Engineering Inc. - September/October 2015 - (Page 44)

Guest Column BY DOUGLAS REED Successful Firm Growth Starts With Cultivating Leadership F or most corporate leaders, growing their businesses is a perilous challenge. The landscape is littered with the corpses of once-successful firms that overextended or pursued badly flawed growth strategies. There are two ways to grow a firm: acquisitions and organic growth. When looking to expand their operations, many firms immediately seek out acquisitions. They often look for targets that are located in potentially lucrative geographic markets or that have a specialty they don't already have. An acquisition is risky since a firm is essentially purchasing intellectual capital, as opposed to a manufactur- Douglas Reed ing plant. Since these are people, not machines, many acquisitions fail or underperform because firms are not ready for the "people adaptation" needed. According to Harvard Business Review, 70 to 90 percent of acquisitions fail, and the people factor is a major cause. Since the failure rate is so high, it is critical to first know whether acquisition thoughts are obscuring larger problems. If a firm cannot grow with its own resources, the red flag of failure is huge. A firm I worked at for more than a decade spent 15 years gyrating between 75 and 200 employees. Along the way, the firm acquired five additional firms as a growth solution. All of those acquisitions failed and harmed the firm's reputation. Time spent on "fire drills" encumbered resources that might have been applied elsewhere. For example, one acquired firm had many design issues that were discovered following the acquisition. More than 1,000 hours were spent on damage control, and the liability insurance policy was paid out to its limit. The root cause of this was a poorly developed leadership team that was not patient enough to wait for a qualified acquisition candidate. Firm leaders should always ask, "Has the firm been able to grow consistently without acquisitions at a rate far greater than the local market?" If not, why hasn't the firm been able to achieve significant growth with the staff and skills it has? Identify this barrier and overcome it before considering any kind of acquisition. 44 ENGINEERING INC. SEPTEMBER / OCTOBER 2015 A Bigger Firm Means More Leaders The key to a firm's successful growth starts with growing its leadership. Successful firms are led by visionary and self-confident leaders who value their staff, understand what the staff brings to the table and foster a staff 's professional growth. This can be particularly challenging in an engineering environment. Leaders typically began their careers as engineers and worked their way up the corporate ladder. While many go to business school to learn how to be more effective leaders, the vast majority learn as they go, imitating their superiors, who themselves are often not students of business science. This approach is limiting and doesn't necessarily foster excellence; it requires leaders to have natural leadership skills rather than providing an ongoing opportunity to develop them. For firms to truly thrive, corporate leaders must be able to operate at the highest level of every aspect of firm management. Too many firms struggle because, while their leaders are excellent engineers, they have a difficult time handling balance sheets, developing marketing strategies or mentoring the next generation of leaders. All too often, when managers struggle with marketing or with managing their staff or clients, they are told that they just need to work harder. Usually, though, it's a matter of working smarter. If a firm's leaders aren't operating at a higher level than their competitors, how can that firm expect to succeed? SWOT Your Staff to Uncover Tomorrow's Leaders It is not uncommon for savvy firm leaders to misread the business landscape. Many leaders are reading the tea leaves wrong, assuming their people are smarter than the competition and that, as a result, they will thrive in the recovering economy. But how do they know their people are smarter? By gazing upon the engineers and managers who sit outside their offices? By reviewing the firm's designs and reveling in their excellence? By talking to clients and ascertaining that they are satisfied? You can't just declare your staff smarter or better than the competition and expect that declaration to bring success. Decisions need to be based on data. The best way to derive that data is through a SWOT analysis- a formal review that measures each leader's and senior manager's strengths, weaknesses, opportunities and threats. Firm leaders are then able to make a realistic and objective assessment of the firm's ability to assimilate another firm and prosper or, if growth is organic, to rapidly hire new employees and remain focused on delivering services. The methodology of a SWOT analysis is to populate the tables with an assessment of the firm's key influential leaders and managers, not of their technical skills. In comparing leaders to your

Table of Contents for the Digital Edition of Engineering Inc. - September/October 2015

Engineering Inc. - September/October 2015
Contents
From ACEC to You
Market Watch
Legislative Action
Unlocking the Ocean’s Secrets
Positive Impressions
Low Water, High Hopes
International Corruption
Leading the Way, Lending a Hand
Guest Column
2015 Fall Conference
Guest Column
Guest Column
Business Insights
Members in the News
Mergers and Acquisitions

Engineering Inc. - September/October 2015