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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.

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THE ZWEIG LETTER April 16, 2018, ISSUE 1244

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