2017 all-ohio conference - oswald companies · resume review •organized presentation of...
TRANSCRIPT
© 2017
2017 All-Ohio Conference
Managing Your A/E Firm in 2017 and beyond…
Presented by Brad Wilson, CMA
PSMJ Resources, Inc.
May 10, 2017
© 2017 2
The A/E Industry’s Biggest Challenges:
• Commoditization
• Recruitment and Retention
• Succession Planning
© 2017 3
Who is PSMJ?
NewslettersSurveys &
Books
Seminars &
ConferencesConsulting
Strategy
Marketing
Project Delivery
Finance
Human Resources
Transition
Providers of management information Focused exclusively on the A/E/C industry for 40 yearsWho is your speaker?
© 2017 4
What are the keys to success of our industry’s top performing firms?
Top 20%
Other A/E Firms
Firm NameTotal
Awards
Wright Pierce Engineers 9
Great West Engineering, Inc. 8
Ready Engineering Corporation 8
Klohn Crippen Berger Ltd 8
SPEC Services Inc 7
Thomas Miller & Partners 7
Willilam Blackstock Architects 7
A/R/C Associates, Inc. 6Brown Engineers LLC 6
Rowland+Broughton 6
© 2017 5
Results of a Recent PSMJ Poll of 76 A/E Firms
Commoditization in the A/E industry is…
© 2017 6
Your Value Proposition
Niche Commodity
Great Design Expert Advice Industry
Knowledge
Your Fees
Lack of Responsiveness Hassles Inconsistent Quality Change Orders
Value = Benefits – [Visible Costs + Hidden Costs]
© 2017 7
Strategies for Firms That Are Both Niche and Commodity
Buy your niche services at commodity prices
Shop around for the best price on your commodity services
Separate pricing structure for niche vs. commodity
Bundle niche with commodity
Price the same services differently to different clients
Your Clients' StrategySome Strategic
Options
2
1
2
1
3
© 2017 8
You don’t have to work for bad clients
© 2017 9
Success Strategies
Stay two steps ahead of your competitors
Maintain high margins
Don’t skimp on overhead investments
Keep an eye on entrance barriers
Prepare for the day when your niche becomes a commodity
Be the low cost producer ($ per unit of product)
Mass production vs. custom design (Henry Ford)
Rigorously control project budgets
Subcontract a niche service
Blow them away with trulysuperior service
Or maybe simply get out!
Niche Markets Commodity Markets
5
2
1
3
4
5
2
1
3
4
6
© 2017 10
When deciding which markets to enter (or exit)…
“Don’t skate to where the puck is. Skate to where it’s going to be.”
-- Wayne Gretzky
© 2017
To assess your prospects, get PSMJ’s quarterly market updates
1. Survey is completed by 200-500 participants in A/E firms
2. We develop a plus/minus index for proposal activity in 55 markets and 7 regions Plus means increasing activity
Minus means decreasing activity
3. Survey participants get updated results for free
4. Detailed report each quarter is also free upon request
11
PSMJSurvey
PSMJSurvey
PSMJSurvey
PSMJSurvey
© 2017
Most sectors have a positive plus/minus index
Housing
Commercial Users
Commercial Developers
Light Industrial
Heavy Industrial
Energy & Utilities
Water/Wastewater
Environmental
Education
Transportation
Other Gov’t. Buildings
Health Care
0-20-40-60-80 +20 +40 +60 +80 +100-100Legend:
Q3 2016Q2 2016
0-20-40-60-80 +20 +40 +60 +80 +100-100
12
© 2017
All regions are showing solid proposal activity
+12%
+14%
+11%
+9%
+5%+11%
13
Proposal Plus/Minus Index (Q4 2016)
© 2017 14
The Hottest Submarkets
69% 68% 65% 63% 60% 60% 60% 56% 56%50%
Proposal Plus/Minus Index (as of December 2016)
© 2017
Market SectorProfitability vs. A/E Industry Median
2016 2015 2014 2013 2012 2011
Transportation -2.2% -3.9% -1.5% -0.8% -1.3% -2.8%
Government Buildings +6.5% +2.3% +2.3% -2.2% +0.1% +2.6%
Water/Wastewater -2.3% +0.1% -1.6% +4.8% +1.9% +4.6%
Industrial +4.9% +4.3% +0.6% +1.5% +14.0% +5.1%
Energy-Utilities -2.5% -2.4% +3.7% +5.3% +10.5% -1.4%
Commercial (Users) +7.9% +5.9% -7.6% 0% +3.4% -0.6%
Commercial (Developers) +8.2% +9.1% +20.6% -5.8% +6.1% NR
Housing +12.6% -1.5% +6.2% +11.3% -3.7% -10.1%
Healthcare -4.2% -4.1% -4.5% +2.3% +3.0% 0%
No Specialty -1.3% 0% -0.5% -0.9% -0.6% -1.1%15
© 2017
Our Latest Prioritization
MarketsShort-Term Prospects(-2 to +2)
Long-Term Prospects(-2 to +2)
Relative Profitability
(-2 to +2)Total Points
(-6 to +6)
Housing +2.0 +2.0 +2.0 +6.0
Commercial +1.5 +1.5 +2.0 +5.0
Govt. Buildings +1.0 +1.0 +1.5 +3.5
Water/Wastewater +1.5 +1.0 +0.5 +3.0
Environmental +1.5 +1.0 - +2.5
Education +1.0 +1.5 - +2.5
Transportation +1.0 +1.5 -1.0 +1.5
Health Care +1.5 +1.5 -1.5 +1.5
Industrial -1.0 +0.5 +1.0 +0.5
Energy/Utilities +1.0 - -0.5 +0.516
© 2017
Things have changed since 2012!
MarketsShort-Term Prospects
Long-Term Prospects
Relative Profitability Total Points
(-2 to +2) (-2 to +2) (-2 to +2) (-6 to +6)Energy/Utilities +2.0 +2.0 +2.0 +6.0Industrial +1.0 +2.0 +1.5 +4.5Housing +1.0 +2.0 +0.5 +3.5Water/Wastewater +1.0 +1.0 +1.0 +3.0Environmental +1.0 +1.0 +1.0 +3.0Health Care +1.0 +1.0 0.0 +2.0Commercial +1.0 +1.5 -1.0 +1.5Transportation +1.0 +1.0 -1.0 +1.0Education 0.0 -1.0 0.0 -1.0Govt. Buildings -2.0 -2.0 +1.0 -3.0
17
© 2017
Firms are growing again,increasing the demand for talent
Source: U.S. Department of Labor
Employment in U.S. A/E Industry
18
© 2017
The long-term trend toward lower turnover may be coming to an end
8%
10%
12%
14%
16%
18%
20%
22%1
98
51
98
61
98
71
98
81
98
91
99
01
99
11
99
21
99
31
99
41
99
51
99
61
99
71
99
81
99
92
00
02
00
12
00
22
00
32
00
42
00
52
00
62
00
72
00
82
00
92
01
02
01
12
01
22
01
32
01
42
01
52
01
6
Me
dia
n A
nn
ual
Tu
rno
ver
3-year Moving Average
19
© 2017
Boomers are beginning to retire
Source: U.S. Dept. of Labor20
Percent of U.S. Population over Age 65
© 2017 21
So your biggest challenge will be winning the war for talent
Recruiting top talentMinimizing turnover
© 2017
Having trouble finding mid-level and senior Civil Engineers?
6,000
8,000
10,000
12,000
14,000
BSCE Degrees
Source: American Society for Engineering Education22
© 2017
The gap is less severe for MEs
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000BSME Degrees
Source: American Society for Engineering Education
23
© 2017
EE’s are especially hard to find
0
5,000
10,000
15,000
20,000
25,000
BSEE Degrees
Source: American Society for Engineering Education
24
© 2017
There are also gaps in the availability of mid-level architects
7,000
8,000
9,000
10,000
11,000
Architecture Degrees
Source: National Center for Education Statistics25
© 2017 26
Many architects are leaving the profession in the first few years
Source: Equity in Architecture Survey 2016, conducted by AIA and San Francisco Art Institute
© 2017 27
The traditional recruiting process takes too long!
Determine Need
Post JobGather
ResumesInterviews
Make Offer
Start
At least 60 – 90 days
© 2017 28
Working the pipelines can reduce the lag time
LEADS PROJECTS
RESUMES EMPLOYEES
© 2017
Are we attracting the best and brightest new grads?
$40,000 $45,000 $50,000 $55,000 $60,000 $65,000
Starting Salary for BS Graduates
Median for AllEmployers
Top 25% for A/EFirms
Sources: • 2014 Salary Survey, National Association of Colleges and Employers• 2014 PSMJ Staff Salary Survey
29
© 2017 30
Effectiveness of Common Recruiting Methods for Design/Technical Professionals
1 2 3 4
Social Media
On-Campus Recruiting
Job Boards (Monster, etc.)
Professional Recruiters
Our Firm's Website
Local Newspapers
Out-of-Town Newspapers
Professional Society Ads
Employee Referral Bonuses
2012
2016
Source: 2012 and 2016 PSMJ surveys of100 A/E firms
© 2017 31
The largest labor pool for new employees is “Millennials”
© 2017 32
So how do you hire the best ones?
Overconfident; don’t accept criticism well (they all got trophies when they were kids)
Enjoy working in teams
Environmentally aware
Want to be judged by achieving goals (not for loyalty or effort)
Better at meeting others’ goals than setting their own
Work-life balance
Casual dress
Multi-tasking
© 2017 33
Want to Get Candidates to Accept Your Employment Offer?
Source: Equity in Architecture Survey 2016, conducted by AIA and San Francisco Art Institute
© 2017
Before you invite anyone to a personal interview…
Step 1: Resume Review• Organized
presentation of information?
• Typos or grammatical errors?
• Record of stability?
Step 2:Skype Interview• Oral
communication skills?
• Technically proficient?
• Why are they interested in your firm?
• What are their expectations?
• Geographical constraints/preferences?
• Identify references
Step 3: Reference Check• The most
honest references
• The 2 kinds of references
• Request portfolio/writing samples
Step 4: Testing
• Skills tests (e.g., CAD or word processing)
• Cultural compatibility (e.g., business vs. practice)
• Management aptitude (e.g., Harrison Assessment)
34
© 2017 35
Conventional interviews are 7% accurate in predicting performance*
* Source: Handbook of Industrial & Organizational Psychology
Situational interviews are much more effective
© 2017
Situational Interviews
“Your first assignment is taking over the management of a project from a PM who recently left the firm. After your first month on the job, you realize that your project is way over budget, far behind schedule and the client is unhappy. How will you deal with this situation?”
“We sent a letter to the Springfield Public Works Department on April 17 of last year. Find the letter. Feel free to ask for help from anyone in the office.”
36
Situational interviews are 54% accurate in predicting performance.
For a Project Manager For an Admin. Assistant
© 2017 37
The Interview as a Sales Tool
Identify a "host"
Select, brief and/or train
interviewers
Define and review interview agenda
Don’t forget to recruit the spouse
Sell the opportunity
Sell the location
Sell the company
Don’t forget spouses
Close the deal!
Have an offer letter ready
Print business cards
Assign an e-mail address
CEO involvement pays!
Pre-Interview Plan The Interview
2
1
3
45
2
1
3
4
6
© 2017
Reasons for Employee Turnover
Source: PSMJ 2015 Bonus & Benefits Survey
38
© 2017
Turnover Due to Retirements and Health Reasons Will Increase
Source: U.S. Census Bureau
39
© 2017
Today’s employees expect flexible working arrangements
40
Source: PSMJ 2015 Bonus & Benefits Survey
© 2017
Professional staff salaries are a function of 4 factors
Type of degree
Office location
41
© 2017 42
Manager salaries are mostly a function of firm size
Source: PSMJ’s 2016 Management Compensation Benchmark SurveySimilar data for management positions from CEO thru PM also available in this survey.
R² = 0.9566
$70,000
$80,000
$90,000
$100,000
$110,000
$120,000
$130,000
$140,000
$150,000
1-20 21-50 51-100 101-250 251 - 500 501 - 999 1,000+
Firm Size (Employees)
Salary for Department Managers
© 2017 43
How effective is your firm’s bonus program?
Ask each of your principals and key employees to rate your bonus program using the following scale:
5 – Very satisfied4 – Satisfied3 – It’s OK2 – Somewhat dissatisfied1 – Very dissatisfied
Then average the results and compare them with PSMJ’s survey data.
Bonus Program ElementsYourFirm
2015PSMJ
SurveyOverall bonus plan satisfaction
3.2
Is bonus plan fair to our staff?
3.5
Does bonus plan reward performance desired?
3.3
Does bonus plan motivate our staff?
3.0
Is bonus plan easy to administer?
3.4
Does bonus plan meet the firm’s needs?
3.3
© 2017 44
Why People Quit
© 2017
Most Firms Have No Leadership Succession Program in Place
Source: 2015 PSMJ Bonus & Benefits Survey
© 2017
So Internal Transition Has Become Very Difficult
© 2017
There Are Going to Be More Sellers Than Buyers
© 2017
Ownership ≠ Leadership
Ownership is a financial state. It requires:
$$$ to invest
Judgement when voting shares
It is also a way to put "golden handcuffs" on your "pie makers."
Leadership is an attribute of employment:
“The ability to get others to support your ideas"
Absolutely nothing to do with $$$
48
LeadershipOwnership
© 2017
Employees vs. Owners
Compensation Employees Owners
Salary
Benefits
Special retirement plans
Perks (car, club membership, etc.)
Bonuses
Dividends
Share appreciation
Ability to pledge your house
49
© 2017 50
How Ownership Correlates With Authority
Ownership is totally divorced from leadership. Authority is based solely on position in organization chart.
Ownership is widely spread among employees. Authority is based primarily on position in organization chart.
Ownership is evenly divided among a few employees. Authority is based on share ownership.
Ownership is controlled by a single stockholder. Authority is determined by the majority shareholder.
Stage 1
Entrepreneurial
Stage 2
Consensus
Stage 3
Corporate
Stage 4
Public
History
Mediocre Performance
Good Performance
PoorPerformance
Highly VariablePerformance
© 2017
Which philosophy is right for you?
• Relatively high valuations
• Broad ownership to provide liquidity
• Must overcome skepticism from potential buyers
• Payoff is at retirement
Ultimate goal: sell firm to an outside buyer at a high price
• Relatively low valuations
• Limited ownership
• Payoff is from annual profit distributions
• Encourages shareholders to stick around
Ultimate goal: maintain the continuity of the firm
SHARE APPRECIATION
CLUB
EARNINGS
CLUB
51
© 2017 52
Step 1 – Get a firm commitment as to when current owners will sell
2010 20402015 2020 2025 2030 2035
Bea Chao (27%)
Ed Ickard (17%)
Jim Gonzalez (18%)
Alice Day (24%)
Andrei Salas (6%)
Felix Goldberg (8%)
Start Selling Finish Selling
© 2017 53
Step 2 – How will the new owners be selected?
• Bring in work
• Maintain clients
• Enhance firm’s reputation
• Technical/design expertise
• Manage projects
• Manage money
• Manage a business unit
• Manage support functions
0
1
2
3
4
5
6
7
8
Small Large
Nu
mb
er
of
Cri
teri
a
Firm Size
Ownership Criteria
Pie makers, not pie eaters.
© 2017 54
Step 3 – What mechanism will be used to transfer ownership?
TransferMechanisms Considerations
Stock acquisition
to/from the firm
Simplest, most common form of internal transition
Stock acquisition
among individuals
Increases liquidity, especially in large firms Owners lose some control of who buys stock
Form a "Newco" Avoids buying into long term liabilities Common in construction industry
ESOP Assists in financing the transition Tax advantaged Advantageous for firms doing lots of FAR work High administrative costs Can leave new owners saddled with debt
Asset purchase Avoids buying into long term liabilities Commonly used for small firms
© 2017 55
Platinum Firm Top 10 Keys to Success
1. Avoid commoditization by focusing on projects where you add real value
2. Repeat clients who share your values are the most profitable
3. Focus on the more complicated aspects of your service
4. Continuous feedback on employee performance helps retain staff
5. Recessions and acquisitions are great for recruiting
6. Don’t burn bridges with departing staff
7. Educate everyone on the financial realities of your firm
8. Your best PM’s are the best candidates for ownership
© 2017 56
And In Conclusion…
Are there any questions???
Please fill out your evaluation form
Please feel free to contact me directly
[email protected] 857-255-3204