Why Are Most Architectural Firms Small?

Did you know that census statistics indicate that most architectural firms are small. I have been wondering about that. Why would that be? 
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Here’s the 2011 data that I found.

All architectural offices = 21,181 offices

1-4 employees = 14,028 firms

5-9 employees = 3,711 firms

Combined, that’s 17,739 of 21,181 firms - or 83.75%.

​Nearly 85% of all firms have LESS THAN 10 staff!
This is a much higher percentage than I would have guessed. 
More playing around with the census data and other sources shows that 80% of all architects are employed in these small firms. Does the AIA know this? They must, but you can't tell from what the AIA actually does. But I digress.

It turns out that architectural firms mirror all other businesses taken as a whole. In other words, about 85% of ALL businesses have less than 10 staff. Seems like there is an idea for a jobs-creation policy lurking in this data. But I digress - again.

At the heart of this mystery is more math to explain the situation. It turns out that complexity grows with the size of the organization. I heard somewhere that complexity doubles every time size doubles. My personal experience bears that out. Things get much more complicated as you add staff. 

Let's look at some of the changes you have to accommodate as you grow.

With one person complexity is as low as it can get. There is no one to disagree with you, or to consider.

Add one person and you now have a payroll to deal with (checks, taxes, W-2s) or at least you have to decide how money will be shared. There is also the issue of who does what. Who is the boss? 

When you add two more staff to achieve your next doubling to four people, you will need to start developing personnel and management policies; and business development is more critical with four mouths to feed. You are working on more than one project at a time to keep everyone busy, so oversight is a new issue along with delegation. If your new staff is inexperienced, you can throw in training, too. There are four distinctive hats to wear that you are rotating among - the design hat, the business development hat, the financial hat, and the management hat. Usually in that order of priority.

The next doubling in size to eight people takes you beyond the realm where you can be involved in everything all the time. You will probably add one non-technical staff to get you there. Someone who can take over the day-to-day financial and management follow through so you can concentrate on business development and project management. There probably aren't enough hours in the week for you to be deeply involved in working out many design issues any more. Delegation is a major issue and you will be developing tactics and procedures to deal with it. Standardization starts. 

If you can get a firm of eight working smoothly, there are a lot of advantages. You can accommodate special requests from clients without feeling any disruption. You can shift people onto projects facing a deadline. And if you get good enough at business development you can grow pretty easily. You can probably handle more work per person than ever. You will finally have the money to act like a 'grownup' firm. You know, fringe benefits and stuff you have heard about or experienced in other firms.

I never made the next doubling to 16. But I know what the issues would be. With 16+ people specialization has to creep in because there are simply too many people to expect everyone to have similar competencies. Differences in age, experience and interest all start to become too obvious. Not enough people will be good enough at many things to handle them unsupervised - contracts, 3D work, construction administration, spec writing, design, code research. 

A multiple team approach or individual specialists will become necessary, including someone who is pushing business development every day. At this level you need to be finding one or two new projects, large projects, every month. That won't just happen by itself.

What does this have to do with the fact that 80%+ of architectural firms are less than 10 people? I think that the lack of business training in college, plus the skills that are required to grow, plus the inclination of architects to focus on the design aspects of the business all 'conspire' to keep a firm’s size small. I am sure this isn't the entire story, but it is a significant part.

So it shouldn't be surprising that most architectural firms are small. Since education is unlikely to change in the next decade, it is a good thing that the playing field has never been more level when it comes to size. If you have the inclination to use the latest technology and software, cost is not much of an impediment any more. Nor is geography. It isn't easy being an architect, but I think it is easier than it ever has been - but you have to embrace technology and hammer away at business development constantly.

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