October 26, 2006
Should design firms grow and change?
By HUGH HOCHBERG
The Coxe Group
Firms that grow and/or change in other ways will be far more successful that those that rest on their laurels. For many firms, growth and shrinkage are primarily consequences of the marketplace, and more specifically, of the work for which the firms are retained. More work means growth and less work means shrinkage.
Firms that succeed at the highest level by most measures of success quality of work, strength of culture, profession development, financial performance, personal satisfaction have learned that this is more than an acceptable way to practice. It is also a way of assuring that the firms largely stay away from the mindset of “we have x mouths to feed, irrespective of what we feed them.”
Critical to this philosophy is the fundamental truism that two things comprise the heart of a successful firm: having the right talent and clients. Chances for success diminish considerably in the absence of either.
With varying degrees of importance, such things as leadership, culture, process, management, resources and administration are all secondary in the overall scheme of things.
Other firms, often ones that grow large to a point where they find themselves locked into an overhead cost structure of some magnitude, see growth as a means of leveraging that overhead to the fullest. This can be a compelling rationale provided the firm’s leaders don’t lose site of the fundamental truism.
Still other firms see wide coverage as an important component of the awareness. These firms are often driven by a notion of marketplace awareness of their brand, coupled with the sense that their name identification can be as significant as the strengths of the individuals behind the name. Such firms are compelled to grow to increase their visibility, often through acquisition.
Growth through acquisition too often (once is too often) becomes growth through indiscriminate acquisition. Given that such firms are frequently profit-motivated, they oddly shift their focus from the bottom line to revenue. That mentality is particularly evident in publicly traded firms, often with the consequence of declining profitability.
At the heart of leading and managing a firm to greater success are understanding how to evolve effectively and energetically, how to overcome attitudes that resist change, and how to identify and mitigate risk so that it becomes a competitive advantage rather than an organizational inhibitor.
Firms with the courage to respond to the rapidly moving society, economy and marketplace can enjoy tremendous opportunity and advantage. However, too often practitioners speculate on what is coming around the curve, and then sit back to see the accuracy of their forecasts. More courageous firms not only speculate, they develop and embark on strategies to benefit from what the future may hold. Leaders of such firms envision a future that centers the firm and the decisions that will move it forward.
Change is more important
Thus far, the primary issue addressed has been growth, but the more important notion is change. Stated simply, change catalyzes success. Change comes in many ways, although practitioners generally think of growth as the only form of change.
In reality, other forms of change warrant consideration. The obvious alternative to getting bigger is getting smaller. Such shrinkage can invigorate the people in a firm, strengthen their focus, and clarify the firm’s expertise in the marketplace.
Change can come in other ways, including people, clients, technologies, setting, leadership style and culture. Few firms make wholesale changes in some of these areas, at least not intentionally, since such changes are perceived to have inordinate risk, as deemed by their generally risk-shy leaders.
One valid risk concern is that changes of magnitude being discussed require changes in people. While most people can effect some degree of change, more significant change means replacing people, a notion understandably loathed by most leaders, in part because they might be part of the outgoing crew.
Change of the unintentional variety often comes in the form of harsh actions, far more common in corporate America than in the design world, most notably by boards’ dismissals of CEOs. An even harsher example of change is the engineering firm that lost its leader to a motorcycle accident.
Challenges of growth, change
Growth and change bring challenges, all of which can be resolved. The challenges include things such as these:
• Creative excellence may be subordinated in the interest of a larger volume, which unfortunately is likely to weaken the firm’s perceived value to some clients, leading to tensions between management advocates and the creative voices.
• A company that valued its small-firm culture may find it difficult to be larger, or even to be a “different” firm.
• Incorporating multiple expertise and disciplines can be difficult culturally and organizationally.
• Getting to be a larger firm can create anxieties in the context of “how big do we want to get?” Ambitions for growth can lead to the sale, acquisition and/or assimilation into another organization, none of which is inherently bad, but can concern some in the firm.
Strategies to overcome the challenges include things such as these:
• Finding the balance between leading and managing the firm, which is both a practice and a business, is important in an energized, goals-oriented organization. Doing so requires overcoming the myth that a firm has to be either a practice or a business. It also makes sense to become leadership-based rather than management-based. The former is more forward-looking while the latter inherently resists timely change and evolution.
• Financial aspects can give confidence about the value of growth and evolution. Smart change of any form occurs within the context of the costs and rewards of such change, with such context including a change-oriented financial plan and insight about mitigating the financial risk.
• How specific aspects of the firm relate is critical to defining the firm’s direction. Included are staffing, process, technology, marketing and succession. Clearly articulated and enthusiasm-generating goals that parlay into strategies and actions help.
• A good staffing strategy attracts, develops and retains the right talent. It also includes assessing the fit of personnel relative to the direction the leaders want the firm to go and engaging staff to enhance the change rather than impede it.
• Implementing the marketplace positioning strategy and overall marketing effort assure the right clients, and equally important, help define which clients not to pursue. Foundational to this are the criteria that define appropriate clients.
• The clearer the vision for the firm, the better able it is to identify the next leaders. Today’s leaders who know where they want the firm to be eases identifying the next leaders.
• Compensation planning can help to retain and enthuse staff and leaders.
• Culture modification overcoming the inherent nature of most firms and cultures to resist change may be the most difficult challenge facing some organizations. Inadequately addressing it dooms the entire evolution and growth vision. It helps immeasurably to understand the cultural issues the firm is likely to face during the evolution. This understanding will help to incorporate capabilities, disciplines, attitudes, faces, roles and processes into the evolving culture.
• Resource alignment assures that the right people, technologies, equipment and facilities will be in place during the journey of change. This requires identifying the resources necessary to support the change, with the goal of getting the right resources to the right places at the right time for all aspects of the practice.
Ironically, the false impression that the risk of change justifies not changing keeps the fainthearted away from change until it is too late. Thriving practices have concluded that unchanging firms wither into obscurity and oblivion. True leaders overcome the inherent resistance to change.
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