Our firm has grown from 45 people to 100 people in 2 years. As a result, our previous way of managing staffing and project financial projections (excel spreadsheets) no longer works. The system was set up when the firm started in the early 2000s.
Any suggestions besides Deltek and Archioffice for nimble, real time financial projection and time management software?
Deltek Vision seems to be the default at nearly every firm I've ever worked for. If nothing else, it means finding people who know how to use it should be much easier.
gruen
Jan 13, 16 5:16 pm
I'm a l
gruen
Jan 13, 16 5:23 pm
Oops.
I'm a lot smaller, but also looking for a good integrated solution. For me, this should include project management (typical tasks and custom tasks that can be assigned). It should have the ability to attach expected time to these tasks. It should track actual time required and use this data for time sheets, for estimating and for resource tracking. Ideally it could also have the ability for team members to communicate and also have a private web based portal that clients can use to see progress on their project.
There are plenty of potential cloud based PM softwares out there. I'm looking at Asana right now. Last time I did this I found it to be overkill for me, but as I look ahead to getting employees and growing I think I'll need to do it. A lot of firms do use Deltek Vision, but I don't think it does everything I need. I also need something really affordable.
shellarchitect
Jan 13, 16 9:10 pm
Ajera?
dominiond
Jan 15, 16 9:28 am
Hi all- for some reason our accounting dept is resistant to using Deltek Vision. They aren't really articulating why. It makes sense to me to use it because from my understanding you can draw directly from timesheets and link it to the project budgets so you can tell where you are financially in real time. For those that are using Deltek, is that the case or are the sales people overstating its capabilities?
Thanks everyone for your advice-
gwharton
Jan 15, 16 12:33 pm
Again: what makes you think hours spent has anything to do with where you are financially in real time?
Miles Jaffe
Jan 15, 16 1:18 pm
Especially when you add in all those hours spent tracking hours spent.
If I recall correctly, gwharton is a proponent of "value based fees" instead of "cost based fees". I share that point of view. However, even if services are priced based on their value, a firm still needs to track time.
You don't want to "value price" a project @ $115,000 when the past two similar projects actually cost you $125,000 to deliver.
There's an old saying in the quality management industry: "if you can measure it, you can't manage it". That concept applies in architecture as well.
null pointer
Jan 16, 16 8:14 pm
I track time because data matters.
If I know how much time things take, I can price them accordingly or estimate the hours with more accuracy (which builds a lot of trust with clients).
quizzical
Jan 16, 16 8:57 pm
^ oops - typo in my post above.
It should read "if you can't measure it, you can't manage it"
gruen
Jan 16, 16 9:04 pm
Quiz I was hoping for a shrodingers cat.
dominiond
Jan 17, 16 6:54 pm
gruen and proto- thanks for the links. Both are interesting- thinking that I'll shadow track two of my studio projects in each one in the free versions to see how it goes. thanks again and if you have tomorrow off- happy volunteering~
gruen
Jan 17, 16 7:14 pm
If you are considering more than just time tracking, look at how they integrate with PM software.
I like toggl because it runs on desktop and iPhone. Also because you are not reporting what you DID work on, but what you are working on right now.
Maybe that will get you closer to real time tracking.
gwharton
Jan 18, 16 12:19 pm
quizzical: "However, even if services are priced based on their value, a firm still needs to track time."
No, you don't.
At least, not if you don't have any hourly contract employees. If your staff are salaried, your labor costs are essentially fixed. They only vary if you staff up/down or give pay raises.
This idea that hours spent on a project is a representation of your true costs and have anything to do with your profitability is a pernicious and false myth which leads to all sorts of poor decision making in architectural practices. It's BAD BUSINESS. If you and your staff are salaried, the amount of time you spend working on a project has very little impact on your actual costs. You've got to make payroll regardless of what you or your staff are working on or what their utilization rates are.
More importantly, the amount of time spent also does not have much to do with real productivity or your income flows. Your profit is dependent on having more money come in than goes out. You know what your costs are to fair degree of accuracy without time tracking, and your income is depending on meeting contractual milestones and delivering billable work product to clients. So what you REALLY need to measure is THROUGHPUT (also effectiveness and conversion), not time.
The main reason we track time is habit, not utility. Architects started doing it back in the 70s, mainly because lawyers and accountants had started doing it a decade earlier. They did it mainly because it had been adopted by mass manufacturing operations in the post-war period as an efficiency measure and it was easy. We track time because we can easily measure it, not because it means anything useful for our actual profitability or productivity.
Unfortunately, you are what you measure. So architects in this habit of mind for managing their businesses have become time-optimizers, not profit-optimizers, effectiveness-optimizers, or productivity-optimizers. This is widely reflected in our poor profitability and business practices.
Time tracking also puts your staff on a treadmill for no good reason and encourages work habits that lead to burnout and lots of short-sighted decisions.
proto
Jan 18, 16 1:13 pm
i get the idea of focusing on the metric that matters but, i'm not following how that works.
how do you measure throughput & throughput efficiency?
(i'm also a tiny office, two partners & part time asst as needed; work loads vary constantly [if that makes any sense]; each month is a new adventure billing-wise)
gwharton
Jan 18, 16 1:52 pm
A few different ways:
1) Switch from time tracking to task-based project management. By tracking what needs to get done, when, and whether or not you're getting it done effectively, you will have a much better measure of throughput and catch problems much earlier than is possible via time tracking.
2) Don't worry about efficiency. Efficiency doesn't really matter when it comes to profit unless you are running a gigantic, mass-scale production system with linear bottlenecks. Worry about effectiveness. How effective are you at delivering value to the client and getting paid for it?
3) You can also measure your contract-to-income conversion rate. How quickly can you turn that design contract into collection of a billed fee? This is one aspect of effectiveness, which ultimately means: how much value is being delivered in a period of time and then converted to cash flows?
4) Similarly, you can measure "innovation sales." How much additional work is your client hiring you to do once you've already started working on the base contract? How much of what you are selling this year is a new product or service for you within the last two years or five years? This is a measure of both client satisfaction and value add.
There are lots of other things you can measure too. But that's a good start.
Ultimately, what you want to do is set up your core metrics and organizational reward system to focus on results over efforts, output over input, performance over method, and effectiveness over efficiency. Doing so will turn you into a profit maximizer.
If you're looking for a fist step in doing this, here's a simple thing you can do (which is also reversible if you're struggling with it):
HOW I LEARNED TO STOP WORRYING AND KILL THE TIMESHEET.
A) Keep your time tracking system in place, but disconnect it from your cost accounting.
B) Instead of allocating hours spent to project time budgets after the fact, instead allocate a percentage of your labor overhead to a project as an estimated periodic fixed cost. Do this for every project until you have allocated 100% of your labor costs to your projects.
C) Identify key deliverable milestones and income triggers in your contracts. These are the points at which you are obligated or want to have some portion of the work complete and delivered, and thus can bill for it under the contract. Plot these against the costs allocated to the project. You now have a projected revenue and profit curve for the project.
D) Make your PMs aware of and accountable to those milestones. Accountability can be performance bonuses, part of annual reviews and promotion prospects, or whatever. Let them know that their performance is going to be measured against how well they hit them. Then tell them to come up with a task-based plan to get it done, explicitly identifying what needs to get done when in order to meet each milestone. Encourage them to work with their team members to create this plan so that it is realistic. Everyone who will be working on the project needs to buy into the plan and commit to meeting its deadlines and expectations.
E) Check the task plan against the projected cost allocation to see if the staff you have assigned to work on the project can get it done. If the task plan as projected does not deliver billable work to the client with enough contingency to cover unforeseen problems, then hire or allocate more people to work on it, adjusting the task plan accordingly.
F) Start working. Encourage PMs to meet with their team every Monday morning to review the week's task workload and milestones. Then meet again on Friday to review work accomplished, identify problems, and revise the task plan to reflect the current situation.
G) Have the PM make periodic completion progress reports up the chain to management (which will also give the PM an incentive to get progress completion information from their team members). It's best to have them do this weekly, but you can do it monthly if you want to start slow. This will allow accounting to have a clearer picture of how likely the projected cash flows from work delivered are to occur when projected.
H) Lather. Rinse. Repeat.
I) If you want, use the time information you've still been collecting to double-check what you've been doing against the old system. You are very likely to find at this point that what you had previously been showing as "write-offs" have disappeared, and that your old time-budgeted WIP tracking system did not do a good job of telling you where you were financially on a project compared to your real work progress.
Eventually, you'll stop putting the effort into tracking time spent because you'll realize how useless and wasteful it is. Your staff will love you for that as they get the message that you trust and value them, and employee retention will improve. Your profit margins will also get healthier and you are likely to find that the old "treadmill" work habits have also gotten much better.
Obviously, your mileage may vary, but you have nothing to lose trying this except a poorly-conceived set of financial management habits which are inhibiting your profit potential.
quizzical
Jan 18, 16 4:02 pm
gwharton: yes - I understand what you're saying, but only from the perspective of the firm where you work.
In most of the firms where I worked during my career, a preponderance of employees were NOT salaried -- meaning junior staff were paid hourly, with a 50% premium for overtime; intermediate staff were paid hourly, with no extra premium for overtime; and senior staff were paid on a salary. Most of our projects were fixed fee contracts, with about 15% of our work being done hourly. In this context, it was important -- and not burdensome -- to track the actual level of effort and cost associated with the delivery of our projects.
Additionally, most of these firms were highly profitable and most of those profits were distributed as bonuses to staff. While never wanting to reward staff simply based on the number of hours worked (that compensation's already been factored in - to a degree - for junior and intermediate staff) it was important to know actual project profitability (not some wet finger in the air number) when making bonus distribution decisions.
But, as you say, YMMV
gwharton
Jan 18, 16 4:45 pm
In the Current Year (TM), most architectural firms in major urban areas have mostly salaried employees. Hourly staff are rare now. Almost unheard of at the two-years-experience and higher level, and essentially never outside of temporary contracts.
And T&M contracts are even more rare.
If you have hourly staff or cost-plus contracts at this point, you really shouldn't. It's a bad business decision that puts an artificial cap on your profits while leaving your cost exposure open-ended.
quizzical
Jan 18, 16 5:27 pm
gwharton: it's pretty much a moot point for me since all of my "bad business decisions" allowed me to retire (very comfortably) at age 62 from a firm in a major urban area.
How many can say that "in the current year" ?
gwharton
Jan 18, 16 5:30 pm
We weren't all lucky enough to be born into the opening days of the world's biggest credit bubble. Some of us were born too late for that and have to scramble for what's left after the Baby Boomers looted everything. :)
TIQM
Jan 18, 16 5:42 pm
OP asked:
"Hi all- for some reason our accounting dept is resistant to using Deltek Vision. They aren't really articulating why. It makes sense to me to use it because from my understanding you can draw directly from timesheets and link it to the project budgets so you can tell where you are financially in real time. For those that are using Deltek, is that the case or are the sales people overstating its capabilities?"
We have used Deltek for many years. That is exactly what it does. Timecard entries are made, and this data gets drawn into the database and can be analyzed in many useful ways. Our project managers can get Project Progress Reports, where they can check on total hours spent, hours by phase, direct expenses, net income, profit, effective multiplier, employee utilization, etc. Without this kind of capability, you are really flying blind.
TIQM
Jan 18, 16 5:49 pm
Your accounting people may be avoiding Deltek because it's expensive. They charge by the overall number of employees, not by the seat.
TIQM
Jan 18, 16 6:16 pm
gwharton said:
"This idea that hours spent on a project is a representation of your true costs and have anything to do with your profitability is a pernicious and false myth which leads to all sorts of poor decision making in architectural practices. It's BAD BUSINESS. If you and your staff are salaried, the amount of time you spend working on a project has very little impact on your actual costs. You've got to make payroll regardless of what you or your staff are working on or what their utilization rates are."
While I agree that if your staff is salaried, then there is no immediate correlation between direct labor cost and profitability. But hours spent are a representation of the opportunity cost of that labor. If an employee spend ten hours on a project, that's ten hours they cannot spend on other projects. If they are not efficient with those hours, there is a lost opportunity cost. Even if they are meeting their deadlines, if employees should be spending 90% of their time on projects, but they are spending 60%, they are underutilized. That time could have been used to achieve deadlines faster, or put toward new projects to bring in additional fees. I don't understand how you can really understand staff efficiency if you don't track hours.
Although we charge a percentage fee, and bill on a percentage-complete of a phase, on a monthly basis, we often bill changes as an additional service on an hourly basis. We of course need to track those changes by the hour.
gwharton
Jan 18, 16 7:20 pm
EKE: In a trivial sense, you are correct that if you spend your time working on one thing, you cannot be working on something else, and therefore there is an opportunity cost associated with that choice.
But if your work is getting done and you are making a healthy profit, it literally does not matter what your employees are doing from hour to hour.
More importantly, if you are measuring their productivity by utilization rates (which actually don't correlate very well to real productivity (i.e. throughput), then you've set up a situation where your employees are disincentivized to spend time creating value for the company and incentivized to grind on projects. You also set up an inversion of the normal capacity/revenue relationship: where you do not increase capacity until you have the revenue to support it, rather than letting profit drive the increase in capacity, which then increases revenue (the normal way it's done).
That in turn leads to systemic overwork of employees and treadmill culture which burns people out.
Remember also that your employees are volunteers. You don't own them. They are human beings and not resources to be spent. That is particularly important in our business, which is 100% dependent on intellectual capital. Educated creative professionals are much more productive when you treat them with respect and trust. Time tracking, on the other hand, communicates a message of fundamental distrust in your employees, and indicates management with control issues and a problem with micromanagement. Honestly, if your staff are getting the work done on time and you're making a healthy profit, why do you care if they are at an 80% vs a 90% utilization rate? In fact, wouldn't everybody be happier if you could increase your profit margins while reducing utilization? They you could focus more mental energy on non-billable things like making your business better, developing new services and products, making new client relationships, and just generally not being a grind all the time.
Even assuming that time reports are accurate (when we all know they are thinly-disguised fiction), by default time-tracking treats hours as fungible when they are not. Does the hour you spend filling out your timesheet have the same value to you or your client as the hour you spend coming up with the killer design concept which makes the project great? Obviously not. All hours are not equal, even from the same person. So why do you track and treat them as equal in value?
TIQM
Jan 18, 16 9:16 pm
"why do you care if they are at an 80% vs a 90% utilization rate?"
I'm not too concerned if they have an 80%, but I'm more concerned if they are at a 65% rate.
Anyone who has spent any time working in my firm knows that I treat them with respect and trust, and that we have anything but a "treadmill culture". The great majority of our employees have been with us five years or longer, and we have many who have been with us 10+ years. We are certainly doing something very right...yet we track hours, as does most of the industry. I think the key is in how you treat people.
You've obviously given this a lot of thought, and have formulated a pretty detailed argument for it. What's your angle?
gwharton
Jan 19, 16 12:03 pm
My "angle" is pretty simple: I want architects to be smarter business people. That's pretty much it.
Everyday Intern
Jan 19, 16 12:31 pm
gwharton, how many firms do you know of that are doing things this way? I'm intrigued, but have to admit ignorance to most business practices. I know I'm tracking time in Deltek and that's about it at my firm. There is a billable percentage (time spent on billable vs overhead) that the firm leaders occasionally bring up when it becomes a problem with a particular employee or project team, but I'd be surprised if there is much thought to the structure you describe. What firms are doing things your way?
gwharton
Jan 19, 16 12:35 pm
Not many architectural firms are doing this yet. PSMJ keeps track of a few of them. But it's becoming much more common in law and accounting firms. The ABA has recommended moving away from time-based financial management. CPAs are ditching it too.
Architects, as usual, are far behind the curve on this stuff.
gruen
Jan 19, 16 1:18 pm
ghwharton - I'm fascinated by this discussion. I'd love to hear some more "real world" or "day to day" examples of how you implement this.
One reason I started my own firm was that I was sick and tired of this situation:
I'm a PM on a multi million dollar project. It's CA. We have a limited time/$$ budget remaining. I'm required to carefully track my time applied to each phase and project. I'm instructed to fill out my time card honestly, even if I'm working extra hours. I feel that the partners underbid this project, or didn't allocate enough time to each phase. This problem seems to occur on each project.
Something comes up in the project - either the need to provide extra customer service, or the need to put out an important fire during CA. I spend more hours than budgeted. Say I've been budgeted 5 hours a week for CA on this project, but one week I do 20 or 30 hours of CA. As a PM, and as a member of the business staff, I see that it's necessary for our firm to put on a good face and solve the problem.
The next week I get raked over the coals by one of my superiors for putting in extra time on the project.
Meanwhile, I've kept an important client happy and possibly saved our firm from a lawsuit.
The next week, another issue comes up on the same project, which will require more than the 5 hours I had allocated to it.
This time, I bill 5 hours to the project, and 5 hours to "office" and 5 hours to a different project and 5 hours I just work overtime without putting it on my time card.
Now, everyone is happy, except me of course.
Then, when I get the opportunity to leave and start my own firm, I jump at it, even though it means I'm making less money. The previous firm now starts to search for another PM. I'm sure they've gotten on fine without me, but it does seem like a silly game.
Again, I'd love to hear how you do it - I'd think it goes something like this:
You have a good idea of how many people/hours go into completing the project and a good idea of where you made money on it before and what you'd like to get out of a similar project in the future. You bid the project and the bid is accepted.
Now, you organize your team and give them the project. You set milestone deadlines that they are expected to hit. All you track is if they hit the deadlines.
Profit.
Again, like some others are asking, how do you know how many people to allocate, and how much time to put between the milestones? So much depends on the employee's current and projected work loads.
I'd think tracking time, even as a check against your assumptions is a good idea. You don't have to couple time to anything, but it is useful for projecting workload, the number of people required and where the milestones should be.
Certainly, employees don't want to feel like they are punching a clock.
I currently track my time in order to know how much to price future projects. It's the only metric I have, but I definitely agree that throughput is much more important than $/hr.
I actually do set weekly goals on completion of projects vs money - this can be VERY good at getting work accomplished, very good at helping prioritize projects and hitting profit goals. I do this right on my whiteboard - where I track active projects. I can put the dollar amount down, and see the total for the week. If the total is too low, then I know I need to add something, or re-prioritize.
I actually am on track for doubling my income since I've started this, without really any extra effort on my part.
Any other suggestions, especially for small and new firms?
TIQM
Jan 20, 16 12:43 am
Gruen: In my opinion, the problem in your story is not that your firm is tracking hours, but that your supervisors are being short-sighted and unreasonable.
All project are different. Some need more time in certain phases, and some need less, and different projects have different potentials for efficiency and profitability. Unforeseen things happen all the time. We aren't making widgets on a factory assembly line. A smart boss knows that when difficult challenges arise on projects, they need to be attended to according to contract and the industry standard of care. This means that budget and profit expectations need to be adjusted all the time. We constantly monitor project profitablilty, and when a project is upside-down, we look to understand the reasons for the problem before holding teams accountable.
That having been said, without understanding how many hours you are spending, you have no benchmark for how long a phase should take, and what deadlines should be set.
emmawilson
Mar 3, 17 4:52 am
Sharepoint, or Office 365 with SP online. The only Issue might be the migration or optimization. We faced it when we were too greedy to pay for SP developer, so we went and hire a 3rd party company, which turned out to be even better after all. I will leave you a link here. But yeah O365 is the best PM solution of all
JackBurling_CMAP
May 17, 21 6:53 pm
Hi @dominiond, you should check out CMAP Software. It's designed specifically for architects and is renowned for being intuitive and user friendly. It combines, CRM, budgeting, fee forecasting, resourcing, time tracking, expenses and invoicing, integrating with QuickBooks. If you'd like more information or to set up a call, email [email protected]
Hello all-
Our firm has grown from 45 people to 100 people in 2 years. As a result, our previous way of managing staffing and project financial projections (excel spreadsheets) no longer works. The system was set up when the firm started in the early 2000s.
Any suggestions besides Deltek and Archioffice for nimble, real time financial projection and time management software?
Thanks all-
Why are you still tracking time?
https://www.tickspot.com/
Deltek Vision seems to be the default at nearly every firm I've ever worked for. If nothing else, it means finding people who know how to use it should be much easier.
I'm a l
Oops.
I'm a lot smaller, but also looking for a good integrated solution. For me, this should include project management (typical tasks and custom tasks that can be assigned). It should have the ability to attach expected time to these tasks. It should track actual time required and use this data for time sheets, for estimating and for resource tracking. Ideally it could also have the ability for team members to communicate and also have a private web based portal that clients can use to see progress on their project.
There are plenty of potential cloud based PM softwares out there. I'm looking at Asana right now. Last time I did this I found it to be overkill for me, but as I look ahead to getting employees and growing I think I'll need to do it. A lot of firms do use Deltek Vision, but I don't think it does everything I need. I also need something really affordable.
Ajera?
Hi all- for some reason our accounting dept is resistant to using Deltek Vision. They aren't really articulating why. It makes sense to me to use it because from my understanding you can draw directly from timesheets and link it to the project budgets so you can tell where you are financially in real time. For those that are using Deltek, is that the case or are the sales people overstating its capabilities?
Thanks everyone for your advice-
Again: what makes you think hours spent has anything to do with where you are financially in real time?
Especially when you add in all those hours spent tracking hours spent.
harvest is what we use (we are only 3, tho)
www.getharvest.com
gwharton, you clearly have something to share...out with it!
(coming back to this thread, it looks my link above isn't pointing in the right place & I can't edit it anymore)
www.getharvest.com
Check out toggl.
gwharton: "Why are you still tracking time?"
If I recall correctly, gwharton is a proponent of "value based fees" instead of "cost based fees". I share that point of view. However, even if services are priced based on their value, a firm still needs to track time.
You don't want to "value price" a project @ $115,000 when the past two similar projects actually cost you $125,000 to deliver.
There's an old saying in the quality management industry: "if you can measure it, you can't manage it". That concept applies in architecture as well.
I track time because data matters.
If I know how much time things take, I can price them accordingly or estimate the hours with more accuracy (which builds a lot of trust with clients).
^ oops - typo in my post above.
It should read "if you can't measure it, you can't manage it"
Quiz I was hoping for a shrodingers cat.
gruen and proto- thanks for the links. Both are interesting- thinking that I'll shadow track two of my studio projects in each one in the free versions to see how it goes. thanks again and if you have tomorrow off- happy volunteering~
If you are considering more than just time tracking, look at how they integrate with PM software.
I like toggl because it runs on desktop and iPhone. Also because you are not reporting what you DID work on, but what you are working on right now.
Maybe that will get you closer to real time tracking.
quizzical: "However, even if services are priced based on their value, a firm still needs to track time."
No, you don't.
At least, not if you don't have any hourly contract employees. If your staff are salaried, your labor costs are essentially fixed. They only vary if you staff up/down or give pay raises.
This idea that hours spent on a project is a representation of your true costs and have anything to do with your profitability is a pernicious and false myth which leads to all sorts of poor decision making in architectural practices. It's BAD BUSINESS. If you and your staff are salaried, the amount of time you spend working on a project has very little impact on your actual costs. You've got to make payroll regardless of what you or your staff are working on or what their utilization rates are.
More importantly, the amount of time spent also does not have much to do with real productivity or your income flows. Your profit is dependent on having more money come in than goes out. You know what your costs are to fair degree of accuracy without time tracking, and your income is depending on meeting contractual milestones and delivering billable work product to clients. So what you REALLY need to measure is THROUGHPUT (also effectiveness and conversion), not time.
The main reason we track time is habit, not utility. Architects started doing it back in the 70s, mainly because lawyers and accountants had started doing it a decade earlier. They did it mainly because it had been adopted by mass manufacturing operations in the post-war period as an efficiency measure and it was easy. We track time because we can easily measure it, not because it means anything useful for our actual profitability or productivity.
Unfortunately, you are what you measure. So architects in this habit of mind for managing their businesses have become time-optimizers, not profit-optimizers, effectiveness-optimizers, or productivity-optimizers. This is widely reflected in our poor profitability and business practices.
Time tracking also puts your staff on a treadmill for no good reason and encourages work habits that lead to burnout and lots of short-sighted decisions.
i get the idea of focusing on the metric that matters but, i'm not following how that works.
how do you measure throughput & throughput efficiency?
(i'm also a tiny office, two partners & part time asst as needed; work loads vary constantly [if that makes any sense]; each month is a new adventure billing-wise)
A few different ways:
1) Switch from time tracking to task-based project management. By tracking what needs to get done, when, and whether or not you're getting it done effectively, you will have a much better measure of throughput and catch problems much earlier than is possible via time tracking.
2) Don't worry about efficiency. Efficiency doesn't really matter when it comes to profit unless you are running a gigantic, mass-scale production system with linear bottlenecks. Worry about effectiveness. How effective are you at delivering value to the client and getting paid for it?
3) You can also measure your contract-to-income conversion rate. How quickly can you turn that design contract into collection of a billed fee? This is one aspect of effectiveness, which ultimately means: how much value is being delivered in a period of time and then converted to cash flows?
4) Similarly, you can measure "innovation sales." How much additional work is your client hiring you to do once you've already started working on the base contract? How much of what you are selling this year is a new product or service for you within the last two years or five years? This is a measure of both client satisfaction and value add.
There are lots of other things you can measure too. But that's a good start.
Ultimately, what you want to do is set up your core metrics and organizational reward system to focus on results over efforts, output over input, performance over method, and effectiveness over efficiency. Doing so will turn you into a profit maximizer.
If you're looking for a fist step in doing this, here's a simple thing you can do (which is also reversible if you're struggling with it):
HOW I LEARNED TO STOP WORRYING AND KILL THE TIMESHEET.
A) Keep your time tracking system in place, but disconnect it from your cost accounting.
B) Instead of allocating hours spent to project time budgets after the fact, instead allocate a percentage of your labor overhead to a project as an estimated periodic fixed cost. Do this for every project until you have allocated 100% of your labor costs to your projects.
C) Identify key deliverable milestones and income triggers in your contracts. These are the points at which you are obligated or want to have some portion of the work complete and delivered, and thus can bill for it under the contract. Plot these against the costs allocated to the project. You now have a projected revenue and profit curve for the project.
D) Make your PMs aware of and accountable to those milestones. Accountability can be performance bonuses, part of annual reviews and promotion prospects, or whatever. Let them know that their performance is going to be measured against how well they hit them. Then tell them to come up with a task-based plan to get it done, explicitly identifying what needs to get done when in order to meet each milestone. Encourage them to work with their team members to create this plan so that it is realistic. Everyone who will be working on the project needs to buy into the plan and commit to meeting its deadlines and expectations.
E) Check the task plan against the projected cost allocation to see if the staff you have assigned to work on the project can get it done. If the task plan as projected does not deliver billable work to the client with enough contingency to cover unforeseen problems, then hire or allocate more people to work on it, adjusting the task plan accordingly.
F) Start working. Encourage PMs to meet with their team every Monday morning to review the week's task workload and milestones. Then meet again on Friday to review work accomplished, identify problems, and revise the task plan to reflect the current situation.
G) Have the PM make periodic completion progress reports up the chain to management (which will also give the PM an incentive to get progress completion information from their team members). It's best to have them do this weekly, but you can do it monthly if you want to start slow. This will allow accounting to have a clearer picture of how likely the projected cash flows from work delivered are to occur when projected.
H) Lather. Rinse. Repeat.
I) If you want, use the time information you've still been collecting to double-check what you've been doing against the old system. You are very likely to find at this point that what you had previously been showing as "write-offs" have disappeared, and that your old time-budgeted WIP tracking system did not do a good job of telling you where you were financially on a project compared to your real work progress.
Eventually, you'll stop putting the effort into tracking time spent because you'll realize how useless and wasteful it is. Your staff will love you for that as they get the message that you trust and value them, and employee retention will improve. Your profit margins will also get healthier and you are likely to find that the old "treadmill" work habits have also gotten much better.
Obviously, your mileage may vary, but you have nothing to lose trying this except a poorly-conceived set of financial management habits which are inhibiting your profit potential.
gwharton: yes - I understand what you're saying, but only from the perspective of the firm where you work.
In most of the firms where I worked during my career, a preponderance of employees were NOT salaried -- meaning junior staff were paid hourly, with a 50% premium for overtime; intermediate staff were paid hourly, with no extra premium for overtime; and senior staff were paid on a salary. Most of our projects were fixed fee contracts, with about 15% of our work being done hourly. In this context, it was important -- and not burdensome -- to track the actual level of effort and cost associated with the delivery of our projects.
Additionally, most of these firms were highly profitable and most of those profits were distributed as bonuses to staff. While never wanting to reward staff simply based on the number of hours worked (that compensation's already been factored in - to a degree - for junior and intermediate staff) it was important to know actual project profitability (not some wet finger in the air number) when making bonus distribution decisions.
But, as you say, YMMV
In the Current Year (TM), most architectural firms in major urban areas have mostly salaried employees. Hourly staff are rare now. Almost unheard of at the two-years-experience and higher level, and essentially never outside of temporary contracts.
And T&M contracts are even more rare.
If you have hourly staff or cost-plus contracts at this point, you really shouldn't. It's a bad business decision that puts an artificial cap on your profits while leaving your cost exposure open-ended.
gwharton: it's pretty much a moot point for me since all of my "bad business decisions" allowed me to retire (very comfortably) at age 62 from a firm in a major urban area.
How many can say that "in the current year" ?
We weren't all lucky enough to be born into the opening days of the world's biggest credit bubble. Some of us were born too late for that and have to scramble for what's left after the Baby Boomers looted everything. :)
OP asked:
"Hi all- for some reason our accounting dept is resistant to using Deltek Vision. They aren't really articulating why. It makes sense to me to use it because from my understanding you can draw directly from timesheets and link it to the project budgets so you can tell where you are financially in real time. For those that are using Deltek, is that the case or are the sales people overstating its capabilities?"
We have used Deltek for many years. That is exactly what it does. Timecard entries are made, and this data gets drawn into the database and can be analyzed in many useful ways. Our project managers can get Project Progress Reports, where they can check on total hours spent, hours by phase, direct expenses, net income, profit, effective multiplier, employee utilization, etc. Without this kind of capability, you are really flying blind.
Your accounting people may be avoiding Deltek because it's expensive. They charge by the overall number of employees, not by the seat.
gwharton said:
"This idea that hours spent on a project is a representation of your true costs and have anything to do with your profitability is a pernicious and false myth which leads to all sorts of poor decision making in architectural practices. It's BAD BUSINESS. If you and your staff are salaried, the amount of time you spend working on a project has very little impact on your actual costs. You've got to make payroll regardless of what you or your staff are working on or what their utilization rates are."
While I agree that if your staff is salaried, then there is no immediate correlation between direct labor cost and profitability. But hours spent are a representation of the opportunity cost of that labor. If an employee spend ten hours on a project, that's ten hours they cannot spend on other projects. If they are not efficient with those hours, there is a lost opportunity cost. Even if they are meeting their deadlines, if employees should be spending 90% of their time on projects, but they are spending 60%, they are underutilized. That time could have been used to achieve deadlines faster, or put toward new projects to bring in additional fees. I don't understand how you can really understand staff efficiency if you don't track hours.
Although we charge a percentage fee, and bill on a percentage-complete of a phase, on a monthly basis, we often bill changes as an additional service on an hourly basis. We of course need to track those changes by the hour.
EKE: In a trivial sense, you are correct that if you spend your time working on one thing, you cannot be working on something else, and therefore there is an opportunity cost associated with that choice.
But if your work is getting done and you are making a healthy profit, it literally does not matter what your employees are doing from hour to hour.
More importantly, if you are measuring their productivity by utilization rates (which actually don't correlate very well to real productivity (i.e. throughput), then you've set up a situation where your employees are disincentivized to spend time creating value for the company and incentivized to grind on projects. You also set up an inversion of the normal capacity/revenue relationship: where you do not increase capacity until you have the revenue to support it, rather than letting profit drive the increase in capacity, which then increases revenue (the normal way it's done).
That in turn leads to systemic overwork of employees and treadmill culture which burns people out.
Remember also that your employees are volunteers. You don't own them. They are human beings and not resources to be spent. That is particularly important in our business, which is 100% dependent on intellectual capital. Educated creative professionals are much more productive when you treat them with respect and trust. Time tracking, on the other hand, communicates a message of fundamental distrust in your employees, and indicates management with control issues and a problem with micromanagement. Honestly, if your staff are getting the work done on time and you're making a healthy profit, why do you care if they are at an 80% vs a 90% utilization rate? In fact, wouldn't everybody be happier if you could increase your profit margins while reducing utilization? They you could focus more mental energy on non-billable things like making your business better, developing new services and products, making new client relationships, and just generally not being a grind all the time.
Even assuming that time reports are accurate (when we all know they are thinly-disguised fiction), by default time-tracking treats hours as fungible when they are not. Does the hour you spend filling out your timesheet have the same value to you or your client as the hour you spend coming up with the killer design concept which makes the project great? Obviously not. All hours are not equal, even from the same person. So why do you track and treat them as equal in value?
"why do you care if they are at an 80% vs a 90% utilization rate?"
I'm not too concerned if they have an 80%, but I'm more concerned if they are at a 65% rate.
Anyone who has spent any time working in my firm knows that I treat them with respect and trust, and that we have anything but a "treadmill culture". The great majority of our employees have been with us five years or longer, and we have many who have been with us 10+ years. We are certainly doing something very right...yet we track hours, as does most of the industry. I think the key is in how you treat people.
You've obviously given this a lot of thought, and have formulated a pretty detailed argument for it. What's your angle?
My "angle" is pretty simple: I want architects to be smarter business people. That's pretty much it.
gwharton, how many firms do you know of that are doing things this way? I'm intrigued, but have to admit ignorance to most business practices. I know I'm tracking time in Deltek and that's about it at my firm. There is a billable percentage (time spent on billable vs overhead) that the firm leaders occasionally bring up when it becomes a problem with a particular employee or project team, but I'd be surprised if there is much thought to the structure you describe. What firms are doing things your way?
Not many architectural firms are doing this yet. PSMJ keeps track of a few of them. But it's becoming much more common in law and accounting firms. The ABA has recommended moving away from time-based financial management. CPAs are ditching it too.
Architects, as usual, are far behind the curve on this stuff.
ghwharton - I'm fascinated by this discussion. I'd love to hear some more "real world" or "day to day" examples of how you implement this.
One reason I started my own firm was that I was sick and tired of this situation:
I'm a PM on a multi million dollar project. It's CA. We have a limited time/$$ budget remaining. I'm required to carefully track my time applied to each phase and project. I'm instructed to fill out my time card honestly, even if I'm working extra hours. I feel that the partners underbid this project, or didn't allocate enough time to each phase. This problem seems to occur on each project.
Something comes up in the project - either the need to provide extra customer service, or the need to put out an important fire during CA. I spend more hours than budgeted. Say I've been budgeted 5 hours a week for CA on this project, but one week I do 20 or 30 hours of CA. As a PM, and as a member of the business staff, I see that it's necessary for our firm to put on a good face and solve the problem.
The next week I get raked over the coals by one of my superiors for putting in extra time on the project.
Meanwhile, I've kept an important client happy and possibly saved our firm from a lawsuit.
The next week, another issue comes up on the same project, which will require more than the 5 hours I had allocated to it.
This time, I bill 5 hours to the project, and 5 hours to "office" and 5 hours to a different project and 5 hours I just work overtime without putting it on my time card.
Now, everyone is happy, except me of course.
Then, when I get the opportunity to leave and start my own firm, I jump at it, even though it means I'm making less money. The previous firm now starts to search for another PM. I'm sure they've gotten on fine without me, but it does seem like a silly game.
Again, I'd love to hear how you do it - I'd think it goes something like this:
You have a good idea of how many people/hours go into completing the project and a good idea of where you made money on it before and what you'd like to get out of a similar project in the future. You bid the project and the bid is accepted.
Now, you organize your team and give them the project. You set milestone deadlines that they are expected to hit. All you track is if they hit the deadlines.
Profit.
Again, like some others are asking, how do you know how many people to allocate, and how much time to put between the milestones? So much depends on the employee's current and projected work loads.
I'd think tracking time, even as a check against your assumptions is a good idea. You don't have to couple time to anything, but it is useful for projecting workload, the number of people required and where the milestones should be.
Certainly, employees don't want to feel like they are punching a clock.
I currently track my time in order to know how much to price future projects. It's the only metric I have, but I definitely agree that throughput is much more important than $/hr.
I actually do set weekly goals on completion of projects vs money - this can be VERY good at getting work accomplished, very good at helping prioritize projects and hitting profit goals. I do this right on my whiteboard - where I track active projects. I can put the dollar amount down, and see the total for the week. If the total is too low, then I know I need to add something, or re-prioritize.
I actually am on track for doubling my income since I've started this, without really any extra effort on my part.
Any other suggestions, especially for small and new firms?
Gruen: In my opinion, the problem in your story is not that your firm is tracking hours, but that your supervisors are being short-sighted and unreasonable.
All project are different. Some need more time in certain phases, and some need less, and different projects have different potentials for efficiency and profitability. Unforeseen things happen all the time. We aren't making widgets on a factory assembly line. A smart boss knows that when difficult challenges arise on projects, they need to be attended to according to contract and the industry standard of care. This means that budget and profit expectations need to be adjusted all the time. We constantly monitor project profitablilty, and when a project is upside-down, we look to understand the reasons for the problem before holding teams accountable.
That having been said, without understanding how many hours you are spending, you have no benchmark for how long a phase should take, and what deadlines should be set.
Sharepoint, or Office 365 with SP online. The only Issue might be the migration or optimization. We faced it when we were too greedy to pay for SP developer, so we went and hire a 3rd party company, which turned out to be even better after all. I will leave you a link here. But yeah O365 is the best PM solution of all
Hi @dominiond, you should check out CMAP Software. It's designed specifically for architects and is renowned for being intuitive and user friendly. It combines, CRM, budgeting, fee forecasting, resourcing, time tracking, expenses and invoicing, integrating with QuickBooks. If you'd like more information or to set up a call, email [email protected]