By now, most of you have heard that privately-held A/E superfirm RTKL has been acquired by the Dutch engineering outfit ARCADIS.
I believe that RTKL is only the first of many big US-based A/E superfirms that will soon be acquired by non-US interests. I predict that non-US firms will acquire between 8-10 of the largest 25 US-based A/E firms over the next 12-18 months.
If you look at the world financial picture right now, it makes perfect sense. A weak US dollar combined with Wall Street's overvaluing of large publicly traded A/E/C firms create a win-win for buyers and sellers alike.
Until next time,
Frank A. Stasiowski, FAIA
Wednesday, August 15, 2007
Thursday, July 19, 2007
What is Wall Street Smoking?
Check out this article consolidation in the A/E industry:
http://money.cnn.com/news/newsfeeds/articles/newstex/IBD-0001-17973024.htm
This is an excellent example of the great minds of Wall Street not knowing what's going on in the real world.
Wall Street bases the entire market for A/E firms on the ENR 500. In doing so, they are missing 30% of the fees generated in the design market - not to mention many firms. They measure the revenue of the publicly held "biggies", apparently based on their gross revenues (which in many cases includes the build in design-build) to measure market share of what amounts to a reduced total market. Thus the basis for their analysis is pretty well out to lunch.
Until next time,
Bruce Lynch, Publishing Director
http://money.cnn.com/news/newsfeeds/articles/newstex/IBD-0001-17973024.htm
This is an excellent example of the great minds of Wall Street not knowing what's going on in the real world.
Wall Street bases the entire market for A/E firms on the ENR 500. In doing so, they are missing 30% of the fees generated in the design market - not to mention many firms. They measure the revenue of the publicly held "biggies", apparently based on their gross revenues (which in many cases includes the build in design-build) to measure market share of what amounts to a reduced total market. Thus the basis for their analysis is pretty well out to lunch.
Until next time,
Bruce Lynch, Publishing Director
Monday, July 2, 2007
Don't feel bad about making money
Question…..An architect recently told me his firm was being ‘unethical’ by charging clients too much money…..he asked if he could complain to the AIA about the Principals actions in this regard…..the quote was ‘raping the clients’….yet this firm does work for developers that fly around in their own private jets and drive Bentley GT’s…..Shouldn’t we FIRE people TODAY who hold the belief that high fees are unethical ???
Go for it!!!
Have a great Fourth,
Frank
Go for it!!!
Have a great Fourth,
Frank
Thursday, June 21, 2007
Reduce the costs of your staff meetings
You are probably thinking that I am going to suggest that you buy donut 'holes' for meetings instead of donuts because they are cheaper. Not this time. I was recently cc'd on an email from a CEO client of mine who called for a staff meeting in several days' time with everyone in his 2o-person firm. On the surface, this would not seem to be out of the ordinary - but this CEO doesn't have scheduled staff meetings because he is rarely in the office so when he calls an ad hoc meeting, it's an event. So what is the cost of this meeting and more importantly, how and why is it more expensive than it needs to be?
This CEO never includes an agenda or even a topic for his meetings. So what happens? People talk...and talk...and talk. What is the meeting about? Are we in some sort of financial trouble? Are we being bought? Sold? Merged? Is someone leaving? Who is it? The amount of lost time that the staff spends on speculating about the topic of the meeting amounts to several times the actual time spent in the meeting.
The simplest way to avoid creating an opportunity for staff to chat idly about what may or may not happen in a meeting is to explain in one sentence why you are having the meeting and what the participants in the meeting will come away with at the end. Be as specific as possible. Treat it as you would treat a meeting with a client.
Use some of the money you save in staff time to buy donuts for the meeting!
All the best,
Frank A. Stasiowski, FAIA
This CEO never includes an agenda or even a topic for his meetings. So what happens? People talk...and talk...and talk. What is the meeting about? Are we in some sort of financial trouble? Are we being bought? Sold? Merged? Is someone leaving? Who is it? The amount of lost time that the staff spends on speculating about the topic of the meeting amounts to several times the actual time spent in the meeting.
The simplest way to avoid creating an opportunity for staff to chat idly about what may or may not happen in a meeting is to explain in one sentence why you are having the meeting and what the participants in the meeting will come away with at the end. Be as specific as possible. Treat it as you would treat a meeting with a client.
Use some of the money you save in staff time to buy donuts for the meeting!
All the best,
Frank A. Stasiowski, FAIA
Wednesday, June 6, 2007
Become a valued member of a community
A/E firms are generally solicited for help through specific project requests - but how good are you at recognizing and addressing the clients' unmet needs?
If you're smart, you are taking the time to get to know your clients when you are presented with specific project requests. You use what you learn to both idenfity their unrequested needs and to communicate the unique value of your skills.
You need also to work this process from the other end: take the time to connect with targeted groups of your prospects, bring out their unmet needs and communicate the value of your skills to set up specific project requests.
When you work both sides of this process, you become recognized not as a vendor of services to your clients, but as a relevant and valued member of the community. As a profession, our tendency is to look at our fixed institutional position then to find needs to serve within it -rather than looking at the needs of our core clients and adjusting our position to serve them. We need to leverage our position as valued member of the community and learn to communicate to clients that we are inseparable from their cultural and social structures.
There are A/E firms doing this sucessfully right now. Identify them and copy their tactics and strategies.
All the best,
Frank A. Stasiowski, FAIA
If you're smart, you are taking the time to get to know your clients when you are presented with specific project requests. You use what you learn to both idenfity their unrequested needs and to communicate the unique value of your skills.
You need also to work this process from the other end: take the time to connect with targeted groups of your prospects, bring out their unmet needs and communicate the value of your skills to set up specific project requests.
When you work both sides of this process, you become recognized not as a vendor of services to your clients, but as a relevant and valued member of the community. As a profession, our tendency is to look at our fixed institutional position then to find needs to serve within it -rather than looking at the needs of our core clients and adjusting our position to serve them. We need to leverage our position as valued member of the community and learn to communicate to clients that we are inseparable from their cultural and social structures.
There are A/E firms doing this sucessfully right now. Identify them and copy their tactics and strategies.
All the best,
Frank A. Stasiowski, FAIA
Monday, June 4, 2007
Get your financial house in order
The 2007 PSMJ A/E Financial Performance Survey came back from the printer last week and I spent part of the weekend reviewing Dan Daniels' findings.
All in all, things are looking good for the A/E industry - growth, revenue, and profits are all up over last year - people are busier and utilization (chargeability) is higher - so it seems that people are working more efficiently.
Having said that, we're still shooting ourselves in our feet on basic business practices that we ought to have figured out a little better by now. To wit:
The current ratio -current assets divided by current liabilities - improved a little this year as some firms used profits to strengthen their balance sheets , but at 1.75 it is still woefully behind most other industries.
Accounts receivable and work-in-process measurements continue to reflect poor billing and collection techniques (67 and 22 days, respectively). Why are A/E firms so weak on converting work into cash? Do you think your auto mechanic would wait 22 days to bill you? Better yet, would she or he wait 67 days to to get paid?
And then there is the direct labor multiplier...granted, this year's median target multiplier has finally budged to 3.10 from 3.0 where it seemed to be stuck forever. If A/E firms are ever going to break the "profit-loss-profit-loss" cycle they need to start charging more for their services. Is there a better time to do this than now - when demand is high? If we are ever going to sustain profitability levels that are more independent of the business cycle, we've got to start charging more for our services.
Can't be bothered with the "accounting details"? Fine, but go find someone who can - they'll more than pay for themselves in improved financial performance for your firm.
If you are curious about the A/E Financial Performance Survey, download a free CEO Snapshot at http://www.psmj.com/publishing/survey/.
Have a great week,
Frank
All in all, things are looking good for the A/E industry - growth, revenue, and profits are all up over last year - people are busier and utilization (chargeability) is higher - so it seems that people are working more efficiently.
Having said that, we're still shooting ourselves in our feet on basic business practices that we ought to have figured out a little better by now. To wit:
The current ratio -current assets divided by current liabilities - improved a little this year as some firms used profits to strengthen their balance sheets , but at 1.75 it is still woefully behind most other industries.
Accounts receivable and work-in-process measurements continue to reflect poor billing and collection techniques (67 and 22 days, respectively). Why are A/E firms so weak on converting work into cash? Do you think your auto mechanic would wait 22 days to bill you? Better yet, would she or he wait 67 days to to get paid?
And then there is the direct labor multiplier...granted, this year's median target multiplier has finally budged to 3.10 from 3.0 where it seemed to be stuck forever. If A/E firms are ever going to break the "profit-loss-profit-loss" cycle they need to start charging more for their services. Is there a better time to do this than now - when demand is high? If we are ever going to sustain profitability levels that are more independent of the business cycle, we've got to start charging more for our services.
Can't be bothered with the "accounting details"? Fine, but go find someone who can - they'll more than pay for themselves in improved financial performance for your firm.
If you are curious about the A/E Financial Performance Survey, download a free CEO Snapshot at http://www.psmj.com/publishing/survey/.
Have a great week,
Frank
Thursday, May 31, 2007
Why good leadership teams perform badly
I routinely work with weak CEOs whose firms make decent profits in spite of them and others who seem to work well with their leadership group and are always one paid invoice away from bankruptcy. Clearly, the strong leaders should be doing better - so what stops them?
I asked my friend and colleague Sandy Blaha - a master builder of high performance A/E firm leadership teams - what are the principal barriers to success? How does an otherwise good management team pull it together and start making real money?
Sandy explained to me about the four most common problems encountered by leadership teams:
1. Lack of Facilitation Skills Most A/E professionals lack the active listening skills required to provide an occasional summary of what the group has said or decided so far. A good facilitator mirrors the group and helps it pause to evaluate what it is doing. Mirroring what has been said or decided so far also helps a participant in a group decision “get off” a point that he or she is continually repeating. It also helps relieve escalating intensity within the discussion.
2. Flying Blind Don't meet about something without the information or research needed to come to a conclusion. Make sure someone in the group has the insight to raise a flag and say "let's find out more before we decide."
3. Reinventing the Wheel Don't make a decision then start all over again several months later on the same issue as if no decision had been made. Keep a notebook of your meeting notes handy so you can review and reinforce previous decisions.
4. Leaving Team Members Out of the Loop Convey key decisions to employees and avoid confusion regarding the direction and intent of a decision. And for goodness sake, don't allow each principal to tell a different story!
Listen, keep it focused, document, and communicate and see the improvement!
All the best,
Frank A. Stasiowski
I asked my friend and colleague Sandy Blaha - a master builder of high performance A/E firm leadership teams - what are the principal barriers to success? How does an otherwise good management team pull it together and start making real money?
Sandy explained to me about the four most common problems encountered by leadership teams:
1. Lack of Facilitation Skills Most A/E professionals lack the active listening skills required to provide an occasional summary of what the group has said or decided so far. A good facilitator mirrors the group and helps it pause to evaluate what it is doing. Mirroring what has been said or decided so far also helps a participant in a group decision “get off” a point that he or she is continually repeating. It also helps relieve escalating intensity within the discussion.
2. Flying Blind Don't meet about something without the information or research needed to come to a conclusion. Make sure someone in the group has the insight to raise a flag and say "let's find out more before we decide."
3. Reinventing the Wheel Don't make a decision then start all over again several months later on the same issue as if no decision had been made. Keep a notebook of your meeting notes handy so you can review and reinforce previous decisions.
4. Leaving Team Members Out of the Loop Convey key decisions to employees and avoid confusion regarding the direction and intent of a decision. And for goodness sake, don't allow each principal to tell a different story!
Listen, keep it focused, document, and communicate and see the improvement!
All the best,
Frank A. Stasiowski
Tuesday, May 29, 2007
Welcome to the PSMJ Resources Blog
Three ways to keep salary issues out of your negotiations
If you are like other A/E firm leaders, you are finding that your management salaries are coming under more client scrutiny than ever. That last issue you want to deal with in a negotiation is defending your management teams’ salaries to clients — you need to keep the dialogue focused on how your service provides unequaled benefits to your client and delivers them maximum value.
How do you deal with clients who insist on raising the issue of management salary? Bear in mind that as a service provider, your relationship with your clients doesn’t end when they sign the contract — it continues throughout the project. Your firm doesn’t deliver a product and walk away — you deliver service that transforms concepts into valuable design parameters. So you need to have a strategy in place to process through — not blow through — your clients’ compensation concerns. Here are three things you can do:
Listen fully to their concern (do not interrupt or anticipate).
Take a proactive role in making sure that your response addresses the complexities of multi-stakeholder scenarios. The person with whom you are negotiating is usually just one of several client stakeholders involved with a project. Make sure your client sees you as their advocate and a problem solver.
Show them where you stand using your 2007 PSMJ Management Salary Benchmark Tool.
Cheers,
Frank A. Stasiowski, FAIA
President and Founder
PSMJ Resources, Inc.
If you are like other A/E firm leaders, you are finding that your management salaries are coming under more client scrutiny than ever. That last issue you want to deal with in a negotiation is defending your management teams’ salaries to clients — you need to keep the dialogue focused on how your service provides unequaled benefits to your client and delivers them maximum value.
How do you deal with clients who insist on raising the issue of management salary? Bear in mind that as a service provider, your relationship with your clients doesn’t end when they sign the contract — it continues throughout the project. Your firm doesn’t deliver a product and walk away — you deliver service that transforms concepts into valuable design parameters. So you need to have a strategy in place to process through — not blow through — your clients’ compensation concerns. Here are three things you can do:
Listen fully to their concern (do not interrupt or anticipate).
Take a proactive role in making sure that your response addresses the complexities of multi-stakeholder scenarios. The person with whom you are negotiating is usually just one of several client stakeholders involved with a project. Make sure your client sees you as their advocate and a problem solver.
Show them where you stand using your 2007 PSMJ Management Salary Benchmark Tool.
Cheers,
Frank A. Stasiowski, FAIA
President and Founder
PSMJ Resources, Inc.