THE LIFE AND DEATH OF DESIGN FIRMS
Like living creatures, design firms have a life cycle. They are born, grow, stagnate and eventually disappear except in memory and in the structures and work they leave behind. In my August 2018 C+S magazine project management column I wrote: "If it isn't broken, don't fix it." This trite cliché is often used as a justification for inaction by firm management. Unfortunately, it is total nonsense. If we lived and worked in an unchanging world, there might be some logic to the concept, however, our world is very dynamic. The construction industry in particular is subject to the constant winds of change." Figure 1 below excerpts from that article highlights some of the factors impacting our industry.
SOME FACTORS IMPACTING DESIGN FIRMS
* Building Technology Changes
* Office Technology Changes
* Regulations and Codes
* Societal Changes
* The Marketplace For Engineering Services
* Project Financing
* Project Delivery Approaches
* The Economics of Running Firms
* Staffing Issues
* Fee Issues
* The General National and International Economy
There may be many other factors affecting specific design firms, such as the untimely demise or illness of a founder or key staff member, a divorce, a natural disaster, or a political upheaval. One issue currently having a major impact on firms is the shortage of trained, capable staff. The Great Recession caused many to leave the industry, others decided not to enter, and the training of those who remained was stunted. Current high workloads are forcing design firms to evaluate alternatives to traditional project delivery methods. In particular, there is a huge shortage of trained, experienced project managers creating great pressure on all staff to meet client needs.
All of these issues are impacting engineering and other design firms. As a result, the life cycle of design firms is fairly straightforward to graph.
ORGANIZATIONAL LIFE CYCLE CURVE ______________________________________________________________________________
An article in the December 1995 issue of Architecture magazine was titled: "TAC's Demise." Quoting from the article: "On the eve of its 50th anniversary in April, The Architects Collaborative (TAC) was far from celebrating--the Cambridge, Massachusetts, firm was on the verge of bankruptcy. Boston's BayBank foreclosed on TAC on April 7, giving the firm's 55 (remaining) employees one day to remove their belongings from 46 Brattle Street--the building TAC designed for its offices in 1964."
"The nation's architectural establishment was shocked as word spread that TAC had closed its doors. After all, TAC was one of the most prestigious firms in the U.S., founded in 1945 by Modern master Walter Gropius. In 1964 TAC won the AIA Firm Award; in 1973 it designed the national AIA headquarters in Washington. By 1980, TAC was among the nation's largest practices, employing 380 people and spawning some of Boston's best firms. Why did it fail?"
"The simple answer is: Too much foreign work and too much debt. In recent years, more than half of TAC's work was overseas; the firm focused heavily on projects in Iraq and Kuwait, where direct losses from the Persian Gulf War of 1990-1991 ran to about $2 million. At the same time, TAC's U.S. developer clients collapsed incurring losses of nearly $500,000. With offices in San Francisco and Rome, the firm had built up tremendous overhead, yet was reluctant to let staff go."
"The chief problem was business judgment, which, because of TAC's collaborative style, was not one person's fault, but everyone's. The firm failed to act like a profit-making enterprise....When the debt load loomed too large, TAC's principals should have controlled overhead and cut staff..."
Unfortunately, today's high workloads are camouflaging many of the same problems that drove TAC out of business. Strong leadership in design firms should be addressing issues now while business is strong.
Howard Birnberg is the executive director of the Association for Project Managers. He may be reached at 312-664-2300 (office), 312-560-6651 (direct), email: firstname.lastname@example.org, website: apminfo.com