Archive | June 2013

Inefficiencies In Connecting To The Engineering Marketplace

The principal role of an engineering consulting firm is to connect engineers to their clients. Unfortunately, the manner in which we make these connections has much inefficiency, in my opinion. This inefficiency increases our cost of doing business and limits the size of the marketplace that can be accessed by a given engineer or group of engineers.

When we constrain the size of the potential marketplace for an engineer or group of engineers, we are also constraining our ability to maximize their effect on the marketplace.Over the next several postings, I would like discuss business growth strategies that address these inefficiencies and effectively remove these marketplace constraints. The intention is to present ideas that can be used by smaller and larger engineering firms to increase both their market share and profitability.

As a starting point, I would like to present some general observations regarding the inefficient manner in which we connect engineers to the marketplace.Keep in mind that these are general and that there are going to be exceptions.

Observation 1) Very talented engineers are often found in local and regional firms. However, they are locked into servicing their firm’s clients on smaller and less complex projects. When they have the opportunity to be involved in larger projects, their roles tend to be minor and are assigned by larger national or international firms who are serving as the first tier suppliers. This participation is often the result of the need to meet governmental quotas for small firm participation. Thus, talented engineers in local and regional firms are often restricted in their impact on larger projects and are limited in the nature of the clients they typically service.

Observation 2) Small business owners and managers are among the most talented and resourceful project managers available in the marketplace. However, because of the nature of their clients and the size of their businesses, these managers typically run small to moderate-sized projects. When considered together, the combined complexity and inter-dependencies of these projects (in terms of allocating resources and getting the work done) rival the most complex engineering projects in the marketplace.

Observation 3) Due to their close physical proximity to communities and clients, the owners, managers and engineers of these local and regional firms are among the first to know when new projects are being conceived, even among larger clients. Hence, they could represent a valuable front-line in a coordinated marketing strategy. Unfortunately, they don’t typically have the level of specialization and manpower necessary to effectively pursue some of the more complex and challenging projects, even though they may be first on the scene. I have heard of instances where they have actually turned down larger projects because of their constraints.

Observation 4) Talented engineers in large firms are effectively “locked-out” of working on most small and midsized projects. They typically work on larger projects for their firm’s clients. Thus, they are also effectively limited in the nature of the clients they typically service.

Observation 5) Given the size of large engineering firms, it is necessary to maintain a large volume of work to “feed” the staff. This need causes them to naturally pursue larger and more complex projects. When there is a downturn in the marketplace, the large staff size results in a large drain on profits.

Observation 6) Large engineering firms tend to carry more staff per anticipated volume of work when compared with smaller firms. Large firms typically have the profits available to “carry” staff through business lulls and they have the ability to distribute work among offices in order to adjust to these lulls.

Observation 7) Local and regional firms are limited in the amount of work that they can distribute. Since they have lower operating profits and do not have the ability to widely distribute work, they tend to carry less staff per anticipated volume of work as compared with larger firms. As result, when the work load picks up, engineers in smaller firms are typically asked to accommodate higher work volumes through longer hours rather than hiring additional staff.

Observation 8) When engineering firms or offices within the same engineering firm share work, the fundamental basis of this work sharing is some measure of quantity and quality of hours. Unfortunately, when work sharing is based upon hours, quality assurance and quality control issues can become acute and result in even higher inefficiencies. These inefficiencies in work performance from one firm (or office) are thus transmitted directly to the project budget without sufficient control of the project manager.

Each of these observations represents one or more constraints being placed upon the way that we connect our engineers to the marketplace. The more constraints we place on a natural system, the more we constrain the optimal solution.

Ideally, the optimal manner for an engineer to connect to the marketplace would be to have full access to all potential projects and clients and to be able to offer engineering services using the most cost efficient and effective delivery system. Since most engineering firms have similar cost structures and we are effectively limiting the types of projects and clients that we can access (whether we are in a smaller or larger firm) we are all in the boat.

I would welcome comments and discussion on these observations.

In future postings I will present business growth strategies aimed at addressing these inefficiencies. It will, however, require us to think outside-of-the-box.

Glen R. Andersen, ScD, PE