ASID Urges Proactive Succession Planning for Design Firm Longevity
Key takeaways:
- Proactive succession planning is vital to business stability and maintaining client relationships.
- Firm leaders should anticipate complex issues such as shifting generational priorities, development of specialist skills, and business competencies.
- Develop a clear outline for aligning values, transferring knowledge, and establishing decision-making authority for a smooth leadership transition.
Why we think this is important to design professionals: Smaller design firms in particular will want to protect and preserve their culture and reputation through the development of talent with the right qualities for sustaining and growing the business.
The American Society of Interior Designers (ASID) recently debuted a report, titled “Designing A Succession Plan: Insights for Firm Owners,” dedicated to equipping interior design firm leaders with considerations for the continuity of their business after retirement or exit from the organization.
In partnership with Greenway Group, a longstanding consultancy to the architecture, interior design, and construction sectors, ASID explored key findings over an internal study of 63 architecture and interior design firms with fewer than 40 employees. The research found that:
- 30% of mid-sized firms (designated with 25–40 employees) have succession plans in place.
- 12% of small firms (2–10 employees) have succession plans.
- Less than 5% of sole practitioners have succession plans.
Using these findings as a starting point, Greenway Group authors Lisa Henry, CEO, and David Henry, finance, M&A, and transition planning practice leader, identified the main challenges firms face during succession planning, and offered recommendations for addressing them and landing on solid ground.
Emotion is the Elephant in the Room
In a foreword to the report, ASID director of communications Lindsey Koren noted that transition planning covers more than a simple transfer of business ownership: “[It’s] about preserving the firm’s culture, relationships, and reputation while securing its legacy. This is especially vital for small firms where the founder’s identity is deeply tied to the business.”
Indeed, that identity can make the process seem daunting to firm owners, the report authors said. Building a successful business encompasses a significant amount of work and, for better or worse, emotion can drive or hinder the process of planning for the future.
“As owners think about the exit strategy, it can heighten anxiety and fear of the unknown” wrote Greenway Group. “That can result in owners waiting too long to begin the succession planning process.” Rather than dwell on uncertainty, though, they explained that “the ideas that are presented in this report are elements of a succession plan that can mitigate anxiety.”
From the report: “Consideration will be given to the dynamics of smaller firm ownership transitions since over 95% of interior design firms in the U.S. have fewer than 20 employees.”
Source: 2024 ASID State of Interior Design Outlook Report
Finding a Way Forward
Greenway Group’s Lisa Henry and David Henry observed that the optimal strategy for succession planning is a phased one. Although some organizations will sell to third parties or close their doors when an owner retires, the report focuses on developing an internal transition plan based on the scenario that smaller to mid-sized firms would not necessarily be M&A targets for private investors, or be able to offer employee stock sharing plans that would transfer partial or full ownership to vested employees.
The succession report identifies six critical long-term steps for a successful leadership hand-off:
- Successors must share the same values as the firm. That means mentorship should be a key part of cultivating new talent.
- Future firm leaders should develop critical business skills and competencies prior to the ownership transition. Continuing education may play an important part in their professional development.
- The successor must begin to assume responsibility for key client and industry relationships.
- Owners should gradually delegate decisions to successors.
- The focus of new leadership should shift from project execution to firm management and growth strategies.
- An explicit financial exit strategy must be defined and executed for a smooth transition.
ASID members and non-members can get the full guide to transition planning in “Designing a Succession Plan: Insights for Firm Owners,” sponsored by Sherwin-Williams, from the ASID website.
