Architect leaves troubles behind and creates a company structure that defies commercial conventions
Architect YRM is ready to talk about itself again, albeit tentatively. It has made a fresh start in stylish offices in London’s up-and-coming King’s Cross and is the first architectural practice to transform itself into a not-for-profit trust.
YRM was traumatised after it floated on the stock market in the late 1980s as a multidisciplinary company only to virtually collapse soon after the stock exchange crash.
It survived, but as a shadow of its former self with a head count reduced from 600 to 30. Further troubles lay ahead in 1997 when the company went into receivership and the architecture business underwent a management buyout.
So is this turbulent history the clue to why it has turned itself into a not-for-profit trust now? And how will this help the practice?
John Clemow, the YRM managing director, who has been at the company since 1978, has decided that it is time to talk about the company publicly, now that his “battle scars” are almost healed and he and YRM have greater confidence in the future.
Above all, he is keen to discuss its status as a trust, his plans to move into the PFI market and his ambition to bring it back into the top 25 UK practices.
Clemow’s approach has been to bring long-term security to the practice. Hence the idea of the not-for-profit trust ownership, unprecedented among architects and masterminded by a host of advisers including some of the “top brains” at PriceWaterhouse Coopers.
YRM formed the YRM Employee Benefit Trust and made the transition from a standard commercial model to not-for-profit for three reasons:
- To safeguard the future of the company and its staff by protecting it from an external takeover threat;
- To aid succession, as the next generation of leaders can be selected on merit alone;
- To ensure that all staff can focus on the business without distractions from ownership issues.
The not-for-profit ownership structure means that Clemow and the rest of the directors of the company have no voting rights. As Clemow says: “If another company approached us, it is not ours to sell. We can concentrate on building revenue.”
Clemow adds that the trust status also lessens the pressure of succession planning, as it means that his replacement can be selected on merit and not according “to how much money they can raise”. As the practice grows, any profit is shared among YRM staff instead of going into shareholders’ pockets.
YRM, which stood for Yorke Rosenberg and Mardall, started life as a signature architect in 1944, following the national post-war agenda of rebuilding the country by designing houses, schools, hospitals and transport infrastructure.
What happened subsequently is a tale of overexpansion. In the 1980s the company became multidisciplinary and branched out into interior design, structural engineering and building service business. It retained its traditional architectural roots but only 200 of its 600 staff were architects.
Today the firm has been stripped down and is once again a pure architect. But Clemow, who was one of 12 directors behind the management buyout in 1997, has not forgotten the bad times.
He said: “It was horrendous, a very scarring experience. It has shaped a lot of the ideas about the business going forward.”
He admits the YRM brand was damaged but saw no reason to abandon the name: “There was a period when the brand was tarnished but you just have to polish it like mad. It was valuable to us.”
The change to not-for-profit may seem radical, but when it comes to plans for growth Clemow’s approach could be described as cautious.
He hopes to increase staff numbers by 14 to 80 people by 2008. Turnover in the year to 30 June was £3.9m, and Clemow aims to keep it at roughly £80,000 a year per head, which works out as a £6.4m turnover by 2008. Similarly the aim is to keep margins at 10% of turnover after tax.
Nor is the company seeking growth through acquisition, unlike some of its rivals, including the recently floated SMC. “We are pretty clear that we are not into acquisitions,” says Clemow. He knows the dangers of overstretching – in its previous life YRM did acquire, and Clemow was around to witness the problems that arose through trying to integrate businesses.
But caution should not be mistaken for a lack of ambition: Clemow wants to take the company from its ranking as among the top 40 architects “back into the top 25 practices in the UK”. It won’t be an easy task given the competition but he is determined to succeed: “That’s where the firm was and we think that is achievable by 2010.”
YRM has been working on some of the UK’s biggest projects, including alongside the Richard Rogers Partnership on Heathrow’s Terminal 5 for client BAA. It has also carried out feasibility tests on a third runway at Heathrow.
Clemow also aims to lead the firm into fresh markets, including PFI.
YRM has just finished working on St Vincent’s hospital in Dublin and is looking at PFI hospital and school projects to identify opportunities. The company has not bid for any work on the government's Building Schools for the Future programme but YRM sees it as way into the PFI market.
But before Clemow starts to sound too enthusiastic about future opportunities, he checks himself: “We’re not in any hurry, though.
We saw a lot of architects go bust over PFI.” Perhaps his caution is understandable – those battle scars are a constant reminder of what can go wrong.
YRM’s strategic aims, set out in 1997 after the management buyout involving 12 directors, including John Clemow, the current managing director (pictured), include:
build it up further