Growth is all but assured in a healthy market, but if a firm doesn’t watch out, it can grow helter-skelter to the point of extinction.
Many firms are experiencing growth during this post-recession period and you can almost sense the excitement generated by the current talk about infrastructure investment. After so many years of contractions in the marketplace, the return of optimism in the AEC industry is a welcome change.
Most translate growth as meaning increased revenue, profit, and opportunity. However, along with all the positives, growth also brings increased risk which can imperil both current and future firm operations. Absent recognition of these risk factors, you may grow your firm to the point of extinction before you even realize it. Some specific risks to avoid include:
- Lack of planning. When business is down, we fret, lament the competition, and focus on the long-term in a concerted effort to prevent failure. When business is good, we rejoice, celebrate the easy wins, and focus on the short-term in an effort to meet immediate needs. Why is planning for the future one of the first items pushed to the sidelines when we get busy? Absent development and adherence to a plan, all the benefits of great economic periods are expended in the short-term with no goal of sustained growth for your firm. You don’t want to be that squirrel who eats all the acorns as they are gathered and then starves to death in the cold winter ahead.
- Lost focus on finances. Cash flow and access to financial resources are always king in a down economy, but in a fast growth economy your capital needs also invariably grow. Expenses escalate as you increase staff, need more office space and acquire additional equipment. Are you prepared to handle the financial demands of a growth spurt? Also, are your collections dragging and your aged receivables increasing? Don’t fall into the trap of praising your increased invoicing and lose sight of fact that it is of no value until you receive payment.
- Pressure on staff. As your work volume increases, pressures will invariably intensify on your staff. Firm leaders often view expansion as creating greater opportunity, but staff may see that same expansion as imposing a greater burden on them. The firm may hire new staff, but to existing staff this may be interpreted as diluting their opportunities for individual growth. And if you have expectations of increased hours or productivity from your staff, you better be prepared to lead by example. It is important to acknowledge the many different points of view regarding growth and firm leaders must communicate in thought and deed why they have decided to grow. It is critical that you maintain buy-in from staff.
- Strained support systems. Increases in billable staff may also mean that you need to increase support staff. What was adequate to support a staff of 20 is woefully inadequate to support a staff of 60. The last thing you want is to have highly paid billable staff focus on non-billable work. Not only is that unproductive, it is extremely frustrating for all involved. Similarly, your technology must keep pace with the needs of your staff and clients. Failure to adequately invest in all areas of business operations will create process inefficiencies resulting in lost revenue and profits.
- Reduced quality. With more work and abbreviated project schedules comes thoughts of short circuiting normal work processes to gain back time. You might even rationalize that you don’t need quality assurance reviews on all your projects, just those overseen by your younger or recently hired staff. Regardless of experience level, we are all human and when pressured we all are more prone to make mistakes. Failure to produce quality work will derail any thoughts of growth as no one wants to hire a firm which extols poor workmanship. There are reasons professional liability claims increase after periods of economic growth, and failure to maintain the quality of your work is a primary cause.
- Impact on culture. When your growth requires new hires, you decide to expand geographically or you expand through acquisition, are you able to maintain the culture and values you embraced prior to this period of growth? Successful firms usually attribute some of their success to differentiating traits within the firm culture. If that is the case, then your culture must be protected and nurtured. You cannot afford for your culture to become a commodity that is altered as a matter of convenience. Without respect for the intrinsic values of your firm, your growth may be impacted by turnover or lost clients because your firm no longer offers anything meaningful that differentiates you from your competition.
Planned growth can be a great ride, but growth just to keep up appearances is a terrible decision under any circumstances. If you chose a strategic path which identifies and addresses the risks, your firm will benefit from your leadership. However, turning to ad hoc decisions made strictly to address ever changing daily challenges will undermine your firm’s performance and long-term success.
Stephen Lucy is CEO of JQ with offices in Austin, Dallas, Fort Worth, Houston, and Lubbock, Texas. Contact him at firstname.lastname@example.org.