Do your potential successors fit this bill? If not, move on!

The retirement wave has officially begun in the A/E industry. Since 2007, the percentage of employee turnover attributable to retirement or health issues has almost doubled. Yet the number of principals who have prepared ownership or leadership transition plans has actually dropped since 2007. If you are one of the 60 percent of principals who have no plans, you need to start evaluating your potential successors to ensure they will carry on the name and reputation of your firm long after you’ve retired.


Think about the people who are your obvious successors and decide whether these criteria describe them:

• Vision. Leaders create a vision for the firm and the future that inspires and motivates others.

• Focus. Leaders spend their energy in the few directions that will really make a difference to clients and to the firm over the long term.

• Values. Leaders embody the personal and professional values that you want to perpetuate in your firm.

• Client relations. Leaders understand what matters to clients and they motivate staff to excel in those areas. They inspire confidence in clients and potential clients.

• Empowerment. Leaders coach employees, help them grow personally and professionally, and encourage them to think and act like entrepreneurs within the boundaries of their responsibilities.

• Achievement. Leaders get things done, maximizing their own performance and constantly looking for ways to maximize the performance of the firm.

• Quality. Leaders strive to continuously improve the quality of their own work and the work of others in the firm, to satisfy and delight clients.

• Optimism. Leaders are positive about the future, and they don’t let obstacles deter them from accomplishing their goals. Their optimism is contagious.

• Teamwork. Leaders enjoy working with, and through, people. They look for opportunities to praise the efforts of others on the team. People like to work with them, and choose them as role models.

• Flexibility. Leaders perceive when their style or approach is not working in a particular situation and they’re not afraid to change to get the results they desire.

• Management. Leaders understand the systems and procedures that make your firm operate as a business. They know how to use these systems to maximize your performance and your profitability.

These traits are a great starting point, but you can take your evaluation of potential successors beyond this step. Come to PSMJ’s Ownership Transition Roundtable, November 8-9, in San Diego, CA for more advice on how to select your future successors and successfully turn your firm over to their capable hands.

Residential Construction Continues to Struggle

A sluggish economy, a soft job market, a large inventory of foreclosed homes, the threat of additional foreclosures, and difficulty in obtaining financing for both potential homebuyers and for builders continue to act as a drag on the housing market. In spite of these factors, some glimmers of hope have appeared recently. Housing starts rose 15% in September from August. Much of that gain was due to ever volatile multifamily starts. Single-family starts at worst are bouncing around a bottom of about 420,000 units. Meanwhile, single-family permits are holding their own at 417,000. The National Association of Home Builders (NAHB) October Housing Market Index (HMI) rose from 14 to 18, the highest it has been since a reading of 22 in May of last year. Particularly heartening was that the HMI for the West jumped from 12 to 21, its highest reading since August 2007. The HMI for the South was up from 15 to 19. Together, the West and the South account for roughly three-quarters of national housing starts.

Lower long-term interest rates from the Federal Reserve’s Operation Twist will provide a mild lift to the housing market, although tight lending standards remain a problem. If the national economy produces at least 100,000 net new jobs per month (at an annual rate) as we fully expect, the housing market will begin to trend upward and build some positive momentum. Regardless, the outlook for multifamily housing projects looks bright in the near term as vacancy rates fall and rents rise.

New residential construction spending has been inching upward for the past three months. In August, it advanced 1.3% to $128.7 billion, its highest level since February. The forecast is for residential construction spending to fall 6.0% in 2011 and then rise 2.1% in 2012 and 7.3% in 2013.

Clinard Engineering Associates merges with Alfred Benesch & Company

PSMJ initiates transaction and advises Clinard Engineering Associates

As of October 3, 2011, Clinard Engineering Associates of Nashville, Tennessee has joined forces with Alfred Benesch & Company, a leading multi-discipline design firm serving a wide range of client markets. With offices in Nashville and Chattanooga, Clinard is a transportation engineering firm that specializes in civil, structural, and environmental engineering services.

By merging with Benesch, Clinard is now part of a multi-faceted engineering team with a network of offices from Pennsylvania to Colorado. The combined firm now has more than 380 employees located throughout ten states including Colorado, Illinois, Iowa, Kansas, Michigan, Nebraska, Ohio, Pennsylvania, Tennessee and Wisconsin.

“When you have the right firms merging together for the right reasons, you will realize growth opportunities that neither firm would have accomplished on their own” states PSMJ Consultant Bradford Wilson, CMA. Wilson, the lead consultant on this engagement, went on to state “Geographic expansion is the top reason that firms choose to grow through acquisition and we’re confident that this transaction will reap rewards for years to come.”

This transaction is one of many that have made 2011 a year of significant transaction activity in the A/E industry. According to PSMJ’s transaction tracking, there have been 156 mergers or acquisitions in the industry in the first three quarters of the year and PSMJ is forecasting that pace to continue bringing the year’s total to pre-recession levels of 200+ transactions. “But, the number of transactions doesn’t tell the entire story.” stated Gregory Hart, PSMJ Consultant, when discussing M&A transaction activity. “The size and nature of deals today is quite different from what we saw before the economic meltdown. This is still a very risk-averse environment and the transactions reflect that.”

To keep tabs on the latest M&A news from the A/E industry and transactions like this one, subscribe to the M&A Insider— PSMJ’s free weekly e-news on the latest transactions and the tips you need for successful M&A strategy. Learn more by visiting http://www.psmj.com/mergers-and-acquisitions.html.

After Upturn, Architecture Billings Fall Again

The American Institute of Architects’ Architecture Billings Index once again showed decline in the month of September. While there was a slight improvement in August, the trend proved to be short-lived and it seems the industry is back to the decline we saw for the four months prior to that. Not only was there a drop in billings at architecture firms around the country, there was a decrease in average backlog.

The Architecture Billings Index (ABI) serves as the leading economic indicator of construction activity, and reflects the approximate 9-12 month lag time between architecture billings, and actual construction spending. The monthly ABI scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline.

The ABI registered a score of 46.9 for the month of September, a significant drop from the 51.4 posted in August. While the average number of billings declined on a national level overall, there were some regions that did show increase in firm activity. Regional billings scores are computed as rolling three-month moving averages, and recent numbers showed enough strength to boost scores for firms in the Northeast and Midwest into positive territory. Scores for firms in the South and West continued to show relatively steep declines.

Billings levels by firms’ specialization were also mixed last month. Commercial/Industrial firms reported reasonable improvement in September; the ninth straight month of billings gains from mid-2010 through the first quarter of 2011. However, residential and institutional firms once again reported a decline.

Unfortunately, backlogs at architecture firms around the country took a slight hit as well. They decreased from 4.4 months at the end of the second quarter, to 4.2 months in the third quarter. This means that firms can keep current employees working for an average of 4.2 months now without signing onto any new projects. While it might seem like a safety net, a continued decline in backlog and billings could be very detrimental to firms’ revenue stream in just a few months.

Economy remains in slow gear

The broader economy continues to show only modest growth. Just over 100,000 jobs were added in September, bringing the total added for the first nine months of the year to just over one million. That is well below the number required to generate healthy growth in the economy, and, as such, the national unemployment rate is up from 9.0 percent in January to 9.1 percent in September.

Construction employment saw an increase of 26,000 positions in September, the second strongest number of the year. However, only 53,000 positions in this sector have been added since the beginning of the year, or fewer than 6,000 per month. Architecture firms have added only 1,200 positions since January, to a current workforce of just over 153,000 in August, the most recent figures available.

Statistics

By region, the ABI breaks down as follows from July* to September: Northeast is up 50.8 from 46.4, South is up 47.3 from 46.9, West is up 46.7 from 46.6, and Midwest is up 51.0 from 44.9.

By market sector: Commercial/Industrial is up 52.4 from 47.9, Residential is up 46.4 from 44.7, Institutional is up 48.0 from 47.2, and Mixed is up 50.0 from 47.1.

*Data was not available for the month of August


This month, participants in the AIA Work-on-the-Boards panel were asked to comment on the current status of these downsized architectural staff:

• We specialize in residential and have stayed in business doing multifamily, as the single-family residential market is dead. Firms that held on with government work are now slowing down significantly.
—7-person firm in the West, residential specialization

• RFPs have dropped to first-quarter levels. Some projects already under contract have been slow to get the owner to agree to finalize and send out to bid.
—4-person firm in the Northeast, mixed specialization

• Our office interiors and retail work for large corporate clients are strong, but government, education, etc., are very weak.
—60-person firm in the South, commercial/industrial specialization

• Larger companies are going after local work instead of their typical national work, so smaller companies are having a struggle to get work. We typically have been doing 90 percent national work and 10 percent local. It is now 90 percent local and 10 percent national.
—50-person firm in the Midwest, commercial/industrial specialization

Stop Being Too Busy to Market! How to gain more exposure for yourself and your firm

We work in a unique industry – selling services is completely different from selling products. When consumers buy products, they consider the reputation of the manufacturer, but, most likely, have no knowledge of the individuals who are employed by that company.

Yet, when a client commissions us for professional services, our firm’s reputation gets us to the short-list, and the personalities and the reputations of our people win us the work.

Unlike products that can be sampled before purchasing, services cannot be tested, leaving clients to imagine what it would be like to work with the person/firm who delivers the service. This is where you come in!

Sooner or later, all professionals must market, if you want to advance your careers – there is no such thing as being too busy serving one client to market to another. Here are some ways you can gain exposure for your firm and promote the success of your own career:

- Write an article and get it placed in a local media outlet
- Speak at your local business association, chamber of commerce, or networking meeting
- Create a client-oriented monthly e-newsletter or webinar series
- Hold seminars and workshops for clients in your office (i.e. lunch-and-learns)
- Create a client-resource web site
- Get involved in social networking: create a blog or Facebook page for your firm to share firm information and news with clients
- E-mail relevant news and information to clients
- Collect and harness the power of client testimonials

Just remember that lack of time is not a valid reason to pass on career and business development activities. The small things you can do every day will yield positive results, if you make the time investment to do them well.

To learn more about how to raise the reputations and industry presence of your firm’s best assets (its people!), join PSMJ this fall for our Winning Proposals and Presentations seminar, coming to 5 locations across North America. Get the tools and confidence you need to succeed in bringing in more work for the firm – register today!

How to Gain Your Client’s Trust

In the present economy, clients only do business with firms they trust. And, with overhead dollars so tightly controlled, you must leverage every dollar you spend developing new business. So, here’s the challenge: what can you do to gain a client’s trust in the most cost-effective way?

Here are six of the most important qualities to demonstrate to build trust with your client:

1. You must prove your skill, competence, and experience in being part of a team.
2. You must prove you have “bench strength,” overall resources, an easily understandable organizational structure, and financial stability.
3. You must prove you have a solid reputation with other client partners who have collaborated with you.
4. You must take the time to understand your clients’ overall financial constraints on each project.
5. You must commit to building relationships with all client stakeholders that are integral to project success.
6. You must thoroughly consider all alternatives, and achieve results in a timely manner.


In contrast, here are six ways to quickly sink the relationship:

1. Be late on a deliverable
2. Give an excuse for being late on a deliverable
3. Be slow to return their call
4. Give an excuse why you were slow to return their call
5. Ask for an unexpected change order
6. Give an excuse for waiting to ask for additional money


Get the picture? Remember, excuses only satisfy those who make them. Don’t do it. If you make a mistake, own it. The game is trust. It’s hard to gain it. It’s easy to lose it.

For more tips on how to mitigate risks with great project management skills, attend PSMJ's A/E/C Project Management Bootcamp, the world's most successful PM training program in the industry! This Bootcamp is a revolutionary training like no other--through interactive case-studies, real-world examples, and proven solutions, you will foster innovation, elevate communications, increase productivity, and improve your firm's bottom line.

PSMJ's A/E/C Project Management Bootcamp can instantly and dramatically improve your ability to manage projects for quality, speed, and profitability. Click here to order or contact PSMJ Education Department at education@psmj.com or (800) 537-7765.

Focus on Your Clients’ Real Issues

When people begin to strategize about proposal opportunities, they tend to focus on their own firm’s strengths and how they can sell those strengths to the client.

In other words, they end up making a great case for features for which the client has little interest while ignoring the client’s most important issues. This is a formula for spending lots of money on a losing proposal.

The first step in developing a winning proposal strategy is to find out what the clients’ real issues are. Fortunately, it isn’t hard to do. During your pre-proposal interview with the client, just ask these two questions:

1. What is your vision for a successful project?

2. What are your greatest fears about this project?


Also, remember that most clients aren’t a single person. So you need to ask those two questions of each individual on the selection committee or, if they don’t have a formal selection committee, each individual who is influential in making the buying decision.

Once you have figured out the clients’ real issues, your next step is to develop a strategy that will convince the client representatives that your firm will address their hopes and fears better than anyone else. And if you can’t convince yourself that you are the best choice to address those issues, you should probably save your time and money and pass on the opportunity.

To learn more about how to make a more targeted proposal that accurately addresses your clients’ true concerns and increase your proposal hit rate, join PSMJ this fall for our Winning Proposals and Presentations seminar, coming to 5 locations across North America. Get the tools and confidence you need to succeed in bringing in more work for the firm – register today!