2020 Mid-Year Executive Outlook

2020 Mid-Year Executive Outlook

July 15, 2020
After the most unprecedented and disruptive global event to start a year in modern history, we caught up with six A/E leaders across the country for our annual Mid-Year Executive Outlook. An industry characterized by early year optimism that rapidly transcended into extraordinary operational and safety responses, is now looking ahead to unique challenges and opportunities. These individuals touched on a wide range of subjects, including their organization’s response to COVID-19, client needs and concerns, forecasts for the remainder of the year, and what’s on tap with their summer reading lists and vacation plans. 

Michael Hinton

Chairman & Chief Executive Officer

Lochmueller Group

Evansville, IN

Tell us about Lochmueller Group and your capabilities and markets. 

Lochmueller Group is a 225 employee firm operating from 10 offices throughout Indiana, Illinois, and Missouri. Our service lines include transportation design (road, bridge, trails, etc.), water design (sanitary, storm, and drinking), environmental (NEPA, endangered species, mitigation), traffic engineering and planning, land acquisition, and survey. About 50% of our work is for State DOTs, 35% is local municipal work, and 15% is private.

How did your staff respond and adapt to workplace and project changes brought on from the pandemic? 

Our staff’s response during the pandemic lockdown was remarkable. While we technically never really “locked down” because we were designated as “essential”, we closed our offices to all but absolutely necessary attendance. Our chargeability during March and April remained above budget and our “hit rate” on proposals was over 60%. Profits remained well above budget. We did see some slow down on a few local municipal projects, but they have not been significant. Our main concern is how tax revenues which were lost or depressed during the national shut down may affect projects in the second half of 2020 and 2021.

What have you been hearing from your clients during the pandemic? 

As indicated above, infrastructure programs have proceeded pretty well on schedule. We have been warned that future projects may be delayed or even dropped.

How does the second half of the year look and going into 2021? Any specific opportunities or challenges?  

Our second half backlog is very heathy, and it stays strong through the first half of 2021. The Illinois DOT has ramped up its program significantly on the back of a huge increase in state fuel taxes. Our proposal volume there has increased exponentially in 2020, and should help to fill whatever gaps may pop up in programs in Indiana and Missouri next year. We are not, however, declaring that the coast is clear. We’re still monitoring the situation and we have begun requiring all new hires to be vetted and approved by our 5 person Executive Council until further notice.

Lochmueller Group went to a 100% ESOP model last year. What was the rationale behind that and how has it been received?  

Although we had successfully transitioned ownership from the founding and initial owners, we found ourselves facing the same challenge as I and my cohorts began anticipating retirement and looking for a way to exit. Several younger leaders had the desire to purchase large share blocks, but they didn’t have the financial wherewithal. We opted for a 100% ESOP because of its great cultural fit, and its solution for share liquidity over the next few decades. The reaction by selling shareholders and current employees has been tremendous. We will be holding our first annual ESOP Summit and “valuation-reveal” next month, and employee-owners are going to be very pleasantly surprised to see the results and the value they will receive in their initial ESOP investment statement.

What’s on your summer reading list?  

I have just begun reading Unknown Valor, a story of family, courage, and sacrifice from Pearl Harbor to Iwo Jima in WWII written by Martha MacCallum.

Roseann Schmid

Chief Executive Officer

Fisher Associates

Rochester, NY

Tell us about Fisher Associates and your capabilities and markets. 

Fisher Associates has been providing comprehensive, professional solutions since 1984. We deliver services in three primary market sectors including transportation, energy, and land development. These services are complemented by the expertise we provide in our geomatics and environmental services lines. We currently have 125 employees spanning 6 offices: Rochester, Syracuse, Buffalo, Canonsburg, Erie, and Houston. We also have staff located in Manchester, NH and Oceanville, NJ. While much of the work we do is in the states where we have a presence, our energy market sector provides services to clients in numerous states throughout the country. We are licensed to do business in 31 states and have provided services in 22 of those states.  

How did your staff respond and adapt to workplace and project changes brought on from the pandemic?

Our staff responded and adapted very well to workplace and project changes brought on from the pandemic. On Friday, March 13th we decided to do a trial run of working remotely the following Monday, as we anticipated it was only a matter of time before it would become necessary, and it would give us time to work out any technology issues. All employees dialed in remotely that following Monday and had little to no issues, which is a testament to our IT staff who have upgraded our systems over the past few years, and consistently monitor changes that are needed to keep us current and our systems secure. Our staff hasn’t returned to work since. In some respects, we are communicating across all sectors and all levels better than pre-COVID and our staff has been creative in holding fun virtual group events. There have been challenges, particularly with staff who have school age children at home. We try to help our staff address these issues as best we can by being flexible and supportive.    

What have you been hearing from your clients during the pandemic?

The situations vary depending on the client type. Municipal clients are feeling the effects of reduced income taxes due to businesses being closed. Many have not been able to hire their typical summer help, some have made staff reductions, and some design projects are being delayed due to funding uncertainties. We have also seen some of our transportation construction inspection projects get pushed into next year due to COVID related issues. Our private sector wind, solar, and utility clients continue to be busy and we are still seeing a fair amount of school district work. Many clients have indicated they have had technology challenges with working remotely, particularly early-on in the pandemic, and some of their processes were not set up to function well in a remote work environment. The majority have since addressed these issues and now are trying to deal with employee fatigue with the remote work situation.

How does the second half of the year look and going into 2021? Any specific opportunities or challenges?

We are cautiously optimistic about the second half of the year and going into 2021. We had a strong backlog entering 2020. Proposal activity in the first and second quarters for the types of work we do remained high, in spite of COVID-19, and we secured many new contracts during the first half of 2020. We anticipate this to continue in the second half of 2020. We are hopeful that a federal infrastructure bill will be passed that will also include funding for clean energy projects and an extension of the production tax credits for renewables. We are currently in the process of business planning for 2021 and evaluating whether we need to pivot in any areas of our business. We were on a growth trajectory prior to COVID-19 and we are exploring options to stay on that trajectory. The biggest challenge, of course, is planning in an uncertain environment. Things can change very quickly and we need to be ready to respond accordingly.

You became CEO in 2018. How would you define your leadership style? Did it have to change during this crisis? 

I have a collaborative leadership style. Our executive management team works very well together and we each bring different viewpoints to the table, so I feel it is important to hear those viewpoints in order to make the best possible decisions. I don’t think that changed during this crisis. We settled in pretty quickly on what each of our responsibilities were going to be related to this pandemic and communication with our employees and it has gone extremely well based on the employee feedback we have received. That is the true gauge of your success. The health and safety of our employees has been our primary focus throughout this pandemic. We can’t control what the market does, but if we take care of our employees, our most valuable resource, they will rise and overcome the challenges of this crisis – and our employees have done just that. I am very grateful.

What’s on your summer reading list?

A few books on my summer reading list are: Extraordinary Leadership: Thinking Systems, Making a Difference by Roberta M. Gilbert; Leadership and Self-Deception – Getting Out of the Box by The Arbinger Institute; and The Art of War by Lionel Giles. Since COVID-19, I have also become obsessed with puzzles and am on my seventh one!

Jon Carlson

Chief Executive Officer

Braun Intertec

Minneapolis, MN

Tell us about Braun Intertec and your capabilities and markets.

Braun Intertec is proud to be a 100% employee-owned geotechnical engineering, environmental consulting, and testing firm which has grown to over 1,000 employee-owners in more than 40 communities across the midsection of the country, from our northern border states of North Dakota and Minnesota to the Gulf Coast states of Texas and Louisiana. Our employee-owner culture is the primary driver of our success. We proliferate that culture by developing programs to compensate, communicate to and inspire our employees to think and act like owners which, ultimately, benefits our clients. Our employee-owners are highly engaged and focused on delivering quality services to our clients. Our widespread capabilities throughout all levels of our company help us develop and maintain value-added client relationships, and that is what differentiates us from our competition.

How did your staff respond and adapt to workplace and project changes brought on from the pandemic?

I couldn’t be prouder of our team of employee owners! Despite the great uncertainty and rapidly changing conditions we are facing related to the pandemic, our team has continued its great work for our clients while remaining healthy and developing creative solutions to do so efficiently and effectively. Many of our clients have reached out to us for assistance to manage through the pandemic, and our very talented team of health and safety professionals have risen to the challenge.

What have you been hearing from your clients during the pandemic?

We get a lot of questions! Although we have been having great conversations with our clients, teaming partners, subcontractors and vendors; and all of us have opinions about what this all means for our companies and our industries; none of us have definitive answers. These are truly unprecedented times; nevertheless, I’m quite encouraged about our collective ability to navigate through these troubled waters given the high degree of collaboration that is occurring across many sectors.

A few conversations of note are:

The future of office buildings - Although I foresee more people in many sectors of our economy continuing to work from home, businesses will continue to need spaces in which to collaborate, socialize, build teams and develop community with coworkers. The needs and demands for office spaces of the future likely will be different, but they will perpetuate.

Renovations of existing facilities - Office renovations are occurring to create more flexible space, which has helped bolster our building and structural sciences team. I suspect such work to continue beyond the pandemic, as we establish the new normal of how we gather and collaborate with our coworkers.

Increased demand for warehouse and industrial/manufacturing buildings - We were seeing increases in these sectors prior to the pandemic, and the increased demand for delivery of online purchases driven by the pandemic has only increased the warehousing sector. Also, changes in supply-chain management (i.e., establishment of more local and diverse sources of supplies, including reshoring of manufacturing) may drive increased demand for buildings in the industrial and manufacturing sectors.

How does the second half of the year look and going into 2021? Any specific opportunities or challenges?

Although the rest of 2020 is still full of uncertainty, our backlogs are strong (except for our oil and gas sector), and we are poised to deliver another financially successful year. Our non-destructive testing and examination (NDT and NDE) services have taken the greatest hit due to our large presence in the oil and gas sector. We anticipate the very sharp decline in demand for those services will continue well into 2021. Fortunately, due to our diverse portfolio of clients, services and geographies, we are weathering this economic downturn likely better than most in our industry, and certainly better than many other industries, for which we are very grateful.

Braun Intertec has made a number of acquisitions over the past several years. How have they helped the organization? What are the keys to making them a success?

As I indicated above, our diverse portfolio of clients, services and geographies, enable us to weather economic downturns. Our acquisitions have been strategically selected to increase that diversity and fill identified gaps. For example, for the vast majority of our 63-year history, Braun Intertec has operated primarily in the Upper Midwest portion of the country. In 2014 and 2015, we made strategic expansions, including both organic and acquisitive growth, to the south along I-35 to provide greater diversity of our geographic markets and weather. These growth initiatives were primarily focused on engineering and testing. We have since expanded our service offerings in the South to provide building and structural sciences consulting, non-destructive testing and examination (NDT and NDE) services and drilling services. In 2018, we purchased W&M Environmental in Texas to broaden both our geographic reach and our multi-disciplinary capabilities for environmental services across our entire footprint.

What’s on your summer reading list?

For business, I recently read Patrick Lencioni’s newest book, The Motive. It is very timely for us at Braun Intertec as we continue to grow our next generation of leaders. For pleasure, I have been reading A Gentleman in Moscow by Amor Towles. It is a very witty tale with exceptional prose.  

Connie Good-Hess

Partner & General Manager

Valley Engineering

Mt. Crawford, VA

Tell us about Valley Engineering and your capabilities and markets. 

Valley Engineering is a professional firm providing civil, mechanical, electrical, and plumbing engineering, commissioning, landscape architecture, planning, and surveying services. While our land development departments work in many different disciplines including healthcare, higher education, commercial, industrial, agricultural, and residential, our MEP team is dedicated to healthcare and higher education.  

At Valley Engineering, we strive to design and deliver the very best product each and every day. We believe our commitment to quality and responsiveness is reflected in the number of repeat clients we serve each year. Our goal is to treat each project as if it were our own, promoting communication, accountability, and transparency between the design team and the stakeholder. Collectively, our engineers bring over 300 years of construction experience to the equation; an important component, because if you don’t know how to build it, how can you design it? This experience allows for value engineering throughout the design phase, saving our clients both time and money.

How did your staff respond and adapt to workplace and project changes brought on from the pandemic?

Because the work we do is considered essential, VE remained business as usual for several weeks after the initial shutdown, implementing CDC recommended guidelines. However, as the number of positive cases started to rise in our local area, the management team made the decision to split the company into two working groups. Half the team worked Monday – Wednesday, the remaining half worked Thursday – Saturday with a deep clean of the office on Wednesday evenings and again on Sunday mornings. We followed this schedule for five weeks and then returned to a normal schedule.

The front office remains closed and we are still not allowing outside vendors, meetings larger than 10 employees, communal meals, or guests. Client meetings take place in our front conference room space, which is close to the front door with limited access to the building. The room is disinfected after each client meeting. Our staff responded very easily to the changes. Everyone understood we were all in this together and made the necessary changes willingly. Many employees worked from home on their ‘off’ days during the split shifts with most maintaining at least 40 hours each week.  

While many civil projects remained unchanged, the MEP department experienced some varying work and project schedules due to their emphasis in healthcare. Certain projects were put on hold while others emerged from the pandemic crisis and how facilities were handling patients and patient care.  

What have you been hearing from your clients during the pandemic? Any lasting changes you see with your healthcare clients in particular? 

Masks are here to stay, particularly in healthcare facilities. Most clients are craving some normalcy, although no one seems to know what that will look like moving forward. We have seen many projects come back online that were stopped early in the crisis. However, there is a lot of thought into how the pandemic may permanently change the healthcare landscape. While everyone knew something like this could happen, no one really believed it would to the degree it has and now there is no ignoring the future possibility of another pandemic or a severe reemergence of COVID-19 in the fall. Healthcare facilities do not want to be caught off guard again so preparing for the future is a top priority.  

How does the second half of the year look and going into 2021? Any specific opportunities or challenges?

A lot of what happens in the latter part of the year and into the next few coming years will depend greatly on how quickly the economy recovers. The Presidential election will also be a factor. With a deeply divided nation and two very different philosophies on how to get the country moving forward again, November should prove an interesting time for our country. We are not able to visit and call on clients like we normally do, everyone is avoiding face to face meetings. Therefore, it becomes more important than ever to service our existing clients beyond their expectations. Most of Valley’s work come from repeat clients, so maintaining those working relationships is key to future success in these very disruptive times.    

What have been your keys to developing leaders within Valley Engineering and building your company culture? 

Building and maintaining Valley’s company culture is very much a deliberate and ongoing process. I like to call our culture an ‘ecosystem’. We talk about it a lot. We hold monthly ‘training’ sessions called High Performance Group sessions, which provide both personal and professional development. The culture is explicit, we identify our core values and live by them. We also pinpoint behaviors we tolerate and behaviors we do not. In living the company culture, we are all accountable to each other. Mentoring has been key for leadership development within Valley. Time and again we have seen interns turn into full-time, long term employees.  

What’s on your summer reading list?

Books on my summer list are: The Opioid Crisis Wake-Up Call: Healthcare Is Stealing the American Dream – How to Take It Back by Dave Chase; The Grass Roots Healthcare Revolution: How Companies Across America Are Dramatically Cutting Their Healthcare Costs While Improving Care By John Torinus; The Left Behind: Decline and Rage in Rural America By Robert Wuthnow; The Vanishing Half By Brie Bennett; and A Woman Is No Man By Etaf Rum.

Rod Sommer

Chief Executive Officer

LJB, Inc.

Miamisburg, OH 

Tell us about LJB and your capabilities and markets.

LJB is a national engineering firm driven to think bigger. Founded in 1966, we work on projects worldwide and serve clients in six primary markets: commercial, education, healthcare, industrial/manufacturing, federal and state and local government. Our portfolio includes projects and professional registrations in all 50 states, several foreign countries and U.S. territories.

How did your staff respond and adapt to workplace and project changes brought on from the pandemic?

Our team has always been extremely mobile, so we already had the infrastructure required to support all employees working remote. While everyone was given the option to work from home beginning late March, our 14 locations never closed, and 25% of staff still chose to come into the office every day. More than 90% were back in the office by June 1. Resiliency is a source of pride at LJB, and our team is very well-suited to adapt to all the uncertainty we’re facing.

What have you been hearing from your clients during the pandemic?

Given the diversity of our markets and geographies, we are seeing a variety of reactions. Most industrial clients shut down their facilities early in the process, which—in turn—temporarily shut down many of our projects. The state and local government sector has continued to be steady, but our clients are unsure about future funding due to decreases in fuel taxes (sorry, user fees!) and other funding priorities. However, some markets that previously showed signs of decline, such as light industrial/distribution, are actually being bolstered by the upturn in online shopping, the need for just-in-time delivery, and growing interest among U.S. companies to on-shore their production.

How does the second half of the year look and going into 2021? Any specific opportunities or challenges?

The overall business climate and disruption will make it difficult to achieve our organic growth goals for 2020, but we remain very active in the M&A market. The uncertainty of a federal stimulus package for infrastructure, and, of course, the upcoming presidential election make planning for 2021 a challenge for us and our clients.  

LJB has made a number of acquisitions over the past 2 years. How have they helped the organization? What are the keys to making them a success?

Acquisitions are a very immediate and tangible way for our team to experience the firm’s commitment to growth. That said, we place even more emphasis on driving organic growth. I firmly believe this balanced approach is the best way to consistently create value for our shareholders. Specific to acquisitions, we target firms that help us diversify our services and geographies and significantly increase our capacity in key markets. Done well, they are also great recruiting tools. Universal keys to success include frequent communication, a genuine cultural fit, and a structured approach to integration.

What are your plans this summer for rest and relaxation?

Given the limited opportunities to travel, my wife and I have planned a few “staycations” this summer. I’m not sure building new garden beds and reorganizing the garage is restful or relaxing, but that’s the game plan for the year of COVID!

Noah Tolson

President 

Array Architects

Conshohocken, PA

Tell us about Array and your capabilities and markets.

Array is 100% dedicated to the healthcare market. While our market is defined, the services we provide our clients are broad. Before an architectural project is even considered, Array provides strategic planning and operational optimization services to executive leadership to ensure a built solution that advances their mission and leverages the current market. 

To this end, our team has developed a software as a service, Pivotal, that allows clients to dynamically drive their strategic planning decisions based on shifting market conditions. Our Array Advisors group consults for clients on operational assessment and improvement, helping healthcare leaders develop a clearer picture of volumetric and operational need through data-collection, assessment, and testing. Our architects and interior designers round out our services by providing process-led design guidance and project execution built on the firm’s 36 years of healthcare design experience. While clients often hire us for one of our services, when we are engaged across all of our perspectives, our clients are afforded an integrated team that provides a comprehensive understanding of the health system’s community, their work, and their space to ensure that they are making the right decisions about what to build, where to build, how to build, or even if to build.
 
How did your staff respond and adapt to workplace and project changes brought on from the pandemic? 

The staff responded wonderfully. It was a seamless transition to working from home, partly due to our already flexible work-from-home and flex-time policies, and partly due to our inherently collaborative work-culture and team that was already accustomed to working virtually across offices. Our robust, cloud-based IT infrastructure, which we have been investing in for some time, was also a great benefit. We’ve had to work harder to stay connected with more meetings, experiencing some of the same “zoom-fatigue” that we’ve all read about as a result, but overall the work has been getting completed well, and (according to our staff-satisfaction surveys) the staff has been very pleased with the firm’s operations during these extraordinary times.
 
Given the firm’s expertise and thought leadership in healthcare design and analytics, what are some of the macro changes we might see in health systems design as a result of the pandemic? 

Well, the first big macro-change is that many health systems won’t be designing anything until there is some stability in the market. We have seen some clients freeze capital spending while they contend with numerous operational and resource changes. There is, though, an increased need for physical space that provides flexibility of acuity, of operations, and of organization. As a result of this pandemic, we have seen that our healthcare infrastructure is not nimble enough to accommodate surge of a particular type. I think health systems (who are not doing so already) will want to start running predictive analytics and scenario testing for another wave of the coronavirus and/or other catastrophic event. There will also need to be design changes around contact, visibility, systems, and density while also affording human interaction and positive experiential qualities of design. I think the resultant mental and emotional fall-out of this pandemic will also become apparent: designers will need to balance the impending turn towards sterility and isolation with opportunities for family, staff, and patient experience accommodations. 
 
How does the second half of the year look and going into 2021? Any specific opportunities or challenges? 

Blurry. Fuzzy. Unclear. Uncertain. If I could just locate that darn crystal ball, I’d have a better answer for you. Array is fortunate to have had tremendous sales in the first part of 2020 after being awarded several large projects. Even in the midst of the pandemic, sales continue, but many are in a holding pattern shortly afterward. I’d like to think that we can all do our part to turn this thing around and get back to what we all do best every day, but for as much as we’re trying at Array, we’re still faced with a market that is being forced to make slow, very cautious decisions. We are choosing to also see this as an opportunity for reflection and improvement. Our team is participating in internal webinars sharpening technical documentation skills, hosting design competitions, and refreshing firm wide policies. Our research and development is in high gear and I’m quite certain that we are getting better every day.
 
You were elevated to President earlier this year. How would you define your leadership style? Did it change during this crisis?

Yes I was — what a time for a promotion, ay? I’ve never really thought of myself as having a leadership style, but believe that I have stayed consistent throughout this crisis. I work hard every day to be kind, and I strive to live and lead with a set of principles that demonstrate that I know the choices I make on a daily basis reflect on us as a company. I strive to be open about what I know and what I don’t, and I seek counsel often. At Array, we have chosen to design places for healing, so these tenets of respect, empathy, and integrity tend to reflect each of us here and persist in our approach to work. 

That said, as leaders we must acknowledge the pressure to make the right business decisions at a time when the world (and especially that defined market I described earlier) is reeling and there is zero precedent to reference; I admit that it has been a challenge. Maintaining and presenting positivity without acknowledging market realities can come off as naiveté or dismissiveness, so we must balance the two. I am fortunate to work alongside two other newly-appointed Presidents, Jonathan Bykowski of Array Advisors and Fady Barmada of Array Analytics, as well as our COO Tim Nichols and numerous others with both fresh and wise perspectives. This team allows my ‘leadership style’ to stay true to itself, yet also evolve and improve. As President, I see it as my responsibility to position the many great (team, project, and firm) leaders at Array for success.
 
What are your plans this summer for rest and relaxation? 

Since my 20-year wedding anniversary plans to Paris and Prague were foiled, I don’t have that getaway I was hoping for. I have enjoyed more time with my wife and three kids (15, 13, and 11) and look forward to sitting back and watching them explore their new-found interests of sewing, playing the ukulele, and surfing. I’m not sure if I’ll feel comfortable truly resting, though, until we have turned the corner towards wellness and have made it through to the other side of this thing. From both a personal and professional side, I’m hoping that can be soon.
About the Author

Steve Gido specializes in corporate financial advisory services with a focus on mergers and acquisitions. Steve has assisted architecture, engineering, environmental consulting and construction firms of all sizes across North America achieve their growth or liquidity goals through successful mergers & acquisitions. Steve has over 15 years of investment banking experience and holds the chartered financial analyst (CFA) designation from the CFA Institute.

sgido@rog-partners.com
p: 617.274.8051
m: 202.412.6882
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