Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, July 16, 1995 TAG: 9507170008
SECTION: BUSINESS PAGE: C1 EDITION: METRO
SOURCE: F.J. GALLAGHER STAFF WRITER
DATELINE: LENGTH: Long
Which means that none of the principals for which the 75-year-old architecture, engineering and design firm is named will be in practice at what's known officially as Sherertz Franklin Crawford Shaffner Inc.
Both Patrick Shaffner, SFCS's chief executive officer, and Executive Vice President Ron Crawford will retire in 1998. Shaffner, who joined the company in 1968, will have accumulated 30 years at the company while Crawford, who joined the firm in 1970, elected to take early retirement. They have, with the board of directors, meticulously planned for the future of SFCS.
"Normal retirement is at age 65 or after 30 years with the firm," Shaffner said, "and both Ron and I are looking at turning over the reins of power, so we've got to be thinking ahead. In the year 2000, who's going to be running this firm?"
Shaffner is not alone in his thoughts.
Architects and other design professionals are coming to grips with society heavily populated by an aging generating of baby boomers and the need to redefine both what they design and how they operate as firms.
The freewheeling 1980s, marked in the building industry by an explosion in the number of shopping malls, office buildings, and at many firms, the number of employees, has yielded to the more fiscally-conservative 1990s and an emphasis on the construction of health care, retirement and corrections facilities.
Moreover, as those in the profession plan for their own retirements, the dilemma of successfully transferring to the next generation the twin mantles of ownership and leadership becomes a primary concern. In a business where the product is the person and a company's reputation is built on its employees' ability to generate innovative solutions to design problems, a failed transition can spell the end for a company.
The standard and most effective transition scenario, said Jack Davis, professor of architecture and chairman of the professional program at Virginia Tech, is to have senior associates and junior associates, and gradually increase the responsibility delegated to the juniors so they are ready to take over as principals when the time comes.
But many times architecture firms don't follow that pattern, he said.
"A lot of firms tell people who have been there 12 and 15 years to go elsewhere because the principals don't want to release any of their responsibilities," Davis said. Junior associates at that juncture in their careers should be looking for a share of a firm's equity, or value, which many times may not be offered at a small firm run by one individual.
That hesitancy to delegate responsibilities isn't limited to small companies, said Brian Lewis, an independent management consultant for architecture, design and engineering firms. Lewis, of Castle Rock, Colo., specializes in guiding companies through periods of transition and has worked with several businesses in the Roanoke area.
"You see this a lot in firms changing from the first generation to the second," Lewis said. "They've developed a whole cadre of No. 3 people that may be good at one particular aspect of the business, but there are no No. 2 people who have developed skills and are ready to take over when the day comes."
Yet even if a company does successfully recruit capable individuals, a smooth transition is not guaranteed.
Lewis said he has noticed a distinct reluctance on the part of younger professionals to buy out senior associates.
"There's not as much willingness on the part of the younger architects and engineers to be as entrepreneurial and get in to business," he said. He added that the costs associated with purchasing equity are substantially higher now than they were 30 years ago. The cost of purchasing a previous principal's share of a firm's equity varies with the success enjoyed by the company. Additionally, Lewis said, that cost has risen over the years as technological developments, including computer-aided design systems, have forced firms to purchase hundreds of thousands of dollars worth of equipment that didn't exist in the past.
\ Some firms, Shaffner said, either cannot or will not survive by remaining as they are now.
"Most professionals are really terrible business people," Shaffner said. "Most neglect the business practice and don't plan for a transition. I've had several firms call and ask if we would be interested in buying them out because they didn't plan for that. Otherwise a firm can just fold."
Indeed, Helene Drieling, a Roanoke architect and president of the Blue Ridge Chapter of the American Institute of Architects, said she has seen several apparently solid firms fold over the past several years.
"I've seen a lot of firms go through transitions," Drieling said, adding that many of them ended up selling their assets and disbanding. "When you look around the state and see six or seven firms go through that, it causes a lot of people to step back and assess their own firm."
A lot of factors can cause a firm to call it quits, Drieling said, not the least of which is conflict that may develop between the associates during the course of planning for the future. Oftentimes, one person's vision is another person's nightmare.
In fact, such differences played a role in the selling of one of Roanoke's oldest architecture firms, Smithey & Boynton. It had existed since 1920 until March 1992, when Kenneth L. Motley, a former Smithey & Boynton president, purchased most of its assets and contracts, including the list of Smithey's clients. A new firm, Motley & Associates, rose out of the ashes of the old, and is now run by Motley's son, Benjamin.
Although he declined to discuss the sale of Smithey & Boynton in detail, Benjamin Motley characterized the transaction as the result of a variety of crises, including a clash of priorities.
"There were differences in personalities," Motley said, "and in that time of transition, Dad came up with the plan that was most workable."
The result, he said, was a firm with a decidedly different presence in the market than that formerly enjoyed by Smithey & Boynton. The previous firm had employed more than 90 people at its height, Motley & Associates now has fewer than one-fourth that number.
The sale of a firm's assets, Lewis said, is becoming much more common, particularly among so-called full-service companies that offer a combination of architecture, design and engineering services. Often, the differences in priorities that exist between architect and engineer turn out to be irreconcilable under the stress of changing leadership.
"Engineering firms tend to be organized with a stronger business orientation," toward the bottom line, Lewis said, "while architects have an inborn design skill that really isn't teachable. There is an observable difference," which can result in potentially bitter conflicts when the time comes to assess the company's future.
Charles R. Holcomb Jr. had been a vice chairman at SFCS. He claimed in a June 1992 lawsuit filed in Roanoke Circuit Court that he was illegally terminated after he suggested that the "corporation reform its marketing strategy, cut personnel and replace ... Shaffner as chief executive officer of the corporation."
"People talk about personality conflicts," Holcomb said in an interview, "but actually they're conflicts in values. Some may value design while other may value the bottom line and making money. In cases like that, you'll have conflicts."
Holcomb and SFCS settled the suit in November 1992, agreeing to keep the terms confidential.
Another employee, David Bandy, who was the director of design and owned nearly 25 percent of the company's equity, left SFCS in April over differences in the direction the firm was taking.
Although Bandy declined to comment specifically on his disagreements with SFCS, pending a financial settlement regarding his share of the firm's equity, others in the Roanoke design community - many of whom were surprised by Bandy's departure from SFCS - are convinced that differences in the role of design in the future of the company played a significant part.
"Pat Shaffner is an engineer," Drieling said, "and David Bandy is a designer. The mentality of a designer and the bottom-line mentality of an engineer often don't mesh. I don't know the specifics, but I suspect that played a part."
Any differences that existed between Bandy and SFCS were most likely amplified by changes in the nature of the industry, which is itself gripped by a similar conflict between practical, value-oriented service and design considerations.
\ "Architecture is a really evolving profession right now," Drieling said. "There are a lot of changes going on right now just like this. There's a delicate balance that needs to be maintained."
Lewis, though, said those differences that may arise in a period of transition don't necessarily preclude a successful change in leadership for a full-service firm. In fact, SFCS has gone through several already in its 75-year history.
"It's not necessarily harder," for the full-service firm, Lewis said. "It really depends on the people that are brought aboard. This is a people-oriented business. After all, what are you selling? You're selling peoples' ideas."
The key to a successful change in leadership and ownership, Lewis said, is to correctly identify the markets in which the company can flourish. An architecture firm needs to establish its goals and then recruit people who can help it meet those goals. The only way to do that, Lewis said, is through market research.
"Most firms are totally deficient in this area," he said. "Compared with other industries, the amount of resources allocated to researching the market is woefully inadequate."
The shift in the industry away from malls and offices toward health care, retirement and correctional facilities was completely predictable, if only people had looked.
"For example, the boom in health care and retirement facilities was totally predictable. You could see it coming if you looked at the U.S. Census date," Lewis said. "It's all tied to the baby boom generation."
Similarly, he said, there was an increase in the number of schools in the 1950s, followed by an expansion of higher education facilities in the '60s and '70s. The 1980s saw retail malls and office buildings being constructed in record numbers and now, as the population ages, the same will happen with health care and retirement facilities.
"I've often said to people that the most valuable book you can buy is the Statistical Abstract of the United States," Lewis said. "Seven out of 10 firms don't have it, and they are the ones that probably won't make it. It's a sign that they are reactive rather than proactive."
And those seven firms are at risk, he said, because market research is directly related to a leadership transitions.
"You need to identify the markets and then bring on the people that can do the work," he said. "That is where you get into strategic planning. There are a zillion things you can do, the point is you've got to be proactively looking."
Drieling agreed with Lewis' assessment, adding that other factors, including increased construction costs and a widening concern for the environment, also are reshaping the industry in the '90s.
As a result, she said, the American Institute of Architects recently implemented mandatory continuing education classes for its members. To sustain membership, a firm will have to earn at least 36 credits annually in classes covering topics such as designing for the aging and refitting buildings for compliance with the Americans with Disabilities Act.
The additional training, she said, will force firms to think about how the profession and the market are changing and how they can adapt to the developments.
"All of these things are going to hit us," she said, "and a lot of us are just sitting around waiting for it to happen."
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