To grow or not to grow

A couple of colleagues of mine, Dave Sharp and John Ellway, responded to my resource planning post a fortnight ago by asking for my take on why our headcount at Mihaly Slocombe is growing. In the post, I had discussed the benefits of a larger team, and its normalising effect on our earnings. Dave and John were interested in our goals for growth, and an exploration of what drives our (or anybody’s) desire to get bigger.

They were good questions that got me thinking: Why have we grown? Why did we start growing? Why did we continue to grow? Why have we grown at all?

Architects are notorious for poor strategic planning, especially those in smaller practices. But many architects also seem to have clear pictures of their ideal maximum practice sizes. In other words, they know where they want to end up, but can’t plot a path to get there.

I suspect the reason for this is that architects are not trained in business, but they do know architecture. Starting out, very few recognise the role that growth plays in the sustainability or profitability of a business. They can’t visualise the effects new people will have on the culture and output of their workplaces, so they tend to ignore the whole concept. Architects are also fearful of the risks of hiring new people, both culturally and financially. But they can articulate what sort of relationship they want to have with their work, and a feeling for the number of people they should have on board to achieve it.

Mihaly Slocombe certainly started out this way – our very first (and mostly useless) 20 year plan nominated 20 people as our longterm growth aspiration. But we wrote nothing about why, how or when we might take on those people. Upon reflection, I think this is a strange dichotomy.

Perhaps unsurprisingly therefore, the majority of our growth has been unplanned, reactive and intuitive. We’ve employed new staff either when we’ve been busy, when we’ve anticipated an impending period of busy-ness, or both. But we’ve not developed clear pictures of things like our ideal organisational structure, or balance between senior and junior people, or even what will happen to our daily lives as we grow. We’ve only discovered these things retrospectively and with the wisdom of hindsight.

Numerically, this is what the last four years of our growth has looked like:

When we took on our first employee, we did so cautiously. Way back in November 2012 we employed an almost-graduate, Jake, for three days a week. We took him on because my partner in business and life, Erica, was on maternity leave and we were feeling the pinch in our productivity. I remember always being conscious of the fact that if I were out of the studio, nothing else was getting done.

We were employer virgins: very nervous about cashflow, uncertain how to be good bosses, inexperienced at delegation, and totally ignorant of the (now obvious) correlation between productivity and income.

Jake remained at 0.6 FTE for two and a half years, until Erica went on maternity leave again and we oh-so-timidly put him up to 0.8 FTE.[1] This became the new status-quo for another year. We took a leap of faith in early 2016, relocating to a new studio, and were rewarded with an influx of projects. In response, we took on our second graduate, Eliza, but again only part time.

Reflecting on these early years of Mihaly Slocombe, I’m pleased to realise that starting with part time, junior employees was a savvy growth strategy:

• It reduced the pressure on our cashflow. Before we employed Jake, we had almost zero expenses – just Erica’s and my time. Taking the leap into the world of employment was daunting, starting off slowly made it somewhat less so.
• It helped us learn how to be employers. As architects without any training in management, and only limited experience in delegation, this was essential. What if it turned out we were horrible bosses, or couldn’t stand other people doing our work? Starting with an age and experience gap helped us ease into our new roles.
• It permitted flexibility. When deadlines loomed, we were able to request extra days from Jake and Eliza without having to take on extra people. This room for ebb and flow allowed us to be nimble in the way we tackled our workflow.
• It created easy room for expansion. Both Jake and Eliza were keen to grow their roles, which meant there was an implicit understanding that whenever we felt ready they would be happy to work more days.

But when Jake shipped off to San Francisco in late 2016, it was as if the nervousness of our early years evaporated. Over the following six months, our growing project list and increasing comfort with our roles as employers encouraged us to put Eliza up to full time, take on a part time senior architect and two full time graduates. We’ve made another leap this year, putting on a student to help us make models and a part time studio manager.

Erica and I certainly haven’t reached our managerial capacity yet, but we are starting to feel the truth of the rule that a principal can successfully manage a maximum of only six people (who could be six architects, or six managers themselves managing six architects). There are now eight of us working at Mihaly Slocombe, working 6.3 FTE between us. Objectively still a pretty small number, but more than 300% our size four years ago. For a small architecture practice, I reckon that’s some pretty rapid growth. In fact, if I squint my eyes a little bit, the above infograph almost has an exponential shape to it.

So why grow? Well, it’s exciting and empowering (though a little nerve wracking too). And as I noted above, growth also has an important role in creating a sustainable and profitable business. Let me share with you the analogy of the winemaker.

The analogy of the winemaker

In 2010, when Erica and I were living in Milan, my parents came to visit us. Together, we pilgrimaged over to the postcard-worthy rolling hills of Piemonte. My parents are winemakers, so we spent a good deal of time visiting wineries.

At one such winery, the owner and chief winemaker, Paolo, commented, “My vineyard is very small, only 100 acres, one of the smallest in the region. It allows me to focus all my attention on making the highest quality wine I can.” Then he asked my parents how many acres their vineyard is. They answered, “We’re very small too, we also like to focus on quality. But we have only 10 acres!” Paolo’s eyes bugged out of his head, and with true Italian bluntness exclaimed, “But with such a small vineyard, how can you afford to buy the equipment you need!?”

Fortunately, the individual winemakers of the Mornington Peninsula don’t need to buy all the equipment they need as they’re very good at sharing resources. However, this interaction has remained stuck in my brain ever since, because it answers the question, why grow?

We began growing without a systematic reason to do so. We had a little more work than we could handle, so we took on an almost-graduate. We continued to grow because our workload continued to increase. But we’re still growing because we want to buy all the best equipment. Or in architectural terms, we want to do cool things like earn decent salaries, diversify, broaden our expertise, undertake design research, make models, take on leadership roles in the profession, and embrace the opportunities of the 21st Century.

When we started out, Erica and I knew how much we wanted to grow, but not how to do so. Now, we have a clearer idea of how to grow, but no longer by how much. So how do we find the right balance between bigger but not too big?

There are a number of factors at play in this equation: we want to buy all the best equipment but also maintain the culture of our small, family-like architecture studio; we want to make ourselves and our staff more money, but also invest in great design; we want to broaden the types of work we do, but also retain a close connection to our projects and clients; we want to grow as leaders within our profession and broader community, but also remain anchored to the work at hand.[2]

I enjoy the size and shape of our studio currently, so perhaps we should sit tight. But Melbourne architects whose practices I admire – KTA, MAA, BKK, EAT for example – all seem to have between 10 – 20 people, so perhaps the magic number is in there somewhere.[3] Then again, travelling the world and playing at the big-kids table would be an exciting life, so perhaps we should go even bigger.

Thinking about what comes next for Mihaly Slocombe brings me back to my Twitter conversation with Dave and John. As I chewed on their questions about growth, I wondered whether we have any data that might illuminate the underlying logic of our intuitive employment decisions. By looking back at this data, might there be important lessons for our future?

Come back next week for a data dive into our recent employment decisions.

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1. FTE translates to full time equivalent. A person working 5 days a week = 1 FTE, a person working 3 days a week = 0.6 FTE.
2. On the money front, here are a few useful rules of thumb: i) a sole practitioner tends to be profitable, but this profitability declines as she grows. It’s not until she’s taken on her fifth employee that she becomes as profitable as she was working on her own, ii) profit is directly proportional to turnover: the more money an architecture practice brings in, the more money that’s likely to be left over, and iii) for a small to medium practice, the relationship between turnover and profit breaks down over $1m in annual turnover. Anything more is sweet, sweet cream (I’d like some sweet, sweet cream).
3. There are lots of architects in Melbourne whose design work I love. There is a much small number whose design work and business strategies I love.

Images

1. Up; author’s own image
2. Team growth, author’s own image
3. Piemonte; author’s own image