Word on the Street: Issue 239

Fork in the Road

It’s that time. You really shouldn’t put it off any longer. You’ve been telling yourself, your family, your friends, and your peers that you have “another three to five years” before you hang it up for good and retire.

Retire, yeah sure. The word and the concept baffle you. You’re the CEO of the most successful AE firm in the tri-state area, which you founded in your late 20s just over 30 years ago. Nobody gave you a chance back then. You were a freshly minded P.E. with a stamp and a dream to do things your own, better way. And you showed ’em, though. Through multiple business downturns, a full-blown financial crisis, and a global pandemic, you’ve built a thriving $40 million firm. You’ve surrounded yourself with an executive team that is competent and loyal. Your line managers and technical staff have deep expertise in the services that clients value. You’ve fostered a culture that is unafraid to innovate and take risks. And through your own innate people skills, your natural love for engaging in and improving your community, and a belief in the science of marketing, your firm’s brand resonates far and wide—with clients, prospective clients, and potential recruits alike.

And along the way you’ve picked up honorary degrees and multiple industry, professional, and business awards. And even though you’re now a grandfather (way earlier than you ever expected), you still have, in your own words, “a full tank of gas,” and you still love running the firm. You cannot imagine your life not at the helm. So yeah, retirement, not so appealing. In fact, not at all.

But you know that it’s time to step back, or step down, or step aside. Whatever type of step is required, you gotta take it. On the one hand, your family demands are different now. More complex, more pressing. On the other hand, your executive team needs to get a read on your future so they can plan for a successful transition. 

In retrospect, probably your greatest achievement is that you’ve built such a high-performing team so that, unlike most of your peers, you have options. You can feel confident about either transitioning the firm internally or selling externally. This is your fork in the road. Which road to take? 

As you ponder your future, here’s some advice so you don’t waste time looking in the rearview mirror of your Viking 90C five years down the road regretting a poor decision. 

1. It’s a small world: But I wouldn’t want to paint it. You may think you’re familiar with all of the external options available to you. You know, the (a) U.S.-based publicly traded firm whose CEO you attended college with and repeatedly calls to encourage you to sell; the (b) seven private equity firms that keep “liking” even your weakest LinkedIn posts although you told them “thanks, but no thanks” at the end of your meetings with each of them; and the (c) French firm that spent 90 days setting up a meeting “to discuss matters of strategic importance,” brought five executives to that meeting, and then waited another 90 days to follow up with a letter (not an email) saying they wished to move “quickly to a discussion on possibly acquiring your firm at some point in the future.” These. Are. Not. All. Of. Your. Options. Fact is, for a $40 million firm there are about 100+/- viable external options (strategic buyers and financial sponsors) depending on location, services, and markets served. (For a $400 million firm, there are probably 50.) Get into the driver’s seat (just like you’ve done for all of your career) and explore as many of these as you can. On your terms. Get the most complete picture of what’s available to you to transition the firm you’ve worked so hard to build. 
2. Don’t go it alone: Selling to your internal team is its own discrete option—with its own set of values and terms and a whole bunch of psycho-political negotiation (which can be liberating or exhausting). However, your internal team is simultaneously a critical part of any external sale or recapitalization. All things being equal, the stronger and more unified your team is in the eyes of a suitor, the greater the value you’ll receive in any external transition. So, collaborate with them to craft the optimal internal AND external option choices. Recognize that they are your partners in the evaluation of your strategic options. Most NextGen teams begin the exploration of strategic options with a bias toward an internal solution. However, many find that through a thoughtful collaborative examination that an external option is best for the greatest number of majority and minority shareholders. 
3. Your next big project: Whether you ultimately secure an internal or external option, you will have a role to play in its success. It’s unlikely that you will be able to just ride off into the sunset like at the end of Shane. As you explore your options, you should recognize the massive opportunity that you’ve been presented with. You’ve once again pulled off something remarkable—a transition of ownership. Now your highest and best use is contributing as only you can to ensure that this next phase of your firm is wildly successful. While you won’t be doing this as the “boss,” you will be one of the most important actors in the drama. This is your next big project.

One of the most important lessons that I learned from one of my mentors was that “everyone is a seller.” And it’s true. When it comes time for you to consider how to transition (“sell”) your firm, keep in mind that maximizing your external options and collaborating with your next-generation team could ideally set you up for your next big project. 

This year’s M&A Best Practices Award (part of our Excellence in Acquisitive Growth Awards Series) will be presented at the Western States M&A and Business Symposium on June 12 at the beautiful five-star Wynn Las Vegas with over 200 AE industry executives and investors in attendance. If you would like your firm to be considered for the M&A Best Practices Award, we invite you to complete the simple application form here. The application should take no more than 20 to 30 minutes to complete. The Award recipient will be notified in early June.

Contact Mick Morrissey at [email protected] or 508.380.1868. 

What’s the Best Org Structure for Your Firm?

Wrong Question—But Let’s Talk About It Anyway

Let’s get one thing straight right away: There is no perfect organizational structure. None. Not for your firm. Not for any firm. You will not stumble upon a tidy chart that magically balances all personalities, capabilities, egos, clients, and service demands. So, if you’re hoping this article will deliver a silver bullet, save yourself the read and just go back to concocting your perfect solution. Who knows? Maybe you’ll defy the odds.

Still with me after that opening salvo? Good.

Because while no structure is perfect, some are better fits than others depending on the size of your firm, your strategic priorities, your leadership bench, and—let’s be honest—your appetite for chaos. And even the “right” structure won’t save you if you don’t do the underlying things well: communication, accountability, decision rights, role clarity, and leadership development. But we’ll get to that.

For now, let’s take a whirlwind tour through the organizational structures most common in the AE industry and examine some totally made-up (but reasonably credible) examples of what these structures look like when they work—and what they look like when they don’t.

1. The Classic Functional Structure

(Departments by discipline)

Fictional firm:
Redstone Collaborative is a 30-person firm that wants to focus on technical excellence and streamline delivery.

What it looks like when it works:
Operations are tight and efficient, and the firm routinely cranks out beautifully coordinated projects. Everyone sits near each other, and the partners are involved in most decisions. Everyone knows what they’re doing, and you don’t need a massive bureaucracy to keep things moving. There are clear lines of authority—engineers report to the Director of Engineering. Architects report to—you guessed it—the Director of Architecture. Clean. Simple. Predictable.

What it looks like when it doesn’t:
Redstone doubles in size in three years. Now there are three layers of engineers, and the Director of Engineering has become a glorified traffic cop. Worse, the architecture team doesn’t talk to the MEP folks until 48 hours before a submission deadline. “Functional” becomes “fractured.”

The lesson:
This structure works best when teams are small and cross-functional communication is informal and easy. But once scale kicks in, the seams start to show.

2. The Studio/Market-Based Structure

(Teams organized by client type or market)

Fictional firm:
Blueprint South is a 120-person, studio-based firm with deep expertise across multiple target markets.

What it looks like when it works:
Each studio is run like a business with its own business development, project delivery, and even its own branded socks, which for some reason, everyone loves. Everyone knows who’s responsible for what and the employees live and breathe the needs of those clients. Teams are tight-knit, and P&L accountability is real. Studio leaders feel like mini-CEOs.

What it looks like when it doesn’t:
The higher ed studio just lost its top client and is scrambling. The K-12 studio is swimming in work but refuses to lend any help. Now the internal environment quickly devolves into turf wars, fiefdoms, and no sense of “one firm.”

The lesson:
This structure thrives on strong leadership in each studio and a culture that promotes firm-first collaboration. If you don’t build and maintain those things, you’ll soon have competing empires under the same roof.

3. The Matrix Structure

(People report to both a discipline lead and a market or project lead)

Fictional firm:
Four-Letter Engineering is a 250+ person firm with offices in four cities. Engineers report to their respective discipline directors across the firm but are deployed into market teams to serve specific client types.

What it looks like when it works:
At its current size, FLE (yes, I get the irony that Four-Letter Engineering goes by three letters) isn’t entirely discipline-driven nor is it entirely market-based. Instead, the firm optimizes both technical depth and market responsiveness by having its people live in two worlds: their technical home and their client-facing team. Technical leaders collaborate well with client leaders, and for the most part, resources end up at the right place and at the right time.

What it looks like when it doesn’t:
Ever try having two bosses? Exactly. Accountability becomes fuzzy. “Who do I actually work for?” becomes an unofficial slogan. FLE’s employees spend more time managing internal expectations than managing actual work. Passive-aggressive email cc’s become a prevalent form of conflict resolution.

The lesson:
The matrix is familiar and can be effective, but only when paired with clear decision rights, regular communication, and a level of emotional maturity that [fill in your own punchline here].

4. The Geographic Structure

(Organized by office or region)

Fictional firm: 
CanyonPoint Engineering has six offices across the Southwest. Each office has its own P&L and is expected to chase work and build teams. 

What it looks like when it works:
Business is highly regional. Each geography has distinct client bases, market dynamics, and delivery models, and regional leaders know their clients like the back of their sunburned hands. They are encouraged and expected to make office-based decisions. Travel budgets are low. Everyone is happy.

What it looks like when it doesn’t:
Phoenix wants to pursue data centers. Santa Fe thinks it’s a waste of time. They start duplicating efforts—two marketing people, two training programs, two “strategic plans.” Scale is lost, and collaboration becomes optional.

The lesson:
Geographic structures require strong central leadership and a culture of knowledge-sharing. Otherwise, each office becomes its own fiefdom with its own HR policies and lunch-and-learn vendors.

5. The Hybrid Frankenstein

(A little of this, a little of that—because why not?)

Fictional firm: 
EnigmaWorks, Inc. is a 900-person EA firm operating in 10 markets and 7 regions that’s grown through acquisitions. The structure is part market-based, part geographic, part matrix, and all-parts confusing.

What it looks like when it works:
That’s just it. No one can quite explain how it works. It just does. One of the more plausible explanations is that the firm has made a science out of collaboration, centralized knowledge, and flexible leadership. Heavy investments in communication protocols, culture-building, and clarity of roles keep the whole thing on the rails. People intuitively know how the machine works, even if the org chart looks like a plate of spaghetti.

What it looks like when it doesn’t:
Same firm, five years later. Original leaders have retired. The “glue” people are gone. Now you’ve got overlapping authorities, endless meetings, and zero accountability. Personal agendas have long since replaced the once-shiny, collective goal.

The lesson:
Hybrids can be brilliant—but they don’t run on autopilot. You need great leadership, constant alignment, and someone in charge of telling the story of “how this place actually works.”

So…What Should You Do?

Let’s get practical. Your job isn’t to find the perfect structure. It’s to pick the one that best suits where you are today—and build the management muscles to make it work. That means:

• Define roles clearly. If someone reports to two people, say who breaks ties.
• Align incentives. Don’t say collaboration is a core value and then reward only individual performance.
• Invest in leadership development. Org structure won’t fix weak leadership. It just exposes it faster.
• Communicate the why. Employees don’t need to understand every nuance of the org chart, but they do need to know how it impacts their daily lives and career paths.
• Stay agile. Structures that worked at 50 people break at 100. Don’t fall in love with the chart—fall in love with adaptability.

And a final note for you org chart enthusiasts: Structure is important, yes, but it is never the strategy. It’s a framework. A scaffolding. It can make good people more effective, but it can’t make ineffective people good. It can support growth, but it won’t create it. Ultimately, you need a structure that helps your people do their best work—and the guts to change it when it stops doing that.

Contact Mark Goodale at 508.254.3914 or [email protected].

Market Snapshot: New Mexico

50 states in 50 weeks – This series leverages our market intelligence database to bring you powerful AE industry insights. Each week, we highlight a new state in green while previously featured states fade to a lighter green. Next, let’s look at New Mexico.

New Mexico Economic Performance and Outlook Grade*: F

• Economy: C
• Population: D
• Workforce: D
• Financial/Fiscal Health: C-

* Overall grade is assigned based on a curve (relative to all states’ performances).

Thanks to booming energy production, growing trade with Mexico, and major federal research investments, New Mexico has shaken off a decade of economic stagnation, according to the Federal Reserve Bank of Dallas. The state’s crude oil production, which doubled between 2019 and 2024, is second only to Texas. Oil and gas revenues, now accounting for 15% of New Mexico’s GDP, have bolstered the state’s general fund to a record-breaking $13.6 billion, helping finance capital projects. Surging trade with Mexico has spurred industrial park expansions, and federal scientific research funds flowing to the Sandia and Los Alamos National Laboratories have propelled related investments. There are warning signs about the economic boom’s sustainability, however. Due to energy market volatility, New Mexico is forecasting a slowdown in oil and gas revenues. Tariff uncertainty could chill trade, and ongoing federal research funding is in doubt. On top of that, the Land of Enchantment—unlike other states in the West—grapples with sluggish population growth. The Federal Reserve Bank of Dallas reports that more residents have left than arrived every year since 2012, except for 2020. See below for regional highlights in New Mexico:

• Albuquerque: Clean energy and logistics infrastructure are being developed along the I-40 TradePort Corridor, and the Max Q development at Kirtland Air Force Base includes transportation logistics and space-related infrastructure. Commercial development is surging in Rio Rancho, but rising construction costs and skilled labor shortages could constrain future development projects.
• Santa Fe: The culture, tourism, and government sectors form the city’s economic base. Housing affordability and high cost of living are top concerns. 
• Las Cruces: The presence of New Mexico State University and proximity to Spaceport America has made the city a growing educational and technological hub. Its location near the Santa Teresa port of entry with Mexico is also driving infrastructure development. 
• Southeast New Mexico: The region is heavily dependent on oil and gas pumped from the Permian Basin. Lea County is the biggest oil-producing county in the U.S. 

For sector-specific data and insights for New Mexico or questions about our market intelligence and research services, call/text Rafael Barbosa at 972-266-4955 or email [email protected].

For a comprehensive outlook for 2025, you can access the 2025 AE Market Intelligence Webinar (recorded on January 28). Click here for details.

Weekly M&A Round Up

Another busy week for domestic and global deals: M&A activity ticked up last week with fourteen U.S. transactions announced, five of which are in the fast-consolidating Western states. Domestic industry M&A activity is now up 5% over the past 12 months. Globally, seven deals were announced in Spain, the UK, Egypt, Poland, and Canada. You can check all the week’s M&A news here.