WHAT’S NEW
MANAGEMENT FOR DESIGN Autumn 2016
Making management reporting work for your business
At Management for Design, we talk to many architecture, engineering and design firms that find management reporting a difficult task. Not only do businesses find it time-consuming, but they find it hard to uncover even the most essential reporting on business performance. These include: •
Employee productivity
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Business development costs
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Company, department/cost centre or client profitability
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Financial growth
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Staff and salary growth
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Employee utilisation
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Projects delivered on time
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Budget vs actual costs on projects in real time.
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Knowing how to address the problems and improve the effectiveness of management reporting systems will ensure alignment with your KPIs and will keep you on track for enhanced performance and business growth.
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Key performance indicators, as outlined above, provide a meaningful way to measure business growth. If firms don’t take advantage of implementing these often within the daily running of their business they will struggle to control and grow their business. Being able to accurately assess your business is paramount to forecasting and planning for success. If the business management systems aren’t effective for an architecture or engineering business, firms will ultimately struggle to grow. Knowing how to address the problems and improve the effectiveness of management reporting will ensure alignment with your KPIs and will keep you on track for enhanced performance and business growth. Five signs that management reporting isn’t working 1. Incorrect data Incorrect data may be entered into your systems for a number of reasons including mis-keyed data or disjointed data communication between various systems. Problems like these can easily be avoided if a single management reporting software is used to obtain and report data. 2. Unavailable data Storing all collated data in one place by taking advantage of centralised management reporting software is key to ensuring required data is immediately available and reports can be accessed accurately without difficulty. 3. Data duplication and inconsistency If your business operates from many different data stores and applications, you are at much greater risk of creating duplicate reports. Other negative implications caused by this error can include an increase in the cost of storage and the hours taken by staff to fix duplication errors. Problems like these will impact the running of your business and performance will decline. Data duplication can be avoided by replacing your isolated business systems with a single authoritative enterprise resource planning (ERP) system and taking
the time to train staff so they are familiar with the standards expected for data input. If your business uses multiple systems to enter data, inconsistencies can easily occur that ultimately impact the reliability of your information. Staff training, automated data collection and the use of a single ERP system or management reporting software can all help to reduce inconsistencies and enhance the accuracy of your data. 4. Inaccurate results While it may be tempting to alter metrics to make the business look good, adjusting some metrics in the system can inadvertently have a negative impact on others. How will you know where to look for problems in the business if they aren’t accurately reported? It is important to ensure your statistics present your business performance accurately and that results aren’t tweaked. Business leaders need to be able to act quickly when issues do arise to avert what may otherwise become a disaster if left unnoticed. By reviewing the numbers regularly, setting up system rules to detect data tweaks and establishing a policy of transparent reporting, you can avoid encountering problems and any knock-on effects that inaccurate reports could have on your business. In summary The more you grow, the more your business will rely on business systems. The difficulties that many firms experience are directly linked to the systems they have in place. Systems are the key to giving your business an edge on the competition. Ensuring your systems align efficiently with your KPIs is essential in order to assess your business performance and make your life a whole lot easier. Taking the time to get the system right will make a world of difference to the overall success and growth of your firm.
The power of business intelligence software Business intelligence software has become a must-have tool across all business sectors in Australia, with increasing integration into AEC firms. Taking advantage of such software provides insight into your business, providing a pathway to innovation and growth. Following the overwhelming response to the launch of Management for Design’s business intelligence software last year, we continue to develop our intelligence toolkit to offer architecture, engineering and design firms greater levels of visibility, control and insight into their business. The ability to access
information graphically and in real-time enables our clients to analyse their business in more depth, consequently providing: •
Faster comprehension of the numbers
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Quicker decision making
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Detailed views of business performance.
Taking advantage of business intelligence software transforms businesses by enabling fast, interactive reporting. By applying a single approach to analysing all key performance of your business data analysis is now far more accurate and reliable than traditional methods of analysis. Management for Design’s business intelligence software has been listed as a leader in 2016 The Magic Quadrant Business Intelligence and Analytics Platform Report for the fourth year in a row. The 2016 Report, reflects a transformational shift to modern analytics. The progression of analytics tools are continually expanding, with innovative methods to analyse business data at the forefront of development. More than ever before, our clients are demanding products that are easier to use, that require little to no IT support and, most importantly, can be easily integrated with existing systems. At Management for Design, we strive to provide clients with a tool that offers flexibility and variety when it comes to analysing your data — helping you make the best informed decisions for your business and stay ahead in your industry. If you would like to see how our clients are utilising sophisticated business performance analysis then please contact us and we will demonstrate the value it will bring to your business. Call us to discuss our latest intelligence software and how it can help your business.
10 truths and myths about design businesses In our Summer eMag, we gave you 10 myths common to architecture and engineering firms and revealed the truths of each of them. We received some great feedback from these so have devised a further 10 myths that we have highlighted in this article.
MYTH
VS
TRUTH
It’s easy to make assumptions in the day-today of running a business. Business leaders are busy doing and don’t often have time to reflect on what is and isn’t true. Sometimes we’re deluding ourselves that a piece of software is great because we don’t want to have to accept that it’s made no impact despite a large spend. The company line may be that the client is always right, yet in reality the team are constantly bemoaning difficult clients. Some say that truth hurts, but in business the truth can open your eyes to problem areas as well as to opportunities that are being missed.
1
MYTH MYTH
TRUTH TRUTH
2
MYTH MYTH
TRUTH TRUTH
3
MYTH MYTH
TRUTH TRUTH
We effectively control the amount of time we spend on the project Work expands to use up the entire fixed fee and we will do whatever it takes to get the “best” design outcome
We’ve agreed on the deadline The minute you agree on a deadline something will change
Our fees are competitive in the market place There is always another firm that will do it for a lower fee
4
MYTH MYTH
TRUTH TRUTH
5
MYTH MYTH
TRUTH TRUTH
6
MYTH MYTH
TRUTH TRUTH
7
MYTH MYTH
TRUTH TRUTH
8
9
Management has far less to do with people than you’ve been led to believe. Architects (and most people) are almost impossible to manage Our principals set an example about how we do things around here Principals never complete timesheets on time
There is NEVER enough time to do proposals correctly We don’t have an effective process for managing our proposals
Our meetings start on time Meetings always start 10–15 minutes after the start time and not everyone will get there unless it is with the client
MYTH MYTH
We price our services accordingly
TRUTH TRUTH
We really would work for nothing
MYTH MYTH
TRUTH TRUTH
10
Our business is all about our people
MYTH MYTH
TRUTH TRUTH
We can handle anything at anytime We’re not experts in everything and need to learn how to say ‘no’ and I’m/ We’re not the best person / business to do that
We capture the extra work that we do and bill accordingly We’ve never had an effective way of capturing and charging for scope of services variations. We will absorb this in our fixed fee
Technical innovations transforming the AEC industry Management for Design attended a recent industry event on Tuesday 5 April that shone a spotlight on innovation in architecture, engineering and construction. The event was hosted by Friends of the industry in Sydney. The evening included presentations from three tech startups innovating in the AEC sector, followed by a Q&A and networking. Historically, innovation is something the AEC industry hasn’t been great at. However, in the past three years this has started to change and we are noticing a rapid innovation shift and a call for novel solutions to old and longstanding problems. Business leaders in architecture and engineering firms are starting to see the strategic benefits of innovation. Innovation is at the centre of new government policy and technologists are taking ideas from industry and innovating to create better ways of doing things. ‘Innovation’ is the buzz word du jour. Sam Carigliano from SkyCiv Engineering presented a demo of his online engineering software platform used to design structures. The software offers deflection and stress analysis, reporting and rendering, along with a full 3D structural design. Sam showed a range of different projects that are being built using his software, including that of a user building an aeroplane. The site also includes free beam, truss, frame and moment of inertia calculators.
SkyCiv’s Sam Carigliano demonstrated his structural design software.
Paul Wintour from BVN Architecture discussed design computation. Paul’s work focuses on rapid prototyping through parametric variations, analysis and simulation. He gave a great demo showing rapid simulation of building volume, as might be useful when discussing a site’s potential with council or developers. Paul also discusses tools that can be used to automate workflows, such as the Dynamo Package Manager that can be used with Revit. Some of the tools available in Dynamo include nodes that automatically number all rooms and doorways on a plan sequentially, and nodes that automatically place all room numbers in the centre of a room. All of these tools provide huge time savings when drawing up plans, as well as savings in site time due to increased clarity.
Paul Wintour from BVN Architecture discussed workflow automation tools, such as Dynamo plugins that work with Revit.
Nick Smith from Tiny+ talked about relationship management and the necessity to move to new technologies that accurately meet the need of AEC firms. Nick pointed out that most client relationship management software is created by sales people, for sales people. At Management for Design, our business management system utilising the Deltek Vision ERP solution has been created specifically for project-based businesses. The software is continually developed with AEC businesses front of mind. There is a massive trend moving towards online software. The cloud industry is currently valued at $106 billion, up from $20 billion in 2010. The benefits of the cloud are many — no installation, no arduous updates, reduced downtime, access any time, anywhere, and simple licensing. The M4D business management solution takes full advantage of the cloud, allowing users to access and update data on the go. In the cloud means that you never miss an opportunity with a potential client, can update project status from your iPad, and fill in your timesheet on your smartphone. Our software uses innovation to streamlines business with IT to make AEC businesses more efficient.
Vision on multiple devices One point the speakers were keen to make clear is that innovation is happening in a big way right here in Australia. We don’t have to wait for things to happen overseas, and can instead get ahead of the game and start taking advantage of the innovation shift happening locally.
The Business of Architecture The business of running an architectural practice requires ongoing focus from business leaders, yet is often neglected in the process of servicing clients and delivering projects. Management for Design addressed these issues in a series of monthly webinars for the Association of Consulting Architects. Rob Peake investigated the main elements that make up an architectural business. Looking at people, strategy, business and financial management, legal, brand, systems and delivery, Rob simplified the complexities of business management. The webinars were presented as a 3 part series — we covered the first two foundations to building a successful architecture practice in the Spring issue of this eMag and the third and fourth foundations in the Summer issue earlier this year. We’ll continue to deliver content from the webinars throughout the year, encouraging business leaders to take a closer look at the foundations of their businesses and to implement some of these insights on an ongoing basis. Links to the webinar slides are available at the end of this article.
The 10 foundations to building a successful architecture practice are:
1. PURPOSE & PLAN
2. LEADERSHIP
6. MANAGEMENT
!
7. MANAGING RISK
3. SYSTEMS
8. MARKETING, COMMUNICATIONS & BRAND
4. FINANCIAL CONTROL & PROFITABILITY
9. DESIGN & DELIVERY
5. TEAM
10. SUCCESSION!
Let’s take a look at Sessions 5 and 6 Session 5: Team Architecture is not about buildings; it’s about people — the people who use your buildings, the public that experience your buildings, the clients that commission you, the consultants and the builders. Your team is made up of a lot more than simply the people you employ — they are only part of the equation. Alongside your employees, your team is made up of owners, advisors, specialists and employees. The main difference between a business and being self-employed is the team you surround yourself with. Surround yourself with experts, mentors and advisors and work out who you need around you — financial, tax, legal, risk, strategy. By learning from the experts around you, you will get the return on your investment that is imperative to the success of your business. Without people you don’t own a practice — you own a job. It is necessary to focus on hiring people that have the correct skills but, more importantly, who culturally fit in your business and can bring quality and talent to the business that you may not have. Surround yourself with people trying to build a career rather than having a job and foster a culture of accountability. The key issue to remember is trust your judgement. Don’t make the mistakes of putting the wrong people in charge of hiring or failing to let go the employees who don’t fit well in the business. Your team needs to have experience, passion and commitment. Develop clear performance criteria (expectations) and a comprehensive review process (with clearly defined objectives) with your team and ensure you reward and recognise employee contributions accordingly. By being a good listener, you will ultimately build stronger relationships with your team. If you know how to listen you know how to problem solve. Having systems in place will enable
you to delegate responsibility to the right employees that in turn will ensure your staff members confidently take control within their roles. As a leader, it is crucial to spend time on business management while also mentoring and educating your team to help them grow and evolve with the business itself. Key people contribution criteria encompasses: •
Work generation
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Business representation
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Strength of client relationships
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Extra curricular activity
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Design initiation
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Design delivery
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Fees written
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Project profit
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Client satisfaction
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Quality of outcomes
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Delivery of scope
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Leadership
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Personal organisation
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Professional development
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Mentoring
Session 6: Management and Operations Management has far less to do with people than you’ve been led to believe. Architects — and most people — are almost impossible to manage. In its simplest form, managing is about managing a process, a way of doing things, a system. Having a great management system in place is imperative when wanting to succeed. Consider the following when thinking about how things get done through people using such systems: •
What is the result we want to achieve?
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Why aren’t we producing that result?
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Are our project expectations clearly communicated and understood?
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Do we lack a system and if we do, why aren’t we using it?
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This is how we manage around here, not who manages here.
It is also important to consider how you manage your projects by: •
Engaging your team in the plan (show them the scope and the fee!)
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Assigning responsibility to your team
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Scheduling weekly programming meetings (45 minutes)
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Providing a schedule of consolidated projects
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Setting priorities, milestones, deadlines and expectations for each project (draw up an organisation chart)
To complete any project efficiently and to the best of your ability, a project needs a plan. By planning a project beforehand, you and your team have a clear vision of what’s expected and when. Tracking progress along the way by noting down how much of the project has been completed and making any adjustments to completion estimates will ensure you and your team stay on track and aim for the same completion deadline. It is also important to keep track of utilisation/chargeability of each project. Project plans should consist of the following: •
Tasks by phase — provide timeframes for every stage of the process
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The responsibility assigned to every member of your team
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The work required
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Number of hours estimated to completion
Using systems correctly and efficiently for every project will make a huge difference to how your team performs and the overall outcome of the project. Rather than spending your time on managing people, focus your time on creating innovative systems that you can use and monitor. A great system will make it easier to find great employees. Once it has been implemented, train and mentor your team to follow the system and evaluate them according to their use of the systems.
The real essence of the business of architecture and business success is the need for business owners to focus ‘on’ their businesses rather than ‘in’ them. By getting this right in your business, it will enable you to focus your attention on establishing relationships with your clients and maintaining a cuttingedge position in your industry. This will ensure that the quality and value your practice delivers is maintained that will ultimately encourage your clients to remain loyal to your services. Downloads You can download full slide decks from the webinar series at the following links: Webinar 1 (foundations 1 and 2): http://bit.ly/1F5L9w3 Webinar 2 (foundations 3, 4 and 5): http://bit.ly/1KBLTED Webinar 3 (foundations 6–10): http://bit.ly/1SLkWHZ
The Executive Summary for the 2015 RIBA Benchmarking survey The Royal Institute of British Architects (RIBA) executive summary of their Benchmarking survey was recently published. The survey provides fundamental knowledge about how well architecture practices in the UK are performing and how they compare to other practices in the architectural industry. The in-depth evaluation is comprised against the following criteria: •
Profit
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Turnover
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Marketing spend
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Hourly rates
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Salaries
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Client types and sectors.
Similar to our own Business Conditions Survey (results available here), by analysing the survey data professionals are better equipped to shape the future of their businesses and identify areas of strength, weakness and opportunity. All results are key benchmarks but it is advised to consider each benchmark at the correct level for your practice’s size and profile. Key results from the summary In general •
£2.4bn (AUD$4.49bn) total revenue in the past 12 months — 55% from London based practices.
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£400m (AUD$748m) total profits = 18% of revenue.
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Practices spend 40% of revenue on paying salaries, increasing with practice size.
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32,000 staff employed in practices
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124,000 projects worked on by practices in the past 12 months
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£500m (AUD$936m) revenue from work on projects outside the UK
Larger practices •
Focus more on new build work
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Have more clients and jobs, but a smaller number of clients and jobs per person.
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Tend to plan for the next two, three or more years ahead — 71% practices with 50+ staff plan ahead for 2 years or more
Smaller practices •
Focus more on refurbishment
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Focused on private housing, particularly for private individuals
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Tend to plan up to 12 months ahead — only 41% of practices with 3–5 staff members plan ahead for 2 years or more
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Have a higher success rate than larger practices — more likely to be appointed without being involved in a competitive process.
RIBA will soon be opening submissions to their 2016 annual business benchmarking survey — opening on Friday 29th April and closing on Sunday 31st July. Only RIBA chartered practices can take part in the survey, but the results are equally useful to companies outside of the Institute and the UK. To see the full set of the results, click here.
READING LIST Turning Your Doers Into Sellers PSMJ E-Book A clear and concise overview, direct from PSMJ’s business development experts, this complimentary ebook covers the complex subject of how to implement a successful seller-doer program and provides more than just business development basics.
The Fountainhead Ayn Rand This instant classic is the story of an intransigent young architect, his violent battle against conventional standards, and his explosive love affair with a beautiful woman who struggles to defeat him. A novel about a hero — and about those who try to destroy him.
The Innovator’s Dilemma Clayton Christensen In this revolutionary bestseller, innovation expert Christensen says outstanding companies can do everything right and still lose their market leadershipor worse, disappear altogether. He also tells others how to avoid a similar fate.
The program David Walsh In this updated edition, covering Armstrong’s confession to Oprah about his ban from professional cycling in 2012, Seven Deadly Sins takes the reader into a world of doping and lies, but shows that there is always hope for a better future.
The Hard Thing About Hard Things Ben Horowitz Ben Horowitz, cofounder of Andreessen Horowitz and one of Silicon Valley’s most respected and experienced entrepreneurs, offers essential advice on building and running a startup — practical wisdom for managing the toughest problems business school doesn’t cover.
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.
