The Zweig Letter : 2010 Industry Outlook

2,132 views

Published on

The Zweig Letter Special Issue: 2010 AEC Industry Outlook.

Click on the below link to purchase this issue:
http://www.zweigwhite.com/trends/thezweigletter/index.asp

Visit us at www.zweigwhite.com

Published in: Education
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,132
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

The Zweig Letter : 2010 Industry Outlook

  1. 1. Issue 843: December 21, 2009 A ZweigWhite Publication 2010— The year ahead Special Issue: 2010 Industry Outlook > Mark Zweig makes 11 predictions for the new year— it’s going to be a doozy! > Editorial It’s that time of 2. We’ll work through the “shovel-ready” Mark year again. Time to dig out my government projects and get back into a design mode. This will, of course, do > In this issue: Zweig crystal ball (I much more for A/E/P firms. ■ Mark Zweig makes 11 predictions for More firms will keep it in my the new year— it’s going to be a doozy! 3. More firms will be shut down by Page 1 be shut down by sock drawer, in a banks that won’t tolerate endless viola- ■ Economy tops leaders’ concerns banks that won’t pile of rarely tions of line-of-credit covenants. This for 2010. Page 1 tolerate endless worn argyles for will be a marked change from banking ■ Business trends to watch in 2010. safe keeping) so I violations of practices of the past, when it rarely Page 2 can try to get a line-of-credit happened. ■ A/E Business News: Cubellis closes glimpse of our shop, and Architects cast doubt covenants. future ahead. By 4. The devaluation of commercial office on sustainability. Page 3 all indications, this year is going to be space is going to hurt banking relation- ■ Economists see brighter days for AEC a doozy! ships for those firms that own their own industry in 2010. Page 4 buildings and are highly leveraged. ■ ’My hot market’ for 2010. Page 5 Here is some of what I see for 2010: When their three- or five-year notes ■ Resources: 2010 Industry Outlook, and 1. Unemployment is still holding back come due and they are upside down on Next Houses. Page 5 the economy. Double-digit unemploy- their loans, this, too, will contribute to ■ Ownership transition and leadership ment will ease back into the 8% range by their banking woes on their credit lines. succession— the planning challenge summer. Real unemployment is, of for the future. Page 6 5. Housing will show continuing signs of course, worse, because so many people ■ Z View: Looking through the lens recovery ONCE the lending mess is are working but making less, due to of leadership. Page 7 solved. Low appraisals and pointless hoops hours restrictions or pay cuts. The unem- to jump through are killing the mortgage ployment rate will remain much higher lending field and knocking the wind out of To our subscribers: for architects, interior designers, and the recovery that wants badly to happen. The Zweig Letter will not be published landscape architects than other A/E/P on December 28. Happy Holidays! professionals. See “Editorial” on page 2 Economy tops leaders’ concerns for 2010 > Matters of Concern Top five challenges in 2010 > Firms worry more about finding good lack of talent as the ninth most important (ranked in a scale of 1 to 5) business news, less about finding qualified staff. challenge they will face in 2010, according Performance of the U.S. economy . . .4.46 to ZweigWhite’s 2010 AEC Industry Increasing competition . . . . . . . . . . . .3.69 What a difference two years of recession Outlook. makes: Today, AEC firm leaders rate the Cost of health insurance . . . . . . . . . . .3.63 performance of the U.S. economy as the > Outlook “The condition of the economy plays an Declining use of Qualifications-based biggest challenge they face in the coming selection for A/E firms . . . . . . . . . . . . .3.55 year. In late 2007, overall economic per- important role in how our business per- Potential new federal formance wasn’t even among the top 10 forms, and the economy is still weak, health insurance program . . . . . . . . . .3.27 challenges they listed. specifically in the private sector,” says Source: AEC Industry Outlook: Strategy Steven Smith, president and managing and Insight for Design & Construction By contrast, two years ago top executives director of WSP Sells in New York, a sub- Firms said their biggest challenge was finding See “Economy” on page 8 qualified staff. This year, firm leaders list a © Copyright 2009, ZweigWhite. All rights reserved. The Zweig Letter ZWEIGWHITE
  2. 2. 2 Issue 843: December 21, 2009 Editorial Business trends to watch in 2010 From page 1 6. Some sort of national health care > Watch out for these six major trends in project pipelines, some firms have been impacting the AEC industry this year. reform will pass early in the year and clear forced to lay off staff members and power- the way for health care institutions to ZweigWhite recently released its annual down their offices to cut costs while they start spending real money on facilities AEC Industry Outlook: Strategy and Insight wait for the situation to improve. At the once again. for Design & Construction Firms report, same time, the cost of providing benefits and while the outlook isn’t as rosy as some to employees continues to climb. Both of 7. The college and university market will previous years’, it’s not these problems are being addressed on a once again be one of the strongest sectors > Trends the gloom and doom of a national level, and look for the outcomes for our industry. With recovering endow- year ago. Firm leaders are of action taken by Congress and the ment portfolios, combined with increasing somewhat more optimistic overall about Obama administration to change the face enrollments (unemployed or underem- their prospects in 2010 than they were of business in the wider economy, as well ployed people tend to go back to or stay in heading into 2009, but it’s not going to be as within this industry, in 2010. school), it has to bode well. easy for many reasons, not least of which 8. The Green Movement, led by firms is continuing uncertainty in the U.S. > What’s Ahead such as Wal-Mart, will create entirely new economy. 1% service lines for A/E/P and environment This year, we are tracking six major trends 7% 15% firms that want to pursue it. 2010 will be that will affect the AEC industry over the the year of “green.” next 12 months: 9. Other strong markets will be airports ■ Economic uncertainty 38% and aviation facilities, roads and bridges, ■ The American Recovery & nuclear power (it’s back!), and many fed- 40% eral government sectors. Weak markets Reinvestment Act of 2009 and other will be office and retail, K-12 (who can government intervention Expectations of business performance pass a tax increase?), and almost anything ■ Unemployment and health care in 2010 industrial other than warehouse and ■ Mixed merger & acquisition activity Outstanding . . . . . . . . . . . . . . . . . . . . .1% distribution. ■ Globalization of the AEC industry Excellent . . . . . . . . . . . . . . . . . . . . . . .15% 10. Popular management and wealth- building book authors will issue sequels ■ Green building Good . . . . . . . . . . . . . . . . . . . . . . . . . .40% such as Who Moved my Cheese, Again?, ■ Economic uncertainty. The past 15 Satisfactory . . . . . . . . . . . . . . . . . . . . .38% Good to Great to Mediocre, and The months have been very difficult for the Poor . . . . . . . . . . . . . . . . . . . . . . . . . . . .7% Millionaire Who Used to Live Next Door, U.S. economy, as a result of the “Great Source: AEC Industry Outlook: Strategy in attempts to revitalize their own careers. Recession” that began in December 2007. and Insight for Design & Construction Firms 11. And, finally, Tiger Woods will prove, While many economists are now declaring once again, what an incredible athlete he the recession officially over and many of really is, as mistress #’s 17, 18, and 19 the most-watched economic indicators are ■❄The American Recovery & Reinves- (identical triplets) present themselves and improving, 2010 may still be a difficult tment Act of 2009 and other government tell their story to the world. The seeming- year as the recovery progresses weakly, intervention. In 2008 and 2009, we saw a ly endless stream of Tiger love partners will especially in light of trend # 2, a still very series of unprecedented government mea- keep Oprah from going through with her high unemployment rate. sures aimed at improving the health of the planned retirement in 2011. ■ Unemployment and health care. On economy. These bills and initiatives— Dec. 4, the Bureau of Labor Statistics most notably the American Recovery and So there you have it. My crystal ball is released new unemployment figures that Reinvestment Act of 2009 (ARRA), the overheating and getting a little cloudy... showed a slight improvement to America’s stimulus bill— provided opportunities for so I have to put it back into the sock soaring unemployment problem, with the the AEC industry, but also caused some drawer until this time next year. Good national rate dropping to 10%. However, headaches. Only about 25% of the bill’s luck, All— you will need it in 2010. ■ that figure is still one of the highest the appropriations have been awarded so far, MARK ZWEIG is the founder of so look for this bill to continue to influ- U.S. has experienced since the recession ZweigWhite. Contact him with questions ence the building and construction sectors began. And the AEC industry has not or comments at mzweig@zweigwhite.com. in 2010 and beyond as more of the provi- been immune. In response to the drop-off sions are enacted. A possible second stim- The Zweig Letter ZWEIGWHITE
  3. 3. Issue 843: December 21, 2009 3 ulus and other proposed measures in preparing for retirement through the use > A/E Business News Washington could pass in 2010, further of a merger or acquisition may be holding changing the course of the economy and on until the markets stabilize before sign- CUBELLIS CLOSES SHOP: Number 13 the industry in the coming 12 months. ing on the dotted line. on the 2009 The Zweig Letter Hot Firm List turned out to be the harbinger of bad luck ■ Globalization of the AEC industry. The for Cubellis, a well-known architecture and > Plans for Success world is shrinking, and the AEC industry engineering firm in Boston. Which of the following growth strategies is going global. That trend will continue After more than two decades in business, will your firm pursue in the next 12 the 175-person firm is in the process months? in 2010 and the implications for design of shutting down, according to an article and construction firms are significant. in Boston Business Journal. Introducing new services to existing markets . . . . . . . . . . . . . . .76% Globalization will provide both opportu- In an interview with The Zweig Letter last nities and obstacles to U.S. firms, even for June, President and CEO Lenord Cubellis Pursuing more public (federal, municipal, etc.) work . . . . . . . . . . . . .72% those firms that do all of their work talked about difficulties facing the firm, domestically. Many American AEC firms including shedding 35% of its staff from Teaming (not joint venturing) . . . . . . .67% 425 in June 2008 to 280 in June 2009. will find new markets opening abroad, at Entering new markets . . . . . . . . . . . .59% the same time that they face competition Just last year, the firm had 18 locations, including an office in Dubai, according to Expanding marketing activities . . . . . .57% from foreign firms for projects closer to another TZL article. Recent office openings Pursuing design/build opportunities . .46% home. In 2010, work will increasingly included locations in Baltimore, Dallas, and flow to the most competent, lowest-cost suburban Los Angeles, according to the Geographic expansions . . . . . . . . . . . .46% professional service provider, regardless of Boston Business Journal article. Pursuing a merger or acquisition . . . .28% where that person or firm is physically Lenord Cubellis told the newspaper that Entering new international markets . .18% located. Sovereign Bank’s decision to freeze the firm’s line of credit, leaving it unable to pay Joint venturing . . . . . . . . . . . . . . . . . .18% employees, led to the decision to shutter Pursuing construction Firm leaders are somewhat the operation. Meanwhile, firm employees management opportunities . . . . . . . . .17% more optimistic overall about are taking over several active projects, and making arrangements to finish them. Pursuing program management their prospects in 2010 than opportunities . . . . . . . . . . . . . . . . . . . .15% Started in 1986 with five employees in they were heading into 2009. Boston, Cubellis generated almost $64 Increasing hiring and recruitment million in revenue in 2008, according to its activities . . . . . . . . . . . . . . . . . . . . . . .12% ■ Green building. Green building, or sus- 2009 Hot Firm List submission. Source: AEC Industry Outlook: Strategy tainable design, has been one of the and Insight for Design & Construction biggest trends affecting nonresidential and ARCHITECTS CAST DOUBT ON Firms residential construction in the past few SUSTAINABILITY: An October poll by years, and it will continue to do so again in Architect Magazine asking respondents ■ Mixed merger and acquisition activity. which statements “most closely describes 2010 and beyond. The growth of green your personal views on sustainable design Over the past several years, strong perfor- building has been driven by a renewal of and the environment, shows some ” mance and record profits in the AEC environmental consciousness in the U.S., surprising results. The survey revealed industry provided many firms with the particularly in regard to the importance of the following: capital necessary to make acquisitions. global warming and the need for action on ■ 46% of respondents identified with the Record industry profits translated into statement, “It’s vital that we design and local and global levels. In addition, volatile build sustainably, in order to conserve strong cash positions and rising internal energy costs have made sustainable design scarce resources and prevent further global stock prices, fueling additional purchases. and energy efficiency much more attrac- warming. ” That all changed late in 2008 as the stock tive from an economic perspective. ■ 34% chose the statement, “I’m not sure market tumbled and the economy was Corporate greening has also driven the rise that global warming is caused by man, but pronounced officially in recession. Firms energy conservation makes economic sense in the sector and will continue to do so, if we’ll be less dependent on other are less optimistic about the performance especially as the Obama administration countries’ oil.” of the AEC business and the overall econ- makes the creation of “green jobs” a top ■ 6.7% identified with, “I’m not sure omy heading into 2010, and that hesitan- priority. whether building green in the United States cy is having an impact on the M&A mar- will help the environment when China and Keep an eye on these trends in 2010 and India are becoming industrialized so rapidly. ” ket. Investors of all shapes and sizes are beyond for information as to how the ■ 12.8% chose, “Global warming is a myth nervous, and many have lost significant markets may change and what opportuni- perpetuated by the media, and green amounts of wealth that was tied up in the building is a fad— it’ll be forgotten in 20 ties and obstacles your firm may face in stock market. Until they can recoup some years time. ” the months ahead. ■ of these losses, firm leaders who were © Copyright 2009, ZweigWhite. All rights reserved. The Zweig Letter ZWEIGWHITE
  4. 4. 4 Issue 843: December 21, 2009 Economists see brighter days for AEC industry in 2010 > Low mortgage rates, stimulus money could down side,” he says. “We’re seeing some “With the revival of the stock market, we spur more activity in some sectors. improvements in the broader economy could see an increase in endowments and a Two leading AEC economic analysts and ultimately that’s going to mean good pickup in activity in those sectors,” he expect an uptick in work next year, things for the construction industry.” He says. Simonson also expects to see a limit- although they warn firm leaders not to believes the recession ended somewhere in ed revival in the retail market “if I’m right expect a return to the industry’s heyday of the June-July timeframe, but will wait for about home building,” saying new home- only a few years ago. official word on that. owners will do increased levels of business Ken Simonson, chief economist for at home-improvement stores and the like The good, the bad, and the ugly in their areas. Associated General Contractors of Simonson says he expects the pool of cash America (AGC) (Arlington, VA), is “par- set aside for infrastructure projects in the Baker says he sees the institutional sector tially optimistic” about American Recovery and Reinvestment Act as much stronger than the commercial sec- > Outlook what’s to come in of 2009— about $135 billion of the $787 tor in 2010, saying he hopes designers see 2010, saying he expects billion total— to be distributed more a turnaround by the middle of the year, a to see growth of 20% to 30% in single- feverishly this year and allay some of the timeline that would mean construction family home building, a boost that would concerns across the AEC industry about activity would grow in 2011. still leave that sector below its 2007 levels, the relatively paltry impact the stimulus “There’s still a hope the stimulus will do but a significant step up nonetheless. package had in 2009, other than on high- more to turn things around than it has so “We’ve got mortgage way projects. far,” Baker says. “These adjustments are rates at record lows High-speed rail projects are likely to see taking time to sort themselves out.” and home prices their first awards late next year, he says, down, so more people and government agencies are expected to “We’re seeing some can qualify for and be better equipped to deal with the flood improvements in the broader afford mortgage pay- of new contracts in 2010 than they were economy and ultimately that’s ments than ever shortly after President Barack Obama before, even with a going to mean good things for Ken Simonson, signed the bill into law in February. That the construction industry. ” Chief Economist, 10% unemployment glut of paperwork caused a backup on get- Associated General rate,” he says. The ting the money flowing, Simonson says, Contractors of first-time homebuyers’ What else is on the horizon? America calling it an unexpected “embarrassment federal tax credit pro- Simonson says he expects a checkmark- of riches” the agencies had never seen and shaped recovery, meaning a more gradual gram has been extended through April 30 weren’t prepared to handle. and expanded to give some existing home- recovery but no second dip anytime soon. owners a $500 credit as well. The inclusion of the Buy American provi- Many economists see reason to call for a sion in the stimulus package slowed many “W-shaped” recovery, meaning a second Kermit Baker, chief water and wastewater projects, as contrac- dramatic drop in the economy before a economist for the tors noted the much higher prices of mate- full recovery. American Institute of rials in the U.S. as opposed to their usual Architects (AIA) Baker says he expects the economic overseas suppliers. That quandary is being turnaround to trigger more consolidation (Washington, DC), sorted out but shouldn’t slow things down says improvements in across the industry as the largest firms in in 2010, Simonson says. the arena take advantage of the fear some the broader economy such as an anticipated State and local projects could be in the small firm owners have about the future, Kermit Baker, increase in the Gross worst shape, he says, since state and local even as things start to turn around. Chief Economist, American Institute or Domestic Product in government budgets are still dropping. “There are a lot of owners who’ll decide Architects Also likely to struggle in 2010 are devel- the fourth quarter of they don’t want to go through this again,” 2009 and a boost in oper-funded projects, with occupancy Baker says. “There’s a lot of evidence that the amount of economic stimulus money rates lower than in many years at hotels, bigger can be better from the client’s per- expected to be doled out in 2010, are good and vacancy rates in apartments and spective, and that could lead to some starts. multi-family homes continuing to fall. opportunities to take advantage, certainly “Six months into the recovery, there are Higher education and health care projects, some lower prices.” ■ more surprises on the upside than on the Simonson says, could go either way. The Zweig Letter ZWEIGWHITE
  5. 5. Issue 843: December 21, 2009 5 ‘My hot market’ for 2010 > Resources > Firms leaders tell us what will likely lift their of this recession as our backlog has been 2010 INDUSTRY OUTLOOK: Will the bottom line next year. housing market improve, or will the reduced, but to date we have not reduced sluggish recovery continue or worsen? Will Surveys give us the overall picture, but for overall staff size. Many projects are hold- the spillover effect from the housing crunch these leaders, a winning market niche ing, awaiting continue to infect additional nonresidential might be found in unexpected places in > On The Record the economy markets in 2010? Will banks ever get back to the business of lending money? Many 2010. and the Oba- analysts are saying that we’ll see marked Thomas Bates, managing principal, ma health care plan to be solidified, but improvement in all areas in the economy BLRB Architects (Tacoma, Washington), we anticipate more projects starting up in 2010, but are they right? And how will after the beginning of the coming year.” improvements be felt in the AEC industry? a 62-person architecture firm: Find the answers to all of these questions “With public percep- “Our only market sector is and many more with ZweigWhite’s 2010 tion slowly embracing AEC Industry Outlook: Strategy and Insight health care and we do not feel for Design & Construction Firms, where the idea of genuine economic recovery, it will be unseated as the you’ll find vast research and discussion of these and many other issues. Knowing the increasing numbers of market sector leader.” answers to these questions can give your public school districts architecture, engineering, construction, Kevin Phillips, CEO, FPM Group and or environmental firm an edge on the are making plans for FPM Remediations (Ronkonkoma, NY), competition. 2010 bond initiatives. a 100-person a full service environmental Tom Bates, This year’s report is the most detailed Managing Principal, The reality for public and traditional engineering firm specializ- Industry Outlook ZweigWhite has ever BLRB Architects schools is that whether ing in environmental engineering, geo- produced, covering more economic trends times are flush or lean, physical investigations, hydro geology, in the broader economy and expanding on school facilities must be maintained, mod- information we’ve gathered in the past. This engineering design and design-build: report is the most up-to-date and ernized, expanded or created to adequate- comprehensive market outlook report ly fulfill student needs. BLRB Architects’ “Our hottest market available, written exclusively for design hottest market for 2010 is the K-12 edu- by far will be the and construction firm leaders. cation sector. Districts are already seeking Department of For more information or to pre-order architectural services for pre-bond plan- Defense Military a copy, call 1-800-466-6275 or log on to ning and promotion, pre-design and edu- Munitions Response www.zweigwhite.com/zw-858.aspx. cational specifications development in Program (MMRP). anticipation of successful bond passage in The MMRP program NEXT HOUSES: Presenting a collection of is estimated to be in 25 houses on five continents, Next early 2010. Several districts passed success- Kevin Phillips, Houses: Architecture for the Twenty-First ful bonds in the November elections and CEO, the billions of dollars Century is a tour of the finest residential we are seeing announcements for increas- FPM Group and just beginning. architecture of this young century. ing numbers of large K-12 projects for The program provides Author Ron Broadhurst has selected which funding has already been secured.” a focus to address the potential explosive examples from nine countries showcasing safety, human health or environmental established superstars and emerging Edward Caruana, president, c|a ARCHI- risk posed by munitions-related activity architects including UNStudio, David Adjaye TECTS (Long Beach, CA), a 30-person and David Chipperfield, among others. The such as unexploded ordinance (UXO), products of dialogue between demanding architecture, planning and interior design discarded military munitions (DMM), clients and innovative designers these firm: and munition constituents (MC) that may houses represent the best and most innovative living spaces, including homes “Our only market sec- be present at our nation’s DOD facilities. created with sustainability and tor is health care and FPM is one of a handful of full-service eco-friendliness in mind— such as Werner we do not feel it will be firms that prepare site investigations, geo- Sobek’s H16 and Krauss Schonberg’s Haus unseated as the market physical investigations, removal actions W— as well as homes constructed on challenging sites— such as Tadao Ando’s sector leader. We are a and environmental remediation. FPM 4x4 House or Álvaro Leite Siza Vieira’s Casa 30-person firm that over the past five years has positioned itself Tolo. An authoritative collection, Next has maintained staff by hiring experienced geophysical scien- Houses demonstrates uniquely size and hours through tists and DOD-trained explosive experts of-the-moment architecture and offers up a Edward Caruana, vision of how we will think of homes in the President, this recession. We have so that it can handle worldwide assign- decades to come. c|a ARCHITECTS felt the repercussions ments.” ■ Available through Amazon.com. © Copyright 2009, ZweigWhite. All rights reserved. The Zweig Letter ZWEIGWHITE
  6. 6. 6 Issue 843: December 21, 2009 Ownership transition and leadership succession— the planning challenge for the future > When the time comes divest, owners have leadership while increasing the ownership documents, and closing and post-closing two options: internal transition or external exit. of the next generation, as well as institut- matters. The search is typically imple- > Legal Matters All firms ing a long term program to ensure that mented with the use of an investment face the the firm is well capitalized and not over- banking intermediary who prepares a George challenge of leveraged. The key concern is getting the confidential memorandum describing the Christodoulo dealing younger generation to buy shares over seller. The seller and the intermediary with intergenerational leadership and time at favorable purchase terms. Since profile prospective buyers, who are then ownership. Firms that are growing pose a much of the internal purchases are fund- contacted on an anonymous basis. more acute challenge because of the ed by bonuses and distributions, the key Interested buyers then sign a confiden- urgent need for management talent, to success is the sustained profitability of tiality agreement and, if there is mutual financial resources, and capital. The chal- the firm. Internal purchase programs may interest, the parties then enter into lenge exists because firms must identify a include different levels of ownership, a discussion. next generation of managers that has the clear understanding of the criteria for When discussions progress between a sell- skills and training to lead the firm’s gov- ownership, communication of an contin- er and buyer, the parties sign a letter of ernance, spearhead management and uing share-offering program and an intent (sometimes called memorandum administration, continue the firm’s ability explanation of the operation of the firm. of understanding). This document, which to generate business, and make the neces- is typically nonbinding, confirms the key sary hard decisions. Firms must fund the Once it is decided where the deal points, identifies open topics to be exit of senior shareholders as well as firm is to go, the question of finalized and sets a timetable for closing. growth, capital expenditures and acquisi- how to get there and the best The deal structure of the transaction can tions with only a limited financial com- mechanism— internal transition be either an asset sale or share sale. The mitment from a younger generation that or external exit, must be components of the purchase price are is risk-averse and less entrepreneurial chosen and pursued. cash, promissory note, earnout and/or than its predecessors. shares of buyer. The choice all firms face is to pursue The documentation for such purchases Immediately following the execution of either an internal transition, or an exter- includes a share purchase agreement, a the letter of intent, due diligence of nal exit. Internal transitions are motivat- promissory note, a share-pledge agree- quantitative, qualitative and legal matters ed by paternal/maternal feelings, a loyalty ment and a shareholder agreement, often is undertaken. Simultaneously, the trans- to key long-term employees, lack of easy with restrictive noncompetition action documents of the purchase and identification of third party partners, a covenants. The management succession sale agreement and employment agree- sense that an internal transition is simpler steps include establishing the criteria for ments are drafted. After due diligence is and less expensive than an external exit, selection, how to select new leaders and completed and documents finalized, the the fear of the unknown third party, and yet retain and motivate unsuccessful transaction is closed, announcements the risk of cultural changes. An external internal candidates, and how to build an made and integration and post-closing exit is often motivated by a goal of maxi- integrated team. New leaders need train- business plans implemented. mizing the price to shareholders, certain- ing and a transition period for the chang- ty of deferred payments, and elimination ing of the guard. The role of outgoing Firm leaders and shareholders should ask of the concern that the next generation is leadership and the composition of the where the firm is now and where is it not capable of running the business and board of directors (including both inside going. What is the competition doing generating the necessary funding to buy and outside directors) must be addressed. and what is the firm’s strategic plan? out the previous generation of owners. Finally, the firm must identify its culture, Once it is decided where the firm is to identify the management style of the cur- go, the question of how to get there and The key elements of an internal transi- rent leadership, the leadership style of the the best mechanism— internal transition tion are financial arrangements (owner- new generation, and decide which is or external exit, must be chosen and ship), management succession and corpo- most appropriate for the challenges facing pursued. ■ rate governance (leadership), and cultural continuity. the firm. GEORGE CHRISTODOULO, PC, The chronological sequence of an exter- is a senior partner at Lawson & Weitzen, The financial challenges include decreas- nal transition includes the partner search, LLP, Boston, MA. He can be reached at ing the ownership of the current purchase price/deal structure, transaction GChristodoulo@lawson-weitzen.com. The Zweig Letter ZWEIGWHITE
  7. 7. Issue 843: December 21, 2009 7 Looking through the lens of leadership > Put aside our outlook for just a moment a strategic decision and what doesn’t. In what the firm is capable of and interested so we can talk about yours. Whether you’re looking though a microscope or a telescope, the coming year, when everyone is vying in handling. Consider what level of change what do you see? for the same small batch of clients and is required— not just technically, but emo- searching desperately for the ultimate tionally and professionally. Rather than ask > Z View It’s a really great point of differentiation, consider the focus what markets have money, ask what ser- thing to be a leader C h r i s t i n e of an architecture, certain leaders will have. vices are needed. Instead of chasing the lat- B r a ck est trend, which is typically broad in engineering, or envi- ■ Good— but not strategic. Strategy nature, drill down into one particular area ronmental consulting firm. The corner implies planning; thoughtful, deliberate, within it. Is your organizational structure office, company car, executive pay and and calculated thinking, the results of capable of doing what needs to get done? bonus, and ample vacation time are envi- which carry long term impacts and bene- Will the board of directors be effective this able prizes after years of dedicated work. fits. Deciding where to cut costs, imple- year? What did they actually accomplish Likewise, what’s not to love about the menting a system for quicker AR collec- for us last year? immense responsibility of guiding the tion, finding firms to collaborate with, organization out of the worst economy in migrating to Deltek and Revit, or asking ■ Best— thinking like a strategist. We decades? Who can dispute that the pres- managers to become more diligent about can all think of someone or some firm that sure and power to make the right decisions business development is not strategic. landed what we deemed a lucky break and were worth climbing the ladder for? These are fine maintenance activities cer- turned it into an exciting story of success. tain people in the firm can perform, but This level of achievement is not always The people we lead generally expect us to they shouldn’t be the highlights. The team derived of methodical effort. It is possible have answers for everything divined is expecting much more and the firm will to be so engrossed in a business plan that through absolute clarity— whether the cli- require a whole lot more if it wants to one fails to capture a prime opportunity at mate is stormy or calm. The truth is, we’ll grow in 2010. the right time. Those chances arise in envi- never have all the answers and we’ll never ronments like these, where economists are be perfectly certain that the decisions we ■ Better— asking intense questions. unsure week in and week out, and where make are foolproof. The difference for Before we even get to the place where we the industries we are in involved in change 2010, however, is that leaders will be re- are balancing one option against another before our very eyes. Leaders who think evaluating the list of decisions to be and need to make a choice, we have to be like strategists identify and utilize the made— and concentrating efforts on those asking the right questions. Formulating potential and swiftly make the decision to most important to firms’ strategic plans. these requires an intense understanding of pursue it. You can’t profit from waiting for the marketplace and what’s brewing inside There is also a strategic way to handle that others to try it and learning from their it. It also requires an honest look inward at filter— and wisely discern what constitutes lessons. Your success will come by pairing your firm with a positive or negative Our newsletters are packed with news you can use today, change in the industry, and twisting it to analysis you can trust, the latest trends, management tips, best practices, important events and resources to keep you your advantage. It requires innovative The Zweig Letter up-to-date on how real professionals in the AEC industry are 321 Commonwealth Road, Ste. 101 thought and courage, but it will carry you tackling today's challenges. For information or a sample issue Wayland, MA 01778 further this year than by doing the same as of any of our titles, go to: http://tinyurl.com/zwnewsletters. Fax 508-653-6522 E-mail: info@zweigwhite.com you’ve done before. Or call 508-651-1559 Subscribe today for 1 year! Total: $ _______ Think about what your own outlook is for The Zweig Letter (weekly): $475 | Marketing Now and AEC Finance News (Monthly): $245 | the year and about the types of decisions The Zweig HR Letter (Monthly): $145 you need to make that will make a big dif- The Zweig Letter Marketing Now AEC Finance News The Zweig HR Letter Subscription Version Options: (check one) Online or Print ference. No matter how 2009 turned out for anyone, it is behind us, and 2010 pre- PAYMENT METHOD My check payable to ZweigWhite is enclosed Please bill my firm. sents its own unique set of challenges and Charge my VISA, MasterCard, or American Express. opportunities. As a leader in your firm, Cardholder:______________________________________ everyone is counting on you. ■ Card# CHRISTINE BRACK, PMP, is a Exp. Date Signature:_______________________ principal with ZweigWhite specializing Name in strategic business planning and project SHIP TO Phone management optimization. Contact her Email ___________________________________ at cbrack@zweigwhite.com. © Copyright 2009, ZweigWhite. All rights reserved. The Zweig Letter ZWEIGWHITE
  8. 8. 8 Issue 843: December 21, 2009 Economy solid infrastructure experience are some- Damon looks forward to the day when the From page 1 what hard to find,” Benvie says. industry returns to its old worry of attract- sidiary of WSP Group plc (London, ing and retaining staff. “This is why we are Executives forecast that the economy will United Kingdom), a 10,000-person doing everything we can to make certain eclipse other challenges for some time. design, engineering, and management our talented staff are treated well through consultancy service firm. “For us, the most important issue is simply these tough times and will remain with us business development,” says Tony Damon, when the job market improves,” he says. ■ “With fewer opportunities to pursue, the CEO at SSOE, Inc. (Toledo, OH), a 950- margin for error is significantly less, and person architecture, engineering, and con- > Firm Index every firm must maximize the opportunities struction management firm. While SSOE BLRB ARCHITECTS. RW ARMSTRONG. presented to it,” Smith says. has a significant backlog of work going into Tacoma, WA. 5 Indianapolis, IN. 8 2009, Damon says, “over the course of the C|A ARCHITECTS. SSOE, INC. Toledo, Finding those opportunities is one thing. Long Beach, CA. 5 OH. 8 Getting paid for taking advantage of year, we worked through that backlog and CUBELLIS. Boston, TECTONIC. them— at least getting paid on a timely due to changes in capital programs by many MA. 3 Mountainville, NY. 8 of our clients, we were not able to replace FPM GROUP , WSP GROUP PLC. basis— can be quite another. Ronkonkoma, NY. 5 London, UK. 1 the backlog at the same pace.” LAWSON & WEITZEN, Some firm names “We’re looking at a 30-to-34% increase in LLP Boston, MA. 6 . were omitted due revenue in 2009, but our biggest issue has At TECTONIC, Benvie says, “the backlog to space constraints. been cash flow,” says Roland Salman, presi- is there for 2010, but the big question is: dent of RW Armstrong (Indianapolis, IN), Where will the backlog come from for a 600-person global design and manage- 2011?... The most pressing issue we are fac- ing is the shrinking markets we serve in > Got Ideas? Talk Back ment consulting firm. “People are holding on to their money longer. You just have to both the public and private sector and how Bill Lewis, Senior Editor. to remain competitive on a cost basis with- Call me at trust that you’re working with the right 800-466-6275, ext. 262, or e-mail clients and that you’re ultimately going to out sacrificing the quality for our work.” blewis@zweigwhite.com. get paid.” Those shrinking markets have lead to João Ferreira, Editor. A year ago, following the credit meltdown increased competition, firm leaders’ second Call me at and bank bailouts, the economy emerged as most-cited challenge. “Companies that 800-466-6275, ext. 245, or e-mail the top challenge listed by firm leaders, but were doing private work are now shifting to jferreira@zweigwhite.com. finding qualified staff remained the third public sector projects, and larger firms are Craig MacCormack, Senior Writer. most important challenge listed (with the going after small and medium-type pro- Call me at 800-466-6275, cost of health care listed as the second most jects, where you wouldn’t expect them to ext. 209, or e-mail submit a bid,” Salman says. cmaccormack@zweigwhite.com. pressing concern). However, as business slowed and thousands of architects and In a continuing slump, Smith says, long- engineers joined the ranks of the unem- term planning gives way to concern about ployed, Smith says, “the dynamics of staff “short-term business issues.” recruitment and retention has become less pressing of an issue. With that said— all “I expect a similar focus” for 2010, “though firms are focusing on retaining their key we are working to position ourselves for a The voice of reason for architecture, staff and, as a result, highly qualified star positive change in the economy,” he says. engineering, and environmental consulting firms. employees are still hard to come by.” “We have done this primarily by continuing Published continuously since 1992 by ZweigWhite, Wayland, Massachusetts, USA. ISSN 1068-1310. our marketing and sales efforts in our weak- Donald Benvie, president and CEO of er areas, so we are properly positioned when Issued weekly (50 issues/yr.). $475 for one-year subscription, $775 for a two-year subscription. TECTONIC (Mountainville, NY), a 312- the market changes.” Mailing Address: The Zweig Letter person civil, geotechnical, structural, survey, 321 Commonwealth Road, Suite 101 environmental, construction management, Those changes will come, and the economy Wayland, MA 01778 homeland security, materials testing and will recover, says SSOE’s Damon, but “we Tel: 508-651-1559 Fax: 508-653-6522 information technology firm, agrees that anticipate it will be much slower to develop E-mail: info@zweigwhite.com than in the past.” In the meantime, he says, Online: www.thezweigletter.com more qualified applicants have become Twitter: twitter.com/zweigwhite available during the economic downturn, the company plans to focus on core clients Blog: zweigwhite.blogspot.com but that recruitment still poses some chal- and markets, “and we are looking at further Article reprints: For high-quality reprints, including international expansion to take advantage of Eprints and NXTprints, please contact The YGS lenges. Group at 717-399-1900, ext. 139, or e-mail the investment being made globally by TheZweigLetter@TheYGSGroup.com. “Project managers with five to ten years of some of our best clients.” Copyright 2009, ZweigWhite. All rights reserved. experience and construction managers with The Zweig Letter ZWEIGWHITE

×