MANAGEMENT FOR DESIGN
Autumn 2018 Release
Why Successful Architecture, Engineering and Design Firms Partner with Experts
Knowing where your business stands financially, at any given time, is a crucial business function of successful engineering, design or project-based firms—which is precisely why some savvy firms simply hire an expert to accurately tell them. However, for those of you that are still doing it in-house, you’re likely managing a resource you don’t have the expertise to do, rather than focusing on your core expertise. In fact, outsourcing accounting and finance tasks is one of the most effective ways to make your business deliver greater efficiencies. By partnering with a specialist service partner, your business can focus its attention on other key areas that directly impact its profitability. This will free you up to lead with confidence in a competitive market, with the knowledge your finances are in safe hands.
The benefits of partnering with experts In an environment where every expense has a place and purpose, outsourced accounting and finance can help your firm cohesively manage the bottom line. Time and cost savings are normally the main reason firms outsource, however there are many other advantages.
1. Sharper focus on core business activities and strategies Outsourcing non-core business functions means firms can devote more of their people and resources to the core mission. This is especially important in small businesses, who may have more limited resources than their larger competitors. By freeing the business from handling accounting and finance in-house, firms will be less distracted by back-end office functions. For engineers and architects, outsourcing can help renew their enthusiasm in their work. Few people start businesses because they’re looking forward to crunching numbers in Xero, but it’s a task many find eating up their time. By outsourcing, firms get more time to spend on the aspects of their business that they’re most passionate about, allowing them to develop new ideas and find better ways to do business.
2. Access to high level technical resources, knowledge and financial management There are times when the geographical location of a firm doesn’t allow for access to the best accounts personnel. However, the outsourcing model puts an end to such difficulties. If the service provider is in a city or a country that regularly produces some of the finest financial minds, then that talent pool can be tapped effectively. The client can then have highly qualified accountants looking after the books. Quality of accounting and finance is then assured to be error-free.
3. Continuity of service, flexibility and scalability By selecting a specialist accounting and finance partner, you benefit from a solution that is customized to your requirements. They can scale accounting and financial processes up or down, much more rapidly than you’d be able to do inhouse. With outsourced accounting and finance, increasing or reducing service is merely a matter of getting in touch with your partner and outlining your needs— much easier than making tough decisions about your internal workforce and cheaper than paying huge compensations.
4. Cost savings for larger firms and affordability for smaller firms Outsourcing accounting and finance activities to a specialist service partner can help firms save money. Hiring accountants can be expensive, especially for smaller businesses with minimal personnel. Not only do you have to pay them a salary, but you also have to provide them with benefits, and cover payroll taxes. Accounting and finance employees also require workspaces, and the appropriate hardware and software. By outsourcing the work, you avoid having to worry about any of these additional costs.
5. Independent and objective advice Financial reports play a key role in business decision making, but as most firms tend to focus on the operational side of their business, the accounting and finance function may take a back-seat. In fact, most firms review their performance only when year-end financial reports are being devised. From budget cash flow projections, to management accounts, an outsourced professional accounting firm provides all the financial reports on a timely basis, making it easier for every firm to make the right financial decisions.
6. Certainty regarding up-to-date commercial and financial knowledge Outsourcing your accounting operations keeps you up-to-date with the global trends in the industry. It gives you access to the latest tools, which can help you to assess your firm’s past financial performance, as well as to predict its future as well.
7. Data-driven analysis to guide decision-making anytime and anywhere As in every other field, technology is making an impact in the accounting sphere as well. Most architecture, engineering and design firms can’t be expected to be completely aware of all the new software and applications that are available in the market—and which ones are actually suitable for their business. Many of the tools are also simply too expensive to purchase. However, a specialist service partner is willing to invest in this technology, knowing which ones are right for what kinds of business. They find it profitable to invest in a whole line of new tools, because they are servicing different clients with different needs. By outsourcing to a specialist service partner, your firm will gain access to professionals using the latest financial services software. This results in more accurate and accessible work, and more organized records and documentation. This improvement in service can then help firms get a tighter grip on managing finances and be better prepared for potential audits.
Your Software is Not the Answer The difference between software and a system The word “system” has been hijacked by the software and technology industry! Let’s roll back the clock—what is a system? “A business system is a repeatable process that people understand and use to achieve a desired purpose.” For example, you will ideally have a system for business development i.e. generating leads, creating opportunities and converting these into projects. The elements of the system could include: • Forecasting the work in the office and the potential projects on a monthly basis • Generating and reviewing a list of potential projects and clients • Assigning responsibility amongst your team for each of these • Maintaining regular contact with your potential clients • Conducting and attending regular networking events • Allocating resources to the activity
Business Development System Regular networking events
Most of these activities require people to act, to monitor, review, and communicate progress. All of this requires regularity, accountability, and feedback to be effective. Where does the software fit in? Potentially you will be using a database or application to keep track of the progress and to capture information and review the performance. Your software is only a small piece of the overall marketing solution. So, when you are investigating and implementing a software solution, don’t think you are implementing a system—all you are doing is putting in place a repository of information and a way to communicate that information. It’s the people that utilise the software that make it work.
When your software is surrounded by supportive, consistent and effective behaviour, you have a system. Several of our clients have been discussing the systems in their business and they look to the software application for the solution. But often they are actually describing the software, and not the system and the root cause of ineffectiveness and inefficiency. In our experience, this is exacerbated by: • The lack of system expertise (and we’re not talking about software expertise) • Unskilled resources • Lack of internal expertise • Inability to effectively change behaviour • Conflicting priorities • Not understanding the work required to implement a new set of behaviours • Lack of commitment to the change process • Blaming the software This inability to implement a system leads to confusion, mistakes, client complaints, and failed communication between employees. The problem in many businesses is that the system is not defined. When it is defined, it’s often not documented. This leads to people following their interpretation or variation of what should be done. A good system needs
standards and quantification. What are the metrics for producing the result? We suggest four steps to creating successful systems: 1. Clarify the purpose 2. Assign responsibilities for each step 3. Document the process 4. Make sure it’s repeatable
What’s going wrong with current software solutions There is a proliferation of software solutions for architects, engineers, and designers available. In fact, Management for Design recently conducted a survey of Business and Practice Management Systems, to research and assess the functionality, effectiveness and importantly the use of the various business systems used in practice. The results identified that: “There are no systems across project control, resource management, CRM and document management that are consistently rated “very effective” by our respondents” And “The level of effectiveness of project control systems is very low — a concern considering this is one of the key foundations of any project centred business”
What’s behind this? With so much investment in software and implementation, why is this happening throughout the industry? Our research indicates that there is a myriad of reasons for this failure to realise the promised benefits. Most of these reasons are not related to the actual software application and relate to ineffective system implementation.
What’s required What’s required is a cultural and behavioural change in your business to support your software solution. And this won’t be achieved by investing in and implementing the latest and greatest software application. Successful system implementation is more than just downloading and creating a new application. The certain key elements for a successful implementation are: leadership, planning, communication, support, resources, training, follow up, and measurement.
What Do You Do About Unpaid Scope Creep? What is Scope Creep? If you operate an architecture, engineering, or similar design practice—no doubt you will have a scope of services, a consultancy agreement or a signed fee proposal, which is agreed at the commencement of the project (or the stage). This should clearly articulate what services you will be providing for an agreed fee and that the project is performed on-time, to budget, and with great outcomes for all the parties involved. Scope creep is when you perform work that is outside of this agreed scope of services. There are 2 main types of scope creep: 1. Changes to the scope created by external factors 2. Changes to the scope created by internal factors Occasionally the industry is paid in the first scenario, however, you’ll likely never be paid in the second. Unpaid scope creep is still a major issue for architects, engineers, designers, and professional services in general.
Why does it occur? Generally, projects performed to the agreed scope of services are few and far between, when creative professionals are actively engaged with clients, authorities, other consultants, and local government for any length of time. Those factors outside of the control of the architect, engineer or designer (external factors) include: • A change of client • Changes to rules and regulations • Unknown environmental or site conditions Work performed because of this is typically called a variation or change to the services—and sometimes you are reimbursed for this work. However, most scope creep is created because of internal factors created within the studio, and you will never be paid for this. These reasons include: • Lack of clarity in the scope of services • Inadequate internal controls • Unresolved designs • Over documentation • Not capturing the out of scope work • Not clearly articulating what is outside the scope i.e. what you won’t do
Also, architecture, in particular, is prone to widespread design and documentation changes. Architects have an innate tendency to over-service and do whatever is required to achieve the best outcome. This mentality is reinforced at university where there are no defined boundaries around the work to be performed, the inputs required and no effective project planning. “Extra effort is often viewed with pride – going the extra mile because, after all, we’re service providers” – John Doering PSMJ Resources
What’s required What’s required is a cultural and behavioural change in your business. (And this won’t be achieved by reading and filing this article!) Firstly, you need to understand and acknowledge the cost to your business. Rework and scope creep combined can add up to 40 % of the project costs! Having said that, this can be impacted, more effectively managed, and controlled with the right leadership and systems in place; but a change in behaviour is required. Unpaid scope creep causes frustration, delays, low profitability and disenchantment in the studio. Your leaders will need to drive the process, so they need to be actively involved. We suggest identifying the issues with your leadership team and project leaders. No doubt, some of these issues will include: • An inadequate scope of services • No articulation of what is additional, what is a change/variation and how you as a business deal with this • Not capturing the work that is additional • A culture of over servicing • Poor project planning • Ineffective or no systems for managing changes to the scope • Leaders accepting the status quo Develop an action plan with responsibilities for making it happen. Be mindful that you won’t succeed in trying to implement everything at once. Your action plan could be: • Raise the awareness in the studio: e.g. mention and discuss this at the next six employee meetings • Review your scope and develop a more concise list of exclusions • Develop a system to capture work that is outside the agreed scope—use the timesheets • Identify the root causes (your system is a set of behaviours – not a piece of software) • Ensure all projects have a project plan (that is consistent with the scope of services)
• Add variation to scope measurement to our management reporting • Implement internal design sign-offs at agreed milestones • Implement client sign-offs at the completion of stages • Ensure all identified scope changes are signed off internally before the work commences • Capture and charge for the work between the end of one stage and the commencement of the next stage • Introduce a reward system that is linked to project profitability for the project team/leader • Identify a scope change and charge for it early in the project to establish the process
What’s the point? Project performance depends on effectively managing the scope of services—and business profitability starts and ends with project performance! Scope creep is one of the main reasons for under-performing projects and results in more work, more resources, missed deadlines, and frustration—yet not much has been done within the industry to radically change things It’s not an easy fix - it requires the business leaders to focus on, and commit to, an effective design management process, quality management, education, regular review, and open communication. It especially needs responsibility and accountability (and that requires leaders to commit to change!). The leaders need to set the example and can’t delegate these change processes to “office manager”. Quite often the leaders are the main cause of the scope creep in the first place! If you can commit to the behaviour change required to develop and ensure your way of working is as effective as it can be, there are so many benefits that can be achieved, including: • Work is more consistent and there is less re-work • Less time/on time
• Improved profitability with increased efficiency and scope control • Will attract and retain great people • More effectively manage and assess the performance of projects and people • Systems create time for the leaders to be entrepreneurs • Allows others to take responsibility for different components of the business • Improved and consistent client management • Mental health, work/life balance • Facilitates and enables growth Prosperity, happiness, having a life outside your business depends on how well your practice performs!
Bringing Balance to Work and Life In the architecture, engineering and design fields, work-life balance can sometimes feel out of reach and leading a satisfying and rewarding life, both in and outside your chosen profession, can be challenging. An important aspect of work-life balance is the sense of purpose that your work provides; feeling that the time spent at work is productive, important and contributes towards fulfilling your goals in life. And, the effort you put into work and your personal life is critical to your overall well-being, physical and mental health. The ability to successfully combine work, family commitments and personal life is important for your well-being and those close to you. In terms of the amount of work, leisure, and personal care, it’s interesting to compare Australian workers with other OECD countries. The OECD Better Life Index states: • Approximately 15% of Australians work over 50 hours a week (resulting in Australia’s rank of 30/38) • At 14 hours per day, Australians have some of the lowest time devoted to leisure and personal care (resulting in Australia’s rank of 33/38).
Long hours culture in the architecture, engineering, and design industries is endemic. Whether it’s the pressure of delivering the best result on each project, the struggle of balancing large workloads, or simply not wanting to be the first one out the door, the pressure to stay at work is great. But what is the effect of this on the AED industry, its professionals, and where is it leading us?
Overtime and unpaid Australia has one of the highest levels of unpaid overtime in the developed world, on average 4.28 hours a week (Randstad report, 2016), and the increasing time pressures of the industry and resulting financial pressures are considered to be detrimental to a sense of work/life balance - a third of Australians rate good work/ life balance as one of their top considerations when looking at a new role. The culture of working late into the night in architecture, engineering, and design has its roots in University, where students are encouraged (or at the very least not discouraged) to put in long hours and aren’t educated about the value of their time and effective project and resource management. This culture of no fixed work constraints – and working to a deadline only – is embedded in the culture in the formative years of the professions. Technology is also blurring the lines between the office and home. While most people are happy to occasionally reply to a work email at 9 pm, if that’s not being recognised or recompensed then it only piles up.
Productivity Contrary to what a lot of people might think, more hours at the desk doesn’t always result in greater productivity. AED businesses generally have a presenteeism problem—people may physically be at work, but not really paying attention to what they are doing. How can employees remain focused for a 12-hour day? How much of this time is beneficial—and how much results in costly mistakes and rework? Multiple experiments by K. Anders Ericsson (one of the top experts on the psychology of work) have shown people can only commit themselves to four to five hours of concentrated work at a time before they stop getting things done. Past the peak performance level, output tends to flat-line, or sometimes even suffer. Many companies have also found that implementing four day work weeks, results in the same amount of productivity, while employee morale improves. Employees can’t work optimally when they are stressed, tired, or sick. Research by the NSW Architects Registration Board concluded that excessive working hours can negatively affect the mental health of architects and those around them. Our research indicates that one of the main reasons people leave their place of employment people is due to stress-related issues. The business costs from this are enormous!
Gender equality Long hour work culture is also having a negative impact on gender diversity and equality in the AED industries. Despite positive steps towards more equal roles, women are still the primary carer for children in Australia. In 2015-16, 95% of primary parental leave used by non-public sector employees was taken by women (ABS); and primary parental leave is the type of leave most likely to affect people’s career trajectories. For many women returning to the workplace, the pressure of working late into the night just doesn’t fit in with picking up children from daycare or school. And, the lack of flexible working arrangements in the industry is having a detrimental effect on gender equality. The ability to be available 5 days a week is still often considered a necessary pre-requisite on the path to becoming a Partner or Director of an AED business.
So, what can be done to improve work/life balance in the AED industry? It stands to reason that in order to create an inspirational and functional built environment—architects, engineers and designers would need to actually spend some time out in it. A change in culture starts at the leadership level. Here are some ways to implement greater work/life balance in your business: • Realise that you can do anything, but can’t do everything (at once) • Let go of perfectionism and focus on delivering • Use technology solutions to enable more flexible working conditions • Work on reducing time wasting activities in your practice (think 80/20 rule) • Facilitate exercise or meditation to reduce stress • Encourage social interactions outside of your workplace • Start with small changes then move from there • For maximum productivity, people should stay mindful of when they start to feel burnt out
Architects Falling Behind on Business Management Systems M4D in the Media Andrew Heaton, Sub-Editor, Sourcable
In any business, having the right systems is critical. Yet many architects, engineers and consultants throughout Australia lack the systems required to deliver optimum outcomes in their practices. According to a recent survey conducted by financial and business management consultancy Management For Design (M4D): Less than one in five architecture, engineering and consultancy (AEC) firms have a formal and functioning system to manage resources • 44 per cent of firms do not have a resource management system in place, and of those which do, the level of effectiveness of these systems is very low • 60 per cent have no system for managing customer relationships (or if they do, the system is not considered to be effective) • More than 40 per cent lack a formal document management system • Microsoft Office programs such as Word and Excel remain the most common platform for managing contract administration. Of those who do have systems in place, there is a lack of enthusiasm about the value of these. Only two finance and accounting packages achieved a ‘very effective’ rating whilst no systems across project control, resource management, CRM and document management were consistently rated as ‘very effective.’ Cautioning that the results reflect a higher proportion of smaller firms (with up to 10 people), M4D managing director Robert Peake says problems revolve around several areas. Read the full article on Sourcable here
Running Your Own Practice? Here are Some Growth Strategies You Should Consider - M4D in the Media
From growing your business, to marketing, finance, leadership, IT and business systems, we’ve got all your bases covered with professional advice and insight. Up first we look at the business foundations necessary to enable sustained success and growth. In Australia, we’ve been seeing strong economic conditions, albeit challenging, and it looks set that this will only continue. But something we often realise when working with architects, engineers and designers (AED) is that the current opportunity to achieve strong and sustained profitability is not necessarily being realised. We know that there are increasing competitive pressures, combined with a subsequent requirement to produce enhanced services for diminishing fees. The profession is delivering more value for less, and as architects, that’s what you innately do. So how can the industry position themselves for future growth and meet the challenges of increasing competition, technological changes, a changing workforce, and potential ownership transitions? The answer is that if you want to succeed in today’s environment you need a stronger commitment to and focus on resource, financial, and project management practices – the kind that can bring long-term goals to fruition. Typically in architecture, engineering and design businesses, 75 per cent of business profits are generated from roughly 25 per cent of the projects. Below we outline some key principles to consider if you want to keep your practice growing from strength to strength. Read the full article on Indesignlive here
Introducing Rana Blair to Our Business Systems Team As you may know, Management for Design provides strategic, financial, technology, and business management services that maximise the potential of architects, designers, planners, engineers and other design professionals. We know that maximising your business potential is a combination of strategy, systems, and people. Interwoven, they enable you to build your business and produce great design. Often though there is a disconnect that prevents you from realising the benefits of the investment you have made in your systems. What’s going wrong and what can you do about it? In light of this, Management for Design is thrilled to announce that Rana Blair is joining our team. Rana brings over 20 years’ experience working to bridge the divide between potential and actual business performance, utilising proven methodologies and systems. Rana is an expert in how to best streamline and improve operations, by combining the power of business systems and behaviour change. Her extensive background working with the top performing architecture and engineering businesses in the US and across the globe provides her with a unique ability to provide project-based professional practices with firm guidance and expertise. She provides consulting services for clients looking to increase efficiency, utilising automation, documented processes, and effective communication.
To book a business systems consultation with Rana, and maximise your potential, contact Callum Bruce on cbruce@m4d.com.au
Reading List The Future of Architecture in 100 Buildings Marc Kushner The founder of Architizer.com and practicing architect draws on his unique position at the crossroads of architecture and social media to highlight 100 important buildings that embody the future of architecture.
Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier Edward Glaeser America is an urban nation, yet cities get a bad rap: they’re dirty, poor, unhealthy, environmentally unfriendly . . . or are they? In this revelatory book, Edward Glaeser, a leading urban economist, declares that cities are actually the healthiest, greenest, and richest (in both cultural and economic terms) places to live. Getting There by Design Kenneth Allinson Getting There by Design adopts an architect’s view to design and project management. It sets out the fundamental principles and shows how they are applied, dealing with these two topics as one indivisible subject.
The Anatomy of a Golf Course: The Art of Golf Architecture Tom Doak Tom Doak, one of America’s youngest and most successful golf architects, here discusses his craft and explains the strategies behind a golf architect’s decisions. Knowing why a course is laid out is critical to how the course should be played.
Business for Bohemians: Live Well, Make Money Tom Hodgkinson If cash flow forecasts, tax returns, and P&Ls sound horrifying, fear not: help is at hand. Tom Hogkinson has spent his career advocating for laid-back living, and in Business for Bohemians, he combines practical advice with hilarious anecdotes to create a refreshingly candid guidebook for all of us who aspire to a greater degree of freedom in our working lives.
