Professional Ethics Project: Draft a letter in response tothe following case study.
Mike Davies and Sally Brant are two Chartered Surveyors intheir early thirties. They were students at University together and met up bychance a few years later, when they were both in employment with separateGovernment Departments and rather less than enamored with the work they wereinvolved in and the ways their careers were going.
Following this meeting in 1998, they kept hi touch and abouta year later, decided to set up their our business. At first it was part time,their working evenings, weekends and holidays, whilst continuing in their fulltime employment Initially most of their work was residential valuations, housebuyer surveys and planning applications for minor alterations to domesticproperty.
It wasn't long before they had sufficient work for Mike toresign from his Government post and work full time from home on then ourventure, whilst Sally continued with her full time employment and helped out asmuch as she could. Passed clients soon started referring friends to Mike andSally and they began to build up a substantial agency line to their business.It was at this point that they realised that, not only would the work load nowsupport Sally in the business, but that they also required a shop premise inthe local town.
They soon found a single fronted property at a reasonablerent, down one of the side street in the tertiary part of the retail area oftown. However, it was in need of substantial renovation and cost them theequivalent of over three years rent to renovate and fit out. Through use of aconsiderable advertising budget, the lack of prime position of the premises wasover come and then" clientele continued to increase steadily, primarily inthe property management, valuation and retail and commercial agency fields,although residential agency continued to provide a steady income.
By the end of that year, they had employed a part time assistant, for front of shop, and a third year student, Jon, from the University where they studied. The following year they employed another similar student and the following year Jon, having gained his degree, rejoined them in a full time employee capacity. He is still with them, having passed his APC this year, and "the group a one happy family".
Mike and Sally have been trading for some five years now asjoint partners in DB4 Estates, Charted Surveyors and have established a verysuccessful business. Unfortunately, the town has several international andsmaller firms of Surveyors and Estate Agents operating in it and Sally and Mikefeel that they have little opportunity of expanding the business, other thanmoving to another town, opening a new office in another town or merging withone of the other small firms in their existing town.
Sally's father, David, is a junior partner in one of theother Estate Agents in the town and is looking to retire next year. He joinedthe firm about ten years ago, following a career in the Valuation Office andthe retirement of one of the firm's partners. His firm has four partners threeof whom are NAEA members and he himself is a FRICS. They trade under the titleof Basset and Brown, Surveyors, Valuers and Estate Agents, from a doublefronted corner property, in a secondary position, just off the High Street.
The majority of their work is residential agency with a small amount of retail agency and general valuation. They do not touch commercial, town planning, architectural or rating appeal work now, having had to defend several actions against themselves, following substandard work by one of their members, several years ago. They employ three ladies who work shop front, all of the client visits and valuations being undertaken by one or other of the partners.
Like Sally and Mike, the partners in Basset and Brown,Edward Smith, Michael Dunn and George Mulliner, realise that whilst with theretirement of David they may each acquire more equity, they have very littlechance of expanding or diversifying their business. Having discussed thesituation with David, and hearing about his daughter's desire to expand, theyarranged a social evening at which they suggested to Mike and Sally that theymight consider a merger of the two firms, on the retirement of Sally's father.As the evening progressed they discussed some details in more depth including apossible name. It was suggested that as Basset and Brown had been trading inthe town for over forty years, that they should continue with that title, butchange the classification to Chartered Surveys, to reflect the professionalismthat Sally and Mike were bring.
Sally is not too sure about this as she rather likes thebusiness name of her firm. Furthermore, she knows that Basset and Brown'sreputation in town is not all that it might be but then successful businessestend to attract adverse gossip. In the mid 1990's, they are supposed to haveprovided poor valuation advice and over ambitious sales particulars for two newestates that they were retained to sell on the outskirts of the town. In morerecent times they are rumoured to have employed questionable accountingpractices regarding clients' accounts.
They also indicated that it went without saying that theywould all be equal partners on the business paper. Sally and Mike raised theissue of Jon and it was suggested that he could become an associate partner and'go under the line'.
Mike did not feel easy with the proposal at face value andstarted to probe. Eventually it started to transpire that the three Basset andBrown partners were keen to diversify into commercial work and also strengthentheir involvement in retail, as several of their residential clients, who hadrecently moved to the area, where looking for retail or commercial properties.It was felt that by merging the two businesses, DB4's client base would be ableto provide for Basset and Brown's clients demands and, by so doing, establish asubstantial property management base for the new business.
You are employed by one of the international firms ofSurveyors in the town, but have known David, Sally and Mike socially forseveral years. Having all met by chance at the squash club recently, they tookthe chance to 'bend your ear' about the proposal, for whilst David feels thatit would be a good opportunity for Mike and Sally, they are not so convinced.You have agreed to think the proposal through, as they have explained it toyou, and to write to them offering advice as to the pros and cons.
Mr. InternationalSurveyor X
Town, Post Code
Sally Brant and Mike Brown
Town, Post Code
Dear Sally and Mike,
It was a pleasure seeing you atthe squash club the other day. It has been such a long time and it is always ajoy to see you both. I was pleased to be able to inform you of how impressed Ihave been by your approach and foothold in the business and the work andgenuine effort you have put into Chartered Surveying. I am also pleased youfelt you could confide in me regarding the currently merger situation you havebeen presented with and as I am familiar with the business, I am presenting youhere, with my personal take on the pros and cons of the business proposal.
I should remind you though, thatI am only advising you as what I think you should do in lieu of being a socialfriend. This is in no way professional advice and only a reflection of what myopinion on the matter is.
Firstly, some advantages. Bassetand Brown have a strong client base and ample resources. They would be able toprovide you with the adequate platform allowing full expansion and consequentgrowth levels you would not be able to obtain with DB4 alone for a long time.This is just from a logistics perspective. Basset and Brown also have areputation in the business, and when people know your name, it makes a hugedifference on their ability and willingness to become involved in a commercialrelationship with you.
Further, Basset and Brown have agreat location allowing easy client access and conveying the kind of image andprofessionalism you would seek in a business such as Chartered Surveying. Theother partners in the business are experts in areas other than those in whichyou both work and would create a diverse and interesting business merger.
Yet, now some disadvantages,which I have to confess, for me personally, outweigh the advantages. You wouldbe losing your name, with a value of goodwill you have built up over the yearsthat could not possibly be replaced by falling under the umbrella of Basset andBrown. People do not look at corporate history (often) when choosing a client,yet they do focus on the name and what they heard about the company. Basset andBrown on the other hand suffer from a bad reputation. They have faced severalliability and litigious actions brought on against them by clients complainingof sub-standard work. These are the things that make the papers and thatclients read and remember. People do not get excited about good news, they hearthe firm closed the biggest deal last year or are aware that Basset and Brownare doing some good work in the residential sector but all this knowledge iscompleted obliterated with the news that there has been a scandal, controversyor court action. Further, it has reduced the working capital with which thefirm can operate. They would be sucking some of your hard earned profits awayin the merger, attempting to compensate for the loses they have incurred. Thegoodwill value of an operating name is difficult to calculate and difficult toreplace and before agreeing to take on their name (given you have agreed to goahead with the merger) I would give it a second thought.
Basset and Brown have also voicedtheir intention of diversifying the business, as currently they do not operatein the areas in which you are specialised, and would require your client baseto do so. Your client base would greatly enhance what they can offer theirclients and they feel that your clients could provide for the demands of Bassetand Brown's clients. Again a word of warning as it would perhaps be of good commercialbenefit for both your clients and their clients, but corporate businesses andtheir managements do not usually enjoy having business relationships forcedupon them. It would all rest on how this is presented to the client.
Another issue of course is Jon.It seems Basset and Brown are not very keen in their exclusively partneredstructure to include Jon even as an associate partner. I would suggest youhammer this point home as Jon has experience that is invaluable. He has beeninvolved from the onset and loyalty to staff will be reflected in the work theydo for you and the work any future employees do as word about dismissals, nomatter on what grounds but if even remotely unfair get around quickly. Further,Jon could potentially bring an action of unfair dismissal, exactly not whatBasset and Brown or even DB4 needs.
Finally a more practical issue.You have built up your business over the years and you both know how you workand what works well for you. There are four partners in Basset and Brown at themoment and with the departure of David, the only person who you are bothfamiliar with and understand, you are left with effectively three strangers. Itmay be difficult hammering out who will operate how and as they are all fairly older,it may be a case that they want you to do most of the work, especially as theydo not know anything about the business area, your specialty, in which theywish to expand. It is difficult to understand how others work and even moredifficult to co-ordinate different working mannerisms or ideals. Naturallybefore the merger you would hammer out these issues but be assured that thedecision-making process and the freedom you both have enjoyed until now will beremoved.
I would suggest to remain a soletrading partnership known as DB4. You will eventually expand as you producegood work and have a good reputation. You will retain the freedom you have thusfar enjoyed and you will be able to maximise your business expertise in yourspeciality. You can always formulate a working arrangement or particularcontractually work-share agreement with Basset and Brown, therefore keeping thebusinesses separate but the client base and knowledge base open to the other.
As I have said before, I findwhat you have accomplished extremely impressive and I hope whichever directionyou chose to venture in will result in a fruitful experience for you both.
Mr. International Surveyor X.
Card, R., Murdoch, J. and Murdoch, S. (2002). EstateManagement Law. Cavendish Publishing Ltd.: London.
Keenan, D. and Riches, S. (2004). Business Law (7thEdition). Longman: London.
Scanlan, G. and Prime, T. (2004). Partnership Law (2ndEdition). Cavendish Publishing Ltd.: London.
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