I woke up this morning thinking about all of the AEC firms I have been an owner in, served on the Board of Directors of, or worked for as an employee or consultant — and how many of them seem to have management with misplaced priorities.
You might be wondering what I am talking about? Business is still strong for most firms in this industry, and the majority of AEC companies are doing well. But that doesn’t mean they are doing well because of how they are running their businesses. It may be in spite of how they are managing things, and simply the result of a situation where there is more demand than there is supply.
Here are some of the ways I think AEC owners are potentially focusing on the wrong things:
Project management versus project fees. I have always felt firms in this business work so hard on their project management, yet don’t pay enough attention to getting a better fee from their client. They act as if the market sets the fees and they can’t charge any more than any other firm in this business. My experience is that there is only so much blood you can squeeze from a stone. No amount of project management attention will make up for a bad fee. Better to increase fees – especially when demand exceeds supply.
Feedback and control versus motivation. Firms in this business seem more worried about tracking utilization and hours worked – along with maintaining overly-complex performance appraisal systems – than they are about creating an environment where self-motivated people who need little to no management would want to work. Management’s goal should be, at least in my mind, focused on how to create an environment that minimizes hassles and demotivating policies and practices – and not on badgering and evaluating.
Projects versus clients. I love the naive (and condescending) people who say things such as, “If every project the firm does makes a profit, the firm will be profitable,” as if that is something incredibly profound. It isn’t. Nor is it likely. What IS possible, however, is to have client relationships that are profitable across the spectrum of all work done for them. That’s the way I would rather look at one of these businesses. There may be times you do a job cheap or free for a good client who pays you hundreds of thousands (or millions) of dollars. All that matters is how successful you are with the client.
Disciplines versus market sectors. Many firms are still organized by discipline. Mechanical engineering, structural engineering, civil engineering, and so on. But does it really make sense to place the emphasis on discipline? Is that how most clients make a decision to hire a firm in this business – based on the technical capabilities inside their disciplines? Does a commercial building developer want the most technologically advanced mechanical engineers, or wouldn’t they really prefer to hire a firm that specializes in serving clients just like them? Which is ultimately more important to their success on the project? Their technical expertise in mechanical engineering or their industry knowledge and experience? I think the latter wins out 98 percent of the time.
Selling versus marketing. I have always felt firms in this business will spend practically any amount of money on selling but hate to spend a dime on marketing. They are thrilled when their $100,000-$200,000 salaried employees will make sales calls, no matter how much time that takes, how successful they are with their efforts, or how little training they have in selling. My experience is that spending money on other types of marketing that makes leads come into the firm is much better spent. The technical and design staff are usually glad to talk to or meet with a client who contacts them with a need.
I could go on but am out of space. Hopefully some of our readers can understand what I am writing about here and redirect their attentions!