WHAT’S NEW
MANAGEMENT FOR DESIGN Spring 2016
Improve your profit margins
Improving profit margins should be a goal that is shared and understood across the whole business. Your business management systems — from finance to project management to marketing — need to enable and support every function within your professional services business to work together rather than sit in their own functional silos. An interconnected approach is a prerequisite to making sure that projects are successful, while reducing costs and improving profit margins. By working together with the support of a sophisticated project-based Business Management System your practice can gain a clear picture of how your projects and resources are operating and their impact on either a project’s performance and the business as a whole. With this greater visibility, you’ll be able to make strategic choices and increase your profit margins as a result. Access and interrogate your business information •
When you capture the value of your Business Management System you are able to access one version of the truth for each aspect of your
projects. This will enable you to put together an actionable plan to improve profit margins. There’s nothing worse than ‘digging’ around to access this information. •
When you have a clear picture of your resource allocation it becomes possible to move resources to other projects and to ensure all your people are effectively resourced. Are your people fully utilised and do they have a schedule of completion for the week? Your resources need to work efficiently to increase your profit margins.
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How many projects have been completed? When you have a clear picture of when projects are being completed it becomes easier to plan your resource requirements moving forward; ensuring minimal ‘downtime’.
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How many projects are late, running up additional expenses that weren’t forecast and that are likely to reduce a project’s profit margins. Your system needs give you better foresight so that you can identify potential issues with scope and delivery in order to keep a project on track, rather than having to act reactively once a project has become delayed.
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Submissions and feasibilities that have been completed or are unsuccessful. By understanding the number of submissions that have been completed or did not go ahead — and how much it’s costing — it becomes possible to adopt more efficient and effective processes, offer additional training or more appropriately allocate resources to increase the potential success of your submission.
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“We need more resources to complete our project”. We’ve all heard this! “I don’t have the people or the appropriate resources to complete the project”. You need access to accurate and timely information. And this should be at your fingertips.
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Effective reporting systems (e.g. project dashboards) can be created and used to simplify an ever growing amount of information. This allows your project leaders and studio managers and finance to generate and share insightful reports to enable discussions about their performance and resources. You can play a role in ensuring that change sits at the heart of your organisation, whenever the reports reveal that it is necessary. You should only adopt changes when the case for it is established.
Take Small Steps One of the best business practices is to keep your focus on your key objectives and to take incremental steps towards them. The best results are achieved by taking small steps — by concentrating on one task at a time. A failure to allocate resources or to expect too much, too soon from your teams can de-motivate them and reduce their willingness or ability to efficiently work together.
Integrated Business Management Systems can, for example, provide you with the financial and resource availability information to enable you to avoid these situations. This can be used to benefit your employees as you begin to focus on projects and tasks that are likely to make a difference to your company’s revenue and profit margins. Your teams will also know more about how they can work successfully together in order to achieve your business’ project-related and financial goals and objectives. Leadership is required Capturing your financial, project, employee and marketing information in the one place will provide you with a broader picture of how the business is performing. Subsequently, you as a leader can play a greater role by sharing this kind of information to inform your people what needs to change in order to make ongoing improvements to the business.
Principals and Directors need to lead change by facilitating and provoking these discussions and organising regular meetings with your people to discuss the firm’s performance — you need to lead and can’t delegate this to the “Studio Manager”. Explaining where projects or the business as a whole, needs to adapt in order to control operating costs will lead to your business increasing profit margins. Take Action In summary there are six ways implementing a sophisticated project-based Business Management System can improve your business. Used effectively it will: 1. Boost revenue and cash flow 2. Generate higher profits 3. Gain visibility and control 4. Eliminate non-value adding activity 5. Provide access to information in real-time/anywhere 6. Increase resource utilisation and productivity
Signs it’s time to move to the cloud Does your company suffer from the following pain points with your current management system? If so, it’s time to consider moving to the cloud. 1. You don’t know how old your system is Your system hasn’t received new updates in quite some time, and you’re honestly not sure what your support systems are anymore. Your vendor has turned its attention elsewhere and is making investments in newer and more current software strategies. Solution: move in the direction that the industry and your peers are moving in. More and more companies like yours are moving to the cloud because that’s where software publishers are making investments and keeping customers up to date. 2. End users are complaining about limited access to data Your company data is locked into a local access-only solution and you can’t access it easily when traveling or away from the office. With reduced access to your information, projects are falling behind schedule. Solution: with cloud: you get native web access to your data wherever an internet connection is available. 3. You just received another invoice for your current system Whether it’s your annual maintenance, an invoice from a vendor for a new backup device or the time it takes your own IT staff to troubleshoot your network, you really don’t know how much that legacy system is costing you. Solution: with a cloud-based system in place, your company will no longer need to spend money. Reassign your valuable IT resources to other high priority functional areas of the company and use your recovered funds to make new financial investments. 4. You recently experienced a hard drive failure and lost critical data You might not have the human capital resources to invest in or routinely test your backup and recovery devices. To complicate things, you may not have the time to monitor your backup processes. As a result, you could be one hard drive failure away from losing very important business information. Solution: with a cloud solution, you won’t have to worry about your disaster recovery process and backup routines. These safeguards are included in your Cloud subscription and are monitored by a team of IT experts to keep your business running smoothly. Files are also securely stored and backed up in Cloud data centres so your information stays safe.
5. Your current system doesn’t scale to meet your growth needs You have set up a new office or acquired a company and realized it will take longer than expected to consolidate your system Solution: cloud software is equipped for scalability and reduced hardware costs. Since Cloud software is flexible, it adjusts and provides additional resources to handle any scalability requirements in your business. You can purchase the necessary scalability without having to buy additional hardware. 6. You have an international workforce that isn’t connected to your system Since your system is housed locally, your global employees have to handle things manually and outside of your system, including overnighting their expense reports and timesheets. Ultimately you lack an efficient way to manage your global operations because your solution isn’t available to your world-wide employees. Solution: With a Cloud system in place, you can connect all your employees within one system and provide secure access to everyone that needs it, regardless of their location. 7. You have come to the realisation that you are not an expert at maintaining a system Lacking expert maintenance skills, you feel as though you are not in control of your environment or the associated system costs. Solution: You are an expert at building relationships with your clients and partners, delivering projects through your project teams and managing a successful business. Why waste valuable time and money owning and maintaining a solution – from end users to disaster recovery – when experts are available that can do it for you in a more affordable and predictable manner? Cloud solutions take the burden of maintaining the software off of you so that you can focus on doing what you do best – winning and delivering projects to your clients. Could your business benefit from a more comprehensive, end-to-end view of performance, productivity and processes? The warning signs all point towards the Cloud. To learn more about how you can fine tune efficiency and capability within your business, discover how Management for Design can help you harness the Cloud by contacting our Head of Business Systems, Callum Bruce, at cbruce@m4d.com.au.
Business of Architecture Series The business of running an architectural practice requires ongoing focus from business leaders, yet is often neglected in the process of servicing clients and delivering projects. Management for Design addressed these issues in a series of monthly webinars for the Association of Consulting Architects. Rob Peake investigated the main elements that make up an architectural business. Looking at people, strategy, business and financial management, legal, brand, systems and delivery, Rob simplified the complexities of business management. The webinars were presented as a 3 part series — we have covered the first six foundations to building a successful architecture practice in previous issues of this eMag. Links to the webinar slides are available at the end of this article. The 10 foundations to building a successful architecture practice are:
Let’s take a look at Sessions 7 and 8. Session 7: Risk and Legal It is important that your business adopts strategies that will mitigate risk. Some strategies include business structure, agreements, contract management, terms and conditions, exclusions, fees, insurances and advisors. How your business is set up can have an impact on the level of risk you take on and there are different legal implications to consider with each different structure. Some of the more common business structures are company, unit trust and partnerships. Deciding on a business structure is not a decision that should be made without research and careful consideration. When creating shareholder or unit holder agreements it is important to consider ownership obligations and transfer of ownership, insurance, restraint, decision-making, other business interests, exiting the business,
percentage of profits linked to performance, employee share plans and buy/ sell agreements. In the architecture business, all profit comes from clients. It is therefore important that you have a signed agreement or contract in place. These documents should define your responsibilities and what happens when things are not working out. You should be providing as detailed a scope as possible and itemise the exclusions and where additional fees are applicable to avoid making a loss due to scope creep. Some items to consider are: what happens when there is a delay in gaining approval?; engagement of secondary consultants; change in documents due to change in scope; additional drawings; negotiation related to Novation; and limit defect inspection. Fee negotiation is an important part of ensuring your business is profitable. You should base your quotes on historical data rather than estimating and reinventing each time. You need to have a system that will track your past performance on projects, this will allow you to more accurately track your profits and create quotes for your work. Look into fixed fees, they do have their advantages, for starters they simplify the invoicing process, they are built around the efficiency of your operation and eliminates the uncertainty for your business. Fixed fees also create certainty in the minds of your clients. You should also provide service guarantees and ask for feedback on performance. Additional things to consider are having adequate PI insurances (relationship with your insurer) and protection of copyright, moral rights etc. You should also have a clause for increasing rates and fees, be clear about indemnity clauses and what their implications are. You should have written documentation on decisions and instructions, comprehensive employment agreements with staff and stay up to date with changing legislation and regulation. As an architecture business you should anticipate downturns, manage cash flow and have a proactive attitude to addressing problems. To have great legal support, establish a relationship. Session 8: Marketing Marketing efforts have a singular focus: “to win work”. Once you start your business it is up to you to help it grow. You should be tracking the amount of work generated and backlogged. To do this you need to think about two elements: business development and communications. To be successful in marketing you need to have a strategy, a plan, a system and measurement criteria. Marketing Business Development You need to be clear about the work you are trying to generate, the project type and client types. By tracking your work generated you can predict your future workload. In Architecture 75–85% of work comes from repeat clients. Develop objectives around this and capitalise on client relationships.
You should identify sectors, clients and a plan on how to connect with them. Some ways to connect with clients is public speaking, philanthropy, industry activities and events, networking and work on relationships, business associations as well as tenders and submissions. Involve and mentor your staff in business development by sharing your strategy and client meetings, attend business development meetings, involve them in contract reviews, engage them in networking and event attendance and develop a business development program. Look for staff/people who have clients who want to work with them, always seem to have more work than they can do, and are able to both delegate and retain responsibility. Keep track of and reward performance in areas such as work generated, networking, new clients introduced etc. Marketing Communications The essence of marketing is to communicate who you are and why a client should use you. This should include both internal and external communications and comprises websites, post project communication, social media, corporate identity, corporate collateral and corporate submissions, event and sponsorship, surveys, client feedback, e-comms, public relations and awards.
Communications focuses on exposing your business to as large an audience as possible. Business is easier when people know who you are. You can’t ignore social media now, it is your online community — your audience is on social, so reach out to them there. Your work, your people and your communications are the core components of your brand; and there is value in your brand to be leveraged. Magnify the characteristics of your business and position your business with words. You should be marketing and getting your name out there when you are at your busiest, one way to do this is to reach out and get to know the editors of key publications that your clients are likely to read. Developing a communications plan and system is key, as this will keep all of your marketing efforts structured, targeted and on track.
Marketing Systems It is important to have a good CRM (Client Relationship Management) system for managing business development and communications activity. A good CRM system will help you to track projects and clients, identify and track activity with potential clients and potential projects. It will also track business development activity. There are many CRM systems out there for you to choose from, for example Salesforce, Sugar and iAccess. Having a good CRM system is one thing, you also need to make sure you maintain it and keep information up to date, you can do this by demonstrating leadership, involving your staff, creating a system and asking questions. Superior client service is based on tight systems that should lead to continued client satisfaction and consistent and sustainable growth.
Introducing our new Head of Finance “Carla strives to provide businesses with the finance rigor, information, skills and commercial acumen to deliver increased profits and efficiencies.”
We would like to introduce and congratulate our new Head of Finance Carla Dexheimer. Carla is responsible for: •
o-ordinating and managing all aspects of accounting, financial C reporting and tax reconciliation
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Developing and maintaining trusted relationships with clients
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Developing and mentoring the finance team
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ontinuously enhancing the financial processes to deliver exceptional C services to our clients
Carla has worked in the UK and Hong Kong for 12 years in the Multimedia, Advertising and Software industries. She is an ACMA qualified, commerciallydriven business partner. Carla strives to provide businesses with the finance rigor, information, skills and commercial acumen to deliver increased profits and efficiencies. Cultural awareness is one of her key strengths gained through working internationally and managing teams spread globally.
The value of design for a sustainable future Vanessa Bird, Australian Institute of Architects Victorian Chapter President and co-founder of Bird de la Coeur Architects, implores designers to value their skills for the future of the industry. The following is a transcript of Bird’s speech at the Victorian Architecture Awards, with credit and thanks to Parlour (http:// archiparlour.org/fairer-fees-to-future-proof-the-profession/; Twitter @_Parlour). When I opened the Awards exhibition two weeks ago I was struck by the exceptional quality of the work given the current fee climate. It is astonishing that while fees are driven down, architects continually find ways to do good work. We are resilient, but this is not limitless. Expectations for ever-higher levels of service for the same fee can’t continue. Fee pressure is applied at both ends of the process. First, at the front end, there’s pressure to provide concept design for free; and second, at the delivery end, there’s pressure to do more for less. I encourage you all to value your skills more highly. Put a decent value on your intellectual property, and don’t sell yourself short. Why are we giving it away? Architects will always need to compete for work, but cut-price design fees or no design fees sends the wrong value message. This doesn’t create a future for our upand-coming practices – or acknowledge the value of design. Concept design is not a loss leader. It is our most precious commodity. The contributions you see here tonight are undeniably excellent and involve significant expertise, developed over time. How can we expect clients and the market to value our expertise if the message we give is that we don’t value it ourselves? Your intellectual property has value – in
some cases, it’s worth millions of dollars in uplift to developers or real-estate agents, and in other cases, it changes people’s lives. You shouldn’t be giving this away for free. We all start with a blank piece of paper and until we provide a creative solution on that piece of paper, the entire project team – consultants, advisors and managers – remain at a standstill. This is where our core value lies. Our intellectual property is our most important asset. All businesses decide what they will and won’t give away to attract clients. However, if you give away your best content for nothing, what possible reason could anyone have to pay for content that is less valuable? If you offer up the farm, or what is truly your most valuable content for free, you are bound to get resistance – or disappointment – on the services you try to sell.
Of course, architects can do ‘pro bono’ work – but a profitable business structure is needed to support this. Value your work, and then make real donations through not-for-profit organisations, community groups, or Architects Without Frontiers, all of which contribute to society in special ways. Doing more for less Architects are doing more for less. And in this case, less is not more, it’s just less. The downward pressure on fees during the GFC created a market accustomed to higher delivery expectations. Business costs, such as insurance and software, have increased – while fees decline. This isn’t because there is a shortage of money in the industry. It just isn’t distributed our way. Tonight you see quality isn’t appearing to suffer – so externally the system seems fine. This is because architects are generous and do more than the fee allows – but under-pricing is not the way forward. For the sake of the future of the profession, change is required. So why does this matter? Inadequate fees mean we can’t pay our staff the wages they deserve. It’s then hard to attract and keep the best and brightest students. Architecture is complex and we need good young minds coming through, who are not having to worry about the
prospect of poor wages or long hours of unpaid work. We need to be paid for the services we provide, so we can pay our staff properly. How do we return the balance and recapture our value? And what is the Institute doing about it? First, we need to take more control of project delivery. One piece of the Institute’s advocacy work is the push for mandatory registration of project managers to help claim back some of our traditional territory and lost ground. This process has begun. The opportunity for architects is to fulfil the registration requirements as project managers themselves, thereby instantly returning scope and lost fees. Or to project manage other architect’s projects professionally and knowledgeably and claim the appropriate fee. Architects can and do find solutions to complex problems. We can change, we like change, we trade in it. This was proven in May when we voted for the governance changes in our Institute’s Constitution. Think about it – there hasn’t been a successful federal referendum for 40 years, so this demonstrates our ability to change by working together. This is fundamental to the concept of a true profession. I encourage you all when calculating your costs and fees to think about our longterm viability. It is one thing to live for architecture – it is quite another to die for it. Architecture is important. We are heading into an election where both major parties are proposing a Minister for Cities. The future of the city, housing and infrastructure are part of the core political debate. We have to advocate for an environment where design is valued. We have to start by giving greater monetary value to design ourselves. Every year at the Awards we see Victorian architects making significant contributions to the city and its life, to our communities and to the advancement of our discipline. In 2016, we see an exceptionally high standard. You all find great solutions and do profoundly valuable work – don’t under-value it.
READING LIST Elon Musk Ashlee Vance In Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future, veteran technology journalist Ashlee Vance provides the first inside look into the extraordinary life and times of Silicon Valley’s most audacious entrepreneur.
We learn nothing Tim Kreider In “We Learn Nothing, “satirical cartoonist Tim Kreider turns his funny, brutally honest eye to the dark truths of the human condition, asking big questions about human-sized problems.
Successful Strategies for Small Firms PMSJ “One size fits all” just isn’t the way it works when it comes to leading architecture or engineering firms. Small firms like yours face unique challenges that require unique approaches for success … and small firms principals who know how to tough it out among the big boys.
Good to Great, why some companies make the leap‌and others don’t Jim Collins Built to Last, the defining management study of the nineties, showed how great companies triumph over time and how long-term sustained performance can be engineered into the DNA of an enterprise from the very beginning. Resource Planning for Dummies Deltek Special Edition The name of the game for successful project-based organisations is resource management. Without the right resources on your projects, margins can erode and projects can slip. Put the right tools and a collaborative platform in place and you have all of the insight you need to scope, plan, and manage your people more effectively.
MANAGEMENT FOR DESIGN
Management for Design provides integrated business systems and services to the design industry across Strategy, Finance, Information Technology, Human Resource Management and Business Systems. By working with Management for Design our clients are enabled to focus on what they are great at and to control and build their businesses. For more information visit www.m4d.com.au or phone 03 9645 8834.
