Travel and entertainment costs T R E N D L I N E S M a y 2 4 , 2 0 2 1 , I s s u e 1 3 9 3 W W W . T H E Z W E I G L E T T E R . C O M
Whether you’re an enthusiast, first-time buyer, or apprehensive seller, it would be naive to disregard these opportunities. Why you should be open to M&A
Zweig Group’s 2021 Financial Performance Report of AEC Firms analyzes data from income statements and balance sheets to understand key trends in the industry. The 2020 fiscal year was incredibly interesting to analyze as firms had to react to an unpredictable circumstance. As expected, the income statement line item with the most stark change was “travel and entertainment costs,” shown as a percentage of net service revenue in the chart above. With updated travel policies and fewer opportunities to entertain clients, firms saw an all-time low in this category in 2020 at just 0.3 percent of NSR spent on travel and entertainment expenses. Participate in a survey and save 50 percent on the final or pre- publication price of any Zweig Group research publication. F I R M I N D E X Blueline...................................................6 BSA LifeStructures..................................4 Dewberry................................................2 Elkus Manfredi Architects......................12 Studio Other. ........................................12 Woolpert.................................................4 MO R E A R T I C L E S xz TIM SPENCE: Centralize, decentralize, or neither? Page 3 xz Trusted advisor: Brian Darrow Page 6 xz JULIE BENEZET: COVID and the gift
A s we all start to catch our breath after a year full of uncertainty and a record number of other buzzwords, AEC firms can finally start to plan for the future with some confidence. While some businesses – especially those in certain disciplines or with a focus on specific markets that were impacted significantly by the pandemic – are still waiting for things to come back around, there are many others that have rebounded and project a strong outlook for this year and beyond (if they even struggled financially during the pandemic to begin with). This trend will only continue moving forward as more Americans become vaccinated and more states lift their various restrictions. Zweig Group founder Mark Zweig wrote an article just a few weeks ago titled “Get Ready for a Big Boom” to discuss the growth that the AEC industry should be expecting. America’s infrastructure needs are mounting and becoming more and more prevalent. The catastrophic winter storm that devastated Texas this year, the deterioration of the Pacific Highway, and America’s broken housing system are all prime examples of why engineers, architects, and other design professionals are so vital to our society. These shortcomings are highlighted in America’s recent C- score given by the American Society of Civil Engineers in their quadrennial infrastructure report card. With a $3 trillion infrastructure bill in the works under the current administration, it appears evident that AEC firms will be experiencing growth, perhaps rapid and at an unprecedented pace, over the course of the next 10 years. This will present huge opportunities within essentially every single firm in our industry as various trends begin to materialize. AEC firms have found organic growth to be a constant uphill battle the last 15 years, and a growing number of firm owners are opening their eyes to the benefits of mergers and acquisitions. This and several other key factors are contributing to the surge in M&A activity that we are seeing amongst AEC firms, and I believe we may only be scratching the surface. This activity is leading to increased interest, and ultimately value, as deals shake out. Whether you are a sophisticated M&A enthusiast, first-time buyer, or an apprehensive seller, it would be naive for any firm leader to disregard those opportunities without first fully understanding the dynamics of the M&A environment. Here are a few reasons you (and every AEC firm) should be willing to consider M&A if the right opportunity presents itself: 1)There are many high-integrity and value-driven buyers and sellers in the market. We work in an amazing industry surrounded by some of the brightest and most genuine individuals in the world. So many of the individuals I get to work with entered this profession due
of organizational change Page 9 xz MARK ZWEIG: Passing of an industry great Page 11
See JOHN BRAY, page 2
T H E V O I C E O F R E A S O N F O R T H E A E C I N D U S T R Y
ON THE MOVE CHRIS COOK AND ADAM HAYES JOIN DEWBERRY Dewberry has announced that Chris Cook, PE, and Adam Hayes, PE, have joined the firm’s mechanical, electrical, and plumbing group based in Raleigh, North Carolina. Cook joins the firm as a project engineer with more than 13 years of experience. As a fire protection engineer, he has worked on various facility types, including commercial buildings, K-12 schools, higher education facilities, civil structures, and healthcare facilities. Cook earned his bachelor’s degree in architectural engineering from North Carolina A&T State University and is a member of the American Society of Plumbing Engineers and the Society of Fire Protection Engineers. Hayes joins the firm as a senior project engineer and has more than 13 years of structural
engineering experience in heavy industrial projects. He has a background in various project types, including chemical structures, utility bridges, equipment support, tank support, open structures, warehouses, and structural ductwork. Hayes has a bachelor’s degree in civil engineering from North Carolina State University. Dewberry is a leading, market-facing firm with a proven history of providing professional services to a wide variety of public- and private-sector clients. Recognized for combining unsurpassed commitment to client service with deep subject matter expertise, Dewberry is dedicated to solving clients’ most complex challenges and transforming their communities. Established in 1956, Dewberry is headquartered in Fairfax, Virginia, with more than 50 locations and more than 2,000 professionals nationwide.
Interested in learning more
about the projects and ideas driving the AEC industry forward? Learn more with Civil+Structural Engineer Media.
JOHN BRAY, from page 1 to their desire to have a positive impact on the world around them, whether that is from a perspective of mental health, sustainability, or breathtaking beauty. Not all buyers are the big conglomerates looking for a takeover, and there are many active mid-size buyers that put their largest priority on culture and taking care of their people. In professional services businesses like these, the people are often the most important aspect of the deal, so many buyers put an emphasis on making sure the employees of the seller are positioned for success. 2)The current administration’s new infrastructure bill. While there is still uncertainty around the details of the bill, it is clear that our government understands the need for investment in America’s infrastructure. It should not be overlooked that the largest investment in infrastructure in America’s history was one of the first items on President Biden’s agenda. It is only a matter of time until money is poured into these projects across the U.S. 3)Private equity interest in AEC firms. Private equity groups have traditionally avoided professional services firms, specifically architecture and engineering, due to their inability to provide immediate returns in a quarterly profit-driven environment. However, the promising outlook and consistent returns of many AEC firms has driven PEGs to become more active in our space over the last 10 years, and the trend is only going to continue. More qualified buyers and buyout options will only create greater opportunities in this industry. 4)“Baby boomer” bubble. Ninety-two percent of non-tech companies are owned by baby boomers (ages 57-72). These firm owners will inevitably need to identify a transition plan and do not always have an internal plan in place. Even if they do, M&A can offer many benefits for these retiring owners and their employees. 5)This is a very fragmented industry made up of many small companies. More than 90 percent of professional service businesses have fewer than 10 employees. There are many opportunities for synergies, efficiencies of scale, and consolidation through M&A. 6)Labor market struggles. As I noted above and as we are all well aware, it can be difficult, time consuming, and expensive to find the key talent you need to grow organically. With my experience as an advisor within Zweig Group’s executive search and M&A teams, I can assure you that M&A can oftentimes allow you to acquire a like- minded firm with great people, and integrate them into your organization, in a shorter time period than you’d spend looking for one key hire. 7)Provide development and growth opportunities for staff and principals. Whether it is the ability to design bigger and better spaces, work in more diverse market sectors and geographies, or have a higher career ceiling, M&A can provide immense benefits to the staff of a seller at all levels of the organization if you focus on culture fit and properly vet out the other side of the deal. JOHN BRAY is an advisor with Zweig Group’s M&A and executive search teams. Contact him at email@example.com.
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© Copyright 2021. Zweig Group. All rights reserved.
THE ZWEIG LETTER MAY 24, 2021, ISSUE 1393
O P I N I O N
There is a third option that empowers leaders at all levels, provides a foundation for growth, and offers a sound path forward. Centralize, decentralize, or neither?
O rganizations that grow by making acquisitions and opening offices in new locations often find themselves struggling with a two-sided dilemma: Should they centralize the expanding organization’s leadership and operations, or decentralize and give individual locations the autonomy to operate almost as individual firms?
Having wrestled with this challenge over the last two decades, BSA LifeStructures recently recognized a third way: One firm, with leaders throughout the organization. I think our experience could help others facing the same challenge. CONTEXT. In its nearly 50-year history, BSA LifeStructures has worked through both sides of the centralized versus decentralized debate. Founded by an engineer named Dwight Boyd and an architect named Richard Sobieray, the firm enjoyed decades of strong growth and, by 2000, had emerged as a substantial firm doing regional and national work from a single office. The board wisely recognized that the firm had outgrown this structure and pursued geographic diversification. As a result of that vision, today BSA has seven
offices that – thanks in large part to a traditional regional director structure – generally have operated like businesses within the business. While that approach served us well in some ways, over time it also led to inconsistent performance and anemic growth. The problem? The firm was operating in silos rather than, as our new vision asserts, as “OneBSA.” To address this challenge, our leadership team took a hard look at the current firm and its future vision and sought the best way to get from one to the other. That process involved four steps: assess, plan, execute, and sustain and grow. ❚ ❚ Assess. While we already were looking for a better way forward, the pandemic provided a perfect catalyst for change by further highlighting the
See TIM SPENCE, page 4
THE ZWEIG LETTER MAY 24, 2021, ISSUE 1393
TRANSACT IONS LONG POINT CAPITAL ANNOUNCES SALE OF INVESTMENT IN WOOLPERT Long Point Capital announced it sold its investment in Woolpert in connection with a new strategic investment by MSD Partners, who are partnering with the Woolpert management team. With its exit from Woolpert, Long Point Capital continues to establish its reputation as a premier partner to the management teams of professional services companies. Financial terms of the transaction were not disclosed. Founded in 1911, Woolpert is a leading global provider of architecture, engineering, and geospatial services to a wide variety of public, private, and government clients. The company today has more than 1,100 dedicated employees at 42 offices and is headquartered in Dayton, Ohio. Long Point made its investment in Woolpert in December 2017. Since that time, in partnership
with Long Point, Woolpert tripled its profits, completed six strategic add-on acquisitions, expanded into new geographic markets, and developed new lines of service, including strategic consulting and data-as-a-service. “Long Point lived up to their reputation – they have been a great partner for me and my management team”, said Scott Cattran, Woolpert president and CEO. “They became my trusted advisor. They provided the strategic and tactical advice that played a critical role in helping us achieve our growth plan. I could not have picked a better partner.” Ira Starr, Long Point Founding Partner commented, “We have had a great experience working with Scott and his team. It is an honor to work with such a smart, talented, and committed management team. We are very proud of our role in their great success. We are very confident that they are well positioned
for continued growth as the premier AEG company in the industry.” Woolpert is the premier architecture, engineering, geospatial and strategic consulting firm, with a vision to become one of the best companies globally. Woolpert has been America’s fastest-growing AEG firm since 2015. The firm has more than 1,100 employees and 42 offices in three countries. Long Point Capital, with offices in New York and Michigan, seeks to partner with and invest in leading founder, family, and management- owned businesses operating in defensible niches with stable demand, highly capable management teams, and strong growth prospects. Long Point focuses on professional services companies and opportunistically niche manufacturing and distribution companies, typically with $5 million to $30 million in EBITDA.
TIM SPENCE, from page 3
3)Leadership. To empower leadership at all levels, this new structure designates executive, national, studio, and project leaders. For example, in the discipline of architecture, the chief operating officer serves as executive leader, the director of architecture as national leader, the architectural lead as studio leadership, and project architect as project leader. This creates a contiguous thread of leadership from the executive team to the project team. 4)Right person, right seat. In keeping with the Entrepreneurial Operating System, a right-person-right- seat analysis ensured that proper leaders were placed in key executive and national roles. Tools like Clifton StrengthsFinder and Cultural Index were employed to understand individuals’ leadership capabilities, and then designated leaders were charged with creating their own teams. 5)Accountabilities. Also in keeping with the EOS methodology, responsibilities for each role were condensed into five accountabilities based on the SMART acronym: specific, measurable, attainable, relevant, and time-based. ❚ ❚ Execute. Using Prosci’s ADKAR change management model, we rolled out the new structure with the following headlines: Why is BSA changing? What is not changing? How is BSA changing? What is BSA changing? Using a fail-fast mindset, macro changes were implemented, knowing it was imperative that leaders at the studio and project levels understand the micro implications. ❚ ❚ Sustain and grow. Having worked under the OneBSA structure for nine months, BSA has seen outcomes any firm would appreciate: increased revenue, greater profitability, and improved quality. More important, the firm is working better across geographic boundaries, a result that has been accelerated by work-from-home policies that allow work to be done regardless of location. In other words, the third way – the OneBSA way – empowers leaders at all levels and provides a foundation for growth. For firms that have evolved beyond the either/or centralization debate, it offers a sound path forward. TIM SPENCE is the president at BSA LifeStructures. He can be reached at email@example.com.
firm’s structural deficiencies. In response, the firm created a leadership subcommittee to examine the current state and outline changes that would better align the firm across its locations. While the analysis was voluminous, the guide for change was concise, covering a simple A3 document with the following headings: background, current state, goals, analysis, recommendation, and implementation plan. Within eight hours, the leaders aligned around the Lean A3 tool. ❚ ❚ Plan. Developing a plan required attention to five key factors: 1)Structure. To communicate the OneBSA concept, the firm adopted a matrix presenting leadership across two perpendicular axes: practices (healing, learning, and discovery) and disciplines (architecture, engineering, planning, and interiors). BSA’s missional magic of “creating inspired solutions that improve lives” occurs at the intersection of practices and disciplines. See an example of this below.
2)Design. Having focused on raising the visibility of its design over the past five years, leadership wanted a structure that reflects a design emphasis, so design was elevated as a separate discipline integrated into the existing disciplines.
© Copyright 2021. Zweig Group. All rights reserved.
THE ZWEIG LETTER MAY 24, 2021, ISSUE 1393
An enriching thought leadership experience focusing on executive level issues, this Summit is ideal for those who are ready to travel again and gather with fellow leaders of the AEC industry.
beginning SEPTEMBER 30, 2020 WITH COHORT PRESENTATIONS EACH WEDNESDAY NOVEMBER 3-5, 2021 Denver, CO Focus for C-Suite & AEC Executives
Zweig Group is ready to see you in-person again! Recognizing the slow return of in-person events, Zweig Group is proud to announce a special concept for 2021, the Elevate Leadership Summit - a meticulously curated in-person event of limited capacity in Denver this Winter. This Summit will focus on the networking and learning pillars of our traditional Elevate AEC Conference. Attendees can expect an enriching thought leadership experience that focus on executive-level issues. This experience will be ideal for those who are ready to travel again and gather with fellow leaders of the AEC industry. The Elevate Leadership Summit will be the industry’s top conference of 2021 with new networking and learning opportunities for leaders across the country. Trust us, you will not want to miss this! Register now to guarantee your spot.
QUESTIONS? For group discounts or any other inquiries, please contact events@ zweiggroup.com, call 800.466.6275 or visit zweiggroup.com
Everything we do is in pursuit of elevating the AEC industry, bringing awareness of the incredible impact that engineers, architects, environmental professionals, survey- ors, planners, landscape architects and related professional service providers have on the world. Empowering organizations with the resources they need to perform better, grow and add jobs, pay better wages and to expand their impact on the community, Zweig Group exists to advance the profession.
P R O F I L E
Trusted advisor: Brian Darrow President and CEO of Blueline (Kirkland, WA), a firm that’s committed to building relationships, enhancing communities, and improving lives.
By LIISA ANDREASSEN Correspondent
D arrow is one of Blueline’s founding principals. While he’s best known for his urban infill expertise with hundreds of projects in the cities of Seattle and Kirkland alone, he’s recently shifted his focus away from project- related work to company operations as the business launches its latest strategic business plan. “The trusted advisor is the person clients call first even before an idea turns into a real project; the person clients call first to bounce ideas off even if they know it’s outside of our area of expertise,” Darrow says. “We get there with our clients by always being honest and always doing what we say we are going to do. We get there by forming strong relationships in the jurisdictions where their projects are located. We get there because we know something about their families. And we get there because, for the most part, we genuinely just like hanging out with them.” A CONVERSATION WITH BRIAN DARROW. The Zweig Letter: Under your leadership, Blueline has consistently been named one of the Best Places to Work
in several business and industry publications. To what do you most attribute that recognition? Brian Darrow: Blueline was first named a “Best Place to Work” in 2007 because we’ve always known that our employees are our most valuable asset and have treated them as such. Our mission statement is, “To build people. To build relationships. To build communities,” and when we talk about building people, we’re referring to our employees. In the last few years alone, Blueline added three key leaders to our ownership group, developed professional development plans for each employee, created an extensive internal training program for our employees, reorganized the company organizational chart to help accomplish more of Blueline’s overall goals as well as staff’s individual career goals, and we formed a board of directors to provide outside council to continue steering our efforts in the right direction. Our owners believe that employee satisfaction and retention is the key to our ongoing success and unique
THE ZWEIG LETTER MA
BD: Prior to 2018, I spent too much time working “in the business.” My founding partner and I came from another firm where too many of the principals were detached from billable work and had essentially retired on the job. We told ourselves from the beginning that we would not run our company that way. We were able to grow the business to 24 employees prior to the last recession and then to about 35-40 employees post-recession. But we eventually reached a point where both our growth and revenue stalled out for a few years. It wasn’t until we changed the partners’ mindset to realize that it was OK for someone to not be involved in billable work as long as that person was focused on working “on the business.” For the past three years, I have had the support of my partners to focus entirely “on the business” and since then we have seen year over year revenue growth in excess of 20 percent, staff has increased approximately 60 percent, we have two branch offices, and we have added two disciplines to our previously single discipline firm. Staff retention is also up because our growth has provided many employees with career opportunities that didn’t exist before. We’re firm believers that it’s critically important to have the CEO focused on working “on the business” rather than in it. TZL: Trust is essential. How do you earn the trust of your clients? BD: We preach to our young project managers that the pinnacle of success with our clients is to become their “trusted advisor.” The trusted advisor is the person clients call first even before an idea turns into a real project; the person clients call first to bounce ideas off even if they know it’s outside of our area of expertise. We get there with our clients by always being honest and always doing what we say we are going to do. We get there by forming strong relationships in the jurisdictions where their projects are located. We get there because we know something about their families. And we get there because, for the most part, we genuinely just like hanging out with them. TZL: Diversity and inclusion are lacking. What steps are you taking to address the issue? BD: We’ve always known that our industry lacked diversity, but until 2020, we never took big enough steps to address it. I think we believed that because we were a small engineering company and there was little we could do to affect change. The murder of George Floyd and the Black Lives Matter movement has since raised our awareness and has changed this mindset up and down our organization. Over the past eight months, we started our DEI journey by hiring two outside DEI consultants to help facilitate education and change. The first consultant worked directly
company culture. We’re constantly re-evaluating our company benefits and perks to make sure we’re being creative and staying ahead of our competition. While some of our perks are not possible now due to COVID-19, we have found ways to show our appreciation for our employees in different ways. For example, we recently gave all employees an employee wellness bonus for them to choose an item or activity that would increase their emotional or mental well-being. Hiking boots, spa appointments, exercise equipment, and childcare were just a few of the suggestions. TZL: How do you anticipate COVID-19 permanently impacting your firm’s policy on telecommuting? BD: We’ve had a telecommuting policy in place for years and had three telecommuters working in separate states prior to the COVID-19 outbreak. We spent lots of time and effort up front to make sure these telecommuters could work as efficiently outside the office as they could inside the office. This included investments in hardware and software to ensure workflow and communication was seamless. In early March of 2020, we made the decision to recommend employees work from home before it was mandated in our state. The investments in the telecommuting tools were already available for our entire company to use, so the transition to remote work was relatively painless. But more important than anything else, it was our employees who proved to us beyond a doubt that they could be trusted to balance working independently while communicating and collaborating as necessary to keep projects moving forward. While not officially stated in our pre-COVID telecommuting policy, the unwritten rule was that employees had to earn our trust through tenure before they were allowed to telecommute. Going forward, I believe we will allow all employees the option to telecommute regardless of tenure. And in addition to making sure employees have a dedicated workspace at home as well as the minimum hardware specs, their supervisors will also be inquiring into what full-time telecommuting employees have planned for what we call the “phantom commute.” The phantom commute is the routine employees have at the beginning and end of their workday. It could be going for a walk, exercising, reading a book, meditating, or just about anything to provide a mental barrier between their home and their work lives. We feel the phantom commute concept is a critical factor for our employees’ mental well- being, especially those who telecommute full-time. This is more important than ever with the additional stress that COVID-19 has put on our lives. It is something that we will continue to encourage long after COVID-19 is in our rearview mirror. TZL: How much time do you spend working “in the business” rather than “on the business?”
See TRUSTED ADVISOR, page 8
OFFICE LOCATIONS: ❚ ❚ Kirkland, WA ❚ ❚ Tukwila, WA ❚ ❚ Mill Creek, WA
SERVICES: ❚ ❚ Civil engineering ❚ ❚ Land use planning ❚ ❚ Landscape architecture
MARKETS: ❚ ❚ Public works ❚ ❚ Residential ❚ ❚ Commercial
HEADQUARTERS: Kirkland, WA NUMBER OF EMPLOYEES: 58 YEAR FOUNDED: 2003
© Copyright 2021. Zweig Group. All rights reserved.
AY 24, 2021, ISSUE 1393
TRUSTED ADVISOR, from page 7
we’ve been using that formula quarterly to internally value our firm. Key metrics and variables in the valuation formula we use are number of employees; net service revenue; backlog; EBITDA; pre-tax, pre-bonus profit; book value; and interest-bearing debt. TZL: They say failure is a great teacher. What’s the biggest lesson you’ve had to learn the hard way? BD: When we started our business in 2003, the founding partners all had expertise in single family residential projects and that market was booming for the first several years of our business. We focused solely on that market and didn’t even attempt to diversify into other markets. While we weathered the housing crash of 2007 longer and better than some of our competitors, it eventually brought our business to the brink of closure and put some of the founding partners in financial conditions worse than before we started the business. As we began to emerge from the recession, we began planning our strategies to better prepare for the next downturn. During one of our brainstorming planning sessions, our facilitator asked what we would do differently in the next downturn. One answer was that we would try to recognize the next downturn earlier and downsize ourselves earlier than we had done previously. To this the facilitator responded, “Why not build your business differently so you don’t have to downsize at all?” This thinking led us to recognize the value of diversification and the importance of marketing even in the best of times. Now, instead of being a 20-person, single discipline firm focused on the single-family market, we are an almost 60-person, multi-discipline firm with nearly identical revenue streams from the single family, commercial, and public sector markets. And while the last couple years have been the strongest revenue-wise in our 18-year history, we continue to increase our marketing budget year after year. We feel confident that during the next downturn, we will be able to shift resources into the stronger markets rather than simply laying off staff to survive. TZL: How many years of experience – or large enough book of business – is enough to become a principal in your firm? Are you naming principals in their 20s or 30s? BD: We have three new principals in our firm. The decision to invite them to join the ownership had more to do with the current owners wanting to run the business with these individuals and less to do with a required amount of experience and/or big enough book of business. That being said, all three were seasoned senior project managers who had several years of experience in many aspects of the business including developing and winning work. The youngest of these new principals was in their early 30s. We are currently developing new criteria to determine the next tier of principals. While experience will certainly come into play, we will be looking at other leadership qualities to round out the skill sets and the diversity of our current set of principals. I suspect that our next group of principals will likely consist of more people in their 30s than their 40s, but I wouldn’t be completely surprised (or opposed) to naming someone in their 20s if they met our criteria.
with the ownership group and provided us with some useful guidance to outline our first steps. The second consultant provided an overall DEI assessment of our company by conducting individual staff interviews, small group workshops, and an anonymous DEI survey. We also created a DEI committee comprised of organizational leaders and staff that will use our DEI assessment as a roadmap for change inside our organization and within our community. Through our efforts to date, we have come to realize that there is no finish line on this journey and that this important work will probably never be completely done in our lifetimes. But we believe that every step forward is a step in the right direction and no organization can solicit change if they don’t believe (no matter how small they are) that they can affect change. TZL: Can you tell me more about the strategic business plan? BD: We embarked on a five-year strategic plan centered around company growth a few years ago and I changed my entire focus toward implementing it. In just three short years, we’ve accomplished everything we set out to do: established marketing and accounting departments (previously we had no marketing and/or accounting personnel on staff), implemented more sophisticated accounting/project management software, created a formal organizational chart from scratch, acquired a complementary business, opened two branch offices, all while increasing net service revenue 15 percent to 20 percent every year. One of the overarching goals of the plan was to provide more career opportunities for our employees. Our staff has grown from 39 employees at the end of 2017 to 58 employees. During this time, we added three new principals, and have internally promoted more than 15 people in the last three years, compared to just a handful three years prior. This year, I plan to focus on creating the framework for our next strategic plan and we’re all excited to get started on the next Blueline chapter. TZL: Are you using the R&D tax credit? If so, how is it working for your firm? If not, why not? BD: We’ve been taking advantage of the R&D tax credit since 2016. We have found the tax benefits the company has received over the years is well worth the internal effort as well as the cost associated with hiring an outside expert to do the analysis, determine the qualifying credits, and provide all the necessary information for redemption to our tax accountant. We will continue to pursue R&D tax credits as long as this program is available and the type of work we do qualifies for it. TZL: How often do you valuate your firm and what key metrics do you use in the process? Do you valuate using in-house staff or is it outsourced? BD: We’ve only done one formal valuation, three years ago, by an outside consultant. At the time of the valuation, we also determined which of Zweig Group’s valuation formulas most closely matched our formal valuation and
© Copyright 2021. Zweig Group. All rights reserved.
THE ZWEIG LETTER MAY 24, 2021, ISSUE 1393
O P I N I O N
People have adapted to new ways of working and living, and in the process discovered new ways of thinking. COVID and the gift of organizational change
T he words “COVID” and “gift” don’t automatically appear in the same sentence. In fact, they don’t coincide at all. The unexpected arrival in March 2020 of a virulent germ that leapt from host to host transformed everyone’s lives, sending workers in nonessential functions home to a life of remote work, Zoom boxes, and juggling multi-generational family care. We didn’t anticipate or plan for these changes, but rather were forced to alter our behavior to cope with the magnitude and severity of the pandemic.
More than a year later, people have adapted to new ways of working and living. They also have discovered new ways of thinking. Therein lies the unexpected “gift” of the pandemic. ORGANIZATIONAL EVOLUTION. The CEO of an engineering and manufacturing company encountered such new thinking among his senior executives. They had weathered COVID relatively well with few cases of the virus among their workers and kept the production lines running safely across many geographies. That was worth celebrating. However, their success came with an unanticipated consequence. A year after the pandemic arrived, almost all his
general managers said the “R” word out loud. Before COVID, they considered themselves lifers, arriving at work each day with little thought about retirement. Then came the pandemic. While they remained committed to the company business, they realized during their constricted COVID lives that there was more to living than work. It led to thoughts of an exit plan, a major change for them and the company. Their situation is not unique. COVID has caused many people to take a serious look at their lives and careers. For companies, it raises organizational issues and opportunities.
See JULIE BENEZET, page 10
THE ZWEIG LETTER MAY 24, 2021, ISSUE 1393
JULIE BENEZET, from page 9
eventually human capacity hits the wall. Therefore, the CEO needed to call a halt to the unhealthy pattern and reset the organizational mindset to include career health. “Discussing a significant turn in one’s career path with one’s manager might feel particularly uncomfortable and risky, because it’s so personal. Not having the conversation, however, can lead to lower productivity, burnout, or an unplanned retirement.” 2)Change the conversation. Changing the frame begins with changing the conversation. The leader sets the culture and can establish a new approach to communication norms. In the COVID era, it is especially important to honor the feelings of employees at every level of the organization. Saying out loud that the pandemic brought intense emotional challenges is important. Not only does it validate the feelings of the workforce, but it also happens to be true. The CEO recognized that continuing to push out product without considering the human toll risked loss of key talent. Instead of focusing on KPIs, he began a new conversation. He invited his GMs to talk about their long-term career thinking in the context of the business and their personal lives. What did they need to motivate and energize them? He also encouraged them to consider alternatives to the traditional career route. By inviting the GMs to talk about learning that work was not everything, the CEO gave them permission to view work in a more holistic way and still be seen as a valuable contributor. 3)Change the plan. To address what the GMs discovered during the pandemic, retirement might be the answer for some. For others, focusing on retooling their work style to allow for fewer heroics, more delegation and institutionally sanctioned breaks can increase employee engagement and longevity. When the CEO cracked open the conversation to consider broader alternatives, several ideas emerged to revitalize careers: ❚ ❚ Sabbaticals or leaves of absence to break the steady beat of daily work. ❚ ❚ Integration of work/life balance into the performance evaluation process. ❚ ❚ Implementation of an official succession process, with an organizational commitment to developing emerging talent and a timeline for transfer of leadership responsibilities. No doubt, it would have been better if the pandemic never happened. However, given our lack of choice on the matter, we can leverage its challenges to capture what we have learned about change and make it work to our benefit. JULIE BENEZET spent 25 years in law and business, and for the past 18 years has coached, taught and consulted with executives from virtually every industry. She earned her stripes for leading in the scariness of the new as Amazon’s first global real estate executive. She is author of the award-winning The Journey of Not Knowing: How 21st Century Leaders Can Chart a Course Where There Is None . Her workbook, The Journal of Not Knowing , provides a self-guided discovery mission to navigate the adventure of pursuing one’s dreams based on the Journey principles. She can be reached at juliebenezet.com.
THE ORGANIZATIONAL ISSUES. Before the pandemic, three organizational issues unintentionally discouraged thinking about future career paths: 1)Team player culture. Culture within an organization determines what is said and not said. It grows over time as people tailor their behavior to what they see around them. AEC firms tend to have a heads-down culture that burrows into the work of converting business visions into thoughtful designs and zillions of details. The workstyle reinforces a team player persona where project deliverables outweigh individual concerns. Thoughts on one’s individual career trajectory arise during annual reviews and organizational crises. Otherwise, people remain consumed with project work. Senior leaders occupy their time getting work in and out the door and making sure the firm maintains profitability. They devote little time to choreographing a satisfying, sustainable career, sending a similar signal to their organizations. 2)Inauthentic communication. When people have a hard time sharing their honest opinions, new ideas suffer. It’s easier to get along and blend into a team culture that favors conformity over unique points of view. What gets lost are insights that challenge the status quo and promote invention. Personal histories can contribute to withholding of ideas, particularly if a company errs toward group think rather than risk-taking in communication. People who grew up in households where to avoid negative consequences they learned to say yes no matter what they really believe are particularly affected. When they carry that behavior into their adult lives, both they and their organizations lose important feedback and ingenuity. 3)Conflict avoidance. Conflict avoidance is a pervasive problem. When faced with the prospect of opposition to an idea, it feels safer to say nothing. Unfortunately, silence perpetuates the problem and thwarts fresh thinking. Discussing a significant turn in one’s career path with one’s manager might feel particularly uncomfortable and risky, because it’s so personal. Not having the conversation, however, can lead to lower productivity, burnout, or an unplanned retirement. THE ORGANIZATIONAL OPPORTUNITIES. With the heightened awareness of the desire for different career paths, companies have an opportunity to avoid negative consequences of pre-pandemic patterns. Below are three steps: 1)Change the frame. When the CEO realized that his GMs were contemplating personal exit strategies, he decided to change the frame. Instead of protecting the conforming, team player culture, he seized the moment to look beyond the daily grind of work production to a broader picture that supported his senior team to do their best work in a sustainable way. A company culture of heads-down, constant production with customer delivery heroics might work short-term. However, “With the heightened awareness of the desire for different career paths, companies have an opportunity to avoid negative consequences of pre-pandemic patterns.”
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THE ZWEIG LETTER MAY 24, 2021, ISSUE 1393
F R O M T H E F O U N D E R
Passing of an industry great
I lost one of my old motorcycling and work buddies, Ed Friedrichs, who died on May 13. He was quite successful and lived a rich and varied life, and was 77 years old at the time of his passing. Ed Friedrichs, former president and CEO of Gensler, truly understood strategy and how all the pieces of a business fit together into a cohesive whole.
Ed and I served on the board of directors of several AEC firms together. He also served as Zweig White’s BOD chair when I first got re-involved with the company (one that I started in 1988 as Mark Zweig & Associates) back in late 2010. I can’t even remember exactly how we met, but I knew Ed for quite some time. We were never what I would call close friends, although we were most certainly friends. Ed even kept two motorcycles at my house in Fayetteville for a number of years so he and I could ride when he came to town, and for he and his then-wife, Pat, to use to travel east every summer. Ed and I talked every so often, and we worked closely on some of the BODs we served on together. We had a common interest in two things: the AEC business and motorcycles. We had each also married three times. Ed was probably best known for his tenure as
architectural firm giant, Gensler’s, president and CEO, a post he held for about eight years. He joined Gensler in 1969 (Art Gensler coincidentally also passed away only days before Ed), and Ed started Gensler’s Los Angeles office in 1976. Other than working as a management consultant and outside director in his later years, Ed spent his professional career there at Gensler. In recent years, Ed moved from San Francisco to Reno, Nevada, where he immersed himself in what I would consider large-scale development and got married to his third wife, Margaret. He loved Reno and couldn’t believe how cheap and easy it was to live there compared with San Francisco. A brilliant guy by any standard, he had dual degrees in both architecture and mechanical engineering from Stanford, as well as a master of
See MARK ZWEIG, page 12
THE ZWEIG LETTER MAY 24, 2021, ISSUE 1393
BUSINESS NEWS STUDIO OTHER & ELKUS MANFREDI ARCHITECTS CREATE SMOOTH SAILING TO SUPPORT A FLEXIBLE AND ADAPTIVE WORKSPACE Studio Other , a creator of custom solutions for commercial interior environments and workspaces, has announced the release of Smooth Sailing, a new product created in collaboration with Elkus Manfredi Architects . Smooth Sailing is designed to support a flexible and adaptive workspace, with extensive options for use. Studio Other engineered Smooth Sailing while Elkus Manfredi Architects provided complete product design informed by expertise in workplace strategy. Smooth Sailing is a monitor rail system designed to offer workplace flexibility and quick adaptability for in-office needs. The product has the capability to shift a private office from solo use to a collaborative workspace within moments. The Smooth Sailing rail provides nearly limitless viewing options for individual users, a team meeting, or full presentation viewing mode. Smooth Sailing features an eight-inch high rail with the ability to hold one or multiple monitors. It can attach to any monitor arm and has customizable installation options for any desk width. The unique design allows users to move the monitor(s) horizontally along the entire rail length, vertically at any angle via the full articulation of the monitor arm, or pulled toward viewers for close-up observing. This enables users to pull out a monitor for visibility for anyone to the left or right in the room to see. The new product can also move with or separately from the desk, providing sit-to-
stand options and stand-up meetings. The Smooth Sailing rail system can independently rotate 90 degrees, is discrete and installs on a wall above a desk or within a workstation, and keeps cables out of sight. “As office space becomes a tool for success rather than a status symbol, the furniture should be responsive to reconfiguration and technology integration without disruption,” said Elizabeth Lowrey, principal and director of interior architecture for Elkus Manfredi Architects. “The ability to move the monitors from the individual seat to the collaboration table with the touch of a finger means no downtime adjusting to different tasks in one office.” Studio Other has a plethora of knowledge in workplace design, and because Studio Other and Elkus Manfredi shared a human-centric approach to this product, the partnership was a natural. This convertible office tool can be used in any office environment, from law firms to life-science research centers. Studio Other can custom-engineer Smooth Sailing for use with multiple-sized monitor screens and can also tailor it to color-match an office and work with many wood types. The entire design functions to create a “convertible office,” meaning it moves between being an office or a room for collaborative sessions. “Our goal is to provide a practical solution to content sharing, enabling flexibility for employees to define their spaces for individual tasks and work just as effectively in the same workspace within a group interaction,” said
Charlotte Wiederholt, president and creative director for Studio Other. Smooth Sailing joins a new suite of products for the future workplace, designed by Elkus Manfredi, engineered by Studio Other, and inspired by the natural organic forms of Boston Harbor, found outside Elkus Manfredi’s office in Boston. Suite products include Harbor Stone® System, a first-of-its-kind alternative to traditional orthogonal workplace benching systems that introduces more humanity to the workplace with increased user control. Other products are in development. Studio Other works closely with clients to reflect and reinforce a distinctive culture through innovative workspace solutions and a process of collaborative input and planning, conceptualization, prototyping, engineering, fabrication, and installation. Its solutions are tailored to the specific needs and aesthetics of each environment. The firm also serves as an integral member of project teams alongside architects, contractors, and others to achieve seamless integration of all requirements. ElkusManfredi Architects is a full-service design firm providing architecture, master planning, urban design, interior architecture, historic preservation, space planning, programming, and experiential graphic design. Its diverse portfolio of work includes planning and design for environments of work, living, learning, play, and innovation. The company is known for its work in mixed-use placemaking that fosters community and creative innovation.
MARK ZWEIG, from page 11
no real formal business education, had a mind made for business. He truly understood strategy and how all the pieces of a business fit together into a cohesive whole. And he stayed on top of what was happening in the world. Plus, he was always fond of my wife, and I have to appreciate him for his obvious ability to judge character! “Ed and I talked every so often, and we worked closely on some of the BODs we served on together. We had a common interest in two things: the AEC business and motorcycles.” I will miss Ed, with his book lists, motorcycling stories, and long holiday newsletters. I’m of a certain age now where my friends are starting to die off with an alarming regularity. It would be nice for that pace to slow down for a bit. I don’t want to lose another Ed Friedrichs any time soon! MARK ZWEIG is Zweig Group’s chairman and founder. Contact him at firstname.lastname@example.org. Editor’s note: Ed Friedrichs contributed to The Zweig Letter for several years. Click here to see some of his articles.
architecture degree from Penn. Nearly every time I either spoke to or met with Ed, he told me about a book (or gave me a list of books) I needed to read! He was also one of the best marketers and business developers I have ever known in the design business. One of his greatest sales successes was the time they had an opportunity to secure a design services contract for a new Ducati showroom (complete with wine bar) in New York City. Ed called into the final presentation from Colorado. He was on a road trip on his own Ducati. Needless to say, they got the project! Ed knew pretty much everybody you would want to know. Besides many leaders of AEC firms throughout the land, he even introduced me to Bob Lutz, an auto industry top executive icon who was vice chairman of GM and Chrysler, and also on the BOD of Ford (he was super fun to talk to and someone I spoke with a number of times afterward). I last talked to Ed maybe three months or so ago. I hadn’t heard from him much lately and was glad to speak with him. He didn’t sound great, and he told me he was down to serving on only one BOD, but looking forward to being able to travel again soon. In any case, Ed was a solid guy who, in spite of having
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