Diversity is the Key to Survival

Jim Cramer of CNBC has a game that he plays on his show Mad Money called “Am I Diversified”.  Viewers call in, list the stocks in their portfolios, and Jim determines if the stocks are from different sectors and industries.  His theory is that a good stock portfolio must contain stocks from different sectors, so that as one sector goes down your portfolio is protected by the sectors that increase.  And this theory is the same theory that any good financial advisor abides by.  So if you would diversify your investment portfolio, why would you not diversify your client base.

At last my last company, I stressed to the project managers and surveyors the importance of maintaining a diversified portfolio of clients.  Having lived and worked in northern California during the recession in the early 1990’s, I saw a lot firms that dealt only in residential development go under.  The same is happening today throughout the country.  Luckily, my firm did diversify into commercial and industrial and even though they are struggling, the lights are on and the open sign still hangs from the door.  We could have chased the big bucks that were there during the housing boom, but many of the companies that did are no longer in business.

I divide the developers into the following six groups:

1. Residential Single Family

2. Residential Multi family

3. Commercial

4. Commercial Office

5. Industrial

6. Government

Development among these six groups goes in cycles as an area is developed.  First come the residential builders as new neighborhoods are formed.  Once there are enough rooftops to support it, the commercial shopping centers, strip malls and gas/convenient stores spring up.  Once the commercial development is there, the warehouse and office buildings spring up in support of them.  And once the population grows to a certain point, the government steps in to produce highways, water/wastewater facilities, parks, etc.  And this causes more residential development and the whole cycle starts over.  This is why diversification is essential.  You want to be involved in the entire cycle, not just one phase.

The last couple of years have been difficult in the civil engineering and land development industries because the lack of lending by the banks has broken the cycle.  Residential development boomed over the last ten years and many areas are now left without the necessary commercial development needed to support them.  This is our industry’s “green shoot.”  I have spoken with many commercial developers recently that say if they knew the funds would be available in six to nine months, they would begin the design phase for future projects.  So as the banking crises eases, jobs will again start to appear.

In the future, when you’re looking for new clients, remember where in the cycle we are and plan for the future.  By staying one step ahead of the cycle and diversifying, you give yourself a better than average chance of surviving downturns in the economy.

Do I Really Need All This Stuff?

I’d like to preface this article by saying I’ve been around engineering long enough that I know how to use a slide rule and a Leroy machine (I’m sure some of you can relate).  I can still remember the time that I dropped my stack of data cards and spent a whole day getting them back in order.  And I remember getting my first word processor (actually the secretary, I mean administrative assistant, got it) and how I thought that I now had everything an engineer needs.  Today, engineers and surveyors are bombarded with new software, super computers and GPS survey equipment that can do everything us old timers used to do and in a fraction of the time.

This article is geared toward the small firms.  I have worked in both large corporations with seemingly unlimited IT budgets and small firms that must struggle everyday with their IT spending.  A small firms IT budget is second only to their payroll and if not managed properly can destroy the firms bottom line.  In 2003 I was brought into one of these small firm in Las Vegas that was struggling to make a profit in the middle of the biggest building boom in history.  As a small firm that had been in business since 1954, they hadn’t made the effort to keep up with technology because they didn’t see the benefits.  They were still using AutoCAD 12 when the standard in the industry was already at version 14.  Their idea of a computer network was putting a zip drive in each computer and then passing the discs around.  And calculations for hydrology, hydraulic and traffic studies were still being done the old fashioned way (although they at least were using calculators, most of the time).  Within 2 weeks of being there, I approached the owners with a (wish) list of what was needed to become competitive in the market.  That was when I first heard the question “do I really need all this stuff?”  After getting schooled in budgeting, I have to admit my answer to them was no.  The network was a resounding yes but it became apparent to me we didn’t need all the latest technology, just the appropriate technology to be efficient and make money.

All firms must have enough copies of the latest drafting software, be it AutoDesk™ or some other vendors.  But don’t be drawn in by all the modules they provide.  For example, in place of the hydrology module, can you do the same job using HEC (my favorite because its free) or one the programs provided by Haestad Methods™ (CivilCAD, StormCAD, Culvert Master, Flow Master, etc.) at a cheaper price.  Next you will need software to create models for hydrology, water/wastewater, traffic, etc., depending on the services that your firm provides.  There are several products available to you at various costs.  Warning, make sure that the permitting agencies you work with will allow output from the software you choose (learned that one the hard way).  Finally, and completely unrelated to engineering, make sure your bookkeeper has a good financial program like Quickbooks™ to keep an eye on your cash flow.  Project managers may not care, but I guarantee the owner does.

Spend your IT budget wisely.  Make sure that your work station computers are sufficient to do the job they need to, but don’t buy addons you don’t need.  Don’t by more licenses or modules than you really need.  Draftspersons don’t need hydrology or sewer modules.  And if you have 2 engineers, see if they can share the license on one copy of the module efficiently.  Take advantage of the free software available to you.  Do you really need to buy an expensive copy of a hydrology modeling program when the Army Corp of Engineers provides free copies of HEC.  And OpenOffice™ from Sun Microsystems is a free program that provides you with the same capabilities and compatibility as Microsoft Office™.  

In conclusion, don’t become a slave to technology.  Evaluate your needs carefully and thoroughly, and then set your IT budget accordingly.  By doing this, you can become more efficient and increase your bottom line.

Building Your Client Base

A good engineering firm can never be happy with just the clients they already have.  They must constantly be looking to increase and diversify their client base by increasing their company’s visibility and reputation.  But some firms either don’t understand how or don’t take the necessary steps to take advantage of the tools available to them.  The art of cold calling is all but dead.  I never did like this approach because it is very inefficient and ineffective.  It requires a lot of time and produces little results.  The key to growth is networking.  Don’t be scared, its not as hard as it sounds.

The first place to start networking is at your job.  Think about all the disciplines that are involved in any project.  The list includes, but is not limited to, the architect, structural, mechanical, electrical and civil engineers, contractors and sub contractors, and even the realtors that sell or lease out the building after completion.  Each one is equally important (sorry architects) to you successfully networking.  They all have clients that you don’t and are key to increasing your company’s visibility.  Most clients that I have landed over the years have come by one of these individuals recommending me to their clients.  Whenever you go to a design or construction team meeting, make sure you introduce yourself to everyone there even if you don’t deal directly with their discipline.  Make sure you give each one your business card, and it never hurts to give them a few extra (cards are cheap). And don’t be afraid to ask them for referrals.  Ensure them you will do the same for them.

The next place to network is in community organizations.  At the very least, join the Chamber of Commerce in all the places you currently do business or hope to in the future.  Don’t stop there, join organizations like the Lions, Rotary, etc that are geared toward working with the community.  These are the places where you’ll get direct contact with possible clients.  But don’t just be a member, get involved.  Volunteer for committees and offer to help with as many events as you can.  Become one of the “superstars”.  This will ensure you maximum visibility and you’ll become one of people everyone wants know.

The last place I will talk about is use of the internet and social networking.  First, make sure you have a web site (if you don’t your not in the game).  Make sure that your site clearly defines who you are and what your goals are.  Fill the site with examples of projects you’ve been involved in and ask clients to give you recommendations that you can add.  If you’ve done your job right, most will be more than happy to oblige.  Next make sure that all executives and managers are on Linkedin, the social network for professionals.  These profiles must remain professional and include as many recommendations as you can get.  Join as many groups in Linkedin as you can that relate to your industry to ensure maximum exposure.  Make sure to place links to all the profiles on your company web site.  Also, encourage your people to create blogs and discuss various aspects of the industry that they can become the “expert” in and place links to those sites as well.  And finally, learn to use Tweeter to effectively guide as much traffic to your website as possible.  Twitter is an effective way to increase you visibility.

These are just a few suggestions on how to increase your company’s visibility and reputation.  Now get busy and get involved.

Hiring the Right Manager is the Key to Success

“He is the worst engineer I’ve ever had.” I’ve heard this countless time from developers who have become disillusioned with their present engineer. When I would ask them why they felt that way, the underlying theme in all the answers was that the developer felt he didn’t get the service and results he was paying for. My belief is that in most cases the engineer was not a bad engineer but a bad manager.

During the construction boom of the last decade, the universities were unable to keep pace with the demand for new civil engineers. As a manager and executive in a land development firm in Las Vegas, NV, I can remember spending thousands of dollars on advertising and recruiters in hope of finding a capable engineer to fill a project manager position, usually with no success. Therefore, many firms were forced to either promote from within or hire an engineer with little or no experience just to fill the need, often times resulting in ruining the reputation of a good firm.

Those days are over. With the collapse of the construction industry, now is the perfect opportunity for firms to weed out the weak and fill those management positions with only the most qualified people. Only those firms that do will be able to survive the next couple of years and come out of this mess as strong and ready to grow. The firms that don’t are going to disappear.

The first rule to remember is that not all engineers are good managers. Engineers by nature are very analytical and creative. They know what they expect from a design and refuse to delegate the design to the team members they manage. They tend to micro manage projects and ignore the following areas requiring project manager knowledge and attention:

1. Project integration management to ensure that the various project elements are effectively coordinated.

2. Project scope management to ensure that all the work required (and only the required work) is included.

3. Project time management to provide an effective project schedule.

4 Project cost management to identify needed resources and maintain budget control.

5. Project quality management to ensure functional requirements are met.

6. Project human resource management to development and effectively employ project personnel.

7. Project communications management to ensure effective internal and external communications.

8. Project risk management to analyze and mitigate potential risks.

9. Project procurement management to obtain necessary resources from external sources.

The second point to remember is that not all good managers are good leaders. Seldom does a manager in a land development deal with one project at a time. To be effective in their position, they must also be leaders. They must inspire their team members to become self starters and work to solve problems on their own while at the same time providing the leadership to ensure the job is done right. I recently read an article by the Geno Prussakov where he states “When comparing leadership with management, it is essential to understand that they are not mutually exclusive. Both leadership and management involve influence, working with people, concern about effective goal accomplishment, and other shared characteristics.” He went on to quote from Warren Bennis’ On Becoming a Leader about management as opposed to leadership:

1. The manager administers; the leader innovates.

2. The manager is a copy; the leader is an original.

3. The manager maintains; the leader develops.

4. The manager focuses on systems and structure; the leader focuses on people.

5. The manager relies on control; the leader inspires trust.

6. The manager has a short-range view; the leader has a long-range perspective.

7. The manager asks how and when; the leader asks what and why.

8. The manager has his or her eye always on the bottom line; the leader’s eye is on the horizon.

9. The manager imitates; the leader originates.

10. The manager accepts the status quo; the leader challenges it.

11. The manager is the classic good soldier; the leader is his or her own person.

12. The manager does things right; the leader does the right thing.

So the next time your looking for the right person to fill that management position or even looking to upgrade your staff, remember these things. Together we can all restore the reputation of our industry that has suffered over the last decaded.