MANAGEMENT FOR DESIGN BUSINESS JOURNAL 103 MAKING STRATEGY HAPPEN Introduction Not all practices need a business plan, a strategic plan, strategic objectives or a clear direction. Those businesses with a compelling design proposition or a unique market expertise don’t need it. Does it help? Yes. Is it necessary? No. They are successful because they have a unique and compelling value proposition that clearly differentiates them from the normal. Think Gehry, think Richard Meier, think GHD! But most businesses, and I mean 95%, are not in this situation. Many like to think they are, but, in our experience, the market doesn’t see it this way. So what’s the solution to elevate your business above the performance of your competitor? It’s no secret that many design focussed businesses are superficial in their planning, concentrating on the design, fees, schedules and day-to-day deliverables rather than defining exciting, attainable objectives for the future that will motivate the key people and lead to high achievement. Our research shows that up to 70% of design businesses do minimal or no strategic planning. Of the remaining 30%, only one in three achieve clear and sustainable change in their business, which leads to new markets, new locations, new client sectors, new design approaches, new ways of working or improved leadership.
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70% of design businesses do minimal or no strategic planning.
In our experience, five critical elements need to be in place to make strategy happen: 1. Leadership needs to drive the process 2. A level of excitement 3. It has to be concise with definitive timeframes 4. It needs to be flexible 5. Consider execution before you start
Why develop a strategic plan in the first place? The key reason to develop a strategic plan is to position your business to focus the energy, resources, and time of the key people in the business in order to create and sustain an advantage in an increasingly competitive environment. Success, of course, is subjective
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and will mean different things to different people — it could include more interesting projects, more engaging clients, more talented people, more revenue, more profit or more innovation. Each business needs to work this out for itself and the strategic planning process should clarify these clear objectives for the future. An effective plan points to specific results to be achieved and establishes a course of action for achieving them. Where should you start? Take a look at your business. Does there seem to be a lack of focus on where the company is headed? Does everyone clearly understand the goals for the business? Strategically, how will the business achieve
those goals? Is your current planning horizon longer than one year? Are you developing annual business/operating plans without a strategic plan in place? Your strategy is your opportunity to develop and deliver on an integrated set of choices. Why does it matter? Arguably, the leading cause of business failure is the lack of a wellimplemented strategy. And if the leadership of the business is not aligned with where the business is heading, it will wander aimlessly, with priorities changing constantly and key people confused about their own contribution and priorities.
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Planning to fail Given this, why do so many businesses lack a clear strategy? And why do the majority of those who do fail to execute it? The fundamental problem is leadership. More often than not the practice leaders are engaged in the here and now — the current and next project; the current and next client etc. Yet, at the same time, they bemoan the lack of quality documentation or don’t understand why they’re not attracting and retaining great people. Secondly, the pathway to leadership in a design practice is typically through design or client relationship talent. It’s not business acumen that gets them there! This means that, typically, leaders of design practices don’t have the inherent discipline and capability that enables effective strategy development and execution. We talk to many leaders who fall victim to the gap between promises they’ve made and results their practices delivered. They frequently tell us they have a problem with accountability — people aren’t doing the things they’re supposed to do to implement a plan. They desperately want to make changes of some kind, but what do they need to change? They don’t know — and if they do they don’t know how to make it happen. Even when the strategy process has been attempted, typically busy leaders delegate the operational side of business, while they focus on the perceived “design and client” issues. This is completely wrong. Execution is not just words, documents and tactics — it is a discipline and a system. The leadership of the business must be deeply engaged in it.
The building blocks of success Level of excitement There is so much methodology and advice around strategy that sometimes you need something that will get you and your people excited to make things happen. In order for a
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Arguably, the leading cause of business failure is the lack of a well-implemented strategy.
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strategy to gain traction, and to engage the people within the business, there needs to be a level of anticipation in your objectives and plans. It can’t all be about improving the profit margin or making more effective use of your technology, or fixing up our communications collateral. Obviously these can be important initiatives but if you want to engage people there needs to be an element of excitement amongst the leadership and the people. Think about it. What would that be for your business? Creating a landmark in the city? Establishing a presence in a new location? Aiming for market leadership in a new sector? Becoming expert in a new work type? Strategic objectives should stretch the limits of your business capabilities, making them exciting to achieve, without being impossible to accomplish. Leadership Leadership can’t delegate strategy development and execution — leaders need to step up. A business can only make things happen, drive change, and deliver strategic objectives if the leaderships’ heart and soul are immersed in the business. The leadership needs to be in charge of getting things done by running the three core processes — setting the strategic direction and priorities, engaging the right people, and regularly monitoring progress.
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Only a leader can ask the tough questions that everyone needs to answer, then manage the process of debating the information and making the right trade-offs. And only the leader who is intimately engaged in the business can know enough to have the comprehensive view. What exactly does a leader who is in charge of execution do? How does he or she avoid being a micro manager, and getting caught up in the details of running the business? Briefly, the core elements are: • Knowing and challenging your people • Being realistic • Keeping to clear and actionable goals and priorities • Following up and creating energy • Rewarding those that contribute • Knowing yourself and setting the example
Flexibility Unforeseen change in business conditions naturally occur so you also need to allow for flexibility in your plans. It’s more effective to continually review and develop the businesses and align your strategic objectives rather than talking and debating the new office in Asia or the new documentation standards. Get on with things! Take small steps, assign smaller goals, communicate your successes, analyse your weaknesses, adapt your approach, seek out business partners that can assist — make things happen, measure their success or otherwise. I can guarantee that others are. If you’re not, then remember our industry is too competitive and too dynamic for you to sit back and wait!!
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Take small steps, assign smaller goals, communicate your successes, analyse your weaknesses, adapt your approach…
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Concise with definitive timeframes Your strategy is not a business plan — they are 2 different things. You don’t need to document your strengths and weaknesses, you don’t need to define your brand and you don’t need a comprehensive set of numbers. Don’t create something that will sit in the bottom drawer and requires endless revisions to make it live. Start with the big picture — what does your business need to look like to thrive in the marketplace in three years? Then action these into ambitious but realistic milestones of three and twelve months, assign responsibilities and tasks to individuals, build in realistic timeframes, targets and measurement criteria to assess progress. With the right people and methodology it’s possible to develop a strategic plan, with a plan for execution, in one day. Consider execution at the start
And when you find yourself at the top don’t rest
We have seen strategic plans not being implemented over and over. In order to avoid this you need to have a plan and process in place for executing your strategy. You need to consider and involve those people that will contribute to making it happen at the early planning stages.
— the best businesses find ways to do great things even better.
They need to take ownership and be part of the process from the start.
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How will you reward those people that make it happen? Is that ownership becoming a Director, profit share, heading up a new office? I can guarantee that even if you aren’t thinking about this, your key people are. Work out what system you will use to track progress — how you will keep people up to date? Where will you keep the key documents? Is your strategy going to be shared with everyone in the business or just the highlights? How much time will the leadership dedicate to follow up and follow through and where is this time going to come from? How often will you meet to review progress? What support will you need? What will prevent the day
to day getting in the way? How much time and resources are you prepared to invest? Don’t commence the planning process until you have thought through these issues and put in place the systems to ensure you deliver on your plans. Don’t let strategy become planning! Management for Design has developed a unique approach to strategy development and execution that if implemented effectively ensures results. At the core is a methodology and system to ensure successful execution that involves the key people in the business.
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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 118 LEADING A DESIGN BUSINESS In design businesses, it’s common for leaders to be the face of the business, to nurture existing and future clients, as well as be the key initiators of design. But it’s often also the case that leaders have a challenging time separating themselves from the day to day activities of the business—allowing for time and energy to focus on building the business, improving the operations, surrounding themselves with great people, and nurturing the future leaders.
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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• Leaders are typically the key initiator of design and client relationships
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 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
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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 performance, an understanding of financials, 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 well?
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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/clarifying your business ‘drivers’ and desired business outcomes e.g. strategy, rainmaking, design, innovation project delivery etc. • Define, articulate and measure the performance criteria across these business ‘drivers’ • Ensure your key people are working in their core capability (set them up to succeed) • Understand and nurture their inherent personal strengths/weaknesses, temperament, and abilities
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Successful and effective leaders today, more often than not, are doing less and achieving more. To borrow from Mies Van Der Rohe ‘less is more’
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Management For Design provides can provide you with a framework to turn your ideas into actions. Refocussing your way of working means you’ll spend less time micro-managing, while the key decisions will always remain firmly in your hands For more information, contact Rob Peake on rpeake@m4d. com.au.
• Include measurable criteria in your executive agreements • Provide individual (and team) contribution requirements and link these to the profit/bonus pool • Provide regular (and expert) feedback on performance on a quarterly or 6 monthly basis Your business can be the vehicle that enables you to shape and control your destiny – both in life and your career. Your challenge as a design leader is to balance the creative and commercial aspects of what you do. Successful and effective leaders today, more often than not, are doing less and achieving more. To borrow from Mies Van Der Rohe ‘less is more’. n
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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 111 SURROUND YOURSELF WITH THE RIGHT PEOPLE
Introduction Your team consists of a lot more than the people you employ — they are only part of the equation. Leaders work with a team for which there are four critical components. Alongside your employees, the people who work with you include business owners, partners, your future leaders, specialists and advisors — this is your team. All components have an equally important role in your business.
1. Your partners Choose your partners carefully! Above anything else, you need to be sure you can trust one another, enjoy each other’s company, and work and communicate well to ensure you achieve great things for your business. Sharing similar values and aspirations for the future of your business, alongside being financially astute and forward-thinking are all important traits of a successful partnership. Finding a partner that offers credibility to your business, while also having skills and expertise that support and complement your own ensure a far broader skillset. This in turn will enable you to plan, grow and run your business more effectively. Today, your partners should possess an element of risk-taking, a desire to control their own destiny, and an enjoyment for watching
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Sharing similar values and aspirations for the future of your business, alongside being financially astute and forward-thinking are all important traits of a successful partnership.
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others receive the recognition they deserve. In a nutshell, they should complement your weaknesses and share your business passions. It goes without saying that you and your partners establish the culture within your business. Cultural misalignment among the leadership team is one of the first things that arises when business becomes difficult. When business is performing well, inadequate communication can be papered over. When there is leadership conflict and a sense of dissatisfaction in the business, this misalignment is one of the first things to come to the fore that really never goes away.
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2. Your future leaders
• Business development and work generation
Your future leaders should offer diversity to your business by bringing new skills and behaviours you don’t have. What are the characteristics to look for? Professionalism, independence and entrepreneurship. These individuals have a great work–life congruence — they value teamwork and respect others, and have the ability to put their egos aside to listen carefully and nurture those around them. Forward-thinking and open to new opportunities, future leaders challenge the status quo — by not being risk averse in their approach to business. They are keen to discuss their concerns with you and have solutions, not problems, to the business issues. In a nutshell, they have a winning personality and are invaluable assets to your business.
• S ervicing clients and representing the business
Your future leaders need to be mentored by you. You need to spend time with them on business management — very few others will! They need and deserve a plan for growth and advancement. In our experience, they typically won’t ask for this plan so the current leaders need to be pro-active about this. This should include an agreement / expectations surrounding:
• Delivery of services • Design collaboration • Client agreements and fee structures • Their role in strategic objectives • Attracting and retaining key people • Building and contributing to cultural values • Business and service innovation • Financial objectives and systems.
3. Your people Without people, you don’t own a practice — you own a job. It is obviously necessary to focus on hiring people who have the correct skills, but, more importantly, who culturally fit in your business and can bring quality and talent that you will need into the future. Foster a culture of accountability by surrounding yourself with people who want to build a career, rather than have a job.
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Your people should be trustworthy, hardworking, productive and work well as part of a team. There should also be a mix of demographics across gender, cultures and age. Hiring people with great energy and a positive outlook on the business is essential — after all they are representative of your business and will influence the impression others have of you and your credentials. A successful team needs to have experience, passion and commitment. Be careful not to simply go through the process of hiring people and then forget to interact with them. Working alongside your people to develop their skills and responsibilities makes an enormous difference when looking to build a team that is fully engaged in their role and is excited for future opportunities in the business. Don’t make the mistake of putting the wrong people in charge of hiring or failing to let go of the employees who don’t fit well in the business. The key issue to remember is trust your judgement! When evaluating your current and potential people, ask yourself the following questions: • Are they passionate? • Do they have a great work ethic? • Are they skilled? • Do they embrace challenges? • Are they fun to be around? Having strong, engaging systems across your business that enables your people to do the right work at the right time will not only ensure your business is run more effectively, but your people will be happier too! Such systems will also enable you to delegate responsibility comfortably. That in turn will ensure your staff members confidently take control within their roles — your systems are your path to independence and fulfilment!
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Working alongside your people to develop their skills and responsibilities makes an enormous difference when looking to build a team that is fully engaged in their role and is excited for future opportunities in the business.
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4. Your trusted advisors The main difference between a business and being self-employed is the team you surround yourself with. Consider what skills you don’t have in your business and surround yourself with experts, mentors and advisors that bring this capability. This will include experts in finance, tax, legal, risk, marketing and strategy etc. Having the right people around your business will enable you to learn from experts in your industry. You will get the return on your investment that is imperative to the success of your business. Surround yourself with experts who: • Have demonstrated expert knowledge and skills in their field of work • Know how to get things done • H ave a network of people they can refer you to promptly • Complement your weaknesses
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• Put your interests first
• A re forward-thinking and able to assist in driving your business further.
Once you have established a strong relationship it is important to nurture it as your business develops further. Asking questions as you go and liaising closely together will help to build a stronger relationship on which you can fully manage every element of your business.
Proper guidance from your accountants, tax advisors, financial advisors, and legal counsel is imperative for building a strong, successful business. Although these advisors can be expensive, their advice can provide you with an incredible return on your investment by helping you structure a strong business while avoiding pitfalls along the way.
Being able to receive the support and advice you need from the experts around you will make an enormous difference to how you view your business and the decisions you make as a result. Having a strong and respected team on board will contribute to any decision you make — it is the combined input of your team that makes it the right decision.
• A re reliable, credible and available when you need them
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MANAGEMENT FOR DESIGN BUSINESS JOURNAL 108 BUSINESS MANAGEMENT SYSTEMS FOR ARCHITECTS, ENGINEERS AND CONSULTANTS Why you should invest Your Business Management System is one of the core foundations of your business. An effective and integrated system will enable you to more effectively control your business and is a key foundation to enable you to build your business. At any given moment, project-based firms need real-time information to: • Provide insight into the status of project profitably • Understand how the business is performing and why problems occurred • Assess the impact on the business, and what should be done to enhance performance • Efficiently share information throughout the organization. A good business management system enables your business to: • Improve project delivery and profitability • Improve business performance • Streamline your operations and execution • Generate more work
What you will achieve An optimised integrated business management system allows you to:
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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 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
MANAGEMENT FOR DESIGN
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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 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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