Business Foundations Business Journal Collection

MANAGEMENT FOR DESIGN BUSINESS JOURNAL 123 BUSINESS FOUNDATIONS

Most architects, engineers, and designers start their practices with little to no experience of running or building a business. Typically, the initial focus is on design, project delivery, and servicing client requirements—with a mind on winning new clients and new work. However, there is a myriad of elements of managing, controlling, and building a business that founders and principals require to become successful owners and leaders.

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To start, you need a clear understanding of where your industry is heading. You should be at the forefront of the industry and have an idea of what will be required into the future

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So, what are these elements that will create and build successful Architecture, Engineering, and Design (AED) businesses, with satisfied and wellrewarded leaders? Our work with architects, engineers, and designers has identified common themes, which set practices up for success— The Business Foundations of Architecture, Engineering, and Design.

1. Purpose and Direction Our research indicates that up to 70% of design business don't have a clearly articulated plan identifying where their business is and where it's heading. That’s seven out of ten people at the leadership level, who don’t have a clear vision for their business. So, if the leaders are not clear about where the business is heading, then how are their people expected to be on board and in line with the business’ direction!

To start, you need a clear understanding of where your industry is heading. You should be at the forefront of the industry and have an idea of what will be required into the future. Secondly, you need a clear understanding of what you are great at and

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what your focus will be.

For your business to thrive today and into the future, you need to be great at something that the market has a demand for. And a key element of that for architects and designers is market expertise.

Your strategy needs to be built around what drives your business—what will lead you to success now and into the future. How does your company win work? How do you generate the work? What is your expertise? How are you positioned in the marketplace? How do you develop the concept and design? How do you deliver the work? What sort of people do you need to have around you? How do you become innovative? And finally, what sort of financial management control do you need? A strategy is built around the answer to these and other related questions.

A strategic plan with clear and concise strategic objectives and clear plans for implementation, only needs be 3-4 pages. The key element is to have a clear path, something that you are all aligned with as a leadership team, that you’ve communicated with your key people, and everyone is on board with.

to a day, on your business each week. Whether that’s nurturing and mentoring your key people, developing systems or developing a marketing program. None of this comes overnight, this takes time, experience and learning from others.

Great leaders of architectural businesses: • Collaborate • Delegate • Expect responsibility and accountability • Empower people • Promote trust in their people • Constantly reinforce the value that they bring • Have a focus on performance and profit • Share information and rewards • Have a clarity of purpose

3. Team

2. Leadership Architects in a leadership position are typically talented and experienced at designing, nurturing clients, and delivering projects. However, they often lack expertise around establishing, running, and growing a successful business.

As a leader, you need to balance the time you spend in the business—which is doing the work— and the time you spend on the business and how much time you spend on yourself. As a rule of thumb, you should spend at least half a day,

Your team is comprised of the people that are in your business, as well as the team that is outside your business. And the people outside your business are just as important as the people inside your business. These are people like your mentors, your business advisors, your accountants, your lawyers, your consultants etc. Your responsibility is to find and nurture those relationships.

When building your team, you need to hire for cultural fit first—and skills second. Finding people who are aspirational and share common attributes to your practice is most important. Quite often, the mistake businesses make is hiring for skills and not cultural fit and often that comes down to who you put in charge of hiring.

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There are typically 4 things that your people look for: 1. Who do I report to?

2. What do I need to do?

4. Systems

3. How will I do it?

Your system is a set of behaviours that are performed consistently in your business. It's the way that you do things, it's not a piece of software.

4. And how well did I do it?

Develop clear performance criteria around the expectations, and review performance against progress; what’s working and what needs to be improved. It doesn’t have to be complicated!

Additionally, spending time with your key people on business management is essential. You need to educate and mentor—no-one else will do this for you. Perhaps a monthly management meeting, or directors' meeting, where you can bring people in and expose them to conversations and give them responsibility for some of the actions that you require.

Some of the systems you should have in your business include: • Ensuring you have the right fee • Managing your time and projects • Tracking project performance • Ensuring you will be paid • Ensuring your people are fully utilized • Managing your financials

These should all be systems—they should be performed consistently the same way each time.

They should be a set of behaviours that you routinely follow.

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For example, this is the way we recruit, and this is the process that we go through. These are the questions that we ask, these are the qualities that we're looking for, this is how we induct, this is how we review performance, etc. That's your system.

By having strong systems in place: work is more consistent, less re-work is required, profitability is improved with increased efficiency and scope control, less frustration is experienced, extra time is created for leaders to be entrepreneurs, and client management consistency is improved.

So, what is Resource Management?

• Who is working on what and when?

• Who is available when?

• Who is over and underutilised?

• What are the resource requirements moving forward?

• How does this tie into billings now and into the future?

• How do regular reviews happen?

Unfortunately, most architecture and design firms don’t have an effective system that they adhere to for managing resources across the studio.

5. Project and Resource Management Project and resource management has far less to do with people than you’ve been led to believe.

If you want to make an impact in this area, your effort needs to be on developing a consistent way of working and then reinforcing and supporting that approach.

In our experience, the level of project management expertise in architecture, engineering, and design firms is “poor”—and unfortunately, this lack of expertise is not addressed early on. Ask yourself “How do you manage projects across the studio and each project?”

Great project management is fundamental to business success in our industry. Your projects require a plan around the work required, tasks, start and end dates, the time it’s going to take, assignment of resources, milestones, per cent complete, etc. The more complex the project the more detail is generally required. And you should be tracking your progress every week—as a minimum.

As a business, you should have a clear picture of the workload moving forward. An effective and comprehensive resource plan ensures you've got the right number of people to complete the work, but also have the right people to grow the firm.

6. Financial Control and Profitability As you may know, profitability is a very good indicator of the effectiveness of your business and your business management. Achieving a 20% profit—that’s income less expenses—(before tax) should be your benchmark. That’s realistically achievable for any AED business.

A strong profit allows you the ability to take on the work that you want to take on, work with clients you want to work with, and say no to projects and clients. It allows you to attract, reward, and remunerate the best people, whilst also investing in marketing, technology, growth, and training.

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Strong financial performance and profitability allows you to be in control of your business.

Financial control is about having at your fingertips the measures or information that will drive, or should drive, your decision-making going forward.

The ability to forecast your future work provides you with the information to project out your resourcing—the resources that you’re going to require and typically, that means people.

Now, all this information is irrelevant unless you review it. You need to set up a regular monthly meeting, with someone who can interpret the information and understand the financials.

But, what does Risk Management mean?

• Surrounding yourself with the right expertise • Adopting strategies and systems to minimise your risk and exposure • Effective quality control to keep yourself free of unwanted and unnecessary disputes

While this can be an extensive subject, key issues most businesses encounter are categorised into three main areas.

1. Business Structure and Legals 2. Clients, Fees and Fee Negotiation 3. Insurances

7. Managing Risk While Risk Management might not be the most engaging subject for leaders of Architecture, Engineering, and Design businesses, it’s an essential concern that you can’t avoid—and something you need to manage effectively.

Ask yourself, does our business have the appropriate expertise, the strategies, systems, and effective quality control to minimise and manage our exposure. While some risk is out of the control of the business, most of the risks that a firm might encounter can be managed, reduced or eliminated.

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value proposition, identify your keys to success, your revenue projections by sector and what investments you need to have in place.

8. Marketing, Communications, and Brand Your marketing effort has a singular focus, and that is to win work. When thinking about marketing, you need to ask yourself whether this is a valuable use of your time and resources and whether it will move your business forward in your ability to win work.

Further, you must think about marketing in two elements—business development and communications. Business development is how you’re going to win work. Communications is how you’re going to build and raise awareness about your business.

As a starting point, you should have a marketing strategy with a documented plan that's agreed upon amongst the leadership team. It should document key areas that will move you forward towards your plans. You need to articulate your

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What's required is to find the right balance for your practice. Typically, the larger your business is or becomes, the more you will rely on a way of working that is consistent, methodical, and aligned with your studio culture — that’s business

Another aspect of increasing your market awareness is communications through social media. It provides you with the opportunity to advocate and develop an online community that will contribute to the positioning of your business moving forward.

9. Design, Innovation, and Delivery Effective design management should be one of the core values of your architecture and design practice. However, when Management for Design delves into this subject and asks business leaders to explain and articulate their processes, they tend to struggle with their response.

What's required is to find the right balance for your practice. Typically, the larger your business is or becomes, the more you will rely on a way of working that is consistent, methodical, and aligned with your studio culture—that’s business. Effective design management finds a balance between creative freedom and consistency.

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10. Succession Firstly, there are two elements of succession: Leadership Succession and Ownership Succession.

Leadership succession is around developing your leaders—the next generation—the people that are going to take on the role of growing, building, and controlling your business. Leadership succession is often far more complex and challenging and should happen before ownership succession.

The problem with leadership succession in our industry is that it’s often more difficult than in other industries. Quite often the leaders are the key initiators of design and client relationships, and they're not necessarily skills that you can educate or develop people on. These traits are inherent in leaders in our profession and therefore they find it difficult to let go of decision-making around clients and design. Leaders feel that this is where they can most effectively contribute to the business.

However, the greatest contribution you can make in your business could be the development of those that take your business forward. There is a great personal and financial reward in leadership succession. If you can change your thinking around leadership succession, you'll be ahead of many other AED practices. Start with transitioning your decision making, your client relationships, and your design decisions. Give your people exposure to business management and give them clear expectations and responsibilities.n

Our financial and business management experience can maximise the potential of architects, designers, engineers, planners and other creative professionals. We believe everybody should focus on excelling at what they do best. Talk to us about getting the most from your business. Email Rob Peake rpeake@m4d.com.au.

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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 102 MAKING STRATEGY HAPPEN Introduction Not all practices need a business plan, a strategic plan, strategic objectives or a clear direction. Those businesses with a compelling design proposition or a unique market expertise don’t need it. Does it help? Yes. Is it necessary?

No. They are successful because they have a unique and compelling value proposition that clearly differentiates them from the normal.

Think Gehry, think Richard Meier, think GHD! But most businesses, and I mean 95%, are not in this situation. Many like to think they are, but, in our experience, the market doesn’t see it this way. So what’s the solution to elevate your business above the performance of your competitor?

It’s no secret that many design focussed businesses are superficial in their planning, concentrating on the design, fees, schedules and day-to-day deliverables rather than defining exciting, attainable objectives for the future that will motivate the key people and lead to high achievement.

Our research shows that up to 70% of design businesses do minimal or no strategic planning.

Of the remaining 30%, only one in three achieve clear and sustainable change in their business, which leads to new markets, new locations, new client sectors, new design approaches, new ways of working or improved leadership.

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70% of design businesses do minimal or no strategic planning.

In our experience, five critical elements need to be in place to make strategy happen: 1. Leadership needs to drive the process 2. A level of excitement 3. It has to be concise with definitive timeframes 4. It needs to be flexible 5. Consider execution before you start

Why develop a strategic plan in the first place?

The key reason to develop a strategic plan is to position your business to focus the energy, resources, and time of the key people in the business in order to create and sustain an advantage in an increasingly competitive environment. Success, of course, is subjective

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and will mean different things to different people — it could include more interesting projects, more engaging clients, more talented people, more revenue, more profit or more innovation.

Each business needs to work this out for itself and the strategic planning process should clarify these clear objectives for the future. An effective plan points to specific results to be achieved and establishes a course of action for achieving them.

Where should you start? Take a look at your business. Does there seem to be a lack of focus on where the company is headed? Does everyone clearly understand the goals for the business?

Strategically, how will the business achieve

those goals? Is your current planning horizon longer than one year? Are you developing annual business/operating plans without a strategic plan in place? Your strategy is your opportunity to develop and deliver on an integrated set of choices.

Why does it matter? Arguably, the leading cause of business failure is the lack of a wellimplemented strategy. And if the leadership of the business is not aligned with where the business is heading, it will wander aimlessly, with priorities changing constantly and key people confused about their own contribution and priorities.

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Planning to fail Given this, why do so many businesses lack a clear strategy? And why do the majority of those who do fail to execute it? The fundamental problem is leadership. More often than not the practice leaders are engaged in the here and now — the current and next project; the current and next client etc. Yet, at the same time, they bemoan the lack of quality documentation or don’t understand why they’re not attracting and retaining great people.

Secondly, the pathway to leadership in a design practice is typically through design or client relationship talent. It’s not business acumen that gets them there! This means that, typically, leaders of design practices don’t have the inherent discipline and capability that enables effective strategy development and execution.

We talk to many leaders who fall victim to the gap between promises they’ve made and results their practices delivered. They frequently tell us they have a problem with accountability — people aren’t doing the things they’re supposed to do to implement a plan. They desperately want to make changes of some kind, but what do they need to change? They don’t know — and if they do they don’t know how to make it happen.

Even when the strategy process has been attempted, typically busy leaders delegate the operational side of business, while they focus on the perceived “design and client” issues. This is completely wrong. Execution is not just words, documents and tactics — it is a discipline and a system. The leadership of the business must be deeply engaged in it.

The building blocks of success Level of excitement There is so much methodology and advice around strategy that sometimes you need something that will get you and your people excited to make things happen. In order for a

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Arguably, the leading cause of business failure is the lack of a well-implemented strategy.

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strategy to gain traction, and to engage the people within the business, there needs to be a level of anticipation in your objectives and plans.

It can’t all be about improving the profit margin or making more effective use of your technology, or fixing up our communications collateral.

Obviously these can be important initiatives but if you want to engage people there needs to be an element of excitement amongst the leadership and the people. Think about it. What would that be for your business? Creating a landmark in the city? Establishing a presence in a new location?

Aiming for market leadership in a new sector?

Becoming expert in a new work type?

Strategic objectives should stretch the limits of your business capabilities, making them exciting to achieve, without being impossible to accomplish.

Leadership Leadership can’t delegate strategy development and execution — leaders need to step up. A business can only make things happen, drive change, and deliver strategic objectives if the leaderships’ heart and soul are immersed in the business. The leadership needs to be in charge of getting things done by running the three core processes — setting the strategic direction and priorities, engaging the right people, and regularly monitoring progress.

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Only a leader can ask the tough questions that everyone needs to answer, then manage the process of debating the information and making the right trade-offs. And only the leader who is intimately engaged in the business can know enough to have the comprehensive view.

What exactly does a leader who is in charge of execution do? How does he or she avoid being a micro manager, and getting caught up in the details of running the business? Briefly, the core elements are: • Knowing and challenging your people • Being realistic • Keeping to clear and actionable goals and priorities • Following up and creating energy • Rewarding those that contribute • Knowing yourself and setting the example

Flexibility Unforeseen change in business conditions naturally occur so you also need to allow for flexibility in your plans.

It’s more effective to continually review and develop the businesses and align your strategic objectives rather than talking and debating the new office in Asia or the new documentation standards. Get on with things! Take small steps, assign smaller goals, communicate your successes, analyse your weaknesses, adapt your approach, seek out business partners that can assist — make things happen, measure their success or otherwise. I can guarantee that others are. If you’re not, then remember our industry is too competitive and too dynamic for you to sit back and wait!!

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Take small steps, assign smaller goals, communicate your successes, analyse your weaknesses, adapt your approach…

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Concise with definitive timeframes Your strategy is not a business plan — they are 2 different things. You don’t need to document your strengths and weaknesses, you don’t need to define your brand and you don’t need a comprehensive set of numbers. Don’t create something that will sit in the bottom drawer and requires endless revisions to make it live.

Start with the big picture — what does your business need to look like to thrive in the marketplace in three years? Then action these into ambitious but realistic milestones of three and twelve months, assign responsibilities and tasks to individuals, build in realistic timeframes, targets and measurement criteria to assess progress. With the right people and methodology it’s possible to develop a strategic plan, with a plan for execution, in one day.

Consider execution at the start

And when you find yourself at the top don’t rest

We have seen strategic plans not being implemented over and over. In order to avoid this you need to have a plan and process in place for executing your strategy. You need to consider and involve those people that will contribute to making it happen at the early planning stages.

— the best businesses find ways to do great things even better.

They need to take ownership and be part of the process from the start.

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How will you reward those people that make it happen? Is that ownership becoming a Director, profit share, heading up a new office? I can guarantee that even if you aren’t thinking about this, your key people are. Work out what system you will use to track progress — how you will keep people up to date? Where will you keep the key documents? Is your strategy going to be shared with everyone in the business or just the highlights? How much time will the leadership dedicate to follow up and follow through and where is this time going to come from? How often will you meet to review progress? What support will you need? What will prevent the day

to day getting in the way? How much time and resources are you prepared to invest?

Don’t commence the planning process until you have thought through these issues and put in place the systems to ensure you deliver on your plans. Don’t let strategy become planning!

Management for Design has developed a unique approach to strategy development and execution that if implemented effectively ensures results.

At the core is a methodology and system to ensure successful execution that involves the key people in the business.

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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 118 LEADING A DESIGN BUSINESS In design businesses, it’s common for leaders to be the face of the business, to nurture existing and future clients, as well as be the key initiators of design. But it’s often also the case that leaders have a challenging time separating themselves from the day to day activities of the business—allowing for time and energy to focus on building the business, improving the operations, surrounding themselves with great people, and nurturing the future leaders.

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It’s often the case that leaders have a challenging time separating themselves from the day to day activities of the business

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As a leader of a design business you are confronted by a set of circumstances (challenges) that are somewhat unique: • Often the leader is the face of the business • Leaders are typically the key initiator of design and client relationships • Leaders have a difficult time separating themselves from the day to day activities of the business • Leaders often don’t share financials • Effective business management is considered secondary to other considerations, including design capability, client relationships, and delivering projects • Profit and profitability can take a back seat to producing great design • The entrepreneurial drive of the founders is usually not found in the second generation • Client relationships tend to be deeper, stronger, and more personalised

This approach often results in profitability taking a back seat to producing brilliant design, which is great for the clients, but not so great for the design practice.

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How important are sound business principles in your business? How do you demonstrate and drive this? Do you have a culture of empowerment?

It’s incumbent on business leaders to lead by example and set the tone.

Not only that, entrepreneurial vision and drive are often not inherent in the next tier of management, so enthusiasm for your vision, clear strategic objectives that filter through to every aspect of the business, and empowering your people are key to driving your business forward.

What are the priorities for your business and how do you communicate these to your team? Do you pursue a culture of trust, sharing, collaboration, empowerment, performance, and profit?

Talk about what you believe in, be open, and address those values in the everyday conversations that you’re having with your people. Use phrases that are inclusive of the collective whole of your business, using the tone and language that reinforces ‘this is important to us’.

Successful leaders, more often than not, exhibit the following personal qualities: • Have a clear purpose • Keep to clear and actionable goals and priorities • Are relationship builders • Understand and challenge their people • Understand the true value of their time • Constantly ask themselves ‘am I the right person to be doing this’ • Focus on what will make a difference • Accept and embrace performance criteria • Are realistic (self-assessment) • Follow up and create energy • Effectively balance life and work • Let go of design decisions and client relationships • Mentor others • Actively pursue professional development

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In most design businesses there are critical elements of the business that the leaders need to drive and ensure they contribute to continuously – the ‘business drivers’. In a design business, these are typically to generate work, to nurture client relationships and to design and deliver great work.

But what about all the areas of the business?

For a design business to be truly successful, the leaders’ attention is needed across strategy, communications, design, delivery, innovation, operations, human resources, and financial control.

Having said that, most architecture, engineering, and design (AED) leaders that are elevated to senior roles or directors’ positions don’t have the necessary business management expertise to manage, direct, and drive a successful business that performs across these key business drivers

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None of this comes overnight and it typically requires small steps. It comes through a wellconstructed plan, time and experience, and the assistance of your team—the team of experts you surround yourself with. It goes without saying that what’s required is a balance between the time you spend ‘in the business’ and ‘on the business’. You need the time out from project-related activities to make this happen.

Be clear about where the business is heading and be prepared to engage your key people in why, where and how you will get there. Ideally, you will be able to empower your staff, hand over control and give some of the responsibility and accountability for achieving your business objectives to others.

Your objective as a leader should be to empower your key people to take on responsibility for project and design delivery, project performance, client relationships, and business systems. Set them up to succeed and flow responsibility for decision making through the business.

For a design business to be truly successful, the leaders’ attention is needed across strategy, communications, design, delivery, innovation, operations, human resources, and financial control

Ask yourself the following questions of your key people (and future leaders):

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• Do they have the information and tools they need?

As a leader, you need to be clear about your expectations around client outcomes, project and financial performance, and managing deliverables.

• Are they trained?

• Do they have the necessary skills?

• How much responsibility and accountability do they have?

• Are they responsible for performance (project deliverables)?

• Are they financially literate?

• Do they embrace technology?

• Do they delegate effectively?

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And if they don’t have the necessary (or desired) capability, work with them to develop a plan to make it happen. Motivate your team by driving a culture of leadership and ownership succession.

Articulate and provide an opportunity for future leaders and be clear about what it takes to become a leader in your practice. By providing a transparent path to leadership you will set the standard for future growth.

Here are some steps to create a culture of leadership among your key people: • Involve your people in articulating and clarifying your business ‘drivers’ and desired business outcomes e.g. strategy, rainmaking, design, innovation project delivery etc.

• Define, articulate and measure the performance criteria across these business ‘drivers’ • Ensure your key people are working in their core capability (set them up to succeed) • Understand and nurture their inherent personal strengths/weaknesses, temperament, and abilities

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Successful and effective leaders today, more often than not, are doing less and achieving more. To borrow from Mies Van Der Rohe ‘less is more’

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Management For Design provides can provide you with a framework to turn your ideas into actions.

Refocussing your way of working means you’ll spend less time micro-managing, while the key decisions will always remain firmly in your hands.

For more information, contact Rob Peake on rpeake@m4d.com.au.

• Include measurable criteria in your executive agreements • Provide individual (and team) contribution requirements and link these to the profit/bonus pool • Provide regular (and expert) feedback on performance on a quarterly or 6 monthly basis Your business can be the vehicle that enables you to shape and control your destiny – both in life and your career. Your challenge as a design leader is to balance the creative and commercial aspects of what you do. Successful and effective leaders today, more often than not, are doing less and achieving more. To borrow from Mies Van Der Rohe ‘less is more’. n

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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 111 SURROUND YOURSELF WITH THE RIGHT PEOPLE

Introduction Your team consists of a lot more than the people you employ — they are only part of the equation. Leaders work with a team for which there are four critical components. Alongside your employees, the people who work with you include business owners, partners, your future leaders, specialists and advisors — this is your team. All components have an equally important role in your business.

1. Your partners Choose your partners carefully! Above anything else, you need to be sure you can trust one another, enjoy each other’s company, and work and communicate well to ensure you achieve great things for your business. Sharing similar values and aspirations for the future of your business, alongside being financially astute and forward-thinking are all important traits of a successful partnership.

Finding a partner that offers credibility to your business, while also having skills and expertise that support and complement your own ensure a far broader skillset. This in turn will enable you to plan, grow and run your business more effectively. Today, your partners should possess an element of risk-taking, a desire to control their own destiny, and an enjoyment for watching

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Sharing similar values and aspirations for the future of your business, alongside being financially astute and forward-thinking are all important traits of a successful partnership.

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others receive the recognition they deserve.

In a nutshell, they should complement your weaknesses and share your business passions.

It goes without saying that you and your partners establish the culture within your business. Cultural misalignment among the leadership team is one of the first things that arises when business becomes difficult. When business is performing well, inadequate communication can be papered over. When there is leadership conflict and a sense of dissatisfaction in the business, this misalignment is one of the first things to come to the fore that really never goes away.

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2. Your future leaders

• Business development and work generation

Your future leaders should offer diversity to your business by bringing new skills and behaviours you don’t have. What are the characteristics to look for? Professionalism, independence and entrepreneurship. These individuals have a great work–life congruence — they value teamwork and respect others, and have the ability to put their egos aside to listen carefully and nurture those around them. Forward-thinking and open to new opportunities, future leaders challenge the status quo — by not being risk averse in their approach to business. They are keen to discuss their concerns with you and have solutions, not problems, to the business issues. In a nutshell, they have a winning personality and are invaluable assets to your business.

• S ervicing clients and representing the business

Your future leaders need to be mentored by you.

You need to spend time with them on business management — very few others will! They need and deserve a plan for growth and advancement.

In our experience, they typically won’t ask for this plan so the current leaders need to be pro-active about this. This should include an agreement / expectations surrounding:

• Delivery of services • Design collaboration • Client agreements and fee structures • Their role in strategic objectives • Attracting and retaining key people • Building and contributing to cultural values • Business and service innovation • Financial objectives and systems.

3. Your people Without people, you don’t own a practice — you own a job. It is obviously necessary to focus on hiring people who have the correct skills, but, more importantly, who culturally fit in your business and can bring quality and talent that you will need into the future. Foster a culture of accountability by surrounding yourself with people who want to build a career, rather than have a job.

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Your people should be trustworthy, hardworking, productive and work well as part of a team. There should also be a mix of demographics across gender, cultures and age.

Hiring people with great energy and a positive outlook on the business is essential — after all they are representative of your business and will influence the impression others have of you and your credentials. A successful team needs to have experience, passion and commitment.

Be careful not to simply go through the process of hiring people and then forget to interact with them. Working alongside your people to develop their skills and responsibilities makes an enormous difference when looking to build a team that is fully engaged in their role and is excited for future opportunities in the business.

Don’t make the mistake of putting the wrong people in charge of hiring or failing to let go of the employees who don’t fit well in the business. The key issue to remember is trust your judgement!

When evaluating your current and potential people, ask yourself the following questions: • Are they passionate?

• Do they have a great work ethic?

• Are they skilled?

• Do they embrace challenges?

• Are they fun to be around?

Having strong, engaging systems across your business that enables your people to do the right work at the right time will not only ensure your business is run more effectively, but your people will be happier too! Such systems will also enable you to delegate responsibility comfortably.

That in turn will ensure your staff members confidently take control within their roles — your systems are your path to independence and fulfilment!

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Working alongside your people to develop their skills and responsibilities makes an enormous difference when looking to build a team that is fully engaged in their role and is excited for future opportunities in the business.

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4. Your trusted advisors The main difference between a business and being self-employed is the team you surround yourself with.

Consider what skills you don’t have in your business and surround yourself with experts, mentors and advisors that bring this capability.

This will include experts in finance, tax, legal, risk, marketing and strategy etc. Having the right people around your business will enable you to learn from experts in your industry. You will get the return on your investment that is imperative to the success of your business.

Surround yourself with experts who: • Have demonstrated expert knowledge and skills in their field of work • Know how to get things done • H ave a network of people they can refer you to promptly • Complement your weaknesses

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• Put your interests first

• A re forward-thinking and able to assist in driving your business further.

Once you have established a strong relationship it is important to nurture it as your business develops further. Asking questions as you go and liaising closely together will help to build a stronger relationship on which you can fully manage every element of your business.

Proper guidance from your accountants, tax advisors, financial advisors, and legal counsel is imperative for building a strong, successful business. Although these advisors can be expensive, their advice can provide you with an incredible return on your investment by helping you structure a strong business while avoiding pitfalls along the way.

Being able to receive the support and advice you need from the experts around you will make an enormous difference to how you view your business and the decisions you make as a result.

Having a strong and respected team on board will contribute to any decision you make — it is the combined input of your team that makes it the right decision.

• A re reliable, credible and available when you need them

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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 108 BUSINESS MANAGEMENT SYSTEMS FOR ARCHITECTS, ENGINEERS AND CONSULTANTS Why you should invest Your Business Management System is one of the core foundations of your business. An effective and integrated system will enable you to more effectively control your business and is a key foundation to enable you to build your business.

At any given moment, project-based firms need real-time information to: • Provide insight into the status of project profitably • Understand how the business is performing and why problems occurred • Assess the impact on the business, and what should be done to enhance performance • Efficiently share information throughout the organization.

A good business management system enables your business to: • Improve project delivery and profitability • Improve business performance • Streamline your operations and execution • Generate more work

What you will achieve An optimised integrated business management system allows you to:

“

An effective and integrated system is a key foundation to building your business.

”

• Replace and consolidate outdated existing systems • Eliminate the cost of purchasing and maintaining existing systems • Provide a single repository and source of information • Integrate core processes • Consolidate reporting of multiple companies • Allow you to align your resourcing with your project requirements • Manage your client, contact and project information • Streamline your operations • Work across multiple currencies • Increase productivity

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• Streamline management reporting • Provide easy access to information anywhere/ anytime • Improve the bottom line performance of your business • Create additional value in your business • Clean up ad-hoc file and email management.

Features

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Powerful analytics and reporting provide key stakeholders with realtime metrics that offer visibility into all areas of the organization.

Manage business and project information Real-time information and tools facilitate decision-making and alignment of goals. Powerful analytics and reporting provide key stakeholders with real-time metrics that offer visibility into all areas of the organization.

Forecast Accurately forecast your future income based on correct and up to date financial information straight from invoicing.

”

Invoicing and Accounts Payable Tracking The financial health of your firm relies on timely and accurate invoicing. Compare invoices against contracts, to improve cost tracking and eliminate vendor overpayment or fraud.

Project Manage

Business Intelligence and Interactive Reporting

Enable PMs to plan projects across stages and tasks, allocate people and hours, account for estimate to complete and monitor and report on progress.

Access and analysis data — from key financial metrics and project analysis to opportunity tracking, resource utilization and trade receivables.

Resource Management

Time and Expense Management

Automate scheduling, resource allocation, budgeting and forecasting to determine whether proposed fees are accurate, appropriate people are available and allocated effectively, and projects come in on time and on budget.

Timesheet entries and expense reports determine actual costs back into the project plan for an accurate rolling forecast that managers can use to make faster, more informed decisions to ensure projects stay on track.

Financial and Project Accounting

Payroll

Integrate project control with the general ledger so you can track profitability in real time and identify problems as they arise.

Your payroll function will reach top performer status, improve its efficiency and reduce operating costs.

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Client Relationship Management Automate the entire lead-to-execution project life cycle by encompassing all of the tools you need to win new business and strengthen existing relationships. With a single central source of information accessible to everyone in your firm, you are empowering your team to fully leverage their collective knowledge.

Services Estimating Simplify labour and expense estimating by automatically calculating project costs and margins.

Proposal Automation Empower your marketing and sales team to efficiently produce winning proposals that stand out from the competition. Ensure your proposals contain the most recent and relevant information by giving employees access to an up-to-theminute central source of company templates, metrics, résumés and more.

Purchasing Manages your firm’s entire requisition, purchasing and receiving cycle — no matter how simple or sophisticated — while maintaining full integration with Financial and Project Accounting and Resource and Project Management modules.

Asset Management Manage the entire lifecycle of your fixed assets for an accurate picture of business assets all in

one place to give your firm the right data to make informed decisions.

Document Management Allow users to browse, enrich, and edit information collected from various sources from within a single application. By enabling sharing and information collaboration users can efficiently distribute the kind of information needed to solve problems and make decisions.

Conclusion In the way it can power your business, ‘doing more for less’ is a win-win situation for today’s Professional Services firms. Serving to cut costs and increase profitability, this concept can be achieved simply by taking the right steps to streamlining your business. When combined with the right processes and technology, your business can truly ‘do more for less’, and enjoy a lean, yet efficient workforce that drives profitability, cash flow and organizational growth.

From our extensive experience in the industry and working with our clients in the Architecture, Engineering and Consultants (AEC) industry, we see that Professional Services organizations inarguably rely on their human capital as one of their greatest resources. Yet, so often, we also see that these assets aren’t being optimized in a way that truly drives revenue for the business as a whole. Aligning your resources and streamlining processes across accounting, project control, resourcing, client management and document control is the best way to get more out your business.

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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 110 HOW TO INCREASE YOUR PRODUCTIVITY AND REDUCE THE NEED FOR MORE PEOPLE Introduction “How do you manage in today’s challenging economic climate and how do you access skilled and capable people to work on your projects?”

Yes, things are challenging fiscally for Architects, Engineers and Consultants — because they rely on people and skills!

Through good or bad times, the equation that defines business success for professional service businesses remains the same: optimising people skills and capacity = increased profitability. While the math may be simple, of course, the realisation of this potential can be a lot more challenging.

Great resource management is the key to solving this equation. It effectively provides a framework within which businesses can easily and effectively plan, implement and deploy their people skills.

This business journal explains what resource management is, and outlines the ‘Best Practices’ to adopt to optimise resources and therefore maximise profitability.

What is resource management?

You may already be familiar with acronyms such as ERP (Enterprise Resource Planning), PM (Project Management) and CRM (Customer Relationship Management), and the business solutions that underpin these disciplines.

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Great resource management is the key to solving this equation. It effectively provides a framework within which businesses can easily and effectively plan, implement and deploy their people skills.

”

Resource management (RM) is often seen as a ‘sub-set’ of these processes. Resource management may also be known under other names, such as ‘people planning’ or ‘utilisation’ — but in-essence, it is a solution for planning, managing and deploying the right people and skills on the right projects for the right amount of time.

In our experience, only around 20 percent of firms recognise and use resource management as a high-value, stand-alone discipline in its own right — which is surprising given that the management

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of resources is a design firm’s raison d’etre.

According to our latest survey results, a surprising 40 per cent of design businesses admitted to having no overview of their resource situation more than one month ahead. In Architecture, Engineering and Consulting businesses, planning resources at least six months in advance enables firms to get the most out of their business.

Resource management is therefore a ‘must have’ in project-focused companies. More than ever, there is a need to provide key executives, leadership and project managers with proactive, analytical information they need to support efficient and effective decision making.

Best practices to increase your resource utilisation So, what are the key ‘Best Practices’ that businesses should adopt and be aware of to increase people utilisation and attain higher profitability?

1. Recognise that ‘busy’ doesn’t necessarily mean productive There’s a very big difference between people being busy and being productive. Look around your studio and you’ll see people who are busy, yet their utilisation rates — and therefore their productive hours — are at an unsatisfactorily low level. No doubt you will also experience a complete disparity across the resource pool, with some people overloaded, while others remain under-utilised.

When your key resources are people, it’s imperative that you make it easy for your people to manage activity and maintain other relevant data in your business systems solution. This should be a familiar, shared and easy to access system. Also, a simple report that gives an overview of historic performance — e.g.. out of the planned hours, how many were chargeable?

— can also ensure that when people say they are ‘busy’, it really does mean they are ‘productive’.

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2. Don’t manage projects on ‘guesstimates’ All too often Architects, Engineers and Consultants do not align project estimation, scope, execution and existing capacity. Making ‘guesstimates’ on projects is often the key driver in resource under– or over-utilisation.

Underestimate and you’ll be scrambling to find additional resources. If you are in danger of missing a deadline on a project because resource management hasn’t been at the top of the agenda, you can too easily add additional people to projects or recruit unnecessary additional people.

Both actions can obviously have an immediate impact on profitability and a ’flow-on’ effect on subsequent projects. New people hired for one project may not be needed for the next, so you end up carrying additional and/or unnecessary overhead. Either way, the impact on project costs and profitability can be significant. The lesson?

Short-term resource management and planning, combined with a narrow view, can seriously impact the bottom line. By integrating your future work requirements including potential projects/ pipeline with effective resource management you can achieve a better understanding of resource impacts, both short- and long-term.

3. Don’t over-service clients One of the biggest challenges facing design businesses is assigning too much resource to a client, and effectively putting in time that isn’t chargeable just to ‘keep the client happy’. This often happens because there is no clear overview of planned resources and fees against what your people actually deliver — the gap between the two can mean the difference between profit and loss on a project. Integrating your “Resource Management System” with your “Project Management System” provides improved insight into the critical path — thus allowing you to focus on the sub-tasks in the optimal sequence.

4. Match your long-term project forecast / pipeline with your planned capacity It always surprises Management for Design how many design businesses have ineffective controls for tracking work generated and forecasting future workload. It is absolutely essential to ensure that the projects in your backlog and pipeline can be forecasted, planned and resourced efficiently.

Again, integrating your opportunity tracking system with resource management means you can achieve an increased understanding of resource impacts, as well as effectively support your strategic and tactical recruiting, out-sourcing and organisational development.

5. Avoid different versions of the truth Having a uniform management system that encompasses all elements of the business will help ensure consolidation of all finance, client and project information. More importantly, it will provide you with a single and accurate version of the ‘truth’. In addition, by having consolidated information ‘based on facts’ in one place (rather than on a myriad of MS excel spreadsheets from

“

By integrating your future work requirements including potential projects/pipeline with effective resource management you can achieve a better understanding of resource impacts, both short– and long-term.

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project managers and project accountants) there is visibility of project progress across the business, from project manager to senior management level.

projects. The very fact that you already know if you can fulfil a project — should you be selected — puts you in a much stronger position to succeed with new proposals.

6. Consider resource management as the ultimate in Business Intelligence

8. Take traditional ERP, CRM and PM systems to the next level

Business Intelligence (BI) technologies can now integrate historical, current and predictive views of business operations. Resource management really represents the ultimate in Business Intelligence (BI) in your organisation.

How do you forecast your current and future work and how do you turn this into your resource requirements? And how do you compare this with your current resourcing and utilisation?

You might be thinking “we already have a traditional ERP, CRM or PM system to manage our client and project-based operations. Why should we bother with resource management?”

The fact is that, while some resource management functionality can be found in traditional ERP systems, it tends to be very much focused on managing resources on single projects, rather than looking at resources across the business.

An effective resource management system will underpin and drive your business operations. You can bring in timescales, role-requirements and other key elements to your resource planning and link this to your overall BI strategy. Resource management needs to be effective in terms of short, mid and long-term analysis and reporting, adding real depth to your BI efforts.

What’s happening with resource management is the same that happened with CRM many years ago, when firms started to realise that they didn’t have a structured way of interacting with clients (and many still don’t).

For example, managers can have a dashboard they look at every day when they log into the system, displaying KPI’s such as chargeability, fees per hour, hours worked and project / resource requirements 3/6/12 months out.

7. Be prepared to take advantage of market opportunities Resource management doesn’t just mean managing today’s work. In identifying skills that the organisation may not have been unaware of, you can create new market opportunities for tomorrow. When you integrate your work pipeline and opportunities with your “Resource Management System”, it gives you the necessary information and confidence to bid on new

Conclusion Once you accept that effective resource management is ‘best practice’ in terms of running your people-centric business operations, it’s time to look at investing in appropriate solutions. What the right solution does is effectively provide a real-time overview of resource availability that is fully integrated with your project plans. You can monitor availability, workload, chargeability and revenue across all employees, and easily assign people to tasks relating to projects and opportunities.

You can avoid projects based on ‘guesstimates’ and target your resources accordingly. You can develop project plans and estimate the cost and revenue of opportunities and real projects, as well as monitor progress with actuals against baseline at any time.

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When you have a long-term overview of your capacity situation, you can work smoothly between operational, tactical and strategic planning horizons and view revenue forecasts based on the plans. Overall, with an effective system you benefit from having a highly visual, intuitive and transparent resource overview across your business. This can be accessed by the leaders and project managers, as well as employees, in real-time and based on facts.

The Return on Investment (ROI) is compelling.

For example, if you have a resource pool of 100 people, with an average hourly chargeable rate of $150, finding just one extra hour per month, through the use of effective resource management will result in $180,000 extra revenue per year.

It is evident that when you have a single, integrated solution supporting everybody in your organisation in their project planning and resource-related work, you can really look at increasing profitability.

With the right solutions, you can: • Become less prone to the changing economy as you gear your business to match the current market situation.

• See who is doing what at any given time.

• M onitor availability, workload, utilisation, and revenue of all employees, and easily assign people to projects and opportunities.

• R educe the risk of lost profits caused by under-utilising resources.

• G et a resource overview that is fully integrated with your project plans.

• Tap into the hidden profitability potential of your people as you start billing more hours to clients with greater accuracy.

• Gain a clear insight into long-term capacity plans.

• F ormulate exact revenue forecasts based on your resource allocations.

• H ave one integrated solution that supports everybody in your business in their project planning and resource-related work.

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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 114 PROFITABILITY AND GROWTH STRATEGIES FOR ARCHITECTS, ENGINEERS AND DESIGNERS Current economic conditions are strong—albeit challenging—and the indications are that this will continue. Having said that, Management For Design

So how can AED firms position themselves for future growth and meet the challenges of increasing competition, technological changes, a changing

continually encounters Architects, Engineers, and Designers (AED) that are not realising the strong and consistent profitability that could be achieved.

workforce, and potential ownership transitions? The answer is that today’s success-minded firms require a concentrated focus on strong project, resource, and financial management practices—the kind that can carry their long-term growth goals to fruition.

To match the high pressures of an increasingly competitive environment, the trend within AED firms has been to reduce fees (without a subsequent reduction in services). There is downward pressure on pricing and businesses are competing with a higher emphasis on attractive price, rather than increased value. And, as wellintentioned as these strategies are, it has made it even more challenging for firms to deliver projects profitably.

Unfortunately, Project and Resource Management for many AED firms is not what it used to be, and many businesses have moved away from best practices—that is, if they ever had them in the first place. Although information is now more readily accessible than ever, more and more of the routine Project Management activity is being left to overworked and under-resourced Project Leaders. It is becoming more and more difficult to deliver a profitable project.

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Project and Resource Control and Management is the key to successful and sustainable business profitability. And profitability is the key to growth — G ordana

Milosevska, Director, Management For Design

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Project and Resource Management Best Practices Typically in AED businesses, 75% of business profit is generated from 25% of projects. Which could also be read as 75% of project work is contributing little to the bottom line—this can be changed! To improve and maximise project profitability (and hence overall business profitability) we recommend applying the following project and resource management best practices:

1. Financial Overview of Project Results The most critical component of effective project performance is having financial oversight of projects.

“This doesn’t just mean having a finance person looking at the project results, but making sure the project leaders understand the financial status of the project and its impact on the business. When it comes to project communication, it means communicating the project status to the client, subcontractors and the entire project team that is involved—and you need a system for this,” says Callum Bruce, Head of Business Systems, Management For Design.

Ensuring that the project leaders are knowledgeable about a project’s finances can lead to a number of benefits across the enterprise, including: •

Planning and matching the work with the resources and costs

•

The ability to manage the scope and deliverables

•

Enable effective pricing and scoping

•

Accountability for performance

•

Identification of the areas of business that need improvement

•

An understanding of what types of projects the company generates the most profit from

•

Stronger project manager contribution to the overall profitability of the firm

2. Leadership Accountability The leaders of the business—directors, principles, asociates—can’t expect the responsibility for project performance to sit entirely with the project leader. The business leaders need to show the way, they need to develop and expect a culture of accountability and this starts at the top. Leaders need to expect and be involved in project budgets, scope expectations and project performance for their projects.

By developing and investing in a culture of accountability

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and project control, AED businesses ensure that their most important assets—their people resources— understand the underlying purpose, skills and profitincreasing practices associated with strong project and resource management.

“By creating a culture of project and resource management excellence, firms will be able to realize consistent, meaningful profitability for years, or even decades, to come,” says Milosevska.

resource costs are expected to be. Tracking percentage complete against expected hours can be a key source of information for addressing productivity.

“Often, what you invoice and how you invoice does not always follow the percent complete,” says Carla Dexheimer, financial controller, Management For Design. “Estimating your costs through to the end of a project requires having set budgets in place right from the beginning, and ensuring that the right data is available to all people on the team.”

3. Resource Management Although some would consider this as obvious, Management For Design is often astounded by the lack of thorough and integrated systems in practice for managing resources across the studio, (i.e. who is working on what and when, who is available, who is utilised and underutilised, and what are the resource requirements moving forward).

“No matter the size of your business, what you need is a system that shows you where and how your resources are allocated through the life cycle of your project— from the planning phases all the way to delivery—and a centralised and shared resource pool that captures who is doing what when”, says Bruce.

This way you can steer your team and their work through obstacles and scope changes as they arise— adding and subtracting resources as needed. Having a comprehensive insight into how your resources are allocated lets you respond quickly, make strategic decisions, and keep stakeholders updated when those unforeseeable project risks and uncertainties make themselves known. All of this raises your chances of delivering projects when you say you will.

4. Regular Percent Complete Calculations This method of measurement is required for all fixed (lump sum) fee projects, and that means that businesses must understand what their project deliverables are at any given time, as well as what their total estimated

5. Out of Scope Management Also referred to as ‘scope creep’, or variation to the scope; out-of-scope management refers to the fact that projects can have many distinct phases, all of which are prone to widespread design and documentation changes. By setting expectations regarding the scope of the project up front, project leaders can effectively eliminate the potential for their firm to move into a ‘grey area' when changes arise—where neither the firm nor the client is in agreement about whether the changes are part of the agreed scope, the timing or pricing.

Businesses need to have systems in place, and a culture that supports the system, to capture work that is outside of the scope of services.

6. Managing re-work Our research indicates that re-work can add up to 40% of project costs, and typically accounts for 1020% of project activity. In fact, re-work is one of the primary factors contributing to mediocre performance and productivity of projects and businesses. This can include design changes, unresolved designs and related documentation, documentation errors, inadequate or unresolved co-ordination, and ineffective project management. This is not an easy fix, it requires the business leaders to focus on, and commit to, an effective design management process, quality management, regular review, open communication, and accountability.

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7. C onsistent Backlog, Reporting, Monitoring and Updating

Know Your Numbers

“A well-managed firm is constantly looking at their backlog and monitoring project performance,” Dexheimer notes. “These businesses have a full picture of both their current projects and what is in the pipeline that will require management. Executed correctly, project leaders are involved in this process, and project performance is constantly evaluated to ensure maximized project profitability.”

All project and resource management best practices mean nothing without the strong financial control and understanding to keep your business ahead of the competition. It’s important for goal-oriented AED firms to recognize where they should be when it comes to key metrics. Below, are the key performance indicators (KPIs) to achieve and sustain significant growth moving forward.

Firms who are geared towards success in the upcoming years need to make it a priority to have a comprehensive resource requirements plan and strategy—one that will ensure they not only have the right number of people to complete the work, but also that they have the right people to help grow the firm and remain ahead of the competition.

Performance metrics are critical to the health of AED firms. Specific data that Management For Design recommends businesses measure and track include:

It goes without saying that these business practices need to be backed up by constant project leader and business training and follow up to make sure it’s happening in the business.

•

Fees per hour worked

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Revenue per technical person

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% complete / % hours used

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Project profit

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Work generated

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Project backlog

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% utilisation

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Performance Measure

Benchmark

Best Performers

Fees per hour worked Revenue per technical person % complete / % hours used Project profit Work generated Project backlog % utilisation

Example performance metric tracking table.

“Having solid, visible historical performance information allows for more accurate project pricing and budgeting,” says Dexheimer. “What’s more, it really has a positive effect. Project management controls that keep projects on budget allow firms to achieve their target performance, and resource management and utilization rates on track. When combined, these all assure strong and sustainable profitability across the firm.”

Conclusion The economic climate is going to remain challenging for the foreseeable future—and will continue to impact the role of the profession, sustainability, growth goals, and planning for the next ten years.

With expected industry-wide growth ahead, AED firms need to move beyond managing the workload, competitive pricing, and winning the next project; to ensuring that all projects are contributing positively to their overall profitability.

Equally as important, firms require solid financial management, controls and expertise, to help them maximise profit margins and to build a sustainable and enhanced business. The first step towards financial stability in the current landscape is to ensure that your firm is managing and executing profitable projects across the board.

By implementing best practice project and resource management processes your business will be far ahead of the competition and equipped to make the decisions required to achieve long term growth and success in an increasingly challenging AED landscape.

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Management For Design can provide pathway for you to implement project and resource management best practices in your practice, allowing a greater number of your projects to contribute significant profits to the business. For more information, contact Rob Peake on rpeake@m4d.com.au.

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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 119 MANAGING RISK FOR ARCHITECTS, ENGINEERS, AND DESIGNERS While Risk Management might not be the most engaging subject for leaders of Architecture, Engineering, and Design businesses, it’s an essential concern that you can’t avoid—and something you need to manage effectively. But, what does Risk Management actually mean?

• Surrounding yourself with the right expertise • Adopting strategies and systems to minimise your risk and exposure.

• Effective quality control to keep yourself free of unwanted claims Although this can be an extensive subject, we’ve simplified this by identifying the key issues most businesses encounter and categorised these into four main areas.

1. Business Structure and Legals 2. Clients, Fees and Fee Negotiation 3. Insurances

Business structures and agreements Business Structure Establishing a company, unit trust, or partnership is a decision you will need to make early on—and you probably won’t fully understand the implications of your decision until you are directly faced with them.

Each structure has its pro’s, con’s, and implications for the owners and directors. What works for you may not work for others.

A Unit Trust is different to a company in that the trust is not directly taxable on income it earns; however, all taxable income is distributed to the unit holders pre-tax, who then pay tax at their own rate. The workings of the unit trust are governed by the trust deed which is like the constitution of a company.

Some of the disadvantages of a trust structure compared to a company include: • It can be more expensive to establish and administer • It can be difficult to dissolve, dismantle, or make changes once established • It can’t distribute losses, only profits

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And some of the advantages include: • Reduced liability, especially for corporate trustees • Assets are protected • Flexibility of asset and income distribution

When third parties know you have a shareholder agreement is a strong indicator that this is a stable business—this applies particularly when applying for credit and dealing with financiers.

What should your agreement encompass: • Ownership obligations and transfer of ownership

Shareholder | Trust Agreement

• Insurances

Why do you need this?

• Restraint (and upon exit)

A formal agreement prevents disputes. Having an agreement prevents disputes and allows for the smooth functioning of companies, trusts and partnerships. Disputes often arise when owners wish to sell or exit. It doesn’t matter how well you know the person you’re doing business with – conflict is extremely common when you’re doing business with someone.

• Decision making

Having a shareholder agreement provides you with the opportunity to tailor a contract to your needs.

Without one you will just have to work within broad legal principles which may or may not work to your advantage.

An agreement is a private agreement. Unlike the constitution of a company, a shareholder agreement does not have to be made public. Also, only people or companies who are parties to the shareholder agreement can change it.

An agreement can result in the smoother functioning of the company. Because the shareholder agreement can divide management functions and spell out rights/obligations it can have a useful secondary use as a kind of collaborative management tool.

An agreement can save costs. The initial fees in setting-up an agreement is nothing compared to the costs of disputes or from bad deals which you might fall victim of in the future.

• Other business interests • Exiting the business • % of profits linked to performance • Employee share plans • Buy / Sell Agreement

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Having a shareholder agreement provides you with the opportunity to tailor a contract to your needs.

Otherwise, you will just have to work within broad legal principles which may or may not work to your advantage.

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Comprehensive employment agreements with your people Employment agreements are an essential document for both employees and employers, legally establishing the working relationship and setting out important frameworks and policies.

These contracts provide both the employee and employer with a clear agreement of what is to be expected from each party while outlining all rights, responsibilities, and obligations. This works to protect the rights of the employee, and also protect the employer from certain risks such as breaches of confidentiality.

Here are five reasons why employment contracts are a must-have in any business: Understanding of Employee Role and Responsibilities. One of the first things an employment agreement will do is clearly spell out the position and responsibilities of the employee, salary, and benefits. There’s nothing worse than stepping into a new role and not being quite clear on the tasks and duties involved. This should be established by the employer before the on-boarding process. Both parties should be clear around what is expected in terms of employee performance and this should include measurable criteria.

Understanding of Termination. The employment contract should specify exactly what actions can result in termination and the terms associated with this. Including this information ensures that each employee knows which activities are mandatory to their role and which actions or behaviours are outside policy and may result in dismissal.

Defined Pay Rates and Income. Regardless of whether an employee is full time, part time or casual, an employment contract defines pay rates and income and handling overtime. Having this information contained in one document shows an agreement between both parties on salary, leaving no room for miscommunication. Within the employment contract, you can establish the income your employees will be receiving and how often they work. You can also set what their annual income will be and any relevant bonuses, or basis for bonuses.

Clear Protocols for Annual, Personal, and Long Service Leave. Throughout their employment, team members will need to take all different forms of leave, such as annual leave, personal leave, maternity/paternity leave or compassionate leave. Having this information set out in a contract means that the procedure for taking leave is always consistent and legal, for all people.

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Confidentiality for Employers. Many positions give employees access to confidential company information and data. A confidentiality clause in each person’s employment contract acts to protect the business. With this clause in place, employees are prevented from divulging sensitive or confidential information to others. This can include being released to the media or public, shared on social media, or being used for any other purposes.

It goes without saying that you must have a signed agreement/contract with the client. This should incorporate:

Employment contracts also often include a ‘non compete clause’ – a clause that prevents the employee from working for any competitors for a certain period (perhaps two or three years) after the employment ends.

• Budgets

Clients, Fee Agreements and Fee Negotiation Risk often arises out of miscommunication and unrealistic expectations—both verbal and written.

This is mitigated by having a comprehensive contract in place that describes the scope and terms of services.

• The scope of the project • The time-frames for deliverables and the project • Preparation and delivery of documents • Engagement and coordination of consultants

Not only that, but typically architects, engineers, and designers are great at articulating what will be provided, but not so good at communicating what is additional to the agreed services. You need to include an itemised list of exclusions and where additional fees are applicable, e.g: • Delays in gaining approval • Changes in documents due to changes in scope • Additional drawings – as builts etc.

• Negotiation related to novation • What happens when things aren’t working out • Additional inspections

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Your contract needs to incorporate your typical terms and conditions that will include: • Payment terms • Dispute resolution • Intellectual property and moral rights • Disbursements • Clause for increasing rates and hourly rates The fee you negotiate and agree to forms the foundation for your project, the on-going relationship with the client and project success.

Considerations include: • Do you have the required project expertise?

• What is your current workload?

• What capacity do you have?

• Who is the client? Have you worked with them before?

• Can you reasonably achieve the time-frames?

• Can you achieve an expected project profit?

• Can you negotiate and determine an appropriate fixed | lumped fee?

• Can you capture more of the fee earlier in the project?

Insurances There are 3 key insurances your business must have: • Professional Indemnity • Public Liability • Business Insurance

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Typically architects, engineers, and designers are great at articulating what will be provided. But not so good at communicating what is additional to the agreed services

”

Professional Indemnity Professional Indemnity insurance protects professionals against claims of negligence or breach of duty made by a client as a result of receiving professional advice or services from your business.

If someone alleges that you’ve made a mistake, overlooked a critical piece of information, misstated a fact, or they have misinterpreted you in the course of your work, and this results in a financial loss for your client, then they may take legal action against you to recover these losses. You need an effective relationship with your PI Insurer Whether or not the allegation is true, Professional Indemnity Insurance seeks to protect your assets, your reputation—and our bank balance. This means you can continue in your business without the stress of financial or reputational ruin should a claim arise. Regardless of the merit of a claim, your Professional Indemnity Insurance will pay for your legal defence as well as any judgments or settlements that you or your business may have to pay to compensate the suing party, up to stated policy limits.

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A professional liability policy will cushion the possibility of financial struggles as a result of a claim.

Additionally, many insurance companies offer risk management services to all of their insureds and they are usually complimentary. One such service is contract review. The insurance carrier will typically use in-house risk management consultants have a third-party risk management firm to handle these services.

In either case, the risk management consultant will review and suggest changes to the contract or how to improve on the wording to further detail what the architect or engineering firm will or will not be responsible for. The risk management consultant will also be reviewing contract language to be sure the firm is not agreeing to something not typically covered by insurance and are not agreeing to a higher standard of care than typically expected.

You are obligated as a business leader to be clear about indemnity clauses and their implications

Public Liability Business owners and Directors have a responsibility to the safety of their clients, employees, suppliers and the community; as well as third party property.

Public Liability insurance protects you and your business against the financial risk of being found liable to a third party for death or injury, loss or damage to property. Business owners and Directors have a responsibility to the safety of their clients, employees, suppliers and the community; as well as third party property. If you are found to be negligent the financial repercussions can be devastating.

With the right Public Liability cover, the insurance company will provide the funds to cover your legal costs and any compensation claims, leaving your business free of financial risk.

If the risk to your businesses is such that you would go out of businesses should you experience a public liability claim, then you need the insurance. It’s

as simple as that. And if you are doing business with another business, make sure they have public liability insurance too, should an accident or injury occur from their negligence.

Business Insurance Business Insurance can provide cover for your business’ premises and contents, against loss, damage or theft, also offering protection against financial loss experienced from an insured interruption to your business. It is usually broken down by the following types of protection: • Material damage loss for your physical assets • Financial loss due to business Interruption There are many different types of Business Insurance cover options, each designed to protect different areas of a business’ operation. The options, depending on your business circumstances include: • Building Insurance which covers any physical buildings which you may own against fire and perils.

• General Property Insurance which covers against theft and accidental damage of equipment, such as tools, laptops, and mobile phones whilst you are away from your office • Office Contents Insurance which covers against burglary, theft and accidental damage of office equipment, such as chairs, desks and computers.

• Tax Audit Insurance which covers fees of any accountants engaged in connection with an audit by the Australian Taxation Office.

• Business Interruption which covers you for loss of income due to material damage within your business.

• Protection of copyright, moral rights which covers you for the cost of retribution and legal costs associated with infringement of copyright and moral rights

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Additional Considerations

Conclusion

Upon the establishment of your practice, one of the biggest, if not the biggest risks a business can face is financial under-performance, and that means:

The Opal Tower and Grenfell tower “disasters” have once again highlighted the requirements for understanding the risks associated with working in the industry. Ask yourself, does our business have the appropriate expertise, the strategies, systems, and effective quality control to minimise and manage our exposure. While some risk is out of the control of the business, most of the risks that a firm might encounter can be managed, reduced or eliminated. n

• Not making a profit/business in loss mode • Underpaying yourself, your leaders and your people • Not investing in your systems and people • Poor collections and bad debts • Liabilities outstripping assets

It goes without saying that issues relating to financial under-performance will overwhelm any practice. What’s required? Great systems, strong financial control, constant monitoring.

Finally, you don’t need to do it all on your own. Surround yourself with experts in their professions.

You need great legal, insurance, financial and management support. These people and businesses are out there. Look for: • A demonstrated track record of success • Extensive expertise in the industry • Great client testimonials • Pro-active attitude to addressing problems

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Upon the establishment of your practice, one of the biggest, if not the biggest risks a business can face is financial underperformance

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Management For Design provides can provide you with a framework to turn your ideas into actions.

Refocussing your way of working means you’ll spend less time micro-managing, while the key decisions will always remain firmly in your hands.

For more information, contact Rob Peake on rpeake@m4d.com.au.

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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 122 EFFECTIVE DESIGN MANAGEMENT Effective design management should be one of the core values of your architecture and design practice. However, when Management for Design delves into this subject with business leaders to explain and articulate the process they tend to struggle with their response.

Why is Design Management Important?

Consistent and effective design management across the studio is not common in our profession. Why is that? Is it because, as architects and designers, we are inherently creatives—and creatives consider management as somewhat counter-intuitive or counter to design innovation? Creativity and management don’t fit neatly together?! Creatives don’t necessarily embrace management, even design management.

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But the key thing is, you need to find a balance between creative freedom, innovation, and business management. Innovation needs to flow throughout the business and be actively encouraged and resourced. But strong and consistent business performance also requires business management and management systems.

The key is to find the right balance for your practice.

Typically, the larger your business is or becomes, the more you will rely on a way of working that is consistent, methodical, with the right cultural fit—that’s business. Effective design management finds a balance between creative freedom and management systems.

Management includes the management of people, technologies, information, and resources. The essence of design management is to maximise these resources and outputs, alongside promoting creativity and innovation within your business.

The key thing is, you need to find a balance between creative freedom, innovation, and business management

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Your design approach, outputs, and the ability to “capture” your intellectual property provides you with the opportunity to innovate and to truly differentiate your business from competitors.

Clients don't choose you for your design talent, they choose you for your ability to deliver highquality design through an exceptional experience.

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Effective design management should be one of the core values of a successful architectural practice— the controlling mechanisms that allow the creative process to be transformed into fee-generating activities.

Effective design management—a consistent approach that is understood and applied throughout the studio—allows your business to: • Ensure consistent processes (and to improve them) • Capture and deliver the design intent • Maximise value to the stakeholders • Develop your relationship with your clients • Build your brand and marketing efforts • Improve your financial performance

Current Status Although designing is central to the tertiary education of architects, engineers, and designers, research indicates that graduates receive little or no training in design management and that they were left to learn on the job.

The challenge for architecture and design businesses is to provide a stimulating and creative studio environment that allows the space for creativity within an organised environment. Like any other business system, design requires monitoring and control mechanisms. Consistent processes ensure that design outputs are consistent, designintent is maintained, and quality work is produced and delivered.

Having said that, ineffective design management is one of the major causes of rework and loss of productivity in the studio. And quite often it’s the leaders that are creating this. Unresolved design work and design changes at the wrong time can be one of the biggest challenges for most studios.

For example, a design review occurs too late in the process and documentation and production has moved ahead of the design decision-making process.

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Design management focus and commitment from the leaders. The unique value architects add to people’s lives and business is grounded in an ability to deliver something their competitors cannot: design vision. But being a creative auteur doesn't always translate to business success—design needs to be a professionally managed service—effective and responsive.

With the move towards integrated project delivery and the uptake of the “design manager” role by contractors, no longer is design or the management of design the exclusive domain of architects in a collaborative, digital marketplace.

To be successful, what's required is to ensure projects are managed professionally and are conceived and delivered within a professionally managed studio. It is through effective management that the client values and central idea are translated into a physical artefact with minimal loss of creativity.

What’s required A design management system is no different from many of the systems in your business. The key is to develop a consistent approach to co-ordinate the required activities and behaviours necessary to deliver the right outcomes. Develop a system—a consistent way of designing in the studio—that is clearly understood and communicated, and everyone adheres to. Support your way of working with: • A physical and virtual environment to enable the sharing of knowledge • Appropriate and sophisticated technologies, both software and hardware, to match the requirements of the studio, like ICT, BIM, etc.

• Consistent and complete Information that is graphic • The right amount of time, people and expertise Your business needs systems to consistently deliver your design intent and ensure quality and client satisfaction—you can’t avoid this! No doubt, your practice currently has design processes and systems in place, but how consistent, understood, codified, and adhered to they are is the real test of effectiveness! As you grow and work with more

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clients you will rely more on these systems.

The factors that could impact this plan include:

It is through effective management that the client values and central idea are translated into a physical artefact with minimal loss of creativity.

Research consistently has shown that effective design management is a significant contributor to success.

• Project complexity—building and technical • Characteristics of the clients • Town planning consideration • Characteristics of the design team • Characteristics of the project team

Where to start

• What systems you have in place

Capturing and articulating client needs is one of the most important events in a project and the project/ design brief forms the basis for that.

• Availability of the right people Once this is established capturing, retaining and communicating the central idea of the design becomes key.

The development of the project and design brief should result in a clear, unambiguous, and concise list of project requirements—it’s an iterative and dynamic process.

The central idea Capture the “central idea”. What is the unifying element of the design, which ties together all the elements of the project that is going to flow through the project?

Management then starts with a plan. What’s required is a clear picture of: • The design initiator/s • The team

Through design development, documentation, in the details, through construction—your project, your documents, your decisions are going to go through a whole selection of people, a whole series of teams. To capture the central idea in the project—whether that’s through photography, whether that’s through sketches, a sketchbook or through precedent projects. It’s critical. Capture that, so that the team embraces and continuously

• Who is involved in the design review process?

• The time-frames and key milestones • An estimate of the amount of time you will spend—this is important as it relates to the profitability of the project (use historical information)

Leadership & Culture Project Brief

Plan

Capture Central Idea

Design Development

Review

Deliver

Evaluate

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refers to it. Your “central idea” informs (drives) design decisions through the complete project cycle. And it’s not a difficult thing to do.

The design review process The design review process—what, who and how—should be a key component of your design management plan. When do you conduct your formal reviews with the team, the leaders, the client? Post concept, at the end of schematic design, at the end of design development, at the end of the project etc. Develop a methodology for assessing your design at the various stages of a project.

Internal design reviews should be planned events at key stages of the project. They should include the project director, the design initiator and design reviewer. Issues to review include: • Response to brief • Design verification – the central idea • Design changes • Constructability • Statutory requirements • Budget / Programme • Sustainability The frequency of these reviews will depend on the characteristics of the project and the team

Evaluation at Project Completion Develop a methodology for assessing your performance at the completion of the project.

This should be with the leaders and the key design initiators in the studio and include: • Strength / quality of idea • Innovation • Delivery of design intent • Client satisfaction (process and product) • Functionality • Well-being • Maintenance and Operating Costs • Project Cost versus budget • Defects And share this with the studio! It’s important.

The sharing of the design and project review discussions with the studio is one of the most effective ways to embed a culture of design management in the studio.

Studio Culture A culture of design management doesn’t necessarily happen within the studio. The leaders need to drive and demonstrate this on a daily basis—they need to show the way. What does this involve?

• Regular design reviews across the studio • Talk about the design decisions—explain them to your people • Regular presentations of work • Articulate the central idea and how this was communicated and captured

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• Promote spontaneity, expression of idea, robust debate • Collateral that talks about the process and results—not just the building • Leaders need to talk about the processes A strategic approach to design at board level elevates design to an innovative process with a long-term vision

Conclusion There is a considerable body of research which examines the dimensions and efficacy of design management. This research has shown that architects and designers struggle with embedding design management into their businesses. It is clear though that the role of the architect and designer is rapidly evolving within the industry. For architects, engineers and designers, in many respects it is the construction industry that is setting the agenda.

Effective design management allows your business to ensure that you’ve got consistency of processes, to capture and deliver the design intent, and maximise the value to the key stakeholders.

The opportunity to drive, nurture, sustain and capture creativity and innovation (your intellectual property) within your practice offers your business the opportunity to lead the industry well into the future.

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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 104 SUCCESSFUL LEADERSHIP SUCCESSION

Introduction Planning for succession is just the first step in a chain of events that culminates in new leaders embracing a key leadership role within the business.

There is no one formula for succession, but the goals of any leadership change are similar — to retain the core values of the business, to retain and build on your client base and skills capability, and to keep the business operating smoothly according to its original vision. Having said that, if you aren’t clear on who your next leaders will be — who will sustain your design values and capability, who will nurture your clients and who will drive the business going forward — you are not on your own!

The vast majority of design and engineering practices have no succession plan in place whatsoever. Management for Design routinely finds that only one in 10 businesses have a plan in place. Of those that do, execution typically occurs in an ad-hoc and spasmodic manner. No amount of management advice will change this but, in our experience, those businesses that have successfully transferred the leadership to new principals and directors have spent many years building and cultivating a culture that enables succession to occur seamlessly.

Leadership transition is an evolution.

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The vast majority of design and engineering practices have no succession plan in place whatsoever.

Management for Design routinely finds that only one in 10 businesses have a plan in place.

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Leadership in design businesses Leadership transitions differ for design and engineering firms when compared with most other businesses. Some of the traits that differentiate their transition from traditional businesses include: • Quite often the leader is the face of the business and is seen as the key initiator of projects and client relationships.

• Principals are typically very engaged in the client relationships and project outcomes and have a have a hard time separating themselves from the day-to-day activity of the business.

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• Because owners tend to keep finances a secret, potential successors don’t understand the business side or the financial status of the firm.

• Effective business management is considered secondary to other considerations including design capability, client relationships and delivering projects.

• Profit and profitability can take a back seat to producing a great design or making an impact.

• The entrepreneurial drive of the founders is often not found in the second generation.

The results: entrepreneurs are replaced with people who don’t like to take risks and don’t necessarily have the same motivations • Client relationships tend to be deeper, stronger, and more personalised than they are in many other industries.

All in all, it’s easy to understand why design and engineering businesses struggle with transition and letting go of their businesses — businesses that are built around unique projects and are an expression of personal creativity, energy and hard work. Not only that, but owners need to come terms with the fact that they are working with a generation of employees who are accustomed to moving about in search of new experiences and opportunities for professional and personal development. Many of the most talented among them would have no qualms about leaving for another firm or even starting up a competing firm of their own — and it’s never been easier to establish yourself in your own business in today’s technology focused environment.

The difference between leadership and ownership succession Typically there are two fundamental components of succession — leadership succession and ownership succession. These are not the same.

Ownership is a legal, financial, valuation, and accounting issue. Leadership is how you conduct

your business, retain your clients and people, develop your new clients and manage your operations. For a successful transition, you need to execute your leadership transition and your ownership transition in parallel. Developing your next generation of leaders is by far the more complex and challenging of the two tasks.

Building a culture of succession Succession is not planning! It’s not something that happens when the existing owners decide that they need to let go or pass on the ownership to the next generation. Successful and sustainable succession occurs when succession is built into the culture of the business and is built on the existing leaderships’ desire to share.

Fundamentally the business embraces the following characteristics: • Trust and openness • Sharing of information and rewards • Identifying and fast-tracking standout performers • Collaboration • Innovation • Personal and professional development • Accountability and responsibility • Integrity • Letting go of design decisions and client relationships • Promotion from within In multi-generational practices these elements pervade the organisation and, coincidentally, are inherent in a performance-driven culture. Most businesses will already have elements of each of these happening but to various levels of success.

Those that do all of them well continue to thrive, to have sustained success into the future and will successfully navigate changes in leadership.

Keeping an eye on these core components affects your ongoing management and recruitment

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“

For a successful transition, you need to execute your leadership transition and your ownership transition in parallel. Developing your next generation of leaders is by far the more complex and challenging of the two tasks.

”

decisions and the year-to-year management of your business.

Identifying future leaders Young people today are more loyal to their own careers and their profession than to their employer. In their experience companies come and go, as does their employment, at a fairly rapid pace. The only way they can have some control over their own destiny is to be independent: either move among practices to find what they want — to gain different work experience, to work on different project types — or become owners fairly early.

The most talented young professionals are educated about the world, independent thinkers, and somewhat impatient for more responsibility and financial reward. They aspire to early ownership. If you want to keep them in your firm, you must make it clear that the ownership path is open to them.

The drivers of success in most design and engineering businesses encompass client relationships, design capability, project delivery

capability and secondarily financial and business acumen, and people management innovation.

Typically your future leaders stand out and demonstrate their capability early. They will embrace your cultural values, be highly skilled in their area of expertise, have strong client relationship skills and take responsibility for the delivery of key projects. No doubt they are already planning their way to a position of influence, so get on the front foot. In our profession, and in today’s age, opportunity abounds and typically they may have had only 5 years (or less in some cases) management experience. Start the conversation.

When you are recruiting, as difficult as it may be, recruit for ‘cultural fit’ and attitude first, and then skills.

The key steps Leadership succession is fundamentally about identifying, leveraging and nurturing the talent that the organisation already possesses by developing it to its full potential. Although there is no one way to succeed in nurturing your next future leaders there are some foundations that need to be in place. Some of the key elements that need to be in place are: 1. Articulate the opportunity The current leadership, and especially the key principals, need to articulate and demonstrate that an opportunity exists. Talk about your values, what drives success in your business, what you look for in your people, your own path to success and leadership. Explain what it takes to be a leader in your business.

2. Provide the opportunity and guidance Communicate your aspirations and your expectations to your future leaders and explain how you see them contributing to the ongoing success of the business — how you see them providing direction and leadership across the business in skills, client relationships, delivering

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projects, innovation and talent management et cetera. Develop a plan for exposing them to the operation of the business outside of the realms of their skillset — for example, financial performance, business systems, preparing proposals, fee structures and so on. Mentor their technical contribution and client relationships skills. Share key decision making with them.

3. Openness Although this is sometimes difficult, you need to involve your future leaders in the key decisions affecting the business. You need to start letting go of making all these decisions and allow your future leaders to set their own course.

Provide them with the guidance and information necessary to make informed decisions around recruitment, future projects, their clients and new ways of working.

4. Put in place performance expectations All strong performance begins with clear expectations. Set the criteria for leadership — that way everyone understands the expectations.

Typically, the more capable individuals thrive on performance criteria and knowing what drives success. Performance criteria need to be closely aligned with the business success factors and there should be both short-term and longer-term expectations around what drives the business performance — for example, financial performance, work generation, design outcomes, strategy, people development, talent identification, innovation.

5. Ownership Clearly, establish your criteria for ownership and paint a picture that includes a conversation around ownership and a stake in the business — whether that be immediate or down the track.

That is ultimately what you are looking for.

Explain the valuation methodology your business uses, the valuation criteria and the path to

ownership. Discuss and work out how transitions are timed and financed Successful succession is an indicator to your people that the business values the mobility of internal talent and promotes an environment for building long-standing careers. Having a transparent succession process has many benefits, including increased employee engagement and retention and a broader view of talent.

Ownership Succession, leadership and ownership are intrinsically linked. In order for succession to truly work leadership needs to incorporate ownership. Sometimes though, the up-andcoming generation does not see ownership as the pinnacle of their careers as previous generations did, and convincing them to become owners is perhaps the most difficult challenge in ownership transition. What you see as the opportunity of a lifetime, they see as a commitment they don’t need.

The challenge becomes to make ownership attractive — to change the culture of the firm and adjust the ownership model in favour of those potential buyers. This typically involves: • Less restrictive ownership models • More transparency • More sharing of authority In the past, principals might wait 10 years before giving younger employees decision-making authority, but that is simply not going to cut it today. Owners must train themselves to see the transaction through the eyes of next-generation buyers and, frankly, stop wishing they behaved as the current owners. They aren’t and won’t be.

Perhaps you are counting upon a next generation that is eager to take the reins — but guess again.

You may find ownership a tough sell.

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Problems There are numerous reasons that leadership and ownership transitions fail, but the vast majority come down to just a few factors.

Existing leadership dynamics The dynamics of the existing leadership are not working. This can occur when there is unequal contribution or perceived inadequate contribution. It’s difficult for this not to affect the culture of the business and affect future leaders’ transition aspirations.

Leadership The current owners have been so busy managing the firm and making all the decisions, that they haven’t spent enough time or thought to develop the people who should be ready to take over. The most serious problems are leadership problems, not ownership problems.

Financing The owners approaching retirement still own a large percentage of the business. There aren’t enough buyers in the firm with the resources to buy them out because the younger people have not been investing in the firm and have other financial commitments.

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Typically your future leaders stand out and demonstrate their capability early.

They will embrace your cultural values and have great design, client relationship skills and take responsibility for the delivery of key projects.

”

Current owners can’t bear to let go

Potential successors can’t afford to buy in

They may be prepared financially, but emotionally they still want to be the one in charge.

The business hasn’t been funding the transition over a period of time: younger employees are not likely to have the independent resources to purchase the firm.

The next group of leaders has not been prepared They haven’t had enough opportunity to develop the necessary leadership or management skills, or they don’t have a good understanding of the business aspects of running the firm.

The business waited until it was too late to create a plan Requirements for a smooth transition have not been considered as part of the firm’s ongoing business planning.

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Start the process If you are an owner of a design or engineering business and are considering your successors ask yourself the following questions: • Why do you want successors?

• What are your options?

• Is external transfer an option?

• How much time do you have?

• Where will the funding come from?

• What do the potential owners want?

• Where is your firm generationally?

At Management for Design we have encountered plenty of discussion and material on ownership and leadership succession that have led nowhere.

Unfortunately there is no formula for success, as no two design businesses are the same — and there is no magic bullet for when you decide the time is right! There are, however, fundamental principles that will lead to a more effective, seamless and harmonious journey. These are shaped by a company culture that engages your people beyond the project-to-project activity.

Embrace these characteristics and succession will happen naturally. Don’t let succession become planning!

Importantly, if you are struggling with succession in your business and can’t get the traction and results you need to move forward then don’t sit

• What’s unique about your firm?

• Do you need help?

• Do you have a culture of succession?

on it!

A version of this article, by Management for Design’s Rob Peake, was originally published by the ACA’s The Business of Architecture on 7 March 2015 (http://aca.org.au/article/successful-leadershipsuccession).

MANAGEMENT FOR DESIGN

Management for Design provides integrated business systems and services to the design industry across Strategy, Finance, Information Technology, Human Resource Management and Business Systems.

By working with Management for Design our clients are enabled to focus on what they are great at and to control and build their businesses. For more information visit www.m4d.com.au or phone 03 9645 8834.