I really think the more successful client relationships we've had have started with interviews and conversations that are deeper than than a design idea. Hello
and welcome to the Business of Architecture. I am your host Ryan Willard and today I am honored to speak with James and a pasta. Who is an F a is a member. He is LEED certified and he is the esteemed principal and chief architectural officer at J. CJ architecture. As si a Oh Jim masterfully manages Design Excellence ensures top notch technical service delivery and oversees professional licensing standards as a pivotal figure in JC J's executive leadership. Jim champions, a design forward ethos identifies business ventures aligned with JC Jay's foundational principles, guarantees unparalleled client experiences and upholds the zenith of ethical and operational benchmarks. Jim's architectural journey is deeply rooted in public and community centric projects, notably educational infrastructures serving public, independent and tribal nations. Under his guidance, Jcj has earned accolades for crafting schools that echo modern values of innovation, mutual collaboration, and avant garde educational methodologies. A point in voice in architectural discourse Jim collaborates with both client bodies and architectural fraternities, spanning local to international arenas, having helmed the AIS committee of architecture for education and spearheaded JC J's partnership with the American architecture foundation designed for learning initiative. He's an industry Trailblazer, constantly revolutionising school designs that cater to evolving teaching methodologies, and students accomplishments and a recognition of his monumental contributions, especially in educational architecture. Jim was distinguished as a fellow of the American Institute of Architects in 2013. So it was a real privilege to sit down and discuss with Jim his career, the legacy and the multi generational transitions of JC Jay. And we talk a lot about about that the history of the firm, his career and his pathway to partnership, we also look at how business acquisitions are used by JC J, to become a powerful tool and a long term strategic method for entering into new sectors. And we discussed the challenges with it and the ways to do it effectively. We also look at the ESOP model of ownership which Jcj has recently undergone, which was a natural evolution of the firm's culture. And we also talk about the skills and attributes that are needed for a firm partner. So as always, an episode filled with absolute gold. So sit back, relax and enjoy James pasta. Have
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Jim, welcome to the Business of Architecture. How are you?
I'm great, Ryan. Thanks. It's, it's a lot of fun to be here.
Absolute pleasure to have you on the on the show. So you are one of the principals at JC J. Architecture. You've been there for a whopping nearly 40 years.
Closing in on 40 years, I joined in 1986. Sounds
fantastic. I mean, that's that's in itself really incredible. And I love speaking to partners of businesses that have that depth of knowledge with one single firm because the level of nuance and intricacies and depth that you know about all the mechanisms of the business is really really, you know, it's deep. It's very, it's very, very insightful for actually understanding how business operates. So your your firm was established in 1936. You've got about 150 employees across seven offices. Seems like you guys are pretty much licensed in every state in the US.
Pretty close to it at this point. As a company couple. We're working on Alaska or Hawaii on the list. Great.
So you've got and you've got seven offices Boston, hollowed on the east coast where you are today. In great Hartford, and you guys have got an incredible portfolio a very diverse portfolio of work from adaptive reuse, arts and culture, community buildings, k 12 educational facilities. And, you know, it's an incredibly impressive organization. I think I guess my first question is, you know, with a company of such heritage, how did you? How did you first get involved with Jcj? And perhaps you could tell us a little bit about what you knew of the business before you before you joined?
I think like a lot of young architects, I knew pretty much nothing about the business of running an architecture firm. When I joined. I found the firm actually through an alumni network. I was a student at Rensselaer, Rensselaer Polytechnic Institute in upstate New York, in the master's program for architecture. And Ed Jeter and Dave Jepsen, who were the two owners of the firm at the time. The firm was called Jeter, Cooke and Jepsen architects back in the in the 80s, actually, up until 2005, when we went the acronym route. So Dave, I met through through some alumni events, they were both alumni of the College. We struck up a conversation actually, after a hockey game, and an alumni event. And and it turned into a summer internship in 1985, in coming down to Connecticut, from upstate New York, had a good couple of months. We stayed in touch while I was finishing my master's degree. And I ended up coming back here to join them I had no it seemed like a lot of opportunity. They had been owners of the firm, I think, at that point for 25 years or so themselves. Right. Dave Dave Jepsen, who's whose role I really took over. After he retired a few years back, he, he had joined the firm after coming out of the Navy. And this had been his one career as well. So there's a kind of a legacy of people spending, spending a lot of time here at the farm and really getting to know another business, another practice.
So it was they were there. The head office was always in Connecticut.
The firm was founded in Hartford, and up until 2005, that was the only place we had an office. Right? When we began, we didn't expand officially till 2005. We started working across the country in the mid 90s. But we didn't establish the second office till the early 2000s.
And what has it been about Jcj? That's had you commit your career to the to the practice? How come you never, you are never swayed or seduced by another firm? Well,
I won't tell you I hadn't looked early in my career most people do. And I'd also like to tell you, there was some grand plan, but there really wasn't. Yeah, it was always the next great project to do. And one of the things we've always done here, and I think I was the beneficiary of it is give young architects opportunity to step up into, you know, into roles, perhaps on bigger projects, and they might, you know, the firm so I was getting tremendous opportunity and trust early on in my career. And that led to significant roles leading the design of relatively significant but also always interesting projects, a lot of K 12 projects in the in the 90s. And before that, retirement communities, which was a major part of our practice in the northeast, back in the late 1980s. That just the opportunity was there. And one project led to the next and it's always hard to leave when you have a really interesting project going on. How
has the firm changed in the last 40 years since you're kind of beginning beginnings there? Sure.
Well, I mean, obviously, we've grown we were when I began, we were about 30 people in one office in downtown Hartford, Connecticut. We focused primarily on local projects. Most of our work was within the state of Connecticut with a couple of forays into nearby Massachusetts, Rhode Island, upstate New York. And we were focused mostly on community based projects. So we would do churches, schools, retirement communities, a lot of work for not for profits. And then in the late 80s, we began to grow. There was a period of tremendous growth in Connecticut and Hartford, in particular, with a lot of mid rise towers, and we began to get into the office market and that began to both fuel our growth as a firm getting up to 40 5060 people, but also began to expand our abilities beyond small scale projects to much larger complicated work.
And what was the kind of the The thing that kind of changed some of the leadership at the practice. So obviously, you were kind of coming into a business that already had a good 40 years of life or 50 years even. What, what, what were the What were these leadership transitions like?
Well, one of the one of the things that have to give a Jeter and David Jepsen a lot of credit for is that they, they look very far ahead in terms of leadership transition. And, and that's something that you have to do because the the transition of a firm to be successful, could take five to 10 years in terms of thinking about that next generation of leaders and how do you grow them? So they began really in the in the mid to late 80s, to think about what would happen when the two of them who were the only owners at the time, there was a very traditional escort where you had two principals who owned all the all the stock in the company. And they, they then began to think about, well, what's next? What was their exit strategy going to be when they still had over 10 years, or more Dave's case that they wanted to practice. What happened was they began to create new principals. They had never, there had never been more than two principals in the firm, really dating all the way back to 1936. When it was Jeter and cook when they were two, two partners, again, very traditional practice on a small scale. So as they engaged with a number of consultants over the years to find out best practices, how do you how do you go about transitioning, and in the late 80s, and early 90s, they began to divest some stock. And while we were still an S corp, they brought in really what was the third generation of ownership, still, in a very traditional sense, it was people buying in, right, so it was it was going through a bank, getting a loan, purchasing your stock, and, and really having a financial stake in the success of the company. And that process, brought in, I believe, initially three additional principles. And then there was another round in the mid 90s, mid to late 90s, when I was a part of that, that transition when I became a principal and became a shareholder in the company, that that went on through the early part of the 2000s. And eventually, we were at about, I think 1212 to 14 shareholders in the in the firm, and we had grown to over 100, actually up to about 150 people in the early 2000s. So large,
what was that like for you? You personally, I think it's quite interesting. And it's a little bit different now as well how people often end up, you know, having ownership in an architecture firm. And I think it's quite important for certainly like a younger generation to to understand what current partners did or the risks that you took in order to buy into the practice. What what did that look like for you personally? What sorts of things did you have to deal with? And what are your what were your concerns,
there was an enormous risk, it was really a leap of faith. And that was, in some ways, the old way of buying into a firm, it literally involved going to a bank and taking out a personal loan. In my case, I was fortunate I didn't didn't have to put my house up as collateral, but some people, some people did, but had to get an unsecured loan from a bank and pay the loan back every month. It was it was a real investment of real money. And that made it made it a risk. Because if at any point if the firm was not successful enough to provide income to repay the loan, and make it a good investment. Yep, you would you you were in potential financial peril. So there was a very real downside risk to to being a principal back back in that under that form of ownership, and many firms still have that, obviously, smaller firms. Sure. And I do talk to our younger staff about that, that that that is the price of of moving into a leadership position. No longer we can talk about that. But in the old, you know, in a more traditional practice, if the firm had a bad year, then we would be we never did, thankfully. But we would have been expected to take a path of cash reserve and put money into the business to keep it going. Yeah.
How did your attitude change when you you when you put your own cash on the line basically, when you got when you got skin in the game? Yeah,
we used that phrase a lot. When we used to meet, I don't I don't know. I don't know that it changed significantly other than practice became much more serious. You became much more aware of I think doing the Extra, although I would argue that anybody who moves into a leadership role in the firm has already sort of committed to that firm, at least ideally. And they're already going the extra mile or doing whatever needs to be done to get to get projects out the door. And that's always kind of been our ethos in the firm is that our principals have always been heavily immersed in the practice, we don't have any principals who don't, who don't work with clients who don't lead project teams who don't do marketing, who don't move furniture around the office, if that's what's needed. I mean, that's, you know, we just pitch in and do whatever, that was always the, the ethos of the firm and remains that so. So there was a, there was a certainly a seriousness that came with it. But also a sense of responsibility, I think more than anything else, understanding that you are now responsible for the business going forward, and that everyone that worked as a collaborator within the firm, also had families and people who relied on them. And there was a real, real responsibility to maintain the business and make sure that it was sustainable, financially, but also was providing culturally, the kind of place people wanted to come to work every day with the kind of atmosphere, I think it would be very easy to fall into the trap of focusing on the money unless you have skin in the game, but that's very short sighted. Because if you're not doing great work, and you don't have people who want to come to work and enjoy each other's company, and if the culture isn't robust, well, then you're not going to do very well. And you're going to end up in a financial problem. So we really had to stay focused on on the other things and keep an eye on the money and spend appropriately and stay within our means, which is another hallmark of the firm, we've always been kind of debt free, and men sort of paid our way. And they're very cautious about that, but not at the expense of staff or, or the work. Yeah.
What makes a good partner in a business? Like Jcj? What what what things are you looking for? And it because I think, again, this is interesting, because it because we often place partnership as the pinnacle of, of a career, I'm not entirely sure that it always is because it's not for everybody, right? No,
it's not, it's not. And we've certainly had people that we've, we thought might aspire to be a partner and they've they've really not been interested. They're very happy to be leading project teams, I do think most of our most of our senior staff are the ones who maybe don't aspire to being a principal in the firm, absolutely aspire to having some level of control over their projects, and some level of self direction. And that's where their their fulfillment comes from is through the work.
Got it? And so becoming a partner, what are the skill sets? Or what are the areas of expertise that partners got to be competent, competent in?
Well, at least in my, in my opinion, my experience, a lot of the skills are things that can be taught and can be acquired as you as you settle into the job, I think the things we look for, as we're as we're elevating people to the principal level are really character traits. So it's, you know, a baseline, you've got it, you've got to know the business, right? You've I mean, the business of design, you've got to, you've got to be passionate about architecture and practice, and really love what we do for a living and be interested. So we also look for curiosity, people who are interested in learning new things, anyone who thinks that they know it all, is probably not going to be a good a good candidate to be a principal in a firm, then you need to be looking ahead. And as curious as the junior staff aren't what the next thing is, both in practice and design and technology. And then we look for judgment, we look for a course of thoughtful conversation of thoughtful judgment, can you exercise, that, that sort of mystical skill of being able to balance all the myriad things we balance of Art and Design and practice and, and culture and find that kind of sweet spot that middle ground? Where we have people who are happy we have buildings that are that are great. We have projects that are on budget? I mean, it's it's a it's a major balancing act. And ultimately, it's it's that sense of leadership and judgment that we're looking for. Can you inspire other people can will people follow you? Or, or not? And if the if, if you're not someone who has some of those innate gifts, probably not going to rise to the level of principle.
How important is bringing in work to all partners have a responsibility to win the work and turn the Go She ain't sure that the fees are on the money or what do you have some partners who don't do any winning work activities and are more focused inside of the operations and projects? Well,
we all have periods when we're not winning work. And that's, that's fun. But, but the reality is that is that is a baseline responsibility. And and, you know, just referencing back to the last question, that's something we look for as well are people who are interested, or participated, you know, bringing work is really something that all of our staff are engaged in. And we encourage, and it's it's one of those things that as people grow through the profession, we like to engage them in that whole process of, of the pursuit and the winning of new work, because it does train leadership. But yeah, we are what we call the cellar door model. So you don't have we have support staff for marketing and business development, but the leadership are really all the principals and senior leaders of the firm, senior associates, associate principals and principals, we all have goals every year for for revenue that we want to win. And, and we all have sectors that we we are more engaged in. So we sort of divide and conquer and the various business areas that we we practice, but everybody's involved and everybody is always networking engaged. And part of the I wouldn't say part of the leading the efforts, really, in terms of putting together proposals and interviews and really pitching new work. That's that's a baseline. And sometimes sometimes that's a barrier to entry for some people show who, who just like, No, I'm really not interested in doing that. And that, that sometimes is something that keeps staff from wanting to rise to the principal level, it's just two biggest steps.
So what are the sorts of strategies that partners employ in order to win work above and beyond obviously, doing fantastic work and allowing that natural process of completing a project and, and accumulating referrals that come from doing good quality work? What did the partners do above and beyond that,
I think that the the key thing we do is we're always focused on what the needs are of the potential client. So when we when we approach a client that may happily, we get a lot of repeat work that's over well, over half of our of our work is repeat work. And that's the least expensive marketing we can do. But when we do have to pitch new work, and because so much of our work is public sector work, that's inevitable, even if it's an existing client. And there are procurement laws that require they go back out. We're always looking sort of behind the curtain with the client trying to understand what their needs are, what their How can we be of service is really what it comes down to. And when we put together a proposal, or we focus on interview, and we try to, we try to have a message, it's always a message that focuses on what the benefit will be to the client. It's never about us. And it shouldn't be, it's not about our work. It's not about awards, we've won, it's about how we can be a good design partner and a good partner, to help guide them through the process and get them to the place they need to be where we were very much want to focus on their needs. And I think that that, that kind of focus. And when we do it, well, that's when we win the work. And when we don't win the work, when we when we take a good look at a debrief sort of post action of why we may not have one, inevitably, somewhere in there, we talked about us too much, and then too little, and that that can be deadly. And people sense that right away they see it.
Do you sit down strategically as a partnership group and kind of identify sectors that you want to be doing more work in and then identified kind of key players in those industries, and then kind of reverse engineer how you might get into contact and how you might be able to serve their needs?
Absolutely. We both we sit as leadership groups, and it's not just principals, we involve staff up and down the practice because everybody knows somebody or has something to contribute. So we encourage, we meet monthly as groups to talk about both our existing practice areas and how we might expand those or change those because those are constantly evolving. We want to make sure we're following wherever those markets are. And then pretty much annually, we sit down and begin to think through are there other areas that we might want to move into what would be necessary sometimes to move into a new practice area, what's necessary, maybe an acquisition of a firm with a portfolio in that market sector. One of the things I've seen over the last 30 Some years of practice is it's increasingly difficult to break into a new area of practice that you're not in To most clients now, one of the minimums of a request for services would be, have you done 10 Other projects exactly like ours in our neighborhood. And if you haven't, they often don't want to even talk to you, and then exaggerating, but not that much. Often it feels that way. And so if you don't have any work in a particular area, you can partner with another firm, which we do a lot to be having expertise. And sometimes that leads us into a new area of business. We're all unique, you can hire, strategic hires people that you bring it at a senior level who have expertise, or you can acquire a firm, those are sort of your paths to entry, it is almost impossible anymore, to just show up and say trust us. We've done a lot of projects similar to yours. And, and we'll be good at it. Because inevitably, there'll be five other firms that have done projects, just like theirs. And yeah, and while they may like you, they're not willing to take that risk, and I really can't blame them, especially if it's a public client, and they're going to be in the newspaper about hiring an inexperienced firm, you know, we sort of get that.
Yeah, it's interesting actually, to consider, like, from the clients perspective, is this method of procurement, intelligent? Or is it actually very constraining? I mean, we're no longer in the era of say, in the, in the 70s. were, say, here in, in Europe, where you had someone like Renzo Piano, which had Rogers winning, who'd never built anything really winning something like the Pompidou Center and build a major, you know, multi million pounds Art Gallery in the center of a major city. Do you think clients are shooting themselves in the foot here with with kind of being overly risk averse? Or is it something that architects that we've missed as an industry, that we've allowed the procurement process to be so sort of demanding and kind of risk averse?
When we first get into the profession, I think every young architect dreams of winning that big competition and you know, building Boston City Hall, or the Pompidou Center and breaking in, but that doesn't much happen anymore. I mean, there's Yeah, few and far between that even the competitions are hard. And we do a few competitions. But we don't do that many, just because it's it's not a it's not something we're set up for. I don't I don't know that clients are always doing themselves a service. Now I know many of these because they're public are set by procurement laws. And there's not a lot you can do. Although they could open up the lens a little bit. And be less risk averse and more willing to, to find out whether or not a client and an architect are a good fit. I would say our best interviews, the ones I've been in that are the best ever have been this, they've been a conversation where they'll say don't bring any boards, don't bring a slide deck, we just want to talk to you. And we've won some work that way. In fact, we're usually very successful. And so years, well, in 2001, I remember because we were actually prepping on 911 for this particular interview. So it was it was in September of 2001. We were shortlisted to do the Center for Film Studies at Wesleyan University here in Connecticut, we had never done a center for film studies of film building, anything even remotely close, we had made the shortlist to some relationships we had on campus and the interview was in a living room. It was with the director of the program and a handful of people with no boards just us to slip, they just want to talk to us. And we went in, we sat down, and the director of the program and I just hit it off, there was a connection, we started, we had this great conversation around film and architecture, and manipulating light and how those two things really had more in common than one might think the production of a film the production of a building. And there were so many similarities. We didn't really talk about their project. We talked about other things. And there was a chemistry and a connection, I think, a level of trust, and we ultimately got the project, which then turned into a 20 year relationship with three different phases. And it was it was it was remarkable. In a process I wish more clients would use. But typically, it's really much more of a dog and pony show. And I don't know how much we as architects can, can actually change that it it really is a challenge because so much of it is set by by regulation and Procurement Offices. private clients have more
to do that. This is where it's interesting, you know, we've private clients, you know, but a commercial or residential, there's a lot more kind of, you know, versatility or there's more of a breadth of ways of approaching them and negotiating and creating new services. When you're dealing with schools and institutions. You know, often many times somebody has sat down with a with a final actual guy in a legal guy or gal, and worked out what the brief is, and then they've got little hole for the architect to fit into. And now you're kind of pitching for that work. And, you know, there's there's infinite amount of issues with that, certainly from the architect perspective. And sometimes you're not even able to ask questions of the, of the prospective client, which then kind of shuts down a dialogue, which is actually very important for for the beginnings of the design design phase, and it's, you know, becomes, you know, how do we how do we navigate around that?
Yeah, but if I can't trust, the process I just talked about with what is the more typical process, you're exactly right, we, we often, well, we almost exclusively get no contact with the actual user group or the client pre interview, that, by law, often in public procurement, or, or even in larger institutions that have systems, large colleges and universities that have procedures procedures in place, then we're asked to come into an interview situation and present some kind of design idea, because everyone expects that in in a complete vacuum. And while we always have a disclaimer and a preface at the beginning that we've designed this in a complete vacuum, and based on what you've told us in the brief, what we found about you online, you were able to gain through site visits, it is not not unusual for a firm that just simply guesses better about the clients looking forward to be selected because people fall in love with images. And with with design work, and it's, I do think they do themselves a disservice when that happens. And it puts us in a very funny position of trying to design something for a client that we've never met. And it's it's not even it's not even as thorough as a competition brief might be where where there's an expectation, that, that you're giving information, we're often working on little to no information about the client, other than the site. Sometimes we don't even have a program. So that's part of the brief is to develop the program. So you're even guessing, at the size of the building the disposition of the spaces, and it becomes a we've lost projects where they said, Well, you know, we really liked this other one better, because it had a pitched roof. And you showed us around roof. And so while we do pitch roofs to but okay. It's been that simple. And that seems like a rather shallow way to select someone you're gonna have a relationship with for five to six years during a building project. How would
you suggest or recommend to clients to improve their procurement process and selection process of an architect?
I think you need to spend more time at it. Often it's rushed. It's very form driven. I think the interview process needs to be more of a conversation. And based on I think, on questions around approach to work about process about kind of a thoughtful investigation of how you how are you going to guide us through this process, and not so much about a commodity, but about a relationship, because I think very often, the focus ends up on the end the end product, which of course, is a building, or an environment of some kind, when really what you're hiring is a partner, and you need to focus on those things that you would look for in any any relationship, you know, are we going to be able to work together? Do we have a we have like mines? Or is this going to be a we're gonna have a hard time communicating? Are we gonna have a hard time you understanding where I where I am, or where I'm coming from the kinds of things that we value? And I really think the more successful client relationships we've had, have started with interviews and conversations that are deeper than, than a design idea. Maybe maybe a design or a sketch is a vehicle to understand how people think, but it should only be viewed as that. And that's often a hard, hard thing for people to do.
Yeah, absolutely. How do you prepare the the kind of younger generation of leaders for kind of dealing with and navigating kind of ever, ever more challenging procurement processes? And you know, and, and winning work? Challenges if you like,
sure. Well, we do it, in part by just involving them. So we don't, we don't shy away from sharing. We were a very transparent organization. So we share every month that a firm wide meeting the work, we're going after the work we've won the work we've, we've lost, sometimes why we've won why we've lost so that people understand that work doesn't magically just drop out of the sky. You know, we're not we're not we're not flying back to the nest and just dropping food in you know, that this is a we're all out there together, going after it and I think I think that helps as people We'll begin to understand that there is a whole process, we involve them in when so when we get a request for proposal, the first thing we do is we have a go, no go meeting. And that is that involves a wide group of people beyond principles, folks who are active in that particular area. So if it's a K 12 project, there's a wide group of folks, designers, young architects, principals, associate principals, interior designers, we have a large interior design, practice, that all get on the call, and we talk it through and we score it with a with a rubric we have, that's not a be all end all. But it's been very helpful to give it a score. And we look at we look at all the things that might make us a good project for us. Is there a design challenge? Is there a fee that we can make money? Is it wired for some other firm? Do we think Do we have a relationship? Have we ever worked for this client in this area on this project type, and then a lot of it's fairly straightforward, but it helps us at least set up, set up a number and then we have a conversation around that. So by having junior staff part of that conversation, they really kind of see that this isn't arbitrary that we're not going after projects, because some principal thinks it would be fun to do. And that's something we've evolved from, I would say, there was a time, that is how we chose to work was oh, yeah, let's I want to go after that. So because Jim says, we're gone after it, we're gonna go after it. Now, it's a it's a group decision. And we do offer leadership. But we we we go after far less projects than we could, because we want to make sure that we're going to be successful. And that if we win it, it'll be a good fit. And it'll be a good project for our staff for our portfolio for our business. It's, it's not enough just to just to win a project and then have five years of misery and a nonprofit, I mean, it's just, it's just, it's, it's not worth it for us, we've done and, and we've learned, so the staff are involved there. And then once the teams put together, the entire team is involved in the written response. So we'll, we'll parcel it out, folks will will help fill out the forms if needed. Under the you know, the marketing department runs it. But they go to the staff for for writing, we ask people to write. We asked them to update their resume. So we involve them beginning at a sort of very low level tasks that, just get them in it, get them in the conversation. And then ultimately, there'll be prepping for an interview, right. So there'll be if we shortlist. There'll be many people in the interview presentation, there'll be part of the of the storyboarding of an interview will will involve them in the conversation around what our message should be, what do we know, but there'll be doing research on the client. And it really is a group effort, because there's no way to do this with individuals and just by yourself. So it'd be a group effort to prepare for the interview, we rehearse we, we talk it through, and then we involve junior staff in the interviews to the level that they may be comfortable. And maybe to push them a little bit as well, because we need people to become comfortable with public speaking with presentation with being sort of nimble on their feet and able to answer questions, and the only way you can learn that is to do that. And as you try that in, yeah, I mean, we don't push people into the deep end without without, you know, any lifeguard you know, I'll be there to guide but we let people go as far as they can, and then try to push them a little further. And, and reassure them that they can do it. You know, we try to build people up and give them the support they need. And if they need extra rehearsal or extra tips, you know, we'll do we'll do what we need to do to get people ready for that. Because ultimately, if they're going to take over in leadership they need they need to be the folks doing the mentoring instead of being the mentees. Yep. Seven word mentee. I think it is. I don't know. Yeah.
Employee mentee works. You mentioned another really interesting strategy of entering into sectors is actually acquisition or merging with another, another firm and I enjoy this subject greatly. And it's, you know, there's a lot of intricacy in it. There's a lot of complexity, actually, with number one identifying a firm that you want to acquire the valuation process. And then of course, the kind of culture fit, which, which is probably the more complex aspects of all of this and dealing with emotions and people now working under a different set of processes and systems. Can you walk us through how, how you guys do that? How do I how do you identify the right firm to either acquire or merged what kind of consultants do you work with and what what some of the challenges with with the acquisition of other businesses
sure Yeah, we have a number of consultants that are brokers and represent firms looking to sell that, that we're in touch with the few over the years that we've we've developed relationships with and they, they, they know, we let them know if there's a particular profile we're looking for. And generally, what we're looking for as either a geographic area that we would like to move into or think we should move into, or a particular portfolio of work that we that we don't have. So and we've done both, we've done both kinds of acquisitions. Our San Diego office was an acquisition of a firm called whether Weimer Blackmun that had been a 50 year old firm in San Diego when we ultimately merged with him in 2005. And that was a geographic, primarily geographic was there was a reason for that we wanted we needed a practice on the West Coast. That was really our first our first remote office. But that was a process that happened. And this this has happened with both of our iego when most of that acquisition and our most recent one. These were firms that we partnered with before. So oddly enough, neither of them came through the broker to the brokers, these were these were organic relationships, that violence for various for various reasons. We had partnered with them to do project work. And then they had been struttin strategically partnered over a period of time. So in the case of Wheeler Weimer, Blackmon we had teamed with them in 1998, I think it was to pursue a Native American casino in California, we had been put together as a team by a construction manager, we thought we would be a good fit, did not get that work. But about a year later, San Diego unified school district had a billion $2 billion bond for K 12 work with Weimer Blackman had done some small schoolwork, but nothing like artwork at that point then was our national portfolio and K 12 work where we had received a lot of national recognition. So they called and, and we teamed with them to go after k 12. Work. And one several projects in our first interview together and then then we want some additional hospitality work. And we work together, including having our people in their office in San Diego for about five years.
Via Okay, so that was a lot of dating before the marriage.
That was exactly how we described it. On our rollout night, we had a big party, we did that we dated and lived in sin for about five years. And then and then we then we got then we got married. And but through that time, there was plenty of time to get to know each other culturally, to understand how we'd work together, we had worked in each other's processes, which in some ways, that's an ideal. It's that's not always the case. But that's ideal when that works. And that's been very successful. And that was about geography more recently, we now have a group one in Boston, the group one studio. Similarly, we've been working with them for a number of years on hospitality projects. They're they're a well known hospitality firm based in Boston. And they do hospitality work had done hospitality work different than ours, ours had been primarily focused on casinos, Native American hospitality, and not so much corporate major flags, whereas they had a long relationship with more corporate hospitality hotel clients, and that was something we had tried for a number of years to, to break into some success. But But again, when you try to do something organically it can, it can just take time. So we have been working with them both in pursuit of projects, but also just sharing staff, we had a good relationship, a really good connection with their principals. And just this past spring, we consummated a deal after again, about three or four years of dating. We started talking to them before the pandemic and then the pandemic just sort of put everything on hold. We continued to work together and we announced our closed on our merger with them back in I think it was May, and in that has now broadened our hospitality portfolio in to a whole nother area, which is corporate hotels for some of the major chains and in in across the country. So that's been very beneficial to us. And it also gives us a larger staff in Boston, our Boston office has been about 10 to 1215 people. We're now up to 30, which gives us a critical mass that that our institutional clients appreciate because they're always looking for a firm especially Boston Boston is very kind of insular parochial. This may be something we need to edit out later but but I think they would admit that too if you if you're not in Boston, they don't. Very often institutions of Boston are reluctant to show it helps us to get work in in the Boston area to have a larger, larger practice there. So it's been kind of a win on both sides. For us, what
are some of the technical aspects to making an acquisition, for example, the kind of conversation around valuations? And actually, you know, how much are you going to pay for the business? How does the how does the valuation actually work? How was how are they described? Is it a case of, you have your own independent valuation, and they have their own valuation, and you kind of come together to see who's who's meet in the middle.
That's exactly how it works. It's like any other any other negotiation or any other purchase, I think we, we have evaluations, they have evaluations, sometimes there, we've had a few acquisitions we've looked at where we couldn't make it work out, for various reasons, couldn't come to a meeting of the minds on what the value was, we look at. So in terms of the actual value, that's exactly how it works. We we look at valuation, we look at work in progress, we look at backlog, liability, you know, with with an architecture practice, there's a lot of due diligence. So what we've done more recently, as we've gotten, every you learn every time you do this, and, and our most recent acquisition, we put a team, an internal team together, of all of our directors of various departments, it HR, finance, marketing, and went through a due diligence checklists. So they sort of dug into what the other firm was doing, had conversations with their counterparts and really began to understand, you know, are there any any skeletons in the closet? Are there are there practices that scare us or they're, you know, and shared our information with them, because it's a two way street, we need to make sure they need to be sure that if they're, if they're being acquired, that their staff are going to be happy that their business is going to thrive, and no one, no one wants to very few firms want to be absorbed by a larger firm and then disappear. They want some, some sense that there's there's got to be value in it for more than just the partners who are selling, there's got to be value to the staff in terms of new work, better benefits, different office. Yeah, often, often what we can offer to a smaller firm, or certainly the staff to or is a better benefits package, because of our size, and broader capability of of work. So in the case of group one, their staff, some of their staff had been interested in moving out of hospitality and trying some community based work, whether it's a school project, or a Boys and Girls Club, or some other cultural project, it gives them more opportunity. So we look at that. But yeah, the valuation is it's down to the numbers. And in the UK, we have our accountants and our lawyers, their accountants and their lawyers, and then we just go back and forth till we arrive at it, we think a fair value is and then also looking at is there is there an earn out period? Is it cash up front? Is there going to be a period of time where we expect the principals to work and write certain targets, so that we're assured that there's some value down the road to the acquisition so that there's some skin in the game for them for at least a couple of years till we get established? Yeah.
And I guess because that's, that's quite a risk if you're acquiring a firm. And whilst the firm name has got experience, it's actually the relationships with the individual principles that that they have of those. And if they suddenly disappear, then have you've got what you want. Right?
We haven't bought much. If that said, I mean, really, that's what you're purchasing. You had the desks and the computers aren't really worth a whole heck of a lot. It's the people and the relationships that are that you're that you're acquiring and acquiring people, you're acquiring relationships and bringing them into the into the fold. And there needs to be a mechanism. And often this is the sticking point is what the you know, how much deferred compensation, there may be what the buyout looks like, are people willing to take that on as a challenge. And I think that often tells us something about the motivation of the sellers as well. We've been approached over the years by firms looking to be acquired. And you don't have to scratch very far to realize that really, it's it's a firm that maybe waited too long to think about their transition. And now now that the owners are looking to make about Yeah, they're just they're looking for a soft landing, they want to get out as quickly as they can. But without them if there's not, we're always looking we always look at the next level of of their team. And if they don't have a strong leadership team, below them that that would step in right after they leave, then that doesn't look like a good deal to us because we do need. We do need the team in place for three, four or five years after an acquisition to really fully integrate the practices fully integrate the projects understand, fully integrate the clients where they I really feel like they're now a Jcj client and not the client of the former firm. So it's a it's a time and people intensive process. So you can't overlook the people side of it.
Absolutely. I think that kind of segues nicely into perhaps quite a significant acquisition, which is of your own firm, your own your own employees. Can you tell us a little bit about about that process? What, why what led you to becoming an ESOP? What have been some of the advantages? And what have been some of the challenges? Yeah,
yeah, actually, I hadn't really thought about it. But is the largest acquisition we've ever had was our when we acquired ourselves as employee is that that's I love that. Well, we, you know, we talked way back at the beginning of our conversation around Ed Jeter and Dave Jepsen and their transition. So they ultimately transitioned over to I think it was, I think it was 14 of us, I'll get the number, right. Ed Jeter retired around 2000 Dave Jepsen wanted to retire around 2012. And we needed to then and that left a group of us that were all within about a 10 year age range. You know, we're all in our 50s. And I happen to be on the younger end of that I still was not a young architect anymore. And we had to start thinking about what our next generation would look like. And we needed to look 10 years 10 or so years down the road. And when we looked at what the by that time, the firm was quite valuable, the share value, our own share values were quite high, and we're going to be higher, we didn't really have enough staff, when we really looked at it that could sort of buy into the firm in the traditional way, we just, you know, over time, the shares just became somewhat unaffordable to most staff. And it would be a very challenge. I would also say to, you know, again, saw earlier conversation, it's a different time. And the idea of going to a bank and getting a loan was really not of interest to most those people, even if they're interested in being a principal, they there was a whole different methodology of maybe bonusing it in. And so we worked with our lawyers and a few consultants and looked at, I want to say 678 different possible methods of transitioning the firm. It took a good year to 18 months of principals meeting, talking before we really landed on the ESOP. And it wasn't our first it wasn't our immediate thought. But the more we learned about it, the more it seemed to make a lot of sense. It allowed a mechanism for those of us who were shareholders to to sell our shares over a period of time. So the there was a note. It was I think there was an eight year it was an eight year note. They broken into two two pieces, where the firm we held notes and the firm paid us each year, which which meant that it was affordable because it was the firm purchasing, purchasing our shares. It also we also all had agreements with the firm. So they were you know, we were it wasn't like we could take our money and leave we had to you know, we had to earn it and work and continue to build the firm's so that we were building value over a period of between five and eight years, there was some different people were allowed to take different different deals depending on their level of ownership. So there was made it a much more gradual transition of leadership where as people retired, and were paid off, the debt paid down, and the ESOP shares increased in value. So we became an ESOP. 100% ESOP in 2012. So we just passed our our 10 year mark, and we're now officially the government calls us a mature ESOP, which comes with some different different rules and different regulations and opportunities. But what it's done, and it took some time, is that it has given every every member of the staff real, a real financial stake in the company. So that was I think one of the misunderstandings about an ESOP is that it's somehow a we all vote on everything, the leadership of the firm has stayed the same. We still have the same leadership structure, the same principles, directors, C suite officers, that has all stayed the same it what the ESOP really is, as a as a retirement plan, where you have you're invested in a single share in a single company, but you have a lot of control over how that company does and a lot of have impact on your share value. So the share started pretty low, because we had a lot of debt. As the decade paid down, and the firm did better. We have an annual valuation, and the share value has continued to increase from from year one and this we just got our staff just got their evaluations last week, and the new Share values and it has grown significantly. And at this point, I think everyone has that's been here, over five years and invested has a fairly significant nest egg that they can now continue to grow. And in people, it took a while. But once people began to see their balance sheet grow in their ESOP account, and understood that the work, that there was a connection between their work, their attitude and their ESOP shares, it really began to take hold, I think the first couple years, there was a lot of skepticism, because nothing really changed, you know, there was no value in your in your shares, not much. Yeah, but even even through the, even through the pandemic, share value group. Because we were able to, we were able to make it through the pandemic in a in a, in a successful way. So it's, it's good financially, but I'd say even more so what's happened as the as the SAP has gained hold, is it's just been a natural extension of our culture. We've talked before about how we try to involve everyone, we're very transparent. This, this made us even more transparent. So we share financials. Every month, we share key performance indices every month, the staff know a lot about what's going on good and bad. And, and we have a think, greater sense of ownership and an ability to to impact change. So we've always, we've always tried to feel a bit like a big family. And we get that a lot when we do do employee surveys. Some of the positives that come back are always that there's this sensitivity cares about each other across the firm. And and that's something that we feel really good about. And I think the ESOP is a natural extension of that. It's just everybody, everybody's in this together. It's not. It's not people working for a group of principals who are taking all the money out of the business, everybody at this point, is getting is getting rewarded financially long term for their investment in the business. And I think that's, that's a great thing. And people are beginning to really embrace that we have we have any subcommittee, which are employees who have typically kind of taken ownership of the messaging around ESOP, and they they share tips and tricks they understand, or they do events to try to build a culture, but they also answer all the questions people have about what does this mean, and you know, they orient new staff to what, what it means to be a member of an ESOP. And it's been, it's been great. I think that's
fantastic. And it's, particularly in this day and age as well, where perhaps homeownership is not the primary way of developing wealth anymore, or perhaps it's, you know, it's very difficult to kind of enter into that, that actually developing and creating wealth through the investment of the business that you're working and participating in, is, you know, is very empowering and kind of just gives her, you know, a different level of freedom for the team members.
Yeah, I think, I think especially for younger staff who may not be in the housing market, it's a great way to begin to build their wealth. Yeah.
Awesome. Brilliant. I think that's the perfect place to conclude the conversation there. Jim, thank you so much. Thank you for your expertise. I thoroughly enjoyed that. We've really got a good a good coverage there. So great, you know, and thank you so much again, and I look forward to speaking to you again.
Thank you. I enjoyed this very much. I'd love to talk to you again.
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