Friday, December 27, 2013

Top 10 Blog Posts of 2013

Another year has whisked by and the traditional year-end look back is upon us. Thanks to readers like you, this blog continues to attract an expanding audience. Part of that is due to the multiplying effect of social media. The posts at the top of the list below, for example, benefited from being linked to or retweeted by others on Twitter, including some who had thousands of followers.

Hopefully I can continue to publish content that others find not only worth their reading, but sharing with others. For the present, here is a second helping of my top ten most read blog posts of 2013, listed in order of popularity:

1. Common Strategic Planning Mistakes. Most A/E firms don't do strategic planning, and a majority of those who do are disappointed with the ultimate results. Perhaps that's why this post hit the mark with so many readers. But the problems with strategic planning are hardly limited to our industry. Most of those who read this post appear to have come from outside the A/E business.

2. Client-Centered Project Management. The popularity of this post came as a pleasant surprise. I've long advocated making the client experience a central element of doing project work. But I've seen very few firms build this into their project delivery process. After providing my first-ever workshop on client-centered project management to one of my clients, I wrote this summary about it and drew a much larger audience than I anticipated.

3. Understand Your Clients? New Study Casts Doubt. I'm convinced that most A/E firms overestimate how well they know their clients. That conclusion comes from working with many different firms and interviewing hundreds of their clients. This post referenced a recent study of A/E firm clients by the marketing firm Hinge, which focused specifically on the buying process. They found a number of things that contradict conventional wisdom about what clients are looking for.

4. Cultivating Creativity in Your Firm. The post-recession world is different enough to challenge any business-as-usual thinking. We need to rethink our strategy and practices in order to succeed in the years to come. Is your firm consciously promoting creative thinking to address these new realities? This post outlines some proven techniques for doing just that.

5. Creating a Rainmaking Culture. Business development has long been the domain of a select few people in most A/E firms. That needs to change as firms scramble to claim their share (or more than their share) of fewer market opportunities. This post describes some basic steps for creating a culture in which rainmaking responsibilities are more broadly shared.

6. Writing Compelling Project Descriptions. The project descriptions I read in proposals or marketing materials are generally pretty weak. They describe not a project but a scope of work—pretty boring stuff. That this post was so popular suggests that I'm not the only one who sees a problem here. 

7. Create Value by Meeting Clients' Strategic Needs. Why don't A/E firms command fees comparable to most other professional service firms? I think much of it relates to our failure to explicitly address strategic needs—those needs that pertain to the client's overall business or mission success. It's not that we can't; we just tend to focus on technical issues while largely ignoring issues of greater importance to clients.

8. Do You Really Need an Elevator Speech? Ever considered what you should say when someone asks what your firm does? First impressions do matter, but does the classic "elevator speech" really resonate with clients? I suspect not. The best approach, in my experience, is to avoid the sales hype and quickly shift the focus to the other party.

9. Can You Escape the Commoditization Trap? I hear a lot of folks in our industry complain about being perceived as commodities, but very few really are doing anything about it. This post offers some ideas for those who aren't resigned to being just another undifferentiated A/E firm.

10. Tangibilize Your Intangible Strengths. If you want to understand why the commoditization trend has overtaken us, just ask A/E firm leaders what separates their firm from their competitors. What you hear most often are traits—like responsive, high quality, trustworthy—that are difficult to demonstrate or prove to prospective clients. There are ways to tangibilize many of these intangible qualities, if you're willing to work at it.

If you've found any of the suggestions in my blog posts helpful, I'd love to hear about it. That's ultimately what this blog is about—helping firms like yours be more successful. If I can help in any way in that regard, don't hesitate to ask. I'm happy to share my insights, whether you choose to hire me or not. Best wishes for the coming new year!

Tuesday, December 17, 2013

Could More Admin Support Improve Profitability?

In the A/E profession, we have typically associated administrative personnel with overhead. Hence, conventional wisdom is that keeping your admin staff as small as possible improves profitability.

But is this necessarily true? It probably is if you continue to use admin staff in traditional ways. But there may be more creative ways to use admin personnel—and even hire more of them—that can increase your profits.

When I stepped into the operations manager role with my previous employer, I inherited a small risk assessment group that served our clients throughout the western U.S. They were notoriously overworked, consistently putting in 60-80 hours per week. I told the group's manager that I couldn't allow that to continue. We either needed to hire more people or find some way to distribute the workload.

In exploring what their work entailed, I discovered that much of it was doing risk calculations. "Is that something that we could train our admin staff to do?" I asked. The group manager thought that we could...and we did. 

We solved two problems at once: (1) we relieved our risk assessment group of some of the more mundane aspects of their work and reduced their hours (which I believe enhanced their productivity) and (2) we dramatically improved the billability of an admin group that had chronically failed to meet their utilization goals. Plus we billed them at significantly higher rates than for their usual project clerical work, with a higher return on investment than we got with our risk assessment professionals.

In other words, we improved our profitability.

But our expanded use of admin support didn't stop there. We assigned a project administrator to each of our largest projects. Much of the work this individual performed had previously been done by the project manager—documentation, accounting, tracking, coordination, communication. Again, we charged a higher-than-usual rate and achieved a higher ROI than we could with the PM performing these tasks.

I gave my administrative office manager a copy of my position description and asked her to spend a few days determining which of my duties she thought she could perform. She assumed several of those responsibilities (and actually was probably better suited for them than I was), freeing me to spend more time on higher-impact activities—like developing new business. Other managers followed my lead.

Eventually we had the highest headcount of admin personnel per capita of any office in the company. And we were the most profitable.

This approach somewhat parallels the use of paralegals in law firms. Paralegals do administrative and research tasks that enable lawyers to spend more time on higher-end responsibilities like client work and business development. It has been well demonstrated that paralegals can significantly improve profitability. With profits declining in many law firms in the post-recession economy, there is a push to expand the role of paralegals because of their higher ROI (compared to many associate attorneys).

If increasing admin support truly can improve business performance, why haven't more firms taken this approach? I think there are a few common obstacles you have to overcome:
  • You need to hire quality admin personnel. This advice seems obvious, but firms often choose economy over quality when it comes to admin staff. Saving a little on salary can cost you more, especially if you forgo opportunities to involve these individuals in more billable work.
  • You need to banish the notion that only specialized professionals can do project work. There's a sentiment in our business that only degreed engineers, architects, or scientists can do the work. But there are many aspects of project work (and project management) that can be capably handled by "nonprofessionals" with proper training and supervision.
  • You need to bill appropriately for the value of the tasks being performed. Just because admin staff are doing the work doesn't mean you need to charge admin rates. I understand that some clients—such as federal agencies—can make this more difficult. But in most cases you can negotiate alternate billing categories. It can be a win-win scenario: The client pays less for the task, but you earn more.
So where do you start? I'd suggest an inventory of tasks that could potentially be performed by admin staff that are currently being done by your technical professionals or managers. Then determine how to shift the work appropriately. And, as noted above, you may need to create some new billing categories.

By the way, you shouldn't stop with looking at better ways to use admin support. This exercise applies the principle of leverage, which is surprisingly little discussed in our industry. Leverage is basically distributing the work optimally among staff such that your ROI (and profit) is enhanced. In the wake of staff reductions during the worst of the recession, many A/E firms today are poorly leveraged (i.e., they're top-heavy). Expanding the use of admin staff should be but one step towards trying to maximize efficiency and profit-making potential across the organization.

Thursday, December 12, 2013

Build Your Capabilities with Independent Affiliates

I once worked for a firm that had a nationally-recognized risk assessment practice. They owed much of their reputation to a group of college professors who worked with them on a part-time contract basis. Same for a mined land reclamation consulting firm that became one of my first clients. They partnered with a few professors whose reclamation research was known around the world.

Another firm I worked with picked up a former Exxon project manager who had directed multimillion-dollar oil shale development projects in western Colorado. When the oil shale boom went bust, he wanted to stay in the area and supplemented his part-time work with us as a substitute high school teacher. Given his credentials, high billing rate, and reasonable cost, he made more money for us per hour than any of our 500+ employees.

These are just a few of the many examples I could share from my experience working with what I call "independent affiliates." The proper legal term is independent contractor, but I use affiliate to designate a special class of independent contractor who has notable expertise, is well connected, and can help you expand your business. This person essentially serves the role of a strategic hire without all the risk. In return, you offer the independent affiliate the reputation and resources of your firm, another source of revenue, and the freedom to continue to pursue other business opportunities as well.

This type of win-win partnership is a no-brainer strategy that I've recommended to most of my clients, yet very few of them have followed my advice. I've heard various reasons for this: They can't find the right people for their needs. They have concerns about the associated liability or legal issues. They prefer making a strategic hire versus counting on someone outside the organization. In most cases, I suspect they simply haven't given enough attention to exploring the possibilities.

Independent affiliates have not only proved valuable in the past, but they appear to be part of a growing workforce trend. The latest Workforce Trends Study by the staffing firm Yoh found that 75% of employers surveyed anticipate increased dependency on the "non-employee workforce"—defined as consultants, independent contractors, and temporary employees. Independent contractors now comprise about 23% of the U.S. workforce. This trend has long been forecast (e.g., the popular 2002 book Free Agent Nation), but has no doubt been accelerated by the Great Recession.

So the demand across multiple industries seems to be increasing, but what about supply? The data I've found seems contradictory. One article says that the number of self-employed "has skyrocketed;" another says the number of self-employed Americans is at an all-time low. One study found that 40% of workers classified themselves as "free agents" in 2012, compared to only 26% in 2008 (I'm not sure how that relates to the 23% figure above). My own experience suggests that the weak economy has pushed many professionals into the ranks of free agent, even if they've not yet established a formal business entity.

In any case, I remain convinced that looking to partner with independent affiliates makes good business sense if you can find the right candidates (which means looking for them!). Here are a few ways that independent affiliates might help you grow your business:

Move into new markets. With some markets still struggling to recover, many A/E firms have given renewed emphasis to moving into new ones. That can be difficult to impossible without adding new capabilities, so in the planning meetings I've facilitated there's frequently discussion about making a strategic hire or acquisition. These are certainly viable strategies, but they're costly and risky. About 70% of acquisitions fail to produce anticipated results. And I would guess that a substantial number of A/E firm strategic hires prove disappointing.

One civil engineering firm took a different tact. Wanting to break into the industrial market, they partnered with a sole proprietor engineering consultant with a wealth of industrial experience and contacts. The consultant benefited because he lacked the resources to pursue the larger industrial contracts that he enjoyed. Eventually the firm was adding junior staff to meet the growing needs of their new industrial clients.

Expand your geographic reach. Our firm had a strong environmental management systems New Haven, Connecticut. I was having little success selling those services in the Rocky Mountain region. So I contracted with a solo consultant I'd met in Denver to support our firm as an independent affiliate. We began opening doors with existing and new clients, largely using our firm's resume but with his local expertise. While he managed the work in our region, much of it was performed back east.

There was admittedly a good deal of time spent selling the partnership before it yielded any new work. That's to be expected any time you're entering new markets or service areas. But one significant advantage of this arrangement versus a strategic hire (which we had considered) was that the upfront investment of our affiliate's time didn't cost us anything. Individual agreements may differ on this, but most of the independent affiliates I've worked with count business development time as the normal cost of doing business.

Strengthen your capabilities. Interested in pursuing a big contract opportunity but realize that your firm's resume is weak in one key area? Most firms in this situation subcontract another firm to shore up that shortcoming. But an independent affiliate has some advantages, if you don't need to extra manpower another firm would provide. You may earn a higher fee from the affiliate's work. Coordination can be easier since you're dealing with an individual. It may be easier to portray the affiliate as an extension of your project team (although you want to be upfront with the client about the nature of your relationship).

Expand your staffing capacity. One of the greatest challenges of running an A/E firm is matching your staffing to an ever-changing work load. Assembling a cadre of independent affiliates can provide some extra capacity for those temporary surges in workload where staffing up isn't warranted. Of course, affiliates are usually more senior personnel who may be too expensive to perform the bulk of typical project tasks. But I've seen firms have success with this approach in addressing the variations in their work load.

Outsource some strategic overhead functions. Some firms may find it advantageous to outsource some aspects of overhead functions like accounting, HR, IT, and marketing to save costs. But there can be some strategic merits as well. Many HR directors, for example, are too busy with routine day-to-day tasks to focus on critical long-range goals such as recruiting strategy, new hire orientation, performance appraisal, and professional development. An independent affiliate with expertise in these areas may enable you to accomplish much more than would be possible otherwise.

I have served in this kind of role on several occasions. For example, I was hired as business development director on a part-time contract basis for two years with one engineering firm. We were able to restore growth and profitability after years of underperformance. One of the advantages I brought was the inherent credibility that often comes with hiring an outside expert. I was able to push needed changes in their BD practices that they had failed to accomplish on their own. I've had similar experiences with other firms: Overhauling project delivery and quality assurance practices, installing a behavior-based safety process, leading implementation of other strategic initiatives.

Despite the benefits of using independent affiliates, let me warn you to be familiar with the rules associated with hiring them. The IRS is currently cracking down on companies that misclassify workers who function as employees but are designated independent contractors. This may scare some firms away from considering this option. But the free agent nation isn't going away. Many successful firms will learn how to leverage the advantages of using these individuals to rejuvenate and build their businesses.