A mid-year review of the business climate

July 2008 » Columns
Now that we’re here in summer 2008, how does the year look to you? Here’s some reflections about what engineering firms are experiencing and what progressive ones should be doing.
John Doehring

Now that we’re here in summer 2008, how does the year look to you? Busy as ever (and wondering what the fuss is all about)? Or standing alone on the dance floor, wondering where everyone has gone?

As leaders said in ZweigWhite’s 2008 AEC Industry Outlook, how one perceives the business depends on the markets the firm serves. At this point, it’s fair to conclude that the business climate has deteriorated since 2007. Funding is down, costs are up, and clients are rethinking, postponing, and even canceling projects. Still, many (even most) engineering firms are doing well. They’ve made necessary adjustments and are pushing forward, preparing for success this year and beyond.

Below are my reflections about what engineering firms are experiencing and what progressive ones should be doing:

Project staff is busy. Firms have been hurrying deliverables out the door and may feel relieved now to have additional time for quality assurance or client relations. This could be good, but be careful: Technical professionals tend to stretch out work to fill the available time (the quest for design perfection). It’s still a business, and you may have to create arbitrary deadlines to keep efficiency up.

Growing firms still need new people. Indeed, several firm leaders I’ve spoken with have (quietly) adjusted staff in the last few months. These (mostly) modest reductions are the first in several years and are often overdue. The industry boom left many performance issues unaddressed, and these recent downsizing events position organizations for strength. Good communication with those who remain is critical. And yes, even with a layoff, you must go after good candidates. Remember: "Right people, right positions, right now."

It’s a good time to clean out the garage. You know what I mean: Taking advantage of that empowering, spring cleaning attitude? Get started now on those "priority" initiatives you’ve postponed while "too busy." Take advantage of recent slack to tackle updates to the QA/QC process, business development, project management training, or the performance review and mentoring processes. Clean up and create real value in the firm.

Collecting cash is non-negotiable. A little work slow down can expose this problem. With median collection periods of more than 80 days, most firms can’t afford to float clients more. Meanwhile, vendors, teaming partners, and staff expect to be paid on time. You must get on top of this—now. Go see your clients personally, and find out what is going on. Be professional but firm, and work out payment plans together. Remember that most companies pay important bills first, and then those whose representatives "squeak" the loudest. Be a squeaky wheel.

Clients are still human beings. Go see them—not for a handout, but for a check up. See how they and their business are doing. Find out what special challenges have cropped up and explore if any of these lead to new opportunities. Conduct some basic research and author a white paper on a hot topic. These investments will come back, if you "pay it forward."

Industry merger and acquisition activity remains brisk. Valuation multiples are strong but reasonable. Ownership transition and exit strategy is virtually on every engineering firm leader’s mind. Even those who are staunchly "not for sale" are heavily courted by serious suitors. An old saw says, "The best time to sell the firm is when someone wants to buy it." So learn about mergers and acquisitions by attending a seminar, have an experienced professional evaluate the firm, and check the status of the company’s strategic and leadership development plans. Consider the implications—and likely consequences—of the decisions you have (or haven’t) made.

Growth still matters. It’s easy to reign in investments—such as in recruiting, marketing, and technology—during tough times. But this is a time when key investments can give a firm a competitive advantage over the more timid. Buck up and keep moving ahead with your programs.

Here’s my mid-year bottom line (in three thoughts). First, make adjustments immediately to right-size and upgrade staff, cut ties with non-paying clients, and eliminate unnecessary expenses. Second, take advantage of the slowdown to do basic maintenance and upgrade work on key operational systems and processes such as project management, accounting, marketing, organization, and human resources. And third, stay the course. Hold firm to the mission and vision of the firm. Take a critical look at chosen strategies and affirm that each makes sense in the current environment. Adjust specific goals and action plans as necessary—reprioritize, realign, and revise—while staying focused on action.

Some firms are slow, while others are busy as ever. But all firms can be better: more focused, intentional, and strategic.

John Doehring is a senior vice president and managing director of ZweigWhite’s strategic advisory services group. He can be reached at jdoehring@zweigwhite.com.

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