Executive Corner: Are These Beliefs Crippling Your Firm?
You’re probably familiar with the adage “beliefs drive behaviors, behaviors drive results.” From my 15 years of experience as an owner and CFO for architecture and engineering firms, I can tell you that faulty beliefs are the biggest culprit when firms are underperforming financially and struggling in other business areas.
The challenge is that most of these firms don’t know that holding faulty beliefs is what’s driving poor performance. That’s why it’s of paramount importance that every firm has a way to identify, challenge and then change faulty beliefs.
To get you started on this road of discovery, I listed below some common beliefs that can be detrimental to a design firm’s operations. See if your firm has any of these or other similar beliefs keeping it from peak performance.
[Insert name] is a terrible employee and cancer to our culture, but they’re a great engineer/architect, so we can’t afford to lose them. Actually, it’s the opposite: you can’t afford to keep them. Your valuable employees and clients probably dislike working with them and will probably leave if you continue to subject them to this culture-destroyer.
Our client service is far better than our competition’s service. Every firm claims this, but most don’t realize their client service is similar to the client service at the firm down the street. Very few firms have asked their employees or clients what they think about their service. When was the last time your firm did a survey? If you think your client service is good—and it’s not—you might be inviting your clients to go elsewhere. And by the way, excellent service isn’t a dominant competitive advantage (DCA)—it’s the ante for getting into the game. You need to find out what excellent client service looks like for your clients. Are you delivering that?
There are no good people to hire out there (so let’s keep the lousy ones we have). Sure there are! And they’re working for your competition! If you continue to keep underperforming employees, the outstanding people you have will eventually leave because A and B players want to work with other A and B players, not C players. Know where the A players are in other firms and have a plan for getting them on your team, even if your budget doesn’t presently support the cost. Better yet, make room in your budget for A players by not having C players.
If we raise our prices, then our clients will leave. Some might, but those are the ones who view your work as a commodity, and they’re probably not the clients you want. You must raise prices because your cost of doing business (e.g., wages, rent, insurance, etc.) increases every year. If you don’t strategically raise your prices, then your profit margin will erode over time.
We don’t train our employees because they’ll end up leaving and taking all that training to our competitors. So … you end up with a poorly trained workforce, and they stay. That sounds worse to me. Maybe a better belief is that we have highly trained employees, and we incentivize them to stay.
We need to keep our overhead as low as possible. The problem with this belief is that it’s short-sighted and sacrifices the business’ longevity and scalability for the sake of short-term profitability. The key to investing your overhead dollars is to balance profitability with expenditures that create a valuable business over the long-term.
We don’t need an ownership transition plan since I have no intention of retiring anytime soon. This belief is detrimental to your business in so many ways, but let’s look at a couple of reasons. First, the most-successful plans we see usually take 5-10 years to implement, so if you wait too long, you’re increasing the risk that you won’t get the exit you want on your terms. Second, your successors need to know that you will exit, how you will exit and how it affects them. In this regard, lack of planning could mean they seek other avenues where their future is more certain, probably at another firm. Then to whom will you transition your firm?
These are but a few examples of faulty beliefs that haunt the halls of design firms. If you aren’t getting the results you want in a particular area, the first thing to do is examine the beliefs you have on that subject. This self-examination can be tricky, so you should consider having a trusted advisor help you. Once you’ve identified the faulty belief, the next step is to replace it with one that serves you better. This better belief will lead to better behavior, which will inevitably lead to better results.
About Carl von Hake
Carl von Hake, CPA, is an associate principal at Rusk O’Brien Gido + Partners, specializing in corporate financial advisory services; email: [email protected]