Yes, the economy stinks. Not for all of course, but most sectors of the US economy remain weak, uneven, and uncertain. Moreover, many economists now believe that both low growth and ongoing uncertainty could be with us – for a good long while.
Ken Simonson, Chief Economist of AGC – the Associated General Contractors of America – recently characterized April’s modest rise in construction spending as “deceptively positive,” [http://news.agc.org/2011/06/01/construction-spending-figures-highlight-how-government-funding-cutbacks-are-limiting-industrys-recovery/] – pointing to weakening public sector demand and the still slow residential construction market as important underlying factors. Simonson further noted that the relatively flat construction market was “uneven” – a product of the mix of some growing segments (power, communications, private healthcare) with still falling segments (commercial, manufacturing, private office). Additionally, ACG reports that the four largest public-sector categories – highways and streets, education, transportation, and sewage and waste disposal (together accounting for some three fourths of public-sector construction spending) – all declined in April. Insufficient funding for projects remains the central issue in both the public and private sectors.
The Architecture Billings Index (ABI) – an oft watched and popular predictive indicator of AEC industry performance [published monthly by the American Institute of Architects (AIA) – http://www.aia.org/practicing/economics/AIAS076265] offers a graphical view – and a sense of the volatility – traveled recently by the AEC industry. Over the last fifteen months, the index has now four times trended upwards for two to four months at a time, only to fall back and lose all or most of its gain to that point. Perhaps it’s the “deceptively positive” recovery, or the product of several market segments moving independently up and down. In any case the ABI trend clearly communicates uncertainty – and possible continued weakness.
Figure 1: Architectural Billings Index (ABI):
Still, as I’ve argued here before – for most firms the weak economy remains a weak excuse. Yes, there are fewer “gimees” out there – winning a trophy for just showing up. Nevertheless, success – even extraordinary success – is available for those who work – both hard and smart – to capture it.
So what is it that firms must do – right now – to achieve success in the economy we have? Here are three priorities – areas of focus that success-oriented leaders must pursue today – with purpose and urgency – to position themselves and their organizations for the road ahead:
Clear Vision-
When the economy collapsed in 2008, many companies froze – setting aside operational initiatives, business plans, strategic investments, hopes and dreams. Some of this made sense in the short term, but rarely in the long. Now – nearly three years later – it’s clear that many (thousands) of these organizations have completely lost their way – core focus, business purpose, competitive strategy, overarching objectives.
it’s time for all leaders to return, revisit, and rethink their organizational vision – where the company is headed and desires to go, and it’s proposed path forward. Continued uncertainty and challenge in the economy is a poor excuse for not planning the firm’s future. On the contrary – a strong and clear vision for the organization is today paramount for success – for pushing back on the forces that will continue to buffet the business and steer the organization off course).
Team Alignment-
In my view, it’s not the economy, but a lack of consensus among the leaders of the AEC firm, that is the largest impediment to success today. Always a challenge in the professional organization, the tough times of the last couple of years has weakened many a firm, and exposed important differences, issues, and problems in the organization. Establishing clearly the company’s core objectives and end point destination should drive consensus and alignment – first within leadership team, and then in organization as a whole. Building alignment around a compelling vision pulls everyone together, focuses the team on real priorities, and calls out those who don’t fit – and thus can’t be a part of – the company’s future.
Firm Fitness-
Despite prior cuts in staffing and assets, many AEC firms are today still too large – overstaffed for the most likely business scenarios. Nobody likes to let staff go. Prior cuts were difficult, and talented folks were lost. (And indeed, it’s hard to forget just how challenging it was to find and capture these professionals in the first place). Nevertheless, leaders must face the reality of the business today – there’s no guarantee, and for many few positive signs, of a bankable rebound in the short term. Firms must realistically assess business prospects, and the risk of protecting a few (perhaps) good, but now structurally underutilized employees. That new project – the one which may kick off any day now – may in the current environment not be funded for a year or two.
Likewise, the firm’s fitness program can’t focus solely on staff. It’s time to look again – and to act much more boldly – in addressing all of the firm’s under-performing assets. Leaders should start with the big stuff: office space, underutilized land leases, extra vehicles and equipment. But don’t stop there – real opportunities can be found on virtually every line of the expense run.
Finally, now is the time to act –again, more boldly and with courage – on those even tougher, larger, legacy issues in the firm. Perhaps it’s time to shut down a poorly performing office, lop off weak (and distracting) business units or service lines, or close out the accounts of the bottom third of clients (probably all economic losers). These are all challenging decisions – but never more important or necessary – for survival and success today.
Picture this: the company as a circular raft, floating down the river. The staff is there, all sitting in the middle (and more than a little anxious), with the firm’s principal leaders around the edges – each with a paddle. Other rafts are visible nearby, and traveling at various different speeds. Before the recession, most rafts were moving downstream – not always comfortably or in full control – but downstream nevertheless. Lately (and with a significant drop in water level) – most rafts are moving much slower than before, and slower than they’d like. In this context – and in round rafts – the most commonly espoused management strategy has been to “paddle faster.” Does this make sense? Indeed, quite a few rafts are spinning faster (with onboard staff both dizzy and sick), but few are making much progress moving downstream.
Firm owners, leaders, and managers, and indeed all staff – have a finite amount of energy (passion, motivation, focus). This energy can be spent on value-added initiatives (improving the business, and competing in the marketplace), or on non value-added efforts (internal bickering, distraction, and anxiety). Organizations focused on capturing extraordinary success today must think differently. Not faster paddling, but instead changing the boat’s shape at the water line, providing new and lighter paddles, teaching the team to communicate and align effort, training and mentoring in navigation and other important skills.
It’s not really the economy, stupid – is it? The market is today what it is – weak, uneven, and uncertain – and it may continue on this path (or one of only modest recovery) for some time. But there is much that leaders and managers can control. In this environment, recommitting to a meaningful organization vision, aligning the team, and building a company fit for the road ahead – is the only path that makes sense.
Best regards,
John
