Mark of success
It is a truism that many architectural practices are poor at management.Architects come out of university with a variety of aims: to design beautiful buildings; to become superstars; or just to make a useful contribution in the world. Many simply want to make a living. Few have a burning ambition to manage practices.
But it is also true that without proper management, clients will not be inclined to appoint an architectural practice in the first place, or if they do, the practice will undoubtedly not perform satisfactorily and lose money on the job.
Although there are a few practices with non-architects at the helm or in senior positions, the numbers are few and likely to remain that way. It is architects - however ill-trained and poorly motivated - who will have to get their minds around management.
Knowing you should try harder is chastening, but not very useful. What practices need is more focused advice. To this end, The Architects' Journal and architectural management consultancy Colander have carried out an analysis of the management performance of a range of architectural practices.
A half-day seminar on 29 November called 'Making practice pay' will present the results of the benchmarking exercise using areas of concern identified by the participating practices.
Using experts in their fields to offer practical advice on marketing, recruitment, finance, and professional indemnity, this is one seminar for architects where the word 'design' might not be mentioned. Good design, however, cannot flourish unless basic management lessons are learnt.
So what is benchmarking? It is the process of setting a recommended performance level against which an organisation can measure itself. If you underachieve the benchmark, then you are not doing well enough.
In the case of the AJ/Colander study, these benchmarks were to do with the management of architectural practices only. Colander used its knowledge of the profession, coupled with the results of a pilot study, to set the benchmarks. These covered a wide range of measures including profitability, staff turnover, expenditure on marketing and success in winning jobs.
The research shows the distribution of results from the participating practices, as well as statistics on other areas of their operations. Colander has then used this information to write a report for the practices, pinpointing the main areas of interest and concern: The Bench Mark Report.
In addition, the practices that took part in the study were given an inter-firm comparison. The practices were varied in terms of size, location, and type of work and were compared to a small number of practices that were most similar to them.
Participation in the benchmarking study is anonymous, hence in the interfirm comparison the practices did not know the names of those with which they were being compared.
However, they were given details on how they ranked against these practices on a number of criteria. For example, best on this measure, second best on another measure, worst on yet another. Colander accompanied this practice-specific report with a further detailed analysis and constructively critical comments.
Initial response from the participating practices has been positive: they found the benchmarking process very good and the interfirm comparisons excellent.
From the responses received to date, more than 90 per cent have indicated that they intend to participate again next year, giving them a chance to monitor their progress year on year. The study will also be open to new participants - further details will be available at the seminar.
So what were the issues that emerged from the first year's exercise? We are, of course, only able to discuss these in very general terms at the moment, but even so they still provide some valuable indicators of the state of the profession.
First of all, profit. Colander has developed a combined measure of profitability, putting together a number of commonly accepted measures, which makes it possible to compare practices of different sizes and types.
By doing this it discovered that in architecture big is not necessarily beautiful. It is actually more difficult for larger practices to achieve the (relatively modest) benchmark figure for profit than it is for smaller ones. This should have particular lessons for practices that are growing.
The authors say: 'We have consistently talked about the importance of good organisation structure and of good productivity.'
Hourly charge-out rates vary enormously. For example, for partners/directors these can vary between £20 and £200. For those still studying for Part 3 it varies between £16 and £72. This in itself is fascinating, but even more significant is the amount of chargeable work that partners/directors are doing - far too much, according to Colander.
'We were very unhappy to see that the average number of chargeable hours assumed for calculating charge-out rates exceeds 1,500 per annum for partners/directors in far too many cases, ' the report says.
If partners/directors do too much chargeable work, they are not spending enough time managing their practices and generating new business. In contrast, the report finds too little chargeable work being done further down the chain.
'This suggests spare capacity; either work is not being delegated down, or the wrong levels of fee earners are being employed.' Profitability by work stage is another area of concern, as it fluctuates wildly according to the stage. But of even more concern is the fact that too few practices measure this - only 11 per cent of the survey do it on all jobs, with 40 per cent not measuring it at all.
Staff turnover is, says the report, 'worryingly high . . . one of the most worrying of all the analyses to emerge form the whole survey'. It is concerned that this means that architects are not being given a satisfying environment in which to work and about the cost of high turnover, both to the practice and to its clients.
It says: 'We appreciate that while it is often held within the profession that you work for one practice 'just to get the experience on your CV and then move on', this is extremely costly to the profession in a myriad of different ways.'
Expenditure and time spent on marketing are both far too low, says the report.
Even worse, there is little correlation between these measures, and profitability.
This suggests that much of the effort that goes into marketing is ineffective.
'If the marketing efforts of most practices in this group are to be effective, ' the report says, 'then there is a need to raise both the level of expenditure and the hours spent on targeted marketing activities.'
The fact that far too many practices fall below the benchmark figure for the number of jobs won is undoubtedly related to this. In addition, practices are better at winning small jobs than big ones and large practices have a better track record than their smaller counterparts.
There is lots more helpful advice, for example, Yellow Pages seem to be a waste of time in terms of getting work, even for small practices there is a surprising divergence in the profitability of different sectors of work.
But the biggest measure is how far practices have to go. Some of the most profitable are labouring under big disadvantages - they are very small and their fee levels are too low. If they could solve these problems, how much more profit could they could make? It follows that companies that are a great deal less profitable must be making even more errors.
Helping address these issues is the main thrust of the 'Making Practice Pay' seminar, which will be held at the PriceWaterhouseCoopers training centre in central London. Issues addressed will include:
organising your finances - making sure that clients pay;
the true cost of recruiting, and how to find the right people;
professional indemnity insurance - are you covered adequately? Are you paying too much? and partnering - giving potential partners what they want and need.
There will also be a discussion, with a panel of experts, which will include Caroline Cole and Chris Andrews of Colander, and AJ columnist and RIBA vice president Paul Hyett.
Afterwards, there will be a drinks reception and a chance to continue discussions informally.
For details of the seminar, contact Tracy Collins on firstname.lastname@example.org
To learn more about participating in next year's benchmarking exercise, contact email@example.com
WHAT IS BENCHMARKING?
Benchmarking is a performance measurement tool used in conjunction with improvement initiatives to measure comparative operating performance. From this starting point, offices can begin to monitor and identify Best Practices. It is a permanent reference mark or point by which something can be measured.
In surveying, a 'benchmark' is a post or other permanent mark established at a known elevation that is used as the basis for measuring the elevation of other topographical points.
In design, management and technology, the term may have any of the following meanings:
1) A set of conditions against which a product or system is measured.
Managers frequently test and compare devices and procedures against a standardised (or aspirational) set of applications, contexts, user responses and results. The total context against which all products are measured and compared is referred to as the benchmark.
2) A procedure that is specially designed to provide measurements for a particular operating application.
3) A known product with which users are familiar or accustomed to that other newer products can be compared to. This is also known as control sampling.
4) A set of performance criteria which a product or action is expected to meet.
Internal audits should form part of a benchmark quality assurance procedure. In terms of Best Practice models, these definitions should extend across individual businesses.