Word on the Street: Issue 222

Five Things I’ve Come to Learn

In June, I caught up with Scott Cattran, CEO of Woolpert (Dayton, OH) (ENR #47), at the opening reception of our Western States M&A and Business Symposium at the Wynn Resort in Las Vegas. I always enjoy spending time with Scott. A visionary chief executive with a great outlook on life and business and a super sense of humor. As usual our conversation bounced around between the personal, the professional, and—shockingly—the profound. It was during that conversation that the seeds of this article were sown. Our conversation had turned to topics we had come to realize over the course of our careers and how our perspectives may have changed or evolved.

That discussion with Scott stayed with me. It prompted me to think more about some of the ways my views on business and management have changed over the years. I kept coming back to our discussion over these past few months and decided to write down my thoughts. 

1. If you’re not growing, you’re dying. In the early part of my career, when I was engineering (I can hear some of you laughing right now) or consulting (your snickering does not hurt me), I used to roll my eyes whenever I heard CEOs or business gurus make this proclamation. I just wanted to keep my head down, get my work done, and make sure my boss was happy with my work product. Any talk about growth implied more stress, more uncertainty, less stability for me to practice my craft. Plus, the “grow or die” statement always seemed to be declared more like a personal preference and less like a cogent statement on business strategy. That all changed when I became an owner in 1996. The necessity for growth became really clear then. Not just to drive returns on my individual investment (capitalism rules!), but more importantly as an owner, I realized I was now directly vested in an experiment that had the potential to improve the lives of my colleagues, our clients, and our communities, and the best (and only) way to maximize that potential was to intentionally grow the business. I had no other choice. Intentional growth has been our mantra at Morrissey Goodale for 18 years. Long may it remain so.

2. Hire people who are smarter than you. This is another expression I would hear bandied about back in the day. As an angry young skeptic, I always figured this was a way for CEOs to virtue signal some form of ultimately self-serving self-deprecation. But I’ve come to learn the critical importance of this over the years. And I’m an evangelist for it in my advisory work. This—the hiring of a team smarter than oneself—is indeed where some really powerful magic is created for firms. When founders or CEOs have the insight, smarts, or just plain good luck to surround themselves with a team of folks smarter than they are, great things happen. The key word here being “team.” This is the critical element in the pursuit of growth. And it’s central to your ability to transition your firm—internally or externally. I’ve witnessed this play out time and time again with our most successful (and dynamically happy) clients. I feel blessed to be surrounded at our firm by a team of talented individuals who collectively empower me to state truthfully in every meeting “Now, I’m clearly not the smartest person in the room…”

3. Your brand is your most valuable asset. No, wait… Or is it “Your people are your most valuable asset?” “No, surely it’s your firm’s data is your most valuable one?” Well, it’s all three. I’ve referred to them in the past as Asset 1A, Asset 1B, and Asset 1C to help mediate client team conflicts on the topic. But that was a cop out. I’ve argued that one is more important than the other to alternatively secure funding from a limited enterprise budget for a marketing initiative, or an HR investment, or a data overhaul—not my finest hour. I’ve come to realize that they are one and the same. The holy trinity of professional services success if you will. The most successful firms proactively invest and look for continual improvement and connectivity in all three areas. We like to think we do, too.

4. Don’t stick around too long. Times change. People change. Perspectives change. What your company needs from you will change. Don’t resist it. Instead, be the catalyst for and facilitator of those changes. Immerse yourself in your transition so that the next CEO will be more successful than you. You may be losing your fastball, but your baton-passing skills as part of the final leg of the business relay 4×400 are next level and essential for the win. Related—if you want to see an awesome CEO transition in action, then check out this week’s announcements coming out of our client Barge Design Solutions (Nashville, TN) (ENR #167). Bob Higgins and his team have literally written the playbook for CEO succession. 

5. It’s OK to fail. This was another phrase that used to infuriate me. I’d listen to CEOs or self-proclaimed motivational speakers declare this time and time again. But all I heard was “I screwed up, I’m not perfect, I’m damaged goods, I let my people and my investors down, I’m a fake.” I heard “failure is bad and an end unto itself.” What I failed to understand was how to take the lessons learned from failure and apply them. Some of our most successful clients have mistimed markets, or made bets on the wrong CEO successor, or invested in real estate that went south (to name just a few outright failures). They swung. They missed. They learned. They recovered. They got stronger. It’s a beautiful thing when it happens. “Our greatest glory is not in never falling, but in getting up every time we do.”—Confucius. 

Have I come to learn more than these five things over my career? Sure. But as I reflect on these five, I’m as happy to have learned them as I am that I have clients and friends who have inspired, mentored, and taught me along the way. 

Our team of folks who are smarter than me will be at our 2025 Southeast M&A and Business Symposium at the Mandarin Oriental in sunny Miami this March 12 through 14. Join them and over 200 AE industry executives, investors, and experts to get a “first read” of how the industry is performing in 2025 and where it’s headed, to learn how industry M&A and valuations are playing out in the new year, and to do some power networking to help take your firm to the next level. Register today at the early-bird rate to reserve your place. 

To contact Mick Morrissey, email him at [email protected] or text him at 508.380.1868.

Closing 2024 and Opening 2025

The year’s end is a critical time to reflect on strategic moves and prepare for the challenges and opportunities of the upcoming year. Wrapping up 2024 isn’t just about revenue and budgets—it’s about examining the strategic bets made and the insights gained, ensuring that you’re set to lead your firm thoughtfully and boldly into 2025. From client trends and operational efficiencies to the impact of the recent elections, here’s a guide to putting 2024 to bed and thinking strategically for a successful 2025.

Reflect on 2024’s strategic moves—what’s worth repeating?

First, analyze the strategic wins and losses of 2024. Treat this exercise as an “annual strategic review,” not just a budgetary closeout. Reflect on your key initiatives, identifying areas where your firm succeeded, stumbled, or learned valuable lessons.

1. Did you hit strategic goals?

Take a high-level view of your 2024 objectives. Did your goals on market expansion, talent development, or diversification of services achieve the desired outcomes? Measure success not only by financial performance but by impact. For instance, did your efforts to deepen relationships in specific client sectors yield sustained, high-value partnerships?

2. What was learned from external pressures?

Inflation, interest rates, and labor shortages were recurring themes this year. How did your firm respond? Reviewing your adaptability to these challenges can highlight where your strategy needs refining or where your team excelled under pressure.

3. How did internal initiatives shape culture and efficiency?

Consider the long-term impact of your 2024 internal initiatives. From talent retention programs to flexible work policies, each initiative reflects on your firm’s ability to evolve with market and cultural shifts. Knowing what positively shaped the workplace and what missed the mark will inform how to improve these efforts next year.

The outcome of this reflection isn’t just to pat yourselves on the back. Use these insights to guide your firm’s objectives for 2025, especially when it comes to expanding competitive advantages and aligning strengths with new opportunities.

Wrap up 2024 tactics and start with a clean slate in 2025

Before looking ahead, ensure the fundamentals are addressed. Successful strategy requires a solid foundation, so as you close out 2024, prioritize the following fundamentals:

1. Finalize strategic projects

Ensure any ongoing initiatives are either wrapped up or clearly outlined for a smooth transition into 2025. This might mean pushing to finish outstanding strategic research, complete client satisfaction analyses, or set up handoffs for initiatives that will continue into next year.

2. Prepare an insightful strategic financial review

Beyond simple revenue analysis, examine your strategic investments and returns. Were certain geographic or sector expansions more successful than others? Which client sectors showed resilience or volatility? This financial perspective allows you to double down on successful strategic plays and limit your losses.

3. Assess key client relationships

Engaging your clients at year-end isn’t just a touchy-feely courtesy— it’s a valuable time to review their changing needs and priorities. Set up strategy-focused check-ins with top clients, focusing on their expectations for 2025. By proactively identifying how their goals align with your competitive advantages, you position your firm to be front and center when they need you most.

Build your 2025 strategic footings

Goal-setting isn’t about loading on more tasks—it’s about establishing expectations and framing a few, high-impact strategies that will build momentum in 2025. As you set goals, here’s how to ensure they’re not only ambitious but aligned with what your firm needs most:

1. Focus on competitive, differentiated goals

Craft three to five firm-wide strategic objectives that stretch your firm without overwhelming it. Some ideas to consider:

• Expand your geographic footprint through partnerships in targeted metro areas or growing regions
• Achieve a 20% increase in high-value, long-term client contracts
• Develop internal leaders to fill key strategic roles and reduce reliance on external hires
• Invest in targeted technology to streamline operational efficiencies by at least 10%

2. SMART goals, not set-in-stone goals

Ensure each goal is SMART— Specific, Measurable, Achievable, Relevant, and Time-bound. Keep a little breathing room to adapt. Quarterly reviews can ensure that if market conditions change or new opportunities arise, you haven’t painted yourself into a corner.

3. Drive strategy from the ground up

Great strategies have buy-in across the organization. Involve not just the senior team, but also department leaders and rising stars in planning sessions. Engaging them brings diverse insights and helps ensure alignment across the firm. When employees feel connected to strategic initiatives, they’re more invested in seeing them succeed, and you get more people at more levels of the organization carrying the flag.

Consider the potential implications of the elections

With Donald Trump poised to return to the White House in January and a Republican majority in Congress, the legislative and regulatory landscape is likely to shift in ways that impact AE firms’ strategic priorities for 2025. Deregulation, tax cuts, and promoting private-sector investment may have substantial implications for private development, interest rates, and construction costs, and could represent opportunities, threats, or both. Here are some potential factors to consider as 2025 approaches:

1. Regulatory rollbacks

The Trump administration will likely emphasize reducing regulations, aiming to remove barriers to private-sector investment in development and infrastructure. This stance could mean loosening environmental regulations, streamlining permitting processes, and accelerating approvals for new construction projects.

2. Tax reductions and capital flow

Tax cuts, especially corporate tax reductions, are a hallmark of Trump’s economic policy. There will likely be a renewed focus on cutting taxes in an effort to stimulate capital investment from private firms and increase the flow of funding into development projects, particularly in real estate, infrastructure, and energy. Additionally, proposed tax breaks for specific industries (e.g., energy, manufacturing) are intended to make private-sector investment more attractive.

3. Shift toward public-private partnerships (P3s)

The Trump administration is expected to continue advocating for infrastructure investment, with an emphasis on leveraging private capital through public-private partnerships rather than direct federal spending. P3s could become the preferred model for funding and executing large infrastructure projects, including transportation, water, and energy.

4. Interest rates and inflation dynamics

Although the executive branch doesn’t directly control interest rates, a Trump administration’s pro-business policies may influence economic indicators that impact Federal Reserve decisions. Reduced regulations and tax cuts could stimulate growth, but they may also contribute to inflationary pressures, potentially leading the Federal Reserve to maintain or even increase interest rates, slowing projects that are sensitive to financing conditions.

5. Focus on domestic manufacturing and energy independence

With a Trump presidency, there will be renewed emphasis on strengthening domestic manufacturing and energy independence. Policy measures will aim to incentivize U.S.-based production and infrastructure projects that support energy extraction, production, and distribution, particularly in oil, gas, and coal.

6. Reduced focus on public-sector funding for green initiatives

Unlike the previous administration’s emphasis on green and renewable energy projects, the Trump administration will likely scale back federal funding and incentives for sustainability-focused projects. This change could lead to reduced government support for renewable energy, green building certifications, and climate resilience initiatives.

Prepare for industry shifts

Your 2025 strategy should also account for the larger trends impacting the AE industry. Beyond the elections, several market forces are likely to play key roles in shaping the year.

1. Private equity and industry consolidation

The AE industry will continue to see a rapid increase in private equity-backed acquisitions, with firms vying to create larger, more diversified organizations. Access to new capital will expand service capabilities for some and lead to increased competition for others. If you’re one of those “others,” you will need to develop ploys to offset the threat.

2. The talent and workforce market

Human resources will remain a fundamental constraint. Make talent development and succession planning focal points within your 2025 strategy, especially at mid- and senior levels.

3. Technology integration and AI

Strategic use of technology, from data analytics to AI, is no longer optional. Develop a 2025 objective focused on technology integration, such as piloting a project using AI to drive efficiency or automating routine processes to free up talent for higher-value work. Effective tech strategy isn’t about having the latest gadgets but about using tools that directly support your firm’s business goals.

Tips for a strategic start in 2025

Finally, here are a few tips to ensure your strategy is primed for the year ahead:

1. Be operationally ready for next year

Strategic success relies on operational strength. Ensure your firm’s core functions—the blocking-and-tackling elements like billing, project management, and client communication—are efficient and streamlined as you enter 2025.

2. Foster collaboration across teams

Leverage cross-functional collaboration as a strategic asset. Schedule regular knowledge-sharing sessions to discuss lessons learned, emerging client needs, or best practices. Strategic ideas are often born from teams learning from each other’s successes and challenges.

3. Celebrate 2024’s successes—and embrace the lessons

Before diving into 2025, acknowledge the strategic wins of 2024 and celebrate the people who made them possible. Equally, identify any setbacks and heed lessons that will improve future performance. This reflection builds the continuous improvement habit.

Be ambitious about 2025, but stay nimble

Establish a strategy that’s bold but grounded, ensuring that each initiative is clearly tied to your firm’s core strengths, market opportunities, and company vision.

Now you’ll just have to accept the fact that despite your best efforts, some of your most exciting plans for next year simply won’t pan out. But if you approach your strategic initiatives as controlled experiments instead of win-or-lose propositions, you’ll learn your way to a terrific 2025. 

For strategic planning consulting and facilitation, call or text Mark Goodale at 508.254.3914 or email [email protected].

Market Snapshot: Construction Spending

Construction spending (not adjusted for inflation) is trending towards a 7% increase from last year’s activity based on September’s seasonally adjusted annual rate, as reported by the U.S. Census Bureau. At the end of the second quarter, the data pointed to a slightly lower year-over-year increase, around 6%.

At the end of the third quarter, data center construction continued to have the highest growth (48%) compared to the same month last year. Public safety (33%) and manufacturing (20%) were next. 

We also looked at how compound annual growth rates (CAGR) for different construction project categories may shift when comparing the 2020 to 2024 period to growth rates between 2019 and 2023. This analysis showed data center, manufacturing, amusement & recreation, religious, and lodging (still negative) having significant growth acceleration. Commercial, multifamily, public safety, and communication are also expanding, but at a much slower pace. Private office, which had a negative 2019 to 2023 CAGR around -1%, has an estimated -5.5% CAGR between 2020 and 2024.

Construction Spending Percentage Change – September 2024 vs. September 2023
(Seasonally Adjusted Annual Rate)

To learn more about market intelligence data and research services offered by Morrissey Goodale, schedule an intro call with Rafael Barbosa.

Weekly M&A Round Up

Another transaction in the Southeast, this time in Florida: Last week, we also reported other domestic deals in FL, PA, NY, KS, and CO. Globally, there were nine transactions announced in Spain, The Netherlands, Canada, and the UK. You can check all the week’s M&A news here.