Are any architecture firms doing well in this recession?
In fact, there are a few. Hugh Hochberg, a design management consultant with Seattle’s Coxe Group, estimates that about 5 percent of U.S. firms have seen net growth in the past two years. “By net growth,” he explains, “I mean that they have more staff today than a year ago. They may have had layoffs, … but the number of new hires exceeds the number who have left.”
Architect tracked down one of these recession-defying practices: RJC Architects, in San Diego, which grew 50 percent—to 30 employees from 20—from 2007 to 2009, earning the firm a spot on the San Diego Business Journal’s list of fastest growing local companies. In tandem, RJC’s gross revenue jumped 83 percent and its profit margin rose by 12 percent. “We’re up in every way,” says James Robbins, one of the firm’s two principals.
What is RJC doing right? “There is a component of luck in this,” Robbins says, modestly, before sharing a few secrets to his success. Firm leaders, and those who aspire to take the helm one day, listen up.
1. Understand your market.
Like most small and midsize firms, RJC is regionally focused. But “it’s hard to outperform a market over time forever,” says Robbins. A regional firm needs repeat clients, or it will always be scouting for new work.
Luckily for RJC, San Diego is home to the West Coast’s largest naval base, and the defense sector has weathered the downturn better than most. RJC began working for the U.S. Navy in 1992, “doing nasty jobs nobody wanted, renovations and such,” says Robbins. These days, RJC is doing close to $300 million in business for the Navy.
It doesn’t always work out so well, Hochberg cautions. “Most firms,” he says, “find it difficult to be considered for the ‘nasty’ projects and the ‘plum’ projects for the same client.”
2. Provide full service.
Every client asks how long a project will take and how much it will cost. “As architects, we really make a mistake if we can’t answer those questions,” Robbins says. “That mistake starts to show up when we hit hard times.”
RJC tries to answer all questions by providing soup-to-nuts services, from predesign work to programming and specifications to construction administration. Over the past 12 years, sensing more apprehension from litigation-wary public clients, the firm has taken the next step, fostering design-build partnerships with local builders. A design-build contract lessens the element of the unknown for clients and stops the blame game between designer and builder. Hochberg recommends this mindset for every practice: “Even firms offering only a narrow range of services will be more successful if they have a deep understanding of the entire process.”
3. Compete to win.
RJC has close to $850 million in work on the boards now, all of it awarded in “best-value” competitions, which are judged on the basis of design value per dollar (functionality, maintenance, sustainability, etc., divided by total cost) instead of cost alone. Competing allows the firm to “jump the scale of our projects,” Robbins says.
It’s usually all or nothing when RJC partners with a builder to enter a competition. The firm works on an unpaid, speculative basis, with the agreement that RJC will get a larger share of the profits if the contract is won. “A lot of architects go in trying to minimize their losses, and we’ve beaten them pretty consistently,” Robbins says. Last year, RJC entered eight design competitions on spec, investing approximately $600,000 in time and expenses. The firm won four, the aggregate construction value of which is approximately $250 million.
While the risk pays off for RJC, some architects don’t gamble on principle, Hochberg points out. “Providing service without compensation can lower the perceived value of the firm’s work—and that of the profession as a whole,” he says.
Yet Robbins describes the real value of competitions as being not in the profits but in the quality of the work: “We are able to sell our ideas for how much they are worth, instead of how long it took us to draw them. That’s a big shift, and one I would recommend to every architect.”
4. Treat employees well.
Some say layoffs make a firm more efficient. Robbins views things differently. Firms that make a long-term investment in their staff will see it pay off in the boom times. “We’re talent agencies,” Robbins notes. “Architects hate it when I say that, but it’s true. We buy talent by the year and sell it by the hour. The better talent you have, the better your firm is.” To keep its talent, RJC offers flex time, paid overtime, paid healthcare deductibles, and a generous 401(k) match.
But at what price? Next to none, according to Robbins. Between the savings from not having to retrain new employees and various tax and insurance breaks, RJC comes out ahead. Only three employees have left the firm over the past five years, and that may be the number Robbins is most proud of. “Low turnover is probably the most important factor in our productivity,” he says.
Robbins understands that his candor about the inner workings of RJC might raise some eyebrows. “I used to be very reluctant to talk about any of this with other architects,” he admits. “But as I’ve gotten older,” he adds, “I realize that most of what I say about running the office as a business will be widely ignored—or contested—anyway.”