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THE PHOENIX IS ON FIRE: How Your Firm Can Rise from the Ashes - Planning During and After Uncertain Times for AE Firms

THE PHOENIX IS ON FIRE: How Your Firm Can Rise from the Ashes—Planning During and After Uncertain Times for AE Firms

Jun 19, 2020 | By Steven Burns, FAIA | 0 Comments

Topics: Best Practices, Architecture and Engineering

What the heck happened? There you were, thriving in a growing economy with unprecedented unemployment and enough work to keep your firm busy for months if not years. In a flash, it all evaporated.

In this monthly webinar presented by BQE University, Steven Burns, FAIA, Chief Creative Officer at BQE Software, guides you through our current state of affairs (changing daily) and what you need to do to, not just get through this crisis, but to come out of it stronger, more resilient and better off. 

We will look at best practices to deal with your employees, your clients, your finances and your business processes, and discuss how to create the business plan of the future by examining the opportunities that COVID-19 presents, reflecting on your firm's values and culture.

 

Video Transcription

It’s been 12 years since the financial crisis of 2008. Whether your firm navigated those troubled waters or you created a firm after the dust had settled, today is inarguably the most significant disruption to our profession, our industry and our way of life.

Clearly, one reason this time is uniquely different, is that the crisis is not the crumbling of a single foundation. The follow-on effects of a non-anthropogenic hazard like COVID-19 are greater than any natural hazard we’ve ever encountered. It doesn’t honor any political and geographical boundaries. Indeed, I would be stunned if anyone in attendance today had a business continuity plan that was so detailed that it predicted and provided for the circumstances we all find ourselves in today.

Today, I’d like to share with you thoughts that can be reviewed more clearly today than two months ago. For the most part, many of you have already figured out how to respond to the immediate crisis and you’re somehow managing to keep the firm running. However, there are really 3 distinct phases to any crisis and we are clearly, still in phase 1. I’d like to talk about how we can proceed into phase 2 where we can recover over the next 18 to 24 months and equally important, prepare for the new normal so we can thrive over the next 3-5 years.

40 years ago, one of the most influential management consultants, Peter Drucker wrote a book entitled “Managing in Turbulent Times”. This quote stands out today. “The greatest danger in times of turbulence is not the turbulence itself, but to act with yesterday’s logic.”

What’s critical for all of us is not to proceed as if what we had built in the past was perfect nor as if the future will look reasonably like it did in the past either. We must keep our ear to the ground and our eyes looking at new trends in order to properly prepare and respond. Carrying as little baggage from the past (both literally and figuratively), is an essential element in recovery and resiliency.

What we all should be doing now is exploring different scenarios for how the world might evolve over the next 3-5 years and remain nimble so as to act upon new trends and opportunities as they become available.

The objective is to pivot from the position of “recovering” from the crisis toward one where you can “thrive” in the long run. Using a timeframe of 3 to 5 years is reasonable in order to actually conceive and build organizational resilience. When it comes to our businesses, it’s hardly worth our time to invest in building anything for a world that might exist beyond a 5 year horizon.

As we engage with this new world, there are 5 things we all need to consider as we prepare our scenarios:

  1. We all operate under a set of expectations that have been formed over decades of doing business. However we need to reevaluate these expectations by looking, for example, at our existing clients - and just as important, at our prospects to see if the potential that might have seemed years away can be accelerated
  2. Think about your clients more. Get inside their heads and their business so you can better understand how you might be able to help them engage with the new world. This may vary from region to region and certainly varies depending on the demographics of your client base. But there is no doubt that the built environment is going to have to undergo enormous change, from residential design which will now, more than ever, need to accommodate the possibility of work-from-home, to commercial and institutional buildings. This is your playground, your passion and your expertise. There is really a new world of possibilities before all of us.
  3. If you regularly run a SWOT analysis of your business, you will no-doubt know what threats exist. However, those are yesterday’s threats. What threats might appear based on our new world.
  4. On the other side of the threat coin - are the opportunities. Consider which companies are best positioned for success in this new world and look for new business models that are emerging and where you fit.
  5. Finally, look at your assets, your capabilities and the relationships you've cultivated and compare this to what will be valuable and important in the new world.

As we attempt to make sense of our futures, let’s first consider the 5 fundamental uncertainties that will impact our post-COVID-19 world.

  1. We still don’t know the overall impact and pattern of progression this disease will take. If it turns out that the pandemic peaked quickly and then similarly declines, clearly the impact will be low. However, if we see seasonal waves of the virus (even with decreasing degrees of severity), or worse, there is a second wave of viral infections that turns out to be stronger than the first, we will see a much higher impact and stress on all our systems.
  2. While there are a few established international institutions, such as the World Health Organization, it’s still uncertain as to the level of collaboration we can expect amongst countries. Indeed, just recently we heard about the Chinese government’s attempt to hack into our medical research facilities that are working on vaccines. If there is a coordinated response where nations can “think big and act fast”, share strategies and take proactive measures through public institutions to prevent a future widespread release, we know this will have a significant impact. However, without coordination amongst governments and institutions, if there is a lack of accountability combined with finger-pointing and distrust in information sharing we know that the outcome will be highly unpredictable.
  3. A lot of attention has been placed on our health care infrastructure, but this is still just the beginning and we know there are many wrinkles that have been ignored for years.
  4. It will be some time before we can look back and understand what the economic impact of this crisis is.
  5. Lastly, as our communities, cities, states and federal government grapple with this pandemic, we don’t really understand the impact on our social cohesion that has already been stressed and polarized over the past few years.

Here are 5 additional uncertainties that we should consider in our scenarios:

  1. With regard to our Society, we have to deal with issues around trust; the psychological impacts of quarantining; impacts on different generations; and finally, the long-term impacts to education
  2. There’s a lot of attention paid to technology. But the jury is still out on people’s attitudes toward data-sharing - (like contact tracing); managing the speed of technological innovation; long-term effects of our technology in the workplace; and lastly, which technologies will be adopted.
  3. With regard to the economy we need to consider the speed of an economic recovery; what economic growth will look like and wealth distribution; impacts on inequality; and shifts to new business models.
  4. With regard to the environment, which has been in the news for decades now, we can’t lose sight of the need to fight climate change; reduce our emissions and invest in renewable energy
  5. And lastly, with regard to politics; what will be the long term impact of the pandemic on governments; how will public policy and regulation need to change; what will the public’s trust in political systems look like; and finally, will there be changes to our election methodologies?

This matrix is based on 4 scenarios moving from what is considered the best outcomewhere the Pandemic is managed effectively but still has lasting repercussions. It is expected that the groups most affected are SMBs and lower-and middle income individuals and communities.

It progresses all the way to the right where we can expect a prolonged pandemic which results in increased isolationism around the globe and disruptions to the supply chains as well as an increase in surveillance and reduction in civil liberties.

I hope you all take this planning exercise seriously and spend considerable time talking amongst your leadership and preparing your response to each of these possible outcomes.

It’s now time to make a pivot and discuss the current state of affairs and how you should expect to proceed over the next 12-18 months. This will include moving forward with clients, optimizing employees and seeking out, understanding and embracing new business opportunities.

We’re first going to cover 6 distinct areas of concern related to the current state of affairs.

#1 Employee Health

First and foremost is the health of you and all your team members. I’m sure most of us have been working from home for about 10 weeks. In the beginning, there was the matter of logistics and ensuring that each employee had the equipment, technology and setup at home that would enable them to perform their jobs.

There were concerns about productivity. I would encourage you all to survey your staff and assess how they feel about their work-from-home situation. Last week we surveyed about 260 of our employees and were quite surprised by the findings.

Not only do more employees believe they are more productive at home, but a significant number had concerns about “turning off” their work day. There have been reports nationally as well that support the productivity bump, but there are other, more objective metricslike those firms monitor in our BQE Core software that assess true productivity rather than an employees personal assessment.

#2 Business Forecasting

There is no doubt that the pandemic has disrupted any business forecasting plans your firm has been entertaining. Just put all your past plans aside and start fresh. As architects, this is what we do best. We, more than any profession I know about can delight in rebuilding.

#3 Business Obligations

Hopefully, by now your firm has addressed your financial, business obligations. But there is no doubt that every firm needs to assess these since this disruption requires it.

#4 Financial Stability

We’re all focused on sustainability and resiliency in our architecture, but your #1 priority is to make sure your firm has those very same attributes. This is a fact despite COVID-19. However, it’s the pandemic that is going to force this issue on those firms that hadn’t taken their financial stability seriously enough.

#5 Working Remotely

For many of you, having a remote workforce is uncharted territory. However, there are also firms that were established on the model of having a distributed workforce and they didn’t have any issues once the Work-from Home orders came down.

#6 Business Continuity

Finally, is having the leadership of the firm develop a business continuity plan. For those of you who are members of the AIA, I would recommend you download the

Architect’s Guide to Business Continuity. It’s a 62 page document, and it is going through a rewrite at this very moment to remain current.

In the AIA’s guide, there’s an interesting chart showing the results of a survey of small, medium and large firms. Less than a quarter of small firms (less than 20 employees) had any continuity plan. About half of mid-sized firms (less than 50 employees) had a plan and almost three-quarters of large firmsover 50 employees claim to have had a plan. And as I said at the start of this webinar, I’d also hazard a guess that no plan covered the unique situation we are in today.

It’s time again for another worthy quote. This time it’s from the legendary Intel CEO, Andy Grove. He said: BAD companies are destroyed by crises. GOOD companies survive them. But GREAT companies are improved by them.” I’d like all of us to believe that when we look back on the events of 2020, we’re going to be able to say that this was the moment when we transformed ourselves into a great company. There is no doubt that times like this inspire introspection and focus.

I want to share with you this graph of the AIA’s billings index over the past 24 years. There were two major downturns in the market. One in 2001 when the dot.com bubble burst. And then again in 2008 with the Financial Crisis. Finally, we see the big downward spike since the current pandemic. The real lesson from these downturns is that there is always a recovery. The key will be positioning your firm to ride the crest of that wave. That doesn’t happen by being a by-stander.

The challenges that our industry is facing are really no different than they were prior to COVID-19, however, they are most definitely exacerbated by our current situation. Let’s look at a few of these.

Clearly, our ability to collaborate remotely is a primary concern. Instead of thinking of this as a stop-gap measure, I can assure you that this must become a permanent solution regardless of whether or when we are able to return to our offices and resume practice as usual. There are great advantages to us maintaining our ability to collaborate remotely. Creating a fail-safe remote work situation means that your firm is no longer limited to hiring locally. In addition, your firm can more easily collaborate with allied professionals and clients regardless of geography.

Over the past 5 years, I’ve spoken around the world on the need for firms to invest in integrated systems. Systems where there is a single source of truth. Technology that provides a system of records that can be relied on without having to research, pull information from multiple sources and by the time you get a result, it’s so far beyond actionable that it wasn’t worth your effort.

Having systems that can track the work being performed by your staff is more important when they are not working under your nose. Having that integrated system that can notify employees what is expected of them and give them accountability while management has real-time visibility to see that this work is being executed.

So now, even more than ever we require real time analytics. Systems to manage this are available, but most firms haven’t invested in them because it just didn’t seem necessary. But our remote and distributed workforce today is magnifying the cracks in the structure of many firms. It used to be easy to run fast and loose. It is no longer tenable in a COVID-19 and post COVID-19 business environment.

The trends that we’ve been seeing over the past half decade are now accelerating due to COVID-19. Let’s take a look.

Moving from analog to digital is more important now than ever. Let’s just take a look at a single example. How do your client’s pay your invoices and how do you pay your bills? Writing checks and having them mailed via the post office should be one of the most welcome casualties of the Coronavirus. Having an electronic payment system is not new. In fact, we see many of our international customers don’t ever deal with paper checks. Money is always moved electronically. This trend is now being accelerated since firms really don’t want to deal any longer with checks being mailed to an office where there is no one working and then have to manually deposit these in a bank. It took a long time for fax machines to die. But I’m hoping this pandemic will but the final nail in the coffin of check writing.

Those firms that were reliant on their on-premise servers that hosted their files, their website, their email or their applications are likewise flawed. I have been asking firms to move their operations into the cloud since 2014. One of my talking points always was why wait for your firm to be attacked by a malware, ransomware or a computer virus before you realize how tragically weak your security is with an on-premise server. It’s like keeping all your money in your mattress at home rather than properly secured in a financial institution. But it took a virus of a very different sort to finally make the ultimate case why your firm should leave your servers and your virtual private networks with expensive IT support and move to the cloud.

I’ve given a number of webinars for the Architects Newspaper in the past on the emergence of Artificial Intelligence, Machine Learning and Business Intelligence and how these technologies are not futuristic or theoretical but actually here now. Moving to the cloud is essential for the adoption of these technologies and courtesy of COVID-19 we are finally seeing the increase in adoption by firms that recognize the future is here.

Industry consolidation has always been amongst us. But it’s during downturns in the economy or during disruptive events when this becomes increasingly active. I have no doubt that over the next 12-36 months we are going to see firms absorbed in an uptick in mergers and acquisitions. I believe this has the added dimension of an aging baby-boomer demographic that will finally want to give up the ghost.

Let’s talk about your process. The steps you need to take to build out your firm into the future.

My expectation is that during the past two months, you’ve already managed this first step. For smaller firms, I know that IF you really stay calm and concentrate on getting through this crisis, you will be a better, stronger company for it. If your firm made it through the 2008 financial crisis, let’s just say that was a testing ground.

We all know the famous adage, “cash is king.” What you probably don’t know is that this was first put into our common vernacular by Pehr Gyllenhammar (say that five times, fast), the former CEO of Volvo, following the 1987 global stock market crash.

What’s really intriguing to me is that this shouldn’t be a lesson for a crisis. It should be a basic business principle for your firm. REDUCE SPENDING. MONITOR COLLECTIONS and PRESERVE CASH.

Continuity is essential and if your firm has a CFO, this would be obvious. But most small firms don’t think about this. You need to identify what is discretionary spending and what is essential.

Many firms believe that having three to six months of cash reserves is what’s required to ride out a difficult period. If your firm has less than that, you’re most likely in panic mode and not sleeping very well right now. In any case, I know each of us is looking at ways to tighten our wallets by reducing unnecessary expenses. Oddly, it takes times like these to make us focus.

If you haven’t done this yet. Do this tomorrow. Call your vendors and ask for revised terms. Call your landlord and ask for terms. Cut off any discretionary spending.

Make sure cash is coming in the door. Monitor your collections daily. Communication with your clients is critical. If your clients are also asking for terms - deal with this directly. You must have commitments and an understanding of when cash will come. Having these frank conversations with your clients also helps build trust. In addition, it also increases the likelihood that you will get paid. Furthermore, having this conversation and working through the problem with your clients will be remembered when this is over. How you behaved during this crisis will determine your long-term relationship. PRESERVE YOUR CASH: as they say “cash is king”. Know exactly how much you have, where it is and where it will be directed.

That cash we’re talking about, should be preserved to help you with your most important asset, your employees. You should be focusing your employee efforts IN-the-business and not burden them with dealing with the crisis. The more confidence you can give your employees about the fact that your firm will get to the other side of the crisis, the more likely it is that they will be able to continue to contribute value to the business.

Enable them to do their best work: Without this you won’t be able to provide your clients with your best work. Without meeting that standard, you risk losing the client because they don’t see the value that was expected. If ever there was a time to over-perform, it is now. Exceed expectations.

Be open, direct and pull no punches. Make your employees your partner in the crisis so they know the way out is not worrying about the future of the business but focusing their efforts IN the business and bringing value to your clients.

Communication is key and will enable you to instill confidence and create connection, both professionally and personally (so they don’t feel like they are lost on an island). You need to get to a different level when they are remote, as opposed to working in a co-location.

Inform your staff on key business decisions (tell them why you are making these decisions). Build trust so they understand how and why you make decisions.

Always manage to your valuescrisis is not the time to figure out who you are as a team. If you have a strong culturemanage to that. Don’t try and become someone that you aren't. Let your values guide your decision making.

Now I'd like to go deeper and look into tactics your firm needs to follow to make it through.

Work-from-home isat leastfor the duration of the crisis. And frankly, I think it is a permanent option we need to consider. It’s not just for a week and you can make do with lower standards for the working environment. Your employees shouldn’t be working on a makeshift table setup in the garage while sitting on a box rather than an acceptable, anthropomorphically designed chair. Maybe for a week that could work. But a week turns into 2. And before you know it, we’re already in week 12. Make sure each employee has the best working environment at home so they can deliver on your expectation that they will be focused IN the business and delivering the value with the same productivity as if they are in your office. As our COO told all our employees: "You are not working-from-home. You are home and also working.”

Don’t speak without fully considering your message. Be authentic, but also know the script when you get the team together on your weekly virtual staff meeting.

Distribute the load: This is less perceptible in a distributed environment so you must be acutely aware of each employee's workload, deadlines and deliverables. This may be a time when certain employees need to take on new tasks that will expose them to work that they may not fully appreciate. Taking on these new tasks builds empathy for teammates on one hand - and on the other builds skills.

The bottom line is that each and every employee needs to feel useful if not essential. Job titles shouldn’t be creating silos of work during a crisis. The captain needs to also grab a bucket and help bail-out the ship. You may have employees that might need to take on tasks that were never on their radar. Not what you planned, but they will jump at the challenge, learn new skills and bring new insights. Everyone will be grateful to be aboard your life raft.

Leadership needs to be visible and engaged. Attend virtual meetings. Pop-in unexpectedly. Let the staff know that you are there, you care and provide the encouragement that fuels them.

Honor the unique circumstanceseach employee has their own stresses in the work-from-home situation. You need to allow that the rhythm of the day has changed and some employees will require periods throughout the day to handle non-work responsibilities or meditate or counseling. If your firm has resources to help, share these. Have your staff share their own resources based on what they have learned as they deal with their own anxieties.

Expect that productivity will vary. There are pressures at home such as dealing with the needs of a high-risk family member, or home-schooling their kids compounded by a living situation that is sub-optimal when you also bring in the need to perform work. More than expecting productivityis surviving. Be flexible. Let them know you will make it through and afterwards you will realize that you've created a more resilient, forward-looking firm.

LEAD WITH EMPATHY. Make sure each employee understands that they should prioritize themselves, their family, their health and wellness above everything. Everyone is in crisis. And for us to leadwe need to remain calm and grounded and not be tone-deaf.

Start by acknowledging that we are in a new world and we should re-examine all of the processes and paradigms that we’ve taken for granted for so long. Make sure that our past models make sense for the way the world is operating today and in the near future.

Because communication is more critical than ever before, look at changing the way meetings are conducted, how they are documented and what becomes part of the agenda.

Your clients are likewise under tremendous pressure and working through the crisis, see how you can help move them through. We know that when people direct their efforts to other people in crisis, they find a path that helps them both.

It’s not always natural, but it’s a proven survival method. You may be helping them work through issues that were never part of your scope of work, keep track of this, but be of service for your clients.

In the middle of the game, the rules have been changed. The ice has melted and our skills and tools may need to be used for different purposes. When your client survives, you’ll not only have a committed ally, but you will likewise survive.

On the subject of Business Operations and risk management: When designing an emergency plan, you have to know what you’re dealing with when it comes to your assets and what could potentially happen to them. Your assets are your people, first and foremost.

What if you won’t be needing your office for 9-12 months? Or, what if you find that you're better off moving half your firm to a permanently remote workforce. What will you do with the office?

What if you can’t have any face-2-face meetings? Put in place a range of scenarios in the event this crisis goes on for 6, 9, or 12 months. What if it returns next year or two years from now with a very different threat? Make the decisions as to how you will deal with each scenario in advance so you don’t have to panic and act without carefully reasoned outcomes.

WORK ON THE BUSINESS: When circumstances arise that prevent you from continuing to work IN the

the workload has lightened, this is the signal that now is the time that you’ve always wished for to work ON the business.

 

This is what separates a good business from a great one. Great businesses have the ability to constantly reflect on how and why they do what they do. So, we’ve all been given an unfortunate gift. Let’s use this time to tune up our processes.

What better time is there than now for you and your staff to take more continuing educational courses. This will increase the value of the employees. Use down-time productively. Don’t squander it since we only get this opportunity once each decade.

For those of you working in the commercial, institutional, hospitality and similar sectors, you can use your robust skills to help your own clients work on their businesses. Let them know that you are there to help and recommend how you can be of service.

While the next 6 to 12 months will be disappointing from a revenue perspective, this is our opportunity to build and strengthen relationships, To expand the trust-bank at a level we’ve never seen before. This opportunity doesn’t come around very oftenso run with it. As you make deposits into your client’s trust bank, this is what you will be able to draw on when the dust settles.

Be flexible not only in the services you provide, but the resources you have that can execute these. Learn to pivot adeptly. Now is the time to realize that your skills can be expanded to provide so much more value than merely design and construction of the built environment.

Have a business plan around these new opportunities and a vision for what your company will look like at the end of this crisis. This is really the most amazing opportunity. Who better to visualize the future and conceive of new modes and models for a business than people with our skills and training?

Today we are confronted with a rubicon. At some point, fairly soon, we will need to commit to a course of action and make a fateful and final decision. The idea about a rubicon is that once you make the decision, it can’t be unmade. Earlier we talked about the business continuity plan. This requires considerable deliberation and balancing the if / then of a variety of scenarios. But eventually, we must pull the proverbial trigger and there’s no looking back. This is a high-risk, high reward opportunity.

In order to succeed at the rubicon game however, you must be true to your personal and company values. Your organization’s values define the soul of your company and shape the content and character of the culture.

Since this is so criticaldon’t try and find the right decision as much as find the best decision. Very often, the best is also the right decision. Just like perfection is the enemy of good. Trying to get the right solution is the enemy of getting to the best solution.

Stop being a prisoner of the vision you hold based on history. Instead, you need to take a big-picture approach in order to see the best opportunities and rebuild on your values.

Take the long-game approach. I can promise you that the firm of 2024 is nothing like what we’ve been accustomed to over the past 20 years. Will you be on the crest of this new wavecreating your own line, or will you be on the sidelines waiting to catch a lift when the economy rebounds?

I want to close with this fantastic quote from Thomas Edison. I have a personal connection with this since I grew up in West Orange, New Jersey where Edison’s plant was located, In the early evening of December 7th, 1914, a massive explosion erupted and ten buildings in his plant were engulfed in flames. At this point, Edison was 67 years old and he stood there watching his life’s work go up in flames. How did he react? He joked with fire fighters that though he’s 67 years old, he’ll start all over again tomorrow. And he was true to his word and immediately began rebuilding after the fires, and he didn't lose a single employeehe didn't have to lay anyone off. 

For me, the true quote was a comment he made to his son during the early hours of the fire. He turned to him and said, “Get your mother and all her friends. They’ll never see a fire like this again!”

With that, I want to remind youwe have in front of usthe most amazing opportunity of a century. I want you to reflect on how you're going to make it through. I know you can do it. It's going to take a lot of work and effortbut there is recovery, and I want you to be on the crest of that wave. 

Video transcription by Rev.com


Want more insights on getting your firm recovery-ready?

Take the extra step and read 8 Essential KPIs for Architects to Measure Firm Growth by Steven Burns, FAIA to ensure you've identified all the right key performance indicators to measure your firm's growth in the coming months. 

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The Author

Steven Burns, FAIA

Steven Burns, FAIA, spent 14 years managing his firm Burns + Beyerl Architects. After creating ArchiOffice®, the smart office and project management solution for architectural firms, Steve brought his management expertise to BQE Software, where he is perfecting the business strategy and product development.

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