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What is meant by goodwill in the context of a business?
What is the primary purpose of succession planning in architectural practices?
Which of the following is NOT a key aspect of succession planning?
In larger corporate firms, succession planning primarily focuses on what aspect?
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Succession planning has historically been a significant concern in which type of business structure?
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What does Art Gensler suggest is a key aspect of a successful transition in leadership?
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Which scenario is NOT mentioned as a reason for the dissolution of a practice?
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What is one requirement for architects who choose to retire and dissolve their practice?
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What should contingency planning ensure regarding the practice’s drawings and documents?
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Which of the following is NOT a possible transfer option for an architect's archives?
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What is considered a key asset during the talent pool development stage of succession planning?
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Which of the following is NOT a step in the strategic planning process for succession planning?
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What is one of the essential elements to maintain staff commitment during the talent development stage?
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How long can the succession planning process take for effective internal staff development?
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What should be established to monitor and foster ongoing development in succession planning?
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In the strategic planning process, the firm's strategic plan serves what purpose?
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Which of the following is a focus during the development of the talent pool?
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What aspect is essential in the development stage to ensure success for future leaders?
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Which of the following components is NOT part of the integration in the strategic planning process?
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What is the outcome of establishing a meaningful performance evaluation system?
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What is a significant factor that has led to the evolution of project delivery methods in the construction industry?
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Which project delivery method emphasizes collaboration to reduce adversarial relationships?
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What is a primary outcome of integrating design and construction activities in project delivery?
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Which of the following describes the current trend in project delivery within the construction industry?
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What distinguishes the design-construction project delivery method from traditional methods?
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What is the initial phase of the architect's life cycle in a traditional design-bid-build project?
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In a design-build project delivery method, when is the contractor typically engaged?
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How does construction management typically influence the tendering phases?
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What role does the architect play after the contractor is hired in a design-bid-build project?
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Which project delivery method has project life cycles similar to design-bid-build but features different relationships between stakeholders?
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What advantage does engaging an advocate architect provide to the owner?
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Which of the following is a disadvantage of hiring an advocate architect?
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In which scenario might an advocate architect's role be particularly beneficial?
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What primary role does the design-builder have in relation to the owner’s statement of requirements?
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What can be a consequence of limited communications between the design team and the client?
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How does the existence of an advocate architect affect the project duration?
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What is a potential challenge when integrating an advocate architect into the project?
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What type of projects may NOT benefit significantly from the engagement of an advocate architect?
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What is one disadvantage of the advocate architect's role in regards to the design-builder?
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Which aspect does the advocate architect provide that directly supports the owner during the construction phase?
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Study Notes
Succession Planning
- Succession planning involves the transfer of a firm’s intangible assets (e.g. intellectual property, reputation) to the next generation of leaders when key personnel retire, leave or pass away.
- It's crucial for all architectural practices, especially sole proprietorships and partnerships, to ensure smooth transitions and ongoing success.
- Large firms focus on developing future leaders at all levels, aiming to advance a pool of potential future owners.
Succession Planning Options
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Dissolution of the Practice: Often happens with small firms when the principal architect retires or leaves. This may occur due to death, illness, disability, divorce, partnership disputes, personal choice, or bankruptcy.
- Architects must comply with provincial regulations when withdrawing from practice and secure professional liability insurance for retirement.
- The practice's drawings and documents should be retained and transferred to another architect, an archiving agency, a storage facility or other approved organization.
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Strategic Human Resources Planning Process: Involves a gradual transfer of leadership within the practice that can take up to 10 years, encompassing three stages:
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Stage 1: Strategic Planning:
- Firm’s values and culture should be understood.
- Develop a strategic plan that integrates components like marketing, production, IT, finance and human resources.
- The strategic plan provides a framework for detailed human resource development.
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Stage 2: Development of the Talent Pool: Focus on existing staff and acquiring new talent to overcome deficiencies.
- Identify and communicate leadership measures to maintain staff commitment.
- Provide leadership and cross-functional experience opportunities.
- Implement a performance evaluation system to monitor and foster development through coaching, reviews and feedback.
- Establish a continuing education program to nurture professional knowledge.
- It is often cost-effective to train staff even if there is a risk of them leaving, as the alternative is having untrained staff.
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Stage 3: Selection and Transition:
- Select a successor or successors.
- Manage ongoing performance and development.
- Provide a transition period to management and ownership, involving management training, leadership development, orientation before ownership, professional development and introductions to clients and external contacts.
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Stage 4: Continuous Renewal:
- The firm’s ownership should continuously maintain the succession planning process.
- Watch for opportunities to utilize experience and succession plans of other owners (if any) to facilitate staged ownership transitions upon successive retirements.
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Stage 1: Strategic Planning:
Issues to Consider
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Payment:
- Prospective buyers may have high personal debt loads.
- Acquiring shares during succession can be difficult.
- A highly profitable practice is beneficial during this period, especially if buyers finance the purchase through increased salaries or bonuses.
- The buy-in must be feasible and attractive to new principals.
- A “sinking fund” could assist the second-generation owners to buy in and pay out the first-generation “founders.”
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Valuation of the Practice:
- Can be estimated using earnings capitalization, discounted net cash flow, excess assets, goodwill, and a modified book value procedure that recognizes the economic worth of the firm.
- Sellers and purchasers should seek independent professional advice for accurate valuation.
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Goodwill:
- Goodwill is an intangible asset that is difficult to evaluate.
- It can be overvalued by sellers due to emotional considerations and undervalued by buyers due to self-interest.
- The valuation gap is wider when the buyer is from outside the architectural practice.
- Valuation of specific intangible factors should be restricted to transferable assets that have a value in exchange. Hard evidence should be provided to justify the valuation.
Table 1: Succession Planning Options
Figure 2: Timeline for Strategic Management
### Project Delivery Methods
- The construction industry is evolving due to social, environmental, and economic factors.
- Multiple project delivery options exist, each with unique functions, features, benefits, and drawbacks.
- Project delivery methods have evolved in response to increasing owner requirements, the transfer of risk from owners to designers and constructors, more urgent timeframes, increased demands for safety and performance, and a desire to reduce adversarial relationships through collaboration.
- Traditional design-bid-build projects are now often called design-construction project delivery, with an increased integration of design and construction activities.
- Integrated Project Delivery (IPD) and Public-Private Partnerships (P3s) are examples of innovative project delivery methods.
- The life cycle for a traditional design-bid-build project includes pre-design, schematic design, design development, construction documents, construction contract tendering, construction contract administration, and general review, closing/commissioning, and post-completion involvement in warranty.
- Design-build projects change the relationship between the design team and the constructor, bringing the hiring of the consolidated design and construction team to the beginning of the project.
- Construction management often involves multiple tendering phases, causing overlap between the design and construction project life cycles.
- IPD projects have similar life cycles to design-bid-build, but with different stakeholder relationships.
### Design-Bid-Build
- The owner engages an architect to prepare design drawings and specifications.
- The architect engages engineering consultants or the owner hires them separately.
- After design completion, the owner hires a contractor through competitive bidding to build the facility under a stipulated price contract (usually CCDC 2).
- The architect administers aspects of the construction contract, reviews construction works, certifies payments, and participates in project completion and warranty periods.
### Owner, Advocate Architect, and Design/Builder
- The owner hires an advocate architect (sometimes a bridging consultant or owner’s advisor) to prepare the owner’s statement of requirements.
- The advocate architect may also prepare conceptual designs to test the statement of requirements.
- The advocate architect advises the owner on hiring the design-builder and throughout construction, acting in the owner’s interests.
- This role is also common in P3s.
- The advocate architect is responsible for ensuring that the owner’s needs are met throughout the design and construction process, and that the project is completed on time and within budget.
### Advantages of Owner, Advocate Architect, and Design/Builder
- The project’s statement of requirements is centered on the owner's interests, independent of other parties.
- The owner benefits from the support of a knowledgeable and independent professional advising on project decisions from design to completion.
### Disadvantages of Owner, Advocate Architect, and Design/Builder
- The advocate architect’s fee is additional to the design-builder’s.
- The project duration may be extended due to the development of an independent statement of requirements.
- Communications between designers and the client may be restricted by the design-builder relationship.
- The architect’s obligation to act in the public interest may be more difficult to manage.
### Owner and Design-Builder
- The owner retains a design-builder.
- A separate design team working for the design-builder prepares design documentation and provides general review during construction.
- The design-builder may assist the owner in developing the owner’s statement of requirements.
### Other Types of Contracts
- Government or “in-house” contracts: Various federal, provincial, and municipal governments have their own contract forms with distinct general conditions.
- Contracts with economic price adjustment: Fixed-price contracts may include clauses to protect contractors and clients against labour and material cost fluctuations in unstable markets. These clauses adjust the contract price based on published or established prices, actual costs, or labor and material cost standards or indices.
- Incentive-based contracts: Also known as incentive contracts, cost-plus-incentive-fee contracts, and cost-plus-award-fee contracts. The contractor and the owner’s contracting officer agree on a target cost, target profit, target fee, and an incentive formula for determining the final fee, adjusting the fee based on the cost difference. The award amount depends on the client’s evaluation of the contractor’s performance.
- Standing offer contracts: Government or institutional clients may retain consulting firms or construction companies pre-qualified by proposal call to provide services on an as-needed basis (on retainer or on call).
- Purchase order contracts: Authorized officials can purchase design and construction services under a stated amount using purchase orders. This is typically restricted to small transactions, one delivery and payment, off-the-shelf items, and small repairs.
- Oral contracts: Oral contracts are highly discouraged and are not legally binding in most jurisdictions. All agreements should be in writing.
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Description
This quiz explores the essential aspects of succession planning in architectural practices. It covers the importance of transferring intangible assets and developing future leaders in both small and large firms. Understand the options available for smooth transitions and compliance with regulations.
