march 14, 2011, issue 902 editorial trendlines · industry,” he said. green cities: the u.s....

E D I T O R I A L T R E N D L I N E S

I N S I D E

F I R M I N D E X

M a r c h 1 4 , 2 0 1 1 , I s s u e 9 0 2

w w w . t h e z w e i g l e t t e r . c o m

Design-bid-build meetsthe opposition

Page 5

❘❚ TOP PLAYER: Lifetime dedication to one fi rm’ssuccess. Page 3❘❚ PM PERSPECTIVES: Communication gameswith the engineers. Page 7

Health issues

It’s come to be expected (and is actually required in many states) that fi rms provide at least some health insurance coverage for their employees. However, with the skyrocketing cost of health insurance premiums in the last decade, some fi rms have chosen to pass along more of the cost to their employees. Consequently, according to the 2010 Policies, Procedures, & Benefi ts Survey, employee-only and employee/family health insurance contributions reached a 10-year high last year. The median employee-only health insurance contribution climbed to $102 from $86 the previous year. Meanwhile, the median employee/family contribution climbed to $424 from $324.— Margot Suydam,Survey Manager

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 T A L C O N S U L T I N G F I R M S

HR | FINANCES U P P L E M E N T S

Pages 9 - 12

20062007 2008

20092010

$0$50

$100$150$200$250$300$350$400$450$500

AECOM ................................................................ 10BCDM .................................................................... 6Butler, Rosenbury & Partners ................................ 5Carney Engineering Group .................................... 5Degenkolb Engineers ............................................ 3England, Thims & Miller ....................................... 4FPM Group Ltd....................................................... 6FRCH Design Worldwide ....................................... 9Gunda Corporation ................................................ 5H.T. Harvey & Associates ...................................... 4JSDA ..................................................................... 5Manhard Consulting.............................................. 4McCarthy Engineering........................................... 4Rippeteau Architects............................................. 4SH Group ............................................................... 5Strada .................................................................... 4X-nth ...................................................................... 6

Mark Zweig

See MARK ZWEIG, page 2

ARE YOU CONNECTED TO ZWEIGWHITE?http://blog.zweigwhite.com www.twitter.com/ZweigWhitewww.facebook.com/ZweigWhite

Revitalization of the fi rm

Do something new, hire smart people and do some cleaning. These are some of the ideas Mark Zweig presents to get things rolling.

So many people today in this business are just getting tired of the

grind. Th e last three years haven’t been fun— with more competition, reduced profi tability, delayed or cancelled projects, stalled ownership transition plans, and layoff s of good people being the norm.

We went through the same thing here recently at ZweigWhite. It’s time for revitalization. Here are some ideas for you:

1) Come out with something new. I cannot over-emphasize to all of you how critical this is. What services are you subcontracting out? Can you bring them in house? Maybe you should buy the fi rm or fi rms you are already

working with. Save money on consolidated overhead and joint marketing eff orts. But even if you don’t buy, maybe you can repackage something you already do in a new and innovative way that allows clients to get a taste of your service and expertise at a low cost. Th is “taste” could lead to a

much bigger project later.

2) Hire some new, experienced people. Th ere is nothing like getting some new people in who are known in the fi elds and markets you serve— people at the top of their game, with a solid reputation. It can shore up your ability to get work in a soft market real fast. Experienced people are more willing than ever to make a move. Don’t get cast off s— get those who are still working but dissatisfi ed by directly recruiting from your competitors. If someone does decide to join your fi rm, they will be doing so for the right reasons— not because they HAVE to— and will last longer on the job.

3) Hire some smart, inexperienced people. New people, fresh out of school, who are smart and motivated, will put the pressure on you to give them meaningful opportunities. Th at’s good! It means they will expect you to grow your business. Young people bring energy and enthusiasm, and represent your future

Don’t get cast offs— get those who are still working but dissatisfi ed by directly recruiting from your competitors.If someone does decide to join your fi rm, they will be doing so for the right reasons— not because they HAVE to—and will last longer on the job.

THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902

2© Copyright 2011. ZweigWhite. All rights reserved.

A/E BUSINESSNEWSABI FALLS: After showing positive momentum during the fourth quarter of 2010, the Architecture Billings Index slipped almost four points in January.

The American Institute of Architects reported the January ABI score was 50, down from a reading of 53.9 the previous month.

This score refl ects stable demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 56.5, down sharply from a mark of 61.6 in December.

As a leading economic indicator of construction activity, the ABI refl ects the approximate nine- to 12-month lag time between architecture billings and construction spending.

“This slowdown is indicative of what is likely to be a very gradual improvement in business conditions at architecture fi rms for the better part of this year,” AIA Chief Economist Kermit Baker said in a release.

“We’ve been taking a cautiously optimistic approach for the last several months and there is no reason at this point to change that outlook. There are still too many fi rms that continue to see weak market conditions to expect a dramatic increase in the demand for services in the design and construction industry,” he said.

GREEN CITIES: The U.S. Green Building Council has released its 2010 list of top 10 states for LEED-certifi ed commercial and institutional green buildings per capita, based on 2010 Census information.

The District of Columbia leads the nation, with 25 square feet of LEED-certifi ed space per person in 2010, with Nevada being the leading state, with 10.92 square feet per person in 2010.

Other top states include New Mexico, New Hampshire, and Oregon, with more than 6 and 4 square feet of LEED-certifi ed space per person, respectively.

“Using per capita, versus the more traditional numbers of projects, or pure square footage, is a reminder to all of us that the people who live and work, learn and play in buildings should be what we care about most,” said Scot Horst, USGBC SVP of LEED. “2010 was a diffi cult year for most of the building industry, but in many areas, the hunger for sustainable development kept the markets moving.”

For the full list of LEED-certifi ed projects log go on www.usgbc.org/ShowFile.aspx?DocumentID=8784.

CALENDARBEST PRACTICES SEMINAR: Your fi rm lives and dies by projects. Strategically and intelligently executing projects from proposal to solution fuels growth, creates opportunities, and sustains a strong commitment to your team and your clients.

Effective project management is a business necessity— the alternative is an expensive way to wreak havoc on your fi rm’s relationships and profi tability.

Project managers are the caretakers of your professional service. Through training based on best practices, they can lead their team to superior outcomes.

That’s why you need to attend the Best Practices in A/E/P Project Management seminar April 7 in Orlando, Florida.

The seminar will present strategies to facilitate excellence at all levels using practical, real-world examples and best practices used by the top fi rms in the industry. From principals and seasoned project managers to assistant PMs and technical staff— every participant will know the role they play within a project, within the fi rm, and toward the vision.

Can’t make it to Orlando? Future dates include May 19 in Dallas, Sept. 8 in New York and Nov. 8 in San Diego.

For more information or to register,call 800-466-6275 or log on towww.zweigwhite.com/seminars/pmo/index.asp.

MARK ZWEIG, from page 1

The voice of reason for A/E/P,and environmental consulting fi rms.

320 Rollston Avenue, Suite 102

Fayetteville, AR 72701

Mark Zweig | [email protected]

João Ferreira | Managing [email protected]

Julie Kyle | [email protected]

Tel: 800-466-6275Fax: 508-653-6522E-mail: [email protected]: www.thezweigletter.comTwitter: twitter.com/zweigwhiteBlog: zweigwhite.blogspot.com

Published continuously since 1992 by ZweigWhite, Fayetteville, Arkansas, USA. ISSN 1068-1310.

Issued weekly (48 issues/yr.). $475 for one-year membership, $775 for two-year membership.

Article reprints: For high-quality reprints,including Eprints and NXTprints, please contact The YGS Group at 717-399-1900, ext. 139,or e-mail [email protected].

© Copyright 2011, ZweigWhite. All rights reserved.

stars. Plus they have no bad habits that you will have to undo, unlike some experienced staff ers. Get them young and mold them in your hands.

4) Move. New surroundings can be motivational to all. Get into a space that has more stuff close by. Everyone will appreciate it. Find a space with more windows and better gathering areas. I never understood design fi rms— they should know better— not providing space with natural light to their employees. Gathering areas are also critical. Is there a space other than the conference room where employees can meet for lunch or coff ee? Th ere should be.

5) Discard archaic systems and processes. Whether it is the non user-friendly accounting system, the marketing database that only one person in the fi rm knows how to use, or the ridiculous expense report submission process. Dump it. Ditto for meetings you have always had but no one wants to participate in because they have outlived their usefulness. Dump ‘em. Bureaucracy is a huge demotivator to busy people who have deadlines set by external clients. Eliminate it everywhere you can.

6) Share successes and celebrate all victories. Whether it is a bell you ring when you get a new project or a thanks that comes in from a client that you send on to all employees, don’t underestimate the importance of reinforcing successes. Share company performance numbers also. People need to know every day that what they are doing makes a diff erence AND that they are part of a successful organization that bolsters them.

MARK ZWEIG is the founder and CEO of ZweigWhite. Contact him with questions or comments at [email protected].

ZWIEGWHITE DISTANCE LEARNING

ZweigWhite’s Distance Learning program makes relevant knowledge readily accessible for A/E/C/P industry professionals— knowledge that directly or indirectly affects their functional priorities. Our new program initiative provides fl exible, engaging andon-demand eLearning to support your business needs.

For more information 800-466-6275or log on to www.zweigwhite.com/zw-64-elearning.aspx.


3

Stacy Bartoletti started his career at Degenkolb Engineers and has helped make it a Hot Firm.

A fi ve-year itch may explain Stacy Bartoletti’s rise within Degen-

kolb Engineers (San Francisco, CA), a 170-person earthquake engineering and structural engineering fi rm.

He never rests quietly. Bartoletti started as a designer right out of col-lege, and is now the president and CEO of the No. 58 fi rm on Th e Zweig Letter 2010 Hot Firm List.

In this interview, Bartoletti talks about his rise, the defi ning character-istics of success and the challenges of raising children.

Th e Zweig Letter: What does it mean to be a Hot Firm?

Stacy Bartoletti: Being a Hot Firm provides recognition of the great suc-cess that Degenkolb has experienced in the past several years and is a tribute to all of our employees.

TZL: How did you get where you are today?

SB: I have basically been with Degen-kolb Engineers for my entire career in progressive roles of growing leadership, and in various locations. I started as an entry-level designer in our San Fran-cisco offi ce right out of undergraduate school at Purdue University and gradu-ate school at the University of Texas. At the time, the company employed about 50 people and only had one offi ce. After about three-and-a-half years I moved to Portland, when we opened our sec-ond branch offi ce (LA was the fi rst). I grew as an engineer and project man-ager while in Portland and saw an op-portunity to run my own offi ce in 2001, after the Nisqually Earthquake in Seat-tle. Chris Poland, the CEO at the time, and I talked about a Seattle offi ce and decided that I should move there and start a new offi ce. For a period of time I ran both our Portland and Seattle of-fi ces and in late 2007 moved into a cor-porate role as COO and president. In 2011 I stepped into the president and CEO role.

TZL: Do you remember your fi rst paid job? What did you learn then that still infl uences the way you work today?

SB: My fi rst job as a young kid was doing lawn care at a local dentist offi ce near my home. It actually instilled a real sense of responsibility. My brother Da-rin and I shared the job and we had to decide when lawn care was needed and had to go and ask the dentist for pay-ment after work was completed. I think working at a young age gives people a sense of the real value of money and an appreciation for working hard and feel-ing good about hard work and the re-wards that come with it.

TZL: What is it in your DNA that drives you to success? Is it audac-ity and risk-taking; a can-do at-titude and a relentless pursuit of perfection; something else more abstract?

SB: I have always looked for new chal-lenges in my career. My wife and I joke about my fi ve-year itch. It seems like ev-ery fi ve or so years I need a big change to keep me challenged and motivated. I believe what has made me successful is my personal drive and my competitive need to succeed.

TZL: In today’s diffi cult business climate, what does it take to suc-ceed? Is the spectrum of failure a motivator?

SB: More than anything I believe it takes teamwork to succeed in today’s economy and in the engineering servic-es business in general. We have really come to learn at Degenkolb that teams succeed where individuals fail. We rec-ognize that as our business has gotten

larger and more complex it takes much more than an individual make it suc-cessful.

TZL: Where do you see this indus-try in 10 or 20 years? What trends are infl uencing it? What about your company?

SB: I cannot say that I can predict where the industry will be in 10 to 20 years, but it is certain that it will be dif-ferent.

At Degenkolb we are very proactive with our strategic planning and this year we are focusing our attention on a discussion about what trends are go-ing to infl uence our business in the next 10 years and what do we need to do to adapt. One area of study that I believe will be very important to our business is demographics. Demograph-ics will drive a vast majority of the in-frastructure that gets built, and in the next 10 to 20 years we are going to see some substantial changes in the demo-graphic makeup of the U.S. and world populations.

TZL: Do hold someone as a special mentor? How did this person infl u-ence who you are?

SB: I would say that my professional career has been infl uenced by two sig-nifi cant mentors at Degenkolb. My ear-lier career was very infl uenced by Da-vid Bonneville, who is one of our senior principals. David hired me and helped guide me through my career all the way to a fi rm-wide leadership position. Chris Poland, our past CEO and current chairman of the board, has also been a signifi cant mentor and I expect he will continue to be one as I grow in the role of CEO.

TZL: What’s the one trait you most admire in people and why?

SB: In my mind integrity has to be the most important trait for a person and certainly one that is very impor-tant to me. When I am dealing with an-other person in our fi rm or elsewhere, I need to know that they have high in-tegrity, and from that follows honesty and trust.

Read complete interview in The Zweig Letter online at www.thezweigletter.com

T O P P L AY E R

Stacy Bartoletti,President and CEO, Degenkolb Engineers.

Lifetime dedication to one fi rm’s success

“I have always looked for new challengesin my career.My wife and I joke about myfi ve-year itch.“



E F F I C I E N C Y

Emergence of project information management and electronic permitting means less waste.

By JULIE KYLEEditor

The paperless offi ce seems a little closer than it did 10 years ago, as

web-based project sites and online fi le storage are becoming normal practices in real-world A/E/P and environmen-tal consulting settings. Th e ability and means to transfer, communicate, and collaborate on ideas more effi ciently and in a timely manner is ever increas-ing, and options abound.

For England, Th ims & Miller (Jack-sonville, FL), a 190-person engineer-ing fi rm, Autodesk’s Buzzsaw has been their most favorable application for going paperless, says Tom Fallin, vice president.

“We use it to facilitate electronic de-sign reviews by regulatory agencies, and once the conceptual design is ap-proved by the regulatory agencies, it’s provided to design/build fi rms for con-tinuation with design and the as-built record process,” Fallin says.

Th e online collaboration tool is con-sidered software as a service (SaaS) that allows project teams to better central-ize and more securely exchange project information, enhance team collabora-tion, and support building information modeling (BIM) workfl ows, according to the Buzzsaw web site.

“It has greatly facilitated our abili-ty to ensure current design availabili-ty and eff ective record keeping. All the clients, design/build fi rms, and regula-tory agencies need is an Internet con-nection— no CADD licenses, etc.,” Fal-lin says.

Electronic permitting takes hold. Very few major cities have a clear development process that makes information available online or have online applications, but some have be-gun utilizing information technology that allows for processes such as down-loading forms, submitting applications,

checking plans, issuing permits, sched-uling inspections and tracking applica-tions online.

Washington D.C. issued its fi rst elec-tronic permit— fi ttingly— for a build-ing to be occupied by a software com-pany.

“It is defi nitely the solution we need, because of the simultaneous reviews by all of the various permit offi cials,” says Darrel Rippeteau, president and CEO of Rippeteau Architects (Washing-ton, D.C.) a six-person fi rm.

“Project managers love the process,” Rippeteau says. “Th ey can see all code offi cials’ comments and annotations on the master design document, hosted by ProjectDox (an electronic project sub-mission provider) on their computers, rather than managing separate cop-ies for each the mechanical, electrical, plumbing, structural, fi re, and life-safe-ty reviewers.

“If you calculate the weight of a 24-by-36-inch permit sheet and multiply by 30 sheets, times three or four sets, you will see how much paper is saved. A wad!”

“Zero” paper plans. Jim Mc-Carthy, president of McCarthy Engi-neering (West Lawn, PA), a 26-person fi rm, says his offi ce contains “zero” pa-per plans, as all plans and drawings are stored digitally.

“We use NomaDesk as an information exchange portal for our clients and col-laborating fi rms, and all internal re-ports, schedules, etc., are located on our intranet site,” McCarthy says.

Although some clients still want pa-per invoices, McCarthy says the fi rm “is trying to move toward 100% (paper-less). We send out 50% of our invoices electronically, via e-mail.”

Strada (Pittsburgh, PA), an 18-per-son multidisciplinary design fi rm, has embraced reducing the amount of pa-per used in the design and construction process, as well as in fi rm operations, says Alan Jesse Cuteri, principal.

“We host our own FTP site that is uti-lized by bidders, clients, and consul-tants for electronic transmission of documents. We use (Adobe) PDF fi les for correction documents. Typically, all bidding documentation, client corre-

spondence, submittals, reviews and so forth are done electronical-ly,” Cuteri says.

“In terms of technol-ogy, we primarily use PaperPort (document management software) through our copiers, but we also use porta-ble scanners that use ScanSnap,” says Karin Hunsicker, vice presi-

dent and COO of H.T. Harvey & As-sociates (Los Gatos, CA), a 90-person environmental consulting fi rm.

A ScanSnap scanner converts all scanned images into a searchable PDF format. It’s fast, small, and powered through a USB cord.

Once scanned, copies of receipts, busi-ness cards, or invoices are automatical-ly saved onto a hard drive and accessed through an online site, EverNote. All notes are stored in the cloud, and can be accessed by any computer or smart phone.

Paperless marketing. Man-hard Consulting (Vernon Hills, IL), a 150-person full-service civil engineer-ing and surveying fi rm, has replaced much of its direct-mail marketing cam-paigns with e-mail blasts that the fi rm executes internally, says Trish Man-hard, marketing director.

“E-mail blasts are less expensive (in terms of postage and printing costs) and are considerably less wasteful. Th e response is easier to track and it allows us to keep our database more current (based on e-mails that get returned due to bad addresses).”

Replacing holiday greeting cards with e-cards is another “small but impor-tant” way in which Manhard Consult-ing is going paperless, Manhard says. It has saved the fi rm a chunk of money.

“Our Atlanta offi ce used Paperless Post to send holiday greetings. What we particularly liked about Paperless Post is that it still feels like you are receiving an actual card because you must open a virtual envelope to view your card. Th eir designs are beautiful, and they allow the recipient to respond back to you,” Manhard says.

Paper disappearing in the offi ce...

Alan Cuteri, Principal,Strada.


5

T R E N D S

Traditional delivery method is falling out of grace in favor of emerging collaborative alternatives.

By JOÃO FERREIRAManaging Editor

Design-bid-build has long been the favored delivery method in

the construction industry, but oh, boy— is it quickly losing its luster.

“Astonishingly, there are still owners who choose a design-bid-build model as the best approach to their projects,” says Joshua Carney, president of Car-ney Engineering Group (York, PA), a nine-person structural engineering fi rm.

Indeed, D-B-B still rules. According to ZweigWhite’s 2010 Project Manage-ment Survey, 43% of all projects are de-livered through D-B-B. But D/B already accounts for 27% of projects, accord-ing to the survey. Th e Design-Build In-stitute of America also estimates that design/build now accounts for 45% of nonresidential construction— same as D-B-B— in the U.S.

Th en there’s Integrated Project Deliv-ery, the much-debated team approach, and other methods and variations of methods, such as construction man-agement at risk and design-build-op-erate-maintain, etc., all competing for space in the A/E/P and environmental consulting world.

Th e emerging trends in delivery seem to point to a return to the primordial concept of the masterbuilder, as exem-plifi ed by D/B and IPD.

But no method is perfect, as practitio-ners will quickly point out.

“I still believe in the design-bid-build process for most projects. However, there is no universal solution for de-livering projects,” says Ramesh Gun-da, president of Gunda Corporation (Houston, TX), a 29-person planning, engineering and management services fi rm.

“IPD, design/build, CM at risk, guar-anteed maximum price (GMP), and other models are additional ways of de-livering projects based on the needs of the client and the project being deliv-

ered. Th e challenge is determining the right delivery system for each project.”

Which system? Good question.For Geoff rey Butler, president/CEO

of Butler, Rosenbury & Partners (Springfi eld, MO), a 90-person archi-tecture, engineering, interior design, planning and development fi rm, it’s not D-B-B.

“Design-bid-build has always been problem-atic in that the success-ful low bidder is usually the fi rm that made the biggest mistake. Th en, after they get the job, they spend the rest of the time trying to cov-er their mistake and to protect their margins. Th is creates an adver-sarial relationship with the architect and own-

er,” he says.Plus, Butler argues, D-B-B is not team-

work-friendly. Although D/B promotes teamwork, Butler is not big on it, ei-ther, because there’s still “two oppos-ing parties,” with the builder compet-ing with the architect for work, which can lead to all sorts of problems.

“We prefer a negotiated cost-plus con-tract with the general contractor where we select a qualifi ed GC and negoti-ate his fee up front during the design phase and he works with us through the design process, providing input on systems costs and the best, most cost-eff ective way to put the building to-gether,” he says. “In that process, he is a member of the project team and his fee is secure and not at risk. We all work to-gether to hit the budget and get our cli-ent the project they want.”

Janice Stevenor Dale, president of JSDA (Pasadena, CA), an interior de-sign fi rm, favors more collaborative methods.

“Design-bid-build has never been the way if teams wish to work collabora-tively and in a positive work environ-ment where team members have mu-tual respect for one another,” she says. “Negotiating with the right general con-tractor to add him/her to the team ear-ly in the process is the far better meth-od and represents best practices for all

non-governmental projects.”Cyrus Izzo, co-president at SH Group

(New York, NY), a 500-person consult-ing engineering and commissioning fi rm, goes farther, arguing for IPD.

“Th e integrated project delivery sys-tem is defi nitely going to impact the future of our industry, and we will see it utilized in conjunction with the pub-lic/private partnership model,” he says. “It is particularly relevant in the gov-ernment sector, where we expect to see it increase. Our corporate clients and private owners will come more slowly to that table; for them, the design-bid-build model has been working fairly well and we do not see the same challeng-ing drivers for them to change as rapid-ly. We are being particularly mindful of risks that are associated with some of these new procurement methodologies and are tracking the legal and fi nancial ramifi cations as they evolve.”

A place for D-B-B. Gunda, the D-B-B adept, argues that D-B-B has been around for a long time, is well under-stood by most of the public and pro-fessionals, and is a proven system for most projects.

“Owners of projects, either public or private entities, have many factors to consider be-fore determining the type of project deliv-ery,” he says. “Some of the key factors to con-sider include project fi -nancing, project reve-nue stream, life-cycle costs, cost of time de-lays, and owner’s capa-bilities of handling al-

ternative delivery methods, etc. If proj-ect funding is available in installments and time value of early completion of the project is not signifi cant, tradition-al design-bid-build becomes the best delivery method.”

Ultimately, Gunda believes that with technological advances, globalization and fi nancial pressures, “we have to change how we deliver projects.”

Not so fast, however. “Just because a new idea of delivery is developed, it doesn’t mean it is the best way for ev-ery project,” Gunda says.

Design-bid-build meets the opposition

Ramesh Gunda,President,GundaCorporation.

Geoffrey Butler, President/CEO,Butler, Rosenbury & Partners.



How can you grow even though your size has decreased? Read on!

A recent editorial by Mark Zweig (see Th e Zweig Letter, Jan. 24, Is-

sue 895) elicited some interesting feed-back on the topic of profi t vs. growth. So, which is more important? We asked our readers.

Jim Dennell, president, BCDM (Omaha, NE), a 41-person full-service architectural fi rm, provided a compre-hensive and eloquent answer, high-lighted here. Here are his thoughts:

Personally, I have come to the con-clusion that profi t is the most impor-tant. As architects, profi t seems to a have an evil connotation. For some, profi t means conceding or conform-ing to something that is contrary to good design. After 30 years of prac-tice, I see that attitude as a cop out or a bush to hide behind. I feel we are avoid-ing accountability and preserving de-nial. It wasn’t until this “Great Reces-sion” that I was able to prove profi t is good. Prior to the recession, we were al-ways in a growth mode and as we were growing, we always saw profi ts. Th is is the fi rst problem. As long as the prof-its were positive we never questioned the amount of profi t. Th is gave us free reign to do anything without being questioned about things such as the amount of fee we got, hours we took, and dollars we spent. Th e second prob-lem with a positive profi t in a growth mode, is that crisis management is ac-ceptable. “Hey, we’re making a profi t, so things must work.”

We were fortunate six years ago to have a fi nancial consultant introduce a concept of accountability. You’re prob-ably laughing, but this was a foreign thought. Over the three years that fol-lowed we compiled data, learned met-rics, developed reports and tried to ed-ucate people. Although we were mak-ing a 10% profi t, and people loved it, I could see that half of the projects were in the 20%-plus and others were losing. Also, half the people were producing the profi t. Th e truth was, if the losing projects just broke even we would have

doubled our profi ts. Because we were in a growth mode, nobody saw the lost profi t. Th e common denominators with the losing projects were the staff and processes utilized. We attempted to manage change to convert to the best practices and develop people. As we did, we developed several metrics to make sure there was balance in what people did. Th is meant watching the quality, client satisfaction, HR, professional de-velopment, and business development, along with the typical fi nancial met-rics. All these were put in place to hide the dirty metric of profi t. Fortunately the recession hit and the profi ts dis-appeared, exposing all the ineffi cien-cies. Since we couldn’t aff ord them, we had to become effi cient. Now profi t is a good word and it measures more than dollars. It measures the eff ects of all the best practices we were trying to de-velop when we were in a growth mode. I have changed philosophies from growth being the only way to become great to profi t makes you great. Th is is because profi t becomes the measuring stick of your design excellence, employ-ee engagement and client satisfaction. Th is being said, you must focus on the three to achieve profi t. Knowing that we were trying to achieve the three in our growth mode, it begs the question: What is growth? Is more profi t growth? We feel we’ve grown, although our size has decreased.

William McGuire, corporate opera-tions offi cer of U.S. operations for X-nth (Maitland, FL), 360-person con-sulting engineering fi rm now part of Trow Global (Brampton, ON):

Without profi t, a busi-ness can’t pay bonuses and raises, so you lose talent in the short run.

Without growth, the business can’t satisfy career growth, so you lose talent in the long run. Th e question that needs to be answered is: What do you want your business to be?

If the purpose of the company is making the owner(s) money— the

profi t route is important. X-nth chooses growth— if you’re not

growing then you’re shrinking rela-tive to your competition. Employees will not be loyal to a company that is in clear decline.

Kevin Phillips, CEO of FPM Group Ltd. (Ronkonkoma, NY), a 100-person full-service environmental and tradi-tional engineering fi rm:

Obviously, they are both important. Growth is necessary for the overall valid-ity, stability, and sus-tainment of the orga-nization. If you are not growing, you are not paying attention to the changing needs of your clients. Growth is also necessary for the needs of your person-

nel, their future, growth in responsi-bility, new challenges, pride in success, and new opportunities. All come with growth, and without a motivated staff the fi rm becomes stagnant, or worse.

Profi ts are equally important, because profi ts mean you have paid attention to the mundane business side of the orga-nization. Winning a $100 million proj-ect is one thing, executing it on bud-get and on time is something quite dif-ferent. Both are necessary and require equal attention and investment.

O N T H E R E C O R D

William McGuire, CorporateOperations Offi cer of U.S. Operations, X-nth.

Kevin Phillips, CEO,FPM Group Ltd.

The debate over growth vs. profi t

FEDERAL MARKET OPPORTUNITIESFOR A/E/P FIRMS WEBINAR SERIES

Many fi rms are rethinking their traditional avoidance of the federal market, and want to develop sound strategies fordeveloping federal customers. At the same time, federal contractingrequirements are becoming morecomplex, rendering this alreadyjargon-fi lled marketplace even harder to understand. To succeed, you need a custom-tailored strategy to achieve your business development goals in the federal market. In this 12-part series presented by ZweigWhite, you will learn the secrets of entering this market.

For more information or to register, call 800-466-6275 or log on towww.zweigwhite.com/zw-1081.aspx.


7

PM PERSPECTIVES

ChristineBrack

Big ideas and ah-ha moments in 15 minutesor less at ACECof Metropolitan Washington event.

ACEC of Metropolitan Washington invited me to present a session

on Eff ective Communication in February to their emerging leaders and other distinguished constituents. Good techniques and best practices are essential in every corner of the organization, but one cannot deny the criticality when applied to projects.

Although I had the podium for four hours that snowy and chilly morning, it took only 15 minutes to illustrate the dynamics of communication, expose the frustrations and assumptions prolifi cally found in teams, and underscore the role each member plays in the success or failure of the project outcome.

A session on eff ective communication would lack any real usefulness if I did all the talking— so I unleashed a little parlor game upon this large group and watched their lessons learned unfold before their very eyes. I won’t go into vast detail about how the game is facilitated, but the teams are small (fi ve members), the only communication allowed is through written notes, and each member is given an individual sheet of instructions. Th e task is to be completed within 15 minutes.

When time was called, and the quiet room fi nally fi lled with the crescendo of sighs, whistles, and laughter, we discussed the phenomenon of what just took place. We didn’t learn “something new” about the stranger or colleague next to us. We didn’t have to think on our feet about what we were going to “bring to a picnic.” Th is exercise intentionally mirrors

the arrangement and structure of a real project team— and the behaviors displayed are the culprits but also the muscle behind good project communication.

In their own words, here are some of those discoveries:

❘❚ I gave them a matrix because I thought it would make their job easier. Th e “principal” thought he was doing the team a big favor by designing a tool they could use to solve the problem. What he didn’t share was the goal of the task with his project manager. Without the meaning behind the activity, the team found the matrix useless and mysterious and proceeded to work without it. Principals take note: Serving good intentions and half-solutions on a silver platter are almost futile exercises if not paired with a purpose.

❘❚ I was bored. I was waiting for him to give me more. Everyone comments on the work ethic of Millennials. On this day, I had a healthy roomful of young engineers who would defy most of the stereotypes. Lower down the communication chain, they had even less direction and were given far less attention. Th ey followed instructions, sat and waited for further word. And they waited, and they waited. And when they asked questions, the project manager was too busy to answer right away. So they sat there and waited some more. Could this be why Millennials want to leave at 4:30? Can we say we know our team’s skill sets, and how we can leverage those? Are we ignoring the potential we have sitting around us? Are we talking about it?

❘❚ Th e note with the goal written on it is sitting here but I guess we forgot to pass it around. Only the “principal” was informed about the objective of the exercise, and for this particular team it made its way onto paper but it didn’t get any

further. What a shame, because had the team shared this knowledge, they admittedly wouldn’t have duplicated eff orts— indeed a very expensive drill. If principals and project managers share the mission at the onset of a new project, remarkable diff erences in effi ciency and profi tability will certainly take place.

❘❚ When I stepped out of the way, he was successful. I let him be the PM. All principals can point to the time they were full-time designers. As a leader, it is tough to shake the temptation to take the reins and call the shots— even though we delegate that responsibility to our PMs. In this scenario, the principal began to gum up the process but when he stepped back, the project began to roll. Th ey found a solution within minutes.

❘❚ If I could do it over again, I’d be more effi cient— then maybe my coff ee wouldn’t have gotten cold. How often are PMs so caught up in the fl urry that they miss out on the fi ner things in life— or simply feel like they have aged 10 years? Projects aren’t supposed to make us feel awful. Applying good communication practices ensures this isn’t the case.

I would like to again thank Mac Cannon, executive director of ACEC of Metropolitan Washington, Angela Marchetti and Eric Rehwoldt of Schnabel Engineering, and Lou Robbins of Dewberry & Davis LLC for the invitation to speak at their emerging leader forum. I would also like to thank all the attendees for their participation and commentary— which gave me ample material to craft this article— which broadly provides learning insight and valuable perspective for the rest of the industry.

CHRISTINE BRACK, PMP, is a principal with ZweigWhite specializing in strategic business planning and project management best practices. Contact her [email protected].

Communication games withthe engineers

Although I had the podium for four hours that snowyand chilly morning, it took only 15 minutes to illustrate the dynamics of communication, expose thefrustrations and assumptions prolifi cally found in teams, and underscore the role each member playsin the success or failure of the project outcome.



How to create a PMP exam brain dump sheetWhile there are general guidelines, you needto include what youneed to pass.

There’s no better catalyst for self realization than taking the

Project Management Professional (PMP)® exam. I’m kidding you, of course, but there is some truth in that the PMP exam day will illuminate that “you don’t know what you don’t know.”

Th e PMP Exam is a ‘closed’ book exam. Th at means the only reference material you are allowed to carry into the testing facility has to be contained in your brain. But during your exam, your brain is going to be very busy interpreting questions and trying to apply all of the knowledge, skills, and principles you’ve accumulated in your studies and work experience.

If you haven’t already, you should visit the local testing facility where you’ll take your exam and confi rm what to expect. Most likely, on your exam day, the exam monitor will check you into the testing facility, hand you six or so sheets of scratch paper and two pencils, then show you to your seat and confi rm that your PC is working. Th en you’ll have about 15 minutes to go through a tutorial that really only takes about fi ve minutes to do. Th en you begin your exam.

During the test, recalling what you do know can be daunting. Quite frankly, some of your ability to access that knowledge is going to seem misplaced among your grey cells. So how do you create the best opportunities to pass the PMP Exam that day? You can use the 10 minutes you don’t need from the tutorial time to do a brain dump!

What is a brain dump? A brain dump is a technique used by many students on closed book exams to create their per-sonal mini reference table. Brain dumps are abbrevia-tions of components and concepts, which you have

committed to memory and are then spilled out on to sheets of paper before the exam for reference.

Brain dumps contain just enough key concepts, theories, formulas and content, which will jog your memory. By having the information on your Brain Dump, your mind can focus on the question at hand, instead of trying to remember the formula needed to answer the question. It helps you to be in the right frame of mind for each question.

What goes into a brain dump? Brain dumps are only as good as the quality and quantity of infor-mation that you can spill out on the piece(s) of paper just before you begin your PMP Exam. Th ey contain the for-mulas, theory, concepts and PMP-isms that you might otherwise forget for a moment at the very moment when you need it most.

Here is what you can generally fi nd as part of a PMP exam brain dump:

❘❚ Table 3-1 of the PMBOK® Guide 4th Edition

❘❚ Formulas, such as earned value, PERT, communication channels, procurement, probability, project selection and depreciation

❘❚ Values, such as 1, 2 and 3 sigma and estimate ranges

❘❚ Acronyms, such as BAC or TCPI

❘❚ Powers of a project manager

❘❚ Confl ict resolution (best to worst)

❘❚ Sources of confl ict (order of priority)

❘❚ Herzberg’s motivators

❘❚ Project closing check list

And, of course, you must include all the items that you have trouble remembering during your studies and that you feel need to go onto your sheet. Th e list above or using a brain dump that someone else created can be a good start, but you really need

to customize it to your needs. Don’t study what others are having trouble remembering. Instead, include what gives you the hiccups.

How do I study a brain dump? Brain dumps are pure memo-rization. As part of your exam prepara-tion, exercises and studying, go ahead and practice committing the content of your brain dump to memory and then writing it out onto a blank sheet of paper on a daily basis.

Every morning, practice your brain dump until you’re satisfi ed with your progress. By the end of the fi rst week, you should be able to write out your brain dump in its entirety on the fi rst go.

Th en, continue dumping it on a regular basis, going back to the daily routine in the two weeks leading up to your exam.

So what *IS* the secret of creating my PMP exam brain dump sheet? Creating and study-ing your very own, personalized PMP exam brain dump sheet is a means to an end in itself.

It all begins with creating the content that goes into it by getting to know your weak areas as you prepare for the exam. Th en you memorize, you dump and you repeat. Pretty soon what seemed too complex to remember is at the forefront of your knowledge.

So, the secret is that you will accelerate your studies and knowledge simply by going through the motions of creating, studying and knowing what’s on your personalized brain dump.

Last but not least, your PMP exam brain dump is a great tool not only to help you bring your reference material into the testing facility, but also providing stress relief knowing it’s there as you encounter questions that require it.

You’ll help yourself to learn the material as you study for your PMP Exam and give yourself an important edge in passing.

CORNELIUS FICHTNER is a noted PMP expert. He has helped over 12,000 students prepare for the PMP Exam withThe Project Management PrepCast atwww.pm-prepcast.com and The PMP Exam Simulator at www.pm-exam-simulator.com.

G U E ST S P E A K E R

Cornelius Fichtner

HR A SUPPLEMENT OF THE ZWEIG LETTER MARCH 14, 2011, ISSUE 902

9

T R E N D S

Making prospective employees feel valuableis key to future growth.

By SUSANNAH SWEARINGENCorrespondent

More and more fi rms are relying on recruiting technology to get

through stacks of résumés, such as au-tomated resumé screening and search tools and computer-assisted interview-ing. Candidates can sometimes end up feeling more like a number than a per-son.

According to a survey by human re-source consulting fi rm Development Dimensions International and web-based recruiting resource Electronic Recruiting Exchange (ERE), nearly half of the organizations surveyed will in-crease their use of screening and search tools in the next year and 12% will in-crease their use of computer-assisted interviewing.

As recruiting begins to pick up at ar-chitecture and engineering fi rms, hu-man resource professionals are looking at ways to best align hiring practices so they attract and retain the best tal-ent— and avoid making potential em-ployees feel that they are nothing but just a skill set.

Employment branding. Don-na Szarwark, senior vice president of human resources at FRCH Design Worldwide (Cincinnati, OH), a 150-person architecture and design fi rm, says it’s important to use your fi rm’s brand in your hiring strategy.

A company’s employment brand is what makes the diff erence in whether or not a fi rm is able to attract top tal-ent, Szarwark says.

“Our employees are our brand so it’s the association they make when they think of us,” she says. “It’s the face, voice and personality of our fi rm. It’s our reputation and the loyalty and emotional attachment people have to our fi rm. It’s our promise we make to them based on our off erings and expe-

rience and we believe that it is a diff er-entiator.”

In today’s world, when the talent pools are larger than they’ve ever been, Szarwark says the employment brand is more critical than ever.

“Branding defi nes the employment expe-rience. It connects the candidates to you and infl uences the choices that are made at each touch point, because a brand creates an emo-tional connection.”

An employment brand is defi ned as the way prospective appli-cants, candidates and employees perceive

the employer. A study of more than 2,000 companies

conducted by ERE found that having a clearly defi ned strategy is the most im-portant factor in achieving employer branding objectives.

Th e study found that 37% of compa-nies have begun work on developing

their employer brand strategy, while 13% do not have a strategy.

Many companies are worried about the impact of the downturn on their brand.

According to a recent CareerBuilder.com survey, 10% of employers polled said they are concerned about the diffi -culty of strengthening their company’s employment brand after layoff s or cut-backs.

“Th e bottom line is your behavior builds your brand so all leaders need to be mindful of their actions and the im-pact on the brand to ensure that no one ever feels like a number,” she says. “If you take interest in your own personal brand you also impact the employment brand. When it comes to recruiting it can be as easy as showing up in time for an interview, returning calls in a timely fashion, taking interest in them, being an empathic listener, being optimistic, honest, and helpful.

“To bring your brand to life you must give candidates a reason to choose to work and stay working with your fi rm.”

Employer branding helps attract the best

Donna Szarwark,SVP of HR,FRCH Design Worldwide.



Flexing cultural dexterity Advice for leaders.

“Michael” doesn’t fi nd much value in giving speeches

about his commitment to diversity. As leader of a 3,000-employee organization representing multiple countries, disciplines, cultures, generations, languages, skills, and backgrounds, he prefers to show his commitment through his daily behaviors, and by ultimately creating a work environment where everyone can reach their career potential.

When Michael (a fi ctitious company leader) forms project teams, he thoughtfully selects members from diff erent countries and viewpoints to harness their diversity of thought. He acknowledges individual diff erences and unique perspectives as opposed to denying that diff erences exist. In fact, he strives not to be “color blind” or “culture blind” by downplaying diff erences. He understands the true benefi ts that diversity brings to his business. He knows that harnessing diversity provides a competitive advantage to his organization, and that in order to capitalize on this opportunity he has to demonstrate diverse and inclusive leadership skills— or cultural dexterity.

Do your leaders havecultural dexterity? Is your or-ganization developing leaders who can successfully navigate diff erent cul-tures, generations and backgrounds? Do your leaders have cultural dex-terity— the business leadership skill that encompasses the ability to un-derstand, manage, lead, connect, and eff ectively communicate with people across multiple dimensions of diver-sity— that is critical to success in a global economy?

Th e ability to develop strong, agile leaders who can lead complex, global organizations was identifi ed as a key

concern by the 2010 IBM Chief Human Resources Offi cers Study entitled Work Beyond Borders. Th e survey reported that companies have traditionally focused on operational effi ciency as the core driver for

managing workforces. However, to make the most out of growth markets and unlock the potential of a global workforce, the survey identifi ed the need for organizations to develop leaders who have the skills and ability to eff ectively lead people from diff erent cultures and generations. An integrated diversity and inclusion function within an organization can facilitate the development of these sought-after leaders.

Diversity of thought. Today, it is common for organizations to view diversity and inclusion eff orts as not only “the right thing to do” but also as a business imperative. Clients expect the best solutions that stem from di-verse talent and perspectives. Emerg-ing markets and talent pools are rap-idly expanding, and companies must leverage the diversity of thought with-in their organizations to “out-inno-vate” competitors. Because diversity and inclusion are viewed as key busi-ness drivers, companies must not sim-ply recruit and retain employees from diff erent ethnicities, religions, and lifestyles. Rather, they should look for ways to promote a work culture where employees have awareness, knowledge, and understanding of various cultures, and who are inclusive thinkers and ex-hibit cultural dexterity.

Culturally dexterous leaders like Michael are confi dent they can succeed in complex and multicultural environments. Th ese leaders understand intercultural issues that impact global team dynamics, such as diff erent communication styles that exist between Western and non-Western employees. Th ey also recognize cultural preferences of clients, such as country-specifi c diff erences in the art of negotiation. Other everyday examples of cultural dexterity can be seen when leaders are mindful of religious holidays and cultural events as they plan meetings

that require travel. Additionally, being sensitive to dietary restrictions of colleagues who observe religious holidays, such as during Ramadan or Passover, sends an inclusive message.

Tips for success. Establishing a company culture aimed at develop-ing creative, agile, culturally dexterous leaders takes time and attention. Here are a few diversity and inclusion tips:

1) Change your current culture. Your senior leadership must be fully supportive of this goal. Th ey should not only talk about the development of culturally dexterous leaders, but should be role models of the kinds of behaviors that they desire employees to demonstrate.

2) Remember that diversity is not an initiative. If diversity is valued as a business imperative, it should not be viewed as an initiative with beginning and end dates. In order to achieve long-term success, diversity should be integrated into key processes of your organization— such as internal communications and training and development— and cultural dexterity should be seen as a valuable skill that is evaluated as a desired attribute during performance management and succession planning.

3) Recruit diverse candidates.To ensure that you are harnessing the benefi ts of diversity, it is critical that your organization casts a wide net to attract diverse candidate pools. It is equally important to recruit candidates who are inclusive thinkers and have cultural dexterity. Ask executive candidates if they have experience leading and assisting diverse employees to reach their maximum potential, whether they have had success engaging multi-generational staff s across borders, and whether they have formed diverse teams and have leveraged diversity of thought to reach innovative solutions.

4) Educate and create awareness. Cultural dexterity starts with understanding your own unconscious biases or blind spots. Acknowledging your blind spots and resisting assumptions and judgments are crucial steps to becoming a culturally dexterous leader.

TEUILA HANSON is vice president of Diversity & Inclusion at AECOM. She is responsible for overseeing the company’s global diversity strategy.

G U E ST S P E A K E R

TeuilaHanson

FINANCE A SUPPLEMENT OF THE ZWEIG LETTER MARCH 14, 2011, ISSUE 902

11

S U R V E Y

Consolidation heating up the A/E industryActivity expected to increase among engineering disciplines.

By JULIE KYLEEditor

The A/E and environmental indus-try is in a consolidation phase, as

the percentages of fi rms considering an acquisition or sale, both increased sig-nifi cantly this year, according to data from ZweigWhite’s 2011 Mergers & Ac-quisitions Survey.

Two-thirds of fi rms (65%) report M&A is in their strategic plan for the next fi ve years. Driving those intentions is the eagerness to fi ll in geographic gaps in service coverage and enter new mar-kets, the survey shows.

“Th ere will be continued consolida-tion as mid-sized fi rms bulk up by ac-quiring smaller fi rms into their prac-tices,” says Hobson Hogan, a principal with ZweigWhite. “Larger fi rms will continue to use M&A as a way to drive earnings growth. I think you will see activity fairly evenly distributed across market sectors and geographies, as the primary drivers to M&A are fairly con-sistent across market sectors,” Hogan says.

“From a macro perspective, there is still over-capacity and hyper-compe-tition in the marketplace. Th e current economic environment tends to push fi rms to one end of the spectrum or the other. You either remain nimble and fo-cused with low overhead or you become part of a large fi rm with broad capabili-ties. It is getting harder to be small fi rm without having a market focus.”

Where is the action? Firms are seeking the following disciplines or ser-vices in a potential acquisition: civil en-gineering (41%), structural engineer-ing (35%), transportation engineer-ing (30%), and construction manage-ment (30%). Hogan believes the mar-kets fi rms are targeting must be viewed relative to other investment opportu-nities.

“While infrastructure in North Ameri-ca is in dire need of upgrades, the fund-ing for large projects is very uncertain. However, the likelihood of fi nding fund-ing sources for infrastructure is greater than the private building market com-ing back in any meaningful way.

“Th ere are certain niches in transpor-tation, municipal and federal markets that will continue to have activity re-gardless of budget concerns and overall economic activity. It is interesting that many of the markets that have the best outlook for the near term, such as elec-trical transmission and energy explora-tion, are also the most consolidated,” Hogan says.

Firms most targeted for a potential acquisition include those working in the transportation (49%), municipal (46%), and federal (46%) markets.

“Th e water market is and will con-tinue to be the area for notable activ-ity, especially in areas with population growth or urban and rural areas where there has been underinvestment,” says Jeff Clark, managing director and prin-cipal with ZweigWhite’s M&A team.

Clark points to solid waste as a sta-ble market and notable for continued M&A activity, and says federal markets are very desirable, but barriers to entry are still high with very few sellers.

“For sizable contracts, mid-size fi rms that play in this space will be extremely sought after by the large buyers,” Clark says. “Short term, we do not see cer-tainties for niches in transportation, although many large fi rms are look-ing to acquire in that space for the long term.”

Possible capital hiccup, but reasons to talk. Capital mar-kets will continue to be constrained for smaller to mid-size fi rms, potentially hindering activity.

“Borrowers that provide business ser-vices need to have in excess of $5 mil-lion in EBITDA to get the most favor-able terms on fi nancing,” Clark says.

Sellers who do not have an urgent need for liquidity are waiting for a more robust economic environment

before they start marketing their fi rms to buyers, and those fi rms considering acquisition for the fi rst time or those that have been burnt on an acquisition in the past may be cautious to buy now with all the turmoil still remaining in the industry, Clark says.

Nevertheless, Hogan believes sellers will begin to return to the market in 2011, and for many, it’s not if they will sell, it’s when.

“Th e reasons are simple: demograph-ics and competition,” Hogan says.

Boomers, who represent the largest single demographic in our country, also have the largest ownership stake in A/E/P and environmental consulting fi rms, and they are quickly coming to the point in life where they would pre-fer to slow down or to enter a diff erent stage in life altogether. M&A survey data shows that among potential sell-ers, the highest-ranked goal for the sale is transition ownership.

“Most fi rms in the A/E industry will face a choice in the next fi ve years to either begin an internal transition of ownership, if they have not already done so, or sell to a third party,” Hogan says. “From an economic standpoint, holding on to your ownership rather than selling is typically in your best eco-nomic interests, as you are not likely to be paid an amount that will make you want to walk away (For example, if you are making $1 million a year, why sell today for $4 million when you can run the fi rm for four years make $4 million and sell it then for $4 million?).

“From a strict numbers standpoint, you keep your ownership until you are ready to retire and then walk away. Practically, that is not the best situa-tion for a sale, but it is the strategy of some fi rms.”

Hogan notes that for many fi rms, an internal sale is not an option because of factors such as poor second-tier man-agement, desire to maximize sale price, or because the fi rm is not generating cash to aff ect a sale. In these cases, a third party sale or liquidation would be those fi rms’ only course of action, Ho-gan says.



Don’t get stuck in the middleIn the current economy, every fi rm needs to be world-class at something.

I recently attended a conference on alternative investments for asset

managers and investors. Th e attendees were mostly representatives from large institutional investors, endowments, hedge fund managers, and corporate bankers. Th e conference focused on the outlook for hedge funds and real estate funds in the future. I was interested in hearing what some of the top investors on Wall Street think about the overall market and real estate in general. I would like to say that I came away from the conference with some good news for the North American market. However, that was not the case. Th e fact of the matter is that many of the structural issues that led to the busting of the real estate bubble are still present and in many cases are worsening, not improving.

When it comes to real estate, the news was dire. Fundamentals have not improved and, while some asset values have increased due to the lack of “solid deals,” the market has become binary— simply made up of winners and losers. Binary markets are not relegated to real estate properties; much of the economy is becoming characterized by fi rms making a choice on how they want to compete on price or service, and building an organization to fulfi ll that strategy.

While business is not likely to improve on any broad measure, there is no need to jump off a bridge. Business will not stop; it is just going to be ultra-competitive because demand will continue to be constrained. In an industry where there is likely too much capacity and competition, it is often helpful to glean lessons from other industries that have dealt with bouts of

oversupply, such as airlines, retail, and energy. Here is a sampling of how other industries have faced tough times and how they successfully navigated the storm:

❘❚ Gained effi ciencies through consolidation

❘❚ Aligned cost structures and strategy to market realities

❘❚ Leveraged information technology to improve effi ciencies of the inputs

Th e fi rst lesson can be one of the more powerful catalysts for change. In the last oil bust, several major oil companies merged, including Exxon-Mobil, BP-Amoco and Chevron-Texaco. Th e resulting organizations cut out tremendous costs from their organizations and added additional scale to their businesses. Th e Exxon-Mobil merger, argued by some to be one of the most successful mergers, squeezed $2 billion in cost savings in the fi rst year alone. Th ese fi rms were able to eliminate redundant costs in accounting, human resources, and operations, saving the shareholders billions. When properly managed, scale can have immense advantages in lowering costs of services per unit of input.

Some academics have argued that in today’s world there are only two strategies: win on price or win on service. Th ere is a lot of truth to that observation, especially if you look at retail. Successful retailers have either created highly effi cient distribution channels to bring you goods at low costs, such as Wal-Mart, Target and Costco, or they have created high service models, such as Nordstrom and Neiman Marcus. Gone are the days where you can succeed in the market by off ering mid-range products with mid-range service. Could Wal-Mart attract Nordstrom shoppers by simply hiring a piano player? Not

likely. Nordstrom would not likely be able to undercut Wal-Mart on price with grand pianos and marble fl oors in the cost structure, either. In a binary world, you have to make a choice and structure your fi rm around that reality.

If you have purchased computer hardware lately or looked at back offi ce software, there is very powerful hardware and software available to even the most cash-strapped start-up. Expensive accounting systems and other back offi ce support is no longer a competitive advantage, as cloud computing has delivered high functionality for little upfront capital. Th e cost of connectivity has also dropped dramatically. Th is can allow boutique fi rms with specialized practices the ability to compete over large geographies without having to invest tremendously in infrastructure.

In no way am I suggesting that engineering, architecture or environmental consulting is like selling an airline seat or a pair of shoes. However, it is becoming more evident in our economy that getting stuck in the middle is a bad thing. Every fi rm, if it wants to thrive, needs to be world-class at something. However, to be truly successful, a fi rm needs to adopt the proper strategy to fi t its market reality. Th at may mean acquiring competitors and eliminating costs to provide value to your clients. Conversely, you may need to refocus on client service and stop trying to win in “commodity” type markets with gold-plated resources. Th ere is no one prescription for success in the industry and not likely one strategy that will lead to success for a fi rm. However, if you fi nd your fi rm is “stuck in the middle,” neither big nor small, neither specialized nor broad, then one thing is certain, history is not on your side.

W. HOBSON HOGAN is a ZweigWhite principal specializing in mergers and acquisitions, fi nance and strategic planning. Contact him at [email protected].

F & A A D V I S O R

HobsonHogan

In no way am I suggesting that engineering, architecture or environmental consulting is like selling an airline seat or a pair of shoes. However, it is becoming more evident in our economy that getting stuck in the middleis a bad thing.

march 14, 2011, issue 902 editorial trendlines · industry,” he said. green cities: the u.s....

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