Changing the DNA of a major construction firm Swinerton Builders

For this book, we interviewed Mark Gudenas, National Marketing Director of Swinerton Incorporated, an employee-owned general contractor headquartered in San Francisco.12 In 2005, Swinerton ranked 18th among general contractors in the US with about $1.2 billion in revenues.13 Gudenas spoke of the long evolution at Swinerton toward becoming focused on green building. This story can be used by any design, development or construction firm to accelerate their progress toward embedding sustainability in the fabric of the company, as Swinerton has done.

Swinerton Builders constructed what can arguably be called one of America's first green buildings in 1970 - the Weyerhaeuser headquarters campus in Federal Way, Washington. With extensive green roofs, natural daylighting and a man-made lake created for passive heating and cooling, this was a pioneering effort that turned out great. Swinerton went on to build the Pacific Bell campus in 1985 in San Ramon, California that featured the same green building features as the Weyerhaeuser headquarters. Then in 1997, Swinerton Builders worked with William McDonough +Partners architects to create the Gap Inc. campus in San Bruno, California. This project put green building in the spotlight - and firmly rooted green at Swinerton Builders.

Swinerton started attracting new employees because of what they heard about the company's green building projects, the new techniques that it was introducing into the building process and the growing interest of their clients in pursuing sustainable practices in building their projects.

In 2001, Swinerton took out its checkbook to demonstrate a corporate commitment to green practices. Having long recognized the importance and value of construction and design practices that conserve energy, water and other resources, reduce waste and promote healthier (and more productive) built environments, it was only natural for the company to apply these principles to our new corporate headquarters at 260 Townsend Street in San Francisco. Swinerton decided to pursue LEED Gold certification for the building as a pilot project under the USGBCs new Existing Building category.

Design decisions enabled Swinerton to beat Title 24 (California's stringent commercial building energy code) by more than 12 percent on a 20-year-old building. A state-of-the-art, digital building management system continuously monitors temperature, CO2 and humidity, maximizing outside air and running the HVAC systems only to meet actual rather than anticipated demand, thus saving over 30 percent on utility bills. New high-efficiency light fixtures with motion sensors were also installed.

Swinerton received a LEED-EB Gold certification from the USGBC, and the greening of the 260 Townsend office become an exemplary case study for LEED-EB, with tours coming in on a weekly basis. Above all, the true benefits are not only in the conservation of resources and energy savings but in the healthy environment that Swinerton and the architect created for the employee-owners who work in the building.

Gudenas says, "We now have a formal Swinerton Green Board of Directors, a full-time Corporate Sustainability Manager, extensive green training programs active in every single office and a huge competition between Division Managers to see who can boast the largest increase in their number of LEED APs by June 1st each year. Our chairman, Gordon Marks, has set the goal of having 250 LEED APs on board by our next Green Building Summit in April 2008 [up from about 50 in early 2007]."

"Green building and sustainable design permeates virtually all of our markets and we bring it to the table at every opportunity. I think that it's how it affects the owners within specific market segments. As we evolve our intelligence in sustainable design and green building - and can then present that intelligence to our colleagues and clients - we witness growing interest, understanding and adoption. For example, we are finding that clients in the hospitality market are extremely interested as it favorably positions their property. We just completed the new Orchard Garden Hotel in San Francisco, and it's become the first LEED-certified hotel in California. As a result, the hotel has received tremendous acclaim in the travel press both locally and internationally. We're now working with the owner to green their existing Orchard Hotel [also in San Francisco] to LEED standards."

Education is another market that is very active in green building. Swinerton is active at the new University of California, Merced campus; the Los Angeles

Community College District (a $2.1 billion Green Building Program); Humboldt State University and others currently in preconstruction.

In terms of winning new business, Gudenas says, "since we have been building green for nearly four decades, we have an impressive resume of green buildings -and the reviews from our green clients are great, with many of them repeat clients".

We work hard on an ongoing basis to increase our intelligence in green building techniques and practices, and share the lessons learned and new data throughout all of our offices. That makes every one of us smarter and faster and enables us to bring that to our RFQ (request for qualifications) and RFP (request for proposals) responses. Our Green Team participates in the client sales presentations, and clients recognize the expertise that we bring to their projects.

On the firm's green focus being rewarded by existing clients, Gudenas says, "We found that after we built Gap's San Bruno campus with William McDonough +Partners, Gap awarded Swinerton the contract to build their corporate headquarters on the Embarcadero in San Francisco, and we recently completed the tenant build-out of their new Old Navy offices in the new Mission Bay neighborhood in the city."

In terms of future growth, Gudenas says that the firm believes that "the faster that we can educate the owners and developers who are looking at new projects in the environmental and economic benefits of building green, the greater the increase we'll see in sustainable projects. The data is here. We just need to distill it down so that we can deliver the appropriate information on increased building performance, including LCA, increased worker productivity and healthier living environments, and increased valuation of spec offices built green in a manner that address the specific requirements of each individual client."

In terms of new marketing materials, the firm published the Swinerton Green Book, featuring comprehensive project case studies of all of its green buildings. They're gearing up for a third printing, as demand has been tremendous, and they will add 20 new case studies in the next edition.

One marketing innovation stands out. For Gudenas, "more than anything else, our Swinerton Green Building Summits have positioned the company as a leader within the industry. The Green Building Summit in 2003 brought together thought leaders who were pioneering the sustainable design and green building movement with owners and developers who were either building green or considering it. Clients who attended that first Summit took away valuable, new intelligence that they actually applied to projects that Swinerton built for them.

The second Swinerton Green Building Summit in 2006 brought back many of the speakers who delivered great insight during the first Summit, plus new participants who brought intelligence on New Urbanism, green building valuation and case studies that illustrated the monumental progress that had taken place in just three years. We created a DVD of the 2006 Swinerton Green Building Summit to share all of the great presentations with those who did not attend. As a bonus only found on the DVD, we interviewed eight of the top presenters in a fireside chat setting. Those interviews provided personal insight and vision, entertaining stories and have proven to be the most popular - and watched -feature of the DVD." The firm plans to host a third Swinerton Green Building Summit in April 2008. For those clients and associates who missed the 2006 summit, the firm hosted a pair of one day Swinerton Green Building Forums in May 2007 in Southern California.

Firm leadership has been strongly engaged since at least 2001, when the company committed millions of dollars to green its corporate headquarters, a move sent a louder message than anything else. At the beginning of 2007, the Swinerton Inc. Board of Directors voted to create the Swinerton Green Board of Directors and officially create the position of Corporate Sustainability Manager. They issued a mandate to reduce the company's carbon footprint by 15 percent, and issued mandatory green housekeeping practices for all of their offices. The Swinerton Board of Directors made the 2007 Swinerton Green Initiative the company's top priority.

After 10 years of activity and commitment, Swinerton is not resting on its laurels. Their business is too competitive for that. The firm is evolving how it deals with sustainability and has now made it the top priority for actions in 2007. Each design, development and construction firm can see in this brief rendition of Swinerton's path toward sustainability some actions it can take to become and stay competitive in this very dynamic marketplace.

The people problem

No discussion of green building marketing strategies would be complete without a fuller discussion of the "people problem." Without talented people committed to sustainable design, most firms can't grow and can't take full advantage of their opportunities in this growing segment of the design and construction industry. I have heard many times in the past few years from principals at design firms that "we have the business, but just can't hire the people to perform it."

So, most design firms are experiencing the best of times and the worst of times right now: after a brief recession in the early 2000s, in 2007 commercial and institutional business is booming in most market sectors and most parts of the country, but some companies are turning away profitable work because they can't hire enough good people. This situation has been developing over the past 10 years, alongside the tech-boom-fueled growth and then recession of the US economy, but most firms have not responded with a comprehensive strategy to address the people problem (one reason, because the brief construction recession of 2002 and 2003 made it easier to hire and keep designers).

What's going on? Most design firm principals today are Baby Boomers, those born between 1946 and 1964, making them 43 to 61 years old in 2007. For most Baby Boomers, the salient fact of their working lives has always been "more people than jobs." Baby Boomers have been competing with their age cohorts for most of their working lives for a relative scarcity of jobs. As a sign of this, real wages in the US did not increase for most of the period from 1973 (when the Boomers first began to be a major presence in the workforce) until well into the early 1990s, despite the prosperity associated with the 1980s.

During the late 1990s, the record-breaking US economic expansion created far more jobs than there are people to fill them. One reason for this is the Generation X cohort, born between 1965 and 1978, between 29 and 42 in 2007. Not only does this group have vastly different expectations for employment, but it is much smaller than the Boomer group in absolute numbers. As a result, real wages for this group have started to rise again, for the first time in a generation, and the balance of power between the workforce and firm management will continue to shift dramatically, even though there were layoffs in many design firms during 2002-2003 building industry recession.

Consider the demographic changes afoot, shown in Table 1 1.1. By the year 2005, the population in the 25-34-year age groups (mostly Gen X), which in 2000 had already fallen 9 percent in absolute numbers from 1995 levels fell another 2.4 percent. This is the group of workers on which professional firms depend to "grind out" the daily work. The next age group, 35-44 years old, the group which manages most of the work in a professional firm, and which rose from 1995 to 2000 (reflecting the last of the Boomers), fell 5.6 percent by 2005 and an additional 8.8 percent by 2010 compared with 2005 levels.

Let's make some sense out of these dry statistics: By 2010, the people available to manage the creative daily work of a firm (35 to 44 year-olds) will fall to a level six percent below that of 2005, 2.5 million fewer people. However, by 2010, the cadre of people available to perform the daily work of a firm (25-34 years old) will increase only by 2 million people over 2005 levels.

One might think: OK, we can make up a 10% shortfall in senior technical workers and project managers. But look at what's happening to the economy at the

Table 11.1 Demographic changes, 2000-2010 (millions)14

Year/Age Group

2000 Number of Workers

2005 Number of Workers vs. 2000

2010 Number of Workers vs. 2005

18-24

26.3

28.3 ( + 7.6%)

30.1 (+6.4%)

25-34

37.2

36.3 (-2.4%)

38.3 (+5.5%)

35-44

44.7

42.2 (-5.6%)

38.5 (-8.8%)

same time. Compounded annual growth rates of 3-4 percent make the requirement for workers even greater than today. Consider a 3.5 percent growth rate, with 1.5 percent increases in productivity, leaving a need for 2 percent more workers each year, or 10.4 percent more between 2005 and 2010. In comparison with 2005 staffing levels, by 2010 that growth means that our worker shortage will be potentially be 19 percent in the 35-44-year-old range and 4—5 percent in the 25-34-year-old range.Yet the average annual amount of work will increase by at least the rate of growth of the gross domestic product.

What are the issues for firms? There are three major ramifications:

1. Business strategy will have to focus more on profits and less on internal growth.

2. Marketing strategy will become hostage to the people problem.

3. Human resources will become the most strategic issue for professional services firms.

Business strategy cannot be predicated solely on organic growth by adding more people. More growth will take place via acquisitions and mergers. Businesses will have to continue the early 2000s trend of focusing on key customers and aiming at profitable long-term relationships, with fewer clients and fewer markets covered. In an era of project-type specialization, the "we do it all" small firm may be headed for the "dustbin of history." Business strategy will also rely on outsourcing more and more services. Engineers and designers in less developed nations such as India and China and in work-short economies of Eastern Europe may do the CAD work each evening, after US-based designers have marked up the drawings earlier that day. With this happening, we'll move to the 16-hour and maybe even 24-hour design work day, all enabled by computer technology and the Internet. When outsourcing comes to professional services in a big way, it will change how firms are organized, with today's leaders much more in the role of account executives and project coordinators than project designers.

Marketing professional services is highly dependent on bringing outstanding people to work on the client's problems. With fewer people in the key age ranges, marketing strategy will have to focus less on increasing revenues and more on targeting long-term relationships that have a strong lifetime value associated with each client. Marketers will have to become even more involved in creating and selling the image of the firm, since that image will be part of the new employee recruiting effort. There may be a way to bring technological improvements and systems to bear on design and construction problems in place of people, but these typically take more than a half-decade to develop, test and bring into general practice. One example is the work of some architects to move directly from CAD-generated designs into shop drawings for construction, leaving out the blueprint stage of design entirely, as well as the move toward building information modeling (BIM) systems that will leverage design resources.15

Human resources will become elevated as a strategic and management issue. I foresee firms adding an Executive Vice President, Corporate Development role that will have command over and responsibility for both marketing and human resources. Every possible means will have to be used to recruit, retrain and retain key people. In my view, these are the "3R's of the New Economy": recruitment, retraining and retention. Keeping and continually retraining a firm's good and average performers is the only viable alternative to constant recruitment. A strong commitment to sustainable design will be one of the primary ways of attracting and keeping these employees.

The good news: if a firm can hold on for the next 5 to I0 years, there is a new generation of people, Generation Y, that is nearly as large as the Boomers, and just coming of age. Called by demographers the "Echo" of the Baby Boom, these "Echo Boomers," now under 29, will begin to swell the ranks of younger workers over the next 5 years, as the numbers of those in the I8-24 age group will rise by 14 percent by 2010, compared with 2000 levels. This group is going to be even more focused on their careers than the Gen X group, but paradoxically will demand even more flexibility in scheduling, lifestyle and workstyle. They are completely Internet-literate and have more information at their fingertips than any of us ever had. In addition, they are passionately committed to the environment and will want to work for firms that elevate sustainability to a core strategic value.

To summarize: our economy and our professional service firms are facing unprecedented people shortages, and executives must begin to commit significant amounts of management time to preparing design and construction firms to look a lot different 5-10 years from now.

The 3R's of the New Economy will become a mantra for all professional service firms: recruit, retrain and retain as many good people as possible.

Notes

1 Interview with J. Rossi, Burt Hill, April 2007; ranking based on "Giants 300," Building Design & Construction Magazine, July 2006, p. 59.

2 Philip Kotler, Marketing Management, 9th Edition, 1998, New York: Wiley, p. 473.

3 Interface Engineering, Inc., www.ieice.com.

4 For a fuller discussion, see the author's article in Environmental Design & Construction Magazine, March 2003, www.edcmag.com.

5 Consulting-Specifying Engineer Magazine [online], www.csemag.com/article/ CA6426830.html?text=2006 + and + ohsu (accessed April 18, 2007).

6 "Giants 300," Building Design & Construction Magazine, July 2006, p. 43.

7 "An Interview with Russell Perry," Marketer, published by the Society for Marketing Professional Services, www.smps.org, April 2007, pp. 12-15.

8 Interview with David Younger, Lionakis Beaumont Design Group, www. lbdg.com, March 2007.

9 Jennifer Wehling, "The Sustainable Design Firm: Floor Plans to Business Plans," Presentation to EnvironDesign 10, Toronto, April 26, 2006, furnished by the company.

10 Russell Perry Interview, op. cit.

1 1 Oregon Natural Step Network, www.ortns.org/documents/ seracasestudyfinal_000.pdf, document prepared in January 2005 (accessed April 18, 2007).

12 Interview with Mark Gudenas, San Francisco, by email, April 2007.

1 3 "Giants 300," Building Design & Construction, July 2006, p. 59.

14 US Census Bureau, P25-II30, Middle Series, www.census.gov (accessed April 19, 2007).

15 Cadalyst [online], http://aec.cadalyst.com/aec/article/articleDetail.jsp?id= 133495 (accessed April 28, 2007).

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