Have a conversation about project details and fees so you can staff them right and finish work on time, preferably below the allocated fee.
On the architecture and engineering professions, we measure everything by time. We contract for services in a variety of ways, but it all boils down to the bottom line – paying our staff, ourselves, and our overhead from the fees we negotiate, based on a scope of services. This means we have to continually allocate and monitor time against services, measuring whether we’re spending more or less to accomplish the work than the fees under contract.Lately, I’ve listened to more examples of frustration, procrastination, and confusion about timecards, time-keeping and budgeting in general. I’ve had a few clients ask, “How should we determine utilization rates when people are working on both billable and non-billable work, such as competitions, proposals and overhead tasks?”
“As design professionals, we just want to design. Doesn’t anyone understand that?” Sorry, folks, you also have to run a business… or not, which is why profitability and compensation have remained a challenge in our profession.
Let’s start with some basics. I think we can all agree that we do better when both the manager and the person assigned a task have discussed and agreed upon the time and effort to be applied to a component of the work for which we’ve contracted. But how often does this happen? Judging from my observations, the answer is, “Not very.” A staff member is typically told to start working on something with very little conversation about how much of the fee converted to hours has been allocated to complete the task.
Why is this? Quite simply, many managers in our profession are really designers or technical staff who have migrated into a manager role, having no desire (and frequently no training) to actually manage. They may enjoy directing others but haven’t developed the skill to do so effectively.
Compounding this are team members who just want to take action, who have little skill in planning their work, estimating how long it will take, or how to utilize shortcuts. Those shortcuts might include referencing similar work, only doing what is really needed rather than what “I’d like to explore,” and so forth. There’s little thought given to whether or not the length of time projected exceeds the fee available. Sound familiar?
So, what skills are needed? Let’s start with a mandate that no work begins without a discussion between the project manager and the team doing the work about the scope and, more importantly, the process to address it, exploring alternative methods that might accomplish the same end in less time. Add to this an agreement between all parties that the methods to be utilized are acceptable. This is not about a manager telling someone how long they have to accomplish something; it’s a negotiation that will only be successful if all parties are in agreement.
Next, all parties must accept responsibility to say, “This is not working. Let’s figure out how to get back on track.” In other words, the project manager is not just giving orders and the team is not just taking them. Together, they’re collaborating in designing and then adjusting the process by which they’ll do their best work within the fee available; or better – below the fee allocated. Yes, we have a profit margin built into our standard billing rates, but that doesn’t mean we have to utilize every hour the contracted fee adds up to. This is exactly why some firms are much more profitable than others.
My philosophy has always been: get on the job, do your best work and then get off the job. But never start working until you’ve planned it as a team in alignment with the contract with the client.
Now let’s talk about “utilization,” the percentage of billable time a person at each level is expected to achieve. Typical staff utilization usually runs quite high (90 to 95 percent), while a leadership principal might be 50 percent and a design or technical principal 75 percent.
In practice, at Gensler we depended heavily on the good judgment of our studio directors and project managers to give guidance and make commitments on this sort of thing. We found it way too difficult to institutionalize this in hard numbers and formulas. It was a target, one to be monitored, certainly, with recommendations about how to get closer to the objective, while at the same time understanding that utilization will vary from time to time because of workload, or particular overhead assignments that we wanted to accomplish.
Then there’s the issue of dealing with marketing time, i.e, the “free” work we often do to get a job or to participate in a competition. Here, we work to carefully assess the risk first (what are our odds of winning the project?) and to budget accordingly. When we make a decision to proceed, we analyze what needs to be done. Designers and architects tend to work on prospective projects as if such projects were already won and real, rather than figuring out how to do only what is necessary and important to the client so you get chosen over the competition. Success is never found through doing more work, but always in presenting an innovative response to a client’s issues.
This marketing time is documented so that if a project proceeds, it is added onto the job cost record. In other words, speculative time to get the job is considered a part of the fee that delivers value to the client.
All of this depends on good judgment on the part of your leaders, designers and technical staff, careful budgeting of what you undertake, and careful monitoring of the team as it works through an assignment.
Are you training your leadership to foster this approach to their work? Has it become a part of your culture, such that no one would even think of working otherwise? Edward Friedrichs, FAIA, FIIDA, is a consultant with ZweigWhite and the former CEO and president of Gensler. Contact him at efriedrichs@zweiggroup.com.This article first appeared in The Zweig Letter (ISSN 1068-1310), issue #1090, originally published 2/9/2015. Copyright© 2015, Zweig Group. All rights reserved.
