Fewer Chiefs

Fewer Chiefs

ENGINEERING by Jean Gruss | Editor/Lee-Collier

Johnson Engineering reorganized the way its leaders make decisions and became one of the fastest-growing engineering companies in the country.

Sometimes organizations have too many chiefs.

As companies grow bigger and older, more people have a vested interest in the business and it's normal that they want a part in running it. Too many decision makers can bog down an organization and make it slow to respond to changes in the market.

But firms that recognize that tendency and return to streamlining the decision-making process can grow almost as if they were a startup. They can be nimble and respond to rapid changes in the market.

Case in point: Johnson Engineering, a 61-year-old firm in Fort Myers. After reorganizing the management process in the late 1990s, the firm became one of the fastest-growing engineering companies in the U.S.

But the process wasn't easy. Company leaders knew it would be a bitter pill for some swallow, so they hired a nationally renowned consultant to help them make the transition.

"It got pretty ugly at times," recalls Steven Morrison, Johnson's president. "We heard stuff that we didn't want to hear, but it was true."

Today, the company's position as one of the leading engineering firms in Southwest Florida is indisputable. It has its hands in virtually every major private and public project, including the massive Babcock Ranch residential project in Charlotte County, the expansion of Southwest Florida International Airport and Florida Gulf Coast University, and the regional Gulf Coast Town Center mall in Estero.

Last year, consulting firm ZweigWhite named Johnson Engineering as the 49th fastest-growing architectural, engineering and environmental firm in the country. From 2002 to 2005, annual revenues grew 102% to $27.3 million.

It has expanded to southern Pasco County just north of Tampa and LaBelle in Hendry County east of Fort Myers. This year, employees buried a time capsule in front of Johnson Engineering's newly built headquarters in Fort Myers that reads in part: "When this capsule is opened on the company's centennial anniversary in 2046, may it serve as a reminder of the diligent work performed by the company, the employees and the principles by which they worked."

An engineering republic

Originally founded by Hendry County surveyor Carl Johnson who died in 1968, ownership of the company passed to a handful of trusted employees. About 10 years ago, the number of employee shareholders grew to a dozen as leaders Archie Grant Jr. and Forrest Banks retired and sold them their interests.

It was getting crowded at the top. What's more, the number of shareholders was bound to grow further as ownership dissipated among a greater number of employees. Indeed, today there are 23 shareholders.

The firm's top executives and the dozen shareholders who met regularly to oversee the business bottlenecked decisions. As the business grew, it was only a matter of time before additional shareholders would greatly complicate things.

"You had too many people trying to run the company," Morrison says.

Shortly after Morrison was named president in 1997, the firm hired ZweigWhite, a nationally known consultant to engineering firms, to organize a full review of Johnson Engineering's organizational structure. They gave ZweigWhite carte blanche to interview everyone at the firm and held a two-day retreat to discuss reorganizing the company.

The result was a radical change in the way the company would be managed. What had been a democracy where every shareholder had a voice in running the day-to-day affairs became a republic where the shareholders elected a seven-member executive board. The executive board then elected a president, who would only report to the board.

In the new republic, most Johnson Engineering shareholders have no say in the day-to-day management of the company. But their votes count; they can choose to reelect or replace board members once a year.

Meanwhile, the president was given more leeway to run the company's day-to-day operations with less interference. With more responsibility came more accountability; the board is accountable to shareholders and the president is accountable to the board. The broader shareholder base means power is less concentrated. No single shareholder owns more than 15% of the stock of the company.

Despite the annual election of the board, shareholders say there's been very little turnover. They acknowledge that the boom in business has given shareholders little reason to vote for change. "It's worked very well," says Andrew Tilton, Johnson's director of water resources who is a shareholder and board member.

Longevity is a big selling point. Most shareholders and executives have decades of experience locally that give them an edge in landing repeat business.

"Part of their success is that they've had a long continuity of their people," says Dennis Gilkey, former president and chief executive officer of Bonita Bay Group, one of the region's largest residential developers. "To get a good reputation, you have to be consistently good and they have been. They have very good connections."

Market leaders

At the same time the company was streamlining shareholder rights, Johnson Engineering executives reorganized its corporate structure into market teams.

Previously, most decisions had to be blessed by one or two top executives. As business picked up, that created bottlenecks and reduced the company's ability to respond to problems or new opportunities.

What's more, tighter environmental and planning regulations in the last decade forced engineering firms to boost their expertise in areas such as water management, landscape architecture and land entitlements. Municipalities now require developers to show their plans down to the minutest detail.

In addition, business started to pick up at the turn of the decade, particularly in the private sector as developers seized on the residential real estate boom. Municipalities also responded by increasing public works projects such as construction of sewage plants and roads.

All this new work meant top executives couldn't micro-manage every project like they used to during slower times. And they couldn't respond nimbly to the changes in the market as developers demanded new services.

So the firm split its staff among different market teams such as planning, development, transportation and water resources. Each market leader was given responsibility to manage the team profitably and be accountable to the president. "I don't really believe in managing everything," Morrison says. "If I was smart enough to do everything I wouldn't need you."

The result was greater agility to respond to the changing market. For example, as federal and state water regulations became stricter, Johnson Engineering grew its water resources team to 40 employees today from none seven years ago.

In addition, Johnson Engineering created new divisions within teams. With the increase in community activism and the Hometown Democracy movement gaining momentum, the firm created a new "Public Participation" division within its planning team. The four employees of this group help shepherd development projects by assuaging community activists. If Florida voters approve in January, Hometown Democracy will require land-use changes be approved by voters rather than elected officials.

While decision-making is more decentralized, it doesn't mean Morrison is completely hands-off. Every Monday morning, Morrison and market team leaders meet to discuss various projects. "As long as they're going in the right direction, they have a lot of freedom," Morrison says. "It makes my job a lot easier."

Careful expansion

While larger rival engineering firms quickly opened offices around the state in recent years, Fort Myers-based Johnson Engineering stuck close to Southwest Florida. Its most distant foray was opening an office in Pasco County.

Even without rapid geographic expansion, Johnson Engineering benefited from the boom in private and public sector work. Its annual revenues grew 22% in 2005 to $27.3 million and another 34% in 2006 to $36.5 million. In a few years, its staff doubled to about 300 today.

Despite the growth, Johnson Engineering executives turned down projects during the recent boom because they wanted to focus on existing customers. "It would have cost us in quality," says Andrew Tilton, director of water resources at Johnson Engineering. "We have clients who want different thinking and you can't do that in 30 seconds."

Turning down work is never easy, but Johnson Engineering executives worried that growing too fast would compromise its hiring practices. "We didn't hire out of desperation," says Tilton. "We hired for the long haul."

Still, it wasn't easy. "It's hard to turn down work," says Patricia Newton, Johnson Engineering's director of planning.

Instead of hiring too fast, Johnson Engineering spread the work out among different areas. If the transportation team needed help, someone from the planning team might help out. "A lot of people worked overtime," Newton says.

Meanwhile, executives made a conscious effort to maintain both private and public sector work, even as private development surged in recent years. Until recently, private-sector work contributed 60% of the firm's annual revenues.

Johnson Engineering's cautious approach has paid off, as the private-sector jobs slowed. Now, that work represents about half this year's revenues, which executives say overall are likely to be flat compared with last year.

Meanwhile, public-sector projects continue to be a steady source of revenues. For example, mapping and replacing aging utilities in areas of redevelopment is one area they see growing.

Still, private-sector work hasn't dried up completely, the firm's officials say. "They know the permitting process takes two to five years," says Kevin Winter, Johnson Engineering's director of development. "This is a market correction and they're preparing."

Developers are taking advantage of the drop in land prices to make strategic acquisitions so that they're prepared for the eventual rebound. "They probably won't turn dirt for two years," Winter says.

And there's always the possibility of growing outside Southwest Florida. The center and northeast areas of the state are especially attractive, Winter says.

But Johnson Engineering is wary of purchasing another firm and starting an office from scratch is tough. "We're conservative," Winter says.

BY THE NUMBERS

Gulf Coast's Fastest-Growing Engineering Firms

Three Gulf Coast-based engineering firms made The Zweig Letter Hot Firm 2006 list, an annual compilation of the fastest-growing firms in the country. It's a closely watched list of the top 100 firms. The 2007 list will be published at the end of this month. (in millions)

Revenues

Rank Firm 2002 2005 $ growth % growth

21 King Engineering Associates, Tampa $14.5 $32.7 $18.2 126%

49 Johnson Engineering, Fort Myers $13.5 $27.3 $13.8 102%

57 WilsonMiller, Naples $37 $64.3 $27.3 74%

REVIEW SUMMARY

Industry. Engineering

Company. Johnson Engineering

Key. Older firms must reinvent themselves to keep growing.