What's the End Game for a Lifestyle Practice?

I took a long summer break to refresh and rejuvenate. During my time off, I reflected on a variety of issues, including the challenges that our industry faces. As I sat on a beach overlooking the ocean, I was struck by the number of firms that had run into difficulties while seeking to be merged or acquired. It wasn't until I began to peel the layers of the proverbial onion that I realized the source of these difficulties. They had run lifestyle businesses and now wanted someone to pay for it!

What do I mean? A lifestyle business or a lifestyle practice is a firm established for the purposes of supporting the partner’s or owner’s lifestyle. In short, it is a personal piggy bank. The opposite of a lifestyle practice is an equity business. An equity business is one in which the business exists to provide a profit and long-term corporate strength to its staff and its clients. Don't get me wrong...there are thousands of lifestyle practices out there that do well alongside thousands of equity businesses, but you need to know which of these you are or want to be.

Why? I prescribe an arduous path forward when a firm owner calls me and says they want to sell their business because they don't have the internal capacity for the next level of leaders. Often, part of the reason they lack such capacity is that the firm has been run as a lifestyle business for 20 years. It takes a significant amount of time and effort to change direction.

Staff aren't naive. They may not know a lot about "buying equity" in a firm but they know enough not to invest in someone's personal piggy bank. Junkets, expensive "client lunches,” spouses or siblings "working" without defined outcomes or expectations, running personal expenses through the business or showing annual losses to avoid taxes are all signs of a lifestyle business that staff will not invest in. More importantly, they are all signs of a poor investment (i.e., acquisition or merger).

Know your end game. If your long-term play is to position your firm for a merger or acquisition, you'll need at least five years to clean up your financial house and to position your potential emerging leaders for a transition. If you hadn't thought about it before now...now is the time.

Karen Compton, CPSM. Karen Compton is principal of A3K Consulting (Glendale, CA), a business development and strategic planning firm specializing in the architecture, engineering and construction industries. Ms. Compton is also the founder of Industry Speaks™, a web-based business-to-business portal that connects AEC firms with experienced consultants, provides peer reviews of consultants, reports on key industry trends, and publishes expert reviews of professional courses and books. Contact her at kcompton@a3kconsulting.com.

Webcast July 18 Includes Digital Copy of Project-Based ERP for Dummies

Does your firm struggle with enterprise resource planning?

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• Do you have enough work to keep all your people employed and busy?
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If projects are in your company’s DNA, you can benefit from this book and preview webcast.

He Threw What?

No one should tolerate bad behavior in their firm. And no owner should feel so helpless as to put up with it.

I received a call from a client, telling me an employee had thrown a desk lamp on the floor in the design studio! “Why?” I asked, although I already knew the answer would get us nowhere. I was told they were mad at someone else because they didn’t catch all of the redlines on the drawings before the final drawing set was sent to the client.

The cavalier tone in which this information was conveyed suggested that this was but one of many times the employee had exhibited poor and yes, abusive, behavior. I asked the next question to get us on track: “And you put up with it ... Why?”

“He’s a really good designer, and I don’t want to go back into the studio and manage work again.” My client, a respected leader in the architecture industry, was being held hostage in their own firm by a temper tantrum bully. Taking a deep breath, I responded, “The last time I looked, it was your name on the door. You are responsible for drawings that you produce and the service that you deliver, but, you are also responsible for the development of staff, the cultivation of a culture and the provision of a work environment that inspires design to flourish! This isn’t the play yard!”

“What should we do?” they responded. In years past, this behavior had never been discussed or documented. The fear was too great that if they began to document performance, they’d actually have to act on it, which might even include termination and the president/CEO going back to working on the floor. In fact, all that came to pass after months of discussions with the employee, and that day that went down in infamy! As furniture was broken and expletives were uttered in the studio, my client never wavered. A better designer could be found, and the best day with this designer was still not equal to the worst day they had in running the studio themselves.

If your name is on the door or you are responsible, financial or otherwise, for the performance of your firm’s work, you also have a responsibility to yourself and others to define what is expected and what is unacceptable. You are not a hostage in your own business. You must define the culture, the behavior and the expectations of your staff and your firm.

After working through this experience, my client found a better designer who motivated and mentored staff, inspired great design and cost $15K/year less. Guess what? You can, too!

Karen Compton, CPSM. Karen Compton is principal of A3K Consulting (Glendale, CA), a business development and strategic planning firm specializing in the architecture, engineering and construction industries. Ms. Compton is also the founder of Industry Speaks™, a web-based business-to-business portal that connects AEC firms with experienced consultants, provides peer reviews of consultants, reports on key industry trends, and publishes expert reviews of professional courses and books. Contact her at kcompton@a3kconsulting.com.

Never Stop Learning!

There are many challenges associated with developing and managing a small firm: staffing, getting work, doing good work, getting paid. A major challenge, but a necessary goal while managing all the rest, is to keep learning.

One of my clients recently admitted he hadn’t remained current on his continuing education. Moreover, the education he had received was on design, code compliance and accessibility. As a firm owner, principal and partner, your continuing education must not only cover topics that drive your professional career (i.e., design), it must also address the ever evolving and challenging aspects of practice management.

Practice management, today, is far more complex. As a service-based industry, we sell intellectual capital: ideas and solutions for real world problems. That said, the “personnel” issues of the 1980s have become the human resources, benefits, compensation, state regulation, federal regulation, performance, and other requirements of the 2010s. The former “computer” department has morphed into complex data and information management, as well as hardware, software, intellectual property rights and phone, electronic and internet communications. These are just two examples! The increasing complexity of management systems and the speed at which they operate affect all aspects of practice management, including business development, finance, and operations.

Let’s face it, very few of us enjoy practice management. But it is the business of architecture and engineering that allows us to continue to practice every day. Well-managed firms achieve their business objectives, attract and retain employees and provide opportunities for the continued exchange of ideas. The AIA Practice Management Knowledge Community is one of many sources that provide free or low cost continuing education on these topics. If you have resources to recommend, post your comments and thoughts!

Karen Compton, CPSM. Karen Compton is principal of A3K Consulting (Glendale, CA), a business development and strategic planning firm specializing in the architecture, engineering and construction industries. Ms. Compton is also the founder of Industry Speaks™, a web-based business-to-business portal that connects AEC firms with experienced consultants, provides peer reviews of consultants, reports on key industry trends, and publishes expert reviews of professional courses and books. Contact her at kcompton@a3kconsulting.com.

Mistake: No Job Description!

The conversation went something like this:

“Karen, my business partner hired his daughter’s boyfriend as an engineer and he isn’t working out so well. I’m going to fire him this afternoon and I thought I should let you know in case there’s something you want to tell me.” The President/CEO of the company said that to me and I was expected to do ... what exactly?

I took a deep breath and said, “I’m out of my area of expertise here." (Human resource laws vary by state and are complicated.) “Send me the job description, and his performance reviews up to this point and let me have our HR Principal take a look at them." He said, “Job description? We don’t have those.”

Let me help you learn from this mistake: Job descriptions provide architects, engineers and administrative personnel with the basic understanding of what is required of them in their day-to-day work. It is insufficient to assume that since someone was an engineer for your competitors, they know what to do when they work for you.

Without a job description, the best you can hope for is a poorly replicated performance of work done for a previous employer. Job descriptions do not determine an individual’s performance. That is addressed through performance reviews. While they may not fully define expectations, job descriptions do define roles and responsibilities for a position.

Back to my client: Since John (not his real name) was never given a job description (or a performance review), it was difficult to terminate him without sufficient documentation. Even in an “at-will” state, no firm wants to increase risk and exposure (financial and insurance) to a wrongful termination suit. So what could have been a Friday afternoon termination and a positive move forward for my client turned into a six-month process of documenting performance and racking up attorney’s bills for advice.

There are two lessons here:

1. Whether you have two employees or two hundred, develop job descriptions. They are not for your benefit, but for the benefit of those whom you employ.
2. If you find yourself in this quandary, seek legal advice. Despite the cost and frustration, it is likely to save you time and money in the end.

Karen Compton, CPSM. Karen Compton is principal of A3K Consulting (Glendale, CA), a business development and strategic planning firm specializing in the architecture, engineering and construction industries. Ms. Compton is also the founder of Industry Speaks™, a web-based business-to-business portal that connects AEC firms with experienced consultants, provides peer reviews of consultants, reports on key industry trends, and publishes expert reviews of professional courses and books. Contact her at kcompton@a3kconsulting.com.

Mistake: That’s Their Sixth BD Director!

If you go through business development directors faster than bloody towels at a boxing match, you’ve got to stop and look at the one variable that remains unchanged: you.

There are some carpetbaggers out there and there are LWL (ladies who lunch). With a well thought-out and well-developed business development plan, however, you can reduce (and in some cases eliminate) this bloody phenomena that has come to be the norm.

There is immeasurable pressure in firms these days to get work. The pressure is real, and so is the need for those capable of delivering new opportunities. But, “Just get work!” isn’t going to cut it. Our business—architecture, engineering and construction—is based on relationships, not sales calls. Hiring and firing business development directors can well be a reflection of you—your unrealistic expectations, lack of focus, inattention to market conditions, and oh yes, your inability to close the deal.

Keep in mind, unless you’re hiring a seller-doer, you (or some principal) must close the deal. Ask yourself: “What is my plan?” “Who am I targeting?” “What is my value proposition?” If you don’t know, here’s a thought: before you hire your seventh business development director, ask them to develop a business plan outline. Who would they target for your firm, and why?

A client used this technique before they hired their business development professional, and guess what? It worked! Why? Because they understood the successful candidate’s proposed plan and direction and were able to “weed out” others who could not deliver on all the hype. In the end, it saved them time and unnecessary lunches. But, more importantly, it created stability and focus in their business development efforts.

Karen Compton, CPSM. Karen Compton is principal of A3K Consulting (Glendale, CA), a business development and strategic planning firm specializing in the architecture, engineering and construction industries. Ms. Compton is also the founder of Industry Speaks™, a web-based business-to-business portal that connects AEC firms with experienced consultants, provides peer reviews of consultants, reports on key industry trends, and publishes expert reviews of professional courses and books. Contact her at kcompton@a3kconsulting.com.