Tags: business skillssmall firm
Episode 095

Business Skills for Architects with Todd Reding – Part 1

Enoch SearsMar 3, 2015

Today I speak with Todd Reding, Chief Operations Officer and Vice President of Investments for Charrette Venture Group.

In today's episode you'll discover:

  • How to be intentional about your firm's growth
  • The value of establishing and encouraging a culture of transparency and engagement
  • How more successful firms are dealing with operational challenges

Charrette Venture Group (CVG) is a company focused on developing and fostering entrepreneurship and innovation, and appling this knowledge to help architects start and grow their firms.

CVG has an on-going yearly business plan competition for licensed architects in the U.S. and Canada who are considering starting a design firm, or who have started a firm in the past ten years. Find out about the Business Plan Competition here.

This interview is on iTunes. Subscribe above, and be a hero! If you know another architect who would benefit from watching this video, share away using the social share buttons.

Show Notes:

  • Learn more about the Charrette Venture Group and their Business Plan Competition via their website

Todd's Recommended Business Resources

Interview Transcript and Members Only Resources:

[DAP errMsgTemplate=”SHORT”]
Enoch: Hello and welcome back, Architect Nation. I am Enoch Sears and this is the show where we sit down with successful architects, designers, and consultants to discuss tips, strategies, and secrets for running a profitable and impactful architecture practice.

Today, we’re joined by Todd Reding, the Chief Operations Officer and Vice President for investments for Charette Venture Group.

I want to remind you that support for today’s show is provided by BQE Software, the makers of ArchiOffice. ArchiOffice is the office and project management software built specifically for architects.

ArchiOffice is more affordable than you think, with a low monthly rate that won’t break the bank for sole practitioners or small firm owners.

I was also told recently that you can get two seats free, if you’re a startup firm, for a full year, which I think is, kind of, cool. So, sign up for a demo over at http://www.ArchiOffice.com.

Also, I want to give a big thanks for those of you who signed up for additional information on the 150|015 Project.

It’s my goal here on the Business of Architecure this year to impact measurably and positively the lives of a 150 architects in 2015. So, you can find out more about that. Sign up on that list to get the details at http://www.BusinessOfArchitecture.com/150.

With that, I’d like to welcome Todd Reding to the show. Welcome, Todd.

Todd: Hello, Enoch. Thank you. Thanks for having me.

Enoch: It is always my pleasure to have guests such as yourself on here, Todd, to come share your expertise, to share your knowledge, to share your background with a wide audience so we can learn from the things that you’ve learned and done in your life. So, once again, thank you for coming on the show.

Now, Todd, I mentioned that you are the Chief Operating Officer of the Charrette Venture Group. Tell us what is Charrette Venture Group.

Todd: Yeah. Well, Charrette Venture Group is an investment firm where we focus on the small to mid-sized architecture firm space. The whole idea is to develop an investment model that can transform that small, four or five person firm, and bring them, in a fairly short period of time, to grow to a ten or fifteen person firm, and then, we benefit from that growth.

Enoch: Do you have any idea, at this stage of your company, what those investments look like or maybe possible scenarios that you guys are thinking about?

Todd: We’re starting to get a better idea of that. We don’t have any active investments at the moment. We’re in the research, kind of, start-up phase for our firm. That start-up phase really involves three parts.

The first part is our Architect Business Plan Competition. This is our second year. I think you’ve helped us with that effort in the past and supported what we’re doing. This year we had more than a hundred firms register for the competition.

They are now in the first phase of preparing their executive summary and a video that they’ll submit, and we’ll select finalists from that. That immediately gives us an introduction to over a hundred very entrepreneurial-minded individuals who are thinking about the future of their firm, and we get to learn from that kind of exposure.

Then, the second piece is we have an Accelerator program. We have twenty-one firms that are participating in that. Every week they come together, we talk about a variety of topics from best practices, leadership, management, what some of their common challenges are, and we have guest speakers come in for that as well. So, that gives us a deeper relationship with that audience.

Then, the third piece is, what you and I talked about some, is my effort to go out and interview, at a minimum, 100… I feel it’ll probably be more in the 200-300 range, but a 100 small and mid-sized firms all over the United States, Canada, and the U.K. Those interviews are simply an opportunity for me to listen to the history, the experiences of those architects and see if I can form a base of knowledge that we can use to really drive our eventual investment model.

Enoch: What kind of experience do you have in the AEC industry? Is this fairly new to you, Todd?

Todd: For me, it’s very new. I did spend six years running a manufacturing company that worked deeply with architects, but I don’t have any training in that field. I’m a business guy, entrepreneur. I’ve started and run companies, but this is my first time to dive really deeply in to architecture.

Enoch: So, do you remember some of the first thoughts that you were having as you started getting exposed to this industry, you know, from your outside perspective?

Todd: Yeah. That’s a great question. First of all, I like the industry a lot. I mean, I always liked design. I live in a house – it’s a 115-years-old. I’ve always marveled at the aspect of design.

Enoch: I can see it behind you. It’s beautiful.

Todd: Thanks. We’re in Iowa. My windows are 115-years-old too, so you feel the breeze practically coming through and you may hear clanking of the radiators in the background.

But, I really am interested in that area. It, kind of, has always been a part of me. Then, to apply my business background to the spaces has been really interesting. I’ve had the opportunity to get to know some really interesting people who I think have some very profound needs, and some opportunities as, I think, you have recognized by creating your business, some opportunities to help people run better businesses.

Enoch: Then from, kind of, the outsider perspective, are there any things where you thought, “Wow. This is interesting that they do it this way,” or, “Wow. This is really different from the way it is in this industry or other businesses I’ve looked at.”?

Todd: Yeah. There is. I can say that there’s this interesting dynamic going on in that small architecture firm space where many people have told me that they were ill-equipped to run a business coming out of architecture school and they underestimated what it would take to run a business. They struggle with what to do with where they are.

I had one gentleman, it was really interesting. He’s running a small firm. He’s being very successful. I asked him, “Did you have any business classes when you were in architecture school to help prepare you for running this small business?” He said, “No, Todd, you don’t understand. I actively avoided anything that had anything to do with business.” I don’t think I’ve ever had anybody tell me that before because I’ve never been in that world.

So, I find some really intelligent, interesting people who are doing what they can to do what they love, but you can’t ignore the business side of it, and so they struggle with that. We watched a lot of different firms address that in different ways – some of them, in my opinion, good, and some of them probably not so good. That’s been an interesting dynamic for me to see that I had not expected.

Enoch: Fascinating. Can you give us some examples of, first of all, some of the not-so-good examples, then, perhaps, some of the good examples?

Todd: Yeah. I will and I hope none of your listeners don’t take any offence to this because I don’t think any of the – perhaps “bad” is the wrong word. Let’s call them, maybe, “less than optimal” ways of running a business. They’re certainly not people that are malicious or are doing anything to intentionally do the wrong thing. They just, perhaps, didn’t know better and they’re doing it the best way they feel they had.

There’s this one dynamic that seems to come up about how you engage younger architects in your firm. It looks like there are at least two paradigms that I see: The first is a paradigm is where the primary leader is, perhaps, a little paranoid about sharing their financials, sharing the inner-workings of their firm with the younger architects because they may have experiences in the past where architects left and took business with them, and started a competing firm, or, for whatever reason, they’ve had some bad experiences. They think that the way to shield themselves and reduce turn over inside their growing firm is to really have this very closed view.

The second paradigm is the exact opposite. It’s typically people that were mentored in a larger firm that had a culture of transparency and open book. One gentleman told me that the firm he grew up in believed in educating every employee on how to run a business. They believed everybody should know how to run the business. It was very transparent.

There is this perception among group one that that’s going to reduce turnover. I would predict, based on my interviews, that the turnovers actually double in the firms that think that they’re protecting themselves from that than it is for the very transparent firm. The transparent firms seem to be where people feel that they are part of the operation, part of the family. They feel it’s more honest and more engaging, so I would encourage firms to consider the latter rather than the former.

Enoch: Which one do you find to be more prevalent just from your small sample size?

Todd: Yeah, it’s probably the former. It’s the more closed, kind of, mentality. Although, I will say that it has a lot to do with the age of the firm, the age of the partners.

I asked one gentleman… I remember a conversation where I said, “Where do you think the plateau point is for that small firm? Where do they get to a point where they really need that outside help to cross the chasm, so to speak, to the next level?” He had a very interesting answer. He said, “It all depends on how the firm started. If the firm started from an implosion of other firms and partners from different firms with a lot of years of experience come together, and create this equal partnership, that firm has a very different growth cycle. If you have someone with, maybe, five or six years of experience in a larger firm, and then decided to go out and start on their own, that has a very different trajectory.”

Enoch: What are those two different trajectories?

Todd: I think, they’re more ready for that “crossing the chasm”, is what I like to call it, to take Malcolm Gladwell’s term. If they started on their own, and they’ve built it up to a point where they have four or five people with them, and it has a very clear culture, a very clear vision, and they’ve plateau, now, they’re going to need to really address some key questions to move to that next level.

The first one being, “Are we going to be intentional about growth?” Among the groups that I’ve interviewed, there is a fairly strong group inside there that aren’t sure about the answer to that question. They said they want to grow to six/seven/eight architects, but they don’t really have an intentional plan of what their revenue should be, what their cost structure is going to be like, what they’re going to invest some of those money in to build them up to that point. So, I think they’ve got to be intentional about growth. I see that more in the firms that were started by one or two, perhaps, younger or less-experienced architects, than the ones that are coming from other more mature partnership, that more intentional focus on growth.

The second thing is that they understand, again, in that four/five person level, that in order to move forward, they’ve got to find an answer to operations. They know that bookkeeping, payroll, HR policies, standard processes, they know that these things need to be done, and they’re really looking for ways to try to get those critical pieces done and managed without necessarily consuming all of one or two partner’s time. So, that’s the other piece.

I guess the third piece, I would say, the ones that are really ready to, again, cross that chasm, are the ones who embrace marketing and they embrace business development as a part of their daily lives. They really understand that in order to grow the firm, they cannot sit back and just, kind of, take the work as it comes in because that’s going to ebb and flow. They’ve got to develop a consistent and somewhat strong marketing plan, and they understand that.

Enoch: So, you mentioned that the firms, I’m just going to rephrase to make sure I have it right, you’re finding that the firms who have more experienced Principals, who are more mature, tend to be, generally, more intentional about their growth.

Todd: I think, generally, that’s what I found. Well, they have strengths as well. The more mature firms, the more mature partnerships certainly understand the design world much better. They come to the table with a stronger portfolio, their networks are stronger. I mean, they have a lot of strengths that are powerful. I do find a number of these firms tend to be more satisfied with where they are, I think. [Inaudible 00:14:42]

Enoch: Okay. Hey, let’s circle back and talk a little bit about transparency, or dealing with younger architects, or nurturing people because you mentioned that that was something that firms struggled with.

Todd: Yes.

Enoch: Fortunately, in my career, my mentors have been very open with the books, and sharing, etc. but, have you come across any best practices for how… I mean, I can personally identify with Principals or business owners that feel hesitant to reveal inner-company information. Maybe someone’s going to be disgruntled about not getting paid too much when they see how much they’re being billed out for, but, of course, they don’t understand all the overhead that goes in to running a practice. So, I, kind of, get that fear.

What would you say to Principals that maybe recognize that they’re on the side of they want to share more, they want to be more transparent, but they’re not quite sure how to do it?

Todd: That’s a great question. I want to be very careful about how I answer it because I don’t want to give the impression that I have an exact formula that you have to follow to create this culture of engagement.

I think, the most important thing is that you acknowledge that that’s the culture that you want to create, that that’s what you want to nurture, and then you work hard to find ways to do that inside your own firm. Every person is going to have a different comfort level about what they’re comfortable sharing as an owner and what they’re not. I’m not sure there is any exact right or wrong answer that works for everyone across the board. Having said that, I would say that every employee wants to feel that they’re making a difference, particularly in this design community where I hear things like, you know, “I didn’t get in to this for the money,” “I want to change the world.”

I asked one firm what their growth strategy was, and their answer was they want to do 12% of their work pro-bono and for non-profits. I said, “No, no. I asked you what your growth strategy was…” But, there is this very, kind of, philanthropic culture inside this community, so, I think, it’s very important to recognize that and to recognize that other people in your firm want to feel that they’re a part of what’s going on, and feeling a part of what’s going on is seeing some of the inner workings of the business.

That may not be, necessarily, the exact P&O every month, but it’s certainly a discussion, at some periodic time, I would say no less than quarterly, with the employees where you sit around the table and talk about the business. You talk about where you’re making money, where you’re not making money, you have concerns about expenses, and you talk about that as an owner so everybody understands that you’re concerned about that. So, and I think you also need have to have some pretty well-defined revenue goals and everybody understands what those goals are so that they’re feeling that they’re helping you achieve those.

Those are just some very basic ideas about how to develop that culture, but I don’t think you can deny that building a culture of engagement and involvement is critical to a healthy business.

Enoch: Okay. Some of the benefits, you mentioned, one of them was a lower turnover rate of having that kind of culture. Any other benefits?

Todd: Yeah. I think the research on the broader business level outside of just the architectural community shows that employees are more productive when they feel like they’re a part of the organization, they feel that they have a say in the organization. You also see productivity numbers go up when people feel happy, right? Generally, the stress level in their life is lower and they feel like they’re a part of an organization that cares about them, productivity numbers go up. So, I think that the benefits are vast in terms of building that culture of involvement.

Enoch: In terms of your business background in your previous experience, are there any resources that you could direct people to, that are listening, to learn more about best practices in terms of encouraging engagement, encouraging loyalty in a sense of being part of the company?

Todd: Yeah. There are certainly some books. Everyone, I think, has probably heard of Jim Collins, the legendary book, “Good to Great.” That book, in my mind, was just a phenomenal examination of things that work and best practices inside organizations that can definitely apply to the architectural community.

One of my other favorite is Stephen Covey’s “Principle-Centered Leadership.” If you want to read a really good book that talks about how you interact with people around you, that’s one of the best.

Certainly, when it comes to processes and efficiency, anything you can learn about the lean movement, “The Lean Startup” is a great book that applies more to the technology sector, but consistently improving efficiency and process improvement are all good topics to read about and try to apply those practices to your architectural firm.

Enoch: Have you ever come across the book “ ’I’ Power” by Martin Edelston?

Todd: I’ve heard of that book, but I’ve not read it.

Enoch: Okay. I just picked it up the other day, I just mentioned it because you were talking about the continuous improvement. I thought he had some interesting things that he was doing in this company a long, long time ago to, kind of, do that.

Todd: Yeah, so have you finished the book yet?

Enoch: No, I haven’t.

Todd: You just got it, yeah.

Enoch: Yeah. It’s sitting with all my other business books that are just there on the shelf to look beautiful.

Todd: Right. Yeah.

Enoch: My wife makes fun of me, yeah.

Todd: Stacks, yeah. I tend to have the same kinds of stacks. Most of them are about ¾ the way read.

Enoch: Exactly. Well, Todd, we talked about some of the challenges that you’re finding as you talked with architecture firms is the challenge of engagement, and engaging the younger staff, and creating that firm culture. What other challenges are you seeing?

Todd: Yeah, certainly. To go back to that operational challenge: “What do you do when you’re at that four or five person firm and everybody is doing a little bit of everything?” I hear a lot of common stories about long work hours, and not totally having their arms around the numbers, and trying to figure out how to move from that point to the next point.

Some firms are more comfortable with outsourcing their bookkeeping functions. I’ve talked to a number of folks that have an off-site, kind of, virtual bookkeeper that does the billing, does the payroll, and handles most of the financial entry of the data, and then just producing reports.

Most firms, it’s not uncommon, certainly, for them to have a CPA that’s helping with tax reporting. That day to day financial management piece, though, is something, I think, the successful firms are finding an answer to that question of how to really get that off their plate, because at that point, the partners have more projects that they need to be involved in. They need to be more active in mentoring some of those younger employees, and they don’t necessarily have the revenues to afford a full-time CFO.

One firm that I talked to is doing a very good job with a remote bookkeeper and they’ve set up a file-sharing system on https://www.Cubby.com. They preferred Cubby over Google Drive just because of the way the folders were sorted, and dated, and so forth. They’ve developed a system for, you know, as the work is produced, it’s put in to client folders online, and the bookkeeper pulls that information down out of the cloud, and then processes the invoices, and updates their online version of Quickbooks. So, those are excellent ways to try to inexpensively overcome this issue of “How do I get these operational off my plate?”

Others are trying to look to the interns to help with marketing and social media. I see varying levels of success in that area. Some of that is my own opinion about social media and marketing, and some of it is that they hired interns who are really interested in architecture, and then, kind of, give them the assignment of managing their Facebook account, and that’s not what they got in this for. So, we see a little bit of that activity.

I would encourage firms to be really intentional with your marketing program. You know, the trick about things like social media and developing a website and a blog is that you don’t build it and just walk away. These are very interactive, alive mechanisms that have to be tested and fine-tuned.

I talked with a friend yesterday who has a franchise. They were considering hiring an intern to manage their Facebook account. They had data that they had produced over the last year on what ads worked better and what ads didn’t, what ads converted more customers to actually sign up for their services and what didn’t.

They were really struggling with this idea that it’s going three months for an intern to even understand what this data means, and what our brand means, and what our services are. They were struggling with: Do they hire someone professionally to manage their social media accounts? My advice was “You’ve got to do that because you’ll spend a lot of time trying to bring someone in to your brand that doesn’t understand the way all of these works, and it will cost you.” So, I think you’ve got to recognize that your marketing program is a live thing that needs constant attention and constant time.

Enoch: Could you give me some examples of what it would mean to be intentional about a marketing program?

Todd: Sure. The first question is, “Do you have a marketing plan?” Have you sat down and really thought through the next year what your brand means to your customers, what value you’re really bringing to the table? Have you articulated that?
Then, if you look for what markets you’re going after: Are you going to continue to focus on a specialized part of the market? Are you trying to broaden that portfolio so you have a lot of different capabilities?

That’s what I mean by being intentional. You’re not just sitting there and, kind of, doing the work every day. You’re really taking some time out to write this out and have a very intentional, well-defined strategy. Then, define how your website fits in to that, even the way you answer the phone can affect that.

Enoch: How so?

Todd: Well, you know, we see this all the time. I’ll tell you a story about a hospital that I know that had very, very low patient satisfaction scores for several years.

They built a new wing on to their hospital and they renovated this to where there was this big fountain in the lobby. They were really excited to open this new wing because they really felt like that was going to answer these low patient satisfactory scores.

What they found six months in to it was the scores actually went way down. The scores went down because people walked in to this beautiful atrium, this brand new wing, and the expectation of the patient experience elevated, right? They thought they were going to get a five star treatment. They hadn’t done anything to change the culture, or change the processes, or change the way they were providing their services. They just thought that the construction was going to solve the problem.

So, everything you do has to be consistent with your brand experience. If you’re going to tell customers that you have a very high attention level to the relationship that you have with your customers, then when a person calls your office phone, they can’t get a busy signal or they can’t get somebody who has the time to talk to them. It all needs to flow and be consistent.

Every architecture firm that I’ve talked to has told me “This is a relationship business.” Well, if that’s true, then you really should be spending some time thinking about, in your marketing plan, how you are communicating that. How are you communicating that you value that relationship and that you’ll be there for that client?

The other thing about the architecture space that I found really interesting is the percentage of business that is referral based and recurring based. I never had anybody say 90% of our business is all new business. Everyone says it’s a relationship. It’s referral and it’s recurring. Well, I think that’s wonderful to hear, but that heightens the importance of that intentional approach to how you’re telling the world about your firm even more because it’s intimate. It’s a deep relationship-based transaction. So, I guess that’s a long answer to how you keep it intentional.

It needs to be intentional. It needs to be consistent. The message that youre sending needs to carry through everything that you do.

Enoch: Todd, I think it’s a good point to break the conversation right now and just end up by asking you what business, sort of, resources are you looking at right now and learning from in your own personal life?

Todd: That’s a great question. I’ll tell you one is I teach a night class at the University of Iowa on e-commerce and entrepreneurial strategies. It might seem contradictory to answer your question of “What do you learn from?” to answer it by “I’m teaching,” but the reality is teaching that course has taught me more about entrepreneurialism than I thought I ever would learn in that experience – the way the students are asking questions, the ideas that they come to. So, that has been a phenomenal experience.

I listen to Business Radio on Sirius Satellite Radio, and love it. It’s done through the Wharton Business School. I’m involved in a number of startup conversations, dialogs, panels, and so forth that I seem to learn from every time. Even exchanges like this seem to always teach me a thing or two.

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Enoch Bartlett Sears is the founder of the Architect Business Institute, Business of Architecture and co-founder of the Architect Marketing Institute. He helps architects become category leaders in their market. Enoch hosts the #1 rated interview podcast for architects, the Business of Architecture Show where prominent guests like M. Arthur Gensler, Jr. and Thom Mayne share tips and strategies for success in architecture.


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