By Dennis A. Paoletti, FAIA, SMP

In 1990, three individuals spun off from a family-owned construction company in the San Francisco Bay area to start a new firm of their own. With limited financial resources, they hired a business consultant-and took his advice. His advice was to focus first on creating an organizational structure that reflected what was an as-of-yet undefined culture, rather than focus on getting work and making a profit. The advice would provide the foundation for meteoric growth at one of the fastest-growing construction companies in the United States.

Few firms in the design and construction industry have intentionally set themselves up as distinctively as DPR Construction. Its organizational structure and core values would be unique for any corporation, let alone for a construction company. What it has found is pent-up demand for a new way of treating clients-its "raving fans," as they are called.

Nine years later, DPR has grown to almost 2,000 employees and $1.3 billion in revenues. (It was just hired to construct DreamWorks' new headquarters in Southern California.) Recently, CEO Peter Nosler-the "P" in DPR-talked openly with Dennis Paoletti, head of Paoletti Associates Inc., Acoustical and Audiovisual Consultants, about DPR's mission, history, core values, and success strategies.

Peter Nosler (PN): The secret of our success has been multifaceted.

First, it's our culture-how we relate to our customers. We listen and take very seriously how we will address their needs. And second, our idea is that a flat entrepreneurial organization is the way to meet the first objective. This organizational structure has allowed us to attract the best and brightest young talent to our firm.

We also have focused on determining to which customers we want to take our strategies. We decided very early that we would do work only for customers with whom we were highly qualified to work-for example, the high-tech industry. We also decided we would work only with corporate clients and take on no public work.

PN: Our biggest failure is when we fail to follow our own strategies. This happens when we fall back to the common contractor mantra, "I know best," and don't listen to the client.

PN: No, it hasn't. Virtually every employee can tell you what our corporate philosophy is, what our mission statement is, and what our core values are.

Our mission is to be a truly great company by the year 2000, and we didn't leave to chance the interpretation of "truly great," so we have a dozen of what we call tangible images. Interestingly enough, probably one of the least significant tangible images is that we would have a feature article written about us by a national business journal, so thank you, Fast Company.

PN: Yes. One of our employees had heard Jim Collins speak. We recognized that it would be really great to have someone help us in the start-up process. Jim Collins is one of the most dynamic and brightest people I've ever come across. He helped us in that process, for a price that we couldn't afford, by the way. Our bank account was diminishing very fast, and to have Jim spend a day with 20 of us to work that out was a little bit scary.

Since that time, Jim Collins and Jerry Porras, both from Stanford, wrote a book called Built to Last. It's required reading of all DPR employees. Nice title, although it has nothing to do with buildings. Built to Last really is a reference on "what is it that makes great companies great." They devise a very interesting research approach to answer that question. The results are very surprising. They aligned very closely with who we are and what we're all about.

One of the attributes of the great companies they portray in the book is that you don't ignore the bottom line, but it may not even make the Top Ten List of important issues for the company. If you focus on employees, if you focus on customers, you are mindful of how you go about making changes in your organization. If you do those things, the bottom line usually is not in any great jeopardy, and that's been the case for us.

PN: Did you have a "Plus Delta" at the end of your meeting?

PN: It's really just an assessment of the meeting: the pluses and minuses. What are the things that went well? Did we accomplish our goals? Did we stick to our agenda? Did we start on time? Did we end on time? The Delta is: What things does this group need to focus on? Did we have too many sidebar meetings? Did someone keep talking while someone else was trying to make a point?

PN: Since its inception, we've had probably an average of 300 or 400 ideas per year. What happens is, the first few years, you get what we call "low-hanging fruit"-the easier stuff-and then it gets harder and harder to really work at it. In any given year, probably a third of the ideas are either just impractical or the cost benefit is questionable. It may just be an idea that isn't worthy of going any further. A third of the ideas are neat ideas, but they sort of get a second ranking. A third of the ideas are things we really want to do. We try to incorporate them, if not on the project level, then at the regional office level, and hopefully a lot of the ideas will become companywide policies.

PN: One of our best ideas from earlier this year was related to safety. We spend a lot of money managing safety issues on our projects. Foundation reinforcing steel for example: When they pour the footings for a building, you will see a bunch of rebar sticking straight up in the air, maybe three or four feet, and they've got orange caps on top to protect from impalement if people fall on them. A fairly large project in Sacramento had $4,000 set aside to manage the rebar caps. Our project engineer, two years out of school, said, "You know, couldn't we accomplish the same thing by just putting a hook on the end of the rebar?" The engineer had no problem with it. The engineer went into the sub and asked, "How much will it cost to have the rebar sent with a hook on it?" And it was $400. So that has become a company standard.

PN: Three years ago, we adopted Lotus Notes for database management along with a variety of other issues in the company. Our customer relational database really drove the issue. It's a little embarrassing to have somebody in Redwood City call a senior person at Hewlett Packard and then have someone from our Austin office call the same person and ask the same questions. We recognized long ago we needed to have good, accurate records of the people with whom we deal.

PN: The important communication is with all employees. Ron Davidowski (the 'R' in DPR and another co-founder) and I visited all 11 offices in 3 months last fall. That meant a day at each office. We visited projects, we met with the management team, and timed it for when there was a quarterly company meeting. We call it part of our training program.

Our employees are exposed to about 110-120 hours of "training events" a year. They are expected to be present at two-thirds of those. One of those events is the quarterly company meeting, which is well-attended. These meetings are really our two-way communication venue. About half the meeting is an information transfer to the attendees. The second half is questions from the floor. These meetings usually have 80-120 people. We've done this for years. It became necessary. These are meetings where the principals are there as well as the leaders of that regional office. Folks are quick to ask questions that, probably at any other company, the management would wither at the thought of publicly answering.

PN: Oh, at least. One of the three of us is at every quarterly company meeting. Last year we divided the regional offices up. I was focusing on Portland and Seattle. Doug Woods (the 'D' in DPR and another co-founder) was focusing on Richmond and Austin. Ron was focusing on Phoenix and Los Angeles. Executive Vice President Eric Lamb was focusing on San Francisco and Sacramento. I was in Portland and Seattle virtually every week. So I was on the road three days a week, week in, week out. This year we're taking a different approach. I'm focusing on pre-construction activities at all 11 offices. Doug is focusing on interface with our customers at every office. Ron is focusing on business development at every office. We're now changing our mode of interacting with our folks. We think this new approach will be better.

PN: If you go back to our Continuous Improvement Program, we have what we call "Seven Critical Success Factors" in the company. One of the critical success factors is meeting our construction milestone schedule commitments. We have a very organized way of measuring our performance.

Right now, our company average is 5.5 days later than the promised date. That's been an improvement over the years. That improvement doesn't just happen accidentally. There are organized efforts trying to improve that particular element of our company's performance. We have Critical Success Factor champions at each of the regional offices, and those champions get together periodically companywide. Some of the task forces have a number of people on them. We have another program called "Zero Punch List," which is really our quality assurance program. That has had enormous success.

We have to be very careful with it, though. In Built to Last, they introduce the concept of BHAG: Big, Hairy, Audacious Goals. It really is audacious to a lot of people in our profession to say "zero punch list"-they think it's an impossibility. It's not.

We've done well over 100 projects where the owner, the architect, and the consultants working with the architect have agreed to put their name to a document that says: "DPR and the team are committed to substantial completion by this date." Period. Unqualified. Did it happen just because you got lucky, or did you put a big force of people out there in the last two weeks? No. It starts back in the design phase. You have to have a mindset of defining what quality is expected. Quality really means, "Are we getting rattles in the diffusers? Are the doors supposed to have newts on them?"

PN: You bet! The real issue is, how do we communicate? We have 70 estimators in the company. As a group, they get together at least once a year in what we call the "All-World Estimating Meeting." We have many folks coming to Redwood City and San Diego (our two biggest offices) to spend a day or two, or a week, to learn how to run Timberline or how to run meetings. A variety of the training is individualized.

PN: We've found it's much better to have training directors at each office. Then those folks communicate with each other. Our most senior training person, who happens to be in Redwood City, does act as a mentor, if you will. We want them quickly to be able to operate independently. The issue is what's good in Denver doesn't necessarily match what needs to be done in Austin. Part of it is geographical location and part of it is just the age of the office. The Redwood City office is going to be the ripe old age of nine years pretty soon. It has a different set of issues than in Portland, which is three years old, and a lot different than what is happening in Denver, which is two years old.

PN: The three of us (Peter, Doug, and Ron) got together and were quickly joined by another 20 or so folks. This was a group with a passion for building things. Laboratory work, pharmaceutical work, microelectronics work, health care work, and challenging or demanding high-end office space were the projects we truly loved doing. We wanted to focus on those areas first. We didn't really want to get into residential building or retail, even though one does those projects to keep groceries on the table.

PN: Right. The other thing was we were really motivated by having customers feel that they got something extraordinary, to the point that they really wanted us to come back and do their next project for them. The only place you can truly have that kind of relationship with your customers is in the private sector-corporate customers.

These four or five market areas I've described-as opposed to doing public work-were the focus we established. We also were committed to the idea that we would take our focus to a wide geographical area. The majority of the contractors we've come to know-Turner being an exception-have been slow or hesitant to branch out. If you're a really great microelectronics builder, why not try to serve your customers, many of whom are the same customers, wherever they are?

PN: Each region is encouraged to understand what is best for them-best in terms of the talent they're able to attract to their office and also what is strong in that particular geographical location.

PN: Not really. We've had the marketing philosophy that the people who deliver the services are the best ones to market it. I'm really talking about business development, work acquisition. The best folks to do that are the folks who deliver the services. That doesn't mean that, as an office reaches a certain size, you can't have a person dedicated to understanding what's coming up in the marketplace, who the owners are, and what team they've begun to assemble.

As an office gets to a certain size, it makes sense to have someone who's well versed in those skills to do nothing but that. In fact, here in Redwood City, we have some folks who do just that. But we still rely almost exclusively on project managers, estimators, and other folks who deliver the services to be the points of contact with a potential buyer of those services. We just don't rely on people who are exclusively business development folks to do that. We've found it just doesn't work very well, or as well as we would like it to.

In terms of marketing, we have a fairly strong commitment to projecting the image of who we are and reaching out to new people. We've spent a fair amount of money on materials and activities that, in fact, move people into greater degrees of awareness of who we are and what we're capable of doing. We've had a lot of campaigns that keep our name in front of people.

PN: I think our mug campaign of two years ago was probably not as successful as we would have liked. We put about 20,000 mugs in various folks' hands. I see them on owners' desks, and it kind of encourages me. Was it worth all the effort to put those out there? I think it's questionable. We've long since abandoned direct advertising as a fruitful way of getting our message across. What we rely on, pretty heavily, is print material and Internet material. Our goal is to have print material in a potential decision-maker's hands on a monthly basis. We have the DPR Review which comes out four times a year.

PN: As you read in the Fast Company article, part of our marketing success has to be our uniqueness. First of all, that's something that we like. It's sort of true of anything: We're unique because we want to be unique, not because it sells. It happens, I think, for a lot of the kind of customers we want to work with. They appreciate a contractor who looks and acts fundamentally different from most contractors. It's been a happy union of customer appreciation and what we would like to do, and I think it will probably stay that way for a while.

PN: I look at the marketing budget every year and decide. For example, the reorganization of the DPR Review a couple of years ago. I think we spent probably upwards of $20,000 doing nothing but just changing the image of that particular quarterly publication. Content was not radically changed, but its appearance was. It's very difficult to get any meaningful measure of that. I think we've looked at some advertising kinds of issues where we've spent thousands of dollars and tried to assess, "How many callers did we get as a result of that?" and have generally concluded the payback was not very sound. We never advertise in a business journal or anything like that.

PN: Our pure marketing budget is more than several hundred thousand dollars a year. It doesn't compute as a percentage. I mean, you know we're $1.2 billion divided by $300,000-it's a pretty small percentage.

PN: Yes. I am differentiating marketing from business development. We're just dealing with image material we develop and place in the hands of potential customers.

PN: Yes. Over the past two years we've had a couple of opportunities to do foreign work. I'm sure at some point we'll be successful at doing that. I think it will probably be a U.S. microelectronics company that sees an advantage to having us do a project they want to do in Asia.

PN: We will use alliances and other proven approaches to successfully deal in foreign countries. We're not going to go striking off on our own and paying the big prices some other folks have paid to learn how to serve their customers in a foreign country.

PN: Not easy. We have one son who is grown and self-supporting. My wife travels with me on occasion. It's a constant struggle to not be gone too much. It's worked out in my case. I'm not away too often, a couple of nights a week is pretty typical. Doug is away from home more than that, and Ron is probably about the same. It doesn't seem onerous. Historically, for me, I've been willing and my family has been very tolerant of me putting in some pretty long hours during the week, with a periodic commitment to being a soccer coach and stuff like that. Weekends have been pretty sacred for my family, and I've been able to pull that off.

PN: Part of it is that we hire really bright folks. Our approach, we think, is quite flat. It's a fairly lean management style, which places a lot of emphasis on individuals managing their own domains with a different kind of supervision. The kind of people who really need a lot of feedback: They're not going to thrive here. The folks who thrive here are the ones who really want to take on all the responsibility they can handle, want to try new ideas, want not to be told "no," want to explore some new and different approach, and want the opportunity to take on new responsibilities. Those kind of people really do well here. Our job is to make sure we don't bring on folks who don't understand exactly how we operate.

That's where the Continuous Improvement Program has really been a laboratory, if you will, of people who have an idea of how to do something in a better way. We get a group of folks to study the process, develop an implementation plan, and follow through on executing the plan-and they lead that process.

We have a terrific individual who's an estimator. There was a need to look at a group of ours at work in a particular domain in mechanical estimating. We wanted a workshop and some specific goals and objectives that would be accomplished at this workshop. This person was an absolutely outstanding estimator but had never really pulled together folks from all over who were expected to come here with high expectations and were coming long distances. We wanted a high-content session. It was a real learning experience. Fortunately for him, he really learned a lot about what it takes to be successful. It was a successful meeting, and so it really reinforced a leadership component in him that had never been developed or challenged before.

PN: Almost accidentally, we went out on our own because the door was open to us. Three of us were working at another organization, where the transition was for the senior people who had been delivering to provide the leadership for the next generation. Instead it went to the children of the owner. That was just unacceptable. We weren't in any way condemning the freedom of choice, if they had to do that, but it just wasn't for us. So, as we headed for the door and bumped into each other on the way out, we said, "Gee, maybe we had better try something on our own."

So we started the DPR Construction company as a reaction to a circumstance we didn't like. That gave us the freedom then to really start.

PN: In order to be successful, and achieve our mission, we must reach alignment with our goals and objectives. We must hire people who can quickly adopt and adapt to new ways of doing business. It's about cultural transformation.

Headquarters Redwood City, Calif.

# U.S. Offices 11

Total # Staff 730 full-time employees
1,190 union laborers

Total # Dedicated Marketing Staff 20

Total Gross Revenues

1997 $890 million

1998 $1.3 billion

The manner in which meetings are conducted is illustrative of DPR's creative perspective. These ground rules are posted on a wall in each DPR conference room:

This is a safe zone.

• No rank in the room.
• Everyone participates; no one dominates.
• Help us stay on track.
• Focus on the process.
• Listen as an ally.
• One speaker at a time.
• Be an active listener.
• Give freely of your experience.
• Actively agree, only if it makes sense to you.
• Anything you write on a flip chart is spelled correctly.

• Encourage having fun.

Dennis A. Paoletti, FAIA, SMP, is president of Paoletti Associates Inc., Acoustical and Audiovisual Consultants, based in San Francisco, Calif. He also serves as chairman of the executive committee of the Global Design Alliance. A veteran SMPS member, he was formerly president of the San Francisco Chapter and served on the SMPS National Board of Directors. Dennis can be reached by telephone at 415-391-7610 or e-mail at paoletti@csi.com.