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2019 Mid-Year Executive Outlook

Summer is already here and with the first half of the year behind us, it’s once again time to connect with A/E leaders across the country for our annual Mid-Year Executive Outlook. An industry characterized by solid revenue growth, rising backlogs, rampant industry consolidation, and acute talent shortages present both challenges and opportunities. These individuals touched on a wide range of subjects, including factors driving their firm’s 2019 performance, recruiting and retention strategies, client needs and concerns, and plans for the summer.


Kimberly Moore
President
KDM Engineering
Chicago, IL

 

Tell us about KDM Engineering and your capabilities and markets.

Founded upon a vision of challenging and changing the energy infrastructure to help light up the world, KDM Engineering has set itself apart as a leading power utility, gas distribution, and telecommunications engineering firm by consistently delivering outstanding project support and service to our clients. We are based in downtown Chicago but also have offices in Pennsylvania and Maryland to service our clients in the Midwest and Mid-Atlantic regions. Our services include full service engineering, drafting, permitting and utility coordination.

How has KDM’s performance fared so far in 2019? What’s been driving it?

The KDM team revisits goals for the following year in the 4th quarter of the current year.  We kept blowing through our goals so we decided to set the bar higher and then looked at what work it would take to get to that higher goal.  So far we are on track for those new goals.  Our teamwork, strategy sessions and communication has set the tone on how to get things done at KDM.  We also have current M&A goals that will push us even further.

You started the firm in 2012 and now have over 75 employees? What’s been your strategy for KDM’s rapid growth?

We are currently at 85 people and still growing!  As fast as that growth sounds, it has been tamed by me so we can at least try to seem like we have some control! We are very fortunate to be in an industry that is seeing a lot of change and also a lot of growth.  For a while, the utility sector was a steady industry but not necessarily a high growth one.  With the recent push for carbon free emissions, renewables, storage, etc, there is a push for innovation, change and updated systems, so we feel KDM is in a good place.  We are also involved in the push for 5G with our telecom partners.  This is another area for rapid growth.

What are the biggest challenges facing your power and utility clients today?

Currently I would say a challenge is the search for talent.  With all of the growth our industry is seeing, we are all searching for the same talent. This makes the talent pool scarce and the talent that is available is more expensive than normal.  This increases the cost of doing business and ultimately increases the cost to the customer.

You’ve been a strong advocate for increasing awareness in STEM fields for women and underrepresented groups. What can our industry do better in terms of bringing more into our profession and retaining them long-term?

There are great STEM programs that aren’t located at the Harvard’s, Yale’s, and Princeton’s of the country, but are at the Howard’s, FAMU’s, and North Carolina A&T’s, and those are just examples.  We have this mindset that the greatest minds come from certain universities and we consider other colleges the “B team”. I also believe in meeting people where they are at various times in their lives.  For instance, there are some good people that I know that never went to, or finished, college and know more about certain topics in our industry than those of us that went.  We have to be more creative in our searches and make sure those underrepresented groups don’t feel alienated once they arrive.

What are your plans this summer for rest and relaxation?

I plan on heading to Las Vegas for a few World Series of Poker events and getting a couple days of relaxation while I’m there.


Ernesto Aguilar, P.E.,
Chief Executive Officer
Ardurra Group
Tampa, FL


Tell us about Ardurra and your capabilities and markets.

Ardurra Group is a national firm with expertise in the following disciplines: water/wastewater, public works, surveying, disaster management, environmental, and structural. Geographically we are in eighteen offices in the Southeast, Northeast, Texas, and California serving private, municipal, state and federal markets.

How has Ardurra’s performance fared so far in 2019? What’s been driving it?

We are having a fantastic year with a strong backlog going forward. Organically we are growing at about 20% with company concentration on cross selling. Acquisitions also play a large role in our growth, with three in 2018 and one so far in 2019.

Given very tight labor markets for engineering professionals, have you had to change your approach to hiring and retaining talent?

Recruiting and retaining talent is priority one for us.  We have invested a lot of resources in the last year to develop employee programs including: the launch of a comprehensive training platform, Ardurra Academy; the introduction of an Employee Council to serve as advocate for employee programs and investments; and the launch of our flagship Ardurra Leadership initiative. We are acutely focused on building a people-centric culture that provides development opportunities for all levels of the business.

We have also made significant investments in recruiting over the prior year, optimizing technology for brand building and targeted sourcing. We have hired dedicated recruiting staff who are adept at actively finding and sourcing talent, and we rely heavily on staff referrals (aided by aggressive referral bonuses) to help reel in the increasingly hard to find talent.

Ardurra has made numerous acquisitions of engineering firms as a means of growth. What do you typically look for in targets and their management teams?

We follow what we call the “Three Fs” when we evaluate engineering firms and their teams:

  • Fit – Will the teams get along (culture)?
  • Future – Are we both better off together than separate? Do our strategies for growth align?
  • Financials – Do the financial terms for both sides work?

What are the biggest concerns your clients face today?

It is no secret that infrastructure in the U.S. needs a lot of attention. Our clients have the hard task of prioritizing their most urgent needs with their available funds. I am optimistic that we will eventually have an Infrastructure Bill in place that will ease the burden of these difficult decisions for our clients.

You joined Ardurra after working at several larger engineering organizations. How has that experience helped you today as CEO?

I have been fortunate to have worked for both private and publicly traded firms. I worked for an international firm managing one of their national business units as well as a fast-growing acquisitive public traded company before Ardurra. Those experiences have been invaluable, as they have provided me a network that I use extensively in my current role. Ardurra is a fast-growing firm, and my experience allows me to introduce the efficiencies of those larger businesses, balanced against the strong entrepreneurial nature of the composite firms.

What are your plans this summer for rest and relaxation?

My daughter competes with a swim club so some weekends will be spent cheering her on.  My son is off to college this fall so we plan to do some activities together like going to a couple of Red Sox games.


Ed Alizadeh,P.E.
President & CEO,
Geotechnology, Inc.
St. Louis, MO


Tell us about Geotechnology and your capabilities and markets.

Geotechnology was established in 1984 in St. Louis as a geotechnical firm and we have expanded into a geotechnical, environmental, materials testing, exploration and geophysics company serving the Midwest and Midsouth.  We have 10 offices in 8 states including Missouri, Kansas, Tennessee, Kentucky, Ohio, Mississippi, Arkansas, and Illinois.  We are somewhat unusual for an engineering firm due to our heavy investment in capital drilling, testing and geophysics equipment.  We are continually trying to invest in the best equipment to optimize our site investigation capabilities.  Recently, we added a high-powered Geoprobe Combo rig that is capable of switching rapidly from direct push sampling to conventional auger drilling and coring.

How has Geotechnology’s performance fared so far in 2019?  What’s been driving it?

Our revenue has been essentially flat but we have increased our profitability by increasing utilizations and lowering overhead expenses.  Our backlog has grown to a historic high but the combination of very wet weather and client project delays have hurt our performance, particularly in the first 5 months of 2019.  We are heavily vested in the high-capital exploration business and we can’t make up all those lost days.  However, we had a stellar June and are expecting the remainder of the year to be very strong.

Given very tight labor markets for engineering professionals, have you had to change your approach to hiring and retaining talent?

The labor market is indeed very tight.  Hiring engineers is challenging but we continue to have success with our summer intern and coop programs leading to full-time employees.  Probably our greatest challenge has been in our field representative and drilling positions.  Those don’t require a college degree and with the unemployment rate at historic lows, finding good candidates is tough.  We have traditionally relied on recruiting/temporary staffing agencies to do the sourcing of candidates.  However, our new human resources manager is taking a hands on approach and focusing on our internal referral program and social media presence to find candidates. We need the right attitude, aptitude and work ethic and we can teach the rest.

Geotechnology has made several acquisitions of engineering firms this decade as a means of growth.  What do you typically look for in targets and their management teams?

We made two great acquisitions in the last nine years.  Both were the result of our strategic planning team identifying geographic diversity as a key goal.  If you look back to January, 2010, Geotechnology was very St. Louis centric with other offices only in Kansas City and southern Illinois.  Our leadership determined that we need to diversify geographically for our long-term health and growth.  We focused on finding firms with the right culture, strong next level managers, strong technical proficiency and a strong market position. We also decided we would stay within a six-hour drive of our other offices so that we could physically support the new offices.  That geographic proximity has been critical as we frequently share drilling, geophysics and personnel resources between offices as needed to meet our client’s needs.

What are the biggest concerns your clients face today?

Like us, clients live in a very competitive marketplace.  We serve a very diverse client mix including industrial, institutional, public infrastructure and private commercial and multi-family development.  We try to understand the key drivers for each client by utilizing a client relationship manager model.  There is no one size fits all solution and we will only be successful going forward to the extent we understand what is important to each client.

How do you describe your leadership style of approach?  Has it evolved as the company has grown over the years?

I am working very hard to improve as a leader.  When we were smaller and St. Louis centric, I was very hands on and led by example.  I was in the trenches on most significant issues and knew all the employees well. Now, I focus on working with the management team to meet key metrics.  We broke the key metrics down to weekly bites this year to help us really execute on a consistent basis.  I am working hard not to dive into every topic myself and that is a continual learning process for me; hands off and patient is not my natural state.

What’s on your summer reading list?

I just finished Roger Daltrey’s autobiography (yes, The Who is my favorite band!) and Howard Schultz’s book describing his Starbuck’s story.  I am just starting The Longest Day by Cornelius Ryan.  This book about D-Day was written long ago but I was inspired to read it when I observed some of the 75th anniversary events in Normandy.  The everyday heroes of D-Day are the folks your readers should listen to, not this engineer from Missouri!


John Lucey
President & CEO
McKim & Creed
Raleigh, NC


Tell us about McKim & Creed and your capabilities and markets.

McKim & Creed is a 550-person engineering and geomatics firm with 22 offices in 7 states providing civil, mechanical, electrical, water/wastewater engineering, and design/build services and a full array of land, hydrographic, aerial, and mobile LIDAR, geomatics services. We serve the municipal and industrial water and wastewater; residential, commercial and industrial land development; educational and health care institutions; transportation; and traditional and renewable energy markets.

How has McKim & Creed’s performance fared so far in 2019? What’s been driving it?

We are forecasting 20% annual revenue growth in 2019 and 36% operating profit growth. These are consistent with our 24% CAGR of revenue and 41% CAGR of profit since 2015. Our growth has been driven by our motivated and entrepreneurial employee owners providing impeccable service to our clients as we add talented recruits to serve our healthy, diverse markets. We have also added two tuck-in acquisitions in the past year.

Given very tight labor markets for engineering professionals, have you had to change your approach to hiring and retaining talent?

We have brought onto our staff a full time talent recruiter and have established a generous employee recruitment bonus system. We have also increased our focus on engagement with universities to connect with students early in their educational process.

McKim and Creed has made several recent acquisitions of engineering firms as a means of growth. What did these firms specifically bring to your organization?

We acquired an MEPS engineering firm in Pennsylvania that doubled the size of our MEP staff serving the educational, health care and commercial development market and provided additional design capacity to support our growing industrial design/build business. We also added a civil, water/wastewater, and geomatics firm in the Florida panhandle that allowed us to fill in that gap in our geographic presence in Florida.

McKim & Creed has an Employee Stock Ownership Plan (ESOP) in place. How has that benefited the firm and your culture?

Our ESOP has been a tremendous tool in transitioning ownership from the founders while establishing a culture of employee ownership. Our employees treasure the concept of owning their firm and ESOP ownership has grown to over 50%. The number of individuals who have purchased shares of McKim & Creed stock outside the ESOP has also increased in the last 5 years from 24 to 118.

You joined the firm this decade after working at several larger engineering organizations. How has that experience helped you today as CEO?

Every firm has certain things that do very well. My experience with other firms has exposed me to those successful elements of managing an engineering firm. Some of my favorite lessons are to drive business growth through a delicate balance of discipline and entrepreneurial spirit and to maintain a continuous focus on incremental improvement initiatives.

What’s on your summer reading list?

Just finishing Sapiens, a gift from an engineering management class that I speak to at Duke University.


Roseline Bougher
President
A.D. Marble
King of Prussia, PA


Tell us about A.D. Marble and your capabilities and markets.

A.D. Marble is an environmental and engineering consulting firm serving clients in the Mid-Atlantic and New England regions. Our work is predominantly in the public sector with our main focus on transportation. We are a one-stop shop for our clients who are looking for expertise in all aspects of environmental, cultural, and water resources services. We also have a communications division which provides public outreach, environmental education, and signage and wayfinding services.

How has A.D. Marble’s performance fared so far in 2019? What’s been driving it?

2019 has been a record year for us when it comes to wins as a prime consultant. Usually, as an environmental firm, A.D. Marble serves as a sub-consultant to larger engineering companies. This is due to the lack of contracts that will select an environmental firm as a prime. However, this year we reached the record number of contracts that we have won as a prime.  The driving factor has been our business development approach accompanied by an excellent group of scientists, cultural experts, and engineers who by doing excellent work have taken the company to the next level. With more contracts as a prime consultant, we have the opportunity to better control our workload and have direct contact with our ultimate clients.

Given very tight labor markets for environmental and engineering professionals, have you had to change your approach to hiring and retaining talent?

I wouldn’t say that we have changed our approach all that much, but we have increased our use of social media to announce our openings. This seems to be the best form of recruitment right now. For some higher level positions, we still rely on recruiters but even those are turning more to social media to find job openings.

A.D. Marble is employee-owned through an ESOP. How has that structure been a competitive advantage and for your culture?

We have been an ESOP company since 2002 so we are now considered to be a matured ESOP in many respects. From the beginning, we have been very proud of the fact that we are employee-owned and our culture has been a great fit for the ESOP. I think the competitive advantage comes from having employees that enjoy what they do, love the company and their co-workers, and are always willing to go the extra-mile to get the job done right. The ESOP did not create our culture, but it definitely enhances it.

What can our industry do better in terms of bringing more women into our profession and retaining them long-term?

We need to start sending the message to our girls that engineering is for everyone and that females have just as much to offer to the industry as men do. As a woman in this industry, I wished I had a mentor to guide me and advise me on how to navigate this male dominated industry. As an industry, we need to come together and present opportunities to men and women equally. That way, our elementary and middle schools girls do not see engineering as an industry that is more available to men than women. There is a lot of work to do in this field, but it is possible if we work together at all levels of the industry.

What are your plans this summer for rest and relaxation?

I must admit that I am not very good at making time for R&R. However, my husband and I have few long weekend getaways planned during the summer and one trip to North Carolina to visit my daughter at the end of the summer. My usual go-to for relaxation any time of the year is a short spa getaway. Once in a while, I try to escape the routine and go to the spa to decompress and relax.


Dan Adams
President
McMillen Jacobs Associates
San Francisco, CA


Tell us about McMillen Jacobs and your capabilities and markets.

McMillen Jacobs is a mid-sized multi-disciplined firm focused on underground engineering and water resources.  We serve water, wastewater, transportation, power, and water resource markets across North America, New Zealand and Australia. Our services on a typical project range from early planning to self-performing construction. About 60% of our work is professional services with most of that being related to tunnels and underground structures. About 40% of our work is engineer led design-build on dams, power stations, and other related facilities.

How has McMillen Jacob’s performance fared so far in 2019? What’s been driving it?

2019 so far has been a very good year for us and is projected to be a record breaker in nearly all markets.  The primary driver is a backlog that includes a higher percentage of work that started “late” due to delays on our clients’ side.  For example, one of our largest projects on the east coast was “awarded” in September of 2017, yet we did not receive NTP until December of 2018. We have four major projects, all design-build, which are in this situation. And of course meanwhile while these delays occurred, we continued to pursue opportunities, many of which have come to fruition.

Given very tight labor markets for engineering professionals, have you had to change your approach to hiring and retaining talent?

In January we re-organized our HR group to put a larger emphasis on recruiting. We also commissioned an external compensation review and changed our key-hire offers to sweeten them a bit and simultaneously expanded our ownership transition.  This is because we are continuously challenged on compensation. Our total comp is competitive but our equation is tied to the company’s performance, typical for a mid-sized firm. It’s tough to keep our motto of “hire good people when they come available, regardless of workload” alive when the staff we’re looking to hire comes from the big/public AE firms.

Given the highly-visible and complex nature of the projects you undertake, how does the firm maintain innovative and technical excellence?

We run as one-firm and the entire company buys into this.  We spend quite a bit of energy on communicating who within the company is on the front end of technology or a given engineering issue, and hold an annual meeting called “what’s next” in terms of predicting the changes we’ll see in our industry. We encourage and support (financially) development of new ideas and choose teaming partners, particularly in design build, who are willing to try something new. In 2019 we received our fourth patent for a drilling device that was developed by our team, tested on a project, deployed and tested the concept with a builder, and celebrated within the company.  One of the reasons we’re here (back in the day we called them core values) is to advance the industry through innovations, so it’s in our DNA and something that people come to us to pursue.

This year marks the five year anniversary of the merger between McMillen and Jacobs. How have you measured its success? Is there anything you would have done differently?

We measure success against the goals/objectives established as part of our merger agreement:  Our shareholders have achieved a good rate of return on investment, we are much more diversified in what we deliver and where we deliver it from, and our brand has caught-on to the extent the days of “little Jacobs” are behind us.  Lastly, our ownership transition effort that started in 2007 has continued into its 3rd generation.

Taking a broadly held company and merging it with a family business has not been easy. Our culture checks and agreed trial period working together prior to merging focused too much on projects and clients.  We would have benefited from a deeper dive into the business of running the companies, with a step-by-step comparison down each other’s 2nd and 3rd tier management levels to compare decision philosophies.  We also under-estimated the resistance of some very senior engineer/managers toward the move into design-build delivery.  30 years in cost+ work doing solely professional services creates habits and practices that don’t easily convert to lump-sum, turnkey delivery.  Both of these issues were challenging to work through but are now behind us.

What’s on your summer reading list?

The Overstory by Richard Powers; Dreamt Land by Mark Arax, Make Big Happen by Mark Moses, and The Old Man and the Sea by Hemmingway.  A mixed bag as it always is (I read quite a bit).  The last one I read every now and again for a quick escape from reality and a reminder to create the time to do what you love.


Coming!

ROG+Conferencelogo_perspective_may18
November 6-8, 2019
Ritz-Carlton Golf Resort
Naples, Florida
Click here for more details and to register.