. 3) Hold a contest for your employees or clients. You are still allowed to have fun with your colleagues and employees right now. Do something to keep them engaged and positive. Trivia night. Best designed work-from-home station. Most creative side projects. Get creative and give your people something to get excited about. “Instead of keeping yourself up at night worrying about things you cannot control, you should be using this time to take advantage of this situation and get things done that maybe you wouldn’t have been able to otherwise.” 4) Research (and implement) new ways to train your employees. It is still important to make sure your employees are getting the training that they need. This is also an opportunity to try new methods to see if they work for your firm. Not sure where to start? Check out Zweig Group’s online learning opportunities. 5) Get organized. Think about the following: ❚ ❚ BD strategy. What clients/markets should you be focusing on right now? Where is the money still going to come from for the foreseeable future? ❚ ❚ Expenses. Many companies procrastinate this. Take a long look at how your firm spends money and cut out anything that isn’t necessary. Is there anything you can permanently change about the way your firm spends money in the future? ❚ ❚ Accounts receivable. Many AEC firms are comfortable with an average A/R collection period of 90 days. This

THE ZWEIG LETTER APRIL 27, 2020, ISSUE 1342

Work From Home Learning Opportunities

KEEP YOUR CAREER DEVELOPMENT A PRIORITY

NEW LIVE WEBINARS LEADERSHIP IS EVERYTHING – ESPECIALLY DURING AND FOLLOWING A CRISIS – LEADERSHIP DEVELOPMENT PROGRAM PRICE: $249 OVERVIEW: There are four key elements needed for success today: Projects, Profits, People, and Purpose. This program is designed to focus on a number of the most important “People” aspects. This is a 4-part webinar series. Goal: Especially during this time of concern and change, provide critical tools and insights to current and aspiring leaders and managers to improve our individual, team, and collective health, growth, and resiliency. THIS WEBINAR SERIES WILL AIR ON EACH TUESDAY IN MAY AT 11 AM CST LEARN MORE

ASK THE EXPERTS: BECOMING A MOBILE WORKFORCE FREE LEARN MORE

OVERVIEW: Your projects have no room for error, yet many engineering projects have several challenges that can make this seem impossible. The fact that teams are work- ing out of the office more than before – either from a home office, or at a job site, or visiting clients – means that they need immediate access to project documents or the most current project status, plus be able to collaborate with team members in re- al-time. THIS WEBINAR WILL AIR ON WEDNESDAY, APRIL 29, 2020 AT 12 PM CST.

NEW ON-DEMAND WEBINARS

CHANGE MANAGEMENT WEBINAR PRICE: $49 LEARN MORE

OVERVIEW: The way we work, do business, and interact is constantly evolving and changing. Leaders are the first we look to when we need to adopt a change or under- stand how change affects us personally. You and your team must understand how to lead and adapt to an ever-changing environment.

DRIVING FINANCIAL RESULTS PRICE: $49 LEARN MORE

OVERVIEW: Solid financial management is crucial to the success of any company, and firms in the AEC industry are no exception. This short course provides an overview of business financial management – specifically tailored to our industry – to help firm leaders make informed decisions that drive results.

VIEW ALL ONLINE LEARNING OPPORTUNITIES

Zweig Group is an approved provider by the AIA & SHRM

THE ZWEIG LETTER APRIL 27, 2020, ISSUE 1342

P R O F I L E

Work together: Tom Hendrick President and CEO of Wallace Engineering (Tulsa, OK), a structural and civil engineering consulting firm that believes in being active citizens, in both our profession and communities.

By LIISA ANDREASSEN Correspondent

H endrick has experience with educational, entertainment, and retail buildings throughout the United States, Puerto Rico, and Mexico. He says the relationships he builds with not only clients, but employees, are the most important part of his job. “We have a lot of great people who are passionate about architecture and the application of engineering to the built environment,” Hendrick says. “They enjoy what they do, and they have fun doing it. Employees feel appreciated and part of something. They’re happy with the compensation, particularly overtime pay and frequency of raises (every six months). The culture is second-to-none and allows everyone to have a good work-life balance.” A CONVERSATION WITH TOM HENDRICK. The Zweig Letter: How has COVID-19 affected your business on a daily basis?

Tom Hendrick: All of our office locations are under shelter- in-place orders, so it’s advised that employees work from home. However, we’re considered an essential business in each location, so we are allowed to work from the office, if needed. We also have a couple of letters from clients doing essential business requesting that we work and continue to assist them. Approximately 85 percent of our 170 employees are working from home though. Our IT people had us prepared to work from home prior to the pandemic, so we have not experienced many technical issues. I have personally checked with each of our employees since this started and found that communication has been fantastic, both with clients and with each other within the offices. We have been using Google Hangouts for communicating within our office for quite a while and have continued to do so more frequently with so many employees now at home. TZL: You were asked to become managing principal in 2002. What do you most attribute that to?

THE ZWEIG LETTER APR

TH: Our previous managing principal left the firm to start his own company. Someone was needed to fill that role. A big responsibility of the managing principal was to hire employees. I had always taken an interest in potential employees when they interviewed, so the former managing principal always made stops at my office with new employees. I believe on his way out the door he recommended me as a possible replacement. Additionally, and probably more importantly, my partners recognized I had leadership qualities, was trustworthy, and was someone who did what he said he was going to do. TZL: What role does your family play in your career? Are work and family separate, or is there overlap? TH: My family, especially my wife, has always been extremely supportive of my career and it started from the beginning. Mary and I married when we were in college and she quit school to work and support me in finishing both my undergraduate and graduate degrees. When I started my professional career, she accommodated me working nights and weekends when needed and understood that traveling was also part of the job. She is a rock star in that regard! I think it’s nearly impossible to completely separate work and family. I bring work home on a regular basis and Mary and I often discuss what is happening at the office and what I do each day. Mary also has always been a good sounding board to bounce ideas off of. TZL: Are you seeking some kind of financial assistance during the COVID-19 crisis? If so, what type? TH: We increased our credit line at the bank and we applied for a small business loan as part of the stimulus plan. We have already been approved and we are supposed to receive funding today. TZL: What type of leader do you consider yourself to be? TH: For the most part, I would say I am a democratic leader – that is, I get thoughts and feedback of team members, then I make final decisions. But I also have a servant leader mentality whereby I try to share power and put the needs of the others first. TZL: Do you still run? How do you make time? Tell me a little about your routine and why it’s important to you personally and professionally. TH: I do still run some, but I am walking more than I run these days. I have a goal each week of 15 to 20 miles running, walking, or a combination thereof. I logged 825 miles

in 2019, and I estimate 30 percent of it was running. I believe that exercise is important, not only for your physical being but also your mental and spiritual being. Running (and now walking) has always been my “classroom of silence” time – a time when I can be alone, think, and really come to know who I am. It is part of my routine; it’s who I am. TZL: What novel approaches are you bringing to recruitment, and how are your brand and differentiators performing in the talent wars? TH: We try to use our culture to find the right person. We look for people who align with the company’s core purpose (why we exist) and our core values (how we behave). We set up our interview with creative questions that will determine if they share our core purpose and core values. Example questions we might ask prospective employees include: “What three qualities would you want to be known for if you were defining your personal brand?” or “What business values are most important to you?” Additional questions might include: “What is your impression of our culture and what do you like/dislike about it?” Or “What is it about you that you think you could bring to our company that would mesh well with our culture?” I don’t know if we are any more successful than other firms on getting the quantity of people that we need, but I believe we are getting people that identify with us and want be here, which cuts down on turnover and the need to hire replacements. TZL: You joined Wallace just a few years after the firm opened. Since you joined in 1988, what have been some of the most significant changes you’ve seen take place? TH: We were a 20-person, single office, structural engineering firm when I started. Our founder, Tom Wallace, was the sole owner. The most significant changes have been adding: 1) Civil engineering services 2) More offices (six in my 31 years) 3) Additional owners (currently 26) To me, these growth changes had positive impacts on the culture and created opportunities for employees. 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? TH: The biggest pitfall to avoid is waiting until it is too late. At Wallace, we were

HEADQUARTERS: Tulsa, OK

NUMBER OF EMPLOYEES:

163, including a few part-

time people

YEAR FOUNDED: 1981

OFFICE LOCATIONS:

❚ ❚ Atlanta, GA

❚ ❚ Denver, CO

❚ ❚ Kansas City, MO

❚ ❚ Oklahoma City, OK

❚ ❚ Tulsa, OK

MISSION: Redefine.

Advocate. Inspire.

Connect.

SERVICES: Structural and

civil services:

❚ ❚ Planning

❚ ❚ Design

❚ ❚ construction,

❚ ❚ Transportation

❚ ❚ Investigation

NOTABLE ACCOMPLISHMENT:

Engineered more

than $100 billion in

See WORK TOGETHER, page 8

construction, nationwide.

RIL 27, 2020, ISSUE 1342

4/16/2020 TREND: RESPONSE TO COVID-19 PANDEMIC networking but has not issued a formal policy My firm has mandated that employees refrain from entertaining clients in social public settings (restaurants/bars/events) No change Other My firm is considering asking employees to refrain from entertaining clients in social public settings (restaurants/bars/events) 9% 27% WEEK-TO-WEEK 1% 1%

54%

65%

6% 7% 4%

6% 3%

As participation increases, each question will be analyzed on a week-to-week basis to reflect the fluidity of the situation.

IMPACT ON TRAVEL POLICIES I PACT ON TELECOMMUTING

3/12 - 3/14 3/15 - 3/28 3/29 - 4/11 3/12 - 3/14 3/15 - 3/28 3/29 - 4/11

IMPACT ON BUDGET COVID-19 has changed my firm's policy on telecommuting to allow any employee to telecommute at any time. COVID-19 has changed my firm's policy on telecommuting to allow only certain employees to telecommute currently. My firm allows for any employees to telecommute at any time and has not changed its policies in response to COVID-19. My firm allows for telecommuting for certain employees and has not changed its policies in response to COVID-19. My firm does not allow for telecommuting and has not changed its policies in response to COVID-19. 15% 18% 24% 28% 15% Business travel is to be conducted on a case-by-case basis All business travel has been suspended No impact Business travel is limited to or prohibited from certain locations Voluntary business travel has been suspended Other 54% 7% 23% 1% 8% 7%

32% 47% 60% 18%

21% 53% 15% 9% 3% 12% 76% 9%

7% 7% 4% 4%

3/12 - 3/14 3/15 - 3/28 3/29 - 4/11 6% %

very fortunate that our founder, Tom Wallace, was more interested in being a small part of something big than he was of being a large part of something small. He started transitioning ownership in 1992 when he was just 40 years old. He just completed the last sell of his stock and 2019 was his last year as a shareholder. So, we have had an ownership transition plan in place that works for a number of years. TZL: How has COVID-19 impacted your firm’s policy on telecommuting/working remotely? TH: We have always let employees work from home for short periods of time on an as-needed basis. Obviously, we have never had so many working at home, nor have we had people at home for such a long period of time. We have not talked about any policy changes at this time but I suspect that we will continue to have the same policy that we had, but will be more flexible with all employees going forward. My firm supports the decision of employees to refrain from public networking but has not issued a formal policy My firm has mandated that employees refrain from entertaining clients in social public settings (restaurants/bars/events) No change Other My firm is considering asking employees to refrain from entertaining clients in social public settings (restaurants/bars/events) WORK TOGETHER, from page 7 My firm is considering changes to the 2020 budget No changes have been made to my firm's 2020 budget and none are currently planned My firm has altered the 2020 budget due to COVID-19 IMPACT ON REVENUE No changes have been made to my firm's 2020 discretionary spending and none are currently planned My firm is considering devoting discretionary spending to challenges created by COVID-19 My firm has suspended all discretionary spending My firm has devoted discretionary spending to challenges created by COVID-19 Other The impacts of COVID-19 will likely cause a decrease in my firm's revenue by this percentage compared to the previous year COVID-19 will not likely impact my firm's revenue in any way COVID-19 will likely cause my firm's revenue to increase IMPACT ON CLIENT ENTERTAINMENT & NETWORKING IMPACT ON DISCRETIONARY SPENDING Data is from the April 16, 2020 report with 207 respondents.

46% 50% 4% 54% 59% 28% 41% 8% 7%

65% 22% 13% 35% 75% 34% 21% 4% 19% 11% 1%

47% 21% 32% 15%

3/12 - 3/14 3/15 - 3/28 3/29 - 4/11

85% 21% 21% 15%

1/1

3/12 - 3/14 3/15 - 3/28 3/29 - 4/11

61%

29%

26%

54%

65%

Wallace Engineering staff enjoying time together.

27% 1% 1%

6% 7% 4%

6% 3%

particularly overtime pay and frequency of raises (every six months). The culture is second-to-none and allows everyone to have a good work-life balance. TZL: A firm’s longevity is valuable. What are you doing to encourage your staff to stick around? TH: We treat people professionally and try to provide a fabulous culture so that they don’t want to go anywhere else. It seems to be working. Our employee turnover is regularly less than 5 percent and we have 23 percent of our staff (38 employees) who have been here more than 20 years and nearly 10 percent (15 employees) who have been with us more than 30 years. TZL: On your firm’s website it says each of your offices is “designed to inspire creativity and promote collaboration.” Can you explain and provide a few examples of how this happens? TH: Our offices are designed with wide circulation areas and breakout spaces to encourage people to stop and talk to each other. Conference and meeting areas have full- height marker board and tack surfacing, allowing teams to meet easily and work collaboratively. Our workplace modules seat six employees in a group with tall central lay spaces that allow standing meetings and common storage of project materials. Everything is designed to allow our folks to meet easily and work together. 1/1 3/12 - 3/14 3/15 - 3/28 3/29 - 4/11 60% 18% 8% 8% 6% 76% 9% 12% 3% 3/12 - 3/14 3/15 - 3/28 3/29 - 4/11 54% 28% 8% 7% 3% 35% 34% 19% 11% 1% 15% 36% 21% 21% 6%

TZL: In one word or phrase, what do you describe as your number one job responsibility as CEO? TH: Keeping the employees happy. If I am able to do that, they will take care of everything else. TZL: What do you think makes Wallace a Best Firm To Work For? TH: I don’t think there is any one thing that makes us a Best Firm To Work For but a combination of many things. We have a lot of great people who are passionate about architecture and the application of engineering to the built environment. They enjoy what they do, and they have fun doing it. Employees feel appreciated and part of something. They’re happy with the compensation, “We were very fortunate that our founder, Tom Wallace, was more interested in being a small part of something big than he was of being a large part of something small. He started transitioning ownership in 1992 when he was just 40 years old.” IMPACT ON TELECOMMUTING IMPACT ON DISCRETIONARY SPENDING

COVID-19 has changed my firm's policy on telecommuting to allow any employee to telecommute at any time. COVID-19 has changed my firm's policy on telecommuting to allow only certain employees to telecommute currently. My firm allows for any employees to tel commute at any time and has not changed its policies in response to COVID-19. My firm allows for telecommuting for certain employees and has not changed its policies in response to COVID-19. My firm does not allow for telecommuting and has not changed its policies in response to COVID-19. 15% 18% 24% 28% 15%

No changes have been made to my firm's 2020 discretionary spending and none are currently planned My firm is considering devoting discretionary spending to challenges created by COVID-19 My firm has suspended all discretionary spending My firm has devoted discretionary spending to challenges created by COVID-19 Other

THE ZWEIG LETTER APRIL 27, 2020, ISSUE 1342

O P I N I O N

“If there’s a silver lining in this crisis, it is that we may each have a chance to reevaluate our priorities and improve the quality of our lives from here on.” Ten questions for you to honestly answer

B esides reacting to the industry-wide slowdown and working remotely as most of us are, now is also the time to focus on YOU .

It is that time because – if you are like me – you have more time. You are probably spending more time at home, and with social distancing, spending a lot less time with other people. Also, spending less time commuting, less time in meetings, and less time running your kids around to one thing or another. So the question with all this newfound time at home is, what are you doing to make a better you? Answer these questions honestly and see if they don’t get you thinking: 1) Are you reading? And I’m not just talking about news online or articles you’ve seen posted on LinkedIn. I mean really reading actual books. The right books can change your life. Not just business books, either – but also fiction and biographies and history – stuff that really gets you thinking. If not, go to your bookcase and grab something and devote some honest time to reading every day. It could change your life. 2) Are you eating better? You should be if not!

Making all of our own meals at home has certainly tuned up our cooking abilities. We had gotten lazy, and in spite of having a full pantry and refrigerators and freezers, we went out to eat for lunch and dinner most every day prior to this shutdown. The result of cooking at home is not only good for our waistlines but is also saving us a tremendous amount of time and money. Nor do we have to listen to our girls complain about our choice of restaurant! 3) Are you getting some exercise? I know I am. While I have yet to actually try the Peleton machine in our fully outfitted lower level home gym, we are trying to get out most days for a vigorous walk around our (very) hilly neighborhood. It has been great. I know I feel better as a result. I can honestly say that this whole thing is making me pick up some new and healthier habits. 4) Are you spending your money more wisely? I certainly am. We don’t go anywhere and don’t seem to really buy anything yet it is still surprising we

Mark Zweig

See MARK ZWEIG, page 10

THE ZWEIG LETTER APRIL 27, 2020, ISSUE 1342

BUSINESS NEWS WARE MALCOMB ANNOUNCES CONSTRUCTION IS COMPLETE ON NEW TRAVEL PLAZA AT ORLANDO INTERNATIONAL AIRPORT Ware Malcomb , an award-winning international design firm, announced construction is complete on a new travel plaza developed by the Greater Orlando Aviation Authority at the Orlando International Airport in Florida. Ware Malcomb’s Miami office provided architecture and interior design services for the project. Located at the northeast corner of Jeff Fuqua Boulevard and South Park Place next to Terminal C at the Orlando International Airport, the new 9,000-square-foot travel plaza includes a 7-Eleven convenience store and gas station, as well as a food court containing Baja Fresh and Built Burger restaurants. The exterior design features a steel and glass canopy in the front of the building that emulates an airport terminal, while both sides of the building curve up at an angle to mimic airplane wings. The plaza’s exterior design

also includes a canopy over the gas station. In addition, Ware Malcomb provided interior architecture and design for the food court, restaurants, convenience store, and gas station. A large flight board is incorporated into the food court for the convenience of travelers. The new travel plaza is directly connected to an existing cell phone lot designed for drivers picking up travelers from the airport. The site of the new facility was previously undeveloped, requiring significant engineering work to de-water and clear the swampy area and prepare the site for construction. The team collaborated with the Federal Aviation Administration to ensure all building materials met strict airport guidelines and requirements. “We worked closely with GOAA to design a comfortable, convenient, and welcoming place for travelers who are coming to and from the Orlando International Airport,” said Rei Gomez, regional manager of Ware Malcomb’s Miami office. “This thoughtfully-designed

travel plaza is an exciting new addition to the airport’s outstanding facilities.” 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, Mexico, and Panama, 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 30 interior design firms in Interior Design magazine ’s Top 100 Giants.

MARK ZWEIG, from page 9

as No. 6 and 7 above. You have the time to do it. You can call people and check up on them personally. How are they getting along? How are their kids? How is their spouse? How do they like working from home? Do they need anything that would make that go better? I thought it was interesting that The Walton College where I teach entrepreneurship sent an email out to everyone the other day telling us that they had heard a number of folks didn’t have good desk chairs at home, and that we were welcome to get our office chairs from our offices at the university to take home if we wanted to. That showed some real care for us as employees. What can you do for your people in this stressful time? 9) Are you thinking about risk and how much of it you want to take from here on out? This whole thing is making many of us reevaluate our lives and some of the decisions we have made. I’m glad that my wife and I decided to start phasing out of the development and construction business about 18 months ago. Even though we still have too much overhead and some unsold/unleased properties, the situation would be far worse had we not taken the steps we did when we did to reduce our risk. There are other decisions I might now make differently than I would have prior to this pandemic. Learn from the experience and don’t repeat your mistakes. 10) Are you thinking about “life after” and how you want to spend your time? Everyone should be taking stock now about what direction they want to go personally and what direction they want their firms to take going forward. We each have only so much time left. It may be time for a new role. It may be time for an ownership transition. Or it may be time to grow and diversify your business with some select acquisitions of firms that can’t weather this storm. These 10 questions – and probably a number of additional ones – should be asked and answered by each of us right now. If there’s a silver lining in this crisis it is that we may each have a chance to reevaluate our priorities and improve the quality of our lives from here on. MARK ZWEIG is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

get the AMEX bill we do at the the end of the month, but at least it is one third to one half of what it used to be. Good thing, too. In spite of being very fortunate that we don’t live paycheck to paycheck like so many Americans do, I just don’t feel like spending a dime on anything we don’t really need. It’s good to learn you can do without. 5) Are you spending time with your family? If not now, when in the world will you? If you can’t see someone because of their potential exposure or your fear of making them sick, that’s one thing. But at least now you should see your at-home kids and spouse more as everyone is stuck together. Use that time wisely. Give them each some real attention. And those you can’t see, give them a call or FaceTime or text with them. “Besides reacting to the industry-wide slowdown and working remotely as most of us are, now is also the time to focus on you. It is that time because – if you are like me – you have more time.” 6) Are you reconnecting with old friends? Just this morning I talked with a friend I hadn’t spoken with for 15 years. It really reminded me of the gratitude I had for the kindness he and his wife showed my older girls and me during a really bad time our family was going through 20 years ago. I’m so glad we have now reconnected. Who are the people you need to reestablish a relationship with? Make it happen! 7) Are you reconnecting with old clients? This is such a great time to actually reach people you haven’t talked with in some time. They are there and you both are more likely to have the time for a good conversation. Ask about how THEY are doing. Have them talk about themselves and their business. Share some about yourself. Connect on a personal level. Now is the time! 8) Are you reconnecting with your employees? Same idea

THE ZWEIG LETTER APRIL 27, 2020, ISSUE 1342

O P I N I O N

Ten takeaways from the Ames & Gough survey of 15 leading insurance companies providing AEC professional liability insurance in the U.S. Update on professional liability insurance

T here’s no question the coronavirus pandemic is having a widespread impact on the U.S. economy, including the construction industry. To this end, any impact on AEC professional liability insurance with respect to insurers’ overall plans to pricing, capacity, or coverage remains to be seen. In the meantime, however, it may be instructive to look back and review their perspectives at the start of the year, prior to the outbreak of COVID-19 in the U.S.

Joan DeLorey

2) Claim frequency and severity rose. Among insurers surveyed, 40 percent reported a worsening of their claims experience last year with most seeing losses increase as much as 10 percent. Many saw more claims related to certain project types, such as residential and infrastructure. Among disciplines, structural engineering was cited for having both high claim frequency and severity; architecture, mechanical engineering, and civil engineering also had higher severity. These outcomes were in contrast to past years, where generally favorable claims experience contributed to insurers’ profitability and rate stabilization. 3) Insurers planned targeted rate increases. Driven by concerns about deteriorating loss experience insurers were planning modest, albeit

Here are 10 takeaways from the Ames & Gough survey of 15 leading insurance companies providing AEC professional liability insurance in the U.S.: 1) Insurers had significant premium growth last year. With the U.S. construction industry generally healthy, billings for AEC firms were up, which contributed to premium growth. Other key factors driving higher premiums included design firms taking on greater risk, having poor loss experience and purchasing higher limits as required by their clients. Today, even though the coronavirus pandemic has stalled construction for the time being, demand for building is likely to remain when the crisis ends. Furthermore, added pressure on the federal government to pass major infrastructure spending may pave the way for a substantial recovery.

Jared Maxwell

See JOAN DELOREY & JARED MAXWELL, page 12

THE ZWEIG LETTER APRIL 27, 2020, ISSUE 1342

ON THE MOVE SCHNABEL ENGINEERING ACQUIRES DEERE & AULT CONSULTANTS, INC. Schnabel Engineering announced the acquisition of Deere & Ault Consultants, Inc. , a water resources, civil, and geotechnical engineering services firm with locations in Longmont, Colorado, and Boise, Idaho. The addition of these two locations will expand Schnabel’s national presence, increasing the companies’ capabilities, and benefit clients and partners. Founded in 2005, Deere & Ault is sought-after for water resources, geotechnical, dam, tunnel, and mine reclamation expertise. Led by industry veterans with decades of experience, the company provides investigation, analysis and design solutions for challenging projects. Deere & Ault brings a diverse portfolio of clients to Schnabel’s footprint, expanding the company’s skill set and encouraging new opportunities for the combined firms within the Rocky Mountain

and the Western regions for Schnabel, as well as the East coast for Deere & Ault. “I have known and respected Schnabel Engineering for many years. Over that time I have admired their technical and business capabilities and their many project accomplishments,” said Don Deere, chairman of the board at Deere & Ault Consultants, Inc. “I am excited at the merger of our two fine organizations and I am certain that we will continue to serve our clients well and accomplish many great things over the coming generations.” An ENR Top 250 design firm and Top 10 dam and reservoirs firm, Schnabel Engineering provides specialized expertise for the planning, study, design, and construction of geotechnical, dam, and tunnel engineering projects in the U.S. and abroad. The employee- owned company has worked in more than 140 countries since its founding in 1956 and

has pioneered the use of new technology and design approaches for foundation systems and dam designs, as well as for managing risk and solving all sorts of complex infrastructure challenges. Headquartered in Glen Allen, Virginia, Schnabel’s workforce exceeds 400 people in 21 locations. “Occasionally something comes along that just feels right from the onset,” says Schnabel Engineering’s CEO Walter Rabe. “The merger of our two firms is one of those occasions. We are extraordinarily similar to one another, and there is a very strong cultural alignment between our two firms. We are both incredibly committed to our employees and we are both passionate stewards of our communities. Together as one bigger and stronger firm, we will work side by side with our clients to improve many lives in the communities in which we work.”

JOAN DELOREY & JARED MAXWELL, from page 11

conditions may be unsustainable if heightened claims activity continues. 8) Don’t overlook opportunities for premium credits. When asked what information supplied on the professional liability application might result in premium credits, 100 percent use of written contracts was noted by all insurers; most also identified fees attributable to feasibility studies, insured subconsultants and abandoned projects as areas where credits can be applied. Also, longevity with the same insurer was cited by some as an area that might qualify for credit. In addition, most insurers indicated that direct reimbursables are fully excluded for rating purposes. 9) Insurers’ insights on impacts of technology. When asked to consider technology’s impact on the AEC industry over the past decade and in the next 10 years, insurers pointed to the the compression of project timelines as well as the role of automation and technology in the insurance sector, facilitating a greater focus on data/analytics. They also cited potential opportunities for the future application of artificial intelligence and robotics. 10) For AEC firms, sound risk management remains key. Adopting and adhering to sound internal risk management protocols are essential, including due diligence when contemplating a merger and acquisition, which would include analysis of the firm’s practice areas, project mix, and loss history. Lastly, be aware that high-risk services have a propensity for claims, which could result in substantial future premium increases. As design professionals work through the various challenges posed by the coronavirus pandemic, they should recognize that practicing sound risk management will continue to be an important element of their ongoing success. To obtain a complimentary copy of the Ames & Gough Survey, PLI Market 2020: As Claim Costs Grow, Insurers Eye Targeted Rate Increases , email info@amesgough.com. JOAN DELOREY is senior vice president and partner at Ames & Gough. JARED MAXWELL is vice president and partner at Ames & Gough. Joan DeLorey can be reached at jdelorey@amesgough.com. Jared Maxwell can be reached at jmaxwell@amesgough.com.

targeted, rate increases in 2020. Most planned to target higher risk disciplines, projects, and even geographic regions for rate adjustments. 4) Concerns grow over higher risk disciplines. In terms of their underwriting assessments, nearly all insurers surveyed cited structural engineering as the top discipline in terms of risk; many insurers also pointed to mechanical engineering, geotechnical engineering and architecture as having significant risk. Even when the crisis ends and the U.S. economy begins to recover, insurers likely will continue to be especially careful in underwriting design firms with these disciplines. Good recent and historical loss experience, as well as sound and effective risk management practices, will be key differentiators in obtaining more favorable coverage terms, pricing, and conditions. 5) Insurers watching construction complexity and costs. Insurers surveyed expressed growing concern about these issues, along with design resiliency as it relates to climate change and state laws adversely impacting design firms. Insurers have begun factoring some of these areas into their underwriting decisions; notably, project mix has been under increasing scrutiny as insurers have assessed the risk profiles of individual design firms. AEC firms should keep in mind that changes in their project mix may affect their professional liability insurance pricing, terms, and conditions. 6) Insurers wary of social trends. Some insurers surveyed are watching how “social inflation” and “litigation funding” are affecting claim severity. This is an industry-wide phenomena not limited to professional liability insurance and may ultimately factor into insurance pricing and coverage decisions across all lines. 7) Mounting questions over rate sustainability. Insurers are aware of a correlation between the increases in claims and the supply of the AEC workforce as compared to the demand in the construction industry. Although the continued competition in the professional liability insurance marketplace for AEC firms has kept rate increases to a minimum, many insurers are beginning to feel those

THE ZWEIG LETTER APRIL 27, 2020, ISSUE 1342

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