In previous EMI blogs, we discussed Thinking Big and Being Mindful as We Set Goals and Building Confidence Through Empathetic Stakeholder Engagement. I fully respect that managing these objectives with a myriad of associated voices can be distracting as we attempt to sustain growth. Sustaining growth, for our businesses and talent, is particularly difficult in the Architectural, Engineering and Construction (AEC) Industry, as we constantly regroup to provide service on projects that marry significant technical challenges with dynamic client expectations. So, the intent of this month’s discussion is to explore a Risk Intelligent approach, creating a consistent basis for our teams to develop an entrepreneurial mindset and explore entrepreneurial solutions.
My view on risk as a critical business instinct was shaped by Community Development Group (CDG) – a small, nimble real estate development company, and AECOM – a decentralized, multinational, professional service company. Private companies rightly focused on growth and profitability; CDG is comprised of a small group of investors, and AECOM is listed on the NYSE. They are entrepreneurial in their own ways. CDG establishes a portfolio of vested land use entitlements and public finance vehicles, while AECOM aspired to leverage broad technical expertise to offer fully integrated services.
I spent nine years at CDG, where daily discussions allowed us to dramatically expand our portfolio of large, master-planned communities. Principal connectivity positioned us to rapidly integrate changes required by public agencies. Long-standing trusted relationships allowed us to quickly garner consensus from the market as our technical experts efficiently updated the associated plans.
Subsequently, I spent eight years at AECOM (the last six in a corporate role), as we grew to over 90,000 professionals providing services in over 150 countries. Scale, coupled with the desire to collaborate across business units, required a responsive risk organization. We established a proactive risk management approach, aligning our risk leads with subject matter experts: adaptive teams capable of forming quickly to analyze issues and frame mitigation for the enterprise, operations, and our projects.
Year over year, these entities grew. Unfortunately, during my tenure, economic events led to dramatic changes. For CDG, the great financial crisis dramatically changed the homebuilding landscape; for AECOM, misaligned strategic investments undercut investor confidence, forcing deleveraging. As an eternal optimist (and one who thoroughly enjoyed these challenging roles), my takeaway from these experiences is two-fold. We can’t avoid, and should not be paralyzed by, what Donald Rumsfeld rightfully described as the “unknown unknowns.” We can make investments in our business, allowing a risk-intelligent culture to support sustainable growth.
This starts with leaders whose appreciation for the business model allows them to:
- establish a viable vision,
- make transparent strategic investments,
- implement a stable but adaptive organization, and
- empower dynamic decision-making.
This sets the stage for a risk-intelligent culture to mature:
- facilitating proactive strategic debates,
- establishing trust with subject matter experts,
- creating buy-in for robust operational decision-making, and
- support an entrepreneurial mindset that
- improving talent retention.
Talent retention is critical for sustained growth as our employees thrive; advising clients and growing as respected internal stakeholders. These principals are critical for AEC firms as we attempt to efficiently balance stakeholder inputs, shaping our infrastructure programs:
- Public policy: responsive to the shifting winds of economics and politics
- Regulations: setting rules challenged by innovation
- Master plans: framing near-, mid-, and long-term growth objectives
- Capital improvement budgets: addressing declining investments and unfunded liabilities with variable restrictions across asset classes
- Project delivery: increasing demand for integrated solutions, requiring improved alignment of our professional EQ and IQ
- Designers: iteratively turning science to solutions as digital efficiencies shift their operating model
- Builders: informing and implementing solutions as their means, methods, and trade partners strive for improved productivity
- Financiers: seeking infrastructure investment returns without mass production efficiency or private sector procurement fluidity
- Operators: seeking efficiency that is sustainable and resilient
Throughout our industry, entrepreneurs are addressing these demands as they improve our project delivery systems, including: enhanced digital tools, progressive design build capabilities, and public private partnership (PPP) frameworks. Akash Deep’s excellent HKS course, Infrastructure in a Market Economy: Public-Private Partnerships in a Changing World, explores how public-private partnering concepts will continue to shape industry behaviors, facilitating balance across the complex demands of our infrastructure programs.
Respecting the varied missions of public and private institutions, we mutually benefit from the natural behaviors of equity, debt, and regulation as:
- equity seeks improved returns by accepting risk and driving efficiency,
- debt, whether from banks or institutional investors, protects against loss through their due diligence and associated lending covenants, and
- regulation strives for consistent and transparent oversight of public expenditures necessary for the welfare of their constituents.
Respecting this challenging landscape, please don’t forget to take a moment to reflect on the amazing projects that we continue to deliver. Every day, we find moments of balance, allowing our teams to thrive. Falling over in a recent yoga class, I grimaced as the instructor calmly noted “balance is bliss,” forgetting that these moments are naturally fleeting as we move between effort and ease. In “Thinking, Fast and Slow,” Daniel Kahneman explores “the dichotomy between two modes of thought: ‘System 1’ is fast, instinctive and emotional; ‘System 2’ is slower, more deliberative, and more logical.”
Like our minds, our businesses and teams have people whose thought processes lean towards System 1 or System 2. As we establish strategy and empower entrepreneurs, our organizations must establish a confident rhythm. As Kahneman notes, “Confidence is a feeling, which reflects the coherence of the information and cognitive ease of processing it.” Nimble risk-intelligent teams provide this balance as trusted voices respond to today’s efforts, creating an ease as we pursue tomorrow’s objectives.
About the Author
Mike’s 27-year career has included planning, design, construction, and finance roles across a broad set of public and private development projects. His empathetic leadership style and program management experiences honed his understanding of complex governance and economic models, deepening his enthusiasm for leading teams delivering sustainable infrastructure in our communities.You can learn more about Mike here.
Embracing risk intelligence establishes a foundation for sustained growth.
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