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Clive Shearer
Management
by Design
By Clive Shearer

September 13, 2000

In an era of mega-mergers, size and profit may not always be linked

By CLIVE SHEARER
Special to the Journal

Over the years, I have read opinions stating that medium-sized firms are doomed to fall beneath the power of giant corporations, or beneath the personal appeal of small boutique practices. Yet, year after year, I see medium-sized firms stay in business and thrive.

Does one have to be huge to survive? Does one have to be small in order to be able to "sell" personal service? Is it viable to say, "We do not want to grow?" Does this spell doom, or is this a practical choice? Is it possible to enhance profit even though a company may not grow in size? These are the questions I posed to these four highly respected principals in the local architecture and engineering industry.

Jim Coughlin is principal of Coughlin Porter Lundeen, a Seattle structural, seismic and civil engineering firm of 61 people, founded in 1994.

Bob Fossatti is principal of Robert Fossatti Associates, a Seattle structural engineering firm of 14 people, founded in 1987.

Vince Nordfors is president and managing partner of Mahlum Architects, a Seattle and Portland architectural firm of 80 people, founded in 1938.

Audrey Van Horne is partner of Van Horne & Van Horne Architects, a Seattle building systems architecture firm of 7 people, founded in 1956.

Q: What are your plans for growth?

"Our goal has always been to provide the highest level of service and quality. As our reputation to deliver this has grown, so has demand, and we've grown as a result," said Coughlin. "But growth has never been a goal. It has always been our belief that a multiple office structure inevitably undermines quality. By remaining in one office, we believe we can best communicate our goals for personal service and ensure the highest quality product," said Coughlin. "We also believe in remaining focused on our core business -- structural, seismic and civil engineering -- and not in adding a multitude of supporting disciplines that may distract us from what we do best."

Fossatti said his firm would like to grow from 14 to 18 or 19 people, but is finding this very difficult. "We have a variety of interesting projects, great clients, the space, and the infrastructure to support expansion, but the problem is finding the right people. You would think that eager young engineers would flock to a fun-loving, sociable group like ours -- anyone who has attended our annual Columbus Day party will attest to that!"

Mahlum Architects "undertook a visioning process about four years ago," said Nordfors. "We had doubled in size between 1988 and 1992, and wanted to address the issue of growth. Should we actively seek more growth to get more clients? Was such rapid growth desirable? We concluded that growth as a stand-alone goal was inconsistent with our corporate commitment to produce meaningful architecture. If growth came as a byproduct of our work, we would accept it, but not seek it as a primary goal," said Nordfors. "We have stayed true to this concept and remained steady with 80 employees in Seattle and Portland," he said. "As to the future, our principals are committed to retaining our company's independence, and we do not actively seek to acquire companies unless they blend well with our core strengths."

Van Horne observed that her firm seems to have found its niche at about half a dozen people and has remained at that level for many years. Very recently, she said, the firm moved to a more spacious office on Capitol Hill, allowing it to effect plans for moderate growth. "I have also commenced an intensive search for a compatible partner who will manage the firm when I eventually retire, and who may decide to expand the practice even more. In addition, we often form alliances with other design professionals to expand professionally," she said.

What does growth do for your company?

"The greatest advantage we have right now is our ability to attract the very best recruits. Young engineers are attracted to a firm that is big enough to get interesting and innovative projects, yet small enough to have a strong, individual culture," said Coughlin. "Our philosophy is to grow and nurture our leadership internally, so our principals are involved in our projects on a day-to-day basis. This gives us an environment where our people can directly learn a new way of doing things, without having to first assimilate the 'corporate' approach," he said.

"To increase our appeal to prospective employees, and to reward our current staff, we have introduced some financial wrinkles, such as giving quarterly bonuses. Other financial benefits are being discussed, and growth will allow us even more opportunities to reward our staff," said Fossatti. "While having a larger staff would allow us to spread our fixed overhead costs over more income-producing people, we are determined to grow one person at a time. We have learned that for a firm of our size hiring a group of new people at the same time takes so much time away from income-producing senior staff to get them settled in and operating, that profits suffer."

Nordfors said that Mahlum's size "allows us to have a democratic operation where people have the freedom to design and create freely without a heavy hierarchy. We are large enough to compete for significant projects and small enough to respond to clients and market changes." The firm's work flow, he said, is relatively consistent because many of its clients are institutional, such as educational and health care organizations. "If new structures are not being built, older ones are being upgraded or renovated. This trend will most likely continue because of the continuing growth in the educational market and the aging of the baby boomers. Our consistent size gives us the ability to focus on doing quality architecture in a highly personalized way. Clients appreciate this level of attention, which might not be possible in a firm of several hundred people," Nordfors said.

"We have a very talented staff, but being small means that everyone must pitch in and help with everything from housekeeping to marketing," said Van Horne. "The growth we envisage will allow us each to have more time to focus on the areas of our design strengths, as well as giving us a greater capacity to serve clients well."

How do you link profit and growth?

"We don't. We focus on taking care of the details-client service and quality, and let the profits follow," said Coughlin.

"Growth will enable us to increase our bottom line, give us more flexibility to target market desirable high profit projects, and still provide for our current clients. We want to stay in our current office space at our current rental levels, and fortunately, we will for a while. If, or when, we are forced to move, or our rent doubles, all bets are off!" said Fossatti.

"We don't link higher profits with being bigger," said Nordfors.

"For us, profit is linked to efficiency. We are always seeking ways to gain efficiencies, such as adopting a team approach with a builder or seeking design/build projects. Potential and real efficiencies can also be made very early in the design process when we meet with clients to build consensus and to resolve design ideas," added Nordfors.

He said that the firm has been able to gain higher profits in the past years because of "continued efficiencies in production of contract documents, and the way we arrange project teams."

"One does not necessarily augment the other. We find that profit is more related to good management than to size," said Van Horne.


Clive Shearer is a professional trainer, educator and retreat facilitator and can be reached at cgb9@yahoo.com


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