Woody Allen’s famous quip, “I don’t want to achieve immortality through my work. I want to achieve it through not dying,” perfectly expresses the kind of wishful thinking that often gets in the way of preparing for the future. Architecture firm principals in particular have a reputation for finding excuses to put off firm succession planning until they are nearly into their 60s. In some cases, this is already too late—planning for a smooth transition of both the leadership and ownership of a firm ought to begin 10 years or more before the retirement of a principal in order that all the benefits of such a change can be realized. The most obvious reason for a succession plan is to compensate principals fairly for the firm they’ve built with their entrepreneurial spirit, including the physical assets and intellectual property they own, and for the money they’ve invested in their businesses. But ownership-transfer planning should be part of the firm’s overall strategic plan. Both require that the firm develop and cultivate talented employees in areas beyond design and project management, such as marketing, human resources, financial management, and technology. Another meaningful consequence of a smooth leadership transition is that it allows the successors continued access to the marketplace. When a principal leaves a firm abruptly because of an ill-conceived succession plan, the reputation of the business may suffer tremendously.

And finally, contingency plans developed as part of a succession plan can act as a hedge against the unexpected. There is always the possibility that a principal could depart on short notice for any number of reasons, or that an event resulting in a principal’s disability or death could occur. Planning for the possibility of such a drastic turn of events is necessary to ensure the continued healthy operation of the firm—if not its survival—and to reassure clients that its obligations to them will be met. In the event of such a catastrophe, it will be necessary for the firm to follow through with its projects in a manner that is consistent with its principals’ values.

Some architects feel preparing a succession plan is an ethical obligation to their employees. Frank Harmon, FAIA, a sole proprietor in North Carolina, believes that succession planning should be part of the responsibility a principal should exhibit both to younger employees and to clients. As he says, “We should nurture young architects—the wonderful interns or associates in the office—by giving them ever-increasing responsibility and then, eventually, part of the practice.” Ann Chaintreuil, FAIA, of Chaintreuil, Jensen, Stark Architects, based in Rochester, New York, underscores this notion. “The most important part of our succession planning is that we’ve contributed to the development of our future partners, not just to the value of the business upon retirement. They’ve done so much during the past 10 years. We would not be in the remarkable position we are in now if it weren’t for their efforts, for which they should be rewarded.”

 Comment below: Share an example of a smooth—or not smooth— ownership transition and perhaps a lesson for others who are about to embark on a similar journey.

 

A tool for recruiting and cultivating talent

If the slogan “people are our greatest resource” is deemed to be true, then a firm must be able to hire great people, and develop their skills as both architects and future managers. A well-defined and documented succession plan can be an excellent tool for recruiting high-potential individuals in what is, at the moment, an extremely competitive recruiting market.

As these high-potential recruits prove themselves, a career trajectory that culminates in ownership and leadership for them facilitates their loyalty, and can provide the motivation they need to contribute to all aspects of the firm’s success. But the firm must have a professional development program that will provide a diverse range of high-quality practice experiences. This kind of development takes years, not months.

Gordy Mills, FAIA, C.E.O. of Durrant, a 300-person A/E firm headquartered in Des Moines, explains that his firm, typical of many large firms, has career growth track plans with well-defined sets of requirements that employees must meet in order to become associates and principals. Durrant has a formal mentoring program, as well, pairing firm principals with candidates for promotion. It is clear that there are advancement opportunities if candidates meet certain specified performance standards.

Firms that use succession planning as part of their strategic planning can also use the opportunity to either hire or develop talent that can help reposition the practice for expansion by creating new studios or opening new offices.

Three Case Studies: Snippets of succession planning are revealed in the profiles of practices ranging from small to large on the following pages. All of the interviews affirmed the conventional wisdom that the issues are the same regardless of size, but become increasingly complex the larger the firm. Those issues include determining an appropriate value, selecting a mechanism to transfer that value, and deciding on elements of firm culture such as governance, compensation, and retirement policies. Generally, transition in a small firm involves one or two principals passing the baton to an equal number of successors. Larger firms typically promote a broader distribution of ownership.