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.

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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.

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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.

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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. 

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.

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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.