MANAGEMENT FOR DESIGN -----------------------
BUSINESS JOURNAL BUSINESS MANAGEMENT SYSTEMS & THE ‘CLOUD’ (SaaS) ----------------------Software as a Service (SaaS)
on resources, the hassles of on-site infrastructure, and the headaches of on-going maintenance.
In a SaaS environment applications are hosted by a service provider (cloud infrastructure) and made available to clients over a network, typically the Internet.
The Cloud
SaaS is becoming an increasingly prevalent delivery model as underlying technologies that support web services and service-oriented architecture (SOA) mature and new developmental approaches become popular.
Why Regardless of the size of your practice, you want a connected organisation with visibility across and control throughout. You could tie together narrow stand-alone systems across sales, client, projects, resources and finance, but such a patchwork of systems means inefficient processes, unreliable data, and costly, cumbersome administration. Our comprehensive integrated Business Management System enables design and project related businesses to tie everything together and eliminate both heavy up-front investments in costly infrastructure, and the on-going expense of personnel to maintain it. We allow our clients to have the same technology advantage as larger organisations without the same overhead. Through cloud-based software-as-a-service (SaaS) our Business Management System provides the visibility, control and insight your business needs, without the drain
Cloud-based solutions are deployed in a secure environment and accessed through the web. Solutions in the cloud are accessible from anywhere, highly secure, and always up-to-date. Users’ access is similar to software you’ve deployed inside your business. Best of all, the solution is managed for you, so you avoid the hassles of hardware, software updates, data back-ups, and security monitoring.
Easy, simple, secure You don’t have to stay attached to out-dated tools or adapt to something that just doesn’t fit. Inefficient, manual and narrow independent tools lead to errors, stifle growth and disconnect both people and information. Our Business Management System delivers the crucial tools you need in a solution that’s simple to implement and secure to access, no matter where you are.
Partnership The essence of our business is that we form long-term partnerships with our clients and suppliers to enable our clients to control, build and sustain successful and innovative businesses. We utilise the Deltek Vision ERP solution as our platform to integrate client management, project and resource management, financial management and control, business m4d.com.au
performance dashboards, analytics, electronic invoicing, advanced reporting and benchmarking.
version updates, monitor security, create back-ups, and even upgrade the underlying infrastructure.
Implementation
Flexible licensing also means you’re not boxed in by rigid tools, and you can make changes whenever you need to.
Acquiring large-scale software applications is disruptive for organisations of any size, bringing arduous capital budgeting, resource-intensive readiness of servers and infrastructure, as well as cash intensive implementations.
Our Business Management System is the most flexible management system available to professional services firms - in the cloud.
Our Business Management System eliminates the purchasing hassles typical of most comprehensive business solutions, is cash-flow friendly and avoids up-front capital investment.
If necessary, you can modify views, build custom reports, or adapt work-flow, before you ‘go live’, or at any time thereafter.
Best Practice
You’re also not pinned down by inflexible licensing that forces you to take on more seats than you need, or more capabilities than you want, just to hedge against future growth.
The Deltek Vision ERP system is used by over 10,000 design businesses and Management for Design has developed specific modules to enable us to deliver the best practice model, with proven capabilities to connect your entire business with flexibility, and to easily add other modules as you need them.
Flexible subscriptions let you choose, add and remove users as your business changes, and expand with additional modules when you’re ready.
Availability
Security Entrusting your growing professional services operation to the cloud doesn’t mean putting your business data at risk.
Because there’s no infrastructure to purchase or prepare our Business Management System is immediately available, avoiding the long preparation phase found in most on-site deployments. It doesn’t divert the attention of scarce IT resources or dampen the enthusiasm of an eager organisation.
Our unwavering commitment to support and security makes our Business Management System available any time to anyone in your firm who needs it, and keeps your information safe from anyone who shouldn’t have it.
Simple to manage
Our cloud-based data-centre assures a level of accessibility and security that any on-site IT department would be hard pressed to match.
Managing a comprehensive Business Management System typically means you need skilled experts to maintain the infrastructure; backing up data, ensuring security, installing patches, and managing upgrades. This effort sacrifices IT’s focus on more important work, and stretches the expertise of scarce and overworked resources. Our Business Management System is in the cloud, so you eliminate your up-front costs and maintenance responsibilities, whilst receiving a higher quality of service than you can ask of your own IT team. Our singular focus is on the maintenance and support of your crucial Business Management Solutions, making your ownership practically ‘hands free’. Alongside our partners we work to keep our systems current with the latest
Accessibility Secure access is direct through any basic internet connection. There is no need for your users to work with a cumbersome or occasionally blocked VPN. Redundant servers, automatic fail-over, and multiple forms of back-up power enable an ‘always on’ environment that is there when you need it. Constant monitoring is perpetually on the lookout for potential issues, and our personnel are available to quickly resolve any problems.
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MANAGEMENT FOR DESIGN ----------------------FACT SHEET ----------------------Characteristic
Management for Design’s Business Management System
Costs
Management for Design’s SaaS solution does not involve large up-front investments in purchasing licenses and our clients are freed from the burden of IT administration and maintenance costs. There are no up-front capital expenses, no servers to buy or hardware to manage. Services are available on an annual subscription basis, which also includes costs for maintaining and updating the system.
System Design
Our Business Management System has been specifically developed for design and project related businesses. We utilise the Deltek Vision ERP solution as our platform to integrate Client Management, Project and Resource Management, Financial Management and Control, Business Performance Dashboards, Analytics, Electronic invoicing, Advanced Reporting and Benchmarking.
Accessibility
Access to the system is subscription based and can be accessed anywhere, anytime and on multiple devices via Citrix over the Internet or Web based browser depending on accessibility requirements
Permissions and Password Protection
The Management for Design SaaS solution includes a robust password protection and permissions system that is easy to administer. The system allows for delegation of administrative responsibility and captures event logs of who logged in when, what information they accessed and what changes they made. Different levels of permissions are assignable – read/write/delete.
Data access and control
Data access is shared between the client and Management for Design and we agree and establish access protocols regarding data and access prior to commencement.
IT Administration
The responsibilities of maintaining, managing and updating the software rest with Management for Design Information Technology.
Customisability
Customisations can be carried out by the client or by Management for Design as appropriate depending on client requirements and capabilities. This allows clients to mould the solution according to their specific business requirements. Management for Design offer simple and smart customisation options to users e.g. Project setup and Information Centres.
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Flexibility
Management for Design’s SaaS solution is appropriate for any sized business and is flexible to adjust to the needs of the user rather than fixed as per the on-premises model of the past. Deltek Vision ERP is used by businesses from 5 to 2,500 people across multi-locations. We provide the flexibility to scale the solution up and down in tune with business growth and downsizing depending on resource usage.
Adoption
Users adapt to the Management for Design SaaS solution more easily than their legacy versions. We will tailor the training requirements specific to the client; however, the ready-touse solutions should not require extensive training programs for users.
Back up
The servers on which your data resides have built- in fault tolerance, this makes sure that, in case your primary server crashes for some reason, your data is still secure and backed up ensuring that you aren’t left high and dry in case of an emergency, and can continue to work with minimum disruption.
Upgrades
Management for Design is responsible for upgrading the application. We regularly upgrade the product and the upgrades are indifferent to user compliance and the cost is included in annual subscription charges. Hence, users can access updated versions without incurring additional expenses. Our clients have an on-going access to innovation and new features, as opposed to the sporadic method of “new versions” for on premise software.
Data security and Hosting
Cloud computing and the facilities they are housed-in are now mature. Client data security and its integrity are paramount to Management for Design. Our hosting service has documented security infrastructure and protocols available that includes encryption requirements, surveillance and disaster management systems and security records.
Service Level Agreement
The Management for Design Software as a Service Agreement sets out the commitments and obligations of both Management for Design and the client in addition to the right to use the SaaS software. These will include: • • •
hosting of the SaaS software and customer data on server; customer support services; and software maintenance services
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Confidentiality
Management for Design comply with a non-disclosure agreement (NDA) / Confidentiality Agreement prior to the client disclosing its business secrets and confidential information. Confidential information will not be passed on to third parties for any purpose other than performing our duties under the Service Agreement.
Customer Support and Service
Management for Design provide live customer support between 8am-6pm Monday to Friday. Emergency contact after hours is also provided where necessary and backed up by 24/7 help through our US support partner. There is also extensive help documentation and an automated self-help engine that helps you easily resolve your queries.
Security
The Management for Design Host Data Centre Facility is built to and maintained in accordance with ACSI33 and AS2834-1955 standards. All aspects of the facilities are fully redundant and concurrently maintainable to a level on par with tier 3. All aspects of power, cooling and network services are designed to be N+1.
Exit Strategy
If the agreement is terminated, or expires, all confidential information will be returned or destroyed. Confirmation of destruction of data will be in writing. Our SaaS Agreement sets out the steps required to ensure an effective and seamless exit for both parties including notice period, licensing arrangements, transfer of information, upskilling of client personnel etc.
Pricing
Our price model is based on number of system users, module requirements and number of consecutive users. We agree and fix our pricing on an annual basis and restrict increases to 10% or less subject to the number of client licences and the Deltek and Citrix pricing adjustments.
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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 103 Improve Project Success and Profitability ---------------------------------------------Measuring Success
and those that were not. Once we have identified these projects we can analyse the data and draw our conclusions
Architecture and Engineering firms use various measures for success. There are numerous Key Performance Indicators that can be managed, tracked and reported on but the aim of every project is to ensure the client is
as to why they were (or were not) a success. Before analysing the data ensure that you know your specific measurements for success. It can be profit, revenue, staff utilisation, repeat work etc.
satisfied with the outcome and that we are satisfied with the outcome.
Today’s challenging business environment highlights the absolute necessity of accurate and up to date project and
For client satisfaction it is necessary to ensure that the
business data. Firms that automate and streamline their
project has been completed according to contractual
business processes are the ones with a significant
agreement, on time and within budget.
competitive advantage.
For business success the project will meet your design
Improve Project Profitability
aspirations, have been completed on time, has been profitable and will deliver on-going work with the client.
Automating your business processes can lead to a significant increase in project profitability. Eliminating
Improve project efficiency and success
manual processes such as re-entering project data from one system into the next leads to time savings, eliminates
In order to achieve project success and maximise
the risk of errors and also reduces the amount of time
profitability we want to ensure we are as efficient as
spent on administration by your project (billable) resources,
possible, are always up-to-date with project progress, can
meaning they can now spend more time on client work.
spot potential problems early on, we can invoice for all the work involved, and our invoices are correct the first time.
Automating your business processes improves the information flow within your organisation. Information can
Clients of design businesses greatly value prompt
now be shared more easily and quickly between
communication and responsiveness. This is particularly true
departments, thereby increasing efficiency throughout the
in tight economic conditions where clients are diligent
company and reducing the amount of time wasted on
about expenditure. It is crucial to highlight any potential
searching for information (for some design firms up to 10%
problems to projects immediately so that timely action can
of staff time is spent looking for information).
be taken to avoid bigger problems later on. By automating the process between project set-up and One key way to ensure success for current and future
invoicing, you can be confident that all time spent on
projects is to look at previous project data. This allows us to
projects will be captured. If you are working on a fixed fee
identify those projects that were successful (and profitable)
project this information allows you to track project m4d.com.au
performance to date: it allows you to view how much time
Benefits of automating your business processes with an
is needed to complete a project, if you have over-serviced
integrated solution:
clients and, ultimately, it will allow you to view which projects are most profitable (revenue vs. expenditure).
•
One point of data entry; one Client, Company, Contact and Supplier record, shared on a ‘need to know’ basis throughout the company
Using multiple applications •
project entered in Melbourne is instantaneously
Design firms that do not use ‘sophisticated’ integrated
available for viewing by a manager in Singapore
systems to automate their process and capture various
through the project or client record
project related information are at risk of inaccurate data and ineffective processes and thereby not achieving full and
Instant updates - an activity record entry on a client
•
Real time reporting – immediate access to up-todate and accurate reporting for financial
efficient performance.
performance, invoices, revenue, time and expenses against projects
In order to make effective, mission critical project decisions we need to be able to access up-to-the-minute project data
•
need for expensive dedicated links between offices
that can be accessed via reporting with drill-down capabilities – allowing us to view the underlying business
Fully web optimised and enabled – reducing the
•
Fast deployment - standard industry best practice business processes built in, the ability to amend
data within moments.
screen layout and add new fields with no programming and business critical reports provided
When using multiple systems, as opposed to one fully
as standard
integrated platform, businesses are at risk of using data that may be out-of-date. Transferring data from one system
•
Lower total cost of ownership - fast ROI achievement
into the next there is also the risk of inaccuracy due to
with ability for firms to “own” the solution rather
systems not working together efficiently.
than relying on consultants
Design businesses that are still working with multiple
Adopting a fully integrated system provides the greatest
applications may want to review the total costs of
opportunity for efficient business process automation and
ownership and the risk of doing so. With the design and
the tools design businesses need to reduce overall costs,
delivery of “cloud” solutions now mature implementation is
lower project related risks and improve project success and
now more much more cost effective. “Sophisticated”
profitability.
systems are no longer as expensive or extensive as once they were and implementation and maintenance costs have
Conclusion
reduced substantially. Not only that, but businesses now
There are significant savings to be made by professional
have the ability to more easily tap into a more dynamic and
services firm when automating business processes and
skilled support network of people and systems.
improving internal efficiency. The majority of these savings will directly impact a company’s bottom line. In addition,
Automate your business processes with one fully integrated system
automation will allow for more effective and efficient project progress leading to more projects coming in on time and within budget. Investing in a system to automate business processes will improve project success and,
A fully integrated business management system (BMS) can
ultimately, increase a company’s revenue and profitability.
meet the needs of the entire project lifecycle within a design firm. It can greatly improve efficiency, reduce risk, decrease cost and increase profit. An integrated solution will allow you to efficiently automate your business processes, leading to improved resource utilisation through proactive resource management, and increasing company-wide visibility of projects and resources whilst reducing overall costs. m4d.com.au
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
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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.
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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.
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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).
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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.
MANAGEMENT FOR DESIGN BUSINESS JOURNAL 105 INVEST IN BUSINESS DEVELOPMENT AGAIN
Why Business Development? Business Development (BD) has become a hot management topic; it has entered architecture and engineering offices as the answer to a rapidly changing business landscape in which competitive advantages have become temporary by nature. Thought leaders agree that every company should invest in BD, as it will help the business achieve tactical and strategic goals, such as acceleration of revenue growth and acquisition.
Top challenges What gets in the way? The key challenges for Business Development can be increased competition, finding time to nurture client relationships, limited business development resources and time, lack of intel for opportunities to position for a win, identifying new prospects, hiring the right people, more restrictive spending environment, among others. These challenges are all interrelated: the challenge of limited business development resources is followed closely by increased competition and the difficulties of developing strong relationships with potential clients. Increased competition is a recurring issue in architecture and engineering practices as tighter budgets encourage new strategies for differentiation.
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Thought leaders agree that every company should invest in BD, as it will help the business achieve tactical and strategic goals, such as acceleration of revenue growth and acquisition.
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Other relevant and widespread challenges can be avoidance and confusion. Some companies avoid BD altogether or simply ignore it, as they want to ‘own’ every function and only rely on themselves. The reality is that resources are constrained and partners are in a position to help achieve goals. Confusion comes when companies invest in BD without a clear understanding of why they are doing it and what specific goals they are trying to achieve. When there is a lack of a plan, efforts are wasted as the business can’t close partnerships (deals make no sense) or the
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• Schedule BD time and treat it as a priority • Plan the work and work the plan • Find what you love
In today’s business landscape, BD efforts tend to deliver the most success when an attempt to benefit both clients and prospects is at the core of the effort.
• Do what comes naturally to you
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• Truly differentiate
• Empower your staff • Share the load and the data • Leverage outside resources • Be selective: quality versus quantity • Nurture your network • Focus on client needs
How to make it fun again
company closes partnerships but they all fail (again, because they don’t make sense).
Tips to improve the process
When you think of business development, what comes to mind? Exciting, riveting and motivating? More often you think frustrating, complicated, necessary evil. But why? And how can you get excited about chasing the win again?
Building meaningful connections requires a strong investment of time and money; contacts will see through pushy sales attempts and one-sided relationships that provide nothing in their favour. In today’s business landscape, BD efforts tend to deliver the most success when an attempt to benefit both clients and prospects is at the core of the effort.
Different things will work for different people, but some of the most important aspects to making business development fun are being prepared (have the pitch ready); use BD tools; research and seek relevant advice; build relationships and follow them up.
A great relationship-building strategy is to transform standard company events into unique business development opportunities that interest clients while creating mutually beneficial relationships.
Many architecture and engineering businesses have achieved performance improvements by investing in resources to sustain a focus on strategy development and strategy implementation. They have invested in setting up a professionally managed business development function with responsibility for capturing new business opportunities and bringing continuity and alignment into their strategy management process.
Other practical tips include: • Reorganise roles of marketing and business development • Start early
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Conclusion
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.
MANAGEMENT FOR DESIGN BUSINESS JOURNAL 106 DOES HAVING THE RIGHT SYSTEMS MAKE MY BUSINESS GREAT? What makes a business system great? Many times we have heard businesses say that “it is important to get the right people” or “we are looking for the right system”. Regardless of the industry, these are common problems at some point in a business’ lifecycle, but what is ‘right’? Having the right people is only the start of developing a great business. The key is to have these people in the correct positions and have their roles working effectively by implementing and using the systems and processes provided by the business. Management, as most people know it, has far less to do with people than you’ve been led to believe. Architects and Engineers (and most people) are almost impossible to manage. Managing is about managing a process — a way of working — a business system.
Chain of command Your people need to know what the ‘chain of command’ is regardless of the structure you use. How decisions are made and communicated must be made clear to everyone inside the business. Not only will having a clear leadership structure assist the business with standardising processes, but it makes the lines of responsibility clear. Too many times we have heard people say “draw a line in the sand”. These lines eventually wash away, so ensure yours are slightly more permanent!!
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Having leaders in a business that can drive enhancement and improvement in the business is a must. From this, selecting the right systems for a business becomes easier.
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Having leaders in your business that can engage and drive improvement in the business is the starting point. Leaders need to actively embrace business systems — why they are important in the business, how the information is used in the business and what’s expected of the users etc. From this, selecting the right systems for a business becomes easier as these people will help drive the selection of key systems and identify processes that need improvement. The beginning of this process should be to start talking internally about what issues you have with your current processes and systems — what’s working, what’s not working, what’s missing, what other systems
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have your people used and would recommend etc. The next step involves documenting in a clear and concise manner these discussions. This then forms a basic requirements document for you to provide.
Effective system implementation The major pitfall most businesses get into is “but we want to do it our way”. This is the biggest mistake we see across any systems implementation. When going through an implementation ensure that your vendor has sufficient local knowledge in your market and a demonstrated history of effective implementation. Then allow your vendor to guide you through the implementation process and merge your current processes with the vendor’s experience. A typical selection process will run through four stages: 1. Ask your vendors to match their system with your requirements brief 2. Have 3 vendors present their systems, and then reduce this to 2 options 3. Have both remaining vendors spend a minimum of 1–2 hours with teams inside your business to gain a greater understanding of how the product will fit your business 4. Select a preferred vendor and present to the decision makers.
Selecting the right team The next step is critical, and that is selecting the right team from within your business to take ownership of the implementation. This team should consist of your biggest critics and your biggest supporters. This team will work with your selected vendor to drive the implementation
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Your Business Systems are one of the key foundations of your business and it is only from having effective systems that you can control and build your business.
” process and help manage change within your business. Then the journey really begins!! A key responsibility for every business owner is to systematise your business. It’s not something you can dwell on. Your Business Systems are one of the key foundations of your business and it is only from having effective systems that you can control and build your business. Your systems should run your business and people must follow your systems. It’s only through having strong business systems in place that will allow you to take time away from your business, knowing that everything is under control, knowing that your team of great people that you trust are following the approved systems in your business and knowing that your team has everything in place to drive the success of the business.
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.
MANAGEMENT FOR DESIGN BUSINESS JOURNAL 107 MAINTAINING CONSISTENT PROFITABILITY
The main asset of a design or engineering business is the knowledge and skills of its people. Similar to the projects they deliver, the development and management of resources becomes increasingly complex as the business grows. It’s often said that project-based businesses become difficult to manage when all decision makers can’t fit around a conference table. In reality, scaling a design or engineering business is an exercise in deploying a finite resource (people’s time) against infinite potential (client solutions). The strategies used to manage the business aspect of this conundrum will ultimately impact growth and profitability regardless of business size or whether the entire management team can fit in the same room. To ensure profitable growth by improving the use of resources and gaining tighter control of finances and performance, businesses need to consider the following: 1. Leverage How is the business structured in terms of the ratio between directors/principals and other client-facing employees? In design and engineering businesses in particular, business leaders are often client
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Scaling a design or engineering business is an exercise in deploying a finite resource (people’s time) against infinite potential (client solutions).
” facing, specifically because it is their talent that is the face of a major project. To manage the spread of chargeable hours across a team, businesses will often structure with a number of high-performing client facing employees who report to one director (as opposed to many), creating a layer of trusted and skilled employees who can spread the load of the chargeable hours created by any one client.
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3. Fees Should fees be determined by the firm or the market?
Inefficient use of resources and poorly defined business strategies are two of the biggest problems in design and engineering firms.
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The reality for design and engineering businesses is that fees are often driven by external factors, such as the competition in the industry and the rate the market will pay. Firms that are providing a differentiated service and product will demand higher fees and are more likely to compete on a different level than price. They compete on the back of a superior or unique project offering for which clients are willing to pay the appropriate fee. 4. Remuneration Can a firm afford market rates for top talent, and if so, should it?
2. Utilisation How do design and engineering businesses maximise chargeable time while avoiding burnout? Utilisation can be increased by increasing the chargeable time of your higher performing and often higher charging people, however the ability of your people to take on these hours needs to be managed carefully. Design businesses often run into problems when their highest performers work an excess of hours because those hours are often the most profitable for the business. Avoiding burnout for your best performers is critical to business success. It can make more business sense to hire a new client-facing employee at a less senior level to take on more chargeable work than what could be achieved by top talent working overtime. Let go, and develop your people. This strategy will produce increased profits for the business without talent burnout.
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While project-based firms certainly have control over what they pay their employees, businesses need to consider the external marketplace and what competing firms are paying for talent. In times of overall market growth, underpaying talent creates a risk that you might lose them to a competitor. Fostering and nurturing creative talent beyond remuneration can also go a long way to promoting employee loyalty and excitement for the job. If businesses can broaden the skills of their employees without stretching resources, they will reap the rewards. Inefficient use of resources and poorly defined business strategies are two of the biggest problems faced by design and engineering firms. Left unchecked, these issues cause businesses to miss out on increased efficiencies, higher engagement and morale among employees, and consistent profitability. Getting business efficiencies, strategies and systems in place and under control will stabilise your business and allow you to focus on what you do best.
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.
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:
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An effective and integrated system is a key foundation to building your business.
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• 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.
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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 109 DO YOU KNOW YOUR NUMBERS?
Are you an expert in business financials? As business leaders you are confronted with a myriad of financial information about your business — your income, your expenses, your profit margin, cash position and project performance. And that’s only the start!’ Your role as a leader is to regularly absorb this information and to make decisions in a timely manner. These executive decisions can then be converted into activities to be completed by your team. Your accountants and finance people then report these activities in a numerical way to produce your business report card. This will most likely be in the form of an income statement, a balance sheet and most importantly a cashflow statement. You then turn to your Chief Financial Officer (CFO) to decipher and inform you about these numbers. That is, if you have a CFO! The role of your CFO is to describe back to you the financial impact of the decisions and associated activities that caused the numbers in the first place. The numbers are always a reflection of the decisions made and/or not made. So doesn’t it stand to reason that if we want to change the numbers we simply need to change the activities that caused the numbers?
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The role of your CFO is to describe back to you the financial impact of the decisions and associated activities that caused the numbers in the first place.
” Where are your numbers today and where do you want them to be at the end of the year? How do you drive your business to succeed and deliver the outcomes that you are seeking?.
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firms that are similar in size and business model to your own. 5. Take the right action — create change Of course, knowledge without action won’t benefit your business. You’ve got to use the information you gather to make smart strategic moves that will enhance your success.
Outsourcing your CFO 5 steps to business success 1. Know your numbers The language of business is accounting. How do you know where you need to go if you don’t know where you are? 2. Set your KPIs Are you measuring your day-to-day activities? Have you set targets that align with your strategic plan? Analyse your data and select relevant metrics to help you define business success. For example, do you know your debtors days? This KPI has a direct impact on your cashflow and should be measured monthly. Do you know your % of technical salaries to fees? This is another valuable measure to use to keep your business in check. 3. Measure, measure, measure Management guru Peter Drucker is often quoted as saying that “you can’t manage what you can’t measure.” What gets measured is what gets done. If you are not measuring it you are not managing your business effectively. 4. Compare/benchmark You need to compare to how you are tracking year in year out as well as comparing your results with those of appropriate peers — that is,
The quality of your decision-making has a direct impact on the performance of your business. To make good decisions and outperform the competition you need the right information at your fingertips. An experienced and expert CFO can bring significant value to your business and ensure that you are set on and continue the path to success. And you don’t need to employ this role on a full-time permanent basis. Many successful businesses are tapping into an expertise that is becoming more readily available at any time you need it. This person will optimise the value of your internal accounts team by providing a business-focussed overlay to your finances. They will report, advise benchmark and provide strategic advice before turning your financial data into actionable information through analytics. Your firm deserves a strong financial leader with the expertise to ensure the well-being of your business now and the knowledge to offer meaningful solutions to take your business forward in the future. By supercharging your accounts, your CFO will become your trusted business advisor and empower the business leaders to see the big picture that impact at a micro and macro scale to protect and accelerate the company. Business analysis and decisions are able to be made with more confidence giving your firm the advantage over the competition.
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Outsourcing your CFO provides many business advantages, including:
• Certainty regarding up-to-date commercial and financial knowledge
• Business leaders are able to focus on core business activities and strategies to remain competitive
• Tailored budgeting to ensure your profits are reinvested where they will have maximum impact for people and infrastructure
• Access high level technical resources
• Total confidentiality of client records
• Continuity of service, knowledge and financial management ensuring your business never misses a beat
• Knowing where your business stands financially at any given time
• Cost savings for larger firms and affordability for smaller firms for whom a CFO was previously a prohibitive expense • Independent and objective advice — no-one is protecting their job • Data-driven analysis to guide decision-making any time and anywhere
In an environment where every dollar has a place and a purpose, outsourced your financial expertise to an experienced and expert Chief Financial Officer will enable your business to cohesively manage its bottom line. This will free you up to take the lead in your core of your business with the knowledge your finances are in safe hands.
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Gordana Milosevska, CPA Director, Management for Design Gordana is a Director and Owner of Management for Design and devotes her valued skills assisting clients to build successful and sustainable businesses that enrich the built environment by setting them free to focus on what they do best. With over two decades of broad experience in accounting and financial management in a range of industries, including design, hospitality, retail and security and investigation, Gordana’s areas of expertise encompass accounting, financial strategy and control, business performance analysis and reporting.
Gordana Milosevska gmilosevska@m4d.com.au @M4D_Australia
Gordana has been instrumental in enabling businesses to attain financial stability and sustainable growth by creating the change that’s needed to unleash the professional expertise and creative spirit in businesses.
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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.
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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
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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 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 112 SHOULD YOU MERGE YOUR FIRM? PROBABLY!
In Australia* there are approximately 10,800 Architecture, Engineering, Planning and related consultant and design businesses*. Of these: • 60% of practices have less than 5 people • 80% of practices have less than 10 people • 90% of practices have less than 20 people. This is just under 10,000 businesses who have a heavy reliance on the principals to bring in the clients, recruit and manage the people, design and deliver projects and control the finances. Ultimately, it doesn’t leave a lot of headspace, time or capacity to build and grow the practice. It also doesn’t allow much time to deal with success and the increasing risks that result from demanding contract conditions, finding and retaining the right people, lower fees, investment needs, and the changes in an increasingly global economy. Most Architecture, Engineering and Consultant (AEC) practices have a desire to develop their businesses and watch their practices prosper. But what’s holding them back from achieving this? Today, some forward-thinking businesses are considering how they break the mould. As BDP’s alignment with Japanese consultant Nippon Koei in March 2017 demonstrated, size, it seems, does matter. *Australian Bureau of Statistics Professional Service Businesses 2016.
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In the past six years alone, approximately 600 architecture and engineering firms have been either sold or merged in the US.
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The benefits of merging Merging — the coming together of two businesses and becoming a new business — is an increasing trend worldwide, an approach that Australia is slow to embrace. In our region, we are a long way behind what’s happening in other parts of the world — in particular, Asia and the US. In the past six years alone, approximately 600 architecture and engineering firms have been either sold or merged in the US. It is clear that the total number of Architects, Engineers and Designers in Australia far exceeds the commercial demand for services. There are too many businesses competing for a diminishing
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service in an increasingly competitive market place. The number one concern for AEC leaders is the diminution of fees and services — the consequence of high and increasing competition for clients and projects from a myriad of sources. This includes other professions, the construction sector, the impact of technology and the forces of globalisation. The advantages of merging / combining your business in today’s increasingly competitive and oversupplied market place include: • Increasing the client base • Stronger and more talented leadership • Increasing your skill base • Increasing productivity • Economies of Scale • Increasing the capacity to invest in technology, innovation and systems • Building scale to engage experts in business • Improving the firm’s competitive position • Expansion into other geographic regions • Adding new practice areas • Greater capacity to devolve and spread the client relationships
• Diversification of work to mitigate the risk • Sharing the workload and improving work / life balance • Increasing your influence in the marketplace • Succession and exit strategy. Although it is often overlooked in our industry, one of the greatest strengths of leaders of AEC businesses is their innate capacity to work with others and collaborate more effectively than most professionals. Add to this the reasons above, and merging becomes a recipe for success! Our advice is to start with the premise that you should merge your practice — not why you shouldn’t. By merging with like-minded businesses, you will accelerate your path to success and break the innate tendency to incrementally improve the way you do things. As Nick Schumann, UK Board Member Rider Levett Bucknall and ex Shumann Consult says “After three and a half successful years developing and growing SCL we have now merged with Rider Levett Bucknall, a global multi service line consultancy which will provide further opportunities for success. In my experience, a merger gives a better chance of having a longterm influence and continuing business as usual”.
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The downsides AEC businesses, in particular, are different to most in that each has a clear identity, a distinctive design proposition and unique culture. Merging with another company and maintaining that uniqueness is ultimately seen to be especially difficult to overcome for many AEC business leaders. Below are a few of the primary reasons that Management for Design regularly confronts with businesses who are hesitant to merge: 1. Leaders not wanting to lose control of design and clients 2. Lack of outside trusted advisors — “who do I go to?” 3. Answering and being accountable to others 4. Inability to step away from the day to day 5. Not knowing where to start and how to go about it 6. Not knowing potential partners / targets 7. Culture of independence and freedom. Let’s look at some of these reasons in more detail. Losing Control “Control” is a crucial factor for the sense of satisfaction and accomplishment that leaders achieve from running their own practice and producing their own work. The ability to influence your own environment and change what you don’t like is critical for the sense of satisfaction an owner gets from their work. Unfortunately, when you are part of a team you surrender some of that control in exchange for the resources and support of your team. If you are insistent on not having to argue your decisions and explain your reasons every step of the way then you will hold your business at its present level. You can’t expect your business to grow. If it does, and you are holding onto
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One of the greatest strengths of leaders of AEC businesses is their innate capacity to work with others and collaborate more effectively than most professionals.
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control, then you are embedding yourself in a job and not building your business as a result. Inability to step away from the day to day More often than not, AEC 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 fees they are receiving for their services, the lack of business acumen and project management expertise in their businesses and wonder why they’re not attracting and retaining great people. The ability to step away from the here and now is not innate in AEC firm leaders — “there is too much to do!”. As a business leader, this is your challenge — more notably, your obligation — to your clients and people. They are looking for you to discover and implement innovative ways of working; designing; collaborating; more exciting work and more opportunities. Lack of outside trusted advisors Simply put, there isn’t a great deal of merger and acquisition expertise readily available in Australia in the AEC sector. Partners that have expertise and specialism in AEC businesses are
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few and far between in our region, primarily because of the low level of activity. Having said this, they are out there. There are two businesses based in Australia that have the required criteria, including: • Australian presence and expertise • In depth knowledge and experience in the marketplace • A track record of closing deals • Target sourcing and screening • Valuation and transaction negotiation • Due Diligence • Strategy development and execution. Not knowing potential partners/ targets
45% of AEC businesses that have conducted a merger in the past five years identified finding quality partners to be their biggest challenge (PSMJ 2016 M&A Study). Sifting out the businesses with tarnished brands, poor strategic alignment and ineffective systems, it is evident that people issues are a huge challenge. Not only that, finding a business that shares common aspirations, cultural values and is a fit financially makes it even more difficult. Having said this, be assured, there are a myriad of businesses that should merge or be absorbed by more developed businesses — you just need to put in the work to find them.
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There are a myriad of businesses that should merge or be absorbed by more developed businesses — you just need to put in the work to find them.
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Making it work for your business In our future Business Journal, we will look at the main considerations and risks behind a business merge and how it can be managed effectively to ensure it benefits your business.
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Management for Design has developed a unique approach to executing an approach to developing and executing a merger strategy that, if implemented, effectively ensures alignment of strategy, brand, aspiration and results. At the core is a methodology and system to ensure successful execution that involves the key people in the business. For more information, contact Rob Peake on rpeake@m4d.com.au.
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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 113 SHOULD YOU MERGE YOUR FIRM? PROBABLY! - PART 2 In our recent Business Journal we presented the business case for merging your business with likeminded businesses. Our advice is to start from the premise that you should merge your practice - not that you shouldn’t. By merging with like-minded businesses, you will accelerate your path to success and break the innate tendency to improve incrementally. The advantages of merging in today’s increasingly competitive and oversupplied market place include: • • • • • • • • • • • • • • •
Increasing your client base Stronger and more talented leadership Increasing your skill base Increasing productivity Economies of scale Increasing the capacity to invest in technology, innovation and systems Building scale to engage experts in business Obtaining additional expertise Expansion into other geographic regions Adding new practice areas Capacity to devolve and spread client relationships Diversification of work to mitigate risk Sharing the workload and improved work/life balance Increasing your influence in the marketplace Succession and exit strategy
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Our advice is to start from the premise that you should merge your practice - not that you shouldn’t
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Considerations While mergers can be a valid option, making them work is often another matter all together. Problems are mainly due to cultural misalignment, personnel differences and improper due diligence. Successful mergers are based upon a sound integrated business strategy that creates synergy, and a combined firm that produces greater client and business value than either firm could produce alone. Start by determining your merger objectives: • What size of firm are you considering? • Do you want to practice in a large firm? If not, what is the largest firm that you would want to practice in?
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• Is having your name a part of the business name important to you? • What are your expectations and objectives for a merger? • What are you looking from a merger partner? If you are weak in firm leadership, management and administration – look for a firm that is strong in these areas. Having said that, strong leadership, management, and administration may be hard to find in a firm fewer than 20 to 30 people. You also need to get your head around the fact that mergers typically occur without compensation or goodwill to either party. No doubt you will find that outside resources can prove invaluable to bolster the internal team - an experienced consultant can find the right targets and facilitate and drive the entire process. Additionally, experienced legal and tax counsel will also be vital, and an experienced partner will be able to manage these resources and bring them into the fold where and when needed. A major consideration for an Australian practice, however, is who do you work with that has been through the process and can provide expert advice?
Preparation Typically, a merger occurs between companies of comparable size and finances, taking two likeminded businesses and making them stronger together. It should be a friendly transaction since both entities are agreeing to the deal, and both parties should benefit from the arrangement. We’re not talking about the path to acquisition, which typically involves one business (the larger one) taking control over another. Once you are sure that merger exploration makes sense – you should ensure that your business is in order. In other words – can anything be done to enhance the value and/or marketability of your firm? For example: • Do you have a business or strategic plan? If not – how will you convince a potential merger partner that you have a plan for the future and know where you are going? • Work on and clean up your financials. Improve the financial performance of your practice. Eliminate deadwood. Get your debtors under control • Fix up your business systems. Great systems seriously underpin the value of your business and the attractiveness of your offer to a potential partner
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• Avoid entering into long term commitments that might make your firm undesirable to another firm. (new long-term leases, risky client matters/cases, loans, admission of new partners, unfunded partner buyouts/ retirements, etc.) • Your communications and branding collateral needs to up to date Next, develop a merger marketing plan and begin working the plan. Try to generate enough leads that you can explore a merger with several businesses rather than engaging in “random merger talks” which often result in isolated merger offers, leaving you with no framework for comparison.
Making it work The real question that businesses struggle with is not the what (merge) but the who (people). The ‘who with’ should be a firm with a similar culture, excellent leaders (or potential leaders), great relationships and clients who understand the long-term benefits to all parties, resulting in what is often described as being 2+2=5: compatible culture, systems, technology, project, client and design aspiration. Identifying acquisition targets, buyers or another firm to merge with is not an AEC firm’s core competence. There are though, many Australian businesses that have successfully achieved this in recent years including: • Rothe Lowman | White Architecture – establishing a Brisbane presence • SJB and FKA spinning off a separate business – PLUS Architecture • HDR and Rice Daubney • Prior Cheney to DWP | Suters to DWP • Cox Group and Coda Studio • Grieve Gillette | Anderson • Mark Williams Architects and AEV Architects In the CODA | Cox scenario - CODA directors Emma Williamson and Kieran Wong assumed
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By merging with Cox Architecture, we have a real opportunity to get stuck into larger and more complex work and to continue our interest in developing practice culture
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directorships with Cox, with all CODA people transferring from the practice’s former studio in Fremantle to the Cox office in the Perth CBD. Williamson said “By merging with Cox Architecture, we have a real opportunity to get stuck into larger and more complex work and to continue our interest in developing practice culture.”
Managing the risks “There aren’t a whole lot of catastrophic failures when it comes to mergers in the architecture and engineering space. Of course, these major failures can and do occur. But, they are very rare” – The Ultimate Mergers and Acquisition Manual, PSMJ Resources Inc. However, there are certain steps to take to minimise the risks of the merger not working out as intended: • Perform proper due diligence on the people and, in particular, the leaders and potential leaders. It’s critical that businesses ensure cultural due diligence is a key component of the merger assessment process. Philosophies, personalities, and lifestyles should be compatible. The partners should like each other!
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• Decide up-front who will be in charge, how you’ll deal with people changes (including redundancies), how you’ll integrate your financial and human resources systems, who will inform who about the changes, and what the plan is to action this.
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• Plan for client retention. Who will talk with clients about what’s going on? What will the message be? How will the new entity maintain its level of service during the change?
...don’t commence the planning process until you have thought through these issues and put in place the mechanisms to ensure you deliver on your aspirations
• Consider retention of key staff. How can you ensure that you don’t lose talented people because of this period of uncertainty and change? Who will go and who will stay after the agreement is formalised?
Merging versus acquisition
• Decide whose systems will be utilised in the new entity, or are you going to go down a path of renewal. Plan how you will announce the changes and how you will phase them in. • Typically, the cost savings can be realised in general overhead/corporate services. In our experience you’ll achieve efficiencies in finance, IT, and HR. Bear in mind that with the AEC industry being a peoplebased business, you won’t be consolidating manufacturing facilities or finding large-scale redundancies. • Assign a senior executive to “make it happen” – and find the right advisor to work with and guide this key person. Successful mergers require a critical degree of communication, alignment and consensus amongst your leadership team. Get on the same page and commit the resources you need to “make it happen.” Finally, don’t commence the planning process until you have thought through these issues and put in place the mechanisms to ensure you deliver on your aspirations. Now is not the time to procrastinate. Make it happen!
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Most people misunderstand the meaning of these two words as they are often used together e.g. M&A activity. But the meanings of them are totally different - an acquisition refers to one company taking over another whereby the larger business takes control over the other business they’ve acquired. Acquisitions as opposed to mergers don’t require mutual agreement, but they do require a huge amount of cash! But, to be clear, they both have their pro’s and cons. In our future Business Journal, we will look at the path to acquisition and why it doesn’t happen often in our region.
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Management for Design has developed a unique approach to developing and executing a merger strategy that, if implemented effectively, ensures alignment of strategy, brand, aspiration and results. Our methodology and systems will ensure successful execution, which involves the key people in the business. For more information, contact Rob Peake on rpeake@m4d.com.au.
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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
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The ability to manage the scope and deliverables
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Enable effective pricing and scoping
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Accountability for performance
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Identification of the areas of business that need improvement
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An understanding of what types of projects the company generates the most profit from
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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.
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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 115 TECHNOLOGY AND ARCHITECTURE, ENGINEERING, AND DESIGN : WHERE IS IT HEADING? The advancement of technology is happening at an increasing pace, and as new tools and technologies are developed and released, they leave a wake of change behind them—with the potential to revolutionise the way we work in the industry. With this in mind, let’s look at some of the technology trends that will shape the way architects, engineers and designers will work into the future.
The Internet of Things (IoT) This is not recent technology—it’s has been around for some time, in many things that we use daily. The swipe card you use to access your work, security sensors in the parking garage, or temperature sensors throughout a building. Experts estimate that the IoT will consist of about 30 billion objects by 2020. How will this impact designers? The biggest change in this space is being witnessed in the retail and work space, and around connected homes, influencing the way people interact with the buildings and spaces they will occupy. Future designers will have to consider how to ensure buildings, spaces and the built environment will customise a solution for each occupant and individual. Buildings of the future will use facial recognition to identify an authorised person, unlock doors, adjust the lights and temperature to an individual’s preferences, and
even connect with the coffee machine to have their choice ready and waiting by the time it takes the individual to move from one part of the building to the next. With a possibility space this diverse, buildings and spaces will use some form of digital solution to access, monitor, maintain and maximise the operation of all any facilities. These will include: ■■ Cladding, windows, or sun protection and weather protection that will self-adjust dependant on the level of sunlight. Not only that they will operate in conjunction with the heating/cooling system to ensure optimal conditions. ■■ Automation of waste handling and recycling – all syncing with third party contractors. ■■ Meeting rooms that turn glass walls opaque, for private meetings or turn walls into multi-purpose e.g. whiteboards, projectors, monitors, screens and interchangeable artwork.
AI and machine Learning Artificial intelligence (AI) and machine learning have been branching out into our everyday lives more and more in recent years. As systems improve and the reliability of their results increase, these tools will be increasingly integrated into the design process, with the power to solve complex problems and the ability to create many
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variations. All replacing, enhancing or replicating what
first-person perspective. No prizes for guessing who gets
was historically the domain of the “designer’.
the gig!
Through AI and machine learning, you’ll be able to fully unleash the power of your expensive design PC and software solutions. Using Big Data, parameters and constraints to empower the software to come up with many design variations far faster than any designer could.
In the future this concept could stretch to remote presentations, where you could meet your client within the virtual building, even if their office is on the other side of the world.
The underlying method is that the design is done via code—this is important because once you are happy with a design, that code can be codified, stored, repeated and altered – all making the design process far more comprehensive but also efficient.
Immersive Architecture (Virtual Reality, Augmented Reality and Mixed Reality) While the hardware and technology are still a bit too new to be truly useful in the actual design process, it is mature enough to impact the presentation and bid stages. Imagine walking into a presentation with a prospective client, passing the competing firm, as they exit with arms full of A3 printouts, USB keys etc. As you enter, you set down (a suitably powerful) laptop and pull out a pair of googles. You instantly have everyone’s attention.
Robotics and 3D Printing While this may not have a direct impact on designers, it will change the way construction is done in the future. Robots will become smaller and faster, with embedded AI allowing for a degree of self-correction and autonomy. 3D printing will also get more robust, with a larger range of base materials available to be printed. In the future your next home might even be 3D printed. And while it may sound a bit farfetched, it’s already happening here in Australia. Australian company, Fastbrick Robotics has a developed a prototype for a fully automated robot (Hadrian X) for building houses using 3D printed bricks. The bricks are printed with all the channels for plumbing, electrical and other infrastructure, therefore drastically cutting down the time it takes to build a house.
You can then talk your client through the design while they walk through the building and see the details from a
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Adoption of BIM
Conclusion
The BIM (Building Information Model) is based on several principles that can be implemented with relative independence:
Despite the increasingly fast pace of change of technology, there is no one trend that’s more valuable or dominant above the other. It’s crucial that business leaders, architects, engineers and designers take a holistic look to the horizon regarding how all these trends will fit within their own business.
■■ Projects are designed using a unique 3D model which is modified throughout the project’s life. ■■ This 3D model is not only the volumetric surfaces, but also has metadata attached (like the material of the element) and parametric modifiers (like the height of a wall). ■■ The 3D model can be stored in a multi-client database, as well as in the cloud, to be accessible at the same time by several people. ■■ Multi-user permissions on the model can be defined to accurately reflect team member’s individual responsibilities on the project. ■■ All construction elements are classified using standard categories, namely the IFC. ■■ Libraries of construction products can be inserted into the model, and can even get actualisation if the product version changes.
When considering trends like the IOT, AI and Machine Learning, the industry need to understand how these elements will change the way design is performed, and their work is delivered, ensuring they are part of and lead the conversation from the start and are not tacked on at the end. Those who invest early in key technologies, and embed them within their workflow and processes, will without doubt benefit in the next 3-5 years, as these trends become more mainstream.
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Management For Design clients are at the forefront of technological solutions that enable them to control and build their businesses. For more information, contact Rob Peake on rpeake@m4d.com.au.
While these aspects are promising, adopting BIM design practices may create tensions with members of the construction team, who have historically been hesitant towards the shift. As the adoption of BIM grows, it’s looking likely that it will be the mainstream tool to design and deliver architecture in the coming years and it presents an historic opportunity for Architects to lead and drive its adoption, working with the other design consultants to “encourage” the construction industry towards its use.
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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 116 WHY SUCCESSFUL FIRMS OUTSOURCE 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 someone to accurately tell them. However, for those of you that are still doing it inhouse, you’re likely managing a resource you don’t have the expertise for, rather than focusing on your core business. In fact, outsourcing accounting and finance tasks is one of the most effective ways to make your business deliver greater efficiencies. By outsourcing your accounting function to 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 outsourcing In an environment where every dollar 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.
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The language of business is accounting and unless you’re well versed in it, you shouldn’t be dabbling!
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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 independent entrepreneurs, outsourcing can help renew their enthusiasm in their work. Few
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people start businesses because they’re looking forward to crunching numbers in Xero, but it’s a task many entrepreneurs find eating up their time. By outsourcing, entrepreneurs 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. A ccess 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. C ost 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
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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 companies get a tighter grip on managing finances and be better prepared for potential audits. n
As a specialist service partner, our experience with financial and business operations brings value to your firm beyond day-to-day accounting tasks. We support architects, engineers and designers, in the following ways:
M4D Provides Full-Scope Accounting Services
• On-site or remote support on a part-time, full-time, or project basis, to meet your organization's needs.
Management For Design takes pride in being a strategic business partner for our clients, including sitting side-by-side with them in critical business meetings. “It feels very much like being part of our client’s business, rather than being an external consultant of an accounting firm” says M4D director, Gordana Milosevska.
• We are industry experts who are knowledgeable in industry-proven accounting processes performing your ongoing back office tasks. • Financial Controller and CFO level support and insight, for meetings with your leadership teams and boards of directors. • Financial and managerial reports, produced both on-demand and at regular reporting intervals.
• A fully integrated accounting and financial management system, powered by industryleading software.
Gordana is a Director and Owner of Management for Design and devotes her valued skills assisting clients to build successful and sustainable businesses that enrich the built environment by setting them free to focus on what they do best. With over two decades of broad experience in accounting and financial management, in a range of industries, including design, hospitality, retail and security and investigation; Gordana’s areas of expertise encompass accounting, financial strategy and control, business performance analysis and reporting. If you’re seeking a pathway for your businesses to attain financial stability and sustainable growth contact Gordana at GMilosevska@m4d.com.au.
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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 117 THE VALUE OF BENCHMARKING IN ARCHITECTURE, ENGINEERING, AND DESIGN How does your business stack up? How does your current performance compare to previous performance? How about other businesses in your industry? What does the future look like for you, your competitors, or your industry as a whole?
The value is not in the benchmarking, but in the decisions you make, as leaders, to create change that will enhance your performance. Benchmarking leads us to focus on change and provides a clear direction for the change process.
The answer to these questions lies in benchmarking—but what value does benchmarking actually provide in architecture, engineering, and design businesses, and how can it be used to give your business an edge?
There are two components to benchmarking performance:
Benchmarking is a radar for change; in and of itself, benchmarking is only a means to an end—and it’s worthless if not accompanied by a call to change.
1. Comparing your business with your own historical and expected performance 2. Comparing yourself to the industry and other businesses
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By benchmarking in these areas, there will always be a call to action, a call to change. Benchmarking can be effective in driving performance and initiating change. For instance, for a business that’s operating in the top quartile, benchmarking could highlight areas where they are doing well and should provide a focus for how to maintain their advantage, as well as presenting an opportunity to raise their standards.
Alternatively, for business in the bottom quartile, benchmarking identifies areas of opportunity where they can make improvements such as: 1. Reviewing fees 2. The work they are taking on 3. How they're producing it 4. Employment costs
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Case study
Decision making
In the chart on the previous page, we have a snapshot of a monthly management report for a Management for Design client.
Typically business leaders are regularly pressed to make decisions. These decisions are then converted into activities. Accountants then convert these activities to numbers and produce a report card, which will be in the form of an income statement, a balance sheet, and most importantly a cash flow statement. Business leaders usually then turn to their CFO’s to decipher the numbers, who then describe back the activities that caused the numbers in the first place.
Their total income is approximately $10m, with a profit margin of 40%. According to industry benchmarks, they’re at the top of their game, in the top quartile of their industry, and are exemplifying superior performance. But are they really at the top of their game? Their total income sure is, and so is their profit margin. However, when we drill down further, we find that their total employment costs to total income are running at 35%—less than their historical averages, and over 20 points below the industry average. How does that show up in the operations? The principals are buried in projects, with little to no opportunity to work on areas that could potentially improve, or to focus on where the company needs to head.
The numbers are always a reflection of the decisions that were or were not made. Doesn’t it stand to reason that if businesses want to change the numbers, they simply need to change the activities that caused the numbers in the first place?
By comprehensively measuring across all areas of the business, they have the numbers to know that billable time is high, income per employee is high, average hours worked is high, but work coming in from new clients is low in comparison to previous years. Therefore, the current position for this business is not sustainable. Armed with this information, they can now focus their attention and make the necessary decisions to see them well into the future. It’s not just financials that need to be measured; reputation, brand, quality of work, client satisfaction, and staff morale are equally as important. These metrics should be measured, year in, year out.
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In another example, a new Management for Design client was previously relying on quarterly management reports to keep them on track—that’s only four shots a year to identify issues and make improvements. By implementing monthly reporting, we were able to provide them with a lot more data and more opportunities to change course and fix problems.
Conclusion Measure. Assess. Create change. Ultimately, if you want to run a successful business you need to know what’s going on in your business, so you need to be measuring as you go. Monitor your progress from year to year. And then compare yourself to your peers. n
In the 12 months following the business started monthly measuring and reporting. This resulted in their best year yet—they produced a profit margin of 25%, paid off their debts in the next year and were paying out dividends from cash flow in 2.5 years. You need to compare to how you are tracking yearly as well as comparing your results with those of appropriate peers, that is, businesses that are similar in size and business model to your own. Chances are that benchmarking will reveal many areas of your business that can be strengthened. For example, your results relative to your peers may present opportunities to: 1. Raise your standards 2. Focus on growing revenue 3. Reducing your labour 4. Increase your use of productivity-enhancing technologies 5. Or take numerous other actions.
Management For Design adds certainty to business decisions by combining your vision and hard data. We uncover the fundamentals of your business, identify areas for improvement and enable sound, evidence-based decisions, to move your business and projects forward confidently with fewer surprises. For more information, contact Gordana Milosevska on gmilosevska@m4d.com.au.
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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 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
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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 120 CHARACTERISTICS OF ALL SUCCESSFUL ARCHITECTURE, ENGINEERING, AND DESIGN BUSINESSES What separates the average (and most) Architecture, Engineering, and Design (AED) firms from the most successful? Is it the design work? Their business processes? The personalities at the top? How are they able to consistently create great work, while growing their businesses, and achieving impressive profitability? There are common characteristics across these leading and high performing firms that enable them to succeed where many others struggle. They are industry leaders that are dedicated to building relationships and they work selectively,
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Leading design firms are successful due to their focus on integrating innovation into their design process and focusing purely on what they do best—design
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allowing their expertise and skills to shine. It is the characteristics of leading architecture, engineering, and design firms that, not coincidentally, enable them to be the most commercially successful.
They tightly control the design process and fewer people are involved Leading AED firms tend to have less (and not more) people involved in the design initiation process. Working with fewer people at the initial stages allows them to have tighter control of the design process. The central idea is strong, consistently applied, and clearly communicated to the client by the design initiators—a core group within the business. To borrow from Mies van der Rohe, “ less is more".
They focus on what they are great at Expertise comes with experience and talent—which doesn’t come overnight. Great AED businesses have clarity about their expertise and they focus on this. They concentrate on what they are great at. They don’t take on work that isn’t within their expertise and they clearly articulate and deliver their value proposition. They thrive in their specific niche.
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They are very good negotiators
They surround themselves with business expertise
The leaders of successful design firms are very good at negotiating—their opinions are considered and highly valued. Negotiations are reputable and more often than not, all parties feel respected, listened to, and satisfied with the outcome, whether that be a design, a project delivery, or business negotiation. Their negotiations strengthen their relationships.
Successful design firms surround themselves with experts in business. It’s their team. Whether that be across strategy, finance, IT, BIM, project delivery, contracts, mentors, or systems. By surrounding themselves with business expertise, the leaders are able to focus on what they are great at—design, generating work, and client relationships; and they are constantly learning from these experts.
They take on work on their terms
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High performing AED businesses are clear about the work they want to take on and just as importantly the work sectors and clients. They have a clear sense of the value they bring to a project; their point of difference and they are able to clearly articulate this to the marketplace. They don’t pursue and take on work with clients that don’t share their values. They don’t negotiate on price.
They are sought out by the marketplace Successful AED firms have a value proposition that sets them apart from most. They are sought out by the market place due to the reputation of their leaders, their expertise, their ability to collaborate and innovate, and their relationship skills. Due to their demand, these companies become very valuable.
By surrounding themselves with business expertise, the leaders are able to focus on what they are great at— design, generating work, and client relationships; and they are constantly learning from these experts
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Their clients love working with them They charge more than others Successful design firms are typically more expensive than others. They are commercially astute but understand clearly the value they bring to their clients and to the project. They focus on communicating their specific expertise, innovation, and their unique value proposition—so that the client understands the flow on benefits to the project and their business. They’re not reducing their fees.
Clients love working with these firms. The client experience across all touch-points is compelling— client service is paramount and this culture flows throughout the entire business. They partner with their clients to build mutually beneficial relationships to deliver outstanding work.
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They attract the best and brightest people—and they retain them
They don’t complain about the industry because they are winning
One of their core capabilities is their ability to source and entice the best and brightest professionals and then to develop and retain them. People are at the core of what they do. They provide fulfilling challenges, flexible working conditions, and clear paths to leadership. For them, it’s about people. not buildings.
Their businesses are thriving, they are producing outstanding work, they are surrounded by talented people, working with good clients and they are commercially successful. What’s to complain about! For them, the industry is exciting and compelling.
They don’t compare themselves with others The leaders focus on client relationships, winning work, design, and representing the business The leaders concentrate on building and maintaining close relationships with clients, winning reputable work, developing designs, and representing the business to the best of their ability. The leaders as a collective are across all elements of the business—the “business drivers”. However, they certainly aren’t intimately involved—there are others in the business that have this covered.
Because these businesses are winning, they’re not interested in comparing themselves with others—forget benchmarking! They are achieving their aspirations, well respected and sought out by the industry. They are outward looking, seeking worldwide industry trends and innovation. But they pay minimal attention to others in their space.
They provide above average remuneration These businesses have talent and they reward their people accordingly. That sets the benchmark across the organisation. Team members are valued and remunerated for the value they bring to the business. They provide above average remuneration.
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They’re clear about who they are and where they are heading Successful AED firms have an unclouded vision of why they do what they do. The leadership is aligned with this direction and hence this flows throughout the entire business. It's articulated and communicated regularly. They are focussed and driven by this purpose and where they are heading. And it’s not necessarily to conquer the world. It’s to be the best at what they do.
Their consultant teams are of a similar ilk Successful architecture, engineering, and design firms associate and align themselves with equally successful professional consultants. When they come together as a team, they are consultative industry leaders. They work with the best, in order to operate at the top of the industry. And they don’t talk about it.
They get business Although the leaders are focussed on what they are great at—client relationships, design and delivery, and generating work, they are somewhat surprisingly educated and informed about most business matters. And that may be across, commerciality, fees, contracts, the marketplace, financials, or people management.n
Do you want to achieve a greater level of success? Management for Design is your essential business partner, to enhance your performance. 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 121 THE IMPORTANCE OF CASH FLOW FORECASTING
Often, when Management for Design asks business leaders if they control their cash flow, we hear a resounding “yes!” But when asked how they do it— the response is usually a more tentative “well... we check the bank account every day.” This is not an effective cash flow management strategy! Firstly, your bank account is a historical record of the comings and goings of your money. Unless you have a proper plan in place for how you are generating money and how it will be spent, simply reviewing the bank balance daily will not make it grow! One of the most important tools in business is a cash flow forecast. Would you ever sit in a car, put a blindfold on, and then start driving? That’s what managing a business is like, if you don’t have a cash flow forecast in place.
Three things to set you up for success 1. Know how to differentiate between profit and cash 2. Create a cash flow management system, including a safety bank balance 3. Review and manage your cash flow regularly
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Would you ever sit in a car, put a blindfold on, and then start driving? That’s what managing a business is like, if you don’t have a cash flow forecast in place
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Know how to differentiate between profit and cash Firstly, profit and cash are different. Profit is a measure derived from income (revenue) less expenses and is reported in your income statement. Cash is simply the money you have in your bank account. Each business transaction will affect your profit and cash in different ways—and at differing times. Paying tax, purchasing computers and equipment, waiting on debtors to make a payment, or the creditors you haven’t paid yet affect your profit
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and cash position differently. Most of the time, the effect on your cash position can be delayed and occur after the change in your profit position. So, which one’s more important? Profit or cash? The answer is actually more complicated—and the two are interrelated. As your business develops, the more you will probably need to invest in systems, equipment, additional people, and premises—all of which require cash. In most cases, you’re investing this cash before you earn any additional profit, so to make more profit or grow your business, you will require more cash. Of course, you can also borrow it or receive it from shareholders or investors, but the point is, to understand how cash and profit impact each other. In saying this, the age-old saying “cash is king” usually prevails. There have been plenty of profitable businesses that were forced to close down because they ran out of cash. Having a loss on your Profit & Loss statement (P&L) doesn’t mean you’ll go out of business, running out of cash is much harder to recover from. Looking at just one of these metrics (profit and cash) doesn’t tell you the whole story. Just because you had a profitable month doesn’t mean you had a positive cash flow month. Similarly, just because you have cash in the bank doesn’t mean your business is performing well. That’s why cash flow and a P&L must be looked at together.
Create a cash forecasting system Cash can be your single most important asset, it’s the lifeblood of your business. You need a cash system that allows you to forecast, as accurately as possible, your cash in and cash out. This may start as a monthly forecast, but depending on your needs, it could turn into a weekly or even daily system. The point is, you need a cash forecasting system.
Starting with historical numbers, you can build out your first cash forecast using either a cash management system or simply MS Excel. The first time you create your forecast, everything is based on historical numbers and future assumptions. Each month that passes is going to tell you something about the accuracy of those assumptions and give you the opportunity to assess and revise. Ask yourself the following: • What was inaccurate about your assumptions? • Was this a “one-time thing”? • How can you refine your forecast based on the actuals that just happened? A cash flow forecast, coupled with your P&L, gives you an accurate picture of the financial position of your business and where it is heading. Most importantly, it gives you the knowledge to make more informed strategic decisions. If you don’t have the capability or capacity to create cash flow forecasts, work with an experienced accountant to create them for you.
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If you don’t have the capability or capacity to create cash flow forecasts, work with an experienced accountant to create them for you
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Review and Manage With a cash flow forecast, you can see which months of the year you can expect to face a cash deficit and which months you’ll see surpluses. This information can assist you to hold over funds from surplus months to cover deficit months. It can also give you insights into your business when you compare forecasts to the actual figures. Not only can a cash flow forecast help you to even out your cash flow, but it can also help you to make important decisions, such as when to make a capital purchase and when to reduce expenses moving forward. By reducing sporadic cash flow and maintaining a healthy equilibrium, your business can enjoy the benefits of increased stability.
So, what are the steps you can take in your business, to prevent you from running out of cash? 1. Ensuring enough cash reserves in your business to cover 2-4 months of expenses (this will depend on your risk profile) 2. A cash plan and forecast that you use to make informed business decisions 3. A clear understanding of the difference between profit and cash
Management For Design adds certainty to business decisions by combining your strategic goals and hard data. We uncover the fundamentals of your business, identify areas for improvement and enable sound, evidence-based decisions, to move your business and projects forward confidently with fewer surprises. For more information, contact Gordana Milosevska on gmilosevska@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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