In part one of this article, I showed you the economic results of the Great Recession by the numbers. Part two will give you the tools to reshape your firm and prepare it to participate in the coming economic upswing.
Design Your Practice
By using a strategic planning process that is based on design thinking, firm owners can identify their aspirations and goals, and help chart a path to achieving them.
Basically, strategic business planning involves three phases, similar in many ways to the design process:
- Assessment (programming, schematic design)
- Understanding your core values and vision for the firm development
- Examining existing conditions including capabilities, market position, and financial health
- Identifying goals with a 10-year time horizon
- Planning (design development, construction documents)
- Scenario Planning (Financial)
- Organizational development planning, development of marketing plan
- Operations planning, development of knowledge management plan
- Ownership transition planning
- Development of an action plan outlining specific steps with milestones on a short-term timeline
- Implementation (construction and post occupancy evaluation)
- Continuous refinement of action plan and updating as actions are completed
- Identification of Key Performance Indicators (KPI) and tracking against milestones
- Adjustment of action plans as conditions change
Many firm owners find it useful to have the help of a management consultant in the strategic planning process. An outside and unbiased voice with information on best practices and industry trends can be invaluable in forming both pragmatic and inspired strategy. Look for a consultant familiar with small firm design practice.
But don’t depend on others to do this for you. The key to the success is to use your abilities as a design thinker when you approach the strategy for your firm. Look at the “design criteria”–what is important to you, how big a firm do you want, etc. Be creative and pragmatic; look for new ways of doing things.
Figure 3 illustrates the relationship between the phases of business planning and phases of the building design process.
Note that both building design and business planning are iterative, ending with evaluation that brings the process full circle back to assessment. Circumstances may force you to re-evaluate your goals, strategies and action plans regularly, so the design of your firm is a continuous process, always looking for what is working and what isn’t. What are not likely to change are your values and vision, and you would be well advised to stay constant and loyal to these.
A word about the Key Performance Indicators (KPIs), which are needed to track progress toward your goals. What you measure becomes what is important, so choose carefully. Typical KPIs related to marketing might include: hit rate (percent of inquiries that become jobs); direct award rate (work acquired through referral or repeat clients--without competition); and the number of significant new relationships formed (ones that have good likelihood of leading to work). Key operational and financial indicators include overhead rate, marketing budget vs. actual, project profitability and staff utilization rates.
Practice Your Design
Although it may be tempting to throw away the strategy that led to downsizing and financial stress, it is not necessarily the prudent approach. It is important to remember that your firm’s pre-recession market position was likely built on your core competence, relationship network, and natural proclivities. The question now is how can you build on these to reboot your firm and position it to grow as the economy recovers?
Instead of rejecting your past as failed, consider adopting a two-prong approach as you engage with the strategic planning process:
- Use what you know and whom you know to get the kind of jobs you did before the recession. If the market you are in is still too competitive or non-existent, look for related work in a market that is active. For example, no more publicly funded affordable housing projects? Ask yourself, whom do I know who is designing or building retirement communities or senior housing? What do I have to offer this market that is not there now? What do I need to learn to make myself more relevant to this market?
Even if you have an aspiration to do a different kind of work, or think you should diversify, acquiring work in which you have expertise can provide the basis for rebuilding. Once you have some bread and butter jobs, it will give you capacity to potentially move into work that is more satisfying to you. Work you did before the recession is also the work you are most likely to get in the short-term. Leverage every relationship you have and take someone to lunch at least once a week.
- Expand your possibilities by participating in the new trends in small firm practice. This may require building capacity, learning new skills, or partnering with those that have complementary experience. Consider alternative project delivery options, such as joint ventures and architect-led design build. There are also various new technical specialties needed in the marketplace, everything from BIM coordination to net-zero energy consulting. Search for the overlap between your skills, passions and potential market place to give you direction.
“Both And” Instead of “Either Or”
Consider your firm’s place in the current trend toward specialization – individuals and firms becoming experts in a narrow area of knowledge, technology, or design. Much is driving this trend - the complexity of the building process; the value of advanced knowledge or unique talent in the marketplace; and the power of a simple branding message.
Small firms who cultivate a specialty may have the opportunity to become team members on large projects and work internationally, if they are so inclined. As independent operators who contract on a project-to-project basis, expert specialists can have more control of their workload and their overhead. Alternatively, specialists who perfect efficient delivery of routine projects can develop a less stressful and more lucrative practice. See my post, How Wide Is Your Triangle?, for a discussion of business models for specialist firms.
Intuitively, specialization seems at odds with the common sense notion that diversification is needed to weather an economic downturn. Despite the inherent paradox, it’s likely you will need both specialization and diversification. In the new normal, your firm must be better than anyone else around in some aspect of practice, which does require some specialization. At the same time, consider how you might diversify by adding flexibility to your project delivery methods, by integrating new technologies and expanding your network of relationships. Diversity can also come by leveraging core competence to pursue related project types, especially if you have something unique to offer from your experience.
The Time is Now
For firm owners who are discouraged and just plain worn-out by the struggle of the last few years, this is the time for action. If your area or market segment is not yet experiencing recovery, consider using this time to acquire new knowledge and capacity. Whether that means becoming an expert in building envelope design or learning advanced BIM software, think about what knowledge you need to compete in the 21st century.
If you are considering new partnerships as a way to expand your possibilities, don’t delay. Try out submitting a joint venture proposal with a prospective partner and test the power of combining your complementary abilities. You may find collaboration is an effective way to expand your reach, be it geographically or in project size.
Although the generally slow recovery is difficult for many, the silver lining is the time it provides for crafting thoughtful business strategy. Boom times demand “fast-track” construction of a firm and the result is often not sustainable in the long-term. The time is now for crafting a way forward to a lasting and reinvigorated firm.
Rena M. Klein, FAIA is the author of The Architect's Guide to Small Firm Management (Wiley, 2010) and principal of RM Klein Consulting, a firm that specializes in helping small firm owners run their firms better.