View
14
Download
0
Category
Preview:
Citation preview
Fall Conference – Kona, HI October 22nd -25th, 2014
Relation of Firm Size to Long-Term Viability
Study Of Engineering News Record (ENR) Data
2
PHASE #1 – Analyze ENR 500 data for industry trends & changes to learn…
PHASE #2 – Dig deeper into Phase #1 findings to learn…
Why Did We Do This?
3
We were hearing… Mid-sized firms saying:
“We feel squeezed and threatened.”
Experts touting: “The death of the
mid-size firm.”
Mega firms suggesting: “Mid-sized firms should give up and sell to
me”
Why Did We Do This?
4
We were hearing…
Our experience was different… Thriving
Nimble
Vital
Purpose-driven
Why Did We Do This?
5
We were hearing…
Our experience was different…
We wanted facts…
Should mid-sized firms be confident or concerned?
6
Phase #1 – What We Did
7
Phase #1 – What We Did
How Did We Do Phase #1?
8
• Research done by the University of Colorado
• Four independent sponsors
• Goal – Maintain independence of the findings
Who
What Data came from public information: • Engineering News-Record • US Economic Census Data • US Bureau of Labor
Phase #1 Fun Research Facts
9
Used 37 years of overall data from 1977 to
2014
Encompassed multiple economic
cycles
Entered 400,000+ data points into
database
Over 1500 firms of ENR data
included in the study
116,000 engineering
firms in census data
…with sector diversification data in the last 25 years
In Phase #1 We Analyzed These Aspects Of The Data
10
• Does Size Matter? Industry trends & characteristics
• Are Mid-Sized Firms in Danger? Volatility of the firms on the list
• Does Size Matter For Market Sectors? Sectors where firms worked and role of diversification
• Are You On The Menu? Influence of industry consolidation
• How Do The Megas Grow? Influence of international work
ENR Top 10
That Was Then…This Is Now 1986 2014
• AECOM • Jacobs • URS • Fluor • CH2M Hill • AMEC • Tetra Tech • Bechtel • CB&I • KBR
• Morrison-Knudsen • CRS Sirrine • Sargent & Lundy • Gibbs & Hill • CH2M Hill • Gilbert/Commonwealth • Holmes & Narver • Black & Veatch • Sverdrup • Louis Berger
11
ENR Top 10
That Was Then…This Is Now 1986 2014
• AECOM • Jacobs • URS • Fluor • CH2M Hill • AMEC • Tetra Tech • Bechtel • CB&I • KBR
12
• Sargent & Lundy • CH2M Hill • Black & Veatch • Louis Berger
ENR Top 10
That Was Then…This Is Now 1986 2014
• AECOM • Jacobs • URS • Fluor • CH2M Hill • AMEC • Tetra Tech • Bechtel • CB&I • KBR
13
• Sargent & Lundy (28) • CH2M Hill (5) • Black & Veatch (16) • Louis Berger (24)
Does Size Matter? (industry trends & characteristics)
15
Study Categories for Data Analysis, 1977 to 2013*
Category ENR Ranking Range
% of 2013 Total Revenue
2013 ENR Revenue Range
Small Midsize Large Very Large Mega Source: Engineering News-Record using 2013 data
What Percentage of the Total Market Revenue Do You Think the Mega Firms Have?
Not on ENR Top 500
ENR 500 to ENR 101 ENR 100 to ENR 31
ENR 30 to ENR 11 ENR Top 10
<$19.4M $19.4M to $122M
$123M to $455M $458M to $1.76B
$1.77B to $7.24B
16
Study Categories for Data Analysis, 1977 to 2013*
Category ENR Ranking Range
% of 2013 Total Revenue
2013 ENR Revenue Range
Small Midsize Large Very Large Mega
Not on ENR Top 500
ENR 500 to ENR 101 ENR 100 to ENR 31
ENR 30 to ENR 11 ENR Top 10
<$19.4M $19.4M to $122M
$123M to $455M $458M to $1.76B
$1.77B to $7.24B
64% 7%
6%
8% 15%
What Percentage of the Total Market Revenue Do You Think the Mega Firms Have?
Source: Engineering News-Record using 2013 data
Page 17
Are Mid-Sized Firms In Danger? (volatility of ENR firms)
Change in Percentage Of Total Revenue For The Last 27 Years
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1981 1986 1991 1996 2001 2006 2011 2013
% of Total Revenue
Mega Very Large Large Medium Small
Mid-sized firms’
percentage of total
revenue has stayed the same over the last 27
years
18
And The Data Also Says… 1550 firms have been on ENR since 1977
58 stayed throughout the 37 years (29 mid-sized)
32 positively increased their rankings (14 mid-sized)
16 outperformed their peers in growth rates (9 mid-sized)
of those
Many midsized firms have endured and
performed!
of those
of those
19
Does Size Matter For Market Sectors?
20
The Market Has Segmented Over Last 25 years
$0
$5
$10
$15
$20
$25
$30
$35
$40
1986 1991 1996 2001 2006 2011
Annu
al Sector R
even
ue in Actua
l $Billion
s
transport
balanced
general bldg
wastewater
industrial
power
haz waste
21
Different Size Firms Dominate Different Market Segments
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
transport balanced general bldg power industrial
% Revenue per Sector -‐ 2011 Mega
Very Large
Large
Medium
22
Are You On The Menu? (merger and acquisition activity)
M & A Activity and Market Consolidation of ENR 500 Firms
Since 2005, has been a shift from acquiring firms in the same sector to
acquiring a diversity of firms (especially for Mega Firms)
0
5
10
15
20
25
30
1985-‐1994 1995-‐2004 2005-‐2012
Same Sector versus Different Sector Purchases
same sector
different sector
24
How Do The Megas Grow? (versus everyone else)
25
Role of International – Factor In Recent Growth Of The Megas
0%
10%
20%
30%
40%
50%
60%
1981 1986 1991 1996 2001 2006 2007 2008 2009 2010 2011 2012 2013
InternaAonal Billings as Percent of Gross Billings Mega
Very Large
Large
Medium
% of 500 revenue
26
ENR Study Phase #2 - Why?
27
• What does it takes to prosper?
• What does it take to sustain success?
• What might have contributed to firms who are no longer around?
Phase #2 – Our Research
28
• The “Sweet 16” firms that stayed on the list and outperformed their peers
• Selected “sustaining” firms (out of the other 42 who stayed on the list)
• Other firms who are “living company” examples • Post mortems on firms not around today
Research Focus: Included and compared…
(> 50 firms represented in the study)
Phase #2 – Our Questions
29
Internal Strategy Cultural/philosophical business characteristics
External Strategy Impact of mix of business services and
geographic diversification
Financial Drivers and Performance Management Key financial practices and performance drivers
Succession Level of leadership/management/ownership
planning & development
Significant Events Triggering events that set the stage for long-term success
How We Organized Our Major Findings On Firms That Prosper
30
• 5 Key Success Factors
• Observations & best practices of Success Drivers
• Fatal Flaws – Counter characteristics of comparison firms no longer on the list
Key Success Factor #1
31
It’s all about the
people
Factor #1
Key Success Factor #1
32
Use the “power of purpose” – Why are we in business
Long-term approach to investing in & developing staff
Extraordinary talent management – especially retention
Performance management & incentives align with & drive success
Success Drivers
It’s all about the
people
Factor #1
Emphasis on work-sharing & collaboration
Key Success Factor #1
33
Losing sight of what
makes up the firm –
PEOPLE
Fatal Flaw
07/31/1996
“You know what the problem is around here? Too much overhead!”
Key Success Factor #2
34
Have a clear client focus
strategy
Factor #2
Key Success Factor #2
35
Use a “customer intimacy” approach – Extra effort to understand clients & “their” business
Continually measure client satisfaction & performance
Have “agility” – Actively look for ways to provide more capability, service & value
Remove internal obstacles so staff can better focus on clients
Success Drivers
Have a clear client focus
strategy
Factor #2
Promote entrepreneurial spirit to better serve and add value
Key Success Factor #2
36
Too internally focused - change & corporate complexity
Fatal Flaw
Carson, this is the new organizational chart and this is you.
Key Success Factor #3
37
“Smart” diversification is key to growth
Factor #3
Success Drivers
Key Success Factor #3
38
Expand capabilities
&/or geography to better
serve clients
Acquisitions are
strategic ”accelerant”
moves rather than
just growing top
line
“Smart” diversification is key to growth
Factor #3
Use adjacencies rather than huge leaps
Divest under-
performing services,
units and/or markets
Key Success Factor #3
39
Being a mile wide and an inch deep with their diversity
strategy – spread thin
Fatal Flaw
Key Success Factor #4
40
You gotta deliver financial performance
Factor #4
Key Success Factor #4
41
Success Drivers
Consistent above-
median to upper-quartile
profitability
Results driven – use goal setting/
metrics to drive clear
expect-ations & account-ability
Promote innovation
& continuous improve-ment to
get better
Capital strategy balances
short/long-term with little or no
debt
You gotta deliver financial performance
Factor #4
Key Success Factor #4
42
Poor financial performance combined with high debt &/or triggering event
Fatal Flaw
“What if we don’t change at all… and something magical
just happens.”
Key Success Factor #5
43
Ownership/ leadership succession taken very seriously
Factor #5
Key Success Factor #5
44
Ownership/ leadership succession taken very seriously
Factor #5
Broadening the ownership group is
a priority
Conservative capital structure &
long-range planning ensures
transition
Retain earnings & convert bonuses to capitalize the firm
Leaders are developed at multiple levels
Key Success Factor #5
45
No preparation for the future,
especially ownership & leadership
transition (I will live to
100!)
Fatal Flaw
Eventually son, you’ll be in charge of this – assuming of course that I
can’t come up with any better alternative.
Regarding The Key Success Factors, Some Of You May Be Thinking…
46
Well…duh! However, in the words
of a wise man….
“Greatness is not a function of circumstance
but of conscious choice & discipline.” -- Jim Collins
Questions?
47
Our Conclusion – Should Mid-Sized Firms Be Confident or Concerned?
48
Mid-sized firms are thriving, in some
ways, doing better than their larger
counterparts.
And if anyone tells you any differently,
tell them…
Recommended