Former president of CobbFendley (Houston, TX), a 530-person firm that is committed to providing innovative engineering solutions with the goal of bettering communities.
By Liisa Andreassen Correspondent
CobbFendley provides civil engineering, surveying, SUE, telecommunications, and some niche services that are not common in the civil engineering consulting field. Conger, former president, ensured that staff were equipped with the tools they need to bring these services to the market.
“Sharing the rewards of the company with our leaders is the key to our continued growth and success,” Conger says.
A conversation with Dale Conger.
The Zweig Letter: How far into the future are you able to reliably predict your workload and cashflow?
Dale Conger: Our overall backlog figure is usually equivalent to a year’s revenue. However, we’re involved in a variety of projects, so this backlog figure can be deceiving. Some of our groups work on short-term, fast-paced projects that aren’t in the office very long, which leads to those groups typically having short backlog terms. We can project annual revenue based on how our groups are adding to their staff as well. We have been in a prolonged period of growth, as our service lines have been successfully attracting more colleagues to join us and the additional people bring more work to the firm. As our staff grows, we generate new clients and projects, and with more projects comes cashflow.
TZL: How much time do you spend working “in the business” rather than “on the business?”
DC: As president, I’ve come to spend most of my time “on” the business. Leaders of professional services firms should spend time working with firm clients on projects, fostering new and existing relationships and mentoring emerging leaders within the firm. As CobbFendley has grown, various things have pulled me from working directly with clients to the point that working “on the business” now occupies most of my time.
TZL: Artificial intelligence and machine learning are potential disruptors across all industries. Is your firm exploring how to incorporate these technologies into providing improved services for clients?
DC: We’re implementing a more robust GIS software and helicopter LiDAR surveying equipment. We’ve offered and introduced GIS to many clients throughout the years and received accolades for our use of LiDAR technology. While these technologies are not as cutting edge as artificial intelligence, our clients expect to see the use of GIS and LiDAR more commonly on their products and we’re working to completely integrate their use into our services. It will take time for artificial intelligence applications to be developed and desired by clients, and we will implement when the time is appropriate.
TZL: Are you using the R&D tax credit? If so, how is it working for your firm? If not, why not?
DC: While we have utilized the R&D tax credit several times in the past, we haven’t seen good results that would lead us to continue. CobbFendley employees have creative and innovative minds; however, they often see their work as simply a “good day’s work,” and not anything that would be labeled as “innovative.” This makes it very difficult to generate the material necessary to support the claim for credit.
TZL: Does your firm work closely with any higher education institutions to gain access to the latest technology, experience, and innovation and/or recruiting to find qualified resources?
DC: Our founders were alumni and big supporters of the University of Houston, and from the firm’s inception, we have participated in their programs and recruited UH Cougars heavily. Then they made the mistake of hiring some Texas Aggies, like myself, and we diverted attention to that school. We have now expanded our focus once again and recruit from schools throughout the firm’s regions. Our efforts have worked, and this summer we had interns from eight colleges in three states. We frequently participate in university career fairs and regularly provide speakers for seminar classes.
TZL: When you identify a part of your business that is not pulling its weight in terms of profitability or alignment with the firm’s mission, what steps do you take, and what’s the timeline, to address the issue while minimizing impacts to the rest of the company?
DC: We are likely overly patient in this regard. There have been CobbFendley offices and groups that posted losses some years, and when looking strictly at the numbers, we should have closed them. When an office or group is slowing down, we try to work with the group involved and mitigate the problem until the situation has improved. In nearly all cases, circumstances changed, and the office and/or group became productive again. There are only a couple of occasions that I can recall where we concluded circumstances would not change and opted to close. These offices and groups are made up of individuals we recruited and wanted at our firm, and we try our best to create an arrangement where they can succeed.
TZL: What financial metrics do you monitor to gauge the health of your firm?
DC: We monitor cash on hand, total invoicing, net fee revenue, accounts receivable, accounts receivable over 90 days, direct labor hours, total hours, number of employees, direct labor cost, total labor cost, utilization, effective multiplier (labor multiplier), and EM factor (cost utilization times effective multiplier) on a weekly basis.
TZL: Ownership transition can be tricky, to say the least. What’s the key to ensuring a smooth passing of the baton? What’s the biggest pitfall to avoid?
DC: We tie the ownership transition into our stock ownership program, which entails compelled sales over a five-year period leading up to retirement. Around 10 percent of the staff is involved in various levels of ownership, and their level of commitment increases annually. Ownership gradually transitions and then leadership follows.
Because ownership slowly transitions and leadership follows, our method allows new leadership to become familiar with what’s happening in the firm and prepares individuals to take over. I’ve found a new leader is most successful when the staff is supportive and rallies to ensure new leadership is successful. This means that existing leadership must be willing to slowly let go of responsibilities over a period. The biggest pitfall is when the current leader(s) can’t bring themselves to allow someone new to rise up and take their place. We’ve experienced this before within departments and it eventually leads to an abrupt change rather than a smooth transition. In cases such as these, momentum can be lost resulting in financial problems for the firm.
TZL: They say failure is a great teacher. What’s the biggest lesson you’ve had to learn the hard way?
DC: In a way, I was fortunate to be a junior spectator of the economic disaster that hit Houston during the oil bust in the mid-‘80s. While I wasn’t directly affected, I saw business failures and took note of what worked and what didn’t. My greatest takeaway was that a company’s staff must match the amount of work available. If your staff is too large for the volume of work coming in, overhead will eat up any possibility of breaking even. I’ve always watched for that type of situation, and thankfully, I haven’t seen another time that severe in my career.
TZL: How many years of experience – or large enough book of business – is enough to become a principal in your firm? Are you naming principals in their 20s or 30s?
DC: There isn’t a set number of years of experience that can quantify when someone should become a principal. Currently, our youngest shareholder is 36 – and 13 percent of our principals are in their 30s. The expectation is for the group to grow into the future majority ownership and leadership of the company. With that being said, we look to promote staff who have a passion for CobbFendley as well as a knack for driving business. You need leadership possessing both qualities to maintain a successful, independent organization. There are obvious benefits that come with being a shareholder, but the position comes with high responsibility and we seek people who will work hard to maintain their investment’s value.
TZL: In one word or phrase, what do you describe as your number one job responsibility as CEO?
DC: Keeping a collection of high-performing individuals from conflicting with each other.
TZL: Diversity and inclusion is lacking. What steps are you taking to address the issue?
DC: CobbFendley has a diverse staff. For example, 25 percent of our principals are women and the group is ethnically diverse. Women make up about 40 percent of our combined Emerging Leaders and Associates programs. Our diversity is not based in an official program; it’s cultured from the belief that all people are equal and should have a seat at the table.
TZL: A firm’s longevity is valuable. What are you doing to encourage your staff to stick around?
DC: We have tried to make it apparent to all that their best opportunity is at CobbFendley. This includes everything from exciting projects and programs to training, benefits, and of course, compensation. Since everyone spends most of their day at work, we have tried to grow a company culture that makes coming to work enjoyable and cultivates friendships within the company. Most recently, we had a nacho bar for lunch to kick off football season and everyone wore their team colors/jersey. Our culture doesn’t resonate with everyone and that’s OK. We try to maintain good relationships with those who do choose to leave as they may show up as teaming partners or clients down the road.