TZL 1238

T R E N D L I N E S W W W . T H E Z W E I G L E T T E R . C O M M a r c h 5 , 2 0 1 8 , I s s u e 1 2 3 8

Stock

Being the best consultant you can be

F I R M I N D E X Fluor Corporation..................................10 HOK. ....................................................10 HRP Associates, Inc.. .............................6 James Corner Field Operations.............12 Kuma....................................................12 Legat Architects, Inc.. .............................8 Natoma Architects. ...............................12 Richard Meier & Partners. .......................4 Skidmore, Owings & Merrill. ..................12 SmithGroupJJR. .....................................2 Steinberg Hart.........................................4 Studio 5 Design + Architecture................4 OPEN FOR PARTICIPATION zweiggroup.com/survey-participation/ the vast majority – 73 percent – of principals surveyed said they would prefer to divest their stock internally . Seventeen percent would like to receive the highest price , regardless of the type of transaction, and 10 percent would like to sell their shares through M&A . We found this interesting because a large group of respondents also stated that they did not have successors or an ownership transition strategy. According to Zweig Group’s 2017 Principals, Partners & Owners Survey ,

A ll of us in the A/E/P business are consul- tants. Sure, we are either engineers or architects or planners or surveyors or design- ers – but we are also consultants. I have been studying consulting firms and consultants for nearly 38 years now. I am a consultant myself – one with a $500-per- hour billing rate. My experience tells me that to be the most effective at what we do – the BEST we can be – there are certain unwrit- ten “rules” we have to follow. Some of these include: 1)You have to read people quickly and ac- curately. No quality will be more helpful to you as a consultant than being able to size-up people quickly. That means you will have to be a keen student of verbal language as well as non-verbal cues such as body language. How are people responding to you? This is one place where it may pay to stereotype and generalize. 2)You have to manage expectations early in the selling process. If the client’s schedule is completely unrealistic – or the budget way too low – it’s best to confront these things very early on. That way you won’t be wasting any time and they won’t be wasting yours. And if you can’t get the client to be realistic with their expectations, it’s best to skip the job because otherwise they won’t be happy. 3)You have to be honest without alienating people. This takes tact which is the hallmark of a good consultant. No tact and you’ll turn off your audience. They won’t listen to you and you won’t be effective. This is a big issue for a lot of people in this businesses – a lack of tact.

“All of us in the A/E/P business are consultants. Sure, we are either engineers or architects or planners or surveyors or designers – but we are also consultants.”

Mark Zweig

MORE COLUMNS xz MARKETING MATTERS: Are you responsible? Page 3 xz CONTINUING ED: You need to know Page 9 xz GUEST SPEAKER: Share value Page 11

Conference call: L. Andrew White See MARK ZWEIG, page 2

Page 6

T H E V O I C E O F R E A S O N F O R A / E / P & E N V I R O N M E N TA L C O N S U L T I N G F I R M S

TRANSACT IONS SMITHGROUPJJR ACQUIRES BOSTON BASED HEALTHCARE DESIGN FIRM TRO Boston, Massachusetts, based SmithGroupJJR expanded its national presence with the acquisition of TRO. The move increases the company’s resources to 1,300 employees and 12 offices across the United Staes and China. TRO’s recent projects include the Alfond Center for Health at MaineGeneral Medical Center which utilized a collaborative Integrated Project Delivery method to complete the project ten months ahead of schedule; the Neonatal Intensive Care Unit at Brigham and Women’s Hospital, a complex expansion over the Hospital’s Labor and Delivery floor, as well as the full renovation of the existing NICU; and the Menino addition and renovation at Boston Medical Center, which faces the compounded complexity of relocating existing, active departments into currently occupied space without interruption to patient care. TRO will become the Boston office of SmithGroupJJR. Mark Jussaume, PE, LEED AP, who has been with TRO since 1990 and most recently served as the firm’s CEO, steps into the role of office director for this location. Jussaume shared that finding a partner with the right cultural fit was the most critical concern that his leadership team expressed when entering into the acquisition process. “A former SmithGroupJJR employee joined TRO and recognized the similarities between our two firms’ cultures and values,” said Jussaume. SmithGroupJJR’s growth plans include establishing additional offices and expanding

Take your advice from Mark Zweig to-go.

services and markets into existing offices where there is strategic alignment with client needs. The acquisition of TRO follows other recent moves, including the opening of an office in San Diego, the addition of engineering services in all California offices, and expanded service offerings at the Madison, Wisconsin office to include architectural design for the first time in the firm’s history. The firm has also recently created Workplace studios in its Los Angeles, Dallas and Chicago offices and Science & Technology studios in Chicago and Dallas. SmithGroupJJR managing partner Russ Sykes, PE, LEED AP acknowledged that establishing a presence in the Northeast, and Boston in particular, has been part of SmithGroupJJR’s strategic long-range plan. “As opportunities to grow the firm have been identified, the Northeast was an obvious gap in the geography of our offices. New England is a prime location for the markets we serve and a great region for recruiting talent,” Sykes said. “We were already teamed with TRO to deliver projects in the region, including working together at Exeter Hospital and on Boston University’s Henry M. Goldman School of Dental Medicine. This move allows us to be closer to those clients while continuing to expand our portfolio in other markets.” The Boston office will continue doing business as TRO into the second quarter of 2018, at which time it will be fully integrated into the SmithGroupJJR brand.

thezweigletter.com/category/podcast/

1200 North College Ave. Fayetteville, AR 72703 Mark Zweig | Publisher mzweig@zweiggroup.com Richard Massey | Managing Editor rmassey@zweiggroup.com Christina Zweig | Contributing Editor christinaz@zweiggroup.com Sara Parkman | Editor and Designer sparkman@zweiggroup.com Liisa Andreassen | Correspondent landreassen@zweiggroup.com

MARK ZWEIG, from page 1

4)You have to do what you say you will, period. Good consultants don’t make excuses. They do finish the job, however. They also do all the little things they say they will do along the way. Research something if they say they will. Call back someone when they say they will. Hit all project deadlines when they say they will. This is so crucial! It builds credibility with the client AND sets an example for those you work with. It’s a mandate as far as I am concerned. No exceptions, no matter what. 5)You have to be willing to offer some free advice/help. Anyone who thinks you are going to get paid for every single little thing is just dead wrong. You have to give a little – especially to your BEST clients – not just your newest ones. Being helpful and not act- ing selfish or short-sighted are hallmarks of being a really great consultant. 6)You have to have the highest quality standards, even for things that “don’t mat- ter.” You want to be the best? You want happy clients? Everything matters. Every detail has to be done right. This has to be demonstrated every day to all the rest of the people in the firm so they get the idea, too. Anything less than “excellent” is not excellent. 7)You have to know when you can and should walk away from a client. Not all clients are good. The ones you can’t be successful serving – because they are too cheap, have unrealistic expectations, or don’t treat you with respect – should be avoided. A hallmark of the best is knowing when to just say “ no” to a bad client. There’s more – but I’m out of time. I have to go serve some clients! MARK ZWEIG is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

Tel: 800-466-6275 Fax: 800-842-1560

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. Issued weekly (48 issues/year) $250 for one-year print subscription; free electronic subscription at thezweigletter.com/subscribe Article reprints: For high-quality reprints, including Eprints and NXTprints, please contact The YGS Group at 717-399- 1900, ext. 139, or email TheZweigLetter@ TheYGSGroup.com. © Copyright 2018, Zweig Group. All rights reserved.

THE ZWEIG LETTER March 5, 2018, ISSUE 1238

O P I N I O N

Are you responsible?

Social responsibility can be one of the biggest and most powerful marketing and recruiting tools at your disposal, but be careful.

H ow much should your firm be concerned with social responsibility? And are charitable donations just a marketing technique or something else entirely?

Millennials have brought this issue to the forefront. A recent Forbes article states that millennials are willing to spend more on a product from a sustainable brand, and they “expect modern brands to be open and communicative about how they operate in the world and to seek incremental and positive social change.” “Corporate social responsibility urges organizations to consider their own actions in relation to the interests of society. Socially responsible organizations balance profit-making activities with activities that benefit the larger community.”

The holidays are a popular time for giving, community service, and charitable donations. Zweig Group donates to various causes throughout the year, both need-based in response to natural disasters, and to larger organizations such as the American Cancer Society. For our holiday donation this year, we decided to donate to the Humane Society of the Ozarks. I was surprised to receive a negative response from one of our clients: “With all of the HUMAN suffering in the world, you chose to be politically correct and donate to the Humane Society?!” Should your firm be judged by which organizations it chooses to donate to? What about who they work for? Corporate social responsibility urges organizations to consider their own actions in relation to the interests of society. Socially responsible organizations balance profit-making activities with activities that benefit the larger community.

Christina Zweig Niehues

The article says millennials are looking for four

See CHRISTINA ZWEIG NIEHUES, page 4

THE ZWEIG LETTER March 5, 2018, ISSUE 1238

BUSINESS NEWS STEINBERG CHANGES NAME TO STEINBERG HART International architecture and design firm Steinberg announced a reinvention of its brand with a name change to Steinberg Hart . The new identity celebrates the company’s legacy and looks to the future, reinforcing the core values that drive the firm – design, relationships, and change. To accompany the name change, Steinberg Hart has also debuted a new graphic identity and refreshed website. “My father, Goody, founded our firm in the heart of the Silicon Valley – a region that is synonymous with innovation and change. Our design practice is always evolving and so is our leadership,” said Chairman Robert Steinberg, FAIA. “It was both my father’s and my hope that the Steinberg firm would continue beyond our individual participation in the company. David Hart assumed the role of president and CEO four years ago. David possesses an unrivaled balance of design excellence, keen business acuity, client relations, as well as a talent for building A-list teams. Our firm rebrand is the culmination of a leadership transition that we have been working on for a little over a decade. The Steinberg Hart rebrand honors the legacy of the diverse portfolio that we have produced over the last 65 years while optimistically embracing the future of our next generation of leadership.”

“People – and creating unexpected connections between people and place – are at the heart of everything that we do,” said Hart, AIA, LEED AP. “As the third-generation leader of a firm and brand that puts our clients and people first, it has been an honor to work alongside Rob and help build a high- performance team over the past 16 years. By creating a company culture that embraces the values of design, relationships, and change, we will continue to sculpt spaces so that they shape lives in meaningful ways. Personally, this rebrand honors our legacy that Goody and Rob built while signaling that we are moving forward by deepening our existing market sectors and launching strategic growth into new markets and regions.” CROCKER PARTNERS UNVEILED CITIGROUP CENTER DURING MIAMI ART WEEK The intersection of real estate, art, and high-design merged at Miami Art Week when Crocker Partners unveiled its highly-anticipated Citigroup Center in downtown Miami. The complex boasts a newly renovated tower, featuring a refurbished modern glass façade, stunning lobby, and multiple retail spaces on the ground level redesigned by world renowned architect Richard Meier & Partners in New York City. Inspired by the building’s urban location, its original architecture and the recent addition by Meier, Studio 5 Design + Architecture

developed new concepts for the elevator lobbies, corridors, and state-of-the-art conference center. The 34-story building – the second largest of its kind in Florida – spans 802,974 square feet and acts as an extension of the InterContinental Miami. As part of the $20 million renovation, the building now boasts the largest tenant amenity conference center in the market, offering seven separate meeting rooms, private restrooms, a full catering kitchen, and a cutting-edge technology package. “We are pleased to deliver a high-quality tower in tandem with all eyes on Miami during this week,” said Angelo Bianco, managing partner of Crocker Partners. “Tenants are looking for amenities that fuse work and play and we believe that Citigroup Center will be a wonderful addition to the downtown market.” To kick off Miami Art Week, Crocker Partners and Richard Meier hosted a private event in the completely redesigned lobby, which housed White Square, a 7,000-square foot pop-up gallery curated by Fabian Basabe. The space featured a variety of interactive and eye- catching installations by New York fashion icon Susanne Bartsch, as well as photography by frequent Warhol collaborator and apprentice Christopher Makos, and Paul Solberg.

CHRISTINA ZWEIG NIEHUES, from page 3

for your firm to work on the design of a marijuana grow- house? The U.S. border wall? An adult entertainment establishment? The corporate headquarters for a company known to produce chemicals that harm the environment? The manufacturing plant for such chemicals? In this situation, does your firm’s role in the project change the level of responsibility? Is the project architect more “responsible” for a building’s use than the engineers who design utility lines bringing power and resources? What about the civil engineer who designs the roads that will lead to a structure? The answers to these questions are not the same for every firm, but one thing is for certain, your employees and clients will judge you for your actions (or non-action). Zweig Group’s 2017 Marketing Survey of Architecture, Engineering, Planning & Environmental Consulting Firms found that of the average 7.8 percent of net-service revenue spent on marketing overall, firms spend 3 percent of that on charitable donations. Social responsibility can be one of the biggest and most powerful marketing and recruiting tools at your disposal, but a high level of sensitivity to these issues or a specific moral or ethical stance can also limit your firm’s options and revenue. It’s important to think about these issues with your entire team and develop a consistent response based on your firm’s mission and vision. CHRISTINA ZWEIG NIEHUES is Zweig Group’s director of marketing. Contact her at christinaz@zweiggroup.com.

major qualities in socially responsible companies: 1)They want companies to be actively invested in the better- ment of society and the solution of social problems. 2)They want companies that prioritize “making an impact” on the world around them. 3)They want companies to be open and honest about their ef- forts – and to be public about their pro-social initiatives. 4)They want companies to involve their customers in their good works. They want an opportunity to give back – whether it’s with a gift of their time or their money. “Social responsibility can be one of the biggest and most powerful marketing and recruiting tools at your disposal, but a high level of sensitivity to these issues or a specific moral or ethical stance can also limit your firm’s options and revenue.” For firms in the AEC industry, the question of social responsibility can be especially tough. Should your firm’s role in development indicate a future responsibility for the use or potential use of infrastructure or a structure? I’ve worked with a number of firms lately that have had to contemplate difficult questions such as: Is it responsible

THE ZWEIG LETTER March 5, 2018, ISSUE 1238

The Industry’s #1 Choice for Principal Training EXPERIENCE A DIFFERENT KIND OF SEMINAR FOR AEC PROFESSIONALS // 2018 SCHEDULE 5

Attendees of The Principals Academy earn 12 PDH / 12 CEUs. Zweig Group seminars are eligible for Professional Development Hours credits and Continuing Education Units. All attendees receive a certicate of completion indicating the number of hours earned during each seminar. • Financial Management • Project Management • Leadership • Mergers & Acquisitions • Ownership Transition Planning • Recruitment and Retention environmental consulting rms, and is presented in tutorial and case study workshop sessions. • Business Planning • Marketing/Business Development • Accounting The Principals Academy is Zweig Group’s agship training program encompassing all aspects of managing a professional AEC service rm. It’s the most impactful two days you can spend learning about principal leadership, nancial management, recruiting, marketing, business development, and project management. The two-day agenda covers several critical areas of business management from the unique perspective of architecture, engineering, and

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THE ZWEIG LETTER March 5, 2018, ISSUE 1238

Andre

P R O F I L E

Conference call: L. Andrew White President and CEO of HRP Associates, Inc. (Hot Firm #76 for 2016), a 120-person engineering consulting firm based in Farmington, Connecticut.

By LIISA ANDREASSEN Correspondent

“B ig, bold, rapid changes are exciting and sometimes needed, but well planned, steady change can often be more effective and sustain- able,” says White, referring to lessons learned. A CONVERSATION WITH L. ANDREW WHITE. The Zweig Letter: The talent war in the A/E in- dustry is here. What steps do you take to create the leadership pipeline needed to retain your top people and not lose them to other firms? L. Andrew White: We’ve taken a few. We’ve hired a full-time recruiter to bring in top talent and de- veloped an Emerging Leaders development group coached by an outside business consultant. We benchmark compensation with Zweig Group sur- veys on an annual basis and provide extreme

flexibility (work at home, non-routine hours, etc.) We also hold employee meetings and do internal surveys to obtain feedback, and then act on that feedback. TZL: As you look for talent, what position do you most need to fill in the coming year and why? LAW: It’s difficult to select one position. I would ar- gue another sales person, as the seller/doer model seems less successful as time goes on. TZL: While plenty of firms have an ownership transition plan in place, many do not. What’s your advice for firms that have not taken steps to identify and empower the next generation of owners?

L. Andrew White, Presi- dent & CEO, HRP Associ- ates, Inc.

THE ZWEIG LETTER Ma

ewWhite LAW:

Zweig Group is social and posting every day! C O N N E C T W I T H U S

facebook.com/ ZweigGroup

twitter.com/ ZweigGroup

linkedin.com/company/ ZweigWhite

blog. ZweigGroup .com vimeo.com/ ZweigGroup

sus government, growing new arenas of technical services, and expanding geographic coverage. Opening up a Midwest office a couple of years ago helped support our growth im- mensely. And, moving into the oil and gas sector provided more depth to our private industry portfolio. We are devel- oping more IT-focused services now to support existing ser- vice areas as well as new offerings. “We have the attitude that any opportunity we are interested in is within our reach, and achievable, alone or with one or more partners. (Even if it really isn’t, we at least lay the groundwork for learning, expanding relationships, and being better prepared the next time.)” TZL: The list of responsibilities for project managers is seemingly endless. How do you keep your PMs from burning out? And if they crash, how do you get them back out on the road, so to speak? LAW: We recognize that with the huge breadth of respon- sibilities and the ever increasing difficulties and new chal- lenges in our industry, not every situation will be handled perfectly. We request that PMs talk to us early if they an- ticipate problems, and if they do occur, we give them tre- mendous front line, visible support to help rectify the situa- tion and learn from it, without engaging in a punitive atmo- sphere. We also hold many fun events (small and large) to blow off steam and provide a high level of concern for, and flexibility with, family situations. Simply, we care about our employees. We give bonuses twice a year and provide cars for regional office managers. TZL: What is the role of entrepreneurship in your firm? LAW: We have the attitude that any opportunity we are in- terested in is within our reach, and achievable, alone or with one or more partners. (Even if it really isn’t, we at least lay the groundwork for learning, expanding relationships, and being better prepared the next time.) TZL: With overhead rates declining over the last five years and utilization rates slowly climbing back up to pre-recession levels, how do you deal with time manage- ment policies for your project teams? Is it different for different clients? LAW: They do not vary by client, unless it’s a government contract that dictates how time is charged and when. We tell people to put all chargeable time on a project even if it is over budget and will be written off. Otherwise we don’t learn how to correct budgets. (Technology and multiple forms of instant communication have made the workforce See CONFERENCE CALL, page 8

❚ ❚ Go to a well-chosen ownership transition seminar and get started now. ❚ ❚ Determine what you want your legacy to be and determine if you have the talent and interest in-house to maintain it. ❚ ❚ Plan two levels of leaders down. ❚ ❚ Conduct 360-degree reviews throughout the firm of the tar- geted potential owners, prioritize internal mentoring, and consider leadership coaching with outside perspectives.

❚ ❚ Don’t let their heads get too big too early. ❚ ❚ Evaluate all means to finance the transition.

❚ ❚ If the potential leadership ability and interest isn’t there, bring it in if you have time, or consider an outside sale, know- ing you may have to stay involved for a period after the clos- ing. TZL: Monthly happy hours and dog friendly offices. What do today’s CEOs need to know about today’s workforce? LAW: As a generality, today’s workforce prefers flexibility, minimized impact to their personal lives, appreciation, fun, a company that makes a positive impact on the world and is not all about profit, a place to go no matter what their talent distribution is, and accountability by management. TZL: Zweig Group research shows there has been a shift in business development strategies. More and more, technical staff, not marketing staff, are responsible for BD. What’s the BD formula in your firm? LAW: Apparently we are out of sync. We’ve been success- ful for 35 years with seller/doer, but it is very demanding for PMs to fill both ends of the spectrum, and as employees’ priorities seem to become more balanced towards increased time with family, the personal investment often needed for seller/doer success seems to be on the downslide. We have therefore become more receptive to a sales force comple- ment. TZL: Diversifying the portfolio is never a bad thing. What are the most recent steps you’ve taken to broaden your revenue streams? LAW: We have always pursued diversification of private ver- “We benchmark compensation with Zweig Group surveys on an annual basis and provide extreme flexibility (work at home, non-routine hours, etc.) We also hold employee meetings and do internal surveys to obtain feedback, and then act on that feedback.”

arch 5, 2018, ISSUE 1238

TRANSACT IONS LEGAT ARCHITECTS ACQUIRES COLUMBUS, OHIO- BASED LEGAT KINGSCOTT Legat Kingscott, LLC of Columbus, Ohio, has transitioned to a fully-integrated studio of Legat Architects, Inc. , Chicago. The Columbus location will become Legat Architects’ fifth Midwestern studio. Patrick Brosnan, president/CEO of Legat Architects, said, “Although the Columbus studio’s name will change slightly [to Legat Architects], it will offer building owners throughout Ohio the same talented people, along with greater resources. It will allow for a more agile and responsive team in Columbus.” The acquisition strengthens the Columbus studio’s value to clients: ❚ ❚ Streamlined work efforts: Legat Architects’ 53-year history, experienced practice leaders, extensive project database, technology, and deep portfolio are now more readily accessible. ❚ ❚ Enhanced expertise in specialty areas: sustainability/energy, interior design, roofing/building envelope, master planning. ❚ ❚ Expanded access to alternate facility solutions: corporate, governmental,

healthcare, higher education, hospitality, mixed-use, preK-12 education, recreation, transportation. The studio will remain on the fifth floor of the historic building on 22 E. Gay Street. This space provides room for growth and access to the heart of Columbus. Legat Kingscott, LLC was founded in 2001, when Legat Architects (Chicago, Illinois) and Kingscott Associates (Kalamazoo, Michigan) opened a small Columbus studio to address the growing preK-12 and higher education marketplace in central Ohio. The studio started with one school district client. Today, the studio has has provided services for 23 school districts, six higher education institutions, and four municipalities. Over the last five years, the studio has expanded its reach to the Cleveland region with clients such as Orange Schools and Shaker Heights Schools. Among the studio’s high-profile projects are Kent State University’s Performing Arts Center at the Tuscarawas campus, extensive work at Newark City Schools including more than 300,000 square feet of additions and renovations at Newark High School, New Boston’s preK-12 school (three schools in one

facility), and the Ohio State University’s Spine Research Institute. Brosnan, who strategized the studio’s inception, attributes much of its success to long-term client relationships. “Projects often start with research, master planning, and community engagement,” he said. “We learn about communities’ values and goals, we listen, and then over the next several years, we help them implement a plan that captures their vision. It’s about building trust.” Paul Garland, leader of the Columbus studio, cites partnering with local architecture firms as another success factor: “For several projects, we united our expertise in education with local firms who have established relationships and a strong understanding of their communities. These partnerships helped us learn and grow and resulted in an improved product.” Legat Architects is one of few Chicago-based, employee-owned architecture and interior design firms. Its 80 employees average 16 years with the company. The firm’s portfolio includes corporate, governmental, healthcare, higher education, hospitality, preK-12 education, recreation, and transportation facilities.

CONFERENCE CALL, from page 7

❚ ❚ Job openings ❚ ❚ Marketing hours by staff

more efficient, but has also led to very significant amounts of down time for all of us, due to personal distractions that affect job focus and production. We have not yet dealt with this issue.) “Organic growth is the best way to maintain your culture. It’s also often the best way to create opportunity and reward dedicated managers who want to move into ownership. It’s slower, but typically more stable.” TZL: Measuring the effectiveness of marketing is diffi- cult to do using hard metrics for ROI. How do you evalu- ate the success/failure of your firm’s marketing efforts when results could take months, or even years, to mate- rialize? Do you track any metrics to guide your market- ing plan? LAW: All of these metrics are tracked by dollar amount and number of submittals, by month, year, and for the company at large: offices, regions, managers, and project type. Spe- cifically, we track:

TZL: The last few years have been good for the A/E indus- try. Is there a downturn in the forecast, and if so, when and to what severity? LAW: Zweig Group probably has more qualified predictions on that from their market research. I believe it will vary tre- mendously with client sector, technical service, and geog- raphy. TZL: They say failure is a great teacher. What’s the big- gest lesson you’ve had to learn the hard way? LAW: Big, bold, rapid changes are exciting and sometimes needed, but well planned, steady change can often be more effective and sustainable. TZL: While M&A is always an option, there’s something to be said about organic growth. What are your thoughts on why and how to grow a firm? LAW: Organic growth is the best way to maintain your cul- ture. It’s also often the best way to create opportunity and reward dedicated managers who want to move into owner- ship. It’s slower, but typically more stable. Organic growth with occasional small acquisitions to increase the growth rate without incurring tremendous amounts of debt is our preferred growth model.

❚ ❚ Monthly proposals submitted ❚ ❚ Monthly proposals captured

TZL: What’s your prediction for 2018? LAW: Best year ever – after a slow start.

❚ ❚ Monthly on call contracts submitted ❚ ❚ Monthly on call contracts awarded

THE ZWEIG LETTER March 5, 2018, ISSUE 1238

O P I N I O N

You need to know

T here’s a fine line between what we know and what we need to know. So I’ll ask you: When was the last time you told someone that you didn’t need to know something? When it comes to our projects, we need to know as much as we can to ensure we stay on track for our firm and our clients.

Some of us are adamant about what we know, even if it’s incorrect. Sometimes, we decide we don’t want to know or don’t need to know something for various reasons. If one of your children comes to you at home with a Sharpie marker in one hand and their younger sibling behind them covered in said marker, you probably don’t want to know what happened. However, if your revenue from a project is less than your expenses, you really do need to know. After leading a project management seminar, one piece of feedback I received was that the financial management section I presented was not necessary, because “Project managers don’t need to know that.” I don’t mean to belittle anyone, but I found the comment funny and concerning at the same time. Since when shouldn’t a project manager, or any firm leader for that matter, not need to know about a project’s performance?

Project managers and principals need to know the numbers behind a project if they are to maintain the firm’s financial viability and progress on their growth goals. “Project managers and principals need to know the numbers behind a project if they are to maintain the firm’s financial viability and progress on their growth goals.” There are many things every project manager must know about their projects, but here are what I consider the minimum: ❚ ❚ Budget. How much have we spent on this project versus our expected expenses at this point? ❚ ❚ Time. Have we spent the expected amount of time

Bill Murphey CONTINUING ED

See BILL MURPHEY, page 10

THE ZWEIG LETTER March 5, 2018, ISSUE 1238

BUSINESS NEWS CONSUMERS CREDIT UNION’S NEW HOK- DESIGNED HEADQUARTERS EMANATES FROM NATURE Consumers Credit Union, one of Michigan’s largest homegrown financial institutions, opened its new HOK -designed Kalamazoo headquarters this week. Nearly 150 employees previously working in four separate buildings moved into a 22-acre collaboration center situated among rolling hills and wooded ravines. The centerpiece: a contemporary, three-story office evoking its natural surroundings, designed to bring employees closer together while providing unmatched amenities. “Our new home underscores Consumers’ strong commitment to West Michigan, including its communities and its local economy,” said Kit Snyder, president and CEO of Consumers. “This new space gives our entire team a place to call home, and a prime location to recruit and train new employees as we continue to grow.” “Our design for the new headquarters captures and manifests the core values and sense of identity of Consumers Credit Union,” said Peter Ruggiero, AIA, design principal for HOK’s Chicago practice. “Designed to promote communication, the open, collaborative workplace recognizes its unique surroundings through its placement on the site and the access to daylight and views afforded by the thoughtfully-designed plan.”

Consumers and HOK collaborated to design the 92,000-square-foot branded environment that expresses the company’s values while fostering collaboration. The building accomplishes these goals through several design strategies: ❚ ❚ Open workspaces, collaboration, and training: The open floor plan includes modern workstations, informal gathering spaces and a learning lab featuring the latest technology for staff training. ❚ ❚ Central gathering space: Employees and visitors enter through a central glass atrium with a grand staircase, connecting all areas of the building. ❚ ❚ Wellness and amenities: Staff can take advantage of an on-site café, coffee bar, fitness center, fitness and running trail, and expansive outdoor patio overlooking nature. ❚ ❚ Connection to nature: The building’s form is influenced by its surroundings, from expansive glass walls providing forest views to the intentional use of tree cover along roads leading to the workplace. To accommodate Consumers’ future growth, HOK designed the building to be built in three phases. It can be expanded up to 200,000-square-feet based if needed. HOK is a global design, architecture, engineering, and planning firm. Through a network of 23 offices worldwide, HOK

provides design excellence and innovation to create places that enrich people’s lives and help clients succeed. FLUOR AWARDED CONTRACT FOR SHELL PENGUINS OFFSHORE UK PROJECT IN NORTH SEA Fluor Corporation announced that the company was awarded a contract by Shell for the engineering, procurement, and fabrication of Shell’s Penguins floating production storage and offloading vessel in the North Sea. “We are pleased to partner with Shell in the U.K. as they make this significant investment in their North Sea operations,” said Jim Brittain, president of Fluor’s energy and chemicals business. “We leveraged Fluor’s full range of integrated solutions to drive down the project’s costs and our fabrication capabilities were a clear differentiator. This award demonstrates Fluor’s ability to design, fabricate and deliver high-quality, capital-efficient offshore facilities globally.” Fluor has full responsibility for the design, fabrication, and delivery of the pre- commissioned FPSO to the North Sea. The FPSO will have a production capacity of 45,000 barrels of oil equivalent per day, and can store up to 400,000 barrels. The FPSO will be designed to operate continuously for 20 years without dry docking and will help extend the life of the Penguins oil and gas fields.

❚ ❚ Revenue factor. This is a great way to measure a firm’s per- formance over time, because of its simplicity. How much did the firm make – minus subconsultant expenses – divided by the firm’s total labor costs. ❚ ❚ Average collection period. How quickly is your firm getting paid for the work performed? When you allow your clients to be delinquent in paying for your services, you have effectively become their bank, allowing them to finance their project, literally, at your expense. An ACP under 60 days is a good target. There are probably some things we don’t need to know, such as “What’s in this hot dog?” or what happens after someone says, “Hold my beer” or “Watch this!” But when it comes to our projects, we need to know as much as we can to ensure we stay on track for our firm and our clients. Just don’t be too quick to say, “I don’t need to know that.” BILL MURPHEY is Zweig Group’s director of education. Contact him at bmurphey@zweiggroup.com. “When it comes to our projects, we need to know as much as we can to ensure we stay on track for our firm and our clients. Just don’t be too quick to say, ‘I don’t need to know that.’”

BILL MURPHEY, from page 9

on this project? Too much time? If we spent more time than planned, what caused the deviation? How much time is left, if we are to stay on budget? ❚ ❚ Resources. Do we have the right people, subconsultants, enough time, or other resources available to complete the projects? If not, how do we acquire the necessary resources? What resources will we need to complete the next phase or the one after that? ❚ ❚ Billing. Have we sent an invoice to our clients for the work we have already performed? When did we send the invoice? Did they receive the invoice? ❚ ❚ Collection. Has the client paid for the services we provided? If not, when will they pay for those services? Who’s respon- sible for collecting payment? Additionally, many firms track specific numbers and multipliers that highlight trends in their financial health. Here are a few of the typical metrics we see: ❚ ❚ Chargeability or utilization rates. This is the amount of labor directly charged to projects versus the total number of hours worked. Most firms track this and have targets they seek to achieve, but this is probably one of the weakest met- rics because time can be manipulated which can lead to over- spending on a project. ❚ ❚ Net multiplier. This is the amount of net service revenue earned per direct labor charged. It can indicate a firm’s project efficiency.

THE ZWEIG LETTER March 5, 2018, ISSUE 1238

O P I N I O N

Share value

F or those of you involved with firm financial management, you expect to regularly review the balance sheet and income statement and maybe a cash flow statement. While these documents provide vital information necessary to make good business decisions, I should tell you that they may not go far enough. Attention to performance metrics can enhance business value, so you might try using a few new financial ratios in your spreadsheets.

Tracey Eaves GUEST SPEAKER

In the business of valuing privately-held A/E/P and environmental consulting firms, we analyze these statements for the story they tell. However, it’s only part of the story. We also conduct an in-depth ratio analysis for a deeper look into the financial drivers of the firm. As a principal, you should be doing the same on a regular basis to gain a better understanding of how just a few internal operational tweaks can lead to vastly improved performance and increased share value. Following are a few key ratios that should be calculated and presented with your firm’s regular financial statements and the median values from Zweig Group’s 2017 Financial Performance Survey . ❚ ❚ Current ratio (current assets/current liabilities). The current ratio measures the ability of the firm to meet its short-term obligations. The greater the cur- rent ratio, the more solid financial position the firm

has in terms of its liquidity. A ratio of 2.0 means that a firm has twice as many assets convertible to cash as it does liabilities. The 2017 median current ratio from Zweig Group’s survey is 2.13. “Firm owners need every tool possible to win. If you’re not already doing so, I encourage you to present some new material at the next board meeting. It’s as close as your Excel spreadsheet.” ❚ ❚ Quick ratio ((current assets – work in process)/ current liabilities). This is another look at liquidity, although from a more immediate point of view by

See TRACEY EAVES, page 12

THE ZWEIG LETTER March 5, 2018, ISSUE 1238

BUSINESS NEWS DESIGN CONCEPTS FOR 1111 SUNSET BLVD REVEAL MODERN COMMUNITY HUB ON NORTHERN EDGE OF DTLA The team behind 1111 Sunset Boulevard unveiled conceptual plans to transform the long-dormant 5.5-acre site into a modern community hub on the edge of downtown Los Angeles. Plans for the property – the last remaining large parcel to sit vacant within the Central City North community plan area – feature residential, retail, and creative office space uses, along with public open space and a boutique hotel designed by Kengo Kuma. The plan calls for 778 residential units, a mix of market-rate and affordable, to help meet the city’s goals for new housing near job centers. Designs show low-rise bungalow style residences with a similar scale and character to the surrounding residential neighborhood as well as two high-rise residential buildings raised above the landscape, allowing pedestrians at eye-level to enjoy views of the downtown skyline. Additionally, the project incorporates more than two acres of open space designed by James Corner Field Operations , which include terraces, gardens, courtyards, water features, and an overlook with views of downtown. “When the project at 1111 Sunset is completed it will be part of the broader mosaic of housing in CD1 and the city of Los Angeles. This project will ensure that everyone who desires to live in CD1 has a place to live,” said Councilman Gil Cedillo. The design plan activates street life on Sunset Boulevard and integrates with public

transit and ride-sharing points along the Sunset Boulevard corridor leading into the downtown area. Neighborhood-serving retail along Sunset will be accessed via a new sloping walkway. New pedestrian access points along the perimeter of the site will also make it easy to access the open space amenities. By creating vibrant streets, the property will create more meaningful connections with surrounding communities. “Our team was drawn to this property because of its strategic location on the edge of downtown within a mile of dynamic neighborhoods like Bunker Hill, Echo Park and Chinatown,” said Brian Falls of Palisades. “Our conceptual plans embrace the site’s adjacency to these vibrant areas by enhancing the pedestrian experience, promoting public transit, and encouraging an abundance of community uses.” Kuma , one of Japan’s foremost architects and architectural scholars, joins the architectural team that includes Skidmore, Owings & Merrill , and James Corner Field Operations. Kuma complements the design team with his architectural philosophy, which focuses on the importance of light, materials, transparency, and a fundamental respect for a building’s surroundings and context. This will be Kuma’s first major project in Los Angeles. The firm’s other projects in the United States include the Portland Japanese Garden and the Dallas Rolex Tower. Construction has begun on Kuma’s design for the Tokyo 2020 National Olympic Stadium in Tokyo.

“Our firm is honored to join the design team tasked with unlocking the potential of this unique property,” said Kuma. “We are eager to draw inspiration from the site’s rich history and the surrounding neighborhoods to create a hotel that will not only showcase this world-class location but also contribute to the dynamic community that is Los Angeles.” San Francisco-based Natoma Architects , led by Stanley Saitowitz, also joins the team. Natoma brings to the project an approach focused on architecture’s systemic relationship with the city. Saitowitz is a celebrated architect with significant experience designing mixed-use and multi-family residential projects including 8 Octavia in San Francisco. The L.A.-based SOM team is led by Design Directors Paul Danna, FAIA, and José Luis Palacios, AIA, who have an extensive track record with ground-up development projects throughout Southern California. SOM is leading the overall design, with a focus on the residential, office and retail uses. The open space areas, landscape, and other public spaces will be designed by a team led by James Corner, founder and CEO of James Corner Field Operations, the landscape architecture firm behind the High Line in New York City. Los Angeles-based real estate firm Palisades and the architectural team look forward to working with the community as the plan continues to take shape throughout the public review process.

TRACEY EAVES, from page 11

receivable collection. The 2017 median ratio from Zweig Group’s survey is 76 days. These ratios are but a few that can be calculated from your existing financial statements. In fact, there are a little more than 30 indicators included in the 2017 survey. “You expect to regularly review the balance sheet and income statement and maybe a cash flow statement. While these documents provide vital information necessary to make good business decisions, I should tell you that they may not go far enough.” Firm owners need every tool possible to win. If you’re not already doing so, I encourage you to present some new material at the next board meeting. It’s as close as your Excel spreadsheet. TRACEY EAVES, MBA, CBA, CVA, BCA, CMEA is a member of the valuation consulting team at Zweig Group. Contact Tracey at teaves@ zweiggroup.com or directly at 505.2588821.

removing work in process. The 2017 median quick ratio from Zweig Group’s survey is 1.92. ❚ ❚ Chargeability ((direct labor hours/total labor hours) x 100). Chargeability is a measure of the percentage of total raw staff labor hours charged to projects, calculating the firm’s labor expenses that are billable. This is a good measure of efficiency and effectiveness. Zweig Group’s 2017 survey median ratio is 60.7 percent. ❚ ❚ Break-even multiplier ((total payroll + total G&A overhead/ direct labor) x 100). This multiplier calculates the amount a firm must generate per dollar of direct labor to cover its over- head costs and direct labor. The 2017 median multiplier from Zweig Group’s survey is 2.54. ❚ ❚ Break-even analysis (total fixed costs/gross margin). This is a simple way to understand the minimum level of sales needed just to make it to zero net income at the end of a year. For example, if your annual fixed costs are $1 million and gross margin is 75 percent, your firm will need to achieve to- tal revenue of approximately $1.33 million. This is one of my favorite planning tools; it’s simple, yet powerful. ❚ ❚ Average collection period (accounts receivable/(gross reve- nue/365 days)). This ratio measures the efficiency of accounts

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