In a time of stifling labor shortages, how can a company get and keep industry superstars? The folks at architectural-design firm Pentagram think they know: make them partners.
Is this the best partnership ever? Meet the most smoothly functioning collection of prima donnas on the planet
Who wouldn't have envied James Biber? As an architect, as a business owner--heck, as a guy with a life--Biber had it made.
Just 38, he had already built a healthy architectural practice designing offices for ad agencies and graphic designers, clients he loved working for. He'd done glamorous projects such as Manhattan's Gotham Bar and Grill. He was making good money. And he was doing it from a studio in New York's SoHo, which he shared with his graphic-designer wife and an illustrator. It was the kind of relaxed, creative place he could bring his dog to--"almost like another home." With smart clients, challenging work, and independence, Biber had just about everything a designer craves.
And then he gave it all up.
That's how it might have looked, anyway, to an observer watching Biber in 1991 as he shut down his successful business to join, of all things, a partnership. A big partnership, even--one with, at the time, 15 full-partner graphic designers, product designers, and architects, plus another 150 staffers, spread from London to New York to San Francisco. The firm is called Pentagram, and the reasons Biber and many other design-scene luminaries have abandoned independence to join it may help answer two questions on every CEO's mind. In this age of stifling labor shortages, how can a company get and keep the most valuable employees of all--the industry stars? And at a time when the intensity and complexity of business make teaming up with partners a smart way to cope, how do you make a partnership--that most emotionally unstable of organizational arrangements--actually work?
Pentagram's answer to each question is the same. Its secret to attracting stars, thriving as a partnership, and rising to international acclaim in its industry can be described in a single phrase: make work better. Create an organization in which even Biber and his ilk can find more-fulfilling work than what they could find on their own--work that's more interesting, more fun. Pentagram has managed that feat with a carefully calibrated partnership agreement and some long-held operating principles, which together enable partners to work collaboratively and yet preserve their identities as individual artists.
"They're more themselves in that partnership than many directors of design businesses are in their own businesses," says Michael Wolff, a graphic designer at the Fourth Room, a renowned London firm. When Biber joined Pentagram, it wasn't without trepidation. He'll say now, though, that he really didn't give up anything. Instead, he found a better way to be Jim Biber.
Which is what good work design is all about.
To really understand what's different about Pentagram, first one has to understand what life is like for a designer running his or her own shop, alone or with a partner or two. To begin with, there's a practical limit to how much an independent designer can take on. Biber says he could handle just a few moderately sized projects at a time on his own: an office, a restaurant, a house in East Hampton. Then there are the limits imposed by the perceptions of would-be clients: Pentagram partner Paula Scher recalls that potential clients with large jobs would visit her previous, two-partner firm "and see a girly design firm, not a lot of bodies at desks, and think I wasn't up to the job."
For independents, cash flow can be erratic, especially for architectural work. Also, independents often find it hard to try something new, since "you can't have experience on a variety of projects when you're by yourself," says Pentagram partner Lowell Williams, who had his own graphic-design firm in Houston for 15 years. Nor do the boundaries between, say, architecture and graphic design blur very much, since few small firms have a mix of disciplines.
And finally, independents are vulnerable to acute professional loneliness: a truly solo designer--one with no partners at all--may have a team of twentysomething assistants but no real peers available to consult or communicate with.
Of course, a lot of designers are happy to work that way. What they get in return is freedom, their name on the door, and the profits from everything that they produce.
But then there's Pentagram. Size-wise, with 160 employees and $25 million in annual revenues, it occupies a middle ground between independent designers and much-larger, corporate firms, such as Landor Associates, Fitch Inc., and Interbrand Group, which are often subsidiaries of ad agencies. In other ways, Pentagram is in a class by itself. At the design world's highest levels, a cadre of about 10 firms compete regularly for the same high-profile projects, estimates William Drenttel, former president of the American Institute of Graphic Arts (AIGA). "At the top of the heap, if you're talking about power and clout and prestige, is Pentagram," he says. Pentagram partners win awards with dizzying monotony. Pentagram's client list includes familiar brands such as United Airlines, Hewlett-Packard, Swatch, and Anne Klein, and blue-chip cultural institutions such as the Tate Gallery in London and the American Museum of Natural History in New York City. If you've ordered from a Williams-Sonoma catalog, operated a Kenwood mixer, viewed a poster for New York's Public Theater, filled out an application for an account at J.P. Morgan, or shopped at a Gymboree store, you've already seen, touched, or used a Pentagram design.
Yet a so-called Pentagram style does not exist. Each of Pentagram's partners (there are now 17) remains a formidable design presence in his or her own right. "It's unusual to hear someone say, 'That's clearly a Pentagram project,' " says AIGA executive director Ric Grefe. "He would say, 'That's clearly a Paula Scher project.' Or '...a Michael Bierut project.' Or '...a Woody Pirtle project.' "
Founded in London in 1962 as Fletcher Forbes Gill by three men bearing those names, the firm became Pentagram when the fourth and fifth partners joined, in 1972. In 1978 Pentagram opened a New York City office, and two more American offices followed: San Francisco in 1986 and Austin in 1993.
From the very beginning, the three founders adopted a couple of key principles. First, each partner runs his or her design practice as a separate profit center, with a free hand in deciding which work to take on, how much to charge, whom to hire for the design team, and exactly how much to pay the team under the firm's general guidelines for employee salaries. The only requirement is that every partner should be comfortably in the black when the monthly financial report--the "blue sheet"--ranks all the partners by profitability. That stricture is enforced mostly by the invisible but effective mechanism of peer pressure. "Nobody ever says anything," Scher says. But, she adds, "you don't want to be on the bottom, because you just want to cry." In a typical year individual profitability can vary among partners by as much as $100,000, says founding partner Colin Forbes.
Yet the second principle is that the partners are absolutely equal. So equal, in fact, that every partner gets exactly the same salary and exactly the same bonus, no matter how profitable his or her work may be. Sharing profits equally seemed simple and logical, recalls Forbes. How else to divvy up the proceeds, given that one partner might land an assignment, a second do most of the work, and a third contribute the suggestion that capped the project off? Taking financial competition out of the equation encourages partners to share work with partners who may be less busy, instead of hoarding it for themselves. "We never squabbled over work," Forbes says.
Put into practice, those founding principles have some interesting consequences that not only make working as a Pentagram partner different from working as a partner anywhere else but also make the very work of being a designer--of whatever type--better than it would be even for designers who could easily succeed on their own. Among the work-altering effects of Pentagram's organizational arrangement:
When it comes to getting better, more challenging projects, it doesn't hurt that Pentagram provides a platform that few designers could match on their own. Biber notes that when his clients visit now, they get a very different impression from the one they would have been left with after visiting his old, shared studio in SoHo. "Now they walk into a building on Fifth Avenue," he says. "They walk into our building." In fact, each of Pentagram's four offices occupies its own building, and the London and San Francisco buildings are owned by subgroups of partners--legally separate from the Pentagram partnership--that banded together to buy the buildings. "The advantage of Pentagram is that the collective net worth of the Pentagram partners makes it feasible to buy a $4-million building," says Williams.
And Pentagram partners know that lots of people will see their work. "They publish like crazy," says competitor Bart Crosby of Crosby Associates. "It's almost like the 'publish or die' ethic you have in universities." Since 1979 the firm has been putting out Pentagram Papers, small, elegant booklets on oddball subjects that happen to strike a partner's fancy--a collection of Cuban-cigar labels, say, or photographs of the homemade, weirdly inventive mailboxes of rural Australia. Also, every few years the firm publishes a large compendium of its own work.
None of that is cheap. Williams, who put together the most recent compendium, the thick, lavishly illustrated Pentagram Book Five, won't reveal how much the book cost the firm but says that the photographs and text alone ran at least $225,000, exclusive of printing costs or his own time. Most of the 7,500 copies that the firm ordered will be given away to clients, prospective employees, friends of the firm, and other designers, though the book is for sale at retailers. But it's the sort of exposure that designers love--and that ultimately attracts clients. "That's far more valuable than anything you could charge for the book," Williams says.
There's also the power of the Pentagram brand. "If nothing else, we have a truly international reputation, so when I go in to talk to someone who may not know us as individuals or even know if we're good designers or bad designers, they do know we're working with the top companies in the world," says Hinrichs. "So it's given us entrÉe to a lot of people whom we might not otherwise come across." From the client's point of view, "design's a very unnerving business because you don't know what you're going to get," says former partner Alan Fletcher. "A company that's been going for 30 years, you feel comfortable about."
To make the Pentagram equation work means selecting the right people to implement it. Recruiting new partners is a serious business at Pentagram, with a courtship that lasts at least six months. "There are people out there who lust to be considered to be a partner," says the AIGA's Grefe, laughing. "You'd be amazed at the comparatively successful designers who, when the name Pentagram comes up, start to stutter and say, 'How does it happen?' " Actually, say Pentagram partners, the considerations are rather simple. First comes the quality of the designer's work. Second, a candidate should have run his or her own successful design firm (although in recent years the firm has bent that rule to promote three associate designers to partner). Third is the question of character: is the prospective partner a responsible sort who will carry his or her share of the financial load to make the Pentagram formula work? And last, but just as important, say two partners, is the question, Do I want to have dinner with this person?
When the right person does come along, Pentagram makes it relatively easy for him or her to join. For new partners buying equity, the firm's valuation is based strictly on its assets, mostly accounts receivable and works in progress, excluding goodwill. That puts the purchase price of a Pentagram partnership into a more manageable range--less than $400,000, representing 90 days of working capital, or about 25% of revenues for an individual partner, which can be paid over a period of 10 years from annual bonuses. Keeping financial barriers to partnership relatively low, Pentagram has been able to attract younger designers on the rise--a key reason for the firm's longevity.
Pentagram's approach to recruiting does have its drawbacks. Looking for new partners who will fit well into the Pentagram structure and culture, the firm tends to skip more strategic hiring. So far Pentagram hasn't caught the electronic-media wave, because the partners haven't been able to find a suitable partner candidate with expertise in that realm. Living in the high-tech boomtown of Austin, Williams knows just how serious missing out on that particular trend could be. But he's not willing to compromise when it comes to the Pentagram way. "If it means that we do only graphic design or product design or architecture forever, that's what we'll do," he says.
Every few years, Forbes says, someone offers to buy Pentagram. The most recent proposition came last year, from an unnamed advertising agency. The possibility always stirs up considerable excitement among the partners, says Williams, who adds, "I'd be embarrassed to tell you the discussions we've had about whatever phantom number we can imagine." At the very least, partners could walk away with a couple million apiece.
But of course, they couldn't really walk away. They'd have to stay at Pentagram, which would probably be a very different place once the partners became accountable to an outside owner. Some of the older partners liked the idea of cashing out. But the younger partners weren't willing to sell their chance to have a Pentagram career.
"I look around," says Williams, "and for what we want out of it as individuals, we actually have the best deal going."
Emily Barker is a senior staff writer at Inc.