FAR EASTERN UNIVERSITY JUNE 2021

INSTITUTE OF ARCHITECTURE AND FINEARTS

The Firm Organization

This module covers the discussion of The Firm and its organization.

At the end of this module, the student shall be able to:

• Know and understand architectural firms/offices and organization in local setting

• Apply the various types of firm management.
• Identify and discern different requirements in establishing architectural firm.

DIFFERENT FORMS OF ORGANIZATION

Proprietorship
Owned by one person who has complete undiluted control over its decisions and destiny and personally has the
legal and financial responsibility for all the firm’s action.
Disadvantages
• Sole Owner, must rely on the personal expertise except for the advise of the employees
• Everything depends on this single person whose capability maybe stretched too thin because of many
demands
• Key staff members feel a limitation on their ability to move up in the firm, and often leave because of lack of
incentive
• Owner has limited sources for financing, and firm growth may suffer
• Full control means full loses of the firm, claims against the firm and the action of the. Firm
Partnership
• most commonly used. Partners share both the ownership of the firm and liability for its acts.
• Each partner is liable for business actions and obligations of each of the partners. The partnership’s profit or
losses are credited or debited each year to each partner’s account. Each partners share of distributed or
undistributed profit of loss from the partnership must be reported on the individual’s ITR.
Corporation
• the principal who form the corporation becomes its employees as such are eligible to employee benefit
programs, which are usually the greatest advantage to be derived from the incorporation
GOAL....
What do the Principals want to achieve?
• If the desire is to retain a small practice and be absorbed completely in all aspects
• If the desire is to grow and expand on new fields, or branch out into new geographic locations, the
responsibilities and liabilities are often best to be shared with others, and. Either form of group ownership-
partnership or corporation- would be better
• This allows a broader coverage through the dividing of activities, increasing the firm’s capital and shares the
leadership. Principals are able to manage remote offices, provide varieties of expertise, and divide the
responsibilities for procuring and developing work.
PERSONALITY
• The prime factor to consider perhaps individual can share responsibilities with others, or may be a loner.
• On the other hand there may be areas of practice the architect does not want to engage. Fortunately because
there is a wide nature of requirements in the field of architectural office, co-owners may often be found to
complement the strengths of the others, thus performing a cohesive firm.

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• For instance the designer type may combine with a production type to provide the complete services. Or the
inside man may join the outside salesman type of firm. However no matter type of combination of the expertise,
careful consideration of individual personalities should be given to the selection of co-principals.
FINANCIAL ASPECTS
Sharing in the ownership of the firm also means sharing financial responsibilities. This allows the traditional
acquisition for capitals to operate the firm to expand, and in bad times to provide the holding power necessary
to overcome the unfortunate valleys of reduced income which all practices seem to have.
AGE
The older the professional gets, the more important age factor becomes. Through group ownership, the
opportunity arises to be able to convert into hard cash the goodwill and reputation which a personal practice
has developed through the year. However, if the essence of the firm is vested in an individual and its entire
entity revolves around that person, then the value of the firm to others becomes questionable.
FIRM SIZE
This may face effect on the decision regarding organizational form. At one time, the only largest firms
incorporated. However, many small and medium sized firms recently have done so for tax or legal reasons.
There are notable exceptions, however such as Skidmore, Owing, Merrill, one of the USA’s largest firm with
offices more than half a dozen which continues to be a partnership by choice.
PRACTICE MIX
The type of services which the from offers will be on large measure dependent on the capabilities of the
principals. For instance, if Architecture and Engineering will be provided through in-house expertise, then it
may engage a specific area of architectural practice, such as health care facilities or shopping center, it may
be helpful to have experts in these fields as part of the ownership team. Of course, this distribution of expertise
among the principals are not essential since these positions may be filled by the employees, but it does help
establish a credibility with the client when the co-owners possess these varied backgrounds.
GEOGRAPHIC LOCATIONS
The choice of a firm’s location may be a factor in choosing the form of organization. If the desire is to have a
multi office operation n various locations it may help to find at least one principal manage each office. This
may help to ensure productivity and efficiency in the branches and make it easier to develop new business.
PARTNERSHIP OR CORPORATION??
• Financial advantages to the principals
• Perpetuating the firm
• Professional concerns
• Potential disadvantages of incorporating
OTHER ORGANIZATIONAL STRUCTURE
1. Associated professional firms
2. Mergers and acquisitions
3. Team endeavors
4. Branch offices
5. Public ownership
6. Combination forms

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FORMS OF ORGANIZATION COMPARISON

TYPES IF INTERNAL ORGANIZATION

1. Departmental Organization
• Separates various functions which must be performed in the development of a project.
• Department heads can maintain close watch over their respective operations and establish performance
standard
• Each department can be set- up as a profit center. Most often used in large firms which can afford to hire
employees with specialties.

ADVANTAGE- personnel can be selected based on their particular skills and asked to concentrate their activities
in the areas which they are most competent.
DISADVANTAGE- personalities of people who don’t want to be segregated in terms of specific processes; want to
identify with an entirety; uneven workflow

2. Non-Departmental Organizations
A team is created to develop a project. The team leader choses people with varied skills to turn out the work. The
main team members are leaders and designers who stay with the project from inception to conclusion. Team
expands with different members as the project progresses, with the number of a team members varying in
accordance with the requirements of each phase of the project.

DISADVANTAGE: control and maintenance of a uniform service

3. Modified Team Organization

Often used in larger offices preferring to use a form of the team system because it answers human desire for
continuity and identity. The leader is assigned personnel from each department as the need arises. When assigned
to the team, employees take directions from the team leader. However, various functions are monitored for
conformity and completeness by the department head.

4. Modified Departmental Organization

On the basis that the construction document phase of practice is the one which most benefits from a departmental
approach, some offices with remote branches organizer their practice to capitalize on this advantage. Branch

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offices carry the project through the schematic and design development phase. When this phase has been
approved, the main office will then turn out the working drawings and specification using a corps of specialist in
the construction document department. The same office may also provide the same reservoir of specialists for the
branches such as expert in facilities programming, environmental impact, economics, etc. In this instance the main
office will be the branches in consulting services and will provide accounting and many other administrative
services as well.

5. Modular Organization
A method of operation within the large firm. Each module is run by one or several principals and each serving as
one profit center. Modules may be based on the different areas of practice such as health care facilities, educational
group, etc. usually contains specific design expertise needed but are serviced by a central administrative group.
They may create their own construction document staff or may draw from a central pool of personnel.

THINGS TO CONSIDER WHEN STARTING A FIRM

1. Financial Set-up
2. Logistics
3. Infrastructure
4. Marketing
5. Business Plan

1. FINANCIAL SET-UP
Financial planning is vital part of getting ready to open a firm.
• Selecting and setting up an accounting system
• Establishing tax identification and filing status based on legal structure
• Establishing a business bank account
• Engaging trusted professional advisers, including an accountant and attorney,
if needed, to help set up legal structure or agreements
• Acquiring start-up funding from outside sources, if necessary

2. LOGSITICS
Flexible space requirements for consideration
A. Rental Office Spaces or Executive Suites- hourly, daily or monthly rental.
a. No space for plotters, and model making equipment
b. Sole practitioner or specialty design consultant may find this beneficial.
B. Virtual Offices- no permanent office but requires fixed contact information for call and mailings.
a. Offers professional ambiance with permanent telephone number with answering services, mail
handling.
C. Coworking Spaces- a workplace shared with other professionals, within or outside the design disciplines,
a popular concept office.
a. Foster interaction between users
b. Sole practitioners seeking collaboration with other like-minded industry colleagues or simply
seeking congeniality of the office environment.
c. Rental cost is on a per use basis. Plug and play, any equipment storage is offered on a monthly
basis.
d. Some coworking spaces participate in the global reciprocity program.
D. Shared Office- subletting office space from an established firm or sharing permanent office space with a
member of other sole practitioners is the most conventional and convenient set-up.
a. Shared overhead cost
b. Having tenants with unique professional skill
c. f collaboration is encouraged, new tenants may provide access to new markets and clients.
INFRASTRUCTURE
• Internet based applications
• Telecommunication tools
• Financial resources
A. If no access to business loans, you may consider the following

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• Secure funding and loans through:

o Credit Cards
o Personal Loans-family, friends, personal contacts
o Vendors and suppliers loans and lines of credit.
• Securing investors through:
o Funding spin-offs new firms can be financed as offshoots of an existing practice or a result
of a strategic alliance with large firms.
o Partnership agreements. Firm founders may consider negotiating a long-term agreement
with future shareholders to consider “sweat equity” in the firms nascent period. Review
existing laws before engaging into this type of agreement.
B. Secure grant funding through:
o Microfinancing or “crowd funding”
o Not for profit organization status- establish themselves as pro bono design work. Community
design works and does not engage in profit work.

MARKETING
Firms who consider the relative value of social media should consider the following:
a. Who is the potential audience.
b. The motivations and objectives behind such a marketing approach and value of the content being
broadcasted through these potentially “viral” media tools.
c. Commitment and level of effort to maintain these applications.
d. Fine tune a social networking strategy that reaches out to larger public audience and potential clients.

BUSINESS PLAN
a. Purpose
b. Finance
c. Operations
d. Marketing

ELEMENTS OF A BUSINESS PLAN

A. PURPOSE/BUSINESS MODEL
• Philosophy/core values
• Project types? Client types?
• Career contentment and disposition of
owners
• Core competence and core weaknesses
• Market opportunities and threats to
market position
• Firm size
• Firm future, including transition plan
B. FINANCIAL PLAN
• Financial expectations of owners
• Revenue goals over time
• Operating budget expectations over time
• Profit plan over time
• Scenario plans for firm revenue and staffing over time
C. OPERATIONS PLAN
• Organization structure
• Technology upgrades and integration
• Project delivery model
• Knowledge acquisition and development
• Promotion, recruitment, and compensation
D. MARKETING PLAN

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• External market conditions and competition

• Target market
• Key differentiators
• Image and brand
• Relationship-building and networking plan

*Excerpted from Architect’s Guide to Small Firm Management by Rena M. Klein (Wiley, 2010).

Level of Comfort
In control-centered practices, architects keep a tight rein on information, knowledge, and drawings (or models),
sharing only the minimum necessary for sub- consultants to perform their work. In collaboration-centered practices,
information, knowledge, and drawings (or models) are readily shared and the entire team participates, to varying
degrees, in the co-creation of the design.

Risk Tolerance
Starting a firm is risky. Architectural firms operate in an environment of unpredict- ability where success or failure
is not solely predicated on the talent and effort of the founder(s). There are ways to mitigate unpredictable risks,
such as purchasing professional liability insurance and planning contingencies on projects. Practice risks can be
mitigated through the careful choice of clients and projects and by following best practices in terms of agreements
and documentation.

WHY FIRMS FAIL?

• Lack of or inability to execute the Business Plan • Slim or no revenue pro forma (projections)
• Limited business opportunities
• Inability or ineffectiveness in execution
• Too much competition
• Limited or lack of valuable intellectual property • Inexperienced team/staff
• Underestimating resource requirements
• Lack of marketing
• Lack of resilience—giving in too early
• Consider the following when starting a Firm
• How important is financial success?
• How much money is enough?
o How will direct and indirect value of firm output be measured?
o How important are name recognition and design awards?
o Does success include “doing good” for the local community?
o Does success include having a healthy and contented office culture?
o How important is fun and creativity in the firm?

REFERENCE:
• American Institute of Architects, & Reeder, L. C. (2013). The Architect’s Handbook of Professional Practice (15th ed.). Wiley.

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