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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 M a y 2 2 , 2 0 1 7 , I s s u e 1 2 0 1

Business development

The growing social media problem

I am becoming more and more aware – by the day – of what a problem social media addiction is for companies of all sizes and shapes. And it is a HUGE and growing problem for all of us in the AEC industry. There are some people who cannot stay off Facebook, Twitter, Instagram, Snapchat, LinkedIn, and others, for what seems like any longer than five to 10 minutes at a time. These are the results: 1)Incredibly short attention span for any- thing. Because they can’t stay off their social media platforms for more than a few minutes, they can’t do anything that takes any real at- tention span. Reading, for example, goes com- pletely by the wayside. Longer term projects (anything that takes more than 30 minutes to do), cannot get finished. It’s terrible! 2)Inability to pay attention in meetings and even one-on-one interactions with other people (clients, fellow employees, subcon- sultants, etc.). The constant phone checking to see who “liked” the funny video they posted or proclamation of love for their significant other keeps them from interacting intelligently in meetings and conversations. 3)Damaged family relationships and result- ing problems at work. Because no one feels like they ever get any real attention, every relationship suffers. Friends and family mem- bers think the social media addict doesn’t care about them. And then when the family life goes to hell, all of the problems associated with that situation eventually spill over into work life as well. Depression, embarrassing confron-

“I am becoming more and more aware – by the day – of what a problem social media addiction is for companies of all sizes and shapes. And it is a HUGE and growing problem for all of us in the AEC industry.”

According to Zweig Group’s 2017 Marketing Survey , over the last few years there has been a shift in the way firms approach business development. Less and less, marketing departments are responsible for business development. This role has been shifted to principals , department managers , and project managers , with the largest increases coming in the latter two categories. This means employees with a technical expertise are having to become comfortable in the BD role. OPEN FOR PARTICIPATION zweiggroup.com/survey-participation/

Mark Zweig

F I R M I N D E X Belcan, LLC............................................2 Choice One Engineering..........................6 Finegold Alexander Architects...............10 Finley Engineering Group. .....................12 Fluor Corporation....................................8 Jacobs Engineering Group Inc............4, 8 Retail Design Collaborative......................2 RPS Klotz Associates..............................8

MORE COLUMNS xz FROM THE CHAIRMAN: Tribal instincts Page 3 xz GUEST SPEAKER: Proceed with caution Page 9 xz GUEST SPEAKER: Avoiding conflict avoidance Page 11

See MARK ZWEIG, page 2

Conference call: Matt Hoying

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

ON THE MOVE JOE TRIOMPO JOINS BELCAN AS PRESIDENT OF ENGINEERING SERVICES Belcan, LLC , a supplier of engineering, technical recruiting, and IT services, announced that Joe Triompo joined the company as president of engineering services. Triompo will lead the operation of Belcan’s engineering services segment. In this role, his responsibilities will include planning and executing strategy and high-level initiatives, governing activities of major customer accounts, and advising and executing on acquisitions. “We are very pleased to welcome Joe to our executive team,” said Lance Kwasniewski, CEO of Belcan. “We are confident that his diversified experience, exceptional leadership skills, and thorough knowledge of the market will continue to drive Belcan’s growth.” “The opportunity to work with Lance and the entire Belcan executive team during this inflection point in the company’s development is an exciting opportunity,” said Triompo. “Companies have come to rely on Belcan’s specialized technical services, and I look forward to finding additional opportunities to enable Belcan to better serve new and existing clients.” Prior to joining Belcan, Triompo was vice president, customer support for Sikorsky Aircraft, president and CEO for JET Advisors LLC, and vice president and general manager for UTC Power. He also worked for many years at United Technologies Corporation, serving in key roles at UTC’s Hamilton Sundstrand division. Triompo has a B.S. in electrical engineering and computer science from the University of Connecticut, and an MBA from the MIT Sloan Fellows program. He serves on the boards of the University of Connecticut School of Engineering and the Connecticut Science Center, and has also served as a member of the U.S. Department of Energy’s Hydrogen Technology Advisory Committee.

Take your advice from Mark Zweig to-go.

BRADWILLIAMS NAMED NEWCEO OFARCHITECTURE FIRM RETAIL DESIGN COLLABORATIVE Architecture firm Retail Design Collaborative announced Brad Williams as new CEO. “Brad is the right choice for us. He’s inspirational, dedicated, personable, and is admired among our staff and clients,” said President Steve Ruth. “We’re confident that Brad will be a great leader and will continue to help generate long- term goals and objectives for Retail Design Collaborative. I’m proud to stay on as President of the firm and to be involved in the forthcoming changes.” Williams joined the firm in 1999, and has excelled in various roles throughout his tenure. Following his appointment as COO of the firm in 2013, Williams helped lead the company in a positive direction, making strategic hires, implementing best-in-class management systems, and overseeing the firm’s Shanghai subsidiary. Now also assuming the role of CEO and Chairman of Retail Design Collaborative’s Shanghai entity, Williams will be responsible for ensuring that the firm’s brand is held to the highest global standards. As CEO, Williams plans to focus on the growth of the company and will work to clearly establish and expand the firm’s services in the re-imagining of the retail realm. Williams and the management team are seeking new opportunities for growth as well as managerial, financial, and design excellence. “I’m thrilled by the opportunity to help take this firm in a new direction, to help focus our efforts on bringing our clients a world-class design process, a more stringent technical process and to help create a better overall experience for our clients and staff,” said Williams. “I’m looking forward to helping our firm grow in all areas of the practice and I am honored to lead Retail Design Collaborative in this new role.”

thezweigletter.com/category/podcast/

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

MARK ZWEIG, from page 1

tations with exes, less hours at work – all are common outcomes. 4)Lack of productivity. These people just cannot get anything done. They are too dis- tracted. They start to confuse “self-imposed-busy-farting-around-on-social-media” with actual work. Their priorities become unclear. The insidious erosion of their ability to get anything accomplished takes hold. 5)Lack of sleep. So addicted, they stay up all night on social media – or, get up in the middle of the night to work on their social media. All relationships eventually become virtual ones and identity is based on numbers of “likes” and “followers.” 6)Give up hobbies. There’s no time to do anything else. Too hard to be on Facebook and ski. Too hard to do quilting and be on Twitter. Too hard to do anything and be on Linke- dIn. Can’t do anything but social media. That makes people angry and alienated. I could go on. But the bottom line is this is a big problem. What can you do about it? You can’t do much. Encourage people to get counseling. If they can’t turn it around, they may need to go. I don’t want to be negative but my guess is the “cure” rate for this problem is pretty low. MARK ZWEIG is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.

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

Email: info@zweiggroup.com Online: thezweigletter.com Twitter: twitter.com/zweigletter Facebook: facebook.com/thezweigletter Published continuously since 1992 by Zweig Group, Fayetteville, Arkansas, USA. ISSN 1068-1310. Issued weekly (48 issues/yr.). $375 for one-year subscription, $675 for two-year subscription. 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 2017, Zweig Group. All rights reserved.

THE ZWEIG LETTER May 22, 2017, ISSUE 1201

O P I N I O N

Tribal instincts The workplace is at its best when teams are as close as tribes, but the only way to get there is to retain your talent.

R etention is a growing concern, fueled by lower unemployment rates and people seeking to improve their position or compensation. It’s worth it to explore some of the reasons people develop a loyalty to their current firm. If you want to know more about why people leave, just think of the opposite – why your best people choose to stay.

Ed Friedrichs

Gallup’s goal is to help people become “deeply engaged” in the work they do. I explore this and many other concepts about retention in my book, Long-cycle Strategies for a Short-cycle World . In it, you’ll find a list of 12 issues, that, if answered in the affirmative, will determine if someone is “deeply engaged” – in their work, with their clients, with their colleagues, and with the full array of stakeholders with whom they’re deeply involved. Engagement is particularly correlated “If you want to know more about why people leave, just think of the opposite – why your best people choose to stay.”

At Gensler, my most important focus as the firm grew was to create an environment that people didn’t want to leave. If you’re not familiar with the Glass Door website, check it out. While it looks like a job search site, it’s also a series of reviews of companies by present and past employees. Check any references about your firm, and learn from it what you need in order to make your firm a destination. Gensler was always concerned about how our firm “felt” to our employees. We did a great deal of work on the culture of the firm, making it a place people were truly attracted to and an environment they were unlikely to find elsewhere. We started with some great advice from the Gallup Organization, which they’ve clearly spelled out in their book, First Break All the Rules .

See ED FRIEDRICHS, page 4

THE ZWEIG LETTER May 22, 2017, ISSUE 1201

BUSINESS NEWS ONEGAS APPOINTS JACOBS FOR PLATFORM DECOMPLEXING PROJECT IN NORTH SEA Jacobs Engineering Group Inc. received a contract from ONEgas to perform engineering services for the decomplexing of its K15-FA platform in the North Sea. ONEgas is a combined business unit of Shell U.K. Exploration and Production and the Nederlandse Aardolie Maatschappij B.V. The contract is the first to be signed under a new Enterprise Framework

Agreement between ONEgas and Jacobs. The decomplexing process involves transitioning K15-FA to an unmanned platform without gas treatment installations, as the gas will subsequently be treated on the centrally located K14. The project will enable ONEgas to reduce power consumption, operational costs, and enhance safety management.

“Jacobs’ oil and gas experience with the L13-FC project will have a significant impact on the successful delivery of the K15-FA platform decomplexing project,” said Jacobs Senior Vice President Upstream Oil and Gas Bassim Shebaro. “Our existing partnership with ONEgas and successful decomplexing of the L13-FC platform in 2016 was a key factor in receiving this award.”

ED FRIEDRICHS, from page 3

and recognize who is a member of the tribe. If you’ve ever worked in a larger office, you know how easy it is to ask someone you don’t recognize if they work there. On the 25-to-35 scale, this is a working unit where each person knows everyone else well enough to understand their individual strengths and weaknesses, which translates into great assignments. One of the Gallup book’s 12 indicators of “deep engagement” is: Am I doing work that I’m well suited to do? In other words, “Am I expected to do something I’m not very good at? Am I and others on the team each working to our individual strengths?” Making those kinds of assignments becomes a key skill of a studio leader. Finally, I learned a great deal from a book by Steven Quartz and Terry Sejnowski titled Liars, Lovers, and Heroes . I was fascinated by a section that talked about how the brain actually alters itself based on the environment in which it lives. I was curious enough to find someone who knew Sejnowski and asked for an introduction. After an hour on the phone describing why I thought this was happening in our studios, he said, “Of course it is! If people work together for a significant period of time, they learn how to become a truly integrated part of a larger construct. They get smarter by knowing how to leverage each others’ strengths and knowledge, producing much smarter work.” I was glad to have this wild-eyed notion validated and have told this story for many years, strengthening the bonds between studio members and the quality of work they accomplish together. It also improves their “deep engagement” with each other and, through the better work they’re doing, with their clients. EDWARD FRIEDRICHS, FAIA, FIIDA, is a consultant with Zweig Group and the former CEO and president of Gensler. Contact him at efriedrichs@ zweiggroup.com.

FOR YOUR BOOKSHELF 1) In this

with the resources in the firm that make the employee feel they’re appreciated, respected, and supported. That support involves someone in the firm who is committed to helping the employee grow as a professional. In the book, I also discuss styles of leadership, the way in which it is deployed, and how people feel about the leaders in their firm. I adopted a simple idea when I first found myself in a leadership role at Gensler. My mantra was: “You don’t work for me; I work for you. It is my job to be sure you have the tools, colleagues, and support to do your very best work.” “In early times, a tribe rarely exceeded 150 people because that was a threshold for the brain to know and recognize who is a member of the tribe. If you’ve ever worked in a larger office, you know how easy it is to ask someone you don’t recognize if they work there.” Seems to have worked for me. I found another definitive reason for longevity of the best talent and continuity of team members. We were organized around studios of 25 to 35 people, although the scale of projects today has caused those limits to be expanded. The same holds true for an office size which I always felt functioned best at around 150 people. In fact, there are firms that feel this is so important that if a business unit exceeds this size, they break a piece off to start a new business unit. The basic reasoning about why these numbers work begins with anthropology. In early times, a tribe rarely exceeded 150 people because that was a threshold for the brain to know

book, Gallup presents the remarkable

findings of its revolutionary study of more than 80,000 managers, revealing what the world’s greatest managers do differently. 2) Ed

Friedrichs presents a model for business design in the 21st century. Drawing on strategies that created

the world’s largest architectural practice, an archetypal long- cycle business, he makes the case for a quantum shift in thinking about organizational design in today’s creative business environment. 3) This book combines cutting-edge findings in

neuroscience with examples

from history and recent headlines to offer new insights into who we are.

Introducing the new science of cultural biology, born of advances in brain imaging, computer modeling, and genetics, the authors demystify the dynamic engagement between brain and world that makes us something far beyond the sum of our parts.

THE ZWEIG LETTER May 22, 2017, ISSUE 1201

This combination of seminars is a powerful antidote for stalled growth. IF YOU’RE NOT GOING VIRAL YOU MAY HAVE A VIRUS

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THE ZWEIG LETTER May 22, 2017, ISSUE 1201

Matt

P R O F I L E

Conference call: Matt Hoying President of Choice One Engineering (#1 Best Firm Civil for 2016), a 37-person firm based in Sidney, Ohio.

By LIISA ANDREASSEN Correspondent “W e have to be out there selling ourselves as much to our clients as to our next employ- ees,” Hoying says. A CONVERSATION WITH MATT HOYING. The Zweig Letter: What’s your philosophy on fee/ billing and accounts receivable? How do you col- lect fees from a difficult client? Matt Hoying: Our philosophy is that happy clients will pay sooner. We have an aggressive aging goal, and all of our project managers know it. Each proj- ect manager is responsible to follow up on accounts receivable that are greater than 30 days, to under- stand the reason for the aging, and what we can do

to make them more likely to pay quicker the next time. It’s really about the relationship you have with your client, and so with difficult clients, we have to find the opportunity to build that relation- ship further so they want to pay. “We go out of our way to extend our culture to our clients so that they feel comfortable working with us and choose to do so time and time again.” TZL: What’s the recipe for creating an effective board?

Matt Hoying, Choice One Engineering, President

THE ZWEIG LETTER May

t Hoying

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

facebook.com/ ZweigGroup

twitter.com/ ZweigGroup

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blog. ZweigGroup .com vimeo.com/ ZweigGroup

MH: We have a board of advisors as our outside board. We look for board members who are not related to our compa- ny or business, so the emotion is taken out of their input. When searching for new members, we take a good look at our strategic plan and business model canvas to see where we could use the most input in the next couple of years to reach our plan/goals. We then go in search of people who have succeeded with those issues with their own companies. “We not only share our financial numbers with employees, but we educate them on what the numbers mean and how they can impact those numbers, as well as provide them a share in the success of the company through bonuses and ownership opportunities.” TZL: Is there a secret to effective ownership transition? MH: The secret is to have a plan, and to make that plan known to everyone in the company as soon as possible. With clarity and direction, the entire company can then work towards making the transition successful. For exam- ple, we had a transition plan for president that we made people aware of seven years ago. This past fall, that transi- tion occurred smoothly because everyone had been work- ing towards that transition. There were no surprises, no loss of knowledge (experience yes, knowledge no), or interrup- tions in the day-to-day activities of the business. There is also no jealousy or hurt feelings of employees who felt like they were passed up for the position. TZL: How do you go about winning work? MH: Through building relationships. Yes, we have to submit proposals and RFQs/LOIs, but we win work because clients enjoy working with us. We go out of our way to extend our culture to our clients so that they feel comfortable working with us and choose to do so time and time again. TZL: What’s the greatest problem to overcome in the pro- posal process? MH: Making ourselves stand out as not only capable of the technical aspect of the project, but also highlighting the in- tangibles that we can bring to the project and project team. Getting the client to see the value in what we can bring, in terms of the specifics, that other firms may not be able to is important and challenging. TZL: Once you’ve won a contract, what are the “marching orders” for your PMs? MH: Get to know the client. Understand how they like to operate and find out what we can do to make their project the least of their worries. Once we know that, we can better

schedule our work, assign our design team, and carry out the scope of the project successfully. TZL: How does marketing contribute to your success rate? Are you content with your marketing efforts, or do you think you should increase/decrease marketing? MH: Lead generation is certainly important to our success rate. We have an excellent in-house lead generation team that really understands who we are and who our clients are. With that understanding, they are able to prepare our de- sired messaging and deliver that message in a way that will be effective to our clients. TZL: What has your firm done recently to upgrade its IT system? MH: We have recently outsourced our IT to a company that is experienced with helping companies with multiple offices run as one cohesive unit. This investment in a new server system allows us all to work congruently and also gives peo- ple the flexibility to work remotely. TZL: What’s the best way to recruit and retain top talent in a tight labor market? MH: We have to be out there selling ourselves as much to our clients as to our next employees. We attend career fairs and get involved with local schools to attract our talent ear- ly. We are able to sell not only the work we do, but also the culture we have and who we are. People want to be a part of something that is focused on more than just the bottom line. “Culture is extremely important to us, and we feel the best way to control that culture is to grow organically. Many of our full- time hires have been co-ops with us for three or four terms, which gives them a chance to get to know our culture, and us an opportunity to gauge their fit within that culture.” TZL: What’s the key benefit you give to your employees? Flex schedule, incentive compensation, 401(k), etc.? MH: Treating everyone like owners. Nobody here gets spe- cial treatment or a more flexible schedule than anyone else. Additionally, we not only share our financial numbers with employees, but we educate them on what the numbers mean and how they can impact those numbers, as well as provide them a share in the success of the company through bonuses and ownership opportunities. TZL: How do you raise capital? See CONFERENCE CALL, page 8

22 , 2017, ISSUE 1201

BUSINESS NEWS RPS KLOTZ ASSOCIATES ENVIRONMENTAL STUDY WINS 2017 ACEC TEXAS HONORS RPS Klotz Associates , a Houston-based civil engineering firm, has garnered a Silver Medal in the American Council of Engineering Companies 2017 Texas Engineering Excellence Awards for its environmental report as part of the Gulf Coast Community Protection and Recovery District’s monumental Storm Surge Suppression Study. The GCCPRD initiated its Storm Surge Suppression Study in the fall of 2014 to investigate the feasibility of reducing the vulnerability of the upper Texas coast to storm surge and flood damages. RPS Klotz Associates was engaged to analyze the environmental constraints of the region as a key part of the study. The environmental report entailed a data- and technology- intensive process to produce more than 40 maps illustrating environmental constraints over 4,300 square miles abundant with environmental impacts such as: ❚ ❚ Wetlands ❚ ❚ Threatened and endangered species ❚ ❚ Floodplains ❚ ❚ Coastal barriers ❚ ❚ Essential fish habitat ❚ ❚ Historic sites ❚ ❚ Wildlife refuges and state parks

and people of the six-county area, while ensuring sustainability for Galveston Bay. Once constructed, storm surge protection will include a structure only found in one other location worldwide. FLUOR FINISHES CONSTRUCTION OF DOW CHEMICAL’S ETHYLENE PRODUCTION FACILITY ON SCHEDULE Fluor Corporation announced that it has safely finished the mechanical construction of the Dow Chemical Company’s new ethylene production facility in Freeport, Texas on schedule. Fluor provided engineering, procurement, and construction services on the 1.5-million-ton- per-year light-hydrocarbon cracker, which can use both ethane and propane as feedstock. The ethylene produced by the facility will be used as a building block for many of Dow’s industry-leading performance plastics products. After receiving the contract award in 2013, construction began in 2014, with more than 3,000 Fluor craft employees and subcontractors onsite at peak to deliver the project on schedule. The project also achieved more than 5 million consecutive work hours without a lost-time incident. In support of craft workforce development, Fluor partnered with area community colleges and high schools to encourage pursuit of construction careers and performed more than 2,300 craft performance assessments and evaluations throughout the project. “This project was successful because of the strong partnership and collaboration between Dow and Fluor,” said Mark Fields, president of Fluor’s energy and chemicals business in the Americas. “The joint team focused on

continuous improvement throughout the project achieving world-class productivity and welding quality. The project was completed safely and on schedule. We are proud to complete this important project with Dow to enable them to take advantage of the area’s shale gas resources and grow their key downstream businesses.” OXEA CORPORATION AWARDS JACOBS CONSTRUCTION MANAGEMENT CONTRACT Jacobs Engineering Group Inc. has been awarded a construction management contract from Oxea Corporation for a Propanol Expansion project at its manufacturing site at Bay City, Texas. Jacobs is delivering pre-construction planning and construction management services to help deliver the new Propanol 2 unit, that will add a capacity of 100,000 metric ton per year of propanol and 40,000 metric ton per year of propionaldehyde. The unit is scheduled to come on line in 2018. “This project reflects our long-term selective growth strategy,” said Oxea Executive Vice President Global Sales and Oxo-Intermediates Purnendu Rai. “It helps us reinforce our strong position as the largest producer of propanol worldwide. Propanol 2 will provide Oxea with opportunities for further expansion into profitable growth areas.” “We are delighted to work with Oxea on this strategically important project,” said Jacobs Senior Vice President Downstream Mark Bello. “Our experience and lessons learned while executing similar U.S. Gulf Coast construction projects will contribute to the success of this important expansion.”

❚ ❚ Hazardous materials ❚ ❚ Water quality/tidal flow

The massive environmental evaluation played an essential role in formulating a cutting-edge solution that will help protect the infrastructure

CONFERENCE CALL, from page 7

is to grow organically. Many of our full-time hires have been co-ops with us for three or four terms, which gives them a chance to get to know our culture, and us an opportunity to gauge their fit within that culture. TZL: What’s the greatest challenge presented by growth? MH: Ensuring that we are enhancing our culture. We can’t just maintain our culture, otherwise it will begin to erode. As we grow and add more people, we need to remain focused on how we realize the benefits of our great culture though our company is different than it used to be. TZL: What’s your prediction for 2017 and for the next five years? MH: We are anticipating 2017 to be another great year for our company and industry because the first quarter has been a record one for Choice One. We are planning for con- tinued growth through the next five years and are excited to see how our company will change in the process, as we con- tinue to extend the Choice One culture to more clients and employees.

MH: Employees who have been with us for three years have the opportunity to buy ownership in the company. We set our profit sharing plan up to encourage employees to make the investment. “We can’t just maintain our culture, otherwise it will begin to erode. As we grow and add more people, we need to remain focused on how we realize the benefits of our great culture though our company is different than it used to be.” TZL: What’s your preferred strategy for growth, M&A or organic? Give us a synopsis of how your firm effected growth in the recent past. MH: We prefer organic growth. Culture is extremely impor- tant to us, and we feel the best way to control that culture

THE ZWEIG LETTER May 22, 2017, ISSUE 1201

O P I N I O N

M any firms in the A/E industry are attracted to using a “valuation formula” to price their stock. They do this more than in any other industry I have studied in my valuation career. Over time, I have had many conversations with clients about their formulas. I thought I would share some of my insights with you. Proceed with caution Valuation formulas are subject to many influences, so it helps to periodically test them out to make sure they yield accurate results.

Tracey Eaves GUEST SPEAKER

fair market value to test the formula in place. The result indicated that the firm was overvaluing the shares at a minority interest level due to, in our pro- fessional opinion, the formula producing a control level value. This creates a difficult problem because minority shares have been transacted at the higher price and the firm is anticipating more transactions in the near future. formula’ to price their stock. They do this more than in any other industry I have studied in my valuation career.” “Many firms in the A/E industry are attracted to using a ‘valuation

To begin, I would like to emphasize that a formulaic approach to determine the value of a firm’s stock does not constitute fair market value as defined in Revenue Ruling 59-60. The ruling specifically addresses formulas, stating, “No formula can be devised that will be generally applicable to the multitude of different valuation issues ….” Having said that, I prefer to think of the use of formulas as a method to price stock, rather than to value it. I know it sounds like I’m being particular, and I am, with good reason. ❚ ❚ Case in point – A. Firm A has been using a stock formula to price shares for internal transactions for several years. Two people in the firm hold a majority of the shares, considered a block of stock, and ap- proximately 10 others own very minority positions. Firm A engaged Zweig Group to value the shares at

See TRACEY EAVES, page 9

THE ZWEIG LETTER May 22, 2017, ISSUE 1201

BUSINESS NEWS CHRISTA MCAULIFFE BRANCH LIBRARY DESIGNED BY FINEGOLD ALEXANDER ARCHITECTS RECEIVES LEED SILVER CERTIFICATION Finegold Alexander Architects announced the new Christa McAuliffe branch library in Framingham has received LEED Silver Certification. Named for Framingham native lay astronaut/ teacher Christa McAuliffe, who died in the 1986 Challenger space shuttle explosion, the newly opened 17,000-square-foot branch embraces contemporary sustainable design. LEED-certified buildings achieve quantifiable energy efficiency, cost-savings, and reduced greenhouse gas emissions. “The design team approached the project holistically to create a beautiful, functional, and sustainable library that reflects the spirit of McAuliffe. The building features a soaring wing-shaped roof lifting over the main reading areas,” said Ruth Winett, library trustee and president, Framingham Public Library Foundation. “The contemporary interiors capture elements inspired by space travel, including 5,200-square-feet of windows,

maximizing natural light, a key feature of the sustainable measures.” “Sustainability was considered from aspirational and technical perspectives with sensitivity to initial and future costs,” said Tony Hsiao, principal, director of design, Finegold Alexander Architects, “The windows are a design element, while providing natural daylight to offset energy demands. The roof is set up for photovoltaics when funds become available in the future.” Features include a reading room, dedicated children’s library, 50-person capacity meeting room, 21 internet-enabled computer-stations, two study rooms, and on-site parking. Key sustainable design elements include the following: ❚ ❚ 21 percent reduction of overall energy use ❚ ❚ 26 percent reduction in potable water use via water-efficient landscaping ❚ ❚ 78 percent of regularly occupied areas provide natural daylight

❚ ❚ 49 percent of site is open space without including off-site reserve ❚ ❚ 90 percent of storm water runoff from average annual rainfall is captured and treated, includes a detention/infiltration system to reduce quantity and improve quality of runoff ❚ ❚ 94 percent of construction waste was diverted from landfill ❚ ❚ 97 percent of wood value is FSC Certified ❚ ❚ Alternative Transportation-Public Transportation Access, easy access to bus stop ❚ ❚ Walkable distance to school, restaurants, retail, senior center, and community services, and near a future “rail trail” for biking and walking ❚ ❚ Green Housekeeping Program The United States Green Building Council developed the LEED rating system to certify buildings as meeting a specific set of standards for green building.

TRACEY EAVES, from page 9

or under-influence a stock price indication. ❚ ❚ Case in point – C. I received an inquiry related to the issue of non-operating assets on the balance sheet, specifically ex- cess cash. Firm C’s ownership in another company that sold produced $1 million in extra cash and the question that arose is how to deal with it in the context of Firm C’s formula. To maintain consistency from year to year, when an abnormal event influences the financial measures, such as excess cash, it is appropriate to remove the non-operating asset from the balance sheet, derive the price result from the formula, then add back the non-operating asset. This will help to maintain a certain level of stability in a stock price and account for a non- operating asset that may only be on the books temporarily. ❚ ❚ Case in point – D. Similar to balance sheet challenges, if a firm’s formula is using metrics derived from the income state- ment, careful consideration should be given to confirm that the measurement used is representative of normal operating conditions. Firm D’s formula uses earnings before taxes as one of the metrics. Historically, the company’s profitability has been relatively consistent until recently when an extraor- dinary event took place, costing the firm a significant amount of money that greatly diminished profitability in that year. It is my position that the extraordinary expense should be added back to the earnings before calculating the stock price to reflect normal operating conditions. If your firm is using a formulaic process to develop a stock price it should be used with care and an in-depth understanding of multiple influencing factors. We suggest that every firm periodically test its formula by going through a formal valuation process. It is a reasonable investment to stay on top of formula pricing results that are being trusted by you and those buying into firm ownership. TRACEY EAVES, MBA, CBA, CVA, BCA, CMEA is a member of the valuation consulting team at Zweig Group. Contact Tracey at teaves@ zweiggroup.com or directly at 505.258.8821.

In addition, the two owners with a majority of the shares have discovered that their individual shares are worth less than they anticipated. So, how will this issue be resolved? Likely the firm will (1) Modify its formula to represent a pricing structure more representative of a minority interest level, (2) Modify the language in the existing shareholder agreement, (3) Value the shares of the two senior people as a control block of stock, which will require the sale of that stock as a block when they are ready to exit, and (4) Invest in a peri- odic formal valuation in an effort to monitor formula results and confirm that they are within a reasonable range of fair market value. “We suggest that every firm periodically test its formula by going through a formal valuation process. It is a reasonable investment to stay on top of formula pricing results that are being trusted by you and those buying into firm ownership.” ❚ ❚ Case in point – B. Firm B was using a formula comprised of multiples applied to net service revenue and EBIT, add- ing cash and subtracting debt. Within the span of one year, the formula produced a per share stock price more than 30 percent below the previous year that was not warranted, even acknowledging some changes in financial performance. Therefore, the formula had a high level of sensitivity to the metrics combined with the multipliers. So, how was this issue resolved? We revalued the firm’s stock at fair market value to provide a reasonable guideline to the shareholders to modify the formula. Besides the full-blown formula problems that we see quite frequently, there are also specific metric issues that can over-

THE ZWEIG LETTER May 22, 2017, ISSUE 1201

O P I N I O N

T his time he went too far. Milo, your senior engineer, will not budge on his code interpretation, no matter what or who is involved. Milo has his codes memorized. Usually that’s an asset. Where it becomes a liability is when his strong opinion ignores a client need for more artful interpretation. Avoiding conflict avoidance Handle the difficult conversations by knowing who you are, learning about other people, and knowing what’s needed to win.

Julie Benezet

Jeremy’s eyes narrowed. “Looks like I’ll have to visit your president, again.” Now you have a frustrated client and a badly behaved colleague. You and Jeremy will work things out. But what about Milo? You hate “Fear of conflict is ubiquitous in the work world. At its heart lies the fear of not knowing how another person will react to a potential disagreement. The person might argue, turn silent, become emotional, or leave the room. Any of these responses can be uncomfortable.”

In the past, you have jumped in to smooth things over. After all, the client pays the bills. The client talks, you listen. With more information, you make the code work. Milo says nothing and sulks. The client emerges happy and Milo revives. However, you resent the time you spend compensating for Milo’s rigidity. It takes away from your most critical role of pursuing new clients. So far, you’ve done nothing about it. Then came yesterday’s meeting with Jeremy Archibald, a design firm CEO that sends you many projects. Jeremy loves to push the envelope with designs requiring creative code interpretation. “No way!” squawked Milo after Jeremy insisted on a curvilinear building facade. Then Milo decided to get personal. “I’m sick of you artist types not respecting engineering standards. The code is there to produce sound, safe design, not to enhance your vanity!”

See JULIE BENEZET, page 12

THE ZWEIG LETTER May 22, 2017, ISSUE 1201

ON THE MOVE FINLEY Engineering Group Hires Bridge Designers Ton Tu, E.I. and Colin Martin, E.I. Bridge design and construction engineering firm, Finley Engineering Group is proud to welcome two bridge designers, Ton Tu and Colin Martin. Tu has a master’s degree in geotechnical and structural engineering and a bachelor’s degree in construction engineering from the University of Central Florida. He has 10 years of experience in structural drafting, research, and analysis. As a research team member, he was responsible for analysis, project management and reports for the “Development of a Sinkhole Risk Program” project between University of Central Florida and the Florida Department of Transportation. “I learned about FINLEY from my academic advisor, Andrew Yun, Ph.D. One of his former students and UCF Alumni is a bridge engineer for FINLEY. I was impressed by the types of projects that FINLEY designs all over the world. It has always been my dream to design complex bridges and now I have the

opportunity to live that dream,” said Tu. “Ton’s structural drafting, education and field experience make him an excellent addition to the FINLEY team. He is very skilled in integrated design and drawing and understands the important link between design and construction. We are very excited to have Ton join our team,” said Craig Finley, P.E., president, FINLEY. Martin has a master’s degree in structural engineering from Georgia Institute of Technology and a bachelor’s degree in civil engineering from Rensselaer Polytechnic Institute. As team captain for the Georgia Tech/RPI Steel Bridge Competition, he led his team to win first place overall at the 2017 ASCE Carolinas Conference, with first place in lightness, first in efficiency, second in stiffness, and second in construction economy. His analysis experience includes a topology optimization of a multi-span bridge system and modeling analysis for the University

of Louisville Children’s Hospital Pedestrian Bridge. His field experience includes performing inspections for the Mohawk River Pedestrian Bridge in Amsterdam, New York and the I-90 Reconstruction Bridge project in Albany, New York. “I’m very excited to join FINLEY’s team and to be given an opportunity to break into the bridge industry among a group with such great international experience. FINLEY uses an integrated design approach which is very different from other firms. I’m looking forward to learning how to apply BrIM on challenging bridge projects,” said Martin. “Colin has a talent for complex analysis and demonstrated his understanding of these concepts throughout his academic studies in a variety of research activities. He is proficient in many structural analysis software design packages and we expect he will quickly learning FINLEY’s full Bridge Information Modeling approach using SOFiSTiK and AutoCAD,” said Finley.

JULIE BENEZET, from page 11

You like Milo, but you need him to recognize the importance of putting client interests first. That means Milo must ask questions and figure out what the client wants. Then he’ll know what problem to solve. A whimsical building façade curve may be about wanting something unique, not the curve itself. 2)Know who you are. Navigating conflict requires you to know your personal values, dreams, and life story. Values include everything from team cohesion to excellence. Your dreams are your personal vision. Your life story is your autobiography. What is your experience with conflict and how does it influ- ence your feelings? You know that you value high caliber performance and need it from Milo. You also have the dream of a firm that provides spectacular client service. Your resistance to conflict comes from growing up in a combative home where opposing view- points were ridiculed and dismissed. Learning to separate the past from the present is important to see the present situ- ation for what it is, not what it evokes from the past. Milo may sulk, but you know he values superior quality and your opinion. 3)Learn about the other person. Everyone travels with per- sonal fears, drivers, and history. To advance your cause, start by walking around in their shoes. Before confronting Milo, spend time learning about him from your own and the experi- ences of others. Milo cares deeply about his code expertise, but what fear prevents him from moving away from an ortho- dox, safe solution? Investing time to know your goals, personal needs, and the needs of others can convert a difficult conversation into a beneficial one. JULIE BENEZET spent 25 years in law and business, and for the past 15 years has coached and consulted with executives from virtually every industry. She is author of the of Gold Medal IBPA winner and Foreword Review Finalist The Journey of Not Knowing: How 21st Century Leaders Can Chart a Course Where There Is None . She can be reached at julie@ businessgrowthco.com.

conflict, particularly with him, who responds to criticism with stony silence. Fear of conflict is ubiquitous in the work world. At its heart lies the fear of not knowing how another person will react to a potential disagreement. The person might argue, turn silent, become emotional, or leave the room. Any of these responses can be uncomfortable. “Beneath conflict avoidance lies a fear of standing alone. To stand on your own two feet in the face of adversity, you must know who you are and what you need. It will clear your vision to learn what the other person needs to resolve the issue.” Nevertheless, without working through the discomfort, you cannot uncover what is needed to improve matters. Worse, not dealing with it causes organizational ripple effects. Operational issues remain unsolved, substandard performance continues, and conflict avoiding executives do others’ work rather than their own. Beneath conflict avoidance lies a fear of standing alone. To stand on your own two feet in the face of adversity, you must know who you are and what you need. It will clear your vision to learn what the other person needs to resolve the issue. To maximize your chances of a positive outcome, consider three strategies for approaching conflict: 1)Know what you need to win. Too often, we go into potential conflicts with the goal of being liked rather than advancing a cause. While it’s nice to be liked, you might make compro- mises that are not best for the business.

THE ZWEIG LETTER May 22, 2017, ISSUE 1201

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