We love our Founders. AEC firms wouldn’t exist without them. You only have to check out the “About Us” or “History” pages of ENR 500 websites to see just how much reverence is paid to those who founded those firms 30, 40, or 50 years ago.
There’s a codified set of rules for a firm’s managers and employees—and then there exists another set of largely unwritten protocols for the firm’s Founders.
The healthy respect and deference for Founders generally works for most of a firm’s initial existence. But when Founders overstay their welcomes, this dynamic can become unhealthy, and a firm begins to experience one of the most pernicious ailments that plagues the AEC industry—Floundering Founder’s Syndrome (FFS).
What Is Floundering Founder’s Syndrome?
Bad things tend to happen when a firm’s Founders stick around too long instead of transitioning in an orderly, agreed-upon manner to the second generation of leadership and ownership. The firm’s performance and culture suffer. Relationships become unhealthy.
Next-generation leaders feel undercut, demotivated, and delegitimized by the Founders’ persistent presence. The board room and leadership team dynamics can resemble an episode of HBO’s dark comedy Succession. That’s why two-thirds of design and environmental firms fail to transition beyond their Founders.
Signs Your AEC Firm Is Suffering from Floundering Founder’s Syndrome
It’s shocking how many firms we see that should be consistently generating profits of 20%+ given their brands that are barely breaking even because of FFS. These changes don’t happen overnight. The degradation happens so slowly and subtly as to be almost imperceptible. But everyone—including the Founders themselves—is aware of the drift. Unfortunately, most of the time leadership teams are not equipped to stop the slide.
The first hint that a firm has FFS is when Founders begin to overplay their Founder’s Card.
You’re familiar with the Founder’s Card, right?
It’s like a special hall pass that only the Founders have. Need to take a call from a family member during a board meeting? No one else can, but the firm’s Founder sure can do it. That’s an example of the
Founder’s Card being played. When the Founder’s Card gets overplayed in governance, strategy, and operations, it’s a recipe for dysfunction and sub-par performance. Here’s how:
Intentional or not, floundering Founders play an outsized role in corporate governance. The Founder’s Card is typically overplayed at the board level either in voting mechanisms (voting by shares owned vs. one person, one vote) or composition (packing the board with hand-picked “yes-people”—either internal or external—or family members). This type of behavior is a manifestation of Founders believing that the firm is “theirs,” that it belongs to them because they founded it—even when they themselves may own less than a majority of the shares.
Most non-founding minority shareholders and next-generation leaders have neither the experience, capabilities, nor short-term incentives (“I don’t want to challenge this situation as the Founder sets my annual bonus. I’m no fool.”) to push back when the Founder’s Card is played this way. This opens the door to poor governance decisions, and the rot sets in.
When Founders stick around too long it can lead to some serious strategy implications.
We’ve seen it all in our consulting work. Founders passionately driving bizarre strategic initiatives (“OK, I know we’re a transportation engineering firm and all that, but I believe we should buy multiple architecture firms to allow us better access to clients.”). Founders capriciously reneging on commitments made through good-faith and oftentimes contentious leadership team meetings. (“Yes, I know we agreed to invest in a technology partnership with that AI firm at our last board meeting, but now I’m not so sure, so let’s defer.”)
When the Founder’s Card is overplayed in setting firm strategy, it leads to poor investments that drain a company. It also erodes trust and confidence among leadership teams.
The Founder’s Card is hidden from employees when played at the governance or strategy levels, but it’s visible to everyone at the operations level. This happens when a Founder lets personal bias undercut agreed-upon management decisions or protocols (“Let’s keep working for this client. I know they don’t pay us well, but I’m friends with the CEO’s mother. If your division director finds out and is upset, tell him I told you it’s OK.”) or is unable to recognize how business has changed (“Value pricing? That will be the end of us! Figure out the hours it will take and add a 5% profit. That’s how we do business here.”). When this happens, the dysfunction at the top of the firm becomes manifest to all. It’s lousy for morale.
How to Overcome Floundering Founder’s Syndrome
The only cure for FFS is a strong, cohesive, and skilled next-generation leadership. This team needs to make it clear to the Founders the terms under which they will commit to transition in
terms of goals and timing. They need to acknowledge the special role and position of the Founders, while also making it clear what is acceptable and unacceptable behavior. They must call out the Founder’s Card when it’s played.
Sounds easy, but it’s not.
Ownership transition is about dealing with power, mortality, risk transfer, and legacy relationships. It takes the Founders working in concert with the next generation to make it work smoothly. The longer Founders linger, the harder it gets.
What Founders Should Look for in Their Next-Generation Leaders
Sometimes Founders stick around longer than planned because they haven’t done enough to create a pipeline of leaders who have the interest and inclination to be an owner. So, what should Founders look for in their next generation of leaders?
Hal Macomber, the author of Morrissey Goodale’s Mastering Lean Leadership for the Architecture & Engineering Industry, helped identify the following five behavior sets:
- Responsible autonomy
- Committed action
- Cooperative consideration
- Sound decision-making
- Lean thinking
“Responsible autonomy” is the capacity to act on one’s own, recognizing the limits of capability and with concern for the well-being of others. Unlike most of the general population, architects, engineers, planners, and environmental consultants are well prepared for acting with responsible autonomy. These professions usually require licensing, continuing education, and membership in a society to be able to practice the profession. While we know that junior professionals may not have the experience that develops knowledge and judgment, by the pledge they made when they became professionals, we can expect them to act responsibly.
“Responsible autonomy” is central to ownership. Founders must have the expectation of other owners that they will consistently act to take care of the concerns of the business, the people in the business, and the firm’s clients. If, however, they find that the firm’s future leaders must be told or asked to do those things, they will retain ownership that much longer.
One way to describe “leadership” is accomplishing things through others. And that requires taking action in language—making requests and promises. Effective leaders take responsibility for the outcomes of their firms by creating networks of commitments with others, and doing so in such a way that people:
- Say “yes” when they mean it.
- Say “no” when they must.
- Ask for clarity when they are unsure of what is being requested.
- Promise to promise later if they need more time to figure out if they can commit.
- Make legitimate counteroffers when they can’t deliver on the specific request.
- Make conditional promises (e.g., “I will do this if you do that”) when they need help to execute.
“Cooperative consideration” is an expectation that each of us behaves with the consideration of others and acts to address those concerns. It is this concept that seems to be at the heart of making a company function well.
Unfortunately, all too often we observe a different behavior being practiced in AE firms—taking care of ourselves. It’s usually done out of the concern for risk and exploitation by others. Nevertheless, cooperative consideration can be cultivated with the knowledge that the considerate behaviors that have been fostered in us by family and friends are available in the workplace as well.
We hear some Founders say, “I trust her. She makes decisions the way I do.” A company where next-generation leaders make decisions like the boss, though, isn’t necessarily what the Founder should seek. Far more important is that future leaders demonstrate the ability to make sound decisions as they establish strategies for the firm, prioritize goals and objectives, and commit company resources. The key to sound decision-making is using the right data the right way.
Lean thinking, the last of the behavior sets, provides a framework for addressing the long-term interests of the firm. It starts with two foundational principles: respect for people and continuous improvement. These principles are universal, and the practices that are derived from these principles are equally so. “Lean leaders” deploy Lean strategies, methodologies, and tools to build firms that deliver highly valued services without the usual waste and do so in a manner that systematically grows capability.
Morrissey Goodale Can Help Your AEC Firm Overcome Floundering Founder’s Syndrome
Morrissey Goodale’s leadership development and ownership transition experts can help your architecture, engineering, or environmental firm prevent or overcome FFS by developing a capable group of next-generation leaders and facilitating successful internal ownership transitions.
Through one-on-one executive coaching and on-site programs, our management experts can put our decades of deep AEC industry experience to work to improve the leadership skills of your rising stars and instill in them an ownership mentality to ensure the long-term viability of
your firm. In addition, Morrissey Goodale’s financial consultants can develop and execute internal ownership transition plans that maximize any Founder’s return on investment.
Is your AEC firm suffering from Floundering Founder’s Syndrome or do you want to prevent its onset in your company? Contact us today to find out how Morrissey Goodale can help.
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