Creating future leaders of your practice
As a partner or director of your architecture practice, you provide the drive behind your firm. You are key to its long-term future. It is therefore vital that you have a plan in place to train and nurture those who will one day succeed you as the future leaders.
Start by identifying where you think the business will go in the future. Have you identified the future generation of partners/directors in your management team? Do they have the relevant skill set to be a leader of your practice and maximise the full potential once you leave? These are the sorts of questions you need to be asking yourself when considering the future of your practice.
Times seem to have changed from when many employees strived to be a partner/director. The millennial age group seem to have less appetite to stay with one firm and fewer aspirations of becoming a partner/director. This makes planning for the future of your practice difficult. The key is making the role as attractive as possible, and ensuring the future generation is equipped to fulfil the leadership role.
Engagement is crucial. Motivated employees will want to be more involved in the direction of your practice and have an influence over decisions. A happier, more engaged workforce is more likely to produce the leaders of the future.
Methods of assessing engagement could include an annual survey, disseminating the results to all employees and highlighting the action that is being taken to address any key issues identified.
Make sure you provide clear directions on their future pathway to promotion, setting and assessing performance for key objectives and skills development. Make sure they stay motivated. Simple steps, such as providing them with an experienced and inspirational mentor, more autonomy and special projects to lead, will help show that you have recognised their contribution and ability. Demonstrate a clear timeline for when you are hoping to promote them and get their feedback on whether that meets their own thoughts. Invest in learning and development to prepare your upcoming partners and directors for their future roles, through management business and leadership training.
By regularly reviewing your succession plan, you can help mitigate risks to your practice’s future. The plans and policies you have in place today may not be suitable tomorrow. Review these regularly, consider them not to be a rigid set of rules but more a flexible set of guidelines to remind you what to consider. Should the practice be faced with an unexpected, or indeed planned exit, you will be well prepared.
You should also consult the feature leaders on the best structure for the firm going forward so that it will also be fit for their needs. Get their feedback on skills they identify as missing and consider future lateral hires. It is worth noting that a possible barrier to bringing new partners/directors on board can often be the financial cost of “purchasing” a stake in the business. While many LLP structures may include non-equity partners that do not have to “buy in,” their role may change to an equity partner after a period of time. Some financial contribution often follows when becoming an equity member. Consider how this can be facilitated.
In a company, you will need to consider how to deal with the purchase of shares. Companies have the benefit of being able to utilise tax-efficient share option schemes which can help to ease this problem.
For the younger generation with families and large mortgages, raising funds to buy into an LLP or purchase shares in a company structure is often difficult. Options may include a staggered payment term to retiring partners who are “selling” equity or even looking at bank borrowings, but the problem does remain a key issue when considering succession. Consider bringing your new leaders into the management team as salaried partners or directors in advance of equity buy-in so that they become more at ease with the commitment they are making.
One potential solution for raising finance could be utilise an employee ownership trust structure which can be beneficial if it works for your practice commercially. Look out for our next article which will provide further details on employee ownership trusts and when such a structure can be beneficial for architects.