Lonny Rossman, AIA, Principal with API Partners, offers recession-specific advice for architecture firms. Image courtesy of TheDigitalArtist / Pixbay.

"Your Life Must Suck."

That was the greeting I received from the CEO of a structural engineering firm during an AIA event in 2010. As the founder of an executive search + management consulting firm in the depth of a recession, I didn’t think his sentiment was unexpected - but it was profoundly wrong. Yes, many companies were in the midst of layoffs. The economy was struggling and companies were challenged to navigate the unpredictable future. My response: “Yes, many firms are downsizing. At the same time, those same firms are adding key leadership talent to propel their short- and long-term growth.” We were retained for and successfully recruited two new leaders for his company, one to run a new division and the other to establish a new office. 

You’ve heard the stories. Every time there’s a recession the financial pundits talk about companies that started during a recession, from IBM and Disney to Burger King and Apple. Architecture is no different. Whether starting a new firm or strengthening an existing firm through new talent or mergers & acquisitions, companies can leverage current conditions to their benefit. In 2008-2009, Perkins Eastman was hit hard by the Great Recession and forced to lay off approximately 30% of its staff. With the goal of emerging from the recession sooner than their peers, Perkins Eastman expanded the firm’s expertise by hiring leaders in select market sectors and opening new offices. Their strategy paid off starting in 2010, months in advance of comparable firms, and has continued through 2020. Will they do the same now? 

Invest in people, relationships, expertise and innovation. An architecture firm’s largest asset is talent. 

This strategic approach to short- and long-term planned success can be seen across numerous industries and is clearly demonstrated by the Kellogg’s and Post cereal companies as detailed in the August 2009 New Yorker article titled "Hanging Tough." The two companies took divergent approaches during the Depression. Post reduced expenses and advertising in an effort to survive. Kellogg’s, on the other hand, doubled advertising and introduced new products. 90-plus years later, Kellogg’s remains the industry giant. Despite the above example, most companies will act like Post by cutting spending and reducing or eliminating investments in an effort to maintain the status quo and wait for their situation to improve. It’s the path of least resistance but akin to the ocean’s rip current - you think you’re standing still while being pulled out to sea. 

Be like Kellogg’s. Invest in people, relationships, expertise and innovation. An architecture firm’s largest asset is talent. Diversify and strengthen that talent. Invest in people and/or companies who add or elevate market sector, design, technical, technology, marketing and business development, and financial expertise. Determine how your firm’s strengths can be leveraged for increased diversity. Each market sector wants to differentiate and regularly looks to other market sectors for inspiration. Hospitals want to be like hotels, fast casual restaurants try to emulate co-working spaces and Airports yearn to be destinations. Leverage relationships. Partner with non-Architecture Firms to build complementary professional networks and expertise. 

Leverage relationships. Partner with non-Architecture Firms to build complementary professional networks and expertise. 

As the saying goes: "Don’t waste a recession." While it’s not clear if we’re in the midst of a recession, depression or temporary economic downturn, the global economic impact of the COVID-19 pandemic has been profound. It’s natural to go into damage control mode when everyone is working from home, many projects are paused or placed on indefinite hold, and most firms are evaluating backlog, AR, and cash flow in real-time. Do what’s necessary to stabilize, and then pivot. Your company’s most valuable asset is people, and a recession provides one of the greatest opportunities to elevate that asset by adding talent or via mergers and acquisitions. Key leaders and/or companies that will differentiate your firm and drive revenue are more inclined to explore new career opportunities during a recession. Your focus on the future, drive for continuous improvement and ability to navigate during challenging times is a clear advantage that will attract talent and align your existing leaders with the firm’s long-term vision. 

While focusing on near-term decisions and the long-term vision, questions emerge: 

What areas of your business require strengthening? To some, the focus will be technology or talent while others may need to strengthen their cash position or increase visibility/awareness through marketing - or all four. Act quickly and decisively. Recently, numerous clients invested heavily in technology to support Working From Home while others drew on Letters of Credit to strengthen cash positions and many made tough staffing decisions. These foundational moves provide a strong pivot point for focusing on architecture and the acquisition of new projects. Marketing is key. In a 2005 article in The New York Times Magazine titled "Chasing Ground," Toll Brothers’ Vice President Doug Yearly said “We're really a marketing company that happens to build houses." Should architecture firms embrace the same mentality? Some already do, and they do it very well. 

Key leaders and/or companies that will differentiate your firm and drive revenue are more inclined to explore new career opportunities during a recession.

What business elements should be added, strengthened or rethought to elevate competitive advantage? Market sectors shift. Some shifts may be significant. Will the hospitality, aviation, and restaurant sectors emerge in the same form? What will it mean to "go to work?" What is an architecture firm? A detailed portfolio review coupled with market analysis and sector forecasting are the first steps to understanding your firm’s position. Mergers and acquisitions may be the second. Capital is important, but there are creative stock-based strategies to achieve the desired outcomes. Emerging from the 2001 and 2008 Recessions we orchestrated acquisitions focused on both strengthening and adding market sector expertise within architecture. Some firms created a deeper bench within their proven sectors, while others added new market sectors or expanded vertically by adding new services. 2020 is different. While mergers and acquisitions that strengthen and add expertise remain prevalent, a shift to acquiring complementary businesses (services and products) is in the spotlight. How do restaurants emerge and how do architecture firms adapt and capture market share beyond design and documentation? We are in the midst of an opportunity to act differently, to innovate, to pivot. 

how do architecture firms adapt and capture market share beyond design and documentation? We are in the midst of an opportunity to act differently, to innovate, to pivot. 

Are you leveraging existing resources? The profile of each economic upturn and downturn is different yet market diversity remains a constant business stabilizer. Diversifying typically means looking externally to add market sector expertise, but some firms lack that financial capacity during a recession. Look internally. During the depths of the 2008 Recession, we consulted with an architecture firm that reviewed the portfolios of their staff and identified four individuals with ample healthcare experience to establish a new healthcare studio. They capitalized on prior projects and contacts, actively engaged at regional and national healthcare conferences, published insightful articles that drew upon the firm’s hospitality expertise, and partnered with healthcare experts to leverage their combined experience. The financial investment was modest and the outcome was significant. 

It’s been 10 years since being greeted with "Your life must suck," and the resulting strategic hires have been an overwhelming success. Your situation should be no different. Once you’ve evaluated, stabilized and reinforced your firm’s current situation, it’s time to refocus on the future. Don’t waste a recession. 

Lonny Rossman, AIA, NCARB, is the Founder and Managing Principal of API Partners, an Executive Search + Strategic Consulting Firm focused on the Built Environment professions. He is an active member of AIA Philadelphia and was Chair of the Design Committee 2001-2020. In addition, Lonny was a panelist for the AIANY Women in Architecture Committee ‘Allies for Women in Architecture’ program in February 2020 and developed the first webinar series for the University of Michigan, Taubman College of Architecture and Urban Planning focused on Careers and Business.