The Vampire Factor: Are the universities ripping the architecture schools off?

Are the universities ripping the architectures schools of? Sure, the 18-20 architecture schools across the country are not the most significant revenue spinners for the universities. But, those revenues are not insubstantial.

When most people did architecture up until about 2005, there was still a strong connection between the profession and the architecture schools. This connection is still mostly the case today, but the difference then was that the architecture schools largely controlled their destinies. The schools could largely dictate what could be taught and how it was taught. Architecture schools largely controlled the agenda of architectural education. For the most part, there was a close linkage between the Architecture schools, the profession—via the Institute of Architects (genuflect and cross yourself)—and the registration boards.

 

To better understand Australian architectural education, the Australia Accreditation Council of Australia (AACA) is doing a survey of Architectural education in Australia. What is great is that the study is not only for architectural academics but also for the MANY SESSIONAL TUTORS who work in Architecture schools. Yep, let me repeat that it covers issues regarding research, university resources, career pathways, the practice-academic nexus, and what should be taught in Architecture schools. If you teach as sessional or fractional academic you can do it. This is a fantastic initiative and the AACA should be congratulated.

 Take the AACA Survey  

The blurb for the survey is below:

The brief anonymous questionnaire is open to all ongoing and sessional architecture academics and may be found at the following link: https://www.surveymonkey.com/r/5RLYN62

It is a once-in-a-decade opportunity to shape the future of architectural education so please take a moment to make your voice heard! The survey is open until 30 November 2018.

The questionnaire will ask some questions about your teaching career and will seek your views on resourcing, teaching and learning practices, graduate pathways, and the future of architectural education. Participation is completely voluntary. You can read the participant information statement here.

This Architectural Education and the Profession in Australia study is funded by the Architects Accreditation Council of Australia (AACA), the Association of Architecture Schools of Australia and the Australian Institute of Architects, and is being administered by the AACA.

 If you have questions about the research, please feel free to contact AACA Research Director Alex Maroya on 0413 339 394 or email alexmaroya@aaca.org.au.  For occasional updates about the study, please “like” our Facebook page at www.facebook.com/aepstudy.

 This research has National Ethics Approval through the University of Technology Sydney: ETH18-2931N.

 Architecture schools no longer control the agenda. Their voice is mostly diminished within the university sector and of course, as is the habit of the profession, this is exacerbated by an increasingly fragmented professional landscape. In the past, the Architects Institute has not been much of a policy advocate when it comes to Higher Education policy. The Architects Consulting Association and Architeam seemed to be consumed, and perhaps rightly, with more local issues around membership. So who is advocating for architects at a policy level?

With the rise of, diminished federal funding, international student markets, research metrics (architects never really seem to get very many research brownie points), university managerialism (in all of its absurd glory), the architecture schools are not what they could aspire to be.

Are the Universities ripping Architects off?

 

So let’s look at a few numbers. This will help put things into perspective. I have only started working through these and happy to argue the assumptions behind them if you are interested. At the end of each year in Australia, the universities produce given that each graduate pays that is an aggregated revenue assuming each graduate pays around 36K for a place each year. As the recent AACA report stated:

Australia’s architecture schools produced around 1300 graduates from accredited Masters programs in 2017, which is consistent with preceding years.Overall, architecture schools enrolled over 10,000 equivalent full time students in bachelor and masters level architectural study in 2017, collectively bringing approximately $225 million to the university sector.

I think these figures understate the case. So let’s look at a local example.

The Subject Example

So in a subject which is 12.5 point subject out of 100 points per year that is around 4,500 per student in the subject. If I then have 280 students that’s total revenue for the subject of $1,260,000. That is equivalent to a pretty big renovation!

If the semester consumes 30% of my time that has a cost of around $50,000 per semester including all salary on-costs (using a 1.7 multiplier). If the Subject teaching budget, for tutors, is around $81,000 It will then be about $137,000 with salary on costs.

Hence the total salary costs is around $187,000.

Now let’s say that the multiplier for other non-salary on-costs such as overheads etc. (in contracted research projects this might vary between 1.7 and 2.1) is 2.5 we get total expenses of around $467,500.

Bottom line: Then the net gain to the university is, by this calculation, $792,500 a profit margin of 62.8%

The Studio Example

For a studio of 14 students as 6 hour subject with 14 students that is about 9,000 bucks per student. Hence, the revenue is $126,000 per studio. Ok, so let’s say you get 70 bucks an hour for a studio. For a 13 week semester that’s about $5460 bucks. Not a lot of bucks for a small practice. The salary on costs would be $9,282, and the non-salary on costs would bring that up to $23,205.

Bottom line: The net gain to the university for a studio is thus around $102,795 a profit margin of 81.5%.

Again, I am happy to further debate and refine these figures.

How much goes back to architecture as research dollars?

How much of this is going back to architects? This is the Vampire bit. Sure the universities support many small practitioners through sessional teaching. But how much of this is going back into architectural research?

Not a lot at all. When was the last time the Australian Research Council consistently gave anyone grants in architecture? For example, we did not raise any money from the universities for our Architeam project and getting funding for book publishing is also a nightmare.

So, I would urge you to survey as it will help present a united front on how we want to promote and shape Architectural Education into the future. But of course, the universities love architects, and I mean lerv, when they get them to brand the new campus or capital works program. Hey everyone wants that gig, But apart from that, in the meantime, the universities will keep ripping off the architecture schools and give us very little back for architectural research.

Take the Survey

https://www.surveymonkey.com/r/5RLYN62

It won’t be a silver bullet but it will help.

 

Surviving the Design Studio: Baristas $20.22 per hour vs Architects $29.76 per hour.

Thank you to everyone who supported the RAsP initiative. This applied architectural research would not have got any funding through any existing channels of research funding. I am hoping that it is the first foundation for creating a transparent and well-governed research fund serving the needs of architects. 

With the recent ructions in the Institute of Architects, one can only be reminded of the way the design focused discourse in architecture, has both corrupted and arguably destroyed, the way that architects both govern themselves and practice. The mantra that its all about design has led to an unbalanced design-centric discourse. This discourse has paradoxically diminished design and has done much to damage the profession in Australia, its institutions and the way it practices.

Is the Design focus a good thing? 

The focus on Design has meant that Architects are coming off a low base when it comes to a consideration of general business practice and protocols. As a result, an evident naivety abounds across the Australian profession when it comes to business. This naivety exhibits itself in a few extreme ways. Firstly, either in a direct antagonism towards considering business and management issues. Or secondly, bypassing antagonism, a complete lack of knowledge and a fundamental ignorance of money; alongside the idea that you can just fly in someone with business knowledge and they will fix everything.

01-20160803_7095-campos-coffee-lobby-tower-3-international-tower-barangaroo-sydney_barista-service-team-i.jpg

The naivety of architects regarding strategic management, business strategy and financial management often leads to poor decision-making. Often architects, get into a bit of a panic and say hey let’s get a business plan together or let’s get someone in with a bit of corporate knowledge to do our marketing. They then make the mistake of employing people who, while they might have business credentials, or appear to be “corporate” have no understanding of the profession its nuances and certainly no understanding of design. I have seen this happen quite a few times. Sometimes architects employ people who are from allied industries, but they still have no idea about design. These examples are all too familiar: The general manager of the large firm that was appointed because she had a background in construction (or worse still law), but no idea about general management in an architectural setting. Or the growing small firm who got in a marketing person they went to school with who also had no understanding of professional service marketing.

Only get in the experts with architectural knowledge

It is naive to think a firm can get ‘corporate’ by getting in people from the corporate world with little or no experience in professional services or architecture. It’s always best to get in consultants with direct knowledge and experience of architecture. Preferably people who have worked in practice previously in some capacity.

download.jpg

The full story has yet to reach my ears about the demise of the CEO of the Australian Institute of Architects. But I suspect that this particular train wreck is a confluence of the above factors. A mismatch of expectations and naivety on the part of all concerned. A naivety about architectural profession on the one hand and perhaps a naivety by architects about policy, advocacy and strategic management on the other. Maybe, if architects knew more about money, they wouldn’t be in this mess in the first place. We really need to mentor people in our own profession with both design skills and financial and strategic management skills.

Its all about design 

This discourse that has led to these train wrecks and its associated mantras and aphorisms goes something like “it’s all about design” and any other consideration is secondary or the be disregarded entirely. This disregard leads to the most visible and remarkable naivety.

Within practices, both small and large the so-called design architects more often than not need to be saved from themselves. But often these design architects resent this, and the strictures and limitations placed crying out that money or even common sense management practices are crushing their sensitive souls and egos. I was the same when I was younger. Mostly such lamentations by these designers are an excuse for poor design outcomes. When will the architects who subscribe to this cultish view recognise that a consideration of other discourses outside of architectural design is essential if architects are to survive and prosper?

Selling out 

Of course, in writing this, I will be accused of somehow “selling out” design; which is by and large the general accusation levelled at those of us who hope for a better, smarter, meritocratic and inclusive profession.

Central to any rejuvenation of architectural discourse is a consideration of the organisational sciences including management and finance. The discourse focused on “design”, and its cult-like nature, as an autonomous, and singular practice, within architecture, has damaged the disciplines ability to support itself. To prove the point if there is one area where the design cult– and its insidious culture of business phobic managing up, discrimination and pedigreed favouritism — have destroyed the architectural profession it is in the area of employee wages.

2018 ACA salary survey 

The latest salary survey put out by the ACA and ably put together by the fantastic Gill Matthewson has just come out. As it summarises there is still a gender pay gap and some practices persist in paying under Award minimums. Perhaps the best thing that could happen to the profession is if a few architects were prosecuted for paying less than the award wage.

Paygaps

A Barista or a person with some training (Level 2 – food and beverage attendant grade 2 full time) gets an adult minimum hourly wage: $20.22. But also some get more on average if you look here. Architects get $29.76 an hour if you are registered and a full-time employee. This is not to suggest that the work of a Barista is in any way less worthy than architectural work. But it is to suggest that architectural training could be better served by a profession that took its responsibility for its own well-being.

Wage_details

Woohoo! That’s $9 bucks an hour more than a Barista or a waiting person.  That’s like more than an extra dollar an hour for the combined 7 years (5 years of tertiary study and 2 years of experience) that most architects need to do to register and call themselves architects.

Thank you to everyone who supported the RAsP initiative. This applied architectural research would not have got any funding through any existing channels of research funding. I am hoping that it is the first foundation for creating a transparent and well-governed research fund serving the needs of architects. 

Boom times but Australian Architects still facing Mutually Assured Destruction

Shaun Carter’s recent piece on architects fees and money is something I think everyone should read. You can find the full article here at ArchitetcureAU.  Shaun is a past president of the NSW Institute of Architects Chapter.  I thought it would be worth commenting on some of the questions and issues that he raises. Everyone architect in the country should read this article.

The old joke 

He starts with an old blokey architects joke.

Did you hear the one about the architect who won the lottery? They kept on working until they were broke. This was my introduction to architecture. I thought it was a joke. Now I’m not so sure.

This was a fine joke thirty years ago. It has a little bit of the boom-bust mentality about it. Plus a tone of altruism. In other words, architects get money and then spend it on architecture. They get money and spend it on design hours. They do this because of a love and passion for architecture and society.  But as a joke it implies architects always go back to zero, or square one, when they go broke.

The usual catastrophe 

images-1

However, while the joke might contain some sublte truths, the problem is as that architects don’t just go broke to the point of zero dollars. They go negative, and the financial and emotional toll on themselves their families and their profession is enormous. No adequate superannuation, no assets no worth in their small businesses when they retire, its worse I guess for employee architects who are inadequately prepared for their later years. Working from contract to contract, below award wages, no paid overtime, moving from poorly managed firm to poorly managed firm isn’t really a recipe once you are past 50 or 60 for a comfortable grey life.

Exploiting the talent

Last week a graduate came to me and said he had been offered a casual job at 17 bucks on a kind of “training” basis. Anyone reading this can look up the award. Sometimes I wonder if one of the best things that could happen to the profession is that the Fair Work commission starts to prosecute architectural employers for not paying award rates. Under the award, a graduate architect on a casual rate should get $31.09 an hour and if full time or part-time. $24.87.

The Scourge of Fee Cutting 

However, as Shaun says the real problem is price competition and fee cutting:

I talk to architects all the time and in almost every conversation hear stories of outrageously low fees and cutthroat fee gazundering. Economics 101 taught me that when a good or a service is in high demand and the supply is limited, the cost goes up. So why is it, then, in this boom time for architects, that we have managed to slash our fees in a desperate race to the bottom? He then goes on to say: If we are to achieve major reforms and be respected as a profession, we need to be not only financially viable, but financially successful. Otherwise, how are we to achieve gender equality? How do we stop our practices becoming sweatshops of juniors working long and late hours?

Shaun Carter proposes four areas where he feels that architects need to change. These are architects, clients, regulation and cheap overseas labour (WTF?).

Idolising the creepy architects

download-1

Shaun argues that architects need to be better at business and that being poor at it is “just plain dumb.” I agree with this but to change this architects really need to shift their culture around. As architects, we have to stop idolising and revering “bad boy” designers. These guys are mostly creeps and yet they are the ones that get all the symbolic capital in our profession. Plus they know nothing about business or management. Or for that matter anything really. But hey does it matter when you get all the street cred.

Sludge 

download-3

However, he argues that architects need to collectively bargain minimum rates of fees and architects need a “strict ethical and moral code to prevent rogue architects from damaging our profession.” Fair enough, but try telling that to the AIA which as an organisation appears to have governance and decision making processes that are slow bureaucratic and easily hi-jacked by ego-driven personalities. Witness the recent hoohaa around the AACA vs. the AIA. Hence reaching any consensus that might translate into policy or advocacy approaches for architects is like wading through sludge.

Going for the Mandate 

Carter calls for minimum fee guidelines for the entire profession. He argues that governments should then follow these guides as well. However, I am not entirely sure how this might work in practice, and I am concerned in legal terms it might be seen as being anti-competitive. But hey if you are starting a practice, it would be great to get an idea of what you should be charging. I think one thing that all of our professional groups and associations could get behind is the idea (suggested to me by Vanessa Bird previous president of the Victorian Chapter). This is the idea that it should be mandated that every building project in Australia, over a certain amount, should have an architect. I am not sure how this kind of regulation would work in detail. But as Shaun Carter argues:

Regulation has been a dirty word these past 30 years of neoliberal and trickle-down economics. What we know of this period is that the failed economic model has advantaged the few at the expense of the many. Economic literature has thoroughly documented the failure of loose and limited regulation and the way this has run down professions and reputations.

Mutually Assured Destruction

download-2

Shaun’s third notion for saving the profession from the “existential cliff” and “Mutually Assured Destruction” as he calls it is to limit university places in architecture degrees linking this to the outsourcing of architectural work offshore. As he says:

“If the profession is going to send our future architects’ jobs offshore, then let’s stop the cruel practice of offering them meaningful employment with one hand and ripping it from them with the other.”

He then goes on to say:

Perhaps the most controversial reason for the erosion of fees is firms employing cheap overseas labour to undercut the market. I believe that this is the emperor’s new clothes of business school management. It drives down fee expectations that will be difficult to claw back, while limiting employment opportunities for our young architects because their jobs are being sent overseas, all at a time when we are enrolling and graduating architects at record rates.

Protectionism?

I am not sure about this line of argument because it starts to sound a little “protectionist” and raising the spectre of “cheap overseas labour” suggests stereotyped images of what that labour looks like. Think, call centres full of Revit CAD monkeys in large second-order centres full in South, South East or North Asia. Nonetheless, I certainly dont think that Shaun Carter is intending to cross the lines into Trump Tariff and Immigration territory. But really what is being suggested here does raise questions about some of the current dynamics in practice. This includes the globalisation of competition between architects and the commodification of architectural services with the rise of new technologies. Despite all the BIM hoopla are we really ahead of the technology game?

Too many at Architecture School? 

As for the numbers of architecture students in the Universities and how many graduates are produced in Australia I might leave that to a later blog. But needless to say in 2015, the universities made $225 million bucks out of architecture (Check that out here). I also doubt that very much of that goes back into research of direct benefit to the profession. On the plus side, the Architecture Schools do support the professions with lots of sessional teaching contracts. However, is that enough given how much money the Universities are making out of architecture? For Australian Universities, Architecture Schools are a valuable cash cow. However, Architecture Schools are by no means the largest of their international education cash cows. The universities also love architects, and they love architecture schools because it all adds to their branding, reputation status and symbolic capital.

However, I don’t see many of the 18 schools of Architecture joining these debates about the value of the profession and its worth. Most architecture schools and faculties are struggling to manage the strictures imposed on them by central university executives who think that having an architecture school, in the portfolio, is a bit valuable and kind of quaint. If that is the case, maybe those same executives can give architecture some more research money.

We are family

To overcome the malaise that architects find themselves in the architecture schools, the professional associations, and the AACA need to lobby for the worth of architecture collectively. A fragmented and ungovernable architectural community will not solve the problems architects face. As Shaun Carter argues fee cutting is a recipe for Mutually Assured Destruction.

I am almost on annual leave between semesters. In the next few weeks expect to see a few more relaxed beach blogs and tweets from Italy and the Biennale. If you want to know more about our RASP research project you can find it here

We Need To Talk About MONEY: 10 profit drivers of small architectural practice.

I can already see the disgust in the faces of those of you who have just read the title of this blog. This is supposed to be a kind of architecture blog and not a money blog. The P for Profit word, and of course, the D for Drivers word. Some of you will also be thinking we never talked much about money at architecture school. So why should we talk about it now?

The AIA in America (not the other Australian one with the similar acronym) 2016 Firm Survey reports that in American firms in 2015 9.7% of firms were not profitable.  21.5% were very profitable with profits above 20% of revenue. 27.6% had profits of between 10 and 20%. But, for 41.2% of everyone else, they only had profits of less than 10% of revenue.

AIA_research

In Sydney the other week, I mentioned this to another MBA graduate who was managing a large firm. It was the usual Architects with MBAs conversation, bemoaning the financial knowledge of architects. This person suggested that there would only be a “few firms” in Sydney that were making a profit of more than 10% or even 5%. If that’s all you are doing then you might be better off putting your money in the bank or buying some shares that will give you a 5 or 6% dividend.

The following is for you: 0 to 10 percent architects, for the architects, wanting to get out of the doldrums of low margin profits. There is no one silver bullet for making your small practice, or even large practice, more profitable. Unfortunately, managing a practice is about getting whole range of little things correct to make it profitable.

1. Don’t guess or make up your charge out rates.

Don’t guess it or make it up. I am thinking maybe there are still people who actually don’t bother to work out charge out rates. Your charge out rate has to cover your own salaries, superannuation and all overheads. The Australian ACA has a great tool that can be found here.

2. Charge for everything (and I mean everything).

Don’t give anything away for free. Not your Intellectual Property, not your time and not anything else. Think like a lawyer and charge your clients for copying, printing, travel and especially your EXTRA time. Charge for EXTRA time expended on a project as a result of client backtracking, indecision, planning or other stuff ups outside your control.

3. Fix (or actually have) your office systems

Ever get the feeling you are spending your life trying to find bits of information no matter in what format or where they are stored. The essential bit is being able to find information quickly and efficiently.  Having in place databases, filing structures and systems that makes workflows quicker is important given that your time is the biggest cost in a practice.

4. Negotiating: Say no and be willing to walk away

Don’t take on a job at a low price because you need the work. What’s the point of doing a job at such a low fee that you are either making a loss or you cannot pay your staff to do it. That’s like you are actually paying the clients to let you do the job.

5. Cash Flow

Sadly, this can be almost full-time job and requires constant vigilance. Get a bookkeeper. Cash flow is volatile. If you think architectural practice is about a steady stream of cash or revenues coming in you are very wrong. You need to manage the volatility of erratic and chaotic cash flows. Use the dreaded Excel sheet.

Figure out when your bills or expenses are coming in and when you will get paid. Try and understand the concepts of Free Cash Flow and Economic Value Added. Managing your cash flow means you will not crash and burn and always be lurching from crisis to crisis because you have no money for stuff. There is great advice and techniques here about Cash Flow management for small practices at Panfilo.

6. Looking after the talent

Don’t underpay your staff. That can be illegal. Don’t discriminate. Don’t treat your staff like shit. You will reap what you sow. It takes a lot of time and money to employ new staff. Don’t yell at them, don’t give them conflicting messages or information. Manage staff in a timely manner. Recognise if you are employing less experienced people who are cheaper to hire, then please help them to be more experienced.

This is a huge subject, and it goes without saying the better you can mentor, manage, and treat your staff the more profitable you will be. Take the time to be with them and provide them with everything they need to get things done for you. Managing and empowering your staff so they can do the boring stuff means more time for you to design.

7. Managing your portfolio of projects

Don’t try and design everything. Spend design time on the projects that matter to you. Decide which projects are trash-for-cash. Don’t waste your time on these get them done. For every five projects in an office one will be great, one will be a nightmare and 3 will bring in the dollars.

8. Competitive strategy

Having a strategy means you know what you are doing and what it is you will design. Don’t waste time designing things that don’t matter.

Every small practice, in my country does housing of some sort. Every architect says they are into sustainability. How are you going to market yourself so that you are seen to be different?  How is your practice going to deliver its services to clients in a way that makes them want to come back one day in the future?

9. Research

Do some research or design research (maybe the odd competition or speculative project) that will build design knowledge in your firm. Work on it when the drudgery of everything else gets to you. Build expertise in something you are passionate about and this will help you differentiate yourself and win work.

10. Operating priorities to build capability 

One thing at a time. Do you have an operational plan? A plan that helps you to prioritize the next three to six months? Do you have projects in the office that will make you more productive? Projects that build capability. Like sorting out the material samples, reviewing the marketing stuff, getting some new software?

Finally: Andy and Philip

For those of us who drank the Architecture Kool-Aid when we were young architecture students the future seemed rosy. Imbued with the Kool-Aid toxin I was convinced that I could make a go of it. I would live the jet-setting architecture lifestyle and hang out in the art galleries in NYC with the New York 5, Nico, Andy W, Lou and the Velvets, and go to a loft dinner with Fischerspooner and Laurie Anderson. We were spoon fed this stuff and these days the star-architect’s dream now seems embodied in Bjarke, Rem and Schoomie.

The more efficient and profitable your firm is the more time you will have for design. In a strange way design is actually all about the money. I am definitely sure Andy Warhol (and this most subversive of architects) would agree with this proposition as well.