There are several strong training programs and operating frameworks designed to help principals develop their skills and expand business. Maximizing the effectiveness of these programs requires principals to first shift their mindset—from designing buildings to building businesses.
In architecture and engineering firms, leaders often progress from technical roles to project management and eventually into business leadership. At times, this transition can feel abrupt—where someone moves from designing a marquee project to being responsible for building and running a business unit almost overnight. While the industry offers no shortage of training programs focused on skills and processes, these tools are far less effective without first developing the right business mindset.
Organizations like Harvard Business School and McKinsey & Company emphasize that true development depends on the combination of mindset, skillset, and the process to apply both. Teaching skills and knowledge without addressing mindset can limit—or even distort—the learning process. Many leaders have seen this firsthand: employees attend management training, only to return with far less impact than expected.
This is because most professionals in A/E firms are conditioned over years to think like designers. Their mindset is shaped by repeated project-based decisions that prioritize delivery, precision, and immediate outcomes. When promoted into business leadership roles, they often continue to address visible symptoms rather than the underlying drivers of performance. The result is predictable: the same issues reappear in different forms, affecting profitability, growth, and ultimately firm value.
What separates high-performing firms from those that continually tread water is a principal’s mindset—the discipline to understand root causes and the willingness to break patterns that no longer serve the business. It requires thinking like a builder of an enterprise, where each decision compounds over time, rather than simply a designer of individual projects. This isn’t theoretical. It shows up in everyday leadership decisions—especially when the pressure is highest.
A Typical Scenario: A Familiar Crossroads
At my former company we would quiz emerging leaders with the following scenario:
You are a division leader for a team with:
- Breakeven financial performance
- A depleted backlog
- Mounting pressure to keep staff utilized
An opportunity appears for a project large enough to:
- Keep the entire team busy for a year
- Stabilize short-term utilization
But with one major catch:
- The project must be priced at cost—no profit
At first glance, the decision feels almost obvious. Idle staff is expensive. A full pipeline—even at breakeven—feels safer than uncertainty. But this is precisely the kind of moment where leaders either repeat past mistakes or break the cycle.
The Surface-Level Decision
If you look only at the immediate problem—low backlog—the project seems like a solution because it:
- Fills the gap
- Maintains team continuity
- Avoids layoffs or difficult conversations
From a short-term operational perspective, it checks many boxes.
But this is where many young leaders often stop their analysis. They solve for today’s constraint without asking a more important question:
How did we get here in the first place?
When an architect or engineer is asked to design a new dormitory, their focus is on delivering the design—not questioning why the space is needed or what financial return it will generate. And rightly so—that isn’t their role.
But when you’re running a business, those become the most important questions to ask.
Creating a Root Cause Mindset
A root cause mindset forces a deeper level of thinking. Before asking: “Should we take this project?” It asks:
- “Why are we dependent on this type of project in the first place?”
- “What led to a depleted backlog?”
- “Why is breakeven performance acceptable?”
This shift changes everything. Because once you identify the root causes, the decision is no longer just about one project—it becomes about whether you are reinforcing or correcting a pattern.
In A/E firms, situations like this often stem from a few recurring issues such as:
- Weak Business Development Discipline: The backlog didn’t disappear overnight. It eroded due to: inconsistent client engagement, reactive rather than proactive pursuit strategies, over-reliance on a small number of clients or project types, etc.
- Poor Project Selection History: If a division consistently operates at breakeven, it may be accepting: low-margin work, poorly scoped projects, clients that prioritize cost over value, etc.
- Lack of Pricing Confidence: Discounting to cost is often a symptom of: fear of losing work, lack of demonstrating differentiation, inability to articulate value, etc.
- Capacity Misalignment: The team size may not match: market demand, core areas of expertise, strategic growth priorities, etc.
The Real Risk: Repeating the Pattern
If the root cause isn’t addressed, it will continue to be perpetuated through short-term, band-aid decisions. Building on a system with inherent flaws only compounds the problem over time. In this example, taking a zero-profit project does more than fill backlog—it establishes a precedent. It reinforces:
- That the firm is willing to work at cost
- That utilization is prioritized over profitability
- That short-term relief outweighs long-term strategy
Even worse, it consumes:
- Time
- Talent
- Leadership attention
All of which could be deployed toward higher-value opportunities or structural improvements. In essence, the decision doesn’t just solve a problem—it locks in the conditions that created it.
What Principals Should Really Consider
A strong business leader has much more to consider than utilization. They must evaluate the decision across multiple dimensions, for example:
- Opportunity Cost: What are we not doing if we take this project?
- Signal to the Organization: Profitability is optional?
- Client Positioning: What precedent does this set externally?
- Financial Reality: Is breakeven truly breakeven? Often, “at cost” is overly optimistic.
- Strategic Alignment: Does this project or client move the division toward its long-term goals?
The Hard Truth: Avoiding Pain vs. Creating Value
Decisions like this often come down to a simple tension: Avoiding short-term pain (idle staff, tough conversations) vs. Creating long-term value (profitable growth, strategic positioning). This simple surface approach my feel like progress—but it can actually be a form of avoidance of greater challenges such as :
- Restructuring the team
- Addressing underperformance
- Fixing business development gaps
- Raising pricing discipline
Once the root cause of the issues is identified and corrected than the simpler questions answer themselves.
Final Thoughts
Adopting a business mindset—one that prioritizes consistent operating systems and a deep understanding of root causes—is a fundamental leadership requirement. It represents a subtle but critical shift from the mindset of completing individual design projects.
Once a principal develops this perspective, they can more effectively apply new skills and implement processes that accelerate and strengthen overall business performance.