E D I T O R I A L

T R E N D L I N E S
I N S I D E
F I R M I N D E X
Ma r c h 1 4 , 2 0 11 , I s s u e 9 0 2
w w w . t h e z w e i g l e t t e r . c o m
Design-bid-build
meets
the opposition
Page 5
TOP PLAYER: Lifetime dedication to one rms
success. Page 3
PM PERSPECTIVES: Communication games
with the engineers. Page 7
Health issues
Its come to be expected (and is
actually required in many states)
that rms provide at least some
health insurance coverage for their
employees. However, with the
skyrocketing cost of health insurance
premiums in the last decade, some
rms have chosen to pass along
more of the cost to their employees.
Consequently, according to the 2010
Policies, Procedures, & Benets
Survey, employee-only and employee/
family health insurance contributions
reached a 10-year high last year.
The median employee-only health
insurance contribution climbed to
$102 from $86 the previous year.
Meanwhile, the median employee/
family contribution climbed to $424
from $324. Margot Suydam,
Survey Manager
T H E VO I C E O F R E A S O N F O R A / E / P & E N V I R O N ME NTA L C O N S U LT I N G F I R MS
HR | FINANCE
S U P P L E M E N T S
Pages 9 - 12
2006
2007
2008
2009
2010
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AECOM ................................................................ 10
BCDM .................................................................... 6
Butler, Rosenbury & Partners ................................ 5
Carney Engineering Group .................................... 5
Degenkolb Engineers ............................................ 3
England, Thims & Miller ....................................... 4
FPM Group Ltd....................................................... 6
FRCH Design Worldwide ....................................... 9
Gunda Corporation ................................................ 5
H.T. Harvey & Associates ...................................... 4
JSDA ..................................................................... 5
Manhard Consulting.............................................. 4
McCarthy Engineering........................................... 4
Rippeteau Architects............................................. 4
SH Group ............................................................... 5
Strada .................................................................... 4
X-nth ...................................................................... 6
Mark
Zweig
See MARK ZWEIG, page 2
ARE YOU CONNECTED TO ZWEIGWHITE?
http://blog.zweigwhite.com
www.twitter.com/ZweigWhite
www.facebook.com/ZweigWhite
Revitalization
of the rm
Do something new, hire
smart people and do some
cleaning. These are some
of the ideas Mark Zweig
presents to get things
rolling.
S
o many people today in this
business are just getting tired of the
grind. Te last three years havent been
fun with more competition, reduced
protability, delayed or cancelled
projects, stalled ownership transition
plans, and layos of good people being
the norm.
We went through the same thing here
recently at ZweigWhite. Its time for
revitalization. Here are some ideas for
you:
1) Come out with something new.
I cannot over-emphasize to all of you
how critical this is. What services are
you subcontracting out? Can you bring
them in house? Maybe you should
buy the rm or rms you are already
working with. Save money on
consolidated overhead and
joint marketing eorts. But
even if you dont buy, maybe
you can repackage something
you already do in a new and
innovative way that allows
clients to get a taste of your
service and expertise at a low
cost. Tis taste could lead to a
much bigger project later.
2) Hire some new, experienced
people. Tere is nothing like getting
some new people in who are known in
the elds and markets you serve people
at the top of their game, with a solid
reputation. It can shore up your ability
to get work in a soft market real fast.
Experienced people are more willing
than ever to make a move. Dont get cast
os get those who are still working but
dissatised by directly recruiting from
your competitors. If someone does decide
to join your rm, they will be doing so
for the right reasons not because they
HAVE to and will last longer on the job.
3) Hire some smart, inexperienced
people. New people, fresh out of school,
who are smart and motivated, will
put the pressure on you to give them
meaningful opportunities. Tats good! It
means they will expect you to grow your
business. Young people bring energy and
enthusiasm, and represent your future
Dont get cast offs get those who are still working but
dissatised by directly recruiting from your competitors.
If someone does decide to join your rm, they will be doing
so for the right reasons not because they HAVE to
and will last longer on the job.
THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902
2
Copyright 2011. ZweigWhite. All rights reserved.
A/ E BUSI NESS
NEWS
ABI FALLS: After showing positive
momentum during the fourth quarter
of 2010, the Architecture Billings Index
slipped almost four points in January.
The American Institute of Architects
reported the January ABI score was 50,
down from a reading of 53.9 the previous
month.
This score reects stable demand for
design services (any score above 50
indicates an increase in billings). The new
projects inquiry index was 56.5, down
sharply from a mark of 61.6 in December.
As a leading economic indicator of
construction activity, the ABI reects
the approximate nine- to 12-month lag
time between architecture billings and
construction spending.
This slowdown is indicative of what is
likely to be a very gradual improvement in
business conditions at architecture rms
for the better part of this year, AIA Chief
Economist Kermit Baker said in a release.
Weve been taking a cautiously
optimistic approach for the last several
months and there is no reason at this
point to change that outlook. There are
still too many rms that continue to
see weak market conditions to expect
a dramatic increase in the demand for
services in the design and construction
industry, he said.
GREEN CITIES: The U.S. Green Building
Council has released its 2010 list of top 10
states for LEED-certied commercial and
institutional green buildings per capita,
based on 2010 Census information.
The District of Columbia leads the nation,
with 25 square feet of LEED-certied
space per person in 2010, with Nevada
being the leading state, with 10.92 square
feet per person in 2010.
Other top states include New Mexico,
New Hampshire, and Oregon, with more
than 6 and 4 square feet of LEED-certied
space per person, respectively.
Using per capita, versus the more
traditional numbers of projects, or pure
square footage, is a reminder to all of
us that the people who live and work,
learn and play in buildings should be
what we care about most, said Scot
Horst, USGBC SVP of LEED. 2010 was
a difcult year for most of the building
industry, but in many areas, the hunger
for sustainable development kept the
markets moving.
For the full list of LEED-certied projects
log go on www.usgbc.org/ShowFile.
aspx?DocumentID=8784.
CALENDAR
BEST PRACTICES SEMINAR: Your rm
lives and dies by projects. Strategically
and intelligently executing projects from
proposal to solution fuels growth, creates
opportunities, and sustains a strong
commitment to your team and your
clients.
Effective project management is a
business necessity the alternative is an
expensive way to wreak havoc on your
rms relationships and protability.
Project managers are the caretakers of
your professional service. Through training
based on best practices, they can lead
their team to superior outcomes.
Thats why you need to attend the Best
Practices in A/E/P Project Management
seminar April 7 in Orlando, Florida.
The seminar will present strategies to
facilitate excellence at all levels using
practical, real-world examples and best
practices used by the top rms in the
industry. From principals and seasoned
project managers to assistant PMs and
technical staff every participant will
know the role they play within a project,
within the rm, and toward the vision.
Cant make it to Orlando? Future dates
include May 19 in Dallas, Sept. 8 in New
York and Nov. 8 in San Diego.
For more information or to register,
call 800-466-6275 or log on to
www.zweigwhite.com/seminars/pmo/
index.asp.
MARK ZWEIG, from page 1
The voice of reason for A/E/P,
and environmental consulting rms.
320 Rollston Avenue, Suite 102
Fayetteville, AR 72701
Mark Zweig | Publisher
mzweig@zweigwhite.com
Joo Ferreira | Managing Editor
jferreira@zweigwhite.com
Julie Kyle | Editor
jkyle@zweigwhite.com
Tel: 800-466-6275
Fax: 508-653-6522
E-mail: info@zweigwhite.com
Online: www.thezweigletter.com
Twitter: twitter.com/zweigwhite
Blog: zweigwhite.blogspot.com
Published continuously since 1992 by ZweigWhite,
Fayetteville, Arkansas, USA. ISSN 1068-1310.
Issued weekly (48 issues/yr.). $475 for one-year
membership, $775 for two-year membership.
Article reprints: For high-quality reprints,
including Eprints and NXTprints, please contact The
YGS Group at 717-399-1900, ext. 139,
or e-mail TheZweigLetter@TheYGSGroup.com.
Copyright 2011, ZweigWhite. All rights reserved.
stars. Plus they have no bad habits
that you will have to undo, unlike
some experienced staers. Get them
young and mold them in your hands.
4) Move. New surroundings can be
motivational to all. Get into a space
that has more stu close by. Everyone
will appreciate it. Find a space with
more windows and better gathering
areas. I never understood design
rms they should know better
not providing space with natural light
to their employees. Gathering areas
are also critical. Is there a space other
than the conference room where
employees can meet for lunch or
coee? Tere should be.
5) Discard archaic systems and
processes. Whether it is the non
user-friendly accounting system,
the marketing database that only
one person in the rm knows how
to use, or the ridiculous expense
report submission process. Dump it.
Ditto for meetings you have always
had but no one wants to participate
in because they have outlived their
usefulness. Dump em. Bureaucracy
is a huge demotivator to busy people
who have deadlines set by external
clients. Eliminate it everywhere you
can.
6) Share successes and celebrate
all victories. Whether it is a bell you
ring when you get a new project or
a thanks that comes in from a client
that you send on to all employees,
dont underestimate the importance
of reinforcing successes. Share
company performance numbers
also. People need to know every day
that what they are doing makes a
dierence AND that they are part of a
successful organization that bolsters
them.

MARK ZWEIG is the founder and CEO of
ZweigWhite. Contact him with questions or
comments at mzweig@zweigwhite.com.
ZWIEGWHITE DISTANCE LEARNING
ZweigWhites Distance Learning
program makes relevant knowledge
readily accessible for A/E/C/P industry
professionals knowledge that directly
or indirectly affects their functional
priorities. Our new program initiative
provides exible, engaging and
on-demand eLearning to support your
business needs.
For more information 800-466-6275
or log on to www.zweigwhite.com/
zw-64-elearning.aspx.
THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902
3
Stacy Bartoletti started
his career at Degenkolb
Engineers and has helped
make it a Hot Firm.
A
ve-year itch may explain Stacy
Bartolettis rise within Degen-
kolb Engineers (San Francisco, CA),
a 170-person earthquake engineering
and structural engineering rm.
He never rests quietly. Bartoletti
started as a designer right out of col-
lege, and is now the president and CEO
of the No. 58 rm on Te Zweig Letter
2010 Hot Firm List.
In this interview, Bartoletti talks
about his rise, the dening character-
istics of success and the challenges of
raising children.
Te Zweig Letter: What does it
mean to be a Hot Firm?
Stacy Bartoletti: Being a Hot Firm
provides recognition of the great suc-
cess that Degenkolb has experienced in
the past several years and is a tribute to
all of our employees.
TZL: How did you get where you
are today?
SB: I have basically been with Degen-
kolb Engineers for my entire career in
progressive roles of growing leadership,
and in various locations. I started as an
entry-level designer in our San Fran-
cisco o ce right out of undergraduate
school at Purdue University and gradu-
ate school at the University of Texas. At
the time, the company employed about
50 people and only had one o ce. After
about three-and-a-half years I moved
to Portland, when we opened our sec-
ond branch o ce (LA was the rst). I
grew as an engineer and project man-
ager while in Portland and saw an op-
portunity to run my own o ce in 2001,
after the Nisqually Earthquake in Seat-
tle. Chris Poland, the CEO at the time,
and I talked about a Seattle o ce and
decided that I should move there and
start a new o ce. For a period of time
I ran both our Portland and Seattle of-
ces and in late 2007 moved into a cor-
porate role as COO and president. In
2011 I stepped into the president and
CEO role.
TZL: Do you remember your rst
paid job? What did you learn then
that still inuences the way you
work today?
SB: My rst job as a young kid was
doing lawn care at a local dentist o ce
near my home. It actually instilled a real
sense of responsibility. My brother Da-
rin and I shared the job and we had to
decide when lawn care was needed and
had to go and ask the dentist for pay-
ment after work was completed. I think
working at a young age gives people a
sense of the real value of money and an
appreciation for working hard and feel-
ing good about hard work and the re-
wards that come with it.
TZL: What is it in your DNA that
drives you to success? Is it audac-
ity and risk-taking; a can-do at-
titude and a relentless pursuit of
perfection; something else more
abstract?
SB: I have always looked for new chal-
lenges in my career. My wife and I joke
about my ve-year itch. It seems like ev-
ery ve or so years I need a big change
to keep me challenged and motivated. I
believe what has made me successful is
my personal drive and my competitive
need to succeed.
TZL: In todays di cult business
climate, what does it take to suc-
ceed? Is the spectrum of failure a
motivator?
SB: More than anything I believe it
takes teamwork to succeed in todays
economy and in the engineering servic-
es business in general. We have really
come to learn at Degenkolb that teams
succeed where individuals fail. We rec-
ognize that as our business has gotten
larger and more complex it takes much
more than an individual make it suc-
cessful.
TZL: Where do you see this indus-
try in 10 or 20 years? What trends
are inuencing it? What about your
company?
SB: I cannot say that I can predict
where the industry will be in 10 to 20
years, but it is certain that it will be dif-
ferent.
At Degenkolb we are very proactive
with our strategic planning and this
year we are focusing our attention on
a discussion about what trends are go-
ing to inuence our business in the
next 10 years and what do we need to
do to adapt. One area of study that I
believe will be very important to our
business is demographics. Demograph-
ics will drive a vast majority of the in-
frastructure that gets built, and in the
next 10 to 20 years we are going to see
some substantial changes in the demo-
graphic makeup of the U.S. and world
populations.
TZL: Do hold someone as a special
mentor? How did this person inu-
ence who you are?
SB: I would say that my professional
career has been inuenced by two sig-
nicant mentors at Degenkolb. My ear-
lier career was very inuenced by Da-
vid Bonneville, who is one of our senior
principals. David hired me and helped
guide me through my career all the
way to a rm-wide leadership position.
Chris Poland, our past CEO and current
chairman of the board, has also been a
signicant mentor and I expect he will
continue to be one as I grow in the role
of CEO.
TZL: Whats the one trait you most
admire in people and why?
SB: In my mind integrity has to be
the most important trait for a person
and certainly one that is very impor-
tant to me. When I am dealing with an-
other person in our rm or elsewhere,
I need to know that they have high in-
tegrity, and from that follows honesty
and trust.
Read complete interview in The Zweig Letter
online at www.thezweigletter.com
TOP P L AY E R
Stacy Bartoletti,
President and
CEO, Degenkolb
Engineers.
Lifetime dedication to one rms success
I have always
looked for new
challenges
in my career.
My wife and I
joke about my
ve-year itch.
THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902
4
Copyright 2011. ZweigWhite. All rights reserved.
E F F I CI E NCY
Emergence of project
information management
and electronic permitting
means less waste.
By JULIE KYLE
Editor
T
he paperless o ce seems a little
closer than it did 10 years ago, as
web-based project sites and online le
storage are becoming normal practices
in real-world A/E/P and environmen-
tal consulting settings. Te ability and
means to transfer, communicate, and
collaborate on ideas more e ciently
and in a timely manner is ever increas-
ing, and options abound.
For England, Tims & Miller (Jack-
sonville, FL), a 190-person engineer-
ing rm, Autodesks Buzzsaw has been
their most favorable application for
going paperless, says Tom Fallin, vice
president.
We use it to facilitate electronic de-
sign reviews by regulatory agencies,
and once the conceptual design is ap-
proved by the regulatory agencies, its
provided to design/build rms for con-
tinuation with design and the as-built
record process, Fallin says.
Te online collaboration tool is con-
sidered software as a service (SaaS) that
allows project teams to better central-
ize and more securely exchange project
information, enhance team collabora-
tion, and support building information
modeling (BIM) workows, according
to the Buzzsaw web site.
It has greatly facilitated our abili-
ty to ensure current design availabili-
ty and eective record keeping. All the
clients, design/build rms, and regula-
tory agencies need is an Internet con-
nection no CADD licenses, etc., Fal-
lin says.
EteciuoNtc veumtiitNo inxes
noto. Very few major cities have a
clear development process that makes
information available online or have
online applications, but some have be-
gun utilizing information technology
that allows for processes such as down-
loading forms, submitting applications,
checking plans, issuing permits, sched-
uling inspections and tracking applica-
tions online.
Washington D.C. issued its rst elec-
tronic permit ttingly for a build-
ing to be occupied by a software com-
pany.
It is denitely the solution we need,
because of the simultaneous reviews by
all of the various permit o cials, says
Darrel Rippeteau, president and CEO
of Rippeteau Architects (Washing-
ton, D.C.) a six-person rm.
Project managers love the process,
Rippeteau says. Tey can see all code
o cials comments and annotations on
the master design document, hosted by
ProjectDox (an electronic project sub-
mission provider) on their computers,
rather than managing separate cop-
ies for each the mechanical, electrical,
plumbing, structural, re, and life-safe-
ty reviewers.
If you calculate the weight of a 24-
by-36-inch permit sheet and multiply
by 30 sheets, times three or four sets,
you will see how much paper is saved. A
wad!
Zeuo vnveu vtnNs. Jim Mc-
Carthy, president of McCarthy Engi-
neering (West Lawn, PA), a 26-person
rm, says his o ce contains zero pa-
per plans, as all plans and drawings are
stored digitally.
We use NomaDesk as an information
exchange portal for our clients and col-
laborating rms, and all internal re-
ports, schedules, etc., are located on
our intranet site, McCarthy says.
Although some clients still want pa-
per invoices, McCarthy says the rm
is trying to move toward 100% (paper-
less). We send out 50% of our invoices
electronically, via e-mail.
Strada (Pittsburgh, PA), an 18-per-
son multidisciplinary design rm, has
embraced reducing the amount of pa-
per used in the design and construction
process, as well as in rm operations,
says Alan Jesse Cuteri, principal.
We host our own FTP site that is uti-
lized by bidders, clients, and consul-
tants for electronic transmission of
documents. We use (Adobe) PDF les
for correction documents. Typically, all
bidding documentation, client corre-
spondence, submittals,
reviews and so forth
are done electronical-
ly, Cuteri says.
In terms of technol-
ogy, we primarily use
PaperPort (document
management software)
through our copiers,
but we also use porta-
ble scanners that use
ScanSnap, says Karin
Hunsicker, vice presi-
dent and COO of H.T. Harvey & As-
sociates (Los Gatos, CA), a 90-person
environmental consulting rm.
A ScanSnap scanner converts all
scanned images into a searchable PDF
format. Its fast, small, and powered
through a USB cord.
Once scanned, copies of receipts, busi-
ness cards, or invoices are automatical-
ly saved onto a hard drive and accessed
through an online site, EverNote. All
notes are stored in the cloud, and can
be accessed by any computer or smart
phone.
Pnveutess mnuxeitNo. Man-
hard Consulting (Vernon Hills, IL), a
150-person full-service civil engineer-
ing and surveying rm, has replaced
much of its direct-mail marketing cam-
paigns with e-mail blasts that the rm
executes internally, says Trish Man-
hard, marketing director.
E-mail blasts are less expensive (in
terms of postage and printing costs)
and are considerably less wasteful. Te
response is easier to track and it allows
us to keep our database more current
(based on e-mails that get returned due
to bad addresses).
Replacing holiday greeting cards with
e-cards is another small but impor-
tant way in which Manhard Consult-
ing is going paperless, Manhard says. It
has saved the rm a chunk of money.
Our Atlanta o ce used Paperless Post
to send holiday greetings. What we
particularly liked about Paperless Post
is that it still feels like you are receiving
an actual card because you must open
a virtual envelope to view your card.
Teir designs are beautiful, and they
allow the recipient to respond back to
you, Manhard says.
Paper disappearing in the o ce...
Alan Cuteri,
Principal,
Strada.
THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902
5
T RE NDS
Traditional delivery method
is falling out of grace
in favor of emerging
collaborative alternatives.
By JOO FERREIRA
Managing Editor
D
esign-build-bid has long been
the favored delivery method in
the design industry, but oh, boy is it
quickly loosing its luster.
Astonishingly, there are still owners
who choose a design-bid-build model
as the best approach to their projects,
says Joshua Carney, president of Car-
ney Engineering Group (York, PA),
a nine-person structural engineering
rm.
Indeed, D-B-B still rules. According
to ZweigWhites 2010 Project Manage-
ment Survey, 43% of all projects are de-
livered through D-B-B. But D/B already
accounts for 27% of projects, accord-
ing to the survey. Te Design-Build In-
stitute of America also estimates that
design/build now accounts for 45% of
nonresidential construction same as
D-B-B in the U.S.
Ten theres Integrated Project Deliv-
ery, the much-debated team approach,
and other methods and variations of
methods, such as construction man-
agement at risk and design-build-op-
erate-maintain, etc., all competing for
space in the A/E/P and environmental
consulting world.
Te emerging trends in delivery seem
to point to a return to the primordial
concept of the masterbuilder, as exem-
plied by D/B and IPD.
But no method is perfect, as practitio-
ners will quickly point out.
I still believe in the design-bid-build
process for most projects. However,
there is no universal solution for de-
livering projects, says Ramesh Gun-
da, president of Gunda Corporation
(Houston, TX), a 29-person planning,
engineering and management services
rm.
IPD, design/build, CM at risk, guar-
anteed maximum price (GMP), and
other models are additional ways of de-
livering projects based on the needs of
the client and the project being deliv-
ered. Te challenge is determining the
right delivery system for each project.
Wntcn svsiem Good question.
For Georey Butler, president/CEO
of Butler, Rosenbury & Partners
(Springeld, MO), a 90-person archi-
tecture, engineering, interior design,
planning and development rm, its
not D-B-B.
Design-bid-build has
always been problem-
atic in that the success-
ful low bidder is usually
the rm that made the
biggest mistake. Ten,
after they get the job,
they spend the rest of
the time trying to cov-
er their mistake and to
protect their margins.
Tis creates an adver-
sarial relationship with
the architect and own-
er, he says.
Plus, Butler argues, D-B-B is not team-
work-friendly. Although D/B promotes
teamwork, Butler is not big on it, ei-
ther, because theres still two oppos-
ing parties, with the builder compet-
ing with the architect for work, which
can lead to all sorts of problems.
We prefer a negotiated cost-plus con-
tract with the general contractor where
we select a qualied GC and negoti-
ate his fee up front during the design
phase and he works with us through
the design process, providing input on
systems costs and the best, most cost-
eective way to put the building to-
gether, he says. In that process, he is a
member of the project team and his fee
is secure and not at risk. We all work to-
gether to hit the budget and get our cli-
ent the project they want.
Janice Stevenor Dale, president of
JSDA (Pasadena, CA), an interior de-
sign rm, favors more collaborative
methods.
Design-bid-build has never been the
way if teams wish to work collabora-
tively and in a positive work environ-
ment where team members have mu-
tual respect for one another, she says.
Negotiating with the right general con-
tractor to add him/her to the team ear-
ly in the process is the far better meth-
od and represents best practices for all
non-governmental projects.
Cyrus Izzo, co-president at SH Group
(New York, NY), a 500-person consult-
ing engineering and commissioning
rm, goes farther, arguing for IPD.
Te integrated project delivery sys-
tem is denitely going to impact the
future of our industry, and we will see
it utilized in conjunction with the pub-
lic/private partnership model, he says.
It is particularly relevant in the gov-
ernment sector, where we expect to see
it increase. Our corporate clients and
private owners will come more slowly
to that table; for them, the design-bid-
build model has been working fairly well
and we do not see the same challeng-
ing drivers for them to change as rapid-
ly. We are being particularly mindful of
risks that are associated with some of
these new procurement methodologies
and are tracking the legal and nancial
ramications as they evolve.
A vtnce rou D-B-B. Gunda, the D-
B-B adept, argues that D-B-B has been
around for a long time, is well under-
stood by most of the public and pro-
fessionals, and is a proven system for
most projects.
Owners of projects,
either public or private
entities, have many
factors to consider be-
fore determining the
type of project deliv-
ery, he says. Some of
the key factors to con-
sider include project -
nancing, project reve-
nue stream, life-cycle
costs, cost of time de-
lays, and owners capa-
bilities of handling al-
ternative delivery methods, etc. If proj-
ect funding is available in installments
and time value of early completion of
the project is not signicant, tradition-
al design-bid-build becomes the best
delivery method.
Ultimately, Gunda believes that with
technological advances, globalization
and nancial pressures, we have to
change how we deliver projects.
Not so fast, however. Just because
a new idea of delivery is developed, it
doesnt mean it is the best way for ev-
ery project, Gunda says.
Design-bid-build meets the opposition
Ramesh Gunda,
President,
Gunda
Corporation.
Geoffrey Butler,
President/CEO,
Butler, Rosenbury
& Partners.
THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902
6
Copyright 2011. ZweigWhite. All rights reserved.
How can you grow even
though your size has
decreased? Read on!
A
recent editorial by Mark Zweig
(see Te Zweig Letter, Jan. 24, Is-
sue 895) elicited some interesting feed-
back on the topic of prot vs. growth.
So, which is more important? We asked
our readers.
Jim Dennell, president, BCDM
(Omaha, NE), a 41-person full-service
architectural rm, provided a compre-
hensive and eloquent answer, high-
lighted here. Here are his thoughts:
Personally, I have come to the con-
clusion that prot is the most impor-
tant. As architects, prot seems to a
have an evil connotation. For some,
prot means conceding or conform-
ing to something that is contrary to
good design. After 30 years of prac-
tice, I see that attitude as a cop out or a
bush to hide behind. I feel we are avoid-
ing accountability and preserving de-
nial. It wasnt until this Great Reces-
sion that I was able to prove prot is
good. Prior to the recession, we were al-
ways in a growth mode and as we were
growing, we always saw prots. Tis is
the rst problem. As long as the prof-
its were positive we never questioned
the amount of prot. Tis gave us free
reign to do anything without being
questioned about things such as the
amount of fee we got, hours we took,
and dollars we spent. Te second prob-
lem with a positive prot in a growth
mode, is that crisis management is ac-
ceptable. Hey, were making a prot,
so things must work.
We were fortunate six years ago to
have a nancial consultant introduce a
concept of accountability. Youre prob-
ably laughing, but this was a foreign
thought. Over the three years that fol-
lowed we compiled data, learned met-
rics, developed reports and tried to ed-
ucate people. Although we were mak-
ing a 10% prot, and people loved it, I
could see that half of the projects were
in the 20%-plus and others were losing.
Also, half the people were producing
the prot. Te truth was, if the losing
projects just broke even we would have
doubled our prots. Because we were
in a growth mode, nobody saw the lost
prot. Te common denominators with
the losing projects were the sta and
processes utilized. We attempted to
manage change to convert to the best
practices and develop people. As we did,
we developed several metrics to make
sure there was balance in what people
did. Tis meant watching the quality,
client satisfaction, HR, professional de-
velopment, and business development,
along with the typical nancial met-
rics. All these were put in place to hide
the dirty metric of prot. Fortunately
the recession hit and the prots dis-
appeared, exposing all the ine cien-
cies. Since we couldnt aord them, we
had to become e cient. Now prot is a
good word and it measures more than
dollars. It measures the eects of all
the best practices we were trying to de-
velop when we were in a growth mode.
I have changed philosophies from
growth being the only way to become
great to prot makes you great. Tis is
because prot becomes the measuring
stick of your design excellence, employ-
ee engagement and client satisfaction.
Tis being said, you must focus on the
three to achieve prot. Knowing that
we were trying to achieve the three in
our growth mode, it begs the question:
What is growth? Is more prot growth?
We feel weve grown, although our size
has decreased.
William McGuire, corporate opera-
tions o cer of U.S. operations for X-
nth (Maitland, FL), 360-person con-
sulting engineering rm now part of
Trow Global (Brampton, ON):
Without prot, a busi-
ness cant pay bonuses
and raises, so you lose
talent in the short run.
Without growth, the
business cant satisfy
career growth, so you
lose talent in the long
run. Te question that
needs to be answered
is: What do you want
your business to be?
If the purpose of the
company is making the
owner(s) money the
prot route is important.
X-nth chooses growth if youre not
growing then youre shrinking rela-
tive to your competition. Employees
will not be loyal to a company that is in
clear decline.
Kevin Phillips, CEO of FPM Group
Ltd. (Ronkonkoma, NY), a 100-person
full-service environmental and tradi-
tional engineering rm:
Obviously, they
are both important.
Growth is necessary
for the overall valid-
ity, stability, and sus-
tainment of the orga-
nization. If you are not
growing, you are not
paying attention to
the changing needs of
your clients. Growth is
also necessary for the
needs of your person-
nel, their future, growth in responsi-
bility, new challenges, pride in success,
and new opportunities. All come with
growth, and without a motivated sta
the rm becomes stagnant, or worse.
Prots are equally important, because
prots mean you have paid attention to
the mundane business side of the orga-
nization. Winning a $100 million proj-
ect is one thing, executing it on bud-
get and on time is something quite dif-
ferent. Both are necessary and require
equal attention and investment.
ON T HE RE CORD
William McGuire,
Corporate
Operations
Ofcer of U.S.
Operations,
X-nth.
Kevin Phillips,
CEO,
FPM Group Ltd.
The debate over growth vs. prot
FEDERAL MARKET OPPORTUNITIES
FOR A/E/P FIRMS WEBINAR SERIES
Many rms are rethinking their traditional
avoidance of the federal market, and want
to develop sound strategies for
developing federal customers. At the
same time, federal contracting
requirements are becoming more
complex, rendering this already
jargon-lled marketplace even harder
to understand. To succeed, you need a
custom-tailored strategy to achieve your
business development goals in the federal
market. In this 12-part series presented by
ZweigWhite, you will learn the secrets of
entering this market.
For more information or to register, call
800-466-6275 or log on to
www.zweigwhite.com/zw-1081.aspx.
THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902
7
PM PERSPECTIVES
Christine
Brack
Big ideas and ah-ha
moments in 15 minutes
or less at ACEC
of Metropolitan
Washington event.
A
CEC of Metropolitan Washington
invited me to present a session
on Eective Communication in
February to their emerging leaders
and other distinguished constituents.
Good techniques and best practices
are essential in every corner of the
organization, but one cannot deny the
criticality when applied to projects.
Although I had the podium for four
hours that snowy and chilly morning,
it took only 15 minutes to illustrate
the dynamics of communication,
expose the frustrations and
assumptions prolically found in
teams, and underscore the role each
member plays in the success or failure
of the project outcome.
A session on eective communication
would lack any real usefulness if I
did all the talking so I unleashed
a little parlor game upon this large
group and watched their lessons
learned unfold before their very
eyes. I wont go into vast detail about
how the game is facilitated, but the
teams are small (ve members),
the only communication allowed
is through written notes, and each
member is given an individual sheet
of instructions. Te task is to be
completed within 15 minutes.
When time was called, and the quiet
room nally lled with the crescendo
of sighs, whistles, and laughter, we
discussed the phenomenon of what
just took place. We didnt learn
something new about the stranger
or colleague next to us. We didnt
have to think on our feet about what
we were going to bring to a picnic.
Tis exercise intentionally mirrors
the arrangement and
structure of a real
project team and the
behaviors displayed are
the culprits but also
the muscle behind good
project communication.
In their own words,
here are some of those discoveries:
I gave them a matrix because
I thought it would make their
job easier. Te principal thought
he was doing the team a big favor by
designing a tool they could use to solve
the problem. What he didnt share was
the goal of the task with his project
manager. Without the meaning behind
the activity, the team found the matrix
useless and mysterious and proceeded
to work without it. Principals take
note: Serving good intentions and half-
solutions on a silver platter are almost
futile exercises if not paired with a
purpose.
I was bored. I was waiting for
him to give me more. Everyone
comments on the work ethic of
Millennials. On this day, I had a healthy
roomful of young engineers who
would defy most of the stereotypes.
Lower down the communication chain,
they had even less direction and were
given far less attention. Tey followed
instructions, sat and waited for further
word. And they waited, and they
waited. And when they asked questions,
the project manager was too busy to
answer right away. So they sat there and
waited some more. Could this be why
Millennials want to leave at 4:30? Can
we say we know our teams skill sets,
and how we can leverage those? Are we
ignoring the potential we have sitting
around us? Are we talking about it?
Te note with the goal written
on it is sitting here but I guess
we forgot to pass it around. Only
the principal was informed about
the objective of the exercise, and
for this particular team it made its
way onto paper but it didnt get any
further. What a shame, because had
the team shared this knowledge, they
admittedly wouldnt have duplicated
eorts indeed a very expensive drill.
If principals and project managers
share the mission at the onset of a
new project, remarkable dierences in
e ciency and protability will certainly
take place.
When I stepped out of the way,
he was successful. I let him be the
PM. All principals can point to the
time they were full-time designers.
As a leader, it is tough to shake the
temptation to take the reins and call
the shots even though we delegate
that responsibility to our PMs. In this
scenario, the principal began to gum up
the process but when he stepped back,
the project began to roll. Tey found a
solution within minutes.
If I could do it over again, Id
be more e cient then maybe
my coee wouldnt have gotten
cold. How often are PMs so caught
up in the urry that they miss out on
the ner things in life or simply feel
like they have aged 10 years? Projects
arent supposed to make us feel awful.
Applying good communication practices
ensures this isnt the case.
I would like to again thank Mac
Cannon, executive director of ACEC
of Metropolitan Washington, Angela
Marchetti and Eric Rehwoldt of
Schnabel Engineering, and Lou
Robbins of Dewberry & Davis
LLC for the invitation to speak
at their emerging leader forum.
I would also like to thank all the
attendees for their participation and
commentary which gave me ample
material to craft this article which
broadly provides learning insight and
valuable perspective for the rest of the
industry.
CHRISTINE BRACK, PMP, is a principal with
ZweigWhite specializing in strategic business
planning and project management best
practices. Contact her at
cbrack@zweigwhite.com.
Communication
games with
the engineers
Although I had the podium for four hours that snowy
and chilly morning, it took only 15 minutes to illustrate
the dynamics of communication, expose the
frustrations and assumptions prolically found in teams,
and underscore the role each member plays
in the success or failure of the project outcome.
THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902
8
Copyright 2011. ZweigWhite. All rights reserved.
How to create
a PMP exam
brain dump
sheet
While there are general
guidelines, you need
to include what you
need to pass.
T
heres no better catalyst for
self realization than taking the
Project Management Professional
(PMP) exam. Im kidding you, of
course, but there is some truth in that
the PMP exam day will illuminate
that you dont know what you dont
know.
Te PMP Exam is a closed book
exam. Tat means the only reference
material you are allowed to carry into
the testing facility has to be contained
in your brain. But during your exam,
your brain is going to be very busy
interpreting questions and trying to
apply all of the knowledge, skills, and
principles youve accumulated in your
studies and work experience.
If you havent already, you should
visit the local testing facility where
youll take your exam and conrm
what to expect. Most likely, on your
exam day, the exam monitor will check
you into the testing facility, hand
you six or so sheets of scratch paper
and two pencils, then show you to
your seat and conrm that your PC
is working. Ten youll have about 15
minutes to go through a tutorial that
really only takes about ve minutes to
do. Ten you begin your exam.
During the test, recalling what you do
know can be daunting. Quite frankly,
some of your ability to access that
knowledge is going to seem misplaced
among your grey cells. So how do you
create the best opportunities to pass
the PMP Exam that day? You can use
the 10 minutes you dont need from
the tutorial time to do a brain dump!
Wnni ts n uuntN
oumv A brain dump is
a technique used by many
students on closed book
exams to create their per-
sonal mini reference table.
Brain dumps are abbrevia-
tions of components and
concepts, which you have
committed to memory and are then
spilled out on to sheets of paper before
the exam for reference.
Brain dumps contain just enough
key concepts, theories, formulas and
content, which will jog your memory.
By having the information on your
Brain Dump, your mind can focus on
the question at hand, instead of trying
to remember the formula needed to
answer the question. It helps you to
be in the right frame of mind for each
question.
Wnni ooes tNio n uuntN
oumv Brain dumps are only as good
as the quality and quantity of infor-
mation that you can spill out on the
piece(s) of paper just before you begin
your PMP Exam. Tey contain the for-
mulas, theory, concepts and PMP-isms
that you might otherwise forget for
a moment at the very moment when
you need it most.
Here is what you can generally nd as
part of a PMP exam brain dump:
Table 3-1 of the PMBOK Guide 4th
Edition
Formulas, such as earned value, PERT,
communication channels, procurement,
probability, project selection and
depreciation
Values, such as 1, 2 and 3 sigma and
estimate ranges
Acronyms, such as BAC or TCPI
Powers of a project manager
Conict resolution (best to worst)
Sources of conict (order of priority)
Herzbergs motivators
Project closing check list
And, of course, you must include
all the items that you have trouble
remembering during your studies and
that you feel need to go onto your
sheet. Te list above or using a brain
dump that someone else created can
be a good start, but you really need
to customize it to your needs. Dont
study what others are having trouble
remembering. Instead, include what
gives you the hiccups.
How oo I siuov n uuntN
oumv Brain dumps are pure memo-
rization. As part of your exam prepara-
tion, exercises and studying, go ahead
and practice committing the content
of your brain dump to memory and
then writing it out onto a blank sheet
of paper on a daily basis.
Every morning, practice your brain
dump until youre satised with your
progress. By the end of the rst week,
you should be able to write out your
brain dump in its entirety on the rst
go.
Ten, continue dumping it on a
regular basis, going back to the daily
routine in the two weeks leading up to
your exam.
So wnni *IS* ine secuei or
cuenitNo mv PMP exnm uuntN
oumv sneei Creating and study-
ing your very own, personalized PMP
exam brain dump sheet is a means to
an end in itself.
It all begins with creating the content
that goes into it by getting to know
your weak areas as you prepare for the
exam. Ten you memorize, you dump
and you repeat. Pretty soon what
seemed too complex to remember is at
the forefront of your knowledge.
So, the secret is that you will
accelerate your studies and knowledge
simply by going through the motions
of creating, studying and knowing
whats on your personalized brain
dump.
Last but not least, your PMP exam
brain dump is a great tool not only
to help you bring your reference
material into the testing facility, but
also providing stress relief knowing its
there as you encounter questions that
require it.
Youll help yourself to learn the
material as you study for your PMP
Exam and give yourself an important
edge in passing.
CORNELIUS FICHTNER is a noted PMP
expert. He has helped over 12,000 students
prepare for the PMP Exam with
The Project Management PrepCast at
www.pm-prepcast.com and The PMP Exam
Simulator at www.pm-exam-simulator.com.
GUEST SPEAKER
Cornelius
Fichtner
HRA SUPPLEMENT OF THE ZWEIG LETTER MARCH 14, 2011, ISSUE 902
9
T RE NDS
Making prospective
employees feel valuable
is key to future growth.
By SUSANNAH SWEARINGEN
Correspondent
M
ore and more rms are relying
on recruiting technology to get
through stacks of rsums, such as au-
tomated resum screening and search
tools and computer-assisted interview-
ing. Candidates can sometimes end up
feeling more like a number than a per-
son.
According to a survey by human re-
source consulting rm Development
Dimensions International and web-
based recruiting resource Electronic
Recruiting Exchange (ERE), nearly half
of the organizations surveyed will in-
crease their use of screening and search
tools in the next year and 12% will in-
crease their use of computer-assisted
interviewing.
As recruiting begins to pick up at ar-
chitecture and engineering rms, hu-
man resource professionals are looking
at ways to best align hiring practices
so they attract and retain the best tal-
ent and avoid making potential em-
ployees feel that they are nothing but
just a skill set.
EmvtovmeNi uunNotNo. Don-
na Szarwark, senior vice president of
human resources at FRCH Design
Worldwide (Cincinnati, OH), a 150-
person architecture and design rm,
says its important to use your rms
brand in your hiring strategy.
A companys employment brand is
what makes the dierence in whether
or not a rm is able to attract top tal-
ent, Szarwark says.
Our employees are our brand so its
the association they make when they
think of us, she says. Its the face,
voice and personality of our rm. Its
our reputation and the loyalty and
emotional attachment people have to
our rm. Its our promise we make to
them based on our oerings and expe-
rience and we believe that it is a dier-
entiator.
In todays world, when the talent
pools are larger than theyve ever been,
Szarwark says the employment brand
is more critical than ever.
Branding denes
the employment expe-
rience. It connects the
candidates to you and
inuences the choices
that are made at each
touch point, because a
brand creates an emo-
tional connection.
An employment
brand is dened as the
way prospective appli-
cants, candidates and
employees perceive
the employer.
A study of more than 2,000 companies
conducted by ERE found that having a
clearly dened strategy is the most im-
portant factor in achieving employer
branding objectives.
Te study found that 37% of compa-
nies have begun work on developing
their employer brand strategy, while
13% do not have a strategy.
Many companies are worried about
the impact of the downturn on their
brand.
According to a recent CareerBuilder.
com survey, 10% of employers polled
said they are concerned about the di -
culty of strengthening their companys
employment brand after layos or cut-
backs.
Te bottom line is your behavior
builds your brand so all leaders need to
be mindful of their actions and the im-
pact on the brand to ensure that no one
ever feels like a number, she says. If
you take interest in your own personal
brand you also impact the employment
brand. When it comes to recruiting it
can be as easy as showing up in time for
an interview, returning calls in a timely
fashion, taking interest in them, being
an empathic listener, being optimistic,
honest, and helpful.
To bring your brand to life you must
give candidates a reason to choose to
work and stay working with your rm.

Employer branding helps attract the best
Donna Szarwark,
SVP of HR,
FRCH Design
Worldwide.
THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902
10
Copyright 2011. ZweigWhite. All rights reserved.
Flexing
cultural
dexterity
Advice for leaders.
M
ichael doesnt nd much
value in giving speeches
about his commitment to diversity.
As leader of a 3,000-employee
organization representing multiple
countries, disciplines, cultures,
generations, languages, skills, and
backgrounds, he prefers to show
his commitment through his daily
behaviors, and by ultimately creating a
work environment where everyone can
reach their career potential.
When Michael (a ctitious company
leader) forms project teams, he
thoughtfully selects members from
dierent countries and viewpoints to
harness their diversity of thought. He
acknowledges individual dierences
and unique perspectives as opposed
to denying that dierences exist. In
fact, he strives not to be color blind
or culture blind by downplaying
dierences. He understands the true
benets that diversity brings to his
business. He knows that harnessing
diversity provides a competitive
advantage to his organization, and
that in order to capitalize on this
opportunity he has to demonstrate
diverse and inclusive leadership
skills or cultural dexterity.
Do vouu tenoeus nnve
cutiuunt oexieutiv Is your or-
ganization developing leaders who
can successfully navigate dierent cul-
tures, generations and backgrounds?
Do your leaders have cultural dex-
terity the business leadership skill
that encompasses the ability to un-
derstand, manage, lead, connect, and
eectively communicate with people
across multiple dimensions of diver-
sity that is critical to success in a
global economy?
Te ability to develop strong, agile
leaders who can lead complex, global
organizations was identied as a key
concern by the 2010 IBM
Chief Human Resources
O cers Study entitled
Work Beyond Borders.
Te survey reported
that companies have
traditionally focused on
operational e ciency
as the core driver for
managing workforces. However, to
make the most out of growth markets
and unlock the potential of a global
workforce, the survey identied the
need for organizations to develop
leaders who have the skills and
ability to eectively lead people from
dierent cultures and generations.
An integrated diversity and inclusion
function within an organization can
facilitate the development of these
sought-after leaders.
Dtveustiv or inouoni. Today,
it is common for organizations to view
diversity and inclusion eorts as not
only the right thing to do but also as
a business imperative. Clients expect
the best solutions that stem from di-
verse talent and perspectives. Emerg-
ing markets and talent pools are rap-
idly expanding, and companies must
leverage the diversity of thought with-
in their organizations to out-inno-
vate competitors. Because diversity
and inclusion are viewed as key busi-
ness drivers, companies must not sim-
ply recruit and retain employees from
dierent ethnicities, religions, and
lifestyles. Rather, they should look for
ways to promote a work culture where
employees have awareness, knowledge,
and understanding of various cultures,
and who are inclusive thinkers and ex-
hibit cultural dexterity.
Culturally dexterous leaders like
Michael are condent they can
succeed in complex and multicultural
environments. Tese leaders
understand intercultural issues
that impact global team dynamics,
such as dierent communication
styles that exist between Western
and non-Western employees. Tey
also recognize cultural preferences
of clients, such as country-specic
dierences in the art of negotiation.
Other everyday examples of cultural
dexterity can be seen when leaders
are mindful of religious holidays and
cultural events as they plan meetings
that require travel. Additionally,
being sensitive to dietary restrictions
of colleagues who observe religious
holidays, such as during Ramadan or
Passover, sends an inclusive message.
Ttvs rou success. Establishing
a company culture aimed at develop-
ing creative, agile, culturally dexterous
leaders takes time and attention. Here
are a few diversity and inclusion tips:
1) Change your current culture.
Your senior leadership must be fully
supportive of this goal. Tey should
not only talk about the development
of culturally dexterous leaders, but
should be role models of the kinds of
behaviors that they desire employees to
demonstrate.
2) Remember that diversity is not
an initiative. If diversity is valued as
a business imperative, it should not be
viewed as an initiative with beginning
and end dates. In order to achieve
long-term success, diversity should
be integrated into key processes of
your organization such as internal
communications and training and
development and cultural dexterity
should be seen as a valuable skill that
is evaluated as a desired attribute
during performance management and
succession planning.
3) Recruit diverse candidates.
To ensure that you are harnessing the
benets of diversity, it is critical that
your organization casts a wide net to
attract diverse candidate pools. It is
equally important to recruit candidates
who are inclusive thinkers and have
cultural dexterity. Ask executive
candidates if they have experience
leading and assisting diverse employees
to reach their maximum potential,
whether they have had success engaging
multi-generational stas across borders,
and whether they have formed diverse
teams and have leveraged diversity of
thought to reach innovative solutions.
4) Educate and create awareness.
Cultural dexterity starts with
understanding your own unconscious
biases or blind spots. Acknowledging
your blind spots and resisting
assumptions and judgments are crucial
steps to becoming a culturally dexterous
leader.
TEUILA HANSON is vice president of
Diversity & Inclusion at AECOM. She is
responsible for overseeing the companys
global diversity strategy.
GUEST SPEAKER
Teuila
Hanson
FINANCE A SUPPLEMENT OF THE ZWEIG LETTER MARCH 14, 2011, ISSUE 902
11
S URV E Y
Consolidation heating up the A/E industry
Activity expected
to increase among
engineering disciplines.
By JULIE KYLE
Editor
T
he A/E and environmental indus-
try is in a consolidation phase, as
the percentages of rms considering an
acquisition or sale, both increased sig-
nicantly this year, according to data
from ZweigWhites 2011 Mergers & Ac-
quisitions Survey.
Two-thirds of rms (65%) report M&A
is in their strategic plan for the next
ve years. Driving those intentions is
the eagerness to ll in geographic gaps
in service coverage and enter new mar-
kets, the survey shows.
Tere will be continued consolida-
tion as mid-sized rms bulk up by ac-
quiring smaller rms into their prac-
tices, says Hobson Hogan, a principal
with ZweigWhite. Larger rms will
continue to use M&A as a way to drive
earnings growth. I think you will see
activity fairly evenly distributed across
market sectors and geographies, as the
primary drivers to M&A are fairly con-
sistent across market sectors, Hogan
says.
From a macro perspective, there is
still over-capacity and hyper-compe-
tition in the marketplace. Te current
economic environment tends to push
rms to one end of the spectrum or the
other. You either remain nimble and fo-
cused with low overhead or you become
part of a large rm with broad capabili-
ties. It is getting harder to be small rm
without having a market focus.
Wneue ts ine ncitoN Firms are
seeking the following disciplines or ser-
vices in a potential acquisition: civil en-
gineering (41%), structural engineer-
ing (35%), transportation engineer-
ing (30%), and construction manage-
ment (30%). Hogan believes the mar-
kets rms are targeting must be viewed
relative to other investment opportu-
nities.
While infrastructure in North Ameri-
ca is in dire need of upgrades, the fund-
ing for large projects is very uncertain.
However, the likelihood of nding fund-
ing sources for infrastructure is greater
than the private building market com-
ing back in any meaningful way.
Tere are certain niches in transpor-
tation, municipal and federal markets
that will continue to have activity re-
gardless of budget concerns and overall
economic activity. It is interesting that
many of the markets that have the best
outlook for the near term, such as elec-
trical transmission and energy explora-
tion, are also the most consolidated,
Hogan says.
Firms most targeted for a potential
acquisition include those working in
the transportation (49%), municipal
(46%), and federal (46%) markets.
Te water market is and will con-
tinue to be the area for notable activ-
ity, especially in areas with population
growth or urban and rural areas where
there has been underinvestment, says
Je Clark, managing director and prin-
cipal with ZweigWhites M&A team.
Clark points to solid waste as a sta-
ble market and notable for continued
M&A activity, and says federal markets
are very desirable, but barriers to entry
are still high with very few sellers.
For sizable contracts, mid-size rms
that play in this space will be extremely
sought after by the large buyers, Clark
says. Short term, we do not see cer-
tainties for niches in transportation,
although many large rms are look-
ing to acquire in that space for the long
term.
Posstute cnvtint ntccuv, uui
uensoNs io intx. Capital mar-
kets will continue to be constrained for
smaller to mid-size rms, potentially
hindering activity.
Borrowers that provide business ser-
vices need to have in excess of $5 mil-
lion in EBITDA to get the most favor-
able terms on nancing, Clark says.
Sellers who do not have an urgent
need for liquidity are waiting for a
more robust economic environment
before they start marketing their rms
to buyers, and those rms considering
acquisition for the rst time or those
that have been burnt on an acquisition
in the past may be cautious to buy now
with all the turmoil still remaining in
the industry, Clark says.
Nevertheless, Hogan believes sellers
will begin to return to the market in
2011, and for many, its not if they will
sell, its when.
Te reasons are simple: demograph-
ics and competition, Hogan says.
Boomers, who represent the largest
single demographic in our country, also
have the largest ownership stake in
A/E/P and environmental consulting
rms, and they are quickly coming to
the point in life where they would pre-
fer to slow down or to enter a dierent
stage in life altogether. M&A survey
data shows that among potential sell-
ers, the highest-ranked goal for the sale
is transition ownership.
Most rms in the A/E industry will
face a choice in the next ve years to
either begin an internal transition of
ownership, if they have not already
done so, or sell to a third party, Hogan
says. From an economic standpoint,
holding on to your ownership rather
than selling is typically in your best eco-
nomic interests, as you are not likely to
be paid an amount that will make you
want to walk away (For example, if you
are making $1 million a year, why sell
today for $4 million when you can run
the rm for four years make $4 million
and sell it then for $4 million?).
From a strict numbers standpoint,
you keep your ownership until you are
ready to retire and then walk away.
Practically, that is not the best situa-
tion for a sale, but it is the strategy of
some rms.
Hogan notes that for many rms, an
internal sale is not an option because of
factors such as poor second-tier man-
agement, desire to maximize sale price,
or because the rm is not generating
cash to aect a sale. In these cases, a
third party sale or liquidation would be
those rms only course of action, Ho-
gan says.
THE ZWEIG LETTER | MARCH 14, 2011, ISSUE 902
12
Copyright 2011. ZweigWhite. All rights reserved.
Dont get
stuck in the
middle
In the current economy,
every rm needs to be
world-class at something.
I
recently attended a conference on
alternative investments for asset
managers and investors. Te attendees
were mostly representatives from large
institutional investors, endowments,
hedge fund managers, and corporate
bankers. Te conference focused
on the outlook for hedge funds and
real estate funds in the future. I was
interested in hearing what some of
the top investors on Wall Street think
about the overall market and real
estate in general. I would like to say
that I came away from the conference
with some good news for the North
American market. However, that was
not the case. Te fact of the matter is
that many of the structural issues that
led to the busting of the real estate
bubble are still present and in many
cases are worsening, not improving.
When it comes to real estate, the
news was dire. Fundamentals have
not improved and, while some asset
values have increased due to the lack
of solid deals, the market has become
binary simply made up of winners
and losers. Binary markets are not
relegated to real estate properties;
much of the economy is becoming
characterized by rms making a
choice on how they want to compete
on price or service, and building an
organization to fulll that strategy.
While business is not likely to
improve on any broad measure,
there is no need to jump o a
bridge. Business will not stop; it is
just going to be ultra-competitive
because demand will continue to be
constrained. In an industry where
there is likely too much capacity and
competition, it is often helpful to
glean lessons from other industries
that have dealt with bouts of
oversupply, such as airlines,
retail, and energy. Here is
a sampling of how other
industries have faced
tough times and how they
successfully navigated the
storm:
Gained e ciencies through
consolidation
Aligned cost structures and strategy
to market realities
Leveraged information technology to
improve e ciencies of the inputs
Te rst lesson can be one of the
more powerful catalysts for change.
In the last oil bust, several major oil
companies merged, including Exxon-
Mobil, BP-Amoco and Chevron-
Texaco. Te resulting organizations
cut out tremendous costs from their
organizations and added additional
scale to their businesses. Te Exxon-
Mobil merger, argued by some to be
one of the most successful mergers,
squeezed $2 billion in cost savings in
the rst year alone. Tese rms were
able to eliminate redundant costs in
accounting, human resources, and
operations, saving the shareholders
billions. When properly managed,
scale can have immense advantages in
lowering costs of services per unit of
input.
Some academics have argued that
in todays world there are only two
strategies: win on price or win on
service. Tere is a lot of truth to that
observation, especially if you look at
retail. Successful retailers have either
created highly e cient distribution
channels to bring you goods at low
costs, such as Wal-Mart, Target and
Costco, or they have created high
service models, such as Nordstrom
and Neiman Marcus. Gone are the
days where you can succeed in the
market by oering mid-range products
with mid-range service. Could Wal-
Mart attract Nordstrom shoppers
by simply hiring a piano player? Not
likely. Nordstrom would not likely be
able to undercut Wal-Mart on price
with grand pianos and marble oors in
the cost structure, either. In a binary
world, you have to make a choice and
structure your rm around that reality.
If you have purchased computer
hardware lately or looked at back
o ce software, there is very powerful
hardware and software available to
even the most cash-strapped start-
up. Expensive accounting systems
and other back o ce support is no
longer a competitive advantage,
as cloud computing has delivered
high functionality for little upfront
capital. Te cost of connectivity has
also dropped dramatically. Tis can
allow boutique rms with specialized
practices the ability to compete over
large geographies without having to
invest tremendously in infrastructure.
In no way am I suggesting that
engineering, architecture or
environmental consulting is like
selling an airline seat or a pair of
shoes. However, it is becoming more
evident in our economy that getting
stuck in the middle is a bad thing.
Every rm, if it wants to thrive,
needs to be world-class at something.
However, to be truly successful, a rm
needs to adopt the proper strategy to
t its market reality. Tat may mean
acquiring competitors and eliminating
costs to provide value to your clients.
Conversely, you may need to refocus
on client service and stop trying to
win in commodity type markets with
gold-plated resources. Tere is no one
prescription for success in the industry
and not likely one strategy that will
lead to success for a rm. However,
if you nd your rm is stuck in the
middle, neither big nor small, neither
specialized nor broad, then one thing
is certain, history is not on your side.
W. HOBSON HOGAN is a ZweigWhite
principal specializing in mergers and
acquisitions, nance and strategic planning.
Contact him at hhogan@zweigwhite.com.
F & A A DV I S O R
Hobson
Hogan
In no way am I suggesting that engineering, architecture
or environmental consulting is like selling an airline seat
or a pair of shoes. However, it is becoming more evident
in our economy that getting stuck in the middle
is a bad thing.