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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 A p r i l 1 6 , 2 0 1 8 , I s s u e 1 2 4 4

No sexual harassment policy

Management’s REAL job

W orking for many, many years in A/E firms as an owner, manager, employee, and board member, as well as serving as a consultant to thousands of more firms, has taught me a lot. I try to bring those lessons to you each week in this cover article for The Zweig Letter . This week is no exception. I want to talk about conventional wisdom on how to pay out bonuses and how following those practices hurts your firm versus what I see as a tremendous opportunity for management to really step up and do their job. So, it is generally accepted that the best (i.e., the biggest) bonuses should be doled out to your best people. Seems to make sense, right? And a good manager will be discriminating – paying the highest bonus monies to those who did the best job – and the lowest – or none at all – to the weakest performers. After this is accomplished by any number of different means, the manager can sit back and say, “I am a good manager. I pay my best people a lot more than I do the worst.” Only there’s one big problem. The guy who got nothing is still there nine months later, but now he’s an even worse performer because he is angry with management. Management didn’t do its job. This is why I am in favor of doling out bonus dollars in part, at least, on a more egalitarian

“I want to talk about conventional wisdom on how to pay out bonuses and how following those practices hurts your firm.”

Zweig Group’s Policies Procedures & Benefits Survey has tracked all manner of HR information, as it pertains to the A/E industry, for years. From spending and staff composition, to healthcare and policy manuals. This year, researchers found an alarming trend. Over the last three years fewer firms have structured policies prohibiting sexual harassment in the workplace. In 2016, only 4 percent of respondents said “No” whereas in 2018, 14 percent said “No” to this question: Do you have a firm policy prohibiting sexual harassment? OPEN FOR PARTICIPATION zweiggroup.com/survey-participation/

Mark Zweig

F I R M I N D E X Affiliated Engineers, Inc...........................4 Burns Engineering...................................6 FIGG Bridge Engineers............................2 Mead & Hunt.........................................10 Michael Baker International. ....................8 Nelson-Miller, Inc.....................................4 STV.........................................................8 ZGF Architects LLP.................................4

MORE COLUMNS xz MARKETING MATTERS: Do you need a marketing plan? Page 3 xz GUEST SPEAKER: Profit

centers? Meh Page 9 xz THE FAST LANE: Knowledge is never automatic Page 11

basis. By creating an unfair situation (someone got bonus money that they

Conference call: Matt Burns 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

BUSINESS NEWS CREATIVE ENERGY UNDER ONE ROOF Siegel & Strain Architects ’ search for new office space was labeled “Under One Roof” because the firm had accommodated its growth in two office spaces for some time. The new light-filled studio, at 6201 Doyle Street in Emeryville, is just two blocks from their previous home and comfortably accommodates the whole team in one place. Being together is an essential ingredient in the team’s collaborative process and office culture. The firm, which first opened its doors in 1985, is busy with a variety of projects and recently promoted several staff members: ❚ ❚ Senior Associate Marjorie Smith, AIA, is leading the UC Berkeley Hillel Center project, which is currently in construction. ❚ ❚ Senior Associate Michael Hayden, AIA, is leading the firm’s many projects in Yosemite National Park. ❚ ❚ Senior Associate Karen Richards, AIA, is engaged in the schematic design of the new Cottonwood Visitor Center at Joshua Tree, another National Park Service project. ❚ ❚ Lindsey Moder, AIA, is the director of historic preservation. The scale and scope of the firm’s historic work has grown over time. Moder is currently leading the Golden Gate National Recreation Area Historic Hangar Buildings project in the Presidio of San Francisco. Several Siegel & Strain projects are hitting key milestones, and practice leaders are active in industry and community events: ❚ ❚ Two projects will start construction this winter: The Brisbane Library and the Oakley Recreation Center. ❚ ❚ The National Environmental Science Center in Yosemite National Park has reached an important construction milestone as the first five buildings near completion. Principal Nancy Malone, AIA, notes that the shape and intention of the full project are coming into view. ❚ ❚ The Bishop O’Dowd Center for Environmental Studies was recently honored with the Acterra 2017 Business Award for Sustainable Built Environment. Principal Susi Marzuola, AIA, highlighted that project in her recent talk at the Behavior, Energy, and Climate Change conference in Sacramento.

Take your advice from Mark Zweig to-go.

❚ ❚ Principal Henry Siegel, FAIA, recently served as a juror on the national Solar Decathlon competition organized by the Department of Energy. ❚ ❚ Principal Larry Strain is presenting at Greenbuild this week in Boston and participating in a day-long workshop of the Carbon Leadership Forum. BURNS & MCDONNELL APPROACHES MAJOR MILESTONE AND PREPARES FOR RAPID GROWTH IN ATLANTA After supporting hundreds of projects across the Southeast U.S. throughout the past two decades, Burns & McDonnell is expanding operations in the Atlanta metro. The 100 percent employee-owned global engineering, architecture, construction, environmental, and consulting firm will hire its 100th employee- owner in Atlanta before the end of 2017 and plans to grow its workforce by 25 to 30 percent in 2018. “With the complex regulatory and infrastructure challenges our clients and communities face, there is a great need for quick, comprehensive engineering, architecture, and construction services,” says Oko Buckle, Burns & McDonnell principal and general manager of the firm’s Atlanta and Orlando offices. “We’re focused on expanding our team so we can provide even more sustainable solutions to our clients.” Backed by an international team of more than 5,700, the firm’s Southeastern offices support the region with a wide range of services, from water, wastewater, power generation, transmission infrastructure, environmental, and business technology to aviation and industrial facilities. The office has successfully managed nearly $160 million in projects with clients in a variety of markets such as Hartsfield-Jackson Atlanta International Airport, McCain Foods, Boeing, Monsanto Company, Duke Energy, Southern Company, City of Madison, Georgia, and Fulton County, Georgia. “Employee ownership drives everything we do, our growth and our employee engagement,” says Buckle. “This ownership culture allows us to attract and retain the most innovative, entrepreneurial, and client- focused professionals in our industry. Our commitment to our clients is that we have the best team that will work the hardest on their behalf.”

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

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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.

MARK ZWEIG, from page 1

shouldn’t get) it encourages management to do the right thing – either reforming the low performer or booting them off the team. You can’t just let them stay and earn less. Not an option. If we did our individual and collective jobs as managers, of course, and hired the right people in the first place and then trained and coached them properly, maybe we wouldn’t have to worry about any of these things. MARK ZWEIG is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

THE ZWEIG LETTER April 16, 2018, ISSUE 1244

O P I N I O N

M ore than one-fourth of firms in the AEC industry don’t have a formal marketing plan, but that doesn’t make it OK not to have one. Do you need shoes on your feet, a roof over your head, and food on your plate? If you don’t have a plan, start working on one! Do you need a marketing plan?

If you have limited time, a limited budget, or need to work on the actual implementation of marketing, don’t spend months putting together a 100-plus page plan. Here’s what you really need: ❚ ❚ A definition of who your clients are ❚ ❚ A statement of who you want your clients to be “If your firm doesn’t have a marketing plan, or has one that is very outdated (think 2015 or earlier), starting from scratch can be a daunting task.”

If your firm doesn’t have a marketing plan, or has one that is very outdated (think 2015 or earlier), starting from scratch can be a daunting task. A textbook definition of a marketing plan includes a situational analysis, which often necessitates a lot of research, a strategy or action plan, forecast (also may include a lot of research), and budget. AEC industry firms often focus heavily on the research component, looking up market economic reports, research on methodology, and industry data benchmarks for a variety of situations and actions. Zweig Group is a big proponent of using research, but with the amount of information available on the internet, it’s easy to get caught up in this phase and take months to accumulate and assess all the available data.

Christina Zweig Niehues

See CHRISTINA ZWEIG NIEHUES, page 4

THE ZWEIG LETTER April 16, 2018, ISSUE 1244

BUSINESS NEWS $368 MILLION SOUTHERN CALIFORNIA CONSOLIDATION PROJECT FOR CALIFORNIA AIR RESOURCES BOARD AWARDED TO DESIGN-BUILD TEAM OF HENSEL PHELPS | ZGF | AFFILIATED ENGINEERS, INC. The Department of General Services has awarded the new Southern California Consolidation project for the California Air Resources Board to the design- build team of Hensel Phelps, ZGF Architects LLP , and Affiliated Engineers, Inc. The $368 million, 380,000-square-foot, 19-acre project will be located in Riverside near the UC Riverside campus. It will be one of the largest and most advanced vehicle emissions testing and research facilities in the world, and the largest true zero net energy facility of its type in the world – generating more energy than it uses. Consolidating the organization’s five existing locations, currently spread throughout Los Angeles, into a single location, the state- of-the-art facility will house more than 400 employees and include an extended range of dedicated test cells, an advanced chemistry laboratory, workspace for accommodating new test methods for future generations of vehicles, space for developing enhanced onboard diagnostics and portable emissions measurement systems, offices, visitor reception and education areas, a media center, flexible conference areas, and a large public auditorium.

The facility and campus will be designed and built to reach the highest possible levels of measured sustainability, with the intention to achieve LEED Platinum certification and to meet California’s CALGreen Tier 2 threshold for overall sustainability and energy efficiency. The unique design will provide a seamless consolidation and integration of the office program into a three-story, pinwheel- shaped building. Vertical connectivity will increase proximity and interaction between departments, while horizontal circulation will provide links with testing areas, support space, and laboratories, resulting in greater flexibility and collaboration. This pinwheel concept creates a Central Command Control area that forms the nexus of the new CARB campus. The high-performance campus will feature abundant open and green spaces, as well as nature walks for al fresco breaks and informal meetings alike. ZGF is a design firm with an intentionally diverse portfolio, including healthcare and research facilities, academic buildings, mixed- use developments, corporate campuses, museums, transportation facilities, and eco- districts. AEI is a leading U.S.-based multidisciplinary consulting engineering firm that plans, designs, and delivers high-performance engineered systems for technically complex

building and utility infrastructure projects. The firm specializes in the industrial test and manufacturing, research, energy production and distribution, higher education, healthcare, mission-critical, and sustainability markets. HUNTER ENGINEERING AWARDS NELSON-MILLER 2017 SUPPLIER EXCELLENCE AWARD Nelson- Miller, Inc. , a leading design, engineering, and manufacturing group focused on providing solutions for the human-machine interface market, announced that it has received the prestigious Supplier Excellence Award from its long-standing client, Hunter Engineering. Hunter Engineering evaluated 375 companies from its broad range of suppliers against the following criteria: ❚ ❚ Reject rate of parts shipped ❚ ❚ Number of lots rejected ❚ ❚ Quantity of “vendor fault/quality” manufacturing interruptions ❚ ❚ Overall delivery performance ❚ ❚ Competitive pricing ❚ ❚ Value-added service variables “Nelson-Miller is delighted to receive the Supplier Excellence Award from Hunter Engineering, and this is a testimony to our customer-centric approach, which drives everything we do here,” said Jim Kaldem, president of Nelson-Miller.

CHRISTINA ZWEIG NIEHUES, from page 3

steal your unique strategy for client follow-up or your plan to do more social media marketing. 5)Include metrics, goals, and a budget. Don’t be afraid to state these things because you might not achieve them. Ac- cording to Zweig Group’s 2017 Marketing Survey , of the firms that have a marketing plan, just around half include a budget. That’s crazy! You need to know how much your firm has to spend on marketing efforts and a potential return on these expenditures. The most important thing about your marketing plan is that it reflects your brand and your firm’s unique characteristics and strengths. No one should be able to “steal” your strategy because it’s representative of your firm’s experiences and people – and there are no two firms in the world that are identical in this regard. If you don’t have a marketing plan, break out a clean sheet of paper and get to work! CHRISTINA ZWEIG NIEHUES is Zweig Group’s director of marketing. Contact her at christinaz@zweiggroup.com. “The most important thing about your marketing plan is that it reflects your brand and your firm’s unique characteristics and strengths. No one should be able to ‘steal’ your strategy because it’s representative of your firm’s experiences and people.”

❚ ❚ How you plan to reach clients ❚ ❚ How you will retain clients

That’s it! Here are a few more tips for your marketing plan.

1)Don’t involve too many people. You don’t need a commit- tee to put together a marketing plan. This may be controver- sial, but I think it’s better to have one person start with the overall structure of the marketing plan. Later in the process it can be added to by others, but the people writing the market- ing plan need to be limited and highly qualified. 2)Don’t obsess over the SWOT (Strengths, Weaknesses, Opportunities, Threats). It’s important to know these things, especially from a strategic perspective, but you don’t need a highly detailed list with hundreds of items. The best place to get information for your SWOT is from a simple em- ployee or client survey. A committee made up of every princi- pal in the firm may not be the ideal group to assess and define a SWOT. You need objectivity and a broad perspective. 3)Start with something simple and basic. When it comes to a marketing plan, something is better than nothing. Don’t delay doing the entire marketing plan because you’re not sure of an exact strategy for a new market. 4)Once it’s done, share it. Some version of your marketing plan should be available to nearly every employee in your firm. I can promise you that no one is going to successfully

THE ZWEIG LETTER April 16, 2018, ISSUE 1244

ALL 2018 ZWEIG GROUP AWARDS ARE NOWOPEN FOR REGISTRATION

2018

SEE YOU IN DALLAS!

hotrm.com/our-awards/

THE ZWEIG LETTER April 16, 2018, ISSUE 1244

P R O F I L E

Conference call: Matt Burns President of Burns Engineering (Hot Firm #88 for 2015), a 220-person firm based in Philadelphia.

By LIISA ANDREASSEN Correspondent

“T he downside of the seller/doer model is that staff often likes the doing more than the sell- ing,” Burns says. A CONVERSATION WITH MATT BURNS. The Zweig Letter: 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? Matt Burns: Project managers have the toughest jobs in the company.They are juggling a lot of things at all times. They’re the quarterback on every proj- ect. We try not to overload and to communicate as much as possible to make sure all is on track. We also have three levels of project managers. The first group works on legacy accounts – those that practi- cally run themselves. The second group is mid-lev- el project managers and the third group are upper level and these folks have the greatest sales goals. There’s no secret formula. We just do our best to understand their workload, have weekly/monthly

meetings about workload planning and share re- sources as needed. Our culture is one that encour- ages working across department lines. We have a strong team culture and keep backbiting at bay. TZL: The talent war in the A/E industry 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? MB: The talent pool is somewhat limited right now and we’re focused on not losing anyone. The re- sponsibility of the management team is to identi- fy high potential employees and then help them to create an individual career plan for the future. We look to see who is ready to step up. It’s like building a farm team. We’re always working on our pipeline and try to have conversations about the future as often as possible. We also have a matrix planning grid. We’re good at it – not great. TZL: As you look for talent, what position do you most need to fill in the coming year and why?

Matt Burns, President, Burns Engi- neering

THE ZWEIG LETTER Ap

MB: We could easily grow 20 percent in the coming year. Right now we have about 30 requisitions out there. Mid- level engineers with about 10 years’ experience are the most difficult to re- cruit. We have to convince them that working here is better than anywhere else. We’re also looking for project managers with client-facing skills and people who can help us to grow geo- graphically – regional leaders. “The responsibility of the management team is to identify high potential employees and then help them to create an individual career plan for the future. We look to see who is ready to step up.” TZL: Monthly happy hours and dog friendly offices. What do today’s CEOs need to know about today’s workforce? MB: Today’s workforce is very talent- ed and we have some great talent at Burns. They desire flexibility and need a lot of communication. They need to be engaged and to know that we are working with them to develop a career for the future. They challenge manage- ment to do what we should do. They want to be part of a high performance team – that’s the most important thing. And of course, we have those other perks like happy hours and such. Most recently, we had an office Olym- pics – curling specifically – and award- ed bronze, silver, and gold medals. 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? MB: We have a seller/doer model. The advantage of that is that the person in front of the client understands the technical needs and this can be reas- suring to the client. They understand their concerns. We’re organized by market sector so thought leadership in the different areas is also key. We work to educate the client on how to solve problems. The downside of the seller/doer model is that staff often likes the doing more than the selling.

TZL: Diversifying the portfolio is never a bad thing. What are the most recent steps you’ve taken to broaden your revenue streams? MB: It’s very important to be diversi- fied. We’re diversified by market sec- tor and geographic region. Right now, we’re working to grow geographical- ly in Florida, California, and the New York metro area. Every few years we also look at new market sectors to off- set any decline in other areas. Cur- rently, we’re doing a lot of work in the micro-grid and niche energy markets. TZL: What is the role of entrepre- neurship in your firm? MB: It’s very important to our busi- ness. We always seek new offerings and need people with entrepreneur- ial skills to help us grow and meet our goals as opposed to helping us to maintain and establish. We are thought leaders. TZL: In the next couple of years, what A/E segments will heat up, and which ones will cool down? MB: I see infrastructure and trans- portation heating up. I’m not so sure about cooling down – perhaps com- mercial retail. A lot of work has been deferred over the past few years and it’s all finally catching up. “Our culture is one that encourages working across department lines. We have a strong team culture and keep backbiting at bay.” TZL: Measuring the effectiveness of marketing is difficult to do us- ing hard metrics for ROI. How do you evaluate the success/failure of your firm’s marketing efforts when results could take months, or even years, to materialize? Do you track any metrics to guide your marketing plan? MB: The ultimate metric is, “Do we meet our sales goals?” Like many firms, we keep track of opportunities and look at hit rates. How much of those opportunities convert to sales? We also do customer follow up and have a third party call to find out how

YEAR FOUNDED: 1957 HEADQUARTERS: Philadelphia, PA OFFICES: 10 offices in nine states NO. OF EMPLOYEES: 220 SERVICES: ❚ ❚ Aviation ❚ ❚ Facilities and Infrastructure ❚ ❚ Higher Education ❚ ❚ Railroad and Transit MAJOR CLIENTS: ❚ ❚ Air France ❚ ❚ Boeing ❚ ❚ Penn State University ❚ ❚ JFK International Airport ❚ ❚ New York City Department of Transportation ❚ ❚ Kraft Foods NEWS:

Burns is serving as the technology and engineered systems engineer for several capacity enhancements at the Metropolitan Nashville Airport Authority. FAST FACTS: ❚ ❚ Avg. number of active projects in a year: 200 ❚ ❚ Avg. tenure of employees: 8 years ❚ ❚ Avg. annual revenue growth over past four years: 18.4 percent ❚ ❚ Avg. age of staff: 43.7 years

See CONFERENCE CALL, page 8

pril 16, 2018, ISSUE 1244

ON THE MOVE MICHAEL BAKER INTERNATIONAL NAMES VICE ADMIRAL FRANK C. PANDOLFE, PH.D., TO ITS BOARD OF DIRECTORS Michael Baker International , a global leader in engineering, planning, and consulting services, has named Vice Admiral Frank Pandolfe, Ph.D., U.S. Navy, to its board of directors. Vice Admiral Pandolfe most recently served as assistant to the chairman of the Joint Chiefs of Staff. In that role, he supported national policy formulation with an emphasis on international diplomacy and strategic affairs. He also served as director for strategic plans and policy for the Joint Chiefs of Staff, where he developed strategic policies and operational plans, and assessed global risk for the U.S. military. Previously, VADM Pandolfe commanded the U.S. Sixth Fleet in Naples, Italy, and Naval Striking and Support Forces NATO in Lisbon, Portugal, where he was responsible for planning and executing U.S. and allied naval operations in the Atlantic Ocean and Mediterranean Sea. During 37 years of commissioned service, VADM Pandolfe served multiple tours of duty at sea, including command of a destroyer, destroyer squadron and aircraft carrier strike group. Ashore, he served in the White House as military aide and advisor to the vice president of the U.S. and in the Pentagon as director for Surface Warfare, where he defined the requirements for the Navy’s future combatant ships, including their command and control systems, sensors and weapons. VADM Pandolfe is an accomplished author who played a leading role in writing the 2015

National Military Strategy and the Navy’s Sea Power 21 vision document. He holds a B.S. from the United States Naval Academy and was awarded an M.A.L.D. and Ph.D. from the Fletcher School of Law and Diplomacy. “We are honored to have Vice Admiral Pandolfe join our board of directors,” said Thomas Campbell, chairman of Michael Baker International. “He is a high-impact leader with extensive experience managing complex organizations. His expertise in organizational innovation, strategic planning, and risk assessment brings an invaluable perspective to the Michael Baker International board of directors.” VADM Pandolfe joins the board of a company renowned for its emphasis on teamwork and collaboration as well as fostering a culture of innovation focused on solving complex problems for clients worldwide. In addition to its award-winning work, Michael Baker International is a premier destination for the industry’s top talent to grow their careers, emboldened by the company’s “We Make a Difference” approach to serving its clients, team members and communities. BRIAN O’KANE JOINS STV AS SENIOR VICE PRESIDENT IN THE CONSTRUCTION MANAGEMENT DIVISION Brian O’Kane, a veteran leader in the construction management industry, has joined STV as a senior vice president and national business development director. He will report to Steven Pressler, P.E., executive vice president of the firm’s Construction Management Division, and will be based in Los Angeles.

In his new role, O’Kane will be responsible for the business development of STV’s commercial and industrial markets nationwide, covering the firm’s design and construction management disciplines. Over the course of his career, O’Kane has coordinated business strategy and managed ongoing business planning processes for several of the world’s largest engineering and construction firms. Most recently, he supervised a team of 170 employees as executive vice president of the project management/construction management division of a Fortune 500 engineering, design and consulting firm. O’Kane brings to STV an outstanding record of overseeing construction projects throughout the United States for corporate, military and transportation clients, among others. He has further expertise in financial planning and analysis, strategic planning and staff development. Among O’Kane’s most notable projects are a $460 million Boeing Facility Program Integration; a $300 million Intel Corporation Base Build Tool Installation; a $1.6 billion Lockheed Martin IDIQ contract; a $400 million facility modernization program at Northrop Grumman Shipyards; and a $2 billion Anheuser Busch expansion project. O’Kane earned a bachelor’s degree in sociology from the University of California Los Angeles and is a charter member of the Construction Management Association of America. He is also a director of the Pasadena Chamber of Commerce.

CONFERENCE CALL, from page 7

Also, part of moving ahead is having some failure. 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? MB: Our strategic plan is 50/50. It’s a mature industry so organic growth often means capturing business from com- petitors. TZL: Do you use historical performance data or metrics to establish project billable hours and how does the type of contract play into determining the project budget? MB: We have different types of contracts. Each project has a budget. We use Deltek accounting software and work with the client to negotiate a reasonable plan. It’s the project manager’s job to deliver on budget and on time. Most proj- ects are cost or fixed fee. Some are lump sum, but we still break projects down internally for our records. TZL: What’s your prediction for 2018? MB: All the signs are strong. Clients have projects they want to advance and we have a terrific backlog. It’s shaping up to be a great year. 2017 was also strong. We’re anticipating 15 to 20 percent growth – that’s right where we want to be.

we’re doing. It’s back-end marketing. We want to know how we compare to the competition. It helps with people build- ing and brand building, too. “Project managers have the toughest jobs in the company. They are juggling a lot of things at all times. They’re the quarterback on every project. We try not to overload and to communicate as much as possible to make sure all is on 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? MB: Not really. We follow GDP growth and things are look- ing pretty strong for the next few years. TZL: They say failure is a great teacher. What’s the big- gest lesson you’ve had to learn the hard way? MB: Hold people accountable and make changes quickly.

THE ZWEIG LETTER April 16, 2018, ISSUE 1244

O P I N I O N

Profit centers? Meh

Banish profit centers in small to midsize firms. Focus on your people by letting each do what each is best qualified to do.

A n engineering, architecture or planning professional services firm can be very successful – maybe more successful – if it maintains a “one company” philosophy without multiple profit centers or a chief financial officer. The key priority should be to stay focused on people – employees, clients, teaming partners, our communities – and not measuring things that don’t matter.

Raj Sheth GUEST SPEAKER

Do we have a CFO? Yes, but not in the traditional sense. The traditional role of a CFO is to review financial statements to gain a perspective on past performance to forecast the future. The “An engineering, architecture or planning professional services firm can be very successful – maybe more successful – if it maintains a ‘one company’ philosophy without multiple profit centers or a chief financial officer.”

Over the past 20 years, Mead & Hunt’s revenues increased from $10 million to nearly $110 million by using a “one company” business model and culture. We’ve grown from two civil engineering offices in Wisconsin to more than 30 offices in 20 states with very diverse service lines in multiple markets. Not only has Mead & Hunt been profitable every year despite economic upturns and downturns, but we have typically exceeded annual industry averages. Throughout this financial success and fast-paced growth, our employee turnover rate is less than 7 percent and we are regularly named a “best place to work.” How? There is a lot at play, but two significant elements are: no high-powered, profit-driven CFO and no profit centers. Small to midsize companies (most companies in our industry are small to midsize) should function better using this model.

See RAJ SHETH, page 10

THE ZWEIG LETTER April 16, 2018, ISSUE 1244

RAJ SHETH, from page 9

Profit centers almost always create internal competition between departments or teams – competition for technical staff, budget allocation, access to corporate management staff, administrative support, and, at times, clients. Without profit centers, managers are encouraged and motivated to cross-sell and collaborate across offices and service lines. In our industry, there is tremendous competition for work and talent. To us, it is counterintuitive and unproductive to compete internally against ourselves. Even with a clear strategic plan and business goals, profit centers have an overriding emphasis on revenue generation which can reduce risk-taking and innovation. Profit center managers will opt to pursue safe sources of revenue rather than those that might provide higher returns over the long term. The focus is on expenditures and budgets rather than on their team, their clients, and continuous improvement. A “one company” philosophy encourages managers to share work and find the best internal talent for the task at hand. It encourages managers to share key staff with other business lines to win new work or to augment bench depth on big projects. This approach maximizes the use of all internal resources rather than leaving teams idle while they wait for new work. “Banish profit centers. Focus on your people by letting each do what each is best qualified to do. Work to better execute every project. Continuously improve operations. De-emphasize industry comparisons by setting the bar for improvement against your last high.” An added benefit is that this practice broadens our employees’ expertise and increases retention by creating versatile employees who can work with multiple types of projects across multiple markets. Employees know that company leadership, from project managers to the COO and CEO, are focused on keeping them challenged, engaged, and productive. My recipe for success? Banish profit centers. Focus on your people by letting each do what each is best qualified to do. Work to better execute every project. Continuously improve operations. De-emphasize industry comparisons by setting the bar for improvement against your last high. Don’t get hung up on metrics that don’t matter and that don’t make you money. Keep it simple! RAJ SHETH is president and CEO of Mead & Hunt. He can be reached at raj.sheth@meadhunt.com.

CFO analyzes financial data, compares that information with industry standards and metrics, and works with operations to develop and implement strategies to improve the company’s future performance. This approach means that the company is leveraging financial data that may not apply to their unique business model. Decisions are being made strictly on metrics instead of insider market knowledge. “Profit centers almost always create internal competition between departments or teams ... Without profit centers, managers are encouraged and motivated to cross-sell and collaborate across offices and service lines.” At Mead & Hunt, our CFO does not worry about collections, bad debt, staffing projections, or claims. He relies on the project managers and operations employees to do their jobs well and leverage their industry and market insights to expand services. He and his team assist the operations employees by managing the financial and regulatory processes and our internal policies and procedures. In my experience, A/E firms are more profitable when the operations managers are engaged in winning and delivering projects that exceed clients’ expectations, rather than a CFO (or CEO for that matter) monitoring irrelevant metrics. At Mead & Hunt, we compare ourselves against our best years of the past, not against other companies. Yes, we review some industry metrics. However, each company is unique and industry metrics are very generalized. Those comparisons therefore have limited value in my opinion. We want our staff to take care of their clients and projects. We want them to deliver great projects that stay within budget, are delivered on time, and make our clients happy. And, we empower our corporate team (finance, human resources, IT, administrative support) to do their jobs. We want our professionals to do what they do best: employ their training, education, and experience to make Mead & Hunt successful. Our somewhat unconventional business model may not work for very large A/E consulting firms. Having spent my career at Mead & Hunt, I know what works for small to midsize firms. Departments or divisions within a company that are individually focused on generating revenue are called profit centers or cost centers. Cost and profit centers isolate expenses in hopes of improving profit generating operations.

TALK TO US Are you interested in having your firm featured in our Business News section? Let us know. If interested, please send your press release to sparkman@zweiggroup.com.

THE ZWEIG LETTER April 16, 2018, ISSUE 1244

O P I N I O N

Knowledge is never automatic

I n the Fiddler on the Roof song, “If I Were a Rich Man,” Tevye sings, “When you’re rich they think you really know!” The second someone becomes a principal, they (erroneously) think they know everything there is to know about their industry and how their firm fits in.

The challenge I often see is that too many AEC firm owners seem to believe – by virtue of their status as owners – that they know everything there is to know about their industry and how their firm fits in. In addition, they seem to believe this knowledge came to them in one lightning strike, during the first sleep period after they became a principal. So when they woke up the next morning, they suddenly knew everything they needed to know to run their part of the operation and make decisions for the overall firm. When an engineer or architect becomes a firm principal, nobody hounds him/her about billable hours anymore; his/her primary responsibilities become firm management, client relationships, and marketing/business development. He/she no longer designs projects, and manages only what I call “signature projects,” those projects large and/ or significant enough to become firmly tied to the firm’s reputation for the foreseeable future and possibly longer.

Now – suddenly – these people who were previously focused only on billable hours are in charge of marketing, overhead hours, with a marketing manager and staff they must direct. “The challenge I often see is that too many AEC firm owners seem to believe – by virtue of their status as owners – that they know everything there is to know about their industry and how their firm fits in.”

Bernie Siben THE FAST LANE

So what is their first decision?

They decide that marketing can’t be that important because it’s an overhead function. So they skip the weekly marketing meetings. If one or two of them miss a meeting, decisions will be made without them. And – as we often joke –

See BERNIE SIBEN, page 12

THE ZWEIG LETTER April 16, 2018, ISSUE 1244

BUSINESS NEWS SG BLOCKS SECURES CONTRACT TO DESIGN AND CONSTRUCT A FOUR-BUILDING WORKFORCE HOUSING DEVELOPMENT TOTALING 183,000 SQUARE FEET IN NEW YORK STATE SG Blocks, Inc., a leading designer, innovator, and fabricator of container-based structures, has secured a major workforce housing project in Sullivan County, New York, representing the second largest project in company history. SG Blocks has been commissioned to design and build a four-building, 183,000-square foot multi-story, multi-family workforce housing development in Sullivan County, New York, representing an estimated revenue opportunity of $29 million. This complex will be built to house low- to middle-income households. SG Blocks will provide the services of a turn- key development manager for this project, including architectural engineering and design, project administration and building systems work. The workforce housing development will target employees for a newly built $1.2 billion destination resort that includes: an 18-story hotel and a casino and entertainment complex with approximately 100,000 square feet of casino floor, an entertainment village, golf course and waterpark. The hotel and casino

will feature more than 10 varied bar and restaurant experiences, including fine dining and an Italian steakhouse created by celebrity chef Scott Conant, and year-round live entertainment at the 2,500-seat event center. “We are proud to announce another major workforce housing development project, representing the second largest in company history,” stated Paul Galvin, chairman and CEO of SG Blocks. “The National Multifamily Housing Council expects that 4.5 million new apartments will need to be built in the U.S. by 2030, particularly in the affordable housing sector. Our modular approach to construction enables a faster time to market and notable cost savings for these types of projects, allowing innovative developers to rapidly address new market opportunities. “Our growing construction backlog, which currently sits at 715,000 square feet, stands as a testament to the value that the market places on our technology, and we expect to recognize revenue from this project starting in the second half of 2018. We look forward to continuing to provide visionary developers with our eco-friendly, economical and safe housing alternative,” concluded Galvin. Founded in 2007, SG Blocks was listed

on Nasdaq in June 2017. It utilizes code- engineered cargo shipping containers to construct and provide safe, strong, and green structures and environments. Instead of consuming new steel and lumber, the firm capitalizes on the structural engineering and design parameters a shipping container must meet and repurposes them for use in building. This unique methodology is transformative and delivers to its customers a sustainable and scalable solution that lowers their costs and increases lead-time to market. Clients have included Lacoste, Puma, Mini Cooper, Aman, Taco Bell, Marriott, Starbucks, Equinox and several branches of the U.S. military. SG Blocks, Inc. is a premier innovator in advancing and promoting the use of code- engineered cargo shipping containers for safe and sustainable construction. SG Blocks is the only container-based construction firm to receive an Evaluation Service Report from the International Code Council for its structural building materials. The firm offers a product that exceeds many standard building code requirements and also supports developers, architects, builders and owners in achieving greener construction, faster execution and typically stronger buildings than most traditionally constructed buildings.

BERNIE SIBEN, from page 11

❚ ❚ What do I just let you handle? ❚ ❚ What do I need to understand about what you’re handling? ❚ ❚ What do I need to do myself? ❚ ❚ What do I need to learn in order to do that? For the next month, the marketing manager and principal meet for 10 minutes every day to coordinate, mostly for the manager to answer the principal’s questions about activities and processes. The second month, the principal meets every week with the entire marketing staff to learn how the group functions, what the group is working on, what challenges they anticipate, and what assistance and decisions they need to move ahead successfully. At the start of month three, the marketing principal schedules weekly meetings for all the principals and the marketing manager. Now, with backlog still dropping, it is easy to convince the other principals that marketing needs their serious attention. And the first big turn-around success in making marketing an activity all principals recognize as important? Just before the start of the New Year, the marketing principal and marketing manager call a meeting of principals, discipline and market sector leaders, and senior project managers to develop a strategic plan for the next year. Everyone attends. BERNIE SIBEN, CPSM, is owner and principal consultant of The Siben Consult, LLC, an independent A/E marketing and strategic consultancy located in Austin, Texas. He can be reached at 559-901-9596 or at siben@sibenconsult.com.

the people who don’t attend get the worst assignments. In the end, none of the principals attend, so marketing staff suffers from a leadership vacuum wherein they get no instruction, no guidance, no praise, but a boatload of criticism when the principals finally realize that their backlog is getting dangerously low. Now, the principals panic, and they want to propose on every opportunity they find. One of my past employers used to call that approach, “Shoot at everything that moves!” I call it, “Shoot first, aim later!” First step: the principals recognized that there was a problem. So far, so good. Then it falls apart. Second step: the principals meet often to ascribe blame for the marketing problem. This is totally unproductive, especially since they all share blame equally but don’t want to admit or accept that. Finally, they appoint one principal to be the marketing/ business development principal. They think this solves their problem because they still think their problem is “who do we blame,” and that the person accepting this appointment automatically accepts the blame. Then, the principal meets with the marketing manager and gets schooled on all the activities involved in marketing/ business development. Finally, the marketing principal puts his/her working brain into gear and asks:

THE ZWEIG LETTER April 16, 2018, ISSUE 1244

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