Ten lessons learned as a professional services firm transitions.

As design practitioners, we are constantly honing the many details of our business: elevating the quality of the work we produce, seeking new opportunities, developing processes and messages that differentiate us from competitors, obtaining and servicing clients, and cultivating and recruiting staff. It’s no wonder that we turn around and another year has gone by without our having done much to further a transition plan for the business.

Ownership transition is often one of the least considered aspects of managing a firm, but it is the most critical in terms of realizing one’s personal retirement goals and continuing the business for the next generation. Like any internal process, it must be designed carefully to account for owners’ and firms’ specific needs. Like any investment, the client list and staff roster must be carefully chosen to position the owner well for that transition. And as with any major change, the groundwork for transition must be laid early with long-term clients and staff.

Corbin Design, an environmental graphic design and wayfinding firm based in Traverse City, Mich., continues its transition even though founder Jeffry Corbin has been retired since late 2006. Now led by President Mark VanderKlipp, the firm has developed a 10-point checklist for transition that speaks to lessons learned and that can provide direction for others who are planning a transition.

1. Begin the planning early

Corbin recalls some advice his father gave him early in his career: “Train your replacement. That’s the best way to assure you’ll keep moving up in the company.” Having successfully transitioned his own company, Corbin would paraphrase that today as “Train your replacements. That’s the best way to assure that you’ll be able to move out of the company.”

In the professional world, one essentially chooses either to start a company or to work for someone else. The decision often comes down to determining if you have an entrepreneurial drive and a willingness to accept the risks that go along with starting a business.

When it comes to planning the transition of a firm, the owner must find ways to imbue next-generation leaders with the necessary entrepreneurial spirit and encourage them to assume the associated risks. Naturally, a tolerance for risk comes with increased knowledge of the business, real-world experience, and mentoring. As the transition at Corbin Design began, the new leadership team often sought fail-safe solutions when none were readily available. That has since changed.

While it is often necessary to identify more than one new leader to assume the many responsibilities that the owner may have previously held, it is important that only one of those new leaders be charged with the overall leadership of the firm going forward. In our experience, firms that have transitioned with more than one executive have not been as successful as those headed by a single person who carries both the responsibility and the authority to act on behalf of the firm.

Corbin began the transition plan five years in advance of the actual financial transaction. He researched different financial vehicles for transition, set up a management team within the company, and began to pass decision-making responsibility to that team in preparation for the change.

It seemed logical to assign each team member a single aspect of the management of the firm: people, finance, design leadership, process, and technology. While founder Corbin had been responsible for all of these aspects of leadership, he realized that he was already relying on several individuals for assistance and advice in their respective areas of expertise. Why not recognize that fact publicly and encourage them all to use their strengths collectively to create the new Corbin Design?

2. Consider letting opportunities determine the timeframe

An employee stock ownership plan was the financial vehicle used to transfer ownership of Corbin Design. The ESOP transition happened in two phases to provide the company the financial capability to manage the debt. Corbin offered personal collateral as a guarantee for the bank loans, which represented a risk for his family. However, his confidence in the transition to new staff and the financial readiness of the company to manage the debt made the decision a simple one. This also allowed him continued interest in the fortunes of the firm throughout the transition. Corbin timed the transition to take advantage of economic forecasts. By monitoring both internal and external trends, the beginning of the transition coincided with favorable global economic projections as well as a solid backlog of work, a new business team sufficiently proven in the field, and the ability to take on the added near-term and long-term debt. When the final transaction occurred, the stock valuation within Corbin Design was at an all-time high.

Most important, the staff was ready to assume their respective leadership positions. The final sale of stock by the founder occurred three years earlier than initially planned because Corbin was convinced that the firm was fully prepared to move forward without him. In reality, he was anxious to complete the transition as well.

3. The financial aspects may be the easiest part

Having chosen an ESOP as the vehicle for transition, many aspects of the financial transaction were determined by external, unbiased entities: a valuation consultant, accountants, and attorneys. Negotiations for the purchase price of the business were simple because the value was predetermined. By working together closely, all parties were assured of sufficient value for their investment.

In fact, it was Corbin’s suggestion that the purchase date be moved forward three years based on his awareness of the financial aspects mentioned above. Once the purchase amount was determined to be fair, we moved ahead confidently. Because of proactive planning, Corbin Design has absorbed the debt service to the loan with very little impact to cash flow.

4. The cultural transition may be difficult

In some ways, it’s easier to hire an outsider to take over the firm than it is to elevate an insider to a leadership position. By promoting VanderKlipp from an in-the-trenches senior designer to president of the firm, Corbin Design faced the difficult task of shifting existing lines of authority.

Work relationships that were formerly tight-knit were necessarily curbed. This was difficult since the Corbin team (20 staffers) works together closely. But with additional authority came additional responsibility, and the interpersonal chemistry necessarily required change: To make clear-minded decisions, VanderKlipp and his management team needed to take emotions out of the equation. This was initially difficult to navigate.

At the point when Corbin sold controlling interest in the company, decision-making authority changed hands; however, Corbin continued to provide coaching and mentoring. This gave the new leadership team leeway to lay the groundwork for the “next company,” basing decisions on the foundational logic of the firm and its founder.

Transition to a new leadership group will potentially be difficult for many staffers, as well. Often the trust and confidence placed in the original founder needs to be built anew with both clients and staff. In every communication of a potential change, new leaders must be quick to acknowledge the success of the previous owners and the opportunity to build on that success.

5. Avoid abrupt changes to the business model

Design firm cultures are unique, each built on the sensitivity that the practitioners share: emotion, vision, balance. It is important to communicate changes long before they occur, to work out the possible implications, and to prepare the staff well in advance.

In moving from a sole proprietorship to a management team, Corbin Design transitioned the leadership over time so that when the changes finally occurred, it was a foregone conclusion that there was a new sheriff in town. However, there was a time during the transition when lines of authority were not clearly drawn for staff. If Corbin and VanderKlipp found themselves on opposite sides of an issue, then who made the ultimate determination? If VanderKlipp wanted to institute a new policy, was it still subject to Corbin’s review and approval?

A good friend and fellow firm leader advised Corbin and VanderKlipp to communicate clearly to staff how decisions would be made and by whom. Still, it was difficult for all involved to get used to this idea until Corbin officially retired.

6. Communication is the key

We know this to be true in every aspect of our business, but it is especially critical in a transition. Make continual announcements at staff meetings and electronically to prepare staff for the transition. Make the appointment of the next leadership team an event, and lay the groundwork with staff well in advance so that promotions are understood and anticipated.

Often, it’s best to hear messages about transition from other individuals who have been through it before or who have a particular area of expertise. Bring in transition consultants to answer questions. Use the knowledge of speakers and trainers to support the decisions being made, and build confidence in the new leadership team. Talk to clients often about what the transition will mean to them.

One tip for individuals who will be taking the reins: Don’t over-communicate to staff. Early on, VanderKlipp would posit ideas to staff that were often misconstrued as policy decisions, causing confusion on both sides. Additionally, the benefits of employee ownership via the ESOP were oversold, giving staff the impression that they had much more authority than they possessed. It was very difficult to take this perceived authority away once it had been mistakenly given. An ESOP consultant was retained to clarify the terms of the transaction, the responsibilities that management and staffers would have, and the contractual requirements of the ESOP vs. the latitude that management had actually given staff.

7. Be decisive

Whether receiving or giving authority, make decisions decisively so staff is aware that all options have been considered and the best course of action has been chosen. Given the nature of the internal transition at Corbin Design, this was initially difficult for the new management team. They felt that they were being proactive by asking for input when in reality most of the staff wanted them merely to make a call. It took time to build new habits.

Having said this, the new team often still checks with key staffers when a major internal decision is being made. New equipment purchases, maternity policy, markets to pursue, and the like — all of these can be more effectively realized by taking advantage of the collective intelligence of the staff.

If you choose to tap into staff this way, however, make sure you inform them to what level their input is being considered; ultimately, the final authority for a given decision will rest with the management team. While there are certain things that can be decided by the entire staff (such as a floating holiday or a location for the summer canoe trip), major decisions must be made authoritatively by management.

8. Make changes quickly, and make them stick

There are undoubtedly some nagging issues that need to be resolved: better communication tools, maybe a new staff intranet, upgrades to technology, even something as simple as painting a wall or a more relaxed dress code. Your staff needs to know that things will change, and that those changes will be beneficial to them.

If you have ideas to expand on your current service offerings, develop partnerships with other design-centered organizations, or even redefine your core service offerings, it will be incumbent on the new leadership team to prove to the staff that those ideas are viable before they are widely adopted. Larger scale changes such as these need some time to percolate; make sure you provide regular updates to staff on progress toward these initiatives.

9. ‘Grow faster than the firm’

This was Corbin’s advice to VanderKlipp in a performance review early on in the transition. Leaders not only need to be in the habit of accepting risk, communicating proactively, and being decisive, but they also need to take advantage of every opportunity for leadership training and development.

Readers of this article have already been proactive in this regard by joining the Design Futures Council. Professional, mentoring, and civic organizations are key to creating new networks for advice and business development. When “that guy who hung the shingle” goes away, the relationships that contributed to his success fade over time. Make sure there is a new peer support system to aid new leaders. Be sure to take leadership positions in professional organizations and spread your knowledge to peers, becoming not only an industry leader but also a leader in the community where you live and work. Stepping up in this way can only enhance your knowledge, reputation, and abilities, allowing you to give back to the communities you serve.

10. For those who stay, begin planning transition now

Ownership transition is not an instantaneous process. For VanderKlipp and the management team, it is now important to identify, encourage, and cultivate the next round of leaders. The business will continue to grow and thrive, and future leaders will make themselves known as time passes.

Training those replacements is important, but encouraging them with proper compensation is also key. Once you’ve identified the next generation, it’s important to keep them on staff. There is nothing as disastrous as one or a group of employees suddenly deciding to be entrepreneurs and breaking off from the company, only to become competitors. Ensure your investment by mentoring and discussing leadership opportunities early and often.

Also consider generational differences. Are you building the kind of company that the next generation of leaders will want to inherit? Do you need to make changes to policies, physical office space, or your client list that will motivate and excite potential leaders? We know that everything changes; communicating your openness to change and responding to the needs of the next generation will be a big factor in keeping them on board.

Recently, Corbin Design hired a consultant to discuss the finer points of assertive communication. During an exercise, he suggested that VanderKlipp was the type of leader who, rather than saying “Follow me,” would rather lock arms with the staff and move forward together. With this simple observation, he summed up the primary difference between the old and the new leadership styles. Embrace such differences, find the positives in them, and leverage them to move your company forward.

Mark VanderKlipp was named president of Corbin Design in 2003 as part of the firm’s ownership transition. In this role, he serves as principal in charge of all project work, participating in client engagements as a facilitator and strategist. A 1987 graduate of the University of Michigan, VanderKlipp has grown from a senior design position to setting the vision and managing the company, including its officer group of four senior leaders.

Jeff Corbin founded Corbin Design in 1976, growing the firm into a national leader in the fields of wayfinding and environmental graphic design. In 2003, he took the title of founder and chairman as part of the firm’s transition to an employee-owned company. Corbin continues to serve as an adviser to the firm, speaking, writing and participating on select client projects.