Your Company After You
What does your company’s future look like? Will it survive beyond you? Ownership/leadership transition is a hot topic in design today, and in the EGD/XGD community, many owners are planning their legacies—or should be. Legacy and transition are major themes at SEGD’s Business of Design Summit Feb. 19 in Denver, featuring innovators like Henry Beer (CommArts/Stantec) and Mark VanderKlipp (Corbin Design)!
SEGD Fellow Henry Beer co-founded pioneering EGD firm CommArts in 1973 and for 40 years co-directed its award-winning work. In 2010, he helped transition the ownership of the company to Stantec, one of the world’s largest A/E firms. Today, he remains a principal in one of Stantec’s most profitable sectors. After working for Corbin Design for 10 years, in 2003 Mark VanderKlipp led his company through an internal leadership and ownership transition and continues to build the company’s legacy as president. Corbin and Beer are among the innovators leading the Business of Design Summit February 19 in Denver. We spoke with both of them recently.
Henry, with Mark VanderKlipp you’re leading the workshop on transitioning leadership. Why do you think this is such a hot topic for discussion?
Mark and I will be looking at the many ways in which a design firm matures, and the specific opportunities our firms have for acquisition, employee ownership, or other options. Our job isn’t to provide the absolute answers, but to illuminate some of the many factors that should be considered as you’re planning a transition. If you own a business, no matter how old you are, you should be planning for its next phase of evolution.
Your company was acquired by Stantec in 2010. How was that transition for you and the rest of the CommArts team?
When there was a big downturn in 2007, we made a long and expensive run at maintaining our practice. It cost us a lot of money and a lot of work to do that, to keep the practice together when there wasn’t a great deal of business out there. In a way, Stantec was a lifeline. We worked very hard to keep the family intact and Stantec enabled us to do that and to transform into a kind of CommArts 2.0, now Stantec ViBE (Visioning Brands and Experiences).
Stantec has about 14,000 employees and nearly $3 billion in annual revenues. So this is a very different org chart than we had at CommArts! The good news is that we’ve survived. The really good news is, we are among the most profitable sectors in the company. Stantec is delighted. We're working together to incorporate a bit of our DNA into other parts of the organism.
Mark, Corbin Design underwent a very different transition, becoming an employee-owned company. Why this model?
Jeff Corbin started the company in 1976 and by the late 90s, he was preparing to retire. He tried a couple of other transition models that didn’t succeed. He’d had a leadership team in place for some time—there were four of us—and he knew that most of us had young families and weren’t in a position to buy the company outright. So he set us up as an ESOP (Employee Stock Ownership Plan) company, whereby every employee could have an ownership stake. Ownership can reside with the leadership team or with everyone in the firm. You can structure it in different ways, but basically it’s a trust that owns the company. As an employee, I have claim to a certain number of shares in that trust. But I don’t realize any value until I leave the company, when I am paid out.
How does employee ownership change the day-to-day dynamic in a company like yours?
When Jeff owned the company, we were subject to his vision and decisions. Now that we’re all shareholders, we treat it like a very small but publicly traded company. We watch our share value closely. We share financials every month, and take part in open discussions about strategy and process. We have an annual meeting where we bring in a consultant to talk about different aspects of employee ownership. Every person cares very much about how productive and efficient we are, because we all have a vested interest in keeping the company profitable and sustained for the next generation.
The beauty of the ESOP is that it’s its own transition model. The value of the company is determined annually by an outside party. It didn’t require any of us to take out a second mortgage on our homes to buy it. Instead, we earn our shares by staying with the company and keeping it profitable. When we had a layoff a few years ago during the downturn, every one of those people who had vested shares got a nice chunk of money. It’s an automatic benefit if you leave and a retirement benefit if you stay.
Mark, if you could offer just one piece of advice to company leadership considering transition, what would it be?
Selling your company is NOT ABOUT YOU. It's about the people left holding the bag. Know when it's time for you to leave and help the next generation prepare for the cultural changes that comes about when the old guard leaves. Most importantly, allow them to make mistakes and learn from them throughout the transition. In doing this, you’ll help your next-gen leaders develop the company that they want to inherit.
Leadership structures and transitions are just one of several great topics we'll explore at the Business of Design Summit Feb. 19, 2015, in Denver. Learn more.