Rise & Fall of LA Firms: Did Company Greed Kill Our Jobs?

[earthworker]

I have been running my own sole proprietorship firm for 2 years now.  What I realize now is that LA work does not need a fancy office or conference rooms or artwork on the wall to accomplish the job.  Very little overhead is required to produce landscape plans, ODP drawings, neighborhood layouts, park plans, etc.  All you need is one person, some pencils, a computer, software….and experience.

I bring this up because many of the local metro firms around here who either laid off most of their staff or had to merge with an engineering firm had invested heavily in prettying up there swanky downtown offices.  They also had partners and principals giving themselves bonuses on top of their already inflated salaries.  They bought pricey office properties they remodeled which they are now renting out to any and everyone.They were also billing out their employees at twice the rate they were paying them.  This translated to huge profits and high fees for their clients.  Those firms who are surviving are smaller with smaller overhead.

The question I pose is if it weren’t for a prevalent culture of greed present within the upper levels of firms, would they be doing better business and would they have been able to keep their employees and projects?  The result of all this is that they are now competing with ex employees like me who do what they do for one quarter of their cost.  I have already been in direct competition with my old firm on several projects.  I have landed two, luckily. Have others found a culture of greed in firms within this profession?

[Boilerplater]

So their other option would be to do what, exactly?  Put those profits into a trust fund to keep employees paid and sitting at their desks surfing the internet during downturns?  Other businesses are just as guilty of living large during the boom times.  I think it is human nature, often to our detriment, to live as swanky as the budget allows.  Its not just LA firms.  And yes, there is a lot of inefficiency created in that process, which you’ve found you can gut out.  That is supposed to be the “upside” of recessions, that they weed out inefficient companies or inefficiencies within an industry, benefitting the consumer with lower prices.  That is just what you are doing.  A nasty rule of the jungle, but a rule nonetheless.  Personally, I think efficiency is an overrated value in our society, but that’s the society that in which I have to compete.  Its often tempting to express anger at former employers, but chances are they are feeling angst and regret as well.

[mark foster]

 I wonder how much of the office “swank” was an attempt to market the firm?  I know some subscribe to bringing the clients to the office, and this would require a real “statement”.  I never liked this approach.  Besides the cost, I would much rather meet the clients on their turf then ours.  The last thing I want to do is send the wrong message– intimidate them or give the impression I live/work better than they do…

Maybe the days of employee/employer are ending, and we all need to see ourselves as independent consultants?  I think both groups are getting burned in this turbulent and unpredictable market— the employer is having to carry heavy fixed costs (with an unstable and wildly fluctuating income stream), and the employee is being promised something that is not true (long term employment), and is being paid less than they should be receiving for a short-term gig .

I am finding myself reaching out to other firms/consultants who may be competitors at times, but may also be a resource for us when a project is beyond our scope.   I am also “brought in” when they run into my specialty.   So maybe the old model of “THE FIRM”  is giving way (at least in part) to a more fluid cross pollination of co-consultants who work together as the project requires?

Not exactly the “co-op” model which was discussed in an earlier thread, but something that is less formal, more fluid, and tighter to the bone than a traditional hierarchic office .  Fixed cost bad, very bad.  Direct costs good.

 

 

[Jon Quackenbush]

Its a risk having a lot of overhead, because your chances of weathering a poor economy lessen, however when times are good it greatly increases the desirability of the firm from an employee’s perspective when times are good.  Why wouldn’t I want to go to work in a nice environment?  I spend a great portion of my life where I work, so why not have it be someplace I like to be?  That takes an investment.  Sure I could get the a lot of work done in a basement with no windows, but I feel better and more creative in a open studio space.  That is how firms attract top notch talent in good economies.

I can’t speak for the decisions big firms have made leading up to this economic downturn, but it is a good reminder of the volatility of the economy which we as a profession are extra sensitive to going forward.

[Pat S. Rosend]

A 2x multiple on employees is not being greedy. That is going to barely cover your overhead and make a small profit. When I was in design build, we had a minimum 3x mulitple for costs to billing. 4x was optimum.

Single proprietors are able to make do with less, but they do not create many additional jobs that way do they…

A snazzy office doesn’t have to be expensive, but it presents a professional front to big dollar clients who expect more than a designer working out of the back of his car.

[Jon Quackenbush]

I work from a van DOWN BY THE RIVER!!!

[Andrew Garulay, RLA]

I’m not by a river, but I work out of my house and my van. My overhead is minimal, but my capability is limited.

 

Billing for employees enables the hiring of employees as mentioned above. Big staff allows for bigger projects to move forward faster. 

 

Small offices like mine can not compete on larger projects because we don’t have the capacity to complete them in a timely manner. Bigger offices can not compete with the pricing of small offices with low overheads. It is a double edged sword no matter which side of the fence you are on.

 

The question becomes about the buying market in the time and places in which you work. I’m in a second home high end seasonal resort area with a lot of local regulation. More projects geared to low overhead, local horticultural knowledge, local regulation knowledge, and regional aesthetics than for larger firms from farther away.

 

I’ve put in a one year notice, went part time (3 days), and I can not keep up with the work that I am getting working four days a week on my own. Hopefully, the winter will be OK. Right now my market puts my situation at an advantage.

 

[Matt Sprouse]

It’s a rookie mistake to assume that because a firm bills someone out at 2x (preferably more) their salaried or paid rate is being greedy.  It is that additional $ that pays for rent, supplies, computers, plotters, copiers, phone and internet service, the power bill, health insurance, liability insurance (general and errors & omissions), and – oh yes – the payroll taxes that are above and beyond what is taken out of your paycheck for income taxes.  There is also (in good times) profit and bonuses and raises that come out of that ‘additional’ money.  Let’s not also forget that the employers who started, own, and run the firm on a day-to-day basis put all of their worldly possessions on the line as a personal guarantee to the bank for lines of credit and business loans.  Granted, in boom times, many of the big corporate firms did go overboard with company cars, jets, and mega offices.  I don’t think this was at all the norm.  I would also like to know what you consider an inflated salary.  I can tell you from experience that the first person NOT to get paid if there is a cash flow shortage is the owner.

 

As for fancy swanky offices, even modest offices need to so some semblance of taste and design aesthetic.  Having a nice conference room artwork on the walls does not make you greedy.   I can say that in many cases, an office location and a place to meet can really legitimize a business to a client.  Clients want to feel like their consultants are established and will be there for the long run. 

 

I don’t begrudge anyone who wants to strike it out on their own and try and compete with bigger established firms.  I think it keeps the bigger firms on their toes.  There comes a point though where $ isn’t always the final determining factor for getting a project.  Bigger firms tend to get the bigger projects because they have employee behind them who can crank it out.  I can also say it doesn’t help the profession one bit when anyone discounts the fees needed to complete a project.  I can see a 10-20% reduction in rates due to low overhead, but if you are charging 1/4 of what other LA’s are, it is going to bite us all in the end.  Landscape Architecture (or any service industry) is not a commodity sold at the lowest price.  

 

If it seems a nerve was struck – it is true.  Most LA’s I know have struggled to keep their doors open and keep employees.  It is no fun to let anyone go.  Most don’t do it so they can keep the swanky offices or fancy artwork.  It is to keep the ship afloat so when the economy returns, those employees have a place to return.  

[nca]

“twice the rate..?” Try 3-4x the rate for me and some of my colleagues. Bigger firms can throw more manpower at large projects but I have found that they really cant even compete for small projects in many cases. The larger projects with the manpower can be kind of a drag as a designer to work on as there tends to be a circuitous line of communication and decisions can take too long and it is nearly impossible to be spontaneous–which in my opinion is detrimental to the product.

 

I actually think theres a larger market out there for small firms with low overhead and willingness to be creative with staff/expenses, ie letting employees work remotely and fostering an inclusive and sensible design process. This is not rocket science.

 

The reason I am reluctant to call large firms ‘greedy’ is because I think they are for the most part products of the market. A small office, given a few projects will naturally grow if they offer a competitive service. I’ve seen a one person office grow to 5 in less than two years–which I know isnt exactly exponential growth, but naturally you could see how a small, simple firms offering a good product could end up a big boy..who’d thought thats how it worked?

[Andrew Garulay, RLA]

There are complaints of how we don’t make enough and now complaints that some make too much. You have to generate wealth to spread it. You have to have money if you are going to hire interns. Last time I checked, a lot of people were complaining that they could not land intern positions. One person firms are not the ones producing internships.

 

Hats off to the firms that can bring in the cash, staff up, and produce.

 

Hats off to the little firms that are also getting work.

[mauiBob]

It can be done!

Here on Maui, there’s a one man LA shop who has been getting along for 30+ years now. I’ve reviewed some of his work (SMA approval, permit appl) and know him professionally for the past 3 years. According to him, about 95% of his work consist of residential designs. He is literally a one man shop! He does no Cad work, no photoshop and owns no large scale plotter of any kind. Yes, he uses a computer with MS Office only and uses Maui Blueprints (similar to Kinkos) to produce full size, plan copies. He usually gets a cad base from the Civil/surveyor and to complete his plans, he does it all by hand with stickyback paper to create project title letterheads. His wife is an accountant so I’m guessing she does all the finance and billing, but she works for the State transportation department. All his clients love him and he has a proven track record of built projects all over Hawaii. And he has so much knowledge about tropical plants that he could easily write a book.

This guy is very passionate about his work and said “his clients don’t care about fancy presentation images. Just provide a great design and the finished product is what counts most of all.”

[Heather Smith]

I hope we are like this man! Well…we can be a two “man” shop. 😉

[Andrew Garulay, RLA]

Are not the majority of landscape architecture offices one person operations?

[Jordan Lockman]

25% Last time I heard

 

[Andrew Garulay, RLA]

My understanding is that 20%+ of all landscape architects are self employed, but that 50%+ of landscape architecture offices are one person operations. I don’t know where i got the latter information, but I am having a hard time finding it today… not that I spent much time looking.

[Author]

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