Adapting for Success in the New Practice Environment

January 13, 2012 · by Thomas K. Fridstein

The environment in which architects operate has changed, bringing opportunities to firms that can adapt to the new realities.

Since the onset of the Great Recession in 2008, the practice of architecture in America has been severely altered. Architects in the United States are accustomed to periodic swings in the economy and the resulting impacts on practice. Economic booms are followed by recessions every eight to 12 years. In the boom years, work is plentiful, fees are generous, employment is high, spirits soar, and there is great innovation. The recessions usually last one to three years and are difficult for architects as building activity dries up, commissions are scarce, completion becomes intense, fees are reduced, and many architects are without employment. Typically, after a few difficult years, the economy rebounds, new and renovated buildings are required, and architectural practices regain their profitability and begin again to grow.

Those of us who have been practicing for 30 or more years have lived and worked through several of these cycles and have learned how to hang on through the recessions until the economy eventually improves. And that is what we’ve become accustomed to: a recession that predictably improves after a few tough years.

But this time is different. Economic experts believe our economy and society have undergone fundamental changes that began decades ago. It will be a very long time before we see vibrant economic growth in the United States, and it is unlikely that the design and construction industries will return to the same conditions that existed prior to 2008. The low-growth economy architects are practicing in today with limited building activity and design commissions is not a temporary recession cycle but the new normal that will exist for many years.

In their recent book, That Used to Be Us, Thomas Friedman and Michael Mandelbaum postulate that the United States has lost its competitiveness in the age of globalization. This lack of competitiveness began when the United States won the Cold War and lost its unifying national commitment to strength and excellence while 2 billion people worldwide were suddenly released to pursue their dreams of having everything Americans had and more. Instead of learning how to better compete in this changed world, the United States has lost ground in education, research, innovation, and leadership while countries such as China have succeeded with committed purpose, which has completely changed the global economic condition. Couple this changed economic paradigm with the paralysis that exists in our national leadership, and it will be a very long time before the U.S. economy and the environment for building and design will return to a vibrant condition.

The environment in which architects operate has changed, and they need to respond to the challenges of this new environment to be successful. Change brings opportunities, and architecture firms that best adapt to the new realities will have the greatest chances for success. Just as architects design buildings as solutions to the client’s requirements and program, they need to design their firms to find creative solutions to the requirements of the existing practice environment.

New Context

The first step in designing a building is to understand the program and the building’s site context. Similarly, architects need to thoroughly understand their changed practice environment and adapt their firms to succeed. In the years prior to 2008 the economy soared, supported by low-cost credit and household spending fuelled by the housing boom, which we have since learned was based on improper economic principles and was unsustainable. Just about every market sector that architects design for in the United States was growing, and the demand for new and renovated buildings was high. Commissions were so plentiful and sufficiently profitable that most firms succeeded with little effort other than to be competent and hard working.

Those plentiful days are now past, and architectural firms are competing in a very different marketplace characterized by long-term slowness of the U.S. economy, few expanding domestic market sectors, enormous competition for every project, diminished fees, clients looking to reduce costs and risk, increased competition abroad from local architects, and increased competition at home from non-architect businesses.

As firms have struggled to maintain their staffs while their revenues have diminished, they have not been able to hire architecture graduates, creating a permanent gap in talent development in their firms and the profession as a whole. As an example, one U.S. firm with more than 800 architects in the U.S. hired only three recent graduates in 2010. Globalization and technology advancements are transforming the practice of architecture, and these talented new graduates are essential to grow into the leaders of the changed profession. Their absence in firms is strangling the future development of the profession.

These are the new realities that architects need to understand and accommodate in the design of their firms.

This is a buyer’s market in which clients have the advantage of numerous architects competing for every commission. It is not uncommon for public or institutional clients to receive more than 50 responses from architects willing to bid on a project.

At the same time, the nearly instantaneous global communication that exists means that architects everywhere are quickly learning what other architects are creating. It is increasingly difficult to distinguish the work of one firm from another as designs, ideas, and technologies are readily available to everyone.

Most clients are under great internal pressure to find the most cost-effective design and construction solution for their projects. Corporate and institutional boards and executives need to save money in all aspects of their businesses and institutions and pressure their facilities managers to find low-cost and low-risk opportunities. Decisions to move forward with a new project are often intentionally made just in time with a resulting reduction in the project schedule, demanding that the designer and builder deliver cost-effective services in less time. Increasingly, clients are requiring projects make use of building information modeling to minimize costly conflicts during construction. Clients are also seeking alternative forms of contracting such as design-build and integrated project delivery to reduce their cost and risk exposure.

In past recessions, many U.S. architects found ample commissions abroad to maintain their practices until the domestic economy recovered. The situation today is different. Many foreign markets have dried up for U.S. architects due to economic distress or political instability: Europe, Dubai, and North Africa are in this category. In China, clients are less willing to pay the higher fees required or deal with the inconveniences of having foreign firms design their projects from U.S. offices.

As an example, when one major New York-based real estate development company established operations in China in the early-2000s, it hired New York architects with previous experience in China to design the initial projects. As the developer’s operations grew and they hired predominantly Chinese staff, they began to insist that the architects’ work be performed in China so they could have closer interaction with the design team and also realize lower fees. Firms are being required to establish full design offices in China, hiring Chinese architects and receiving fees much closer to local rates. This does not help their need to support staff in U.S. offices. Additionally, Chinese architecture firms have become increasingly skilled, and the distinction between local and foreign competence is lessening. Chinese firms are winning commissions that would have gone to foreign firms in the past.

Fees in India have always been a challenge for international firms, and few U.S. firms have been able to be profitable working in India. Increased opportunities for U.S. architects exist in newer markets such as Vietnam, Saudi Arabia, and South America, and each market has its particular challenges.

Adapt for Success

Business as usual will not lead to success in this challenging environment. The context for architectural practice has fundamentally changed. Architects must recognize that conditions will not return to the pre-2008 state. They must fundamentally adapt and transform their practices if they are to succeed. To survive in this demanding new environment, architects must be creative, client-focused, competent, collaborative, cost-effective, and global.

By recognizing and responding to the new opportunities being presented, they can transform the role of the architect in the design and building process. Some of these opportunities include taking a true leadership role in promoting and effecting sustainable design and by embracing BIM and owning the creation of the complete virtual model of the building that will come to be required for almost every project.

Creative: Architects are sought to create inspiring and functional solutions for the program and requirements of a building. There is no substitute for genuine creative design ability: This is the role in the A/E/C industry that truly distinguishes the architect and is highly desired by clients. Architects who continually distinguish themselves with consistently creative designs that responsibly address the client’s requirements and are well executed will always be in demand.

Client-focused: It has always been important for an architect to understand and address the client’s goals and objectives, but it is critically important to emphasize this in the new environment where the client has heightened concerns about cost, schedule, and performance, with many choices of architects. As competency is widespread and communication allows ideas and technology to be commonly shared, exceptional client service is an important area in which firms can distinguish themselves. The architect who makes the effort to fully understand the client’s requirements, aspirations, and limitations and then visibly focus the design services to support and assist the client in achieving these objectives will stand out and succeed in a crowded field of competitors.

Competent: Clients are demanding proven expertise for their projects. They are reluctant to take a chance with an architect who has not shown extensive experience specific to their type of building. Clients do not want to risk an over-budget or over-schedule project or one that has functional errors. With the multitude of architects pursuing every commission, clients can choose an architect that has proven experience and expertise relevant to their project. The opportunities for the generalist architect are disappearing, and successful firms are moving toward market-sector specializations. Proven competency and project-type expertise are particularly important in distinguishing a firm in international markets. As these markets have become more mature, clients will hire a foreign firm if they bring a particular expertise to the project.

Perkins Eastman, as an example, has been successful winning senior living projects in China based on their market leadership in that building type in the United States. Firms such as Kohn Pedersen Fox Associates, Skidmore, Owings and Merrill, and Pelli Clarke Pelli continue to win office building commissions due to their impressive office portfolios. Almost all health care and research projects are awarded to firms with prior experience.

Clients are also expecting greater competency and skills in the execution of their projects. They want the architect to have visualization capabilities during design so they can better understand and evaluate the developing design. They want projects designed with BIM so that costly conflicts in construction due to poor design coordination can be eliminated. They also want competent project managers and technical architects so their projects proceed smoothly and are well executed.

Cost-effective: In this new environment, clients are exerting enormous pressure on the A/E/C community to deliver their buildings at the lowest possible cost. The impact on architects is lower fees, lower construction budgets, and sometimes alternative project delivery methods. It also means architects must be much more cost effective in the design of projects and the operation of their firms in order to be profitable.

Collaborative:
The new environment requires much greater collaboration within the architect’s team and with all parties in the design and construction process. The design of specialized, competent and cost-effective buildings requires many experts on the design team closely collaborating to bring all their skills into the project effectively. There is little tolerance for miscommunications or errors. The increasing prevalence of BIM requires increasing participation and collaboration of multiple parties from the early stages of a project. Clients, builders, and architects are also realizing that better buildings can be delivered faster and at less cost through collaborative project delivery methods.

Global: The new environment is a truly global marketplace for building projects, building materials, information, and talent. Successful firms must understand and embrace the globalization of the practice and adapt to operate in the global market. Many firms have been operating abroad for many years and have become very successful in the international marketplace. As an example, KPF generates the majority of its revenues from international projects. Other firms, such as AECOM, have established large offices in other countries to produce their work there locally. Information, ideas, talent, and opportunities flow around the world continually, seamlessly, and effortlessly with little regard to borders. As domestic markets shrink, many architects must find new markets for their services abroad. Even if they do not work overseas, all architects need to be aware of new ideas and products that are being developed in other countries.

New opportunites: Architects need to be creative, cost-effective, competent, collaborative, and global as a minimum requirement to survive in the new environment. New environments also create great new opportunities for architects to expand their traditional roles. Two such areas are found in the creation and ownership of the BIM model and in leadership in sustainable design and building.

BIM: BIM is rapidly becoming a necessity for all major projects in the United States. Clients and contractors are demanding its use because its clash detection capabilities minimize costly construction conflicts. There are other significant attributes from the use of BIM that are being more fully understood as experience increases, including energy and building performance modeling, cost estimating, construction scheduling, resource planning, and facilities management.

The creation of a virtual model of the entire building requires input from the architect, contractors, clients, engineers, and other consultants from the beginning of the design process, and information continues to be added, refined, and updated throughout the project. This requires new levels of collaboration and is generating alternative forms of project delivery that will eventually offer better buildings with better information at lower cost and schedule and greater environmental performance.

Peter Campot, a senior executive at Suffolk Construction, a major contractor in the Northeast, recently spoke to the Design Futures Council Executive Board. He noted that creating a virtual model of the building before it is contracted for construction moves building construction from the problematic unique prototype condition of the past to a much simpler building manufacturing process. Conflicts and issues are resolved in the virtual model so the construction can be a straightforward manufacturing process.

BIM is transforming the A/E/C industry and presents new opportunities for architects to increase their services and fees and assume an even more important role in the creation of buildings by becoming the trusted creator and custodian of the virtual model.

Currently, many major contractors are building the virtual model for their projects, often funded by the client. The contractors know that resolving conflicts in the virtual model translates into real savings in time and money during construction. They are assuming this task because they either are not getting a full BIM virtual model from the design team or they are skeptical of the models they receive due to insufficient construction and constructability input.

The architect should be the party to create and maintain the virtual model. Doing so will greatly increase the importance of the architect’s role. To do this effectively will require amending traditional teams to incorporate realistic construction information and modifying traditional fee structures and contractual liabilities, all of which is feasible and necessary. As BIM transforms the building industry, architects have a special opportunity to redefine their role and be increasingly rewarded as the integrator of all the necessary information for project implementation.

Leadership in sustainability: Leadership in sustainable design and building is another opportunity for architects. Buildings are the single largest consumer of energy and are responsible for the largest proportion of carbon emissions in the United States. The negative impacts of the resulting climate change, if unabated, will seriously impact most societies and economies in the world within a few decades.

The A/E/C community has an essential obligation to produce sustainable and carbon-negative buildings. While few dispute the necessity for sustainable buildings, the difficult economic conditions have lessened interest from clients, designers, and builders to engage in sustainable practices. Government has demonstrated little leadership on the subject and cannot be expected to do so in the near future.

Architects have the greatest capability to influence energy use and carbon emissions as they decide how a building will perform and what materials are used in the construction. Architects have the position to educate and influence clients about the necessity and benefits of sustainable design and construction.

Architects can and should assume leadership in the promotion and creation of a sustainable built environment. This leadership will bring enhanced distinction, authority, and respect to architects and will generate increased demand for the architects’ services. There will be increased opportunities to generate fees for a wider range of services. The architects that take on the responsibility for leadership in sustainable design will be rewarded as the effects of global warming are increasingly felt and understood by the general population.

Design the Design Firm

With the multitude of fundamental changes rapidly occurring in society and the economy, architects must consciously redesign their practices in order to succeed. Some architecture firms have recognized and adapted to the changed practice environment and are stronger, leaner, and more effective. Many firms, however, have not made the necessary modifications required by their new situation. The process for change should be understandable to architects. Just like designing a building, they need to assess their values, mission, strengths, and interests (programming) and understand and evaluate the practice environment (site analysis). Based on these understandings, they should create a new or revised strategic plan to provide direction to their firm (design) and implement the plan through the appropriate organizational structure, business development, talent, tools, and operations (construction).

Most architecture practices have evolved slowly over time, responding to different leaders, clients, and economic conditions. The current economic condition has changed so rapidly that firms must now adapt quickly to stay competitive. Change creates opportunities, and these can be very exciting times for architects. The profession is being forced by greatly changed conditions in the society, economy, and business condition to adapt. Architects who recognize the new opportunities and take full advantage of them will be rewarded with increased success and enhanced contribution to society in a time of great need. External change is occurring so quickly that architects need to design their firms consciously to optimize their practices around the requirements needed for success.

Humans live, learn, work, and play in the physical environment, of which architects are the creators and guardians. As the needs of the environment change, so do the responses of the architects need to change. The future is promising for architects who understand, embrace, and rise to the challenge of the new normal.


Thomas K. Fridstein is a consulting principal with the Greenway Group. With extensive international practice experience, Fridstein has managed major architectural firms, including leading the world’s largest architectural practice at AECOM. He earned a Bachelor of Architecture degree at Cornell University and a Master of Business Administration at Columbia University. He is a fellow of the American Institute of Architects, a member of the Royal Institute of British Architects, and a LEED accredited professional.

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