Check out page 12! Arcbazar was featured in the latest issue of PSMJ - a go-to source for powerful training, research, events, and advice for architecture, engineering, and consulting firm leaders.

1. MAY / 2017 • VOL / 44 • ISSUE / 5
INSIDE:
USE WEBINARS TO TAP THE
PRESENTATION PHOBIC / 3
T. BAKER SMITH ROLLS HR INTO
STRATEGIC PLANNING / 4
3 BIG LEADERSHIP CHALLENGES / 4
SHARE BUT BEWARE / 5
PM MANAGER USES ‘PEOPLING’ TO
GET THE JOB DONE / 5
CONSIDER PROCESS BEFORE YOU SELL / 6
A/E GROWTH CONTINUES / 6
SUSTAINABILITY NOT JUST FOR CLIENT / 7
TEXT WITH CAUTION / 7
INFRASTRUCTURE: A ‘RUSSIAN ROULETTE’
SITUATION / 8
READY FOR TAX REFORM? / 8
CYBER SECURITY AS A MANAGED
SERVICE / 9
TIME TO INSURE AGAINST A CYBER
ATTACK? / 10
ENSURE EVERY CONTRACT HAS A
MEDIATION CLAUSE / 11
REALLY CARE ABOUT PROFITS?
LOOK AT JUST 3 METRICS / 11
9 SECRETS TO TURN CLIENTS
INTO FANS / 12
DISRUPTION: WARM UP TO
CROWDSOURCING / 12
1
75%
Project Managers charge a median
of 75 percent of their time to client
projects according to PSMJ’s 2017 A/E
Management Compensation Benchmark
Survey Report. This is slightly less than
in 2016, when survey participants
reported that PMs charge a median of
79 percent to client projects.
Many firms rely the sandwich generation—middle-aged adults caught
between aging parents and kids. And this hard-working generation—who
often represent the mainstay of talent in design firms across the country—
deal with issues at work, parents needing care, and their children’s demands.
As Dave Burstein, PSMJ director points out, “They have a life.”
With roughly two-thirds of all adults (67 percent) saying workers should
receive paid leave when they need to take time off to care for a sick family
member, how should and do firms deal with staff that often have heavy and
growing family obligations?
CONTINUED / PAGE 2 u
PAID LEAVE: ICING ON THE CAKE
FOR ‘SANDWICH GENERATION’
TRUMP CUTS ANGER ARCHITECTS
President Trump’s mid-March proposed budget calls for hundreds of program
and agency cuts—with more than 50 in the Environmental Protection Agency
alone. The highlights for design firms include:
• Department of Housing and Urban Development (HUD)
- Trump’s budget proposes $3 billion in cuts to Community Development
Block Grant program (CDBG). The money funds parks, health care
clinics, senior centers, and neighborhood rehabilitation efforts.
- The budget seeks to cut the Affordable Housing programas well.
• Department of Transportation (DOT)
- Transportation Investment Generating Economic Recovery (TIGER)
grants. The program funds support projects, such as multi-modal
developments and transportation upgrades coordinated with related
efforts such as affordable housing development or brownfield cleanup.
- Trump seeks to totally defund National Endowment for the Arts (NEA).
“The NEA does a lot more than just support art exhibits or symphonies,”
says Andrew Goldberg, managing director of government relations at
the American Institute of Architects. “It does a lot of grant work on
placemaking, working with mayors and local officials, community
design and planning.”
• U.S. Environmental Protection Agency
- Fifty EPA programs including Energy Star are slated for elimination.
More than 700 architectural firms sent a letter to EPA administrator
Scott Pruitt saying, “Energy Star tools are vital for architects conducting
energy efficient design work.” l
A/E STRATEGIES FOR SUSTAINABLE SUCCESS
PSMJ
PROFESSIONAL
SERVICES
MANAGEMENT
JOURNAL

2. PSMJ • MAY / 2017 • VOL / 44 • ISSUE / 52
PAID LEAVE (continued from page 1)
55%
More than half of firms (55 percent)—
both large and small—continue to pay
employee group insurance when an
employee is out on leave, says PSMJ’s
2017 A/E Bonus & Benefits Benchmark
Survey Report.
This is very different from the low of 13
percent nationwide reported by the Pew
Research Center, which recently released
data on how U.S. businesses comply with
the Family and Medical
Leave Act.
82%
Young professionals in your office support
paid leave. In fact, 82 percent of adults
ages 18 – 29 say fathers should be able
to take paid leave following the birth
or adoption of their child, reports Pew
Research Center. However, firm leadership
faces growing demand for more time
off amid an industry reliant on the percent
of time each staff member charges to
billable projects. (See 75% on p. 1.)
2018
Current U.S. Department of Labor FMLA
forms are set to expire one year from now
on May 31, 2018. Go to https://www.dol.
gov/whd/fmla/ for e-tools, fact sheets,
and more.
BY THE NUMBERS
PTO (Paid Time Off) is the answer for 58 percent of firms, reports the PSMJ’S
2017 A/E Bonus & Benefits Benchmark Survey Report—up from 46 percent in
the 2015 survey. Ironically, we’ve found this strategy—where employees accrue
paid leave for vacation, sick leave, or any other personal reason—doesn’t result
in more time for employees, Burstein says. “Results indicate that the opposite
is true.
“When firms implement a personal leave policy, the total time off is slightly
less than those with separate policies,” he says. Burstein adds that PTO is much
easier to administer because firms don’t need to inquire and track the nature of
the employee’s time off.
Here are a few details:
• Personal leave accrues at increasing rate as an employee’s seniority with the
firm increases.
• The typical personal leave is 120 hours or 15 days during the first four years
of employment.
• When you compare earned PTO, larger firms (staff size over 500) offer almost
20 hours more of PTO accrual than firms with a small staff (less than 20).
• No matter how much PTO is offered, time off from work is considered a
valuable benefit. “When we ask design firms what employees most want they
say, ‘extra vacation days,’” Burstein says. l
PUBLISHER / Frank A. Stasiowski, FAIA
EDITOR / Cathy Cecere
GRAPHICS/LAYOUT / Marc Boggs
PUBLISHED BY / PSMJ Resources, Inc.
10 Midland Avenue, Newton, MA 02458
TEL / 617.965.0055
EMAIL / customerservice@psmj.com
VOLUME 44 | ISSUE 5
PSMJ is published monthly by PSMJ Resources, Inc. Annual
subscription price: $397.
Copyright © 2017. All rights reserved. Quotation with
attribution is encouraged. Duplication in any other form,
including photocopying or electronic reproduction,
without permission is strictly prohibited and subject to
legal action. For permission to photocopy or use material
electronically, contact us at customerservice@psmj.com or
at 617.965.0055. Attractively-priced group subscriptions
are available.
PSMJ
PROFESSIONAL
SERVICES
MANAGEMENT
JOURNAL
DESIGNERS BRING HOME BACON AND BABIES
About eight-in-ten Americans (82 percent) say mothers should have paid
maternity leave, reports Pew Research Center. And firms now do offer more
days for those who request maternity leave. When you compare days offered
in 2015 compared to today you see an increase of 7 days, says PSMJ’s 2017
A/E Bonus & Benefits Benchmark Survey Report.
Maternity Leave Benefit
2017 2015
Maternity Leave Days Allowed With Pay 22 15
Maternity Leave Days Allowed Without Pay 60 60
PSMJ and Pew
Find out more about the PSMJ’s 2017 A/E Bonus & Benefits Benchmark
Survey Report at: http://store.psmj.com/2017-a-e-bonus-benefits-
benchmark-survey-report-psmj/
And to download the Pew Research Center’s “American Widely Support
Paid Family and Medical Leave,” go to: http://www.pewsocialtrends.
org/2017/03/23/americans-widely-support-paid-family-and-medical-leave-
but-differ-over-specific-policies/

3. POWERFUL STRATEGIES FOR A/E FIRM LEADERS 3
When you have a staff of engineers, the problem of
staying in contact with clients may be compounded as
these passionate, but reserved design professionals, don’t
always see a need to become networking mavens.
To get those who know structural mechanics and
interceptor drain projects better than how to start a
conversation with the firm’s next client, you need a robust
strategy. Bill Reader, Corporate Marketing Director for
NTH Consultants, Ltd. with offices in Michigan and Ohio,
thinks he has found the secret formula—webinars.
TEACH AND TALK
For the last six years, Reader has worked diligently to
take the passion that his engineers have for improving
infrastructure, and using it to connect with old and
new clients. “Every month or so, we ask a couple of
industry experts to share an hour to discuss the latest
developments in their field,” he says. And it is as simple as
that. Or is it?
Reader admits that it has taken NTH many years to see
clients and staff embrace the webinar as networking
strategy. So what are his tips for staying in touch with
clients this way? He has six:
1. Recognize passion. Reader knows his firm is staffed
with intelligent professionals with a hunger to help
clients succeed. With webinars, he allows even the most
presentation-phobic professional to present what they
know. And it works.
2. Be consistent. “We have 12 business units, so the
first year we had each business unit do one webinar a
year,” he explains. But Reader did not stop even if there
was pushback in years two and three. “Everyone has
something to offer,” he says.
3. Personalize the invite. Reader does use email blasts
and social media to invite clients to an upcoming webinar,
but he points out that 80 percent of the audience register
after being personally invited by a member of NTH
staff. “All the work is done for them,” Reader says of the
process. “That leaves our staff with the job of responding
back to emails that may come back with client questions
and inquires.”
THE FUTURE OF THE
A/E/C INDUSTRY
PSMJ’S Director Dave Burstein was
hosted by NTH Consultants and
presented over 500 attendees with
an overview of the economy and
insights an outlook of the A/E/C
business. To access the webinar,
go here:
http://www.nthconsultants.com/
webinars.html
USE WEBINARS TO TAP THE PRESENTATION PHOBIC
4. Pushback on
pushback. Over
the years, engineers
have told Reader
that not all clients
are interested in all
the topics covered,
and may not be the
best to invite. “I
request that they
send the invite
anyway,” he says.
“Often we find
clients will forward
good content to those who may be more interested, and
then we end up getting in contact with a person who is
new to NTH.”
5. Spread the message. Five years ago, Reader was happy
to have 30 people attend a live event, but now NTH’s
webinars bring in between 350–550 attendees each
month. “We cover the industry, top trends, and other
very specific technical areas of interest,” he says. “But we
also invite top speakers to give our clients information
they can use.” (See “The Future of the A/E/C Industry.”)
6. Tweak the process. Reader suggests that any process
a firm decides on needs modifications now and then to
make it better. He suggests surveying attendees, and then
making changes that will make the most impact. For
example, paying attention to audio quality (decreasing
echo with foam panels and headsets) increases overall
satisfaction exponentially, he says.
DID YOU MAKE A SALE?
Reader has been asked by leadership if the webinars have
resulted in real project dollars. “Yes. But we have done
more than that. We have taken a difficult proposition—
engineers who need to but are reluctant to reach out to
clients, and have given them a way to network and help
make sales.”
Reader also says that his strategy is getting quite a
following. NTH has become “the webinar company,” he
says. Not bad for a 100-person firm that began with a
small list of contacts, and now boasts a robust database of
more than 30K people with varied interests and needs. l

4. PSMJ • MAY / 2017 • VOL / 44 • ISSUE / 54
“We have a Vice President of Strategic Planning and
HR—that’s how closely strategy and HR are tied together
at T. Baker Smith,” says the company’s President and
CEO, Kenneth Wm. Smith, P.E., P.L.S. Smith delivered the
keynote presentation “How to Involve HR in Your Firm’s
Strategic Planning Process” at PSMJ’s 2017 A/E/C HR
Summit in New Orleans last month, and he shares
TBS’s strategies.
FIRST—THE WHY
Smith says of professional services firms, “What we sell, it
is intellectual capital; people’s ability to use their education
and talents to solve problems. So I don’t know how you do
strategic planning without HR.” Hence, strategic planning/
HR vice presidency, a title Smith believes is unique in the
industry. “So the person whose job it is to help run and hold
everyone accountable for strategic planning is the exact
same person in charge of human resource operations.”
NEXT—THE HOW
That VP is present at T Baker Smith’s annual strategy
meetings and monthly strategy review meetings. “There
we look at what’s changed, how we’re doing, and hold each
other accountable,” says Smith. “And more importantly,
how do we need to adapt.” One such adaptation was to the
competition for talent, “Not just to find talent but to keep
them,” says Smith. “Almost like you’d submit an RFP for a
project, we had to raise our game in defining who we are
and what are our expectations for a position.”
Now T Baker Smith creates not just a job description, but an
expectations document for each position. “If we’re trying to
recruit a senior engineer in a major metropolitan area, we’ll
have a document with specific goals such as, ‘Grow and
develop staff within a 24-month period.’ I find engineers
3 BIG LEADERSHIP
CHALLENGES
At a recent PSMJ A/E/C Principals Bootcamp, the group
listed the following as its biggest challenges:
1. Growth—Operational challenges
2. Transition—Leadership training
3. Recruitment—And retention
Also mentioned:
• How to research the competition
• How to have a better firm culture
• Sustain price position
• Train project managers
• Best business KPIs
• Finding new clients
• Remaining profitable
• Proactive client relationships
• Reaching diversity—age, race, gender
• Working with Millennials
love goals. They know up front ‘This is a challenging
position, and I can do this,’” says Smith.
Secondly, new employees have three months to complete a
17-page onboarding checklist, which covers different
elements of the business and the people responsible for
coaching the new hire.
The broad categories include (among others):
• Corporate culture
• Information technology
(e.g., the company’s Deltek system)
• Safety
• Marketing
• Discipline-based checklists like the design and
QA/QC processes
• Communications and collaboration systems like
Office 365, Skype for Business, and cloud-based
file-sharing systems
“Those are all processes and systems you have to know to be
fully integrated into the firm with a much higher chance of
success,” Smith says. l
T. BAKER SMITH ROLLS HR INTO STRATEGIC PLANNING
FINALLY—THE FUTURE
The onboarding checklist is a new strategy, implemented
less than six months ago, “And the feedback has been
phenomenal,” Smith says. “People who’ve been here a year
or more want their own checklists.”
He adds about tying HR to strategy, “I wouldn’t know
how to do it any other way. We’re blessed that we’re busy
trying to bring in new folks, which is getting harder to
do, and we had to raise the bar on ourselves; to separate
ourselves from the competition.”

5. POWERFUL STRATEGIES FOR A/E FIRM LEADERS 5
SHARE BUT BEWARE
Does everyone in your organization know which projects
are on budget and on schedule? Do staff know which
ones are in trouble? Does everyone know who’s booked
up solid this week? Is it common knowledge who has a
few billable hours to spare?
If these seem like odd questions, they shouldn’t. Mike
Kuppinger, a former General Manager at Environmental
Systems Design, examined the distinguishing factors of
top-performing firms, and found that the top firms all
engaged in regular information sharing.
SHARE IMPORTANT INFORMATON
One firm goes so far as to have a weekly meeting at
which the utilization data for everyone in the firm from
the CEO to the newest hire are shared with the entire
staff. This level of openness “creates a culture of shared
accountability,” according to Kuppinger.
Four benefits of sharing what you know:
1. With teams working together to make everyone’s
hours billable it becomes much easier to “borrow” an
engineer for a few hours in a week if he or she has the
time to spare.
2. Reporting project status allows senior project managers
to “jump in to help get a project back on track,”
Kuppinger adds.
3. Sharing information helps create a team culture
throughout the firm.
4. This practice also prevents destructive rumors that
often hurt morale.
WHEN YOU DON’T SHARE
Kuppinger cites one firm that did not share information
with the staff. When a down year necessitated budget
cuts, the staff, unaware that business was down and
that principals made serious cuts of their own, assumed
the firm was doing fine and the principals were simply
being greedy.
Firms eager to move to greater transparency with their
staff should be aware that the process may take a few
years. In a culture where transparency is not yet the
norm, employees may feel threatened, for example, by
having their utilization data shared with their co-workers.
The process may involve some growing pains, but the
increased camaraderie, trust, and loyalty it inspires is
well worth the effort. l
USE ‘PEOPLING’ TO GET THE
JOB DONE
With a headcount of 265, Cuhaci & Peterson has many personal
styles. Manager of Project Management, Donald Miller has
21 full-time direct reports and three principals who are
active project managers. To get to a common and united goal
he practices “peopling”—the active management of people
that leverages strong character traits. “Understanding the
psychology of what makes people tick through active listening,
and where their passions are, I believe can help motivate an
individual,” Miller explains.
Five tactics he recommends:
1. Build “equity” into a relationship. Simply put, get to know
an individual and find common interest. “That builds equity
because you build trust,” Miller says. It also allows you to make
a request.
2. Practice intra-business development. “Go in the door
saying ‘I hope we can build a business relationship,’” Miller
advises, just as you would in business development. “By that,
I mean treat your team like they are clients. Like a client, you
cannot perform anything without them, and certainly need
their buy-in to get it done.”
3. Exercise humility, which Miller admits is “not a very
popular word within the architectural community.” However,
when dealing with people in an effort to rally your banner,
I believe approaching professionals from the standpoint of
assistance breaks some of these walls down, he says.
4. Consider cultural analytics. Cuhaci & Peterson uses KPIs
to measure performance. Miller says, “Anything that has
to do with numbers,” like WIP, utilization percentages, and
scheduling. They also look at individual strengths, such as
technical capabilities—what is the team member’s level of skill
with Revit or AutoCAD? But Miller also describes a level of
cultural analytics, like work ethic. Does the individual come in
on time? Does he or she stay late to finish an important task?
5. Deal with square pegs. Sometimes you must deal with a
strong character. How about an individual who is both heavily-
introverted and “Type A” who has been placed in a leadership
role to coach, mentor, and discipline engineering staff and
architectural resources? This individual is highly motivated
by the common outcome of document quality, profitability,
and self-accountability, and eager to share that expertise.
“Understanding how to motivate this leader is the key to
success, because essentially people become self-motivating
when their DNA kicks in,” he says. l

6. PSMJ • MAY / 2017 • VOL / 44 • ISSUE / 56
CONSIDER PROCESSES BEFORE YOU SELL
Mark Bartlett, president of the Massachusetts Chapter
of the American Council of Engineering Companies
(ACEC) and Senior Associate at Stantec, cautions small
and mid-sized firm owners considering a sale to look
deeper into the project management process during
due diligence.
In the long slog of the typical firm sale process, some
owners overlook the crucial matter of how their
professional liability mindset may change when they
join the combined entity. Even if cultures align and the
firms mesh in every other way, professional liability
assumptions and expectations could drastically change.
“There are so many dimensions to culture,” Bartlett says.
“The people and their roles, the personalities and how
they interact. But there is also the corporate structure.
You may like it or not, but you have to understand what
it is, and how it’s going to affect your life.”
CHANGE TAKES GETTING USED TO
Small and mid-sized firm leaders joining a larger firm
are particularly susceptible to a change in this dynamic.
Projects in larger firms may be more complex, client
relationships increasingly at arms-length, and the project
staff and subconsultants less familiar and more far
afield. This can lead to a sense of uneasiness among
firm leaders who previously considered a handshake
or phone message from a long-time client sufficient
notice to proceed.
Bartlett has been involved in multiple mergers and
acquisitions. In March 2014, Bartlett and his partner
sold 20-person Norfolk Ram Group to 285-person Fay,
Spofford & Thorndike (FST). Nineteen months later,
industry giant Stantec acquired FST.
The transition from Norfolk Ram to FST generated
few professional liability hurdles, despite the size
difference, Bartlett says. “Our cultures were so similar
that there really weren’t any issues. We continued to do
the same kinds of projects for the same clients that we
did before the acquisition.”
Other than ensuring that a solid tail insurance policy
was in place to cover Norfolk Ram’s pre-acquisition
projects, professional liability wasn’t a concern, he
says. The situation is different with Stantec, which
abides by and enforces both rigorous safety standards
and a 10-point framework policy on all projects. Much
of this approach stems from the company’s ISO-
9001:2000 Quality Management System standard.
The steps necessary to meet ISO requirements favor
larger projects, rather than “quick in-and-out projects”
that were once a greater part of Norfolk Ram’s book of
business. “I still have legacy clients and projects; things
that I have connections with that come to me,” says
Bartlett. “But it takes more time now than before to set
up a project, do the plan, and go through the protocol
to meet the ISO standards. It makes you think twice
about taking on smaller projects.”
Bartlett adds that the Stantec quality management
approach, while a different experience for him, is
designed to instill more safeguards against professional
liability exposure. “It’s a good system, very thorough.
For a firm such as Stantec, I totally understand the
importance of such protocol being in place. But it took
getting used to.” l
A/E GROWTH CONTINUES
Firms are growing again! Back in February, employment
numbers (1,437,000) for architects and engineers almost
reached the high hit in February 2008 (1,453,000).
According to the DOL, engineers are doing much better
than any time since January 2006. Architects and
construction employment, however, have not returned
to the high employment numbers set in 2008.
Source: U.S Department of Labor

7. POWERFUL STRATEGIES FOR A/E FIRM LEADERS 7
Sustainability isn’t just for clients; it’s a goal that can animate a
firm’s entire practice. Along with designing projects that earn the
Green Building Council’s LEED certification or the International
Living Future Institute’s Petal certification, design firms also
focus on saving energy closer to home. Here are three ways to
make sustainability part of the lifeblood of your firm:
1. Share Information
If your firm has a culture of transparency, especially around
financial performance, breaking out energy costs as a factor
dragging down profitability (and, with it, potential bonuses and/
or profit sharing) can be a great way to get your staff motivated
to reduce the costs.
2. Gamify
Gamification—using the trappings of games to encourage
participation—can be a great way to motivate staff to save
energy. Creating a competition with clear goals and “badges”
or “achievements” to mark milestones can be a fun and effective
way to stimulate energy savings. If this feels childish or corny,
consider not only your staff members who grew up on video
games, but those who use fitness trackers. The apps that go
along with these popular devices use gamification to encourage
exercise and/or weight loss. Gamification is not only effective,
it’s also familiar and comfortable.
3. Redesign
If you’re ready to make a big commitment to energy efficiency,
you can do what Miller Hull in Seattle did—design yourself a
green headquarters. Miller Hull’s Wendy Abeel explains, “We
were determined to ‘walk the talk’ with the environmentally-
minded renovation of our 14,000sf studio space,and we reached
remarkable energy performance outcomes that far exceed 2030
Challenge targets, earning Living Building Petal Certification.” l
SUSTAINABILITY NOT
JUST FOR CLIENT
TEXT—WITH
CAUTION
Given the security and legal concerns around
texting, it’s critically important to be aware of
its drawbacks as well as its advantages. “The
need for immediate responses is growing,”
explains David Johnston, principal at STG design
in Nashville, “The use of texting in informal
communication and even, in some cases, formal
communication is generally acceptable, and, for
some clients, preferable.” Texting is not going
away, but, as firms embrace this technology,
there are at least two serious caveats to consider.
Security Concerns
“I personally don’t know of anyone who has
a password for accessing text messages on
their phone,” says Joe Adu, a Boston-area IT
professional who has implemented Information
Technology security policies for companies
in public and private sectors. He stresses the
security advantages of email over texts.
Emails can be automatically monitored
within the firm for the exchange of sensitive
information, and, Adu adds, “Emails are much
more secure, and offer more options for your
communication. I can encrypt or password
protect an email so that only the recipient can
see it. Think of your kids getting hold of your
phone: they can open the mail app, but if the
message is protected or encrypted, they won’t
be able to read it unless they know the message
password or have your encryption key.”
Legal Concerns
While texting may feel more like a conversation
than a written exchange, it’s important to
remember that a text is, legally, every bit as
much a piece of writing as an email or
a letter, and courts may find that text messages
from principals do constitute legally
binding promises.
In 2016, Massachusetts Land Court, in St.
John’s Holdings vs Two Electronics, found a
text conversation between agents constituted
a legally binding written agreement to sell
property. It’s easy to imagine how answering
a request in what feels like a conversational
way can lead to complications if every text is
a contract.
60%
Sixty percent of Millennials who work in engineering
and construction say that they deliberately seek out
employers whose corporate responsibility reflects their
own values. For those who work with capital projects and
infrastructure this percentage drops to 50 percent, reports
PwC. Both groups are below the 70 percent of Millennials
in the USA who have or will seek out employers for this
attribute. More here: http://www.pwc.com/gx/en/issues/
talent/future-of-work/millennials-survey.html

8. PSMJ • MAY / 2017 • VOL / 44 • ISSUE / 58
With Republicans in control of the White House and Congress, most
business insiders expect tax reform that could benefit design firms across
the country. President Trump has several ideas for tax code changes, and
the House Ways and Means Committee has theirs.
BUSINESS TAXES
One of the major components of the Trump plan is to cut corporate tax
rates from a maximum of 35 percent to 15 percent. However, these tax
savings apply only to C corporations, and the majority of design firms
conduct business as one form or another of pass-through entities—
partnerships, limited liability companies (LLCs) taxed as partnerships
or S corporations. One point of contention that hampered the ability
to achieve tax reform throughout the Obama Administration was the
Republicans’ refusal to agree to a lower corporate tax rate without
addressing the issue of pass-through entities. The Trump plan and the
House seek to address this issue in two key ways. First, both plans call for
three tax brackets—12, 25 and 33 percent—although they differ on when
each bracket will apply. The current maximum tax rate on individuals
is 39.6 percent on taxable income over $250,000, and 43.4 percent if
the individual is subject to the Net Investment Income Tax (NIIT).
Both reform plans call for the elimination of NIIT, so the reduction
in individual rates alone could save ownersup to 10.4 percent in their
maximum tax rate.
According to the Tax Policy Center, Trump’s plan includes the ability for
pass-through entities to elect a maximum rate for “business income” of
15 percent. This applies to active trade or business income from pass-
through entities, except distributions from “large” pass-through entities
would be taxed as dividends. The House has a similar concept, but
increases the maximum rate to 25 percent. If one of these plans makes it
into an overall tax reform package, small business owners could realize
a savings of up to 28.4 percent on their K-1 income from the companies
they own. Both plans have provisions that allow full expensing for all
capital investment, but in general, a company would have to forgo any
deduction for net interest expense. This would effectively provide for an
unlimited Section 179 deduction with no phase-outs occurring at any
level of investment. Currently, Section 179 allows for $500K of expensing.
AMT AND ESTATE TAXES
Several other proposals may also benefit design firms. For example, both
plans call for a complete repeal of theAlternative Minimum Tax. Trump’s
plan calls for a revision of the estate tax that would make capital gains
over $10 million held at death subject to tax, while the House calls for
a total repeal of the estate tax. Either provision, if enacted, would help
design firm owners pass their companies down to the next generation
without the same tax burdens they face today. l
To find out more reach Bill at billsmith@cbiz.com or 301-907-2412.
READY FOR TAX REFORM?
By Bill Smith, Managing Director, CBIZ MHM
INFRASTRUCTURE:
A ‘RUSSIAN
ROULETTE’
SITUATION
When speaking about the massive U.S.
infrastructure problem, Barry LePatner, of
LePatner & Associates, New York is not
equivocal, “The U.S. is facing a ‘Russian
Roulette’ situation where there will be
massive failures,” he says.
Speaking on CNBC, the author of Too Big
to Fall: America’s Failing Infrastructure and
the Way Forward pointed out that “we’ve
had them repeatedly, six hundred failures
since 1989. We have eight thousand high
priority, vulnerable bridges capable of
collapsing at a moment’s notice.” Such as
the seven-lane Tappen Zee Bridge that
crosses the Hudson River, LePatner says.
Congressman Bill Shuster (R-PA),
Chairman of the House Transportation
Committee, says that any infrastructure
plan won’t be funded by Congress.
Because of this stance, LePatner says that
if we are going forward with President
Donald Trump’s infrastructure plan, it is
going to have to be funded with private
money—offshore or in the U.S.
He points out that the U.S. could
employ two million workers, almost a
million of them currently unemployed.
“Put them back to work for three years,”
LePatner says.
And ancillary projects such as steel
manufacture, delivery, etc., will employ
more people. One third of the trillion
dollars would come back in federal and
state taxes, he points out. “Now we
are down to a pricetag of $660 million
dollars,” he says.

9. POWERFUL STRATEGIES FOR A/E FIRM LEADERS 9
“It’s not a question of if an architecture or engineering
firm is going to suffer a cyber attack,” says attorney and
cyber security expert David Furr, “it’s a question of when.”
Furr, who teaches cyber security at Wake Forest
University, recommends that design firms, especially small
firms without dedicated IT teams, invest in a managed
services suite, including a next-generation firewall, to
prevent debilitating cyber attacks.
WHY YOUR FIRM MAY BE AT RISK
It may be tempting to think that a small business is
immune from cyber attack. After all, attacks on enormous
corporations such as Target are the ones that make the
news, and with such large, wealthy corporations around,
why would a cyber attacker bother with a small or
medium-sized firm?
Simply put, any business of any size that does not have
proper cyber security measures in place is low-hanging
fruit for today’s cunning cyber criminals, and any data
that should be confidential, from employee social security
numbers to plans to the contents of sealed bids, is
potentially valuable. (See “Time to Insure Against a Cyber
Attack?” p. 10.)
WHAT A CYBER ATTACK LOOKS LIKE
A cyber attack often looks like business as usual—at
first. Malware sits in a computer network gathering data,
sometimes for months at a time, until the actual attack
is launched. Attackers can use data gathered during this
stage to create what security experts call a “shiny pig”
email. This is an email that looks legitimate—it may come
from a familiar-looking address and even contain personal
touches (“hope your daughter is feeling better”) but which,
when clicked on, unleashes the attack.
CYBER SECURITY AS A MANAGED SERVICE
Ransomware is a common form of attack: The firm’s
entire network is locked down until a ransom (paid in
untraceable digital currency bitcoin) is paid. Firms
may feel they have no choice but to pay the ransom,
but, according to Furr, paying the ransom marks the
firm as an easy target that may be subjected to ongoing
digital extortion.
Even if ransomware isn’t used, a cyber attack can do
devastating damage. Firms may be held legally liable for
any confidential client and employee data stolen from
their systems, or they may simply have a large sum of
money drained from their bank accounts.
Once an attack occurs, undoing the damage means a large
cash outlay and disruption of business while the entire
network is taken offline and every device attached to it is
swept clean. Furr estimates that the average cyber attack
costs between $300,000 and $1 Million to resolve. The
damage done to a firm’s brand by such an attack may be
even more serious.
MANAGED SERVICES
Hiring a dedicated IT team responsible for cyber security
is a good solution for large firms. Smaller shops, though,
may prefer to purchase a suite of managed services.
These services, including anti-malware and next-
generation firewall products, can be purchased for a
monthly fee of between $750 and $1,500, and usually
include an initial sweep and checkup, which scans the
network for malware without disrupting daily business.
According to David Furr, “that’s really not a lot of
money when you compare it to the cost of hiring an IT
department or the cost of putting a cyber attack right after
the fact.”
Any unsecured network is an attack waiting to happen,
and preventing an attack is ultimately much cheaper
and far less disruptive than trying to recover from
one. Furr says, “60 percent of small businesses that
suffer a cyber attack wind up going out of business as a
result.” The right protection can prevent your firm from
becoming a statistic. l
Even if ransomware isn’t used, a cyber attack
can do devastating damage. Firms may be
held legally liable for any confidential client
and employee data stolen from their systems,
or they may simply have a large sum of
money drained from their bank accounts.

10. PSMJ • MAY / 2017 • VOL / 44 • ISSUE / 510
As cyber security threats increase in frequency and
ferocity, firms of all sizes face the risk of attacks that are
both difficult to detect and complicated to remedy. While
the media focuses on high-profile breaches, cybercrimes
targeting smaller businesses are far more common and
the range of cyber security risks are many and constantly
changing.
Insurers now offer cyber liability coverages—via
endorsements and stand-alone policies—to cover the
damage and costs associated with breaches and other
cyber liability events. For example, firms can obtain
coverages relating to breach response, cyber extortion,
third-party litigation, and myriad other risks. But
should they?
RISK TO SMALL AND MEDIUM FIRMS
Not only are small and mid-size companies not immune
to cyber risk, they’re prone to it. Often wrongly assuming
that cyber criminals aren’t interested in entities of their
size. In fact, many cyber criminals target small to mid-size
companies for this very reason. Hackers can scan multiple
systems and then focus their resources on
weaker systems that they can breach easily. A large
percentage of compromised data results from human
error. Employees lose laptops and smartphones and
inadvertently disclose sensitive confidential corporate
information. Companies in all industries face heightened
scrutiny in the regulatory realm because of enhanced
enforcement by governmental entities.
COST TO THE BUSINESS
Of course compliance carries a cost, but in the immediate
aftermath of a cyber security event, a business will have to
deal with:
• Allocation of significant resources to identify the source
of the breach, ensure that it has ended, and upgrade all
systems to ward off future attacks.
• Subsequent regulatory fines and litigation. Currently,
47 states and all Canadian provinces have mandatory
compliance standards that set a baseline for how private
information must be protected, as well as breach-
notification statutes that dictate what must be done
following discovery of a breach.
• Private lawsuits also present a significant risk for a
TIME TO INSURE AGAINST A CYBER ATTACK?
company dealing with a cyber security breach, and some
courts have begun to ease the administrative barriers to
certifying a class action against a breached party.
• Damage to a company’s reputation. For a design firm,
the reputational damage arising from a cyber security
breach has the potential to drive away clients, partners,
and vendors. Many businesses are wary of working with
companies that may serve as jumping-off points for
hackers trying to access larger systems.
RISK MITIGATION/RISK TRANSFER
Today’s cyber security insurance policies responds to
current risks. In general, such policies provide both first-
and third-party risks. First-party coverage may include
crisis management, cyber extortion, and data breach
response. Policies may be tailored to include any or all
of these coverages, but nearly all contain data breach
response coverage. Third-party risk coverage typically
includes privacy liability, privacy regulatory defense costs,
and network security liability.
If a company chooses not to transfer its risk through
insurance, risk mitigation becomes imperative. Well-
drafted contracts with suppliers may help mitigate risk
if they include defense and indemnification, limitations
of liability, and mediation provisions specifically limited
to cyber breaches. Additionally, businesses should
review their cyber security posture to confirm that an
information security plan is in place. At a minimum, this
should include an incident response plan (with annual
testing), a privacy policy that the legal department
keeps current with respect to regulatory requirements
and privacy law, and background checks and privacy
awareness training for all employees.
Companies should also confirm that access to data is
limited to certain employee roles, that there’s a strong
password management process in place, and that mobile
devices connected to a company’s network are secure
and employ a data segregation scheme and encryption.
Most important, all companies should be prepared
for security incidents by maintaining agreements with
reputational risk advisers and attorneys who are versed
in privacy law. l
Find the complete article by Elissa Doroff, JD, and Nancy Kelly, JD, from
XL Catlin’s Cyber division, “Is Cyber Liability Coverage Essential as P&C
Coverage?” Randy Lewis at XL Catlin Design Professional can be reached
at Randy.Lewis@xlcatlin.com.

11. POWERFUL STRATEGIES FOR A/E FIRM LEADERS 11
REALLY CARE ABOUT PROFITS?
LOOK AT JUST 3 METRICS
Design leadership in most firms obsess over labor utilization rates. And
sure, in general, firms with higher utilization have higher profitability. But
high utilization numbers can be deceiving. We know many firms that have
low utilization rates and consistently high profits—and vice versa. In fact,
our analysis indicates only a 12 percent correlation between utilization
rates and profitability. So what are the key metrics that really drive
profitability? And what is the correlation among these indicators?
OBSESS ON THESE 3 METRICS
If you do the math, you’ll find that profitability is a function of only three
key performance indicators:
1. M is Direct Labor Multiplier(Net Revenue ÷ Direct labor)
2. U is Utilization Rate(Direct Labor ÷ Total Labor)
3. N is Non-labor OH Factor (Non-labor Overhead + Total Labor) ÷ Total Labor
Profitability = 1 – (N ÷ M x U)
The formula works like this: If you have a firm with $3 million in net
revenue, $1 million in direct labor, $500K in indirect labor, and $900K in
non-labor overhead, you can compute this firm’s profit as follow:
M = $3 million ÷ $1 million or 3.0 Direct labor multiplier
U = $1 million ÷ ($1 million plus $500K or 66.7% utilization rate
N= ($900K + $1 million plus $500K) ÷ ($1 million + $500K) or 1.6 non-labor OH factor
Profitability = 1 - [1.6 ÷ (3.0 x .667)] = 20%
THE REAL WORLD
If you look at the correlation of each factor (M, U and N) with profitability,
they are all remarkably low. So you have to look at all three together,
especially M and U, which are the biggest drivers of profitability. l
Be careful of accepting a contract that
doesn’t call for mediation as the first step
in dispute resolution, says Dale Kleber of
Accord Mediation, located in the Chicago
area. Once a dispute has started you may
not have much luck getting a client to the
mediation table, so think ahead.
Litigation and arbitration proceedings are
expensive and exhausting. They also suck
up valuable firm time as professionals
are called away from their duties and
billable hours shrink. Plus, the nature of
mediation offers a better chance for a
client relationship to survive the dispute,
as opposed to adversaries facing off in
court at an arbitration hearing.
“Including a mediation clause in a
contractual agreement ensures that the
parties will be obligated to first attempt
to mediate any dispute that arises prior to
pursing their remedies in court or through
arbitration,” Kleber says. “You can’t force
someone to reach a voluntary agreement
in mediation, but the process often
results in resolution even if the parties are
contractually required to participate.
Accord has reviewed countless versions
of mediation clauses; some are too short;
others are overly complex or cumbersome
and lack flexibility. For specific contractual
mediation language go to: http://accord-
adr.com/Mediation_clauses.htm
85%
Mediation works. The average rate of
settlement in mediated cases is nearly
85%, says the American Arbitration
Association, 2003.
ENSURE EVERY
CONTRACT HAS
A MEDIATION
CLAUSE
10% OF FIRMS
EMPLOY 20 – 250
There are about 113K firms in the United States
offering architecture, engineering, and related
services. According to the U.S. Census Bureau, 10
percent employ 20 to 250 people, about 9K firms.

12. PSMJ • MAY / 2017 • VOL / 44 • ISSUE / 512
9 SECRETS TO TURN
CLIENTS INTO FANS by Wally Hise
First, make an immediate change to how you approach
clients. Treat that word as a proper noun. Every time you
write the word “Client,” spell it with a capital “C.”
Now, link the shift on your keyboard to a shift in
your mindset:
1. Be there. Spend time with your Clients. You can
pretend to care, but you can’t pretend to be there.
2. Seek dissatisfaction. We may be satisfied with a
Marriott hotel, but Bill Marriott, Sr. felt differently. “I’ve
never been satisfied with anything we’ve built. I feel that
dissatisfaction is the basis of progress. When we become
satisfied in business, we become obsolete.”
3. Move to the future. You heard Wayne Gretsky say,
“I skate to where the puck is going to be, not where it
is.” Anticipate your Client’s needs, and find ways to
satisfy them.
4. Focus on feelings. The authors of Smart Moves for
People in Charge suggest that we stop providing products
and services. Instead, “start solving problems, meeting
needs, easing pain, giving pleasure, and helping Clients
be more successful.”
5. Benefit from mistakes. Admit them. Even when you
may not be at fault, or when the point is arguable, take
the attitude, “if you’re not happy, we’re not happy.”
6. Make post-service calls. What if the garage mechanic
called a car owner the day after working on her car to
see if the repairs were okay? The prospects for repeat
business go up with this small gesture.
7. Listen. It’s been said that the best way to persuade
people is with your ears, by listening to them.
8. Stay in touch. A face-to-face meeting is one of the
most important service encounters possible. Show
genuine interest in learning how things are going, and
how you can do better. l
Wally Hise is vice president of federal marketing for HDR Engineering,
Inc. (Omaha, NE). Contact him at wally.hise@hdrinc.com.
DISRUPTION: WARM UP
TO CROWDSOURCING
Crowdsourcing for design services has its detractors, but
Dr. Michael Crosbie, FAIA, isn’t one of them. A longtime
journalist and current professor of architecture at the
University of Hartford, Crosbie calls crowdsourcing “a really
positive development” for the profession.
He likens design crowdsourcing to the do-it-yourself
construction craze, the subject of his early 1980s doctoral
thesis. “The focus of my dissertation was how we can get
good design in the hands of people who can’t afford an
architect, but want to participate in the design process.
Crowdsourcing is an outcome of that culture.”
Crosbie, whose Hartford colleague Imdat As founded
the trailblazing crowdsourcing site Arcbazar, offers these
additional benefits:
• Customizing design. “In today’s culture, you can get pretty
much whatever you want made-to-order. Architecture should
be that way, and not just for the very rich.”
• Expanding access to architecture. “Crowdsourcing creates
opportunities for more involvement by the profession at a
level of design where it didn’t exist before. It’s not stealing
jobs from high-profile architects doing sophisticated work;
they usually don’t get anywhere near this.”
• Advancing young architects. “Young people can be
so adept at visualizing things and creating images that
folks who are not architects can understand and react
to.” Crowdsourcing offers an outlet for young designers
that typically isn’t accessible through traditional firm
employment, Crosbie says.
• Broadening creativity. “These usually aren’t full-blown
design plans, so we’re talking about a spatial opportunity that
a property owner may not have considered before. They get
multiple design ideas without spending a lot.”
Crosbie cautions architects not to give away too much
in crowdsourcing competitions. Otherwise, he sees great
potential in the trend. “There are no boundaries, and
that’s the way the profession is going,” he says. “It doesn’t
matter where you are or when you’re working. The process
never stops.” l
Find Arcbazar at https://www.arcbazar.com/