Co-founder and president of BHC Rhodes (Hot Firm # 15 for 2017), a 130-person civil engineering firm based in Overland Park, Kansas.
By Liisa Andreassen
“Profit centers go against the dynamic of a team culture,” Honomichl says. “We win/lose together. Profit centers are countercultural and would never make us better.”
A CONVERSATION WITH KEVIN HONOMICHL.
The Zweig Letter: What’s your policy on sharing the firm’s financials with your staff? Weekly, monthly, quarterly, annually? And how far down into the org chart is financial information shared?
Kevin Honomichl: You need to balance transparency with confidentiality. Annually, we share financial information with all staff. That information is focused on how we did the year before and we talk about things like 401(k)s and discuss if we did what we said we were going to do. Once a month we share more detailed financial information with shareholders. Project managers also get income sheets on a monthly basis and can then communicate to their team how things are going. I find that you need to give people the information that will be helpful in their roles. They don’t need to have everything all the time. During the recession, people wanted to know everything. We gave it to them straight. It was ugly. They really want to know more about things like our war chest and reserves. We strive for profitability and share in rewards.
TZL: The design-build delivery model appears to be trending upward. What are the keys to a successful design-build project? What are the risks?
KH: The key to success lies in the relationship of the team members. You can’t just throw together a team. There needs to be thoughtful consideration behind each choice (i.e., Does each team member have the same objective? Is there trust? Is there role understanding?). The risk happens when information doesn’t flow well between team members.
TZL: The talent war in the A/E industry is here. What steps do you take to create the leadership pipeline needed to retain your top people and not lose them to other firms?
KH: It takes time for roles to open up so you have to constantly engage and provide leadership training for people at all levels in the company. “Pipeline” is the operative word here. You need to have plenty of people ready to step up – specifically people who reinforce your company’s culture.
TZL: As you look for talent, what position do you most need to fill in the coming year and why?
KH: I’m sure my answer is like many others – mid-level project managers. We also need seasoned technical staff. We try to target internal referrals but are getting tapped out. We use all channels to recruit – website, Glassdoor, LinkedIn, and staffing agencies. It’s incredibly competitive out there right now.
TZL: While plenty of firms have an ownership transition plan in place, many do not. What’s your advice for firms that have not taken steps to identify and empower the next generation of owners?
KH: It’s a long runway. We’re a first-generation firm and have a stock ownership plan in place. It’s different for every firm. Focus on leadership development. I don’t think ESOPs are the end all. It takes careful planning.
TZL: There are A/E leaders who say profit centers create corrosive internal competition for firm resources. What’s your opinion on profit centers?
KH: I agree that profit centers create a corrosive situation. We operate as one company. We’re all focused on the customer and project types. While each group (i.e., public, utilities, surveyors, or municipal development), has its own financial targets, at the end of the day we have one overhead rate and are one company. Profit centers go against the dynamic of a team culture. We win/lose together. Profit centers are countercultural and would never make us better.
TZL: Zweig Group research shows there has been a shift in business development strategies. More and more, technical staff, not marketing staff, are responsible for BD. What’s the BD formula in your firm?
KH: We separate marketing from business development. Business development focuses on sales, signing contracts, following leads, and relationship development. Marketing focuses on getting the word out about what we’re doing. They are different roles. Let people do what they are good at doing.
TZL: Diversifying the portfolio is never a bad thing. What are the most recent steps you’ve taken to broaden your revenue streams?
KH: You never know what’s going to happen. We have four market segments. We are consistently looking to diversify our customer base and sectors. We’re always on top of that. That said – stick with what you’re good at and build on it.
TZL: The list of responsibilities for project managers is seemingly endless. How do you keep your PMs from burning out? And if they crash, how do you get them back out on the road, so to speak?
KH: You have to set up your PMs for success. Give them a moderate workload and run interference for them when you need to. Give them the resources they need and monitor their number of projects and clients. It’s easier to manage multiple projects with one client versus multiple projects with multiple clients. Everyone above the PM needs to make sure they’re paying attention and listening to what’s happening with the PMs.
TZL: What is the role of entrepreneurship in your firm?
KH: We’re constantly working to win new projects. For each of our market leaders, it’s like running their own business. These people need to have fire, understand market dynamics and figure out how to beat the competition. We always want people who are looking to innovate.
TZL: In the next couple of years, what A/E segments will heat up, and which ones will cool down?
KH: I think the private sector will remain strong. Public infrastructure may cool down – but it’s more of a state-by-state thing. For example, infrastructure in Texas will be hot, but in Kansas it will be cool.
TZL: They say failure is a great teacher. What’s the biggest lesson you’ve had to learn the hard way?
KH: I think it was Bill Gates that said, “Success is a lousy teacher.” Apply a lessons learned mentality throughout the company. It’s okay to tell people they made a mistake and then share the information. Don’t hide mistakes and don’t be slow to respond. Be ready to make uncomfortable decisions.
TZL: While M&A is always an option, there’s something to be said about organic growth. What are your thoughts on why and how to grow a firm?
KH: We’ve primarily been an organic growth firm. We’ve grown a great deal over the last three to four years, but are now in a limited growth mode because of not being able to find and hire new staff. We’re using this time to refine leadership, clean up our client base, and focus on better onboarding. It’s good to have a little breather to grow internally in our systems processes, so we’ll be ready for action when the time comes.
TZL: What’s your prediction for 2018?
KH: Very optimistic. We have a strong backlog. There’s concern about some uncertainties such as trade wars and interest rates, so we have our antennae up. You have to.
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