President of JLG Architects (#4 Best Firm Architecture for 2016), a 110-person, employee-owned North Dakota-based firm co-founded in 1989 by Laffen.
By Liisa Andreassen Correspondent
“We love organic growth but it’s dependent on developing internal leadership fast enough,” Laffen says. “M&A allows you quicker penetration into the market and leadership you can’t find internally.”
A conversation with Lonnie Laffen.
The Zweig Letter: What’s your philosophy on fee/billing and accounts receivable? How do you collect fees from a difficult client?
Lonnie Laffen: We do a lot of public work (intentionally for this reason), and haven’t had many issues relating to collections. We work hard to turn out billing as soon as we can at the beginning of the month. We learned a long time ago that the best way to get paid faster was to bill quicker.
TZL: What’s the recipe for creating an effective board?
LL: I’m also a senator in North Dakota and came to understand that the legislature sets policy and the governor executes that policy. We operate our company the same way. We have been more effective since we focused our board on policy and established our executive committee (CEO/COO/CFO) as the team to execute the board’s policies. It has allowed us to be more visionary at the board meetings and less hands on. I know this is how it’s supposed to work but we grew fast and making this transition from sole proprietor to a firm of 110 staff has lots of transitions. Nothing can beat experience in terms of finding good board members.
TZL: Is there a secret to effective ownership transition?
LL: I think the secret is that there are a lot of options and you need to work hard to find the one that fits your long-range goals. We have been at it for 12 years and finally have a plan that is working for us. The transition will happen – even if you do nothing. You will be happier with the results if you give it the effort that it needs.
TZL: How do you go about winning work?
LL: We are big enough to divide up that task between our market sectors. We still focus heavily on repetitive marketing and getting to know everyone personally. We still believe that who you know trumps what you know.
TZL: What’s the greatest problem to overcome in the proposal process?
LL: Our clients really need a generalist, but they want a specialist. Most clients believe that we should have a unique “approach,” but there is really nothing new about the design process.
TZL: Once you’ve won a contract, what are the “marching orders” for your PMs?
LL:
- Service. Treat that project like you will own it when it’s done.
- Be frugal with clients’ money as if it’s yours.
- Constantly inform your client of the process and where you are at.
TZL: How does marketing contribute to your success rate? Are you content with your marketing efforts, or do you think you should increase/decrease marketing?
LL: Our commitment to marketing is one of the things that has separated us from our competition. We are still deeply committed to the value of marketing. Social media is becoming very effective and allowing us to lower our costs.
TZL: What has your firm done recently to upgrade its IT system?
LL: We have 12 offices so internet speed is important to us. We rely heavily on IT to make us seamless in communication and work flow. Standardization is also important.
TZL: What’s the best way to recruit and retain top talent in a tight labor market?
LL: Be the place everyone wants to work. We have worked hard to be the place you would love to be and never leave. We recently were selected as one of Inc. magazine’s 50 best places to work in America.
TZL: What’s the key benefit you give to your employees? Flex schedule, incentive compensation, 401(k), etc.?
LL: These are all important. We try to train our staff as best we can and encourage them to find their own success as they define it. We hire good people and turn them loose. We are 100 percent employee owned so we all share the reward.
TZL: How do you raise capital?
LL: Profit. It’s been a long time since we needed anybody else’s money.
TZL: What’s your preferred strategy for growth, M&A or organic? Give us a synopsis of how your firm effected growth in the recent past.
LL: We’ve done a lot of both and see merits in each. We love organic growth but it’s dependent on developing internal leadership fast enough. M&A allows you quicker penetration into the market and leadership you can’t find internally.
TZL: What’s the greatest challenge presented by growth?
LL: Organic growth stretches your leadership capabilities. M&A stretches your cash and challenges your communication capabilities.
TZL: What’s your prediction for 2017 and for the next five years?
LL: I’m always about finding work. Our upper Midwestern markets are struggling a bit with the downturn in oil production, but I’m extremely optimistic about our nation’s economy. I think we are poised for one of the greatest runs in productivity and economic growth since the post WWII boom. I can’t wait – it’s going to be awesome.