David Wolfberg had big plans for his Miami architectural firm. Too big, as it turned out.
David Wolfberg had big plans for his Miami architectural firm. Too big, as it turned out.
You have to see the building site through the architect's eyes. To the casual passerby, it is just another construction project, one more pit in the ocher clay of residential Miami. But not to David Wolfberg.
The air is hot today, even in the shaded suburbs, muggy, with gray heads of thunder forming over Biscayne Bay, so Wolfberg stays inside his Mercedes-Benz, air conditioner on high, when he visits the site. He can't afford to muck about in the mud, sweating up the crisp cotton of his monogrammed shirt and getting spots on his polished shoes. Now that Wolfberg/Alvarez & Associates, formerly Wolfberg/Alvarez/Taracido & Associates (WAT), has hit hard times, image is even more important than it was during the glory days of fast growth in the early 1980s.
But even through the tinted window, David Wolfberg sees more than just an imaginary new building -- 6,000 square feet of offices about to go up for South Miami's Hematology & Oncology Associates, his clients for the job. He sees dollars -- and the chance to get his firm moving forward again. In a break with architectural tradition, WAT not only drew the plans, but will also manage the construction -- hiring the subcontractors and monitoring cost and quality. If everything goes according to plan, the firm will earn not just the 6% architect/engineering fee, but the construction manager's 5% to 10% as well. In the future, Wolfberg expects to offer clients even more services: from site selection, environmental reports, and community relations right through to delivery and installation of the furniture and equipment. In time Wolfberg hopes to provide financing, too, or set up joint ventures. Whatever it takes to make his business grow.
About growth, the 37-year-old chief executive officer considers himself an expert. The company description he gives clients describes Wolfberg/Alvarez as the "fastest-growing" firm in America, and for a time the characterization was believable: WAT soared from sales of $200,000 in 1976 to $6.1 million by 1982 a 2,950% growth rate. For two consecutive years it made INC.'s listing of the 500 fastest-growing privately held companies in America; it even hit Building Design & Construction magazine's list of the 50 biggest architectural/engineering (A/E) firms. WAT was celebrated for seizing the technologies and management styles of the future, and its glittering roster of government and private-sector clients reflected its reputation. Virtually overnight it became a national presence, doubling and redoubling staff in a year.
Throughout, Wolfberg basked in the success, convinced that with "inherent skill" like his, business was easy. Then, perhaps inevitably, the growth curve tapered off, slowly at first, then flattening, then plunging downhill. Profits and productivity fell, and the firm that had recently grown so quickly found itself struggling for survival. Yet even that didn't shake Wolfberg's confidence. He had learned his job, he figured, crisis by crisis. The end of growth was just one more lesson in change, albeit the most wrenching.
Now, with the recession behind him, he looks at the yellow-brown hole in the ground and sees only more glorious triumphs. Other architects may scoff. His own staff may be losing faith. But he plans to become the total, modern, market-driven architect -- if only he can find the market again.
Few of America's 60,000 architects have found their markets easily in recent years. Profitability among architects has shrunk to an industry average of 3.2% of net sales, all this while the nation's architecture schools are annually releasing another 4,900 would-be practitioners into an already glutted market. Good design, most professionals agree, is still the sine qua non of success but good design isn't enough anymore. Clients are no longer patrons; they have become customers. Design competitions have become price sensitive, with work awarded to the lowest bidder. To survive, architects are being forced to give up the pipe-and-tweed fantasies of exploring art through building, to think of architecture not as a profession but as business, a service industry.
"I give it five to eight years before the conventional A/E firm is extinct," Wolfberg says flatly. "It just doesn't pay. Other architects can 'pooh pooh' the changes. But they're going to 'pooh pooh' themselves to death."
Not that Wolfberg ever set out to be a businessman. Offered a job running his family's textile-manufacturing business, he chose architecture instead, and helped start WAT specifically to escape the pressures of a business-oriented practice. He and the other frustrated young mavericks who founded the firm in 1976 were idealists, and their objective was to create the new-age A/E firm, a warm and humanistic environment in which creative young talent could thrive.
There were six at the start. Wolfberg, the wunderkind design director at Connell, Metcalf & Eddy (now called Connell Associates), a prominent Miami A/E firm, fired for being too cocky, too outspoken -- too New York. Julio E. Alvarez, a project electrical engineer at Connell, a Cuban exile, a former employee of the power company, disgusted by the red tape of big companies. Hector Seiglie, who had worked with Alvarez on occasion; C. David Morton, a solo practitioner with a yen for big projects; and Karl Frese and Manuel Taracido, two more frustrated Connell engineers.
"The whole point was to avoid becoming what we ran away from," Alvarez says. Connell, they felt, dictated design from the bottom line. Connell didn't understand that architects sell environment. The distant old men who ran the firm didn't know real design, or care; they spent their time making rules, tightening a corporate chain of command meant to stifle the young and imaginative.
In their company, all six agreed, there would be no bureaucracy, no obsession with profits, and no chasm between management and employees -- once they could actually afford employees. The partners would stay involved, rolling up their sleeves and sitting down with blueprints, all six making management decisions in concert. To begin, they aggressively pursued government projects; although that meant filling out reams of forms, at least they could save the cost of four-color brochures and client lunches. On paper, they would vest 51% of the business in the firm's Cuban-born partners -- Alvarez, Taracido, and Seiglie -- so they could check off both "small business" and "minority owned" on all the applications. At first they thought of using a generic name, such as "The Design Group," but settled instead on listing all six names on the letterhead, along with the company's conservative gray and maroon logo.
The fledgling business fell short its first time out, coming in 24th in a competition to choose 22 firms to design Miami's 22 new transit stations. It was all politics, Wolfberg steamed, convinced they had been torpedoed by his old bosses at Connell.
For the next three months, until they bid on their second project, the six eked out a living separately, from whatever solo work they could find. But when their second chance came up -- a new vehicle-maintenance center for the city's trucks and heavy equipment, a $2.6-million garage with a $176,000 design fee -- they were ready. The firm's Hispanic partners met with the predominantly minority members of the commission and presented their proposal. And all six partners, with their wives, showed up at the commission hearing.
"I want to win an award with this," the Mayor told them when he presented WAT with the job. "You will," Wolfberg replied.
As any businessperson might have predicted, that first success brought the firm's first real crisis. "Once we won the garage, we started spending like drunken sailors," Alvarez remembers. "Then one day there was no money, and that's when the conflict started." The inefficiency of management-by-consensus would have to go, he told his partners. They needed a CEO, and someone else to manage the cash.
"What do you mean, manage the cash?" one of the partners sneered. "I thought you said there was no money to manage."
But the former idealists had little choice; it was either get down to business or disband. Alvarez began training himself as a financial officer, setting up and monitoring a structured invoice and cash-flow system. Wolfberg became CEO, and wrote a business and marketing plan, pledging 12% of future sales income to marketing, significantly higher than the industry average. A friendly banker lent them $15,000, and WAT stayed afloat.
Wolfberg sold hard, trying to offset youth and inexperience with local ties, with minority ownership, and, above all, with indefatigable energy. He submitted all of his forms in red folders, so they would stand out on a desk. He spent hours schmoozing with secretaries, trying to convince them to leave the folders on the top of the stack. He tried to anticipate clients' objections. "This time you're not getting somebody's assistant to work on your job, you're getting active participation of the partners," he would tell clients who worried about WAT's small size. "I'm not going to show you pretty pictures," he would say, to disguise the firm's lack of completed projects.
For a while, nothing helped. The partnership's net sales hardly reached $200,000 in that first year. Wolfberg went back to the bank, but WAT's friendly loan officer had been fired. There was no money for partners' salaries; all the partners went nine months without taking a check. The strain began to show. Partners started to drift off, to concentrate on their own projects. The list of names on the letterhead got shorter.
"I became very religious," Wolfberg jokes. "Every time it looked like we would die, a small project would come in through the door. They were dog projects, lots of small renovations, $500,000 projects with a $30,000 fee, but at that point we'd take whatever we could get."
By 1979, however, Wolfberg's selling skills and persistence began to pay off. Finally the firm was up and running, with four partners, 19 other employees, and $579,000 in net sales. The Miami garage was finished; true to Wolfberg's promise, five design awards hung on the wall.
And Wolfberg, the reluctant CEO, started to get frustrated. He wanted more than survival, he wanted growth. Although he didn't know it at the time, that meant he needed computers.
The leap into computers in the fall of 1980 was hardly a rational business decision. Wolfberg didn't even pay much attention when the interviewer from the Army Corps of Engineers asked him if he knew anything about computer graphics. "Sure," he said, and went on talking about the proposed table of organization and equipment.
A table of organization and equipment is, in civilian parlance, a maintenance garage, but this was not just any maintenance garage. WAT was to design 12 different prototype vehicle-maintenance centers, site-adaptable around the world, for the Army. The fee -- $500,000 -- was more than the partnership grossed most years. So when the officer called a month later wanting to modify the contract to specify that the work would be done on computers, Wolfberg didn't hesitate.
"Our biggest customer said we needed a computer, so we went out and bought one. If we had asked a bunch of MBAs to advise us, they would have told us we were crazy. But we didn't ask." Instead, WAT hired a programmer and made a deal for $400,000 worth of hardware, 10% down and the balance due in 90 days, the same time the final Army fee came due."I figured if things went well, it would pay for itself. And if worse came to worse they could just crate it up and take it away."
Computer-aided design and drafting (CADD), by most architects' estimates, is still a technology in search of a function: Systems are not yet well-enough developed to be of much practical use. Wolfberg, although he boasted publicly that CADD would cut design costs to the client by 25%, has himself never been enamored of the technology. A computer makes beautiful drawings, he says, but the system threatens his staff, cuts his flexibility, and "really doesn't save me any money." Still, that was all right: Wolfberg never meant to use CADD primarily for design. Instead, he used it as a marketing tool. In that context, he says, "the impact was spectacular."
Completion of the Army project on time, within budget, and on a computer made a name for Wolfberg virtually overnight. Suddenly WAT was swamped with commissions from other high-volume builders. In one month, $2.5 million in fees came through the door, most of it from new clients attracted by the mysterious promise of state-of-the-art architecture. And the work kept coming: fire stations, barracks, and commissaries for the military; corporate headquarters for high-technology companies; a specialized payload handling device for the National Aeronautics and Space Administration's space shuttle; "all clients I wouldn't have gotten without the computer," says Wolfberg. He set up a consulting firm, called AEI CADD, to sell computerized architecture, engineering, and interior design and drafting services. He printed up a glossy brochure to take to trade shows, sweeping in such jobs as an underwater mapping project for Phillips Petroleum Co.
WAT was hot. Now there were never enough bodies for the work, never enough desks for the bodies. The firm kept moving into new offices, first 1,200 square feet, then 2 200, then 4,400, then 8,000. Working at a blackboard, the partners made up a hit list of the talent they could steal from local firms, people like themselves stagnating at places like Connell. Then Wolfberg went on a series of raiding missions, luring 40 professionals from his competitors in six months, including 9 hired away from Connell in a single three-week blitz.
Hiring them was one thing, Wolfberg admits, absorbing them was another. "When we got to 50 people, we began noticing the big-office syndrome taking hold. There was a lethargy, a tendency to blame the other guy. Not that we were turning into a bad firm, we were turning into a typical firm. We were losing our ability to respond."
It was a time for dramatic moves, and Wolfberg made them. Like most A/E firms, WAT was organized by departments: architecture, electrical engineering, and so forth. A project would move through department after department until it was finished. That was fine when the firm was small, a handful of people working together, but in the white heat of growth it broke down. People assigned to the same project might well be working in different offices. A missed deadline in one department would place the other departments behind schedule, too. Alvarez, watching the invoices, saw disturbing drops in productivity.
Wolfberg tried setting up a stricter organization chart. That didn't help much, and it was dismantled when the grumbling of his new young Turks grew louder. So he decided to try making the business small again. He broke the staff into six teams, specialists from each department under a team leader, and sat them together with their own handful of projects. He turned the team leader into a small-business proprietor, managing the projects and the personnel, acting as prime client contact, sending out invoices and monitoring collections. Each team leader was free to set his own priorities, to trade staff during a crunch, and to help hire more members for his team. Clients liked the instant access the system gave them to every aspect of a project. Employees liked being able to follow a project through to the end.
WAT became a magnet for young talent from across the country. "I'm offering opportunity," Wolfberg would tell prospective recruits. "There are lots of balls lying around. If you want to pick one up and run with it, go ahead." The workload was staggering -- nights and weekends were the rule -- but so were the opportunities: Young architects and engineers got 10% and 15% raises, the chance to become team leaders while still in their mid-twenties, the opportunity to manage the design and construction of a forensic hospital, a maximum-security facility for the criminally insane; the first fabric-covered mall in America; or the restoration of the historic Vizcaya Museum and Gardens. Corporate visitors were common, there was a dress code, but there was no quibbling about time clocks, sick days, or taking a sunny afternoon off. And the partners were right in there pitching. Employees called Alvarez "Mr. Alvarez" to his face, and they called Wolfberg "God" behind his back, but the two were "Julio and David" at the softball games and the regular Friday afternoon beer blasts.
By the end of fiscal 1981, a year after WAT leapt in to CADD, productivity was up to $50,000 per employee, 25% higher han the industry average, and profits were 13.5% of $3.3 million in sales, compared with the industry average of 3.6%. The partners introduced "WIP," a work incentive program promising to distribute all annual profits exceeding 10%. They subsequently gave out $100,000 to the staff.
"We were taking the town by storm," Wolfberg remembers. The papers were filled with praise: stories about his garage, his prison, his computer, his style. His in-box was filled with client letters, tributes to his "creative use of technology," his "relaxed though thoroughly businesslike attitude," his "professional competency, dependability, and talent."
"If I'd had an MBA, we wouldn't be where we are now," Wolfberg crowed to a local reporter. "I've read all the articles and gone to some of the seminars, and, to be very honest, I think they're mostly garbage.
"Look at how far we have gone. . . . You think creatively and you don't bog yourself down in doing things by the book. Then you'd be surprised how easy it is to be successful."
In 1982, while the papers reported hard times for Miami architects, WAT just kept growing. Sales climbed another 85%, up to $6.1 million. Although his firm's profitability was slipping, Wolfberg preached volume, predicting $10 million by 1983. To cap it all off, Wolfberg set his sights on creating new headquarters for the firm. The new offices would be a symbol, concrete proof that WAT had arrived.
As a young architect just out of Ohio State University, Wolfberg had worked in the New Haven practice of Kevin Roche, the architect of record for the United Nations Plaza Hotel and the renovation of the Metropolitan Museum of Art in New York City. He had been impressed that Roche had renovated a decaying mansion for his offices; Wolfberg liked the statement that made. Now, recycling an old telephone-switching station into an office for WAT would be his own homage to tradition.
But Wolfberg imagined he could make the building a symbol of much more than just respect for the past. The new building would be his first project development: WAT would design, build, manage, and own the property. As such, the building would be a prototype for the many similar ventures he had in mind. Law-plan, he called one such scheme: design, development, and operation of a building specifically geared to lawyers' needs. Med-plan would be a similar arrangement for doctors. "People are looking for a single source of things," he explained. "Doctors don't want to know from interviewing architects and going out for bid and choosing a construction crew and building. They only want to know how much money and how little aggravation."
With these projects, Wolfberg told his staff, he could offer even more opportunity. He had just about reached the ceiling on salaries, he explained, but everyone involved could get a piece of the action with the new office development, once the lawyers worked out the paperwork, and a piece of all the action to come.
The building itself was a triumph, a giant open workroom upstairs for the teams, a huge display room for models and mockups next to the computer, space for the bookkeeper, the comptroller, and WAT's three marketing assistants. WAT moved in.
The recession hit WAT right after the move. The downturn had been going on for a while: the worst recession since the Depression, it was called. Still, Miami fared better than some parts of the country. And WAT had seemed virtually immune. Who else could have grown so fast, come so far, in such otherwise bleak times?
But the recession was only late, not absent. In three fateful weeks in 1982, the firm lost three projects in a row. One project that was delayed was a Miami International Airport central utilities and cogeneration plant; it was a big project, with a $3-million fee. That $3 million alone was almost six months' worth of sales.
Suddenly -- even more suddenly than it had grown -- WAT was in trouble. And Wolfberg, for once, wasn't sure what to do.
"We were losing money, but we didn't want to let people go," Alvarez remembers. "We kept saying, 'We're going to get a project next month.' It was the intoxication of having won too much. We thought we could do nothing but go up."
With more staff than work, WAT's backlog quickly dropped from a year to two months. Productivity dropped as well. WAT was tied in to long-term commitments for everything from computer equipment to office copiers. Worst of all, the firm's beautifully renovated building, the symbol of its success, was turning out to be a millstone. In addition to the new building's costs, Wolfberg was carrying the lease on his old office, all 8,000 square feet worth. He had used his line of credit for the new space instead of taking out separate loan. Now, when he turned to th bank for funds, he was turned down cold.
When 1983 sales were down 17% from 1982's, Wolfberg and Alvarez had no choice: They had to shed load, dismantling what they had built. First to go were the administrative director, the office manager, and other support staff, "the people you think you need when you're fat," Alvarez says. The marketing team was chopped down to one assistant and two word processors, churning out customized forms. No more trips to conventions. No more overnight packages. Long-distance calls were monitored through the switchboard, and all expenses had to be approved in advance. Wolfberg's wife left her full-time position as head of the company's interior design department and became an outside consultant. Alvarez s wife became company counsel.
The softball games and beer blasts withered away as more and more desks emptied out. The young Turks -- those that were left -- became more and more restless, disspirited, and paranoid. By the beginning of 1984, the company was down to 83 employees, from a high of 154. Miami's other firms began to fill up with old WAT staffers who either had quit or were fired. All carried tales of the broken promises, the crushing workload, and the change that had overtaken the remaining partners.
"People upstairs think we've changed. Well, we have," Alvarez admits. "The recession changed us. There are still some scars left from the downturn. During the period of conquest and glory we were great guys, great leaders. Then we hit the recession. We were no longer growing; the money wasn't flowing in. We had to make hard decisions, like firing the guy who's been playing softball and having a beer with you. That left us with a bitter taste.
"The only thing I resent is that we tried to explain the why in ways no one ever did for us. I knew I wasn't going to make my bank payments if I didn't cut people, but they didn't understand that upstairs. It just made people nervous. They didn't want to hear the truth, they wanted to be comforted.
"So we've become a little secluded. I don't think I can emotionally handle the strain of getting close to these people again."
Today, stepping inside the imposing gray Wolfberg/Alvarez office in suburban Miami is like stepping inside a refuge. Outside it is hot; a Jaguar and a Mercedes, the partners' cars, sit side by side in the parking lot, baking, while traffic rushes by on the busy suburban street. But behind the thick walls it is quiet and cool. A grainy black-and-white blowup of Frank Lloyd Wright hangs behind the receptionist, frozen in time over a wilting philodendron.
The building also bespeaks an uncertain time for its occupants. The computer blinks and hums away in the back room, but the corridors leading to it are dim, lights off and desks empty The display room for the models is an echoing cavern. Only two of the original six partners are left, facing each other through the glass walls of their main-floor offices. Alvarez sits beneath a framed letterhead from his grandfather's confiscated Havana business, poring over the daily expenses and the weekly invoice forms. Wolfberg still sells hard, but he, like Alvarez, also reads all the in-coming and out-going mail, and checks the weekly reports from the team leaders and the department heads.
Upstairs, away from the partners' closed offices, Wolfberg/Alvarez has changed as well. "It's important for us to be perceived as if we're still a big firm," says Wolfberg, but the large workroom feels deserted, with pockets of four or five men clustered in small groups rather than the mobs crowded together during the glory days. Nor do most of the employees sit with their teams any longer. With the staff cuts, quality had started to fall off; the firm was left with too few senior engineers and too many low-priced novices. So Wolfberg reinstituted departments, with department heads responsible for technical accuracy. "But that could change again tomorrow," Wolfberg says. If he has learned anything crisis by crisis, it is the importance of being flexible.
What hasn't changed is Wolfberg's energy, and his capacity to spin out strategies, plans, and dreams. No more buckshot marketing, he vows; no more "obsession with volume." Now he will concentrate on profit, aiming at high-payoff/low-labor projects in which his capital investment in computers can make a real difference. He also plans on expanding the services he can offer, just as he is already doing with Hematology & Oncology Associates. "I'm going to be out there offering design, construct, manage, furnish, finance, lease -- I'll do whatever you want," he spiels. "Once you get a client, why turn him over to someone else to make money?" Medplan, he is convinced, is one way to come back, to heal the scars of the struggle, selling busy doctors turnkey architecture. If that doesn't work there is Law-plan, or AEI CADD, his incorporated computer consulting business.
And if these plans don't fly there is Metro Support Services, which, Wolfberg reports, is "in high gear" for a joint venture with The Wackenhut Corp. to provide forensic hospitals for the public sector -- not just to design and build them, but to staff and run them as well, riding the coming wave of privatization.
The recession, Wolfberg claims, "may have been just what we needed." He feels smarter for the trial, and the business may be stronger because of it. Wolfberg/Alvarez shed 54% of its expenses while keeping 86% of its capacity. The $3-million Miami International Airport plant is back on the board, and for fiscal 1984 Wolfberg expects $5 million to $6 million in sales, with a modest profit. The pared-down staff, with most members in their late 20s to mid-30s, still racks up impressive numbers. Each professional turns out close to $70,000 in work a year, 75% higher than the industry average; team leaders still invoice and collect, with collections averaging 43 days, about half the time most A/E firms wait. "So I don't think we did anything wrong," Wolfberg says. "With our growth momentum we had always been at the limit. But we landed on our feet, so it wasn't a failure."
Even so, the staff is restless. Team leader Marcel Morlote, in his late 20s, dismisses Wolfberg's new promises as "pie in the sky," but adds, "I don't buy lottery tickets, either. I hope they do something in the immediate future, though, or they'll lose people. Most of the good talent here plans to leave and start their own firms anyway; we're all that kind of people."
"This is still a young firm," agrees Samuel Matthews, a project architect. "In older firms they already have practices for keeping people, but the partners are still struggling with that here. The only really important thing for morale, though, is the perception of where the company is going."
Wolfberg knows how they feel; he was young and impatient once, too. But he is a different man from the young idealist of 1976 or the go-go growth CEO of the early '80s. "Morale has always been bad," he says impatiently. "So what? In the growth period, people complained they were too busy. During the recession, it was no money. Now, it's 'What's my future?'
"I do talk pie in the sky, but my dream is their dream. The most important thing I have to offer is opportunity. I know that. And I know that when the opportunity is gone, I'm going to lose them.
"Let them go start their own firms," he scoffs. "There is a certain delusion about how easy it is to do what we've done. But I'm tired of hearing about the problems of the past. Let's get rid of that baggage. Let's look forward again."
And that, of course, is exactly what he is doing as he looks out the window of his airconditioned Mercedes at WAT's latest project, the ditch that will one day be doctors' offices. Viewing the site with the eyes not just of an architect but of a man who has learned a lot about business, he shows that his vision, at least, hasn't failed.
"This may look like it's just a hole in the ground," he insists, "But it's more, much more."