A growing environmental and geotechnical engineering firm struggled to improve margins, which were approximately 1/3 of industry benchmarks. As the firm grew topline revenue, leadership was working harder than ever, but not seeing bottom line results. They had scrutinized overhead expenses and felt they were reasonably efficient. When they started to work with Thinc Strategy, they were skeptical about whether we could help them improve their efficiency. They just didn’t think there was anywhere else to cut.
A quick review of firm financials confirmed that overhead costs were not the problem. Rather, the inefficiencies stemmed from how teams were deployed and a bonus structure that didn’t motivate the right behaviors to drive profitability as well as growth. Salespeople who were managing accounts tended to be eager to please and wouldn’t issue change orders when project scope exceeded the original budget. Account managers who were also incentivized on bringing in new clients, were more inclined to look for the next new client rather than growing relationships with existing clients. Employees were focused on individual incentives versus firm performance. There was no motivation to work together as individuals or as teams.
This wasn’t simply a matter of restructuring a bonus plan. This was a challenge that we met on multiple fronts. We reorganized the company to create a dedicated sales team focused on bringing in new clients and an account leadership team focused on managing and growing existing client relationships. Even with fewer salespeople, sales increased, because they had the right people in the right seats. And, project profitability improved thanks to the introduction of a new change order process administered by account leaders who were accountable for project performance. We conducted training on project management and account-based selling to empower account leaders to grow their client relationships. Bonuses and incentives were restructured to reward company success. Culture improvements were integral, with an emphasis on decreasing individual and department competitiveness and focused on unifying company goals.
Revenue and profitability per client improved. The firm doubled EBITDA in the first year following the changes and more than tripled EBITDA in year two, surpassing industry benchmarks