Change occurs in many forms throughout our business careers. It can happen gradually, in the form of technological advancements that have occurred over the last 25 years and have changed the way we work. Or quickly, when a business associate or client may leave their job or a fellow employee is relocated or reassigned. The downturn in the economy has created a great deal of change for a large number of people in the construction industry. Virtually all companies that work in construction related fields have felt the effects of the downturn.

My company was hit very hard by the economic downturn and even with the layoff of half my staff. I came to realize that I could both struggle through the down turn with drastically less revenue and put the remaining employees at risk or attempt to secure more stable employment for myself and the remaining employees. I was fortunate that Hankins & Anderson recognized the value of my company's remaining employees and acquired my firm in March 2009. In joining Hankins & Anderson I've benefited greatly from a big picture mentality encouraged by Mike Mathews (CEO of Hankins & Anderson and past president of ACEC Virginia). The reading and mentoring he's offered have been both motivating and important in my development. I was encouraged to read several books relating to company development, leadership and management. That reading has fueled my interest in other books on management and leadership. I came to my new position within Hankins & Anderson willing to change and with a desire to learn. It's been particularly revealing to me how I had handled issues with my own company (or didn't handle them), the opportunities I missed and the resources available to me that I didn't utilize. I've learned that ACEC Virginia and the relationships you foster within the groups and committees can be a valuable aid both from a management perspective and as a resource to connect with other professionals.

Most firms have some sort of bonus plan wherein they distribute profits to employees once they've retained some earnings and have met retirement plan obligations. These bonus plans are often referred to as "Incentive Compensation Plans", which of course, implies that employees will be "incentivized" to work harder and perform better knowing that there is a carrot dangling at the end of their 60 hour work week.

Unfortunately, most compensation plans are patterned around the faulty notion that engineers (as well as doctors, lawyers and candlestick makers) are motivated externally based on rewards (or punishment). This form of pop psychology goes back as far as Pavlov's salivating dogs, and the pigeon that rings the bell, certain to be rewarded with bird seed. Well, as all of you astute readers know, humans are not dogs or pigeons. As it turns out our motivation is intrinsic, that is, it is internal, based on our morals and beliefs.

We have been taught that as leaders one of our most important jobs is to motivate people. But, I am here to tell you that we cannot motivate people to work harder, or better, we can only afford them the means to get the job done to the best of their ability. Now you say, "Come on, DeStephen, you mean if I tell someone I'll give them a $20,000 bonus to do something they won't do it"? No, I'm not saying that. Anyone can be "bribed" to do a specific (short-term) task. But changing their innate disposition to "work hard" or the way you want them to over the long term, just isn't going to happen.

The requirement that engineers obtain 30 hours of post bachelor education to be eligible to sit for the PE exam is potentially one of the most damaging things that could impact our businesses and our industry.  This is being pushed by a bunch of academicians and manufacturing engineers who see the PE license as some sort of status symbol among their peers.  In our industry, it is not about status, it's about assuring that design professionals are qualified to protect the health, safety, and welfare of the public.  Requiring a graduate degree or equivalent post-graduate education does nothing toward achieving this goal. The exam itself does - by testing competencies.  Our member firms and others practicing engineering whose work potentially effects public safety should do everything they can to derail this absurd initiative.  If you think the engineer shortage has been bad over the past ten years, wait until the economy picks up and this idea becomes law.

Variable costs are defined as costs that vary directly with the quantity of product manufactured.  These usually include raw material, supplies, production labor and other operating costs associated with the manufacturing process.

In professional service firms, labor costs are only partially variable.  Management can't lay-off and re-hire staff on a continuous basis to match market demand.  Because of the difficulty in hiring professional staff as needed, most professional service firms will keep staff during periods of low demand for future anticipated work, often when the anticipated work hasn't even been identified.  This would seem to argue against direct labor being a variable cost and argue for staff to be treated more as fixed assets.  In reality, they are semi-variable.  Few firms will go out of business before reducing professional staff, however many have come close.  On the other end of the spectrum, firms often use overtime to try to smooth out spikes in workload rather than hiring professionals to meet temporary demand spikes.

Limitation of Liability - Where Do We Go From Here?

During the recent Virginia Legislative session, ACEC Virginia, together with other design professional organizations in the Commonwealth, were successful in having legislation passed that clearly permits Limitation of Liability (LOL) clauses in agreements for design professional services in Virginia. Now that we have accomplished this, we need to be aware that the legislation alone does not guarantee the enforceability of LOL clauses in our agreements.

About twenty years ago, structural engineers across the country were facing considerable challenges with the rising costs of professional liability insurance. About twenty years before that, ASFE (Association of Soil & Foundation Engineers) faced the same challenges. ASFE developed limitation of liability language to place in their agreements to more reasonably allocate the risk between themselves and their clients. In the early 1990's structural engineering groups such as CASE (Council of American Structural Engineers) borrowed the idea from ASFE and worked with liability insurance carriers to come up with simple documents to use as agreements between the designer and clients. These agreements included limitation of liability clauses. Some liability insurance carriers actually offered discounts to consultants who were successful in having written agreements that included LOL clauses. Other professionals, besides just structural engineers, began to use the agreement form, particularly for smaller projects. As use of the documents became more wide spread, the term Limitation of Liability was changed to Allocation of Risk for some consultants, to better describe the intent, and to counter the negative first impression offered by the term Limitation of Liability. The standard agreement evolved into a simple one page, front and back, agreement with all of the specific project information (client, scope, fee) on the "front side" and the Terms and Conditions of the Agreement on the "back side". The Risk Allocation, or Limitation of Liability clause, was included in the back side language. LOL clauses are usually worded to limit the liability of the design professional to either the amount of the fee, or some identified amount, whichever is higher. Some agreements simply use the amount of the fee.