President and CEO of Westwood (Minneapolis, MN), a firm that’s been focused on enhancing communities with smart engineering for almost 50 years.
By Liisa Andreassen
Greenhagen focuses on corporate development, strategic alignment, risk management, and sustainable and scalable growth. His strong leadership style emphasizes a culture of integrity – one that enables staff to achieve success through client satisfaction and personal and professional growth.
“Through my experience doing acquisitions and entering new markets, I’ve learned that culture is more important than numbers,” Greenhagen says. “In the beginning, we looked more at the numbers than the people and their cultural fit. It caused more damage than any monetary gains an acquisition could bring. A strong culture and good leadership has proven to be our biggest differentiator and brings us greatest success.”
A conversation with Paul Greenhagen.
The Zweig Letter: What are the three to four key business performance indicators that you watch most carefully? Do you share that information with your staff?
Paul Greenhagen: Revenue, profit, backlog, and utilization. We share these details in a “State of Business” summary at our monthly town halls. Our employees appreciate the transparency. Having an understanding of this information along with business trends, helps them understand how their hard work and contribution is so important to achieving our goals.
TZL: Artificial intelligence and machine learning are potential disruptors across all industries. Is your firm exploring how to incorporate these technologies into providing improved services for clients?
PG: Yes. We have a dedicated staff member who focuses on innovation and new technologies to improve our performance and client satisfaction. Innovation is deeply embedded into Westwood’s culture and we recognize the potential for technologies such as artificial intelligence and machine learning to transform our industry. We continually invest in our vision and strategy to provide a basis for integrating new technologies. Our teams are in early discussions on implementing AI into our business operations and we’re starting to use machine learning to do drone-based inspections of facilities. We’re also collaborating with software experts to use AI/machine learning to analyze thousands of images to determine faults and failures on specific projects.
TZL: What, if anything, are you doing to protect your firm from a potential economic slowdown in the future?
PG: Like most firms, we learned a lot from the past recession. Focusing on diversification helps stabilize our business when the markets fluctuate. We concentrate on balancing our revenue streams across our markets, services, and geographic locations. We hold quarterly, all-day business update sessions with our leadership team to stay on top of changing markets and our business activities as a whole. Every year, we update our three-year strategic plan to account for economic changes as well.
TZL: Are you using the R&D tax credit? If so, how is it working for your firm? If not, why not?
PG: We’ve received R&D tax credits annually since 2014 and it’s working extremely well. These credits lower our effective tax rate, which frees up cash to run the business. They’re complicated to calculate, but simple in concept. It’s also inspired new innovations on projects and within our industries.
TZL: It is often said that people leave managers, not companies. What are you doing to ensure that your line leadership are great people managers?
PG: Westwood invests in training and leadership development with a focus on core values and culture. Culture is a priority for us and a top focus in our strategic plan. We have a mentoring program and offer leadership training (in- and out-of-house).
TZL: What novel approaches are you bringing to recruitment, and how are your brand and differentiators performing in the talent wars?
PG: We had more than 40 interns this year. More than 70 percent of them became full-time employees. We’re also growing our co-op program, which means we have students in our organization year round. This pushes our diversity, inclusion, and technology advancement efforts. We know that people like to be a part of something successful, so we focus on achieving awards that recognize us as a top firm, best place to work, and leader in marketing excellence. Our strategic plan guides how we approach our business, recruiting, and brand. The requirements of the awards we pursue help us to set goals and measure success. Top talent is in high demand, so we’re more likely to attract their attention as a leading industry firm that offers unique opportunities.
We also use feedback from employee surveys to find new ways to enhance our workplace. We differentiate by zeroing in on our long-term strategies and using a wide variety of communication channels to reach the people who fit on our team. All of these efforts, as well as the programs we have for career development help us to attract new talent and companies for acquisition.
TZL: Does your firm work closely with any higher education institutions to gain access to the latest technology, experience, and innovation and/or recruiting to find qualified resources?
PG: We provide scholarships to many institutions that support our professions. We’re also actively working with 15-20 colleges and technical schools around the country to attract interns and future staff. We focus on those schools that are in the communities we serve and those that support our profession. Our activities with these schools extend to career fairs, internships, co-op opportunities, classroom presentations, project support, club sponsorship, club participation, alumni support, and instructors. A number of our employees are part-time instructors at partner institutions.
TZL: When you identify a part of your business that is not pulling its weight in terms of profitability or alignment with the firm’s mission, what steps do you take, and what’s the timeline, to address the issue while minimizing impacts to the rest of the company?
PG: First, we determine why it’s not pulling its weight or why it doesn’t align with our mission. Then we identify what success would look like. The timeline depends on the situation. In general, we create a plan which could include any mix of focused leadership guidance, strategic hires, acquisitions, etc. and then set a realistic timeframe with milestones to measure our progress.
TZL: How do you handle a long-term principal who is resting on his or her laurels? What effect does a low-performing, entitled principal or department head have on firm morale?
PG: We confront them directly and determine what steps are needed for change. A low-functioning principal can have a very negative effect on the company, and we deal with it as soon as possible.
TZL: How often do you valuate your firm and what key metrics do you use in the process? Do you valuate using in-house staff or is it outsourced?
PG: We do it annually and we outsource it.
TZL: Ownership transition can be tricky, to say the least. What’s the key to ensuring a smooth passing of the baton? What’s the biggest pitfall to avoid?
PG: Ownership and leadership transition are very different for us. At Westwood, our buy-sell agreement requires that we sell our shares at 65, which allows us to manage the process. We create scenarios for retiring owners which allows us to plan years in advance. Westwood has been in business for 47 years and has successfully transitioned ownership multiple times. Shareholders are required to give a one-year notice, which also allows us to plan ahead. Westwood has worked to keep balance in share ownership as we’ve grown. The biggest pitfall to avoid is not planning. Look forward and be prepared.
TZL: They say failure is a great teacher. What’s the biggest lesson you’ve had to learn the hard way?
PG: Through my experience doing acquisitions and entering new markets, I’ve learned that culture is more important than numbers. In the beginning, we looked more at the numbers than the people and their cultural fit. It caused more damage than any monetary gains an acquisition could bring. A strong culture and good leadership has proven to be our biggest differentiator and brings us greatest success.
TZL: Research shows that PMs are overworked, understaffed, and that many firms do not have formal training programs for PMs. What is your firm doing to support its PMs?
PG: We outsource some of our PM training, but we also have internal training through Westwood University on our processes and methods. Our senior leaders are actively involved with mentoring PMs. They have an open door policy and place high priority on PMs to ensure they have what they need. Mentoring ranked high in feedback that we received from employees regarding how they would define our culture.
TZL: In one word or phrase, what do you describe as your number one job responsibility as CEO?
PG: Increase shareholder value – that’s sort of strange to say out loud, but it’s a fact (or should be) for every CEO. Increasing shareholder value isn’t just a win for shareholders, it’s a win for clients and employees.
TZL: Diversity and inclusion is lacking. What steps are you taking to address the issue?
PG: Westwood has become diverse by welcoming and supporting talent from different backgrounds. The success of these employees has driven our PMs to demand more diverse talent. As a result, we’ve developed more programs geared toward reaching and supporting them than we did five years ago.
TZL: A firm’s longevity is valuable. What are you doing to encourage your staff to stick around?
PG: Recruiting and retention are everyone’s job. This is the message that we try to support every day. Our success as an organization is dependent on our success with our clients. Every project manager understands this. We have a lot of programs – from an active wellness program (that we call Lifestyle) to a company-wide Toastmasters group – but recruiting and retention cannot be “outsourced” to a program. Every supervisor understands that their success is dependent on their talented, trained team, and that they need to support that team in every way possible.