If you’re serious about growing your design firm, you need to add outside experts to your board of directors.
I founded an engineering/landscape architecture/geomatics firm named “McAdams” in April of 1979 while I was enmeshed in an MBA program at Duke University. I carefully nurtured my nascent enterprise with everything I had, conscious of relying on my business education more than my civil engineering degree. What I did not do is consult with others in the design industry; because, “Hey, I’m a freshly-minted Duke MBA!” What advice could I possibly need from others in the design industry (who probably didn’t have an MBA)?
Well, about 15 years in, I learned there is a wealth of knowledge out there in our industry, and I was missing out on a lot of industry-specific know-how about running a successful design firm because I didn’t bother to access it. So some other top McAdams officials and I started going to industry conferences – a very eye-opening exchange of ideas, actually; and then at our 40th anniversary we finally firmed-up the structure of our board of directors, set term limits that were staggered, and brought in three seasoned outsiders who are tremendously valuable.
Here’s is what you get with outside directors:
1. Knowledgeable advice from design-industry and corporate veterans who have navigated issues you have not experienced.
2. Business executives who hold your firm’s CEO accountable for internal matters, as in:
- When are you going to get serious about curing your receivables problem?
- What will you do to improve the work climate? Or adios those toxic employees?
- What programs or changes can you implement to improve talent retention?
Internal directors, who report to the CEO, are a lot less likely to press these issues.
3. Executives (current or retired) from other industries (public works managers, DOT officials, real estate development executives, construction industry executives, etc.) can be invaluable in gaining introductions to potential clients, expanding into new market sectors, and in coaching the design firm as to serving selected industries with excellence.
4. CEOs should ardently desire a group of advisors – a “kitchen cabinet” – to bounce ideas off of. This is the cure for that “alone at the top” feeling. Outside directors, veterans of our industry, are the best bet.
5. The external board members should constitute a “compensation committee” of the board, to set the salary of the CEO. This should be set at a level that is fair to both the CEO and the company, and should include meaningful bonuses tied to achieving profit and revenue (and other) goals.
Boards of directors with external members should meet quarterly, allocate an entire day for the board meeting, and they should include some strategic issues on the agenda. Send the agenda packets out at least two days prior to the meeting, so that members have at least two evenings to review the packet. Run the board meeting with intentionality. Pay the external members $5,000 per meeting. The profitability of the firm will increase far more than the fee paid to the external board members, the careers of the teammates will be enhanced, and the firm will rise to new heights.
A comment about pursuing growth of your design firm: Some founders of design firms operate theirs as a sole proprietorship, where continuous growth is not in the program. Small design firms with a 30-50 FTE headcount can have very low turnover and very high profitability; because everyone is highly experienced in their role, and there are no new hires to be trained. Everyone feels part of the “family.” It’s a safe place to be. Everyone works for the owner, and the profits all belong to that owner. External board members are rarely needed for that type of firm. This small-firm culture provides a nice lifestyle for that owner, but it can get particularly difficult to retain top talent, who may want an expanded career. Eventually the owner sells to an acquiring firm; and the brand and the culture get absorbed into a different entity.
Alternatively, for design firm leaders who want to grow the enterprise, the firm itself must be respected and nurtured above all, for it is the firm that is the source of all prosperity for both the people who are employed within it, and for the clients it serves. The founder/owner, originally, and the CEO later, must treat the enterprise as an entity separate from him/herself personally, and work every day to build the enterprise, causing it to grow far beyond the level of a sole proprietorship. As part of that, constituting a board of directors that includes external members (always more than one), will enhance the performance of the CEO, and therefore of the enterprise itself.
If you are serious about the growth and prosperity of your design firm, build a board with external members. You don’t know everything.
John McAdams is the Founder and Chairman Emeritus of McAdams, a multi-discipline civil engineering, land planning, landscape architecture, transportation and geomatics firm headquartered in Raleigh, NC. Connect with him on LinkedIn.