MANAGEMENT FOR DESIGN FIRST QUARTER E-MAG 2021
What Happens When JobKeeper Ends? Is Your Business Prepared? In March 2020, 12 months ago, Management for Design wrote: “We are facing an economic crisis created by unprecedented and unforeseen circumstances. This requires unprecedented action by the government. We need to do much more than just expect businesses and workers to “get on with it” and suffer the consequences. The tangible support and messaging from the Federal Government and health authorities is inadequate. It is not helping, and is certainly not reassuring architects, engineers and designers!” The fiscal response from the Federal and State Government was indeed unprecedented. We now have a “debt burden” that will probably never be paiddown. Certainly, that is far down the list of priorities for our political leaders and economic “experts”.
The Impact of JobKeeper It’s one thing for a business to fail because it has difficulties balancing income and expenses or generating work, but another when the government makes it unprofitable to reduce viral infections and deaths. Having said that, the JobKeeper payment scheme was certainly a lifeline for many Architecture, Engineering and Design (AED) businesses and individuals alike. The scheme was designed to assist businesses that were (supposedly!) negatively impacted by COVID-19 to prevent business closures and job losses. There’s no doubt that JobKeeper was a necessary measure—our government moved comparatively quickly, both with lock-downs and financial support to help businesses with the inevitable economic downturn. Across our industry, up to 60% demonstrated a downturn of at least 30% of income to apply and successfully receive JobKeeper support!
JobKeeper has been the most significant and successful COVID-19 business support measure, providing substantial cash and employment support to impacted businesses across Australia through 2020. The scheme was extended a few times, and despite talk of a more ‘targeted’ state and industry-specific extension, the official scheduled JobKeeper end date is 28 March 2021. For businesses that have had projects stopped, postponed, and delayed JobKeeper (and other tax relief measures): ■■
provided vital cash flow
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enabled the retention of employees
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and for some to maintain profitability
Without measures such as JobKeeper and tax relief, we’d be looking at a very different economy and profession today. These measures have provided businesses with much-needed cash flow, helped to keep consumer spending alive, and—to date—helped us to avoid serious economic fallout.
A Year of Transition We have seen a dichotomy of fortunes, not only across industries but also within our industry, with results that vary according to market sector and state. There are some sectors (and businesses) that have remained virtually untouched by COVID-19. And not only that, there has also been an entirely different response state-to-state, which means we now have six or seven separate economies running in one country. Victoria is still grappling with the consequences of the initial “quarantine disaster” and some of the strongest restrictions in the world. Having said that, Architects, Engineers and Designers were able to respond to “lock-downs” by rapidly moving to “remote working” with comparatively minimal disruption to outputs, unlike other industries, like tourism and hospitality, that have taken massive hits. Of course, one of the biggest problems with JobKeeper is the fact that it’s a blanket solution to deal with a host of different issues. Broad initial eligibility rules meant that better-performing businesses could adjust their results and continue to receive payments. In turn, this has resulted in some businesses ending in a stronger position than before the pandemic, with extra cash flow and less business stress! Some businesses are even considering returning a portion of their JobKeeper subsidies due to their stronger than anticipated financial position.
Meanwhile, investor confidence has soared, with an unprecedented stock market boom from the end of March. Consumer confidence has also continued as eCommerce saw its most significant growth in history. While this all sounds positive on the surface, it points to real concerns about what happens when JobKeeper ends. Overall, the true economic impact of COVID-19 won’t be seen for another one to two years. What we’ve seen is that most businesses that were in a strong position before Covid are emerging from the pandemic (“panic”) even stronger. A Future Without JobKeeper The number of workers collecting JobKeeper wage subsides Australia-wide has fallen to a little over 1.5 million between October and December 2020 according to the Australian Taxation Office (ATO). This figure is much lower than Treasury’s estimated 2.2 million recipients predicted to stay on the programme by the end of 2020. It also continues the downward trend that began in Q4 last year. Treasurer Josh Frydenberg believes the results prove the Federal Government is ready to pull the plug on wage support, which was extended until 28 March. Australian businesses need to be prepared—they’ve had a good 8-9 months to consider their position and plan for what lies ahead. While many businesses have no doubt done this, others have used this time to hibernate or have been reluctant to change. Although many businesses will struggle without the government subsidy, JobKeeper will (and should) end in its current format. A more targeted (and sophisticated) solution may be required for specific industries over the next 18 months to keep small-to-medium-sized businesses operational until we can return to pre-covid normality.
Preparing Your Business Dr Steven Kennedy, secretary to the Treasury, expects job cuts to take place once JobKeeper ends. The question is to what extent. “I’d expect it would mean there are some peoples whose employment won’t be present and job losses would come with that,” Dr Kennedy said at a hearing in parliament. According to Josh Frydenberg “the government will now direct its focus on the economic recovery plan, which will include measures such as tax cuts, business incentives, the JobMaker Hiring Credit and a record investment in skills and training”. It’s stating the obvious that businesses need to plan for what will happen when cash safety nets are removed. How will they cover costs? How will they adjust their operations? How will they continue to grow revenue? While some businesses were hit hard by COVID-19 lock-downs, many have already transitioned away from JobKeeper in the second round and most other businesses have been planning for the end of JobKeeper. Knowing when cash is coming in and going out and having the right tools to deal with fluctuating sales, cover procurement, and capture opportunities are all key. Getting the right working capital in place lets businesses capture the opportunities that have come out of the pandemic. Changes such as remote working and on-line procurement have transformed the way many AED businesses operate. It’s the perfect time to consider what has worked well, what you want to continue doing, and how you can create opportunities to reduce ongoing costs and increase revenue. Companies that are still experiencing cash flow issues at this point need to look at the business more broadly. Without a doubt, underlying business issues were compounded by the COVID-19 crisis, magnifying and accelerating the impact of these issues for those businesses. If businesses are likely to struggle to meet their overheads without JobKeeper, they should speak with their advisor to identify options. Restructuring could help the business emerge from this crisis stronger than before. For businesses that know they will need to make redundancies due to issues of affordability when the JobKeeper subsidy ends, a question arises as to whether there are any advantages of making redundancies before the JobKeeper end date. One example of this is a situation where an employer has employees who are not actually performing any work (having been stood down on zero-hours) but whose wages are being funded by the JobKeeper payments. By making employees redundant before JobKeeper ends, employees will stop accruing leave that, in the case of annual leave and sometimes long-service leave, needs to be paid out on termination of the employment. Finally, on a sobering note, according to our recent Business Conditions Survey about 27 per cent of AED businesses believe they are at high risk of failure when supports such as JobKeeper, tax relief, interest waivers, and other measures end. To what extent these fears will be realised is still yet to be seen. If you require help to ensure your business can continue to operate successfully throughout 2021 and into the future, contact Management for Design. By helping you to run your practice efficiently, and enabling you to plan effectively, we free up your time to focus on what you do best — building your business and creating great work.
Measuring and Understanding Productivity Our recent Business Conditions Survey responses highlight the fact that many firms don’t have a true understanding of what productivity means or of the most effective ways of achieving it. Getting to grips with how you define and measure productivity in your business can present real opportunities for productivity growth.
What is Productivity? 39% of architecture and engineering firms surveyed are not measuring productivity. These businesses are either unable to accurately define what productivity is, or think that productivity is derived from sales and growth. Cost reduction (indicated by 6% of respondents) rarely increases productivity, and we think cost reduction in and of itself is not a clear way of defining productivity as cost reduction may actually be an indication of staff attrition or a number of other significant factors that have potentially contributed to a decrease of productivity within the business. How Do You Measure Productivity? Respondents who identified more capability (19%), as a measurement for productivity, were getting closer, but they were still missing the key relationship. The 39% of respondents who measured productivity as a way of doing more with less (or the same) resources are ahead of the curve. These businesses recognise that productivity and—as a direct result—profitability, are best measured by analysing the relationship between outputs and inputs. These firms incorporate productivity into their business analytics, where data can have a real impact on strategic plans and growth strategies.
Measuring Productivity Firms who are failing to accurately measure productivity are missing out on huge business insights and growth opportunities. If taken advantage of, these insights present an opportunity for architecture and engineering firms to take a closer look at how productivity is measured, how it should be measured, and how to maximise the potential for productivity gains and financial growth. PSMJ define productivity “as the ratio of output volume to input volume”. Firms should be measuring billable and non-billable hours alongside actual client billings. Productivity growth is best achieved when more hours are billed for less staff time, e.g. fees/hours worked. Many firms don’t measure non-billable hours. We believe this is an oversight. All hours spent on client work should be logged. This includes rework and out-of scope tasks that often don’t end up being charged to the client. Measuring all areas of input is the first step to ensuring that your analytics are truly meaningful. Once this is captured, you can measure it against output and compare this ratio over time to get an accurate picture of productivity gains and losses in your organisation. Improving Productivity Our annual Business Conditions Survey asks business leaders to inform us how they plan to improve productivity in the year ahead. Looking at the most popular responses can help your firm gain insights into what competitors are doing to enhance productivity and what options you should consider to keep up and remain competitive in the market. The main strategies for improving productivity identified in our latest survey include: ■■
More accountability for performance
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Implement improved management systems
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Improve utilisation of resources
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Identify and reduce inefficient work practices
If business leaders implement these four strategies (or at least one!) over the next 12 months, productivity will increase and they will gain useful insights into how to maintain and improve productivity in their architecture and engineering firm. Do you want a competitive edge? Management for Design is offering a complimentary 60-minute business productivity coaching session for architecture, engineering, or design firms under 20 people. To book your complimentary coaching session simply email Robert Peake rpeake@m4d.com.au.
Consult Australia and Business Management Systems
Effective and integrated systems give you more efficient control and are key foundations of your business. But once you have identified the need for business systems and software and considered different approaches, how do you go about successfully implementing and running these to ensure your business benefits? On the 24th of March, Callum Bruce, Business Systems Director of Management for Design, presented a webinar with Consult Australia to assist engineers to successfully implement business management systems. The webinar covered the “ins and outs” of implementing business management systems, helping business leaders to plan system implementation, put the right team in place, and ensure they are getting the most from their investment. In addition, Callum was able to preview Management for Designs new Management Reporting resource as well as our System Selector for Architects, Engineers, and Designers. If you were unable to attend this webinar and would either like to access a recording, or to speak with Callum about optimising your business systems, contact cbruce@m4d.com.au.
Association of Consultant Architects (ACA UK) Advisory Service
MANAGEMENT FOR DESIGN Management for Design is excited to announce a new partnership with the ACA UK to provide financial and business management support services to its members.
ACA members will now have access to: ■■
n advisory service relating to Business Planning, Business Management, A Performance and Business Systems
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n-line access to the “Business Foundations Starter Kit” that provides O essential guidance and recommendations for establishing and sustaining your business
Benefits for members will also include: ■■
Access to networking events e.g. “Growing your firm: Secrets to Success”
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dvice on who to go to for external assistance e.g. communications, A accounting, legal, insurance etc.
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Access to thought leadership white papers and articles
Management for Design strives to nurture long term relationships with our clients that are built on integrity, expertise, commitment, and teamwork. Whether you recently started a business or have operated for years, we will advise you on the right way forward! We will be reaching out to all members to introduce ourselves and to elaborate on how we can help you build and control your practice.
International Women’s Day
In March, Management for Design had the pleasure of hosting a wonderful group of women for an inspiring International Women’s Day Breakfast. The event, hosted by Business Chicks, and with over nine hundred attendees at the Crown Palladium, featured a powerful line-up of speakers; including Wendy McCarthy AO, businesswoman, activist, and writer; Kelly Cartwright OAM, Paralympian, and motivational speaker; and Nyadol Nyuon, lawyer and humanrights activist. The theme this year was “Choose to Challenge” – which encourages calling out gender bias and inequality, so we can experience change. Wendy McCarthy began the morning with a powerful talk on women’s rights and explained the journey and challenges she faced throughout leading the successful NSW Pro-Choice Alliance campaign and fighting for gender equality. Wendy’s advocacy and passion for women’s rights have driven the next generation of women to keep fighting for equality and solidarity. She called for a 50:50 representation of women to men in leadership roles given we represent 51% of the population and asked that we all “find our leadership voice”. Kelly Cartwright then spoke about her personal journey of developing a rare form of cancer, which resulted in her right leg being amputated at the age of 15. Kelly has since competed at the London 2012 Paralympics, become a world champion in the long jump and 100m sprints, and become a mother (amongst a host of other things). Kelly highlighted the importance of seeing people from within, regardless of disability, gender, or race, and encouraged the audience to start the conversation around disability, to educate and normalise looking “different”. Finally, Nyadol Nyuon delivered a speech that underlined that fighting for gender equality also means fighting for racial equality. Nyadol highlighted that race is linked to our identities, and therefore should not be considered a separate fight from gender equality, stating I am a woman only if I am a black woman. Her journey—being born and raised in refugee camps—has given her the resilience and determination to continue fighting for women’s rights and racial equality. A special thank you to all the lovely ladies in attendance and we look forward to more eye-opening and inspiring discussions in the future.
Strategy Portal for Architects, Engineers, and Designers
Management for Design is proud to launch our Strategy Portal, designed specifically for architects, engineers, designers, planners, and consultants to assist them with developing and executing their business. By using the Strategy Portal, Management for Design will also partner with your firm to assist you to manage and track your progress and provide you with the support you need around your strategy development. To gain early access to this valuable tool, please contact Callum Bruce, Business Systems Director of Management for Design, cbruce@m4d.com.au.
Reading List WTF?: What’s the Future and Why It’s Up to Us Tim O’Reilly Silicon Valley’s leading intellectual and the founder of O’Reilly Media explores the upside and the potential downsides of our future- what he calls the ‘next economy’. O’Reilly explores what the next economy will mean for the world and every aspect of our lives - and what we can do to shape it.
Covid-19: The Great Reset Thierry Malleret & Klaus Schwab “COVID-19: The Great Reset” is a guide for anyone who wants to understand how COVID-19 disrupted our social and economic systems, and what changes will be needed to create a more inclusive, resilient and sustainable world going forward.
Lean In: Women, Work, and the Will to Lead Sheryl Sandberg In Lean In, Sheryl Sandberg- Facebook COO and one of Fortune magazine’s Most Powerful Women in Business- draws on her own experience of working in some of the world’s most successful businesses and looks at what women can do to help themselves, and make the small changes in their life that can effect change on a more universal scale. Unfinished Business: Women Men Work Family Anne-Marie Slaughter Slaughter’s gift for illuminating large issues through everyday human stories is what makes this book so necessary for anyone who wants to be both a leader at work and a fully engaged parent at home.
The Future
of Work Changing Places: How hybrid working is rewriting the rule book
pwc.com.au/futureofwork
The Future of Word PwC This report offers insights into how organisations can successfully realise the benefits of hybrid ways of working. It suggests strategies to optimise work according to where and how employees work best and boost employee experience and wellbeing, while meeting organisational obligations and setting a foundation for future growth.