Sunday, August 10, 2008

Gensler's focus on business created a new standard

San Francisco Business Times - by Lizette Wilson

I am copy pasting the whole article as it is.....its really interesting how architectural frm are getting more professional and treating architecture like any other trade . The hype created by architectural colleges and then by the students ....leads to frustration once the students are thrown into the real world which is beyound the reality the arch students have created , hope this article prove an eye opener .

article :-

The founder of the nation's largest design firm doesn't dress fancy and doesn't have a favorite building.

Art Gensler of Gensler architects is atypical in other ways, too.

He studied architecture at Cornell University, but doesn't consider himself an artist. He specialized in building interiors during the '60s when exterior design was the rage, and interior work was still essentially furniture arrangement.

But the biggest difference is the way he runs his architecture firm. He runs it like a business.

"He's reading the Wall Street Journal, and I'm reading an architecture magazine. He's looking for an industry, and I'm looking for one good project," said San Francisco architect and occasional Gensler competitor Theodore Brown, recalling a transatlantic flight when Gensler was his seatmate.

Ed Friedrichs worked alongside Gensler for 34 years, including eight years as president and three years as CEO of his company. "He got the money gene -- we all did," he said.

Indeed, with the industry's cyclical and highly competitive nature, slim margins and long delays between services rendered and payments made, architecture firms are not easy businesses to run.

Most schools still emphasize theory and design over business rules, and architects are typically drawn to the profession for a love of the work -- not a burning desire to run a business. Businesses are usually small, too, with 87 percent of firms nationwide operating from a single office and fewer than a dozen employees, according to the American Institute of Architects.

"Small firms don't have the resources to weather a downturn," said Kermit Baker, chief economist for the AIA, noting that just 14.2 percent of firms founded before 1970 are still around today. And Gensler is the largest of them.

During the past 40 years, Gensler has grown from one office in San Francisco to 28 offices and more than 2,000 employees worldwide. Revenue for the year ending March 31, 2006 is tracking 28 percent ahead of last year's numbers, thanks to rapid growth in every office except Tokyo and Detroit.

Practice areas now stretch beyond interior design work for corporate clients to include hospitality, education, airports, railways, furniture design and large-scale urban planning, with projects ranging from the 110-acre International Financial Center in Dubai to redesigning the approach to the Black Stone of the Ka'aba in the Muslim holy city of Mecca.

Art Gensler, 70, steps closer to retirement this month and is appointing three co-executive directors to lead the firm, including his oldest son, David Gensler.

While the change could signal a major shift in company operations, chances are it won't.

Beyond Art

Although the firm is named after Art Gensler, he's never been the sole decision maker.

Run for roughly 30 years by directors including his wife, Drucilla, Friedrichs, Anthony Harbour, Denis Rice and Margo Grant Walsh, the practice would usually reach consensus after debate, according to past and current board members. Votes were taken rarely, if ever, and nearly all major decisions emerged after a roundtable discussion.

While the management structure recently put in place will be different, the leadership has been active since 2003.

That was the year Friedrichs, Harbour, Rice and Walsh stepped down and the firm added 10 new board members to join Gensler and Drucilla. That board included their oldest son, David Gensler, who splits his time between Los Angeles and San Francisco; Washington, D.C.-based Diane Hoskins; and Los Angeles-based Andy Cohen. All three now hold responsibilities as co-executive directors and continue to serve as part of the 12-person board.

Gensler will handle finance and operations; Cohen will focus on clients and design; and Hoskins will be responsible for employee and practice issues.

Said David Gensler: "To change from a founder leader to the next generation is something that we've been working on for 15 years. It's an evolution."

The firm's design style, which is as diverse as the client roster, is also unlikely to change with Art Gensler less active in daily operations.

He only touched 30 to 40 of the 1,000 projects the firm was working on in any given month, with much of his time going to networking and not-so-glamorous tasks like bill collecting and handling insurance issues.

And on the projects he did touch, Gensler didn't leave a signature mark. He's proud of the fact the firm doesn't have a distinct design style, and instead takes its leads from clients.

That was a major reason why Gap founder Don Fisher continued to hire the firm for the past 40 years. He estimated the firm has done roughly 3,000 of the Gap's 4,000 stores worldwide, plus the majority of the corporate office build-outs.

"He does not have a distinct architectural style where people will look at his building and say 'that's a Gensler building'," Fisher said.

Said Gensler: "Architecture has to be appropriate. It's about solving problems. One of the problems is aesthetic -- it's the most obvious, but it's not necessarily the most important."

The most important?

Money. And Gensler learned that lesson from his clients.

Money honey
When Gensler launched operations during the mid-'60s, it was the beginning of the great white-collar expansion. Professional service firms were opening up branch offices nationwide and multi-tenant buildings, particularly in San Francisco, were becoming the norm. With older floorplates not always well-suited to an organization's business or focus, a lot of work was available.

"At that time, interior work was really done by housewives. The attitude of most architects was, 'We'll take the rough and tumble part -- the exterior -- and leave this other prissy stuff to the women,' " said Brown.

The sector meant both a major opportunity for Gensler -- it was the first firm to specialize in interior design -- and an education.

Execs at fledgling companies didn't have blank checks for build-outs and had to make the numbers pencil out for corporate headquarters.

"The culture very early on was to work on business-to-business terms. Not be interior decorators," said Friedrichs -- noting the firm broke the stereotype that interior design was more an artistic endeavor than a business.

Shortly after starting the company, Gensler realized he needed to know more about running a business. He attended a few night classes at San Francisco State University before deciding it would be more efficient to hire a business professor to come to Gensler and teach all the firm's architects -- roughly two dozen at the time -- business basics.

An early lesson was the importance of collecting on overdue bills.

"Most architects are generally embarrassed to ask clients for overdue bills," said Friedrichs. "We had a re-education process for people who carried that attitude. People make a science of floating their late payments, and if you let them, they'll work it to the max."

Along with hiring business consultants on an ongoing basis, Gensler and other executives sought out best business practices and principles from other fields. They learned to be flexible, creating a separate business unit for Gap projects to ensure they snagged all the company's business, and they learned to focus on financials.

That was among the reasons Friedrichs began courting David Gensler to join the firm in the early '90s.

With an undergraduate degree in economics from Dartmouth and an M.B.A. from Stanford, David Gensler had worked at the Pacific Stock Exchange, Morgan Stanley and Microsoft.

He was chief financial officer of Datis Corp., a software firm in San Mateo, and was happily anticipating it going public. He was a numbers guy, and architecture, let alone joining his father's firm, was the furthest thing from his mind.

"Being the oldest of four boys, the closeness to Art was a little overwhelming," David Gensler said. "I wanted to make my own way in life, so I got as far away from design as possible."

Friedrichs, who had known David since he was 10, had been searching for a CFO-type to help run the rapidly growing firm. After sitting next to David during the firm's 25th anniversary celebration, he decided to pursue him as a job candidate. The men had several clandestine meetings at the San Francisco International Airport -- Gensler would meet Friedrichs when he was flying up from the Los Angeles office -- before deciding to discuss the idea with Art.

"We agreed on a couple of ground rules going in, the main one being that we would never let anybody or the company come between us. That's always a risk when you go into a family business," said David Gensler. "We've fought about issues, and I'm sure there are hard feelings on both sides. But at the end of the day, our father-son relationship is different than our business relationship."

David began working at Gensler in 1992.

The youngest of the Gensler boys -- 37-year-old Doug -- joined the firm that same year. He had studied architecture at Cornell University, like his father, and then traveled in Asia. He worked at the San Francisco office for three years before being asked to run the Boston office.

After building the group to 70 people, he moved back to San Francisco, where he now does a mixture of academic, mixed-use, hospitality and life-science projects.

"When we're all together, we tend to talk about (the business) a little bit. It doesn't consume us, but it can certainly be a big part of a dinner conversation -- everything from individual projects, to clients to strategic initiative -- you name it," said Gensler, before adding, "but it's not a family business."

Extended family
With 1,600 or so shareholders and a 2,000-plus employee-roster, critics often say Gensler has grown too big to respond to client needs.

David Gensler and other company leaders say scope is the firm's greatest strength, enabling the company to select the best people for a job. While a project is often handled from the nearest office branch, location becomes irrelevant as the project advances. Firm directors, who discuss roughly 1,500 of the firm's 2,000 employees at review time, frequently create new teams, drawing from locations around the world.

The 28 offices share the same profit and loss statement so they don't compete with each other.

While Gensler has not formally announced expansion plans, more activity in India and Asia will likely require an increased presence in those markets.

"People talk about us being a large firm, and it's like, 'Yeah, we're the tallest fifth-grader in the class,' " said David Gensler. "We're trying to build a truly multi-disciplinary global design firm."

Lizette Wilson covers real estate for the San Francisco Business Times


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