Life is short, people sometimes say, to convey the idea that you should do what makes you happy. But now that we’re living longer and retiring later, the opposite is also true, though the meaning is essentially the same: Life is long, so look ahead and pace yourself. Rather than being too single-minded about it, there’s probably time to test out new ideas, dreams, and directions. Or, as T.S. Eliot poetically put it, “there may be time for a hundred visions and revisions before the taking of a toast and tea.”
That’s more or less what Christopher Hays, AIA, was thinking a year ago, when he left a satisfying partnership at William McDonough & Partners, Charlottesville, Va., to do something he’d dreamed of since he was in seventh grade: head up his own architecture practice. “Architecture is a long, slow profession,” he says. “It’s easy to get on a track that may be interesting and exciting, but how that relates to a long-term vision is something that’s important to continue to gauge against. Life is long, and there’s opportunity for many kinds of professional experience.”
That sentiment is very 21st century. This is not our parents’ workplace, where management-level employees strove for tenure or partner status and then toiled away until they retired, out of loyalty or for fear of starting over. Today, many architects who are part of a firm’s inner circle eventually reach a personal turning point and decide to move on. There may be personality conflicts with the other principals; perhaps they want a different kind of practice or a different focus, or they’re simply relocating to another part of the country. Regardless of the reasons, starting over is a journey that’s exhilarating in its freedom yet is logistically akin to a divorce—sometimes psychologically, too. So how do architects extricate themselves from the tentacles of a firm and go on to invent a new professional life?
With partner-level turnover increasingly common, smart firms have devised exit agreements that make things easier for everyone. Spelling out issues such as the formula for cashing out of a firm and the rules governing competition for clients and employees can minimize 11th-hour lawyering, which threatens to sour relationships. Even so, those contracts are rarely written with the best interests of the departing partner in mind. “Everybody signs one, not because you think you’re going to leave, but because you want to keep the other partners from leaving,” says attorney Paul Lurie, of Schiff Hardin, in Chicago. “They get signed for good business reasons, but you still need to look at the implications of the restrictions and negotiate the terms when the time comes.”
the spin-off When Jeff Davis, AIA, parted ways with Cline Davis, the Raleigh, N.C., firm he and Gary Cline had founded in 1989, they were at the pinnacle of their success. The firm had grown to 65 employees and a handful of partners, with residential, planning, recreational, and institutional projects spread across four states. But along with the project mix, the interpersonal dynamics had shifted over the years. “I’m more of a hands-on architect, and when you get to be that size, it’s not hands-on anymore,” says Davis, who specializes in community planning. When he left the firm in 2000 to start a smaller but competing practice, a detailed separation contract drafted years earlier helped to ease the turbulence.
As agreed, work in progress fell out along principal lines. Davis took the projects he’d brought to the firm and on which he was principal in charge. The payout was straightforward, too, because the formula for determining the company’s value was already in place. Davis cashed out his shares, and the outstanding receivables roughly matched the equity he was owed. The partners also met with their insurance carriers to figure out who would assume liability for past projects. Since Davis took 30 percent of the company, it made sense for him to also take legal responsibility for the projects on which he was architect of record.
“The physical stuff like money and equipment was real easy,” Davis says. “But I took 22 people with me as well. It doesn’t get contentious until you start messing with the manpower balance.” In negotiations, the partners had agreed that Davis could invite the staff he wanted to go with him. He prepared offers for 25 employees, letting the partners know whom he’d contacted so that they could make counteroffers. “It’s either that, or you leave in the middle of the night with a group of people,” Davis says. “We were trying to be very much above board.” To ensure that the word on the street was equally upbeat, their attorneys suggested that they jointly hire a writer to cover the breakup. “We hired a guy with good political instincts who interviewed us and put a positive spin on the whole thing,” Davis says. “This went into the Triangle Business Journal. I think we were the largest firm in the area, so it was quasi-newsworthy.”
dividing lines and liabilities Even when everyone is on their best behavior, breaking up is hard to do. There are years of professional relationships to untangle, tough decisions to be made about what to take and what to leave behind, and insurance complications to sort through. Noncompete clauses address the issue of employee poaching, but they can be ethically uncomfortable and may be unenforceable. A more elegant solution is the gentlemen’s agreement, a code of honor that mediates the interests of both parties. “The thing to keep in mind is that staff choose who they want to work with,” says Hugh Hochberg, a partner at The Coxe Group, Seattle. Still, he recommends abiding by the rules of a separation agreement, particularly if a financial payout is at stake. “It doesn’t make sense to put that at risk by violating a noncompete agreement,” he says, adding that firms ought to revisit their position to make sure that it’s reasonable.
The same philosophy applies to clients. Smart firms want them to be well-served, and if clients want to accompany the departing partner, it’s unwise to lock them in. “Put yourself in the client’s shoes, and figure out what’s best,” Hochberg advises. “One of the arguments is that if you give up a project, you’re giving up the potential profit. Yeah, live with it.”
Donald Rattner, AIA, drew similar lines in the sand when he left Ferguson Shamamian & Rattner, New York City, to found the Studio for Civil Architecture in 2002. The old office had three operating studios, with each partner responsible for a roster of projects and client relationships, so each of Rattner’s clients made the transition with him. “It would have been difficult to imagine it any other way,” he says. He and the partners did negotiate on the staff that Rattner would be allowed to invite along. And, like Davis, they all sat down with their insurance agents to assign liability for past projects and work in progress, should a claim arise. More discussions ensued between Rattner and FS&R’s circle of professional consultants—lawyers, insurance agents, and accountants—some of whom he retained for work with the new firm. “You need to address in advance how the relationship might work, should a dispute arise between the two firms.” Rattner says.
a clean slate For some architects who parachute from partnerships, dividing and conquering is the key to landing on their feet. Others prefer to walk away unencumbered. Maryann Thompson, AIA, of Cambridge, Mass., chose the latter strategy when she and her former spouse, Charles Rose, went their separate ways four years ago. Rather than dissolve the practice as a legal entity, Thompson signed over the corporation documents to her ex-partner, with the understanding that she could have free access to the firm’s archives. Because she and Rose had both been principal in charge on every project, trying to divvy up project ownership and liability would have been too messy, she says. But doing away with the practice hadn’t made sense to her either. “It felt too destructive to me to take that practice and say it’s gone,” Thompson says. “I liked the idea of starting with a clean slate. I felt like I would be fine, and I have been.” She did, however, take three staff members and two local projects with her. Today, Maryann Thompson Architects, which focuses on sustainable design, has grown to 12 staff and 22 projects. “It’s amazing how easy it was just to jump back up,” she says.
Easy, that is, except for one detail that often gets overlooked in separation agreements: how to credit past projects. “I didn’t realize that in signing over the corporation documents, the attribution of projects could be changed retroactively,” Thompson says. She points out that when an existing corporation changes its name to reflect the new ownership, it is allowed, by law, to identify past projects by the firm’s new name. This is an important issue, especially for a firm whose work is published frequently. “It should be agreed upon explicitly when a firm breaks up,” she says. “I do have an ethical right to call the projects by the former name of the firm. You think of architecture as an art form, and the author’s name is historical fact. However, copyright laws don’t consider architecture to be something that has a stable authorship.”
While architectural management courses failed to prepare her for that scenario, another lesson did translate: “Just as you learn that liability is decreased by a lot of communication with the client, I actually think that’s true with a breakup,” Thompson says. “Openness and gratitude for the experience that you had together can help to keep things easy in terms of sharing photos and storage areas. You try to remember all of the good things and bring them into the present relationship.”
leveraging relationships Indeed, a civil breakup can lay the foundation for a new venture, as Doug Graybeal, AIA, discovered when he left Cottle Graybeal Yaw Architects, Aspen, Colo., last year to pursue an interest in green design. He credits an up-to-date separation agreement for making the parting virtually pain-free. (The contract had recently been adjusted to make it affordable for new partners to join and for the firm to buy out those who leave.) To avoid some tricky insurance issues, Graybeal left all the projects on the table but is being paid as a consultant to manage the work for which he was principal in charge. The agreement also gave him access to project files and promotional photography. “I’d put the relationship akin to a 25-year good marriage,” Graybeal says. “It’s not a divorce but a separation of ways, with 110 percent support. I think it’s so critical to keep professional relationships. There’s more to it than money.”
“Take the high road,” Hugh Hochberg says. “If that means swallowing a little ego, so be it.” Likewise Chris Hays, who left William McDonough & Partners, gave several months’ notice, and agreed to consult through the transition period with clients. He also complied with an unspoken agreement not to co-opt employees or clients. In return, the firm has been generous about recommending him for some smaller-scale projects that it’s turned down.
In an ambitious startup, there’s more at stake. Jeff Davis managed to meet the terms of his separation agreement while gearing up quickly for community planning projects. In addition to the 22 people he was allowed to pluck from the old office, Davis merged with a small landscape architecture firm that gained him a supporting cast of office manager, CAD operator, and operations manager. He also offered four of the talented younger architects equity in the new firm. “It was an opportunity for them to emerge from deep stratification in the old firm and be leaders in the new one,” he says, “and it proved to be a smart move.”
There are other ways to back up a practice while getting one’s bearings, and there’s something to be said for a calm, unhurried approach to starting over. Inspired by a friend who has successfully lived life on the edge, Bob White, AIA, left Scheurer Architects in Newport Beach, Calif., last year at age 39 to follow his dream of designing custom homes. Intimidated by the idea of plotting a long-term plan, he decided go away quietly for a while and focus on a couple of projects.
White works by himself in a small rented office on the main shopping street in Laguna Beach, taking on several multimillion-dollar coastal homes at a time. To get the projects through documentation phases, he collaborates with an architect friend who runs a larger office. “He’s got the staff and technology for us to take on projects we want to do, and it’s the key to my effort to keep my own quiet environment,” White says, adding: “I tend to be more casual. I wanted this to be a comfortable place for my clients to come to, where I could leave my door open and get the music going. But I also wanted to be downtown where there’s activity and a buzz in the air. It turns out clients love coming here. They can do a little shopping here by my office, or we’ll go to dinner or lunch.”
Rather than put his own moniker on the door, White named his new practice Forest Studio, after the street on which the office is located. He says it will allow the firm to grow in different ways. “If you know Laguna Beach, you know Forest Avenue,” White says. “I love the concept of my first space paying homage to my leap of faith. I said that wherever I end up in five or 10 years, I’ll keep the name, and in my heart Forest Studio will always bounce me back to when I took the leap.”
cheryl weber is a contributing writer in severnapark, md.
dotting the i’s When a partner leaves, the most contentious issue may be the potential loss of clients and employees. Paul Lurie, an attorney at Schiff Hardin, Chicago, and the author of Ownership Transition: Options and Strategies (published by the American Council of Engineering Companies), says noncompete laws vary by state. But generally it’s illegal for a partner to solicit an existing client before he or she leaves the firm. On the other hand, if a client decides to terminate the contract with the former firm after the partner leaves, the partner isn’t held liable for interfering with the contract. The same rule applies to employees, unless negotiations dictate otherwise.
Exiting partners also need to be clear about their liability for completed projects. Frank Musica, a risk management specialist at Victor O. Schinnerer & Co, Chevy Chase, Md., says that if the old firm continues its professional liability insurance, the departing partner is typically covered for everything he or she did while at the firm. But if the remaining partners discontinue their policy, the one who left is unsafe. They might, for example, buy a cheaper policy that doesn’t provide retroactive coverage. Or, unbeknown to the ex-partner, they could let coverage lapse until they get the office going again.
“The exiting partner could purchase coverage for a new practice, but it probably won’t reach back to what he did with the other firm,” Musica explains. In another scenario, if the partners are discontinuing the entity and going their separate ways, they often will pitch in to pay for a tail policy that covers claims on past work. Their new insurance will cover for new efforts, and the insurance they buy together will cover for old work.