Conference call: Al Barkouli, part 2
Chairman and CEO of David Evans and Associates, Inc. (Hot Firm #93 for 2016), a 1,000-person engineering firm based in Portland, Oregon.
By Liisa Andreassen
Barkouli joined DEA in 1988 as an engineer-in-training. He advanced to project manager, engineering discipline director, and office manager of the firm’s flagship office in Portland. He served as COO and president before being named chairman and CEO.
“Having entrepreneurs and entrepreneurial spirit means we look for opportunities and acknowledge risks,” Barkouli says. “For entrepreneurs, the risk of failing comes with the territory. Failing is an opportunity to learn. What we don’t like is not trying.”
A conversation with Al Barkouli.
The Zweig Letter: Diversifying the portfolio is never a bad thing. What are the most recent steps you’ve taken to broaden your revenue streams?
Al Barkouli: In the recession of 2007-2008, we reorganized from a purely geographic organization to a matrix organization. Now, we have business units that serve our four markets – transportation, energy/power, land development, and water and environment. We serve them from four geographic regions: Oregon, Puget Sound, California, and Mountain West.
The reorganization has helped us see where we can diversify in the Western U.S. We’ve assessed where we are strong and where we need to be stronger. In the last three years, we’ve merged with firms in California and in the Puget Sound region to strengthen our land development services. We recently merged with a small electrical firm with offices in Oregon, Washington, and New Mexico to bolster our power engineering capabilities.
We continue to look at strengthening our water, environmental, and energy services in California, Oregon, and Washington. We’re also looking at expansion in other geographies such as Idaho and Utah.
TZL: The list of responsibilities for project managers is seemingly endless. How do you keep your PMs from burning out? And if they crash, how do you get them back out on the road, so to speak?
AB: Frankly, there is immense pressure on project managers to deliver on schedule and on budget while also delivering excellence in technical quality and a superior relationship experience. I sincerely empathize with our project managers and the challenges they face. At DEA, we set up teams to assist project managers and train task leaders in the different aspects where they need to be strong. The PM is the leader, but we want the whole team offering support, collaboratively.
When a project manager needs help, leadership is available, including supervisors and our business unit general managers. We have also established an executive role, our vice president of professional excellence. This individual’s role is to help project managers at the project level, to provide them with tools, and to offer them a forum to identify challenges at the systemic level.
One of the roles that we recognize at our quarterly, all-employee meetings, is project management. Outstanding project managers and their teams are recognized based on performance metrics and client feedback.
TZL: What is the role of entrepreneurship in your firm?
AB: Dave Evans founded the firm with his entrepreneurship. Entrepreneurial spirit is one of DEA’s core values. Our core value states, “We are keenly interested in new opportunities. We venture into new fields and develop new approaches to our work. We do not take these risks lightly, but seek input from our colleagues and clients so that all who are affected are aware of the risks before action is taken.”
Having entrepreneurs and entrepreneurial spirit means we look for opportunities and acknowledge risks. For entrepreneurs, the risk of failing comes with the territory. Failing is an opportunity to learn. What we don’t like is not trying. We recognize failure happens and think about ways to take risks smartly and safely. A good example of this is the risks inherent in merging with other companies.
TZL: In the next couple of years, what A/E segments will heat up, and which ones will cool down?
AB: Right now, it’s a great time in our industry. Several local funding initiatives have passed, and there is talk of more investments in infrastructure at the national level. In the Western U.S., we see most markets as strong. For example, there is a strong need for housing and a key factor is affordability.
We look at the markets as interconnected. Investment in transportation has a positive impact on housing, which fuels land development, water, and energy needs. We think of the markets holistically, as an integrated system. In this sense, the increased public funding will benefit all our markets.
TZL: With overhead rates declining over the last five years and utilization rates slowly climbing back up to pre-recession levels, how do you deal with time management policies for your project teams? Is it different for different clients?
AB: As a federal contractor, DEA works under Federal Acquisition Regulations and complies with all federal, state, and local regulations. Under FAR, our overhead practices are consistent, regardless of the type of client or project.
TZL: Measuring the effectiveness of marketing is difficult to do using hard metrics for ROI. How do you evaluate the success/failure of your firm’s marketing efforts when results could take months, or even years, to materialize? Do you track any metrics to guide your marketing plan?
AB: One thing we track rigorously is our sales pipeline. Our sales pipeline is our leading indicator, even more so than actual booked sales. For us, the foundation is our client development teams, which I mentioned earlier. These teams are responsible for developing relationships with our clients so that they know what is upcoming with respect to client needs. We measure sales opportunities monthly, consider go/no-go decisions carefully, and weigh our likelihood of winning the work. We set a target for each business unit’s pipeline. Success is maintaining a strong pipeline while continuing to win work.
For us, 70 to 80 percent of our work is repeat work for our clients. Our best marketing is doing great work and providing exceptional services.
TZL: The last few years have been good for the A/E industry. Is there a downturn in the forecast, and if so, when and to what severity?
AB: As I said earlier, we see the market as very strong for the A/E industry. It’s hard to predict a downturn in the short term. If unforeseen events occur, events that affect the national economy, that would certainly affect our industry. Barring that, we see the next few years as extremely strong for us.
TZL: They say failure is a great teacher. What’s the biggest lesson you’ve had to learn the hard way?
AB: The biggest lesson is related to decision-making and the need to trust both the head and the gut. The “no” decisions are often harder and more important than the “yes” decisions. What we say “no” to defines us more than what we say “yes” to. There’s pressure to be all things to all people so “yes” is easier. I am now more trusting of my gut when it’s a close decision and more comfortable with a “no” decision.
TZL: While M&A is always an option, there’s something to be said about organic growth. What are your thoughts on why and how to grow a firm?
AB: Growth is extremely important and an outcome of performing well on a firm’s differentiation strategy. Growth is an indicator of health, vitality, and prosperity. It can happen organically and/or through mergers and acquisitions. M&A can help establish or strengthen a new practice or geographic location. We see M&A as one of the means and not an end in and of itself.
There really is not a right or wrong way to grow. Ideally, I like both organic and acquisitive growth. When we were looking at choices to expand our power services, we had few electrical engineers on staff, and chose M&A. It was faster and we knew of a firm we liked and with which we would be synergistic.
TZL: Do you use historical performance data or metrics to establish project billable hours and how does the type of contract play into determining the project budget?
AB: We use a combination of historical and forward-looking data. We begin by looking at the firm’s needs for growth, then to past performance. We look at each business unit’s sales pipeline and backlog along with our firm’s needs. We establish a firm-wide budget, then cascade it downward to the business units and then to the individual level.
TZL: What’s your prediction for 2018?
AB: I am not very good at predictions. As I said throughout, markets in the West look extremely strong. These are some of the best times I have seen. I think it’s highly likely that a 2018 infrastructure bill will make it through Congress. When that happens, it will fuel infrastructure investments and prosperous times for several years to come.
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