Adapting to changes in the architecture engineering industry

The founder and CEO of Alvarez & Associates talks about moving on from his successful firm.

By Morrissey Goodale July 17, 2023
Morrissey Goodale Word on the Street July 17, 2023. Courtesy: Chris Vavra, CFE Media and Technology

The founder, CEO, and sole owner of Alvarez & Associates (A&A) sat down in his office to write his mid-year “State of the Firm” message to be sent to his 100 or so employees. A naturally emotional and empathetic person, he viewed his employees more as family than staff. He liked to write from the heart and share not only how the business was doing, but also his perspective on life, love, politics and religion. All the things that they tell you not to talk about in business. And that’s why his employees loved him.

He wrote two letters per year—one every December reflecting on the year that had been and looking ahead at the upcoming one and this, his mid-year update on the firm’s progress against its goals. He always started the same way—copying and pasting and then editing the prior version. As he did so this time, he realized that since 2018 each of his letters (except for the mid-year 2020 update that was, to say the least, “dark”) had started with “Thank you all for your hard work; we’ve just had another record six months…”

And that’s exactly how this letter was going to start off too…another unbelievably good six months. It was a great time to be the CEO of a civil engineering firm in California. Or anywhere else in the country for that matter. But he didn’t take these good times for granted. He was, of course, old enough to remember when that was not the case. He pondered how the robust architectural engineering and environmental industry of today differed from that of 15 years ago. Then, he almost lost his house and everything he owned to the bank, so his mind began to wander to how he, his firm, and the industry had changed.

The post-pandemic era

He worried about all of the “high-dollar” folks whom his 100-person firm had added during and since the pandemic. Those had been crazy times, and his firm had paid over-the-top money to get talent on board. Signing bonuses, too. Big ones. Crazy. But all of his competitors and peers had been doing the same thing then, so he didn’t have a choice, right? He needed those employees to meet the massive wave of work headed his firm’s way.

But now, in the cold light of day — even though his firm was still racking up record performance — it was clear that many of those pandemic-era hires were “B” and “C” players. And more than a few were all about, if not only about, the money. And with the addition of those people to A&A, the firm’s culture felt lessened and cheapened. It felt different than before—and not in a good way. The pandemic and post-pandemic Gold Rush had been great for the firm and himself financially, but he wondered if it had changed his firm beyond recognition. He wondered if he loved the firm anymore.

Life changes impact work

At 65 he was at the top of his game. At least that’s what he told himself. He was still the primary rainmaker. Clients still called wanting to speak to him and have him either on or overseeing their projects. He was the clear and sole authority in A&A—even though he had developed a “leadership team” composed of three long-time employees (the “three amigos” as they were fondly referred to by everyone) around him. The firm revolved around him and his investment of time, energy and finances. He loved that. He was so proud of the firm that he and his team had built.

But these days, more often than not, he was working 40-hour weeks instead of 50. He was spending more time travelling to see his grandkids than to meet new clients. He invested more time in his small but growing residential real estate holdings than the firm’s mentoring program. Three-day weekends had become five-day ones. In what seemed like the blink of an eye, his relationship with his firm had changed. He was no longer the entrepreneur whose every waking hour was consumed with growing and sustaining the firm. Now he was some guy trying to figure out how to liberate himself from that very same firm. One of his bridge club pals had recently told him, “You play the game differently in the final two minutes of the quarter.” Now he knew what it meant.

Generational differences

For sure, he knew he had slowed down. But it also seemed to him that there had been shifts in how his firm “worked” over his career. He remembered in the late ’80s and ’90s that it was not unusual for everyone, managers and technical staff, to work on the weekends in the office to get projects done. Sixty-hour weeks were regular occurrences. It seemed like that changed in the 2000s, with 50-hour weeks being the norm, and with most people realizing that if you were not putting in that amount of “face time,” then you were likely going to be disappointed with your bonus. Today—despite the fact that his firm had more work and a larger backlog than ever and despite all of the technology to facilitate around-the-clock working—the spike of hours worked during the pandemic lockdowns had given way to a pervasive 40-hour mentality. Especially for the firm’s younger staff. He was having a very hard time squaring that circle.

Looking for a new leader

He knew his firm needed a new, fresh, younger leader—someone who could take full advantage of the seemingly endless opportunities ahead. The firm’s residential land development business was booming like never before. Focused on wealthy coastal California towns and the communities surrounding Lake Tahoe, A&A could hardly keep up with the demand for tearing down old  houses and replacing them with $20 million mansions—some sleek and modern, some traditional—all on the water or with water views.

At the same time, the firm’s already busy public works practice was anticipating—but had no actual plan for—all the work that was going to hit when Infrastructure Investments Job Act funds finally started flowing. The firm could easily double in size over the next five years. In many ways the firm felt like it did when he founded it 25 years ago—vibrant, growing, full of potential. He would have loved to have had both the energy and desire to be at the helm for the next decade of growth. But like an aging soccer team captain, his legs were gone, and with them his ability to lead from box to box. If he had not already outgrown his usefulness to the firm, he was not far away. The reality pained him. Long ago he had promised himself that he would never let things get to this point. But now here he was.

He was no fool. Nor was he greedy. He knew that it was best for him, his family, and the firm that an orderly transition of business should take place. He had shared the wealth over the years with managers and employees to reward and retain the best. And he had tried on three separate occasions over the past decade to transition ownership internally and twice externally. Internally, folks never wanted to put enough skin in the game. Externally, one “buyer” was in reality a tire-kicker, the other was a bottom feeder. Both of them were great engineering firms, but lousy buyers.

He suspected that he may have gone about selling the firm the wrong way. Maybe he should have proactively found better potential buyers rather than waste time with two non-starters. Or maybe he could have been more “reasonable” in what he wanted from an internal sale. But either way, here he was now, 65 years old with no viable exit strategy and a firm that he was no longer compatible with. But at least it was a successful, thriving business that allowed him to take home $3 million a year. So as long as this dynamic kept on keeping on, things were not all that bad, right?

Difficulties of leaving

He fired up his laptop and had just typed “It’s been another record year for us here at A&A…” when there was a knock on his office door. He looked up to see one of the three amigos—the one who had recently remarried, the one who ran all of A&A’s project operations—standing there. Apparently, his new wife was eager to travel the world—starting now. And at 63 and having never set foot beyond California, this friend was all in with a vision to spend the rest of his 60s and hopefully his 70s visiting Warsaw, Wellington, and Walla Walla.

So, he was tendering his resignation, effective the end of the month. And leaving on a jet plane (so to speak). So much for $3 million a year and keeping on keeping on, Alvarez thought. The rest of the year was going to be spent figuring out how to retool the business and shore up operations. He realized that not only did he not have the desire to grow the firm anymore, neither did he have the stomach to deal with the hard slog fixing it. He had left things too late. For a decade plus, he had known that he had three options—transition internally, sell externally, or wind things down. And he detested the thought of the last option. It reeked of defeat. But now here he was, and the wind-down was inevitable. He remembered something else his bridge partner had said, “Enjoy yourself, it’s later than you think.” The end of the affair.

Morrissey Goodale is a CFE Media and Technology content partner.

Original content can be found at Morrissey Goodale.