Beyond Words: Organizing for growth

October 2006 » Columns » BEYOND WORDS
As companies grow, they need to ensure that they are organized to operate efficiently when they reach where they are headed.
Michael W. Matthews, P.E.
About nine years ago, I was named CEO of a 50-year-old, multi-discipline engineering firm. We had about 50 people with one branch office and had just come off of a 20-percent loss inherited from the previous management team. After struggling with ownership and leadership transitions for which no one had planned, the other new principals and I tried to figure out how to turn this heavy, sinking ship around.

We all eventually agreed that we needed to grow the firm to be successful, to outgrow the inherited debt, and to attract the best talent. As I looked around the industry, I noticed that as engineering firms crossed the 80-person-or-so threshold they seemed too often to crash and burn. After paying close attention and talking to a lot of folks, it seemed to me that the main reason for these firms' failures was their attempt to run an 80-person firm the same as a 20- or 50-person firm. I was convinced that there were major differences between the two. I wasn't about to let that happen to us.

First, we organized around a strong, corporate structure. I was the president and CEO, with technical discipline department heads as vice presidents reporting to me. The board was arranged with five members consisting of three of the four other principals and two at-large members elected each year. As CEO, I was to take direction from and report to the board of directors. Therefore, we deemed it appropriate that I not sit as a board member. I was truly to be accountable to the board, and to this day, I formally report to them on a quarterly basis about the company's performance.

Once the board members left the board meeting, they took their positions as senior managers and were accountable to me as CEO. This type of 360-degree accountability seemed to work far better than the single president, CEO, chairman, and majority stockholder model of the previous management. Everyone knew what was expected of them and each person was accountable to someone else.

As we began to grow, I paid close attention to our organization and how it would adapt to a larger company. We instituted several operational changes during the next six years. First, we established a strong production management department consisting of dedicated project managers, CADD support, information technology, and security administration (we do a lot of federal contracting). A production manager was named to oversee this function. We have set up a model where the project manager is the client's representative to the design team.

Second, I looked at some of the administrative functions in the office and recognized some weaknesses. The accounting and human resource (HR) functions were being handled by an individual who had been trained on-the-job for bookkeeping, and who took on HR as an "interest." When the opportunity presented itself, I replaced the retired individual with a degreed accountant and a degreed HR professional. Sometimes you don't know what you don't know until there's someone there to show you. Of course, two degreed professionals are more expensive than a single, on-the-job-trained employee, but I kept telling myself and the other principals, "You must adapt if you're going to succeed."

Previously, we all talked a lot about quality control, but actually did little about it. I re-hired an employee who had left a project management position three years prior for greener pastures. He became our new, full-time quality control manager. Over a relatively short time, quality control became part of our culture, and not just something that the marketing people talked about.

We realized that we couldn't be all things engineering to all people needing engineering, so we decided to focus our efforts on five markets (these have morphed over the years). We assigned a senior manager to each market as a market-segment leader, with the responsibility of knowing the market, procuring work, and serving as the principal-in-charge for projects within that market. For the past nine years, department heads also have been the market-segment leaders. We're recognizing the need to split these responsibilities as we grow to more than 100 employees.

As our technical disciplines grew, we recognized that one person just couldn't oversee the work of 30, be responsible for scheduling, have ultimate technical responsibilities, and serve in a marketing capacity. We eventually changed from a single department head to a department head supported by a department manager. The larger departments were also organized internally around team leaders with three to five direct technical reports under the team leader.

We've now passed the 100-person mark and are very successful in terms of revenue, profit, growth, and employee moral. My latest direction from the board is a result of our recent strategic planning retreat: Double the size of the firm during the next five years through increased share in existing markets, geographic expansion, and additional service offerings. We're already thinking of what a 200-person firm should look like.

I wouldn't be so bold as to suggest that what we've done is the only way, or even the best way. But, I would suggest that, as companies grow, they need to ensure that they are organized to operate efficiently when they reach where they are headed. Don't wait to find out what isn't working and then try to fix it. Rather, recognize what will work in the future and implement it before you get there.

Michael W. Matthews, P.E., is president and CEO of Hankins and Anderson, Inc., in Richmond, Va. He also is the current president of the American Council of Engineering Companies (ACEC)/Virginia and serves on the ACEC Federal Liaison Committee at the national level. He can be contacted at m.matthews@haengineers.com .

FIRM STATS
Firm name: Hankins and Anderson, Inc.
City and state of headquarters: Richmond, Va.
Number of branch offices: None
Total number of employees: 100
Year firm was established: 1947
Total billings for last fiscal year: $18 million


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