Building Stronger AEC Teams with Smart Decisions

Dear Reader,

What if some of the things you've always believed about running an AEC firm are actually holding you back? From how you value your business to how you reward PMs and pursue new work, conventional wisdom doesn't always lead to the best outcomes. These tips challenge some common assumptions and offer a fresh perspective on how to make smarter decisions, build stronger teams, and create lasting value for your firm.


Do you have any questions on any of these tips? Perhaps you wish to share some feedback? Maybe you need some guidance or support on a challenge that your firm is facing? Comment below!

A good valuation formula is easy to understand and difficult to manipulate. 

I’ve seen a lot of valuation formulas over the years. The good ones smooth out volatility and don’t place too much emphasis on one element of value. They don’t focus on just one year’s performance. They don’t focus too heavily on balance sheet or capitalization factors that may have little to do with a firm’s operating performance. They don’t get so complex that nobody understands the calculation. A good valuation formula should be simple enough for everyone to understand and transparent enough that both buyers and sellers trust the outcome. It should clearly define how earnings are calculated, which adjustments are permitted, and how debt, cash, and working capital are treated. Most importantly, it should minimize opportunities for either side to manipulate results or make short-term decisions that benefit them at the firm’s expense. The ultimate test is whether buyers and sellers would consider the formula fair before knowing whether they would be buying or selling shares.

Treat some revenue growth as a warning signal.

A firm growing 20% annually may be in worse shape than one growing 5%. Growth can conceal serious operational problems. New projects compensate for lost margins. Strong demand hides weak pricing discipline. Rising revenue masks overhead creep and poor project management. By the time growth slows, the underlying problems can become painfully visible. Conduct a quarterly "growth stress test": What would profitability look like if net revenue fell 10% next year? Identify which management weaknesses are being subsidized by a strong market. Most importantly, ask whether you would still consider your firm successful if revenue stayed flat for two years.

Don’t forget about the PM heroes in your bonus program. 

Bonus programs for Project Managers will often, rightfully so, consider the performance of projects under an individual’s management. Deliver highly profitable projects and get rewarded. Sounds good, right? Well, it is…but good bonus programs consider more than this and look at the entire picture. More specifically, the unsung heroes on your project management team are often the ones who parachute in to save a project that is on track for financial and client relationship disaster. They bring it back to life and are able to get it to mediocre performance. In another situation, mediocre is…mediocre. But these rock stars are saving client relationships and project performance one heroic action at a time. This is the subjective “x” factor that every bonus program needs to consider. It won’t always be simple math that gets you to a bonus value.

Make it harder to win bad work.

Your business development team's job isn't just to win more work. It is also to help the firm make better decisions about which work to pursue. Poorly priced projects consume scarce PM capacity, technical talent, and leadership attention that could have been invested elsewhere. At a minimum, require a simple go/no-go scorecard for strategically important pursuits. Even better…include opportunity cost: what higher-value work might this pursuit prevent us from doing? Reward BD professionals for profitable, repeatable client relationships. If your firm could eliminate its five least profitable clients without replacing their revenue, would it be better off?

Design the firm so that your best people are replaceable.

Key person risk can be a problem in even the most successful firms. In many AEC firms, expertise becomes a form of job security. Leaders hold on to client relationships, technical knowledge, and decision-making authority because their indispensability feels valuable. But your strongest leaders need to be developing people who could eventually replace them. Transfer client relationships deliberately rather than waiting for retirement or resignation. Document critical decisions and institutional knowledge. Give emerging leaders real authority before they feel completely ready. Measure leadership effectiveness partly by how easily responsibilities can be transferred. If your five most important leaders each took a six-month leave of absence, what would break?