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12 reasons why design practices underperform financially

Robert Peake, founder of Management for Design, shares the 12 things that contribute to your design practice underperforming financially. Some of them may just surprise you.

12 reasons why design practices underperform financially

1. Minimal business management expertise

Most architecture, engineering and design (AED) leaders that are elevated to senior roles or directors’ positions don’t have the necessary business management expertise to manage, direct and drive a successful business that performs across the key business drivers of design, rainmaking, project delivery, people performance, strategy, innovation and financial management. Not only that – they don’t have a plan to gain this expertise, other than on the job training, or just surrounding themselves with this expertise.

2. Lack of accountability

Lack of accountability can, and does, occur at all levels of an underachieving business. Whether it’s partner to partner, partner to project leader, or project leader to the team – seldom are people held accountable for missing deadlines, unproductive work, rework or being over budget on projects.

3. Low expectations

“If mediocrity is the goal you will probably succeed.” Expectations of business performance are often set far too low – and people do their best to barely achieve them. Most architects and engineers underperform financially, and seriously underestimate their capability and potential. They’re prepared to accept the status quo and not focus on innovation and performance improvement.

4. Design outcomes, not business outcomes

We get it, it’s why you got into this business – to produce great work and be recognised for it. But that shouldn’t be your main reason, plus it’s bringing down the profession! What about building a great business, making an impact in the industry, and changing the way you work and your role in the project.

5. Managing the design process

Do you have a process, system or people in place for managing the design process/stage? Probably not, or if so, the process is more than likely unsophisticated and/or not adhered to. Considering that a clear, resolved design and central idea is the foundation for the on-going performance of a project, it would be expected that most businesses should have this under control.

6. Poor project and resource management

As project and resource management is the key to successful and sustainable business profitability, you would think that most firms have this under control… not so, unfortunately. There is downward pressure on pricing, and businesses are competing with a higher emphasis on attractive price rather than increased value. Yet, as well-intentioned as these strategies are, these initiatives have made it even more challenging for firms to deliver projects profitably.

Management For Design is often astounded by the lack of thorough and integrated systems in practice for managing resources and projects across the studio (i.e. a plan of work, what’s completed, what’s still to be done, who is working on what when, who is available, who is utilised and underutilised and what are resource requirements moving forward).

7. Not handling scope creep

Scope creep for architects and engineers is typically considered part and parcel of servicing the client – and not additional to the service that was originally agreed upon. This often stems from the leadership, where the performance drive is design outcomes and not business outcomes. Lack of clarity around the service, a culture of over-servicing and lack of systems to manage scope are prevalent in an underperforming business.

8. Lack of strategic planning and execution

It’s no secret that many design-focused businesses are superficial in their planning – concentrating on the design, fees, schedules, and day-to-day deliverables, rather than defining exciting, attainable objectives for the future that will motivate the key people and lead to high achievement.

The strategic plan for many firms could be summed up as:
a. Bring in as much work as we can
b. Do our best to create a great design and satisfy the client
c. Hope that we make some money

Management For Design research shows that up to 70 per cent of design businesses do minimal or no strategic planning. Of the remaining 30 per cent, only one in three achieves clear and sustainable change in their business that leads to new markets, new locations, new client sectors, new design approaches, new ways of working, or improved leadership.

9. Taking too long to elevate your key people

Decision-making at the top is how most architects and engineers operate – across design, people, innovation, and finance. This tends to mean that key people are not involved in, or exposed to the key business decisions. It’s then difficult to proactively elevate the great people in the business. Procrastination rules! Often, this leads to great people moving on to other opportunities, or establishing their own businesses – and we don’t need more architect and engineering businesses, we need better!

10. Universities are not delivering the skills required

What’s happening in the tertiary education of architects, engineers and designers? There is an increasing focus and emphasis on design, idea creation and technology, and less and less on what is required to have a successful and well-rewarded career. When more and more of the required education is being left to businesses, is it any wonder why graduate salaries are so pitiful compared to other professions? It’s difficult to see when this boat will be turned around.

11. It’s not the people

Most of your people will actually have minimal impact on your business performance. Without the right leadership, culture and systems in place, it’s pointless bemoaning the lack of capability of your team.

12. Not reinvesting in the business

We are currently operating in a buoyant economic environment – there’s more than enough work to enhance our built environment. Many successful businesses are delivering exceptional financial performance. This is the time to be reinvesting profits in mergers and acquisitions, investing in needed technology/systems, leadership, innovation and new ways of operating. It’s not the time for all the profits to be taken out of the business for the benefit of the owners or to pay taxation. Today, businesses should be allocating a third of the profits for reinvestment in the business.

Robert Peake is the founder of Management for Design, a company that works exclusively with the architecture, engineering and design industry. Robert has over 30 years of experience and brings expertise in strategic direction, financial and business management, systems, operations and performance. Read Robert’s growth strategies for A+D businesses.

Keep your eyes out for FRONT, a new commercial and hospitality event launching in August. FRONT is all about knowledge building and bringing the industry together to share insights and innovations to help you achieve success in your design practice. 


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