Firms use a variety of metrics to measure their financial performance and behavior. The most common is profitability – did we make more money than we spent doing the work. This is usually determined by looking at the value of the hours spent versus the net project fee. Each project is evaluated with the gains and losses aggregated to indicate the overall firm or office performance.
Now if you’re an architect in a medium or large sized firm, you’ve probably been told that it’s important to be billable. This means there is a project to work on that you can charge your time to. When firm management looks at it, they see the employees are actively engaged in paying work.
“If you’re not billable, you won’t be here long” – or something like that was said to our firm's management group not long after the post 9/11 recession had started. Airlines tottered towards bankruptcy and projects were cancelled as money for development just seemed to dry up overnight. Layoffs followed. I wasn’t worried as I worked on institutional projects – which tend to be less affected by abrupt changes in the economy.
Being a bit of a contrarian and always ready to challenge a declaration – I began to think about it. There were all kinds of work activities we did that were billable, but also a complete waste of time. Poor project management practices, re-designing and over-drawing; re-researching those basic building systems yet again, and much much more.
Regardless, the goal became – to stay billable.
And this repeated itself again in 2008.
I’ve kept thinking about this as I discovered a natural aversion to all things accounting. I believe all real architects suffer from this. Perhaps it’s because deep down we don’t like constraints. We certainly don’t want to be monitored or bird dogged.
I think that in many ways accounting is a crude tool to navigate by. This manifests itself when one project team slows down temporarily and we don’t let them work on another project because it might hurt the project’s profitability. Never mind the firm is paying the team members anyways to sit idly.
Of course this begs the question – is the goal of the firm to make money in the collective sense – or is it more important for each project to be individually profitable? Might the whole be greater (and more important) than the sum of the parts? The answer has ramifications in how we reward teams and assess their success or failure.
In my experience of trying to make each project profitable, it became a weekly hunt to find those who had put time to my job, but shouldn’t have. Some did by accident, others just camped too long. The question I eventually asked was what value there was in parsing hours. It took time to find them, accounting's time to contact the offender and find out what they really did – and a little more time to fix the error. So really, was our goal to keep perfect records – no matter how long it took?
THAT NASTY WORD
I’ve also noticed that in the effort to reduce overhead costs, we often eliminate accounting and similar administrative positions and shift those tasks to project managers. Technically you can now consider the data entry efforts as billable. Never mind that project managers can quickly get bogged down in a quagmire of numbers – to the exclusion of tending to the client or the progress of the work.
LET’S WASTE SOME FEE
I assisted on a large project that was an award winning addition to a university campus. In reviewing the team’s Design Development set, all 226 sheets – I suggested there were better ways to produce the CD’s and more effectively document with less effort. The project manager’s response was insightful - “We’re not concerned as we have a good fee”.
Message received: it’s o.k. to waste fee as long as you are utilized and billable – and there is sufficient fee to cover your time.
SO WHAT ARE GOOD METRICS?
I’ve not answered the question yet as to what are good metrics for Architects to use. Here are some ideas:
Objective: Are we profitable? Now this is a good question to ask – and perhaps the only one. If we are making more money than we are spending, that is a positive indicator. However it isn’t necessarily a reliable gauge to know if we’re working effectively.
- We can negotiate a great fee and work wastefully, still making money. Alternatively, we may have a poor fee and work very efficiently, making a profit.
Subjective: The client’s opinion of us and our work. After profit, this may be the next most important indicator. If they are pleased and give us additional work, our efforts may be considered worthwhile even if we lost a little on the job.
Subjective: RFI’s, ASI’s, and change orders. These can be an indicator of poor project management or documentation. It may also reflect a “B” team contractor or a client who keeps making changes. Parsing through a list of RFI’s and change orders can be educational.
Objective: How many sheets in a set of CD’s. This is still a pretty good guide to the overall effort spent – yes, even in the BIM age. The more sheets there are, the more information to manage.
Maybe the better effort is to understand what adds real value to our work – and relentlessly pursue that. Be less interested in looking for boxes to place time in and instead judge whether the effort expended actually contributed to progressing the project.
OTHER THAN DESIGN AWARDS
I’m curious, do you have any ideas or observations you would share about metrics you have found useful for your work? How have you been able to get a good picture of what your firm or office are doing – and judge whether it is effective or not?