The 2007 list expands to include the top 200 fastest-growing A/E and environmental consulting firms
For the eighth year in a row, The Zweig Letter has ranked the fastest-growing architecture, engineering, and environmental consulting firms. The Zweig Letter Hot Firm 2007 List was created to identify the fastest-growing architecture, engineering, planning, and environmental firms in the U.S. and Canada from 2003 to 2006. After much competition for one of the top 100 spots over recent years, the 2007 list was adapted to recognize more firms for their accomplishments. The list doubled in size—from 100 firms in 2006 to 200 in 2007—and 50 honorable mentions were added. In addition, the top three firms in each of eight common firm types were recognized and the top 10 firms by size were listed within each of three categories based on number of employees.
The process began last January with a nationwide call for industry firms to complete a short entry form with questions about their firm type, size, and 2003 and 2006 gross revenues. Submissions were received from hundreds of firms exhibiting growth over the past three years, and then the top contenders’ revenue figures were verified using financial statements or income tax returns reviewed by third parties.
Eligibility rules for The Zweig Letter Hot Firm 2007 List state that firms must be based in the U.S. or Canada and derive the majority of their revenue from the practice of architecture, engineering, planning, environmental consulting, design and construction, or allied disciplines. Eligible firms had to be in business as of Jan. 1, 2003, and had to have 2003 gross revenues of at least $1 million. Since the Hot Firm List was created in 2000, special care has been taken to recognize both small firms and large firms for their success. Firms’ dollar growth and percentage growth are weighted equally to give both small firms and large firms an opportunity to make the list. Each firm was assigned a dollar ranking and a percentage ranking—combined for a total score. The 200 firms with the best combined scores made The Zweig Letter Hot Firm 2007 List.
An organizational structure that supports creativity
Each of the Hot Firms’ success is as individual as the people they employ. A/E firms depend on their employees’ hard work and creativity to meet clients’ needs. In turn, an A/E firm’s organizational structure can hinder or buttress that creativity.
A/E firms can choose to operate as command-and-control organizations or in a decentralized manner. Each organizational structure has its pros and cons, but a decentralized organization can support creativity among employees, Chris Smith—COO at 53-person structural engineering firm Miyamoto International, headquartered in West Sacramento, Calif.—said last October at The Zweig Letter Hot Firm Conference in Boston. Miyamoto International placed #176 on The Zweig Letter Hot Firm 2007 List.
Many firms operate as command-and-control organizations where the leadership decides everything, Smith said. "The big strategic ideas aren’t continuous because there’s no ownership. Everything has to go back to the leadership because everything comes down from the leadership," which forces staff to wait for new ideas and directions.
As a result, Smith said, changes are limited and there is a ceiling to growth potential. However, Smith said, a decentralized organization is an open system where the authority is spread out. The organization is "continuously striving to put the most competent people at the right levels to make the best decisions, and management has to support that."
Each unit is responsible for itself and the whole organization, Smith said. In turn, the units respond quickly to changes. Also, Smith said, there’s "no mystery. Everybody needs to know what’s going on to feel comfortable and get behind it."
"It’s managed chaos," Smith said. "There’s creativity so you can’t have too much structure." A decentralized organization gives employees the necessary freedom so that they are able to tap into their creativity. They can take ownership of ideas and, as a result, they get excited. Management then must "believe in people and trust them to exert common sense."
Building a decentralized organization
A decentralized organization is powerful, but not easy to create. Miyamoto International made the change from a command-and-control to a decentralized organization in 1997 when now-President and CEO Kit Miyamoto assumed the leadership position.
Revenues increased shortly after Miyamoto became president and CEO. Before 1997, revenues remained level, but within the last 10 years, Miyamoto said the firm has grown more than 1,000 percent. Revenues went from roughly $1 million in 1990 to about $10 million in 2006.
"It’s not for everyone," Miyamoto said. When Miyamoto International first made the transition to a decentralized organization, many employees left the firm. Yet, he said, "To be a great business, you have to have people who want to be creative." That means that they can’t be forced into being creative. In order to become a decentralized organization, Miyamoto said the firm must have a vision and ideology. "(Miyamoto International’s) vision is to make the world a better place to live."
Next, Miyamoto stated, the right leadership needs to be in place. The leadership must want to help others achieve their goals and desires. They must trust and empower their employees. "When you empower someone, you must have some sort of balance so that it’s in alignment with the firm’s strategy and culture."
With a decentralized organization, Miyamoto said, it’s less about the leadership and more about the people. "It’s through logic and passion that you can inspire people and get them to go in one direction."
When a leader meets a new person, Miyamoto said, he or she is trained to "map out how this person will fit into the organization’s goals." Everyone has something to offer; a leader in a decentralized firm needs to extricate each employee’s skill. "When you do that, you form an emotional bond."
"You have to give people room to think," Miyamoto said. "You don’t want to give them the answers. You want to create people who will think and have solutions for you." Transparency within the organization is essential, he said. Miyamoto International practices open-book management. An external board of directors holds leadership accountable and brings additional expertise to the company.
According to Miyamoto, the organization must also continuously improve its processes and systems. "Understand the best practices and then do something better. Make the change if the customer wants it or if it will improve efficiency, but don’t overanalyze the decision."
Becoming responsible for the whole company and not just one unit can help build a successful decentralized organization, said Miyamoto. "If any problems exist in another unit, help fix them. Also, have a company-wide bonus pool." By doing so, Miyamoto said, the firm will have a decentralized organization that "unleashes people’s talent and creativity," produces higher and sustainable profit, and will achieve its goals more efficiently.
SIDEBAR: Hot Firm leaders respond to industry survey
In an exclusive survey, The Zweig Letter asked presidents and CEOs of The Zweig Letter Hot Firm 2007 List about their growth strategies, their biggest obstacles to continued growth, and the outlook for the A/E business, among other topics.
Seventy percent of survey respondents said their firm’s primary means for achieving growth over the past three years have been through geographic expansion; expanding marketing activities accounted for 68 percent. Other strategies used by more than half of the firms are increasing hiring and recruiting activities (64 percent), entering new markets (58 percent), and introducing new services to existing markets (55 percent).
Sixty-four percent of survey respondents said that expanding market activities has supplanted increasing hiring and recruiting as the most popular growth strategy when asked, "What are your primary growth strategies for the coming 12 months?" While only 28 percent said they had pursued a merger or acquisition in the past three years, 55 percent say it will be a primary strategy in the next year. Conversely, fewer firms will be expanding geographically than in previous years, and firms aren’t planning to enter into new markets.
Hot Firm leaders say that finding, hiring, and retaining qualified employees is the biggest operational challenge they face in growing their firm. Nearly half (49 percent) cited finding, hiring, and retaining qualified employees as their top challenge.
When asked to assess their biggest challenge in continuing to grow over the next year, Hot Firm leaders again cited a lack of qualified workers as their greatest hurdle. Thirty-eight percent said staffing would be their biggest roadblock to growth in the coming year, while 11 percent said overall performance of the U.S. economy and another 11 percent said lack of capital for investment would be their biggest challenge.
Thirty-four percent of Hot Firms report that they currently offshore services to be performed in other countries, up from 11 percent last year. Less than half of the Hot Firms (47 percent) are currently working on projects outside the U.S.
Hot Firm leaders are cautious about the outlook for the U.S. economy in the next 12 months, but 58 percent of respondents expect the A/E business will outperform the U.S. economy as a whole in 2008. That number is down, however, from the 68 percent of respondents in last year’s survey who felt the A/E business would outperform the economy.
Overall, presidents and CEOs expect that their firms’ growth will continue to be strong in the coming year, and most expect to return to The Zweig Letter Hot Firm List in 2008.
Laura Rothman is a principal with ZweigWhite and has served as the research director for The Zweig Letter Hot Firm List since 2001. She can be reached at firstname.lastname@example.org. Franceen Shaughnessy is an editor of The Zweig Letter, The Zweig HR Letter, and The Zweig A/E Marketing Letter. She can be reached at email@example.com. Additional information about The Zweig Letter Hot Firm List may be found at www.hotfirm.com.
Rank Firm Dollar Growth Percent Growth
1 TolTest, Inc. $131,014,002 301%
2 Arquitectonica $60,751,602 345%
3 NELSON $52,248,848 449%
4 ENTACT $96,552,399 276%
5 The Lawrence Group $43,661,610 342%
6 Compass Environmental, Inc. $77,019,344 235%
7 Cubellis, Inc. $30,099,507 283%
8 Natural Resource Group, LLC $32,794,250 251%
9 Stantec Consulting Inc. $194,078,425 168%
10 ENGlobal Corporation $188,271,000 152%
To view the full The Zweig Letter Hot Firm 2007 List, visit www.zweigwhite.com/trends/thezweigletter/hot-firm-issue/index.asp.