> Firm leaders share techniques and insight into how they struggle with profitability at their satellite offices.
It takes an average of 18 months before a new branch office becomes profitable, according to ZweigWhite’s 2005 Multi-Office Firm Survey of Architecture, Engineering, Planning & Environmental Consulting Firms.
If it’s taking longer than 18 months for your branch offices to be profitable, it’s probably time to take some action. To turn around a struggling branch office, firm leaders say a variety of strategies can be applied, including providing the office manager with additional marketing or financial support, sending a representative from headquarters to intervene, or changing management.
Determining the problem
Bob Desautels, CEO of 90-person architecture and engineering firm ATI Architects and Engineers (Danville, Calif.), says there’s a feeling of disconnectedness between corporate and the firm’s two satellite offices. The offices are either a plane ride or a day-long drive away from headquarters, he said. "That leaves the manager off on an island, and they tend to make decisions that they normally would not make if they were sitting in the same building."
That’s especially true with hiring, Desautels said. They might hire employees that they don’t really need yet, and then they’re "slow on the trigger to cut back," which can have a significant impact on profitability.
While at 406-person architecture, planning, and interior design firm HMC Architects (Ontario, Calif.), Managing Principal Chris Taylor said the profit struggles are mainly because of overhead. "Much of the overhead at our branch offices of 35 or fewer employees is constant and involves having similar overhead expenses [marketing staff, administrative staff]," he said. "As their technical staff increases, the non-technical staff naturally begins to work more efficiently."
Finding a cure
Even with profits varying at branch offices, firm leaders use different techniques, as well as patience, as they try to maximize profitability. Joe Brown, president and CEO at 1,200-person urban design, landscape architecture, and environmental planning firm EDAW, Inc. (San Francisco), says his firm doesn’t call them branch offices. "We say that we have regional offices. That way, everybody is on an equal level. We don’t want them to get a second-class citizen mentality." They are held to the same expectations as the headquarters, he says.
Firms need to make an investment in their regional offices, Brown says. "You need to make regional offices equal [to the headquarters], and they have a responsibility to build just like anywhere else." Good people are sent to the regional offices to help with hiring, and the regional offices hire strong employees, he said.
To try to rectify that feeling of disconnectedness, Desautels said, ATI holds monthly principal meetings where leaders from the branch offices are brought into the headquarters. Visits also are made to the branch offices, and there’s a lot of communication over the phone.
The 23 branches of 1,000-person consulting engineering and architecture firm Edwards and Kelcey (Morristown, N.J.) share work, information over the firm’s intranet, and specialized expertise in an effort to keep profits up at branch offices, according to Senior Vice President Magued Zaglama. Central marketing materials are used, but the key to success is continuous communication. "This is a big element in keeping employees informed and motivated," he said.
Sharing is a big part of HMC’s model as well, Taylor says. "Fortunately, our branch offices have pretty good profit margins. We support their efforts by sharing centralized corporate resources and encouraging all offices to share unique technical expertise as needs arise," he said. "We have found that each office performs best when there is a balance of good technical, business development, management, and design support."
Patience is a virtue
Branch offices are a long-term investment, Desautels says. They are almost like start-ups where the office has to get to critical mass before it starts making a profit. "It’s the nature of the beast. There’s always a battle to get some kind of profits," Desautels said. "But, it’s the price you pay to have a presence in someplace. "Eventually, down the road, it’ll become profitable," he said. "We get more business by having satellite offices then we would without them."-Franceen Shaughnessy (email@example.com)
This article first appeared in The Zweig Letter (Issue #659, originally published April 24, 2006.