Turning Things Around
We’re convinced that 1993 is going to be a good year for the A/E and environmental consulting industry. No matter how bad the last few years have been, every single firm has the potential to cash in if they manage their business properly. Here are our suggestions:
Match the labor budget with the actual current workload. Overstaffing is the biggest single mistake we see in unprofitable firms. It isn’t that these firms are stupid— more often than not it’s a function of holding on to people until projects come in. The firm may have been selected for a project that hasn’t started, or they may expect to get one or more big jobs that will require this staff. The problem is, it takes six months of profits to pay for every one month a staffer has nothing to do. Raw labor is one of the few controllable expenses. Always look to cut unneeded overhead staff, but don’t ignore underutilized technical and managerial staff at all levels (especially the top). This is particularly true for firms that have been in a state of decline— they are almost always top-heavy with underutilized, high-priced professional staff. Track your labor versus your revenue every month and take action based on the numbers.
Don’t forget existing clients in your zeal to get new ones. You will never be able to sell enough new work to make up for lost clients. Direct your marketing efforts to getting new clients. But make sure the old clients are getting the service they expect. Are your PICs calling on these people to make sure they’re happy? Do your PMs (all of them) realize that pleasing the client is their number one priority, or do they view the client as the enemy? Do key design and technical staff understand that they have to constantly seek out new and better ways of doing things, not just for new clients but with old ones? Do your clients view your service as a help or a hindrance to them? Are you making life easier for your clients— or harder?
Pay attention to quality. The easiest way to lose a good client is to put out garbage. Projects must be done right from top to bottom. If conflicts between disciplines are resulting in poorly coordinated work, don’t throw up your hands— solve them. Make sure your system of rewards and sanctions reinforces cooperation. Don’t tolerate people who sabotage a project for personal reasons. Be willing to replace marginal performers. Get your recruitment pipeline filled so you will be more willing to trim the deadwood and toss the bad apples.
Hire entrepreneurial people at all levels. By entrepreneurial, we mean people who are creative, who go above and beyond the call of duty to figure out new and better ways of doing things, ways to save money, and ways to improve client service. We do not mean those who just do a yeoman’s job. A/E and environmental firms are full of yeomen. What’s lacking are the movers and shakers, whether they be young engineers, CADD managers, marketing directors, or secretaries. With the low margins in this business, every position is critical to your success. If you want entrepreneurs be willing to offer tangible rewards— not B.S. recognition programs.
Of course, there are many other steps to success. One thing every principal will agree on— consistent success requires constant vigilance. Although ours is a relatively simple business— selling labor— it’s not an easy business to manage and make money at. But the interesting thing is that whenever we go into a troubled company and ask people what the biggest threats to the firm are, the answer is almost always the same: We have seen the enemy, and he is us.
Originally published 2/15/1993.