Practice Management Member Conversations

I am seeking an open discussion on current practice management approaches to firm profitability.  It is nothing new that we are facing continual pressures by clients to "do more for less"; challenges on projects to do more and more details; be competitive on salaries and benefits; not to mention the economic pressures from these crazy times.  How are you addressing firm profitability?  THIS IS NOT A FEE DISCUSSION! but in concept/generalities, I am curious if others are raising rates and, if so, how that is being tolerated by your clients. Or otherwise, what approaches are you using to hopefully maintain some profitability?  Please include your firm size with your responses.  Thank you!

Most of our projects are % of construction costs; so, indirectly (with construction inflation), our fees have increased with the inflation amounts.  We have raised our hourly rates as well.  We raise them about every 3 years.

FYI, our labor costs are killing us right now.

I am seeking an open discussion on current practice management approaches to firm profitability.  It is nothing new that we are facing continual pressures by clients to "do more for less"; challenges on projects to do more and more details; be competitive on salaries and benefits; not to mention the economic pressures from these crazy times.  How are you addressing firm profitability?  THIS IS NOT A FEE DISCUSSION! but in concept/generalities, I am curious if others are raising rates and, if so, how that is being tolerated by your clients. Or otherwise, what approaches are you using to hopefully maintain some profitability?  Please include your firm size with your responses.  Thank you!

I am seeking an open discussion on current practice management approaches to firm profitability.  It is nothing new that we are facing continual pressures by clients to "do more for less"; challenges on projects to do more and more details; be competitive on salaries and benefits; not to mention the economic pressures from these crazy times.  How are you addressing firm profitability?  THIS IS NOT A FEE DISCUSSION! but in concept/generalities, I am curious if others are raising rates and, if so, how that is being tolerated by your clients. Or otherwise, what approaches are you using to hopefully maintain some profitability?  Please include your firm size with your responses.  Thank you!

Eva, I have experienced in medium and large firms over the 10 years or so, that there is a much higher focus by leadership on monthly utilization of each staff member and tracked target multiplier performance in tracking profitability. This is especially evident in firms with non-architect business MBA staff in their ops team that all they do is report and drive utilization and report multiplier performance on weekly basis to leadership. 

This are very good measure but the key to this is communicating to staff the successes and how to make team adjustments to fix when a project is getting behind and to not lose sight to avoid compromising the quality of design and deliverables and to avoid putting extreme pressure on staff that can result in a sweat shop atmosphere.

I never could separate the fee and the follow-on tracking of profitability - profitability was based on the contracted fee.  I found getting behind in the monthly and for some projects weekly, utilization and profit measures was attributable to expending unexpected fee hours in addressing sometimes frivolous owner and/or contractor situations as well as excessive internal digital REVIT preparation, view checking, clash detection and managing clash resolutions, etc. and finally the delivery of documents. I liked the old and simple light table pin-bar mylar overlay process before computers - I guess I'm showing my age here with that comment - back when an architect wrote every note and drew every line and knew what it was.

For many firms now the multipliers are now including the contribution of time from their IT departments and other ops staff. And, to make a lump sum fee even more challenged is when a firm recovers all or a portion of their BD and/or marketing cost in the fee, and another heavy hit can be when execs with the highest hourly rates will poach hours to achieve their utilization even with low utilization targets.  All these factors may be necessary in some form in a firm's policy or for individual projects, but these factors can quickly drain profitability after the project starts, and when the architecture team needs to utilize and burn precious design and production hours to hit deadlines.

Getting behind in profitability can also be attributable inaccurate lump sum fee projections. It is a challenge to rectify dropping profitability after the project starts, and you see the trend after just a few months after the project team starts design and production. So, at the front end I recommend (if you don't already do so) developing and comparing a top-down fee (percent of construction for basic services and + specialties) and a bottom-up fee projection of basic and specialty services to develop the lump sum fee. For my work and over the years, I developed a detailed basic and specialty services fee format.  If the result was too high, I would then develop a strategy to get the fee lower.

I found it is very difficult to fix a project's profitability, so it was essential for me in the marketing phase, to assure that all necessary internal measures, doing owner background research and identify precautions were evaluated.

The above is just my experience and opinion - I hope this is helpful or useful in some way.

I am seeking an open discussion on current practice management approaches to firm profitability.  It is nothing new that we are facing continual pressures by clients to "do more for less"; challenges on projects to do more and more details; be competitive on salaries and benefits; not to mention the economic pressures from these crazy times.  How are you addressing firm profitability?  THIS IS NOT A FEE DISCUSSION! but in concept/generalities, I am curious if others are raising rates and, if so, how that is being tolerated by your clients. Or otherwise, what approaches are you using to hopefully maintain some profitability?  Please include your firm size with your responses.  Thank you!

Eva, I have experienced in medium and large firms over the 10 years or so, that there is a much higher focus by leadership on monthly utilization of each staff member and tracked target multiplier performance in tracking profitability. This is especially evident in firms with non-architect business MBA staff in their ops team that all they do is report and drive utilization and report multiplier performance on weekly basis to leadership. 

This are very good measure but the key to this is communicating to staff the successes and how to make team adjustments to fix when a project is getting behind and to not lose sight to avoid compromising the quality of design and deliverables and to avoid putting extreme pressure on staff that can result in a sweat shop atmosphere.

I never could separate the fee and the follow-on tracking of profitability - profitability was based on the contracted fee.  I found getting behind in the monthly and for some projects weekly, utilization and profit measures was attributable to expending unexpected fee hours in addressing sometimes frivolous owner and/or contractor situations as well as excessive internal digital REVIT preparation, view checking, clash detection and managing clash resolutions, etc. and finally the delivery of documents. I liked the old and simple light table pin-bar mylar overlay process before computers - I guess I'm showing my age here with that comment - back when an architect wrote every note and drew every line and knew what it was.

For many firms now the multipliers are now including the contribution of time from their IT departments and other ops staff. And, to make a lump sum fee even more challenged is when a firm recovers all or a portion of their BD and/or marketing cost in the fee, and another heavy hit can be when execs with the highest hourly rates will poach hours to achieve their utilization even with low utilization targets.  All these factors may be necessary in some form in a firm's policy or for individual projects, but these factors can quickly drain profitability after the project starts, and when the architecture team needs to utilize and burn precious design and production hours to hit deadlines.

Getting behind in profitability can also be attributable inaccurate lump sum fee projections. It is a challenge to rectify dropping profitability after the project starts, and you see the trend after just a few months after the project team starts design and production. So, at the front end I recommend (if you don't already do so) developing and comparing a top-down fee (percent of construction for basic services and + specialties) and a bottom-up fee projection of basic and specialty services to develop the lump sum fee. For my work and over the years, I developed a detailed basic and specialty services fee format.  If the result was too high, I would then develop a strategy to get the fee lower.

I found it is very difficult to fix a project's profitability, so it was essential for me in the marketing phase, to assure that all necessary internal measures, doing owner background research and identify precautions were evaluated.

The above is just my experience and opinion - I hope this is helpful or useful in some way.

I am seeking an open discussion on current practice management approaches to firm profitability.  It is nothing new that we are facing continual pressures by clients to "do more for less"; challenges on projects to do more and more details; be competitive on salaries and benefits; not to mention the economic pressures from these crazy times.  How are you addressing firm profitability?  THIS IS NOT A FEE DISCUSSION! but in concept/generalities, I am curious if others are raising rates and, if so, how that is being tolerated by your clients. Or otherwise, what approaches are you using to hopefully maintain some profitability?  Please include your firm size with your responses.  Thank you!

Eva, I have experienced in medium and large firms over the 10 years or so, that there is a much higher focus by leadership on monthly utilization of each staff member and tracked target multiplier performance in tracking profitability. This is especially evident in firms with non-architect business MBA staff in their ops team that all they do is report and drive utilization and report multiplier performance on weekly basis to leadership. 

This are very good measure but the key to this is communicating to staff the successes and how to make team adjustments to fix when a project is getting behind and to not lose sight to avoid compromising the quality of design and deliverables and to avoid putting extreme pressure on staff that can result in a sweat shop atmosphere.

I never could separate the fee and the follow-on tracking of profitability - profitability was based on the contracted fee.  I found getting behind in the monthly and for some projects weekly, utilization and profit measures was attributable to expending unexpected fee hours in addressing sometimes frivolous owner and/or contractor situations as well as excessive internal digital REVIT preparation, view checking, clash detection and managing clash resolutions, etc. and finally the delivery of documents. I liked the old and simple light table pin-bar mylar overlay process before computers - I guess I'm showing my age here with that comment - back when an architect wrote every note and drew every line and knew what it was.

For many firms now the multipliers are now including the contribution of time from their IT departments and other ops staff. And, to make a lump sum fee even more challenged is when a firm recovers all or a portion of their BD and/or marketing cost in the fee, and another heavy hit can be when execs with the highest hourly rates will poach hours to achieve their utilization even with low utilization targets.  All these factors may be necessary in some form in a firm's policy or for individual projects, but these factors can quickly drain profitability after the project starts, and when the architecture team needs to utilize and burn precious design and production hours to hit deadlines.

Getting behind in profitability can also be attributable inaccurate lump sum fee projections. It is a challenge to rectify dropping profitability after the project starts, and you see the trend after just a few months after the project team starts design and production. So, at the front end I recommend (if you don't already do so) developing and comparing a top-down fee (percent of construction for basic services and + specialties) and a bottom-up fee projection of basic and specialty services to develop the lump sum fee. For my work and over the years, I developed a detailed basic and specialty services fee format.  If the result was too high, I would then develop a strategy to get the fee lower.

I found it is very difficult to fix a project's profitability, so it was essential for me in the marketing phase, to assure that all necessary internal measures, doing owner background research and identify precautions were evaluated.

The above is just my experience and opinion - I hope this is helpful or useful in some way.

I am seeking an open discussion on current practice management approaches to firm profitability.  It is nothing new that we are facing continual pressures by clients to "do more for less"; challenges on projects to do more and more details; be competitive on salaries and benefits; not to mention the economic pressures from these crazy times.  How are you addressing firm profitability?  THIS IS NOT A FEE DISCUSSION! but in concept/generalities, I am curious if others are raising rates and, if so, how that is being tolerated by your clients. Or otherwise, what approaches are you using to hopefully maintain some profitability?  Please include your firm size with your responses.  Thank you!