A lmost 10 years ago, principals at RDK Engineers in Andover, Mass., decided to radically reorganize the MEP firm's business operations. They envisioned a new operating model that would imbue the century-old firm with an exciting new entrepreneurial spirit and, in the process, greatly increase client services, create new opportunities for their employees, and significantly increase the firm's bottom line.
Their risky move paid off big time, turning RDK Engineers into a successful business incubator. The firm traded in its traditional business model—assembling a new project team to work on any project that came in—for one where engineering groups act as independent business units tackling their own projects—all under the RDK umbrella.
Over the past decade, the firm has opened two new offices (Boston and New Brunswick, N.J.), total revenues have increased 19% annually and the number of employees has leaped by nearly 400%, to 220, all through internal growth.
By promoting a corporate hands-off policy that lets engineers be engineers, RDK attracts highly motivated professionals eager to flex their entrepreneurial muscles and grow businesses that, without the support of a larger firm, might never get off the ground. RDK's unique business model is strengthened by an extensive benefits portfolio that furthers its goal of attracting and retaining high-quality, entrepreneurial employees.
The impetus for RDK's 1998 reorganization was the need to ease the firm's growing pains. At the time, the firm had less than 70 employees and management realized that in order to maintain quality and consistency of work, the firm needed to enhance communication between team members.
“We found that as we got larger and larger, the people on the teams didn't know each other well, and communication wasn't as good as it could be,” says CEO Chris Cummings.
“We thought a much better way was to develop teams that worked together all the time,” says Cummings. “The same engineers, the same designers, the same CAD people all working together to improve communication and coordination with clients.” Such a model would encourage team members to know each other—and their clients—much better.
That led to the creation of RDK's 10 current individual business units, each of which provides services to a number of market sectors, including commercial, academic, multifamily, hospitality, aviation, healthcare, bio/pharmaceutical, and high-tech manufacturing. Groups range in size from six to more than 30, depending on the amount of work each handles. Because the groups work autonomously, they staff as needed.
“Fundamentally, I believe that if people are going to be held responsible for their work, they're going to need authority to make decisions,” says Cummings. “The group leaders are responsible for who they want to hire, what projects they're going for, what work is being brought in,” he says. They're even free to negotiate their own fees. Each group's compensation is directly related to the profits they generate.
So, if each group has such a high degree of autonomy, what benefit do they derive from being part of RDK?
“Our people could have their own companies if they wanted to, but we free them up to concentrate on engineering tasks and life outside of work,” says Cummings. If these groups had to function as small businesses independent of RDK, they would have to expend a lot of time and energy on management, maintenance, and administrative tasks.
“Our approach is to provide all the administrative, financial, and other resources of a large company to support the smaller business units,” says the CEO. “They don't have to worry about accounting, buying computers, IT, or any other administrative work. We take away tasks that aren't their specialty.” About 20% of RDK's 220-person staff serve in a support role.
“We get them to do what they do best, to focus on engineering and bringing in work and managing clients,” says Cummings.
By being part of a larger entity, the small, independent business units within RDK also assume much less financial risk. “A lot of these people who could have their own companies might not want to take the financial risk of going out on their own,” says Cummings. “We allow them to essentially have their own businesses, but we take care of all the risk and share in the profits.”
Providing that small-firm feel with large-firm benefits has attracted talent that RDK might not ordinarily have landed. For instance, in 1999, several engineers specializing in hospital and R&D facilities were attempting to build up their own independent practice. These were highly skilled engineers not looking to join an MEP firm. However, the incidental tasks of running an independent business were soon taking up a significant amount of their time, leaving insufficient time to devote to project work.
They approached RDK about bringing their practice into the RDK fold. They were able to take advantage of RDK's administrative help, marketing support, and financial services and they, in turn, exposed RDK to new markets and became the firm's highly successful healthcare group.
Attracting and nurturing engineers eager to establish new business units is also how RDK expands its practice scope and geographic base. Cummings says the firm isn't necessarily looking for new market sectors or new geographical locations, but they are looking for the right people and the right opportunities, wherever they may be located.
In 2001, for example, engineers Pat Murphy and Bob Persechini came to RDK interested in establishing an engineering practice in downtown Boston. The office opened under their leadership, and has since grown into a 40-person practice providing services across the U.S. Similarly, the New Brunswick, N.J., office opened in 2005 when Regis Gaughan joined the firm after having spent many years working at larger firms.
“That exemplifies our philosophy,” says Cummings. “We find talented, ambitious people who want to build something, and we help them build it.”
Cummings is careful to note that it's not about building huge practices—it's about building successful ones. “Some people want to build a bigger group, and some people are happy with a six-person group,” he says. “It's up to those individuals, and how we can help them build the practice they want.” Cummings says that not all RDK employees aspire to start groups or be group leaders. “Some of our CAD designers are very happy working as CAD designers,” and that's just fine, too, he says.
RDK's clients are also reaping the benefits of the firm's incubator model. “Larger firms have the resources, but clients can get lost [in the shuffle],” says Cummings. “What our structure accomplishes is that clients get a lot of attention from senior staff [of the business units], and they get great communication and coordination with all the resources of working with a large firm.”
—Jay W. Schneider, Senior Editor