challenges

Chewing over the challenges of running a profitable practice

Oct 8, 2019
  • Article by Online Editor

A group of architecture industry practitioners came together recently to discuss the challenges facing their individual practices and how they are able to remain profitable in the current economic climate.

A team from Deltek, the global provider of enterprise software and information solutions for project-based businesses, hosted the lunch to spend some time with their key customers and get a better idea of what their businesses need to continue to thrive.

Representing a range of high-profile practices, the round table comprised Mark Murphy (director, Fender Katsalidis), Ivan Ross (CEO, Aspect Studios), Rohan Wilson (director, DesignInc Melbourne), Matt Tence (business manager, Silver Thomas Hanley), Barry Aarons (COO, Architectus), Craig Gordon (director, DKO) and Blair Calvert (national manager, DKO).

The group was joined by the new CEO of the Association of Consulting Architects (ACA), Angelina Pillai, who talked about her role and the association’s history, areas of focus and how it plans to support the industry.

The overall theme ‘ Challenges of Running a Profitable Practice in 2019’, ensured the conversation was wide-ranging. Particular topics took prominence, however; namely risk and insurance, fee negotiation and contracts, staff acquisition and education.

Project management and talent

Project managers are an essential part of delivering projects on time and budget, but with staff shortages and competing priorities, the architects noted that their firms are struggling to equip designers-turned-project managers with the training and visibility into the key performance indicators (KPIs) they need to be successful. This means giving them the necessary tools to keep projects on schedule and under budget while meeting client expectations.

Given the ongoing shortage of candidates, it has become increasingly important for firms to retain, develop and advance employees from within. Companies investing in learning, succession planning and professional development are emerging as leaders in the industry, while firms leaning away from adopting human capital management technology are beginning to lag behind.

There were divided views across the group on the skills being displayed by the newcomers to the profession. On the one hand, some lamented that it would help if tertiary systems taught business skills to its architecture graduates to prepare them for the industry, while others pointed out that this has long been the way, and the only real school for such skills was the school of hard experience.

Technological progress

It has become increasingly clear that the industry needs to stay ahead of the technological curve if it is to thrive and address evolving challenges. Practices are facing an ever more competitive market, in which tighter margins are prevalent and projects are becoming increasingly complex. For its ‘Insight to Action Report’, Deltek conducted a survey of the professional services industry and, following the input of 700 global decision-makers, has noted a pervasive concern about the future. Many feel their firms are ill-equipped to tackle current challenges and future risks, expressing a desire for the strengthening of internal systems and processes, as well as core business models. A majority believe technology could help overcome these obstacles, but many are lacking a strategic technology plan to identify how emerging technology trends like geolocation and the Internet of Things (IoT) can drive their business forward.

Risky business

Across the industry risk and insurance are currently top of mind, especially, regarding complaint materials issues, with the group voicing their belief that risk has become so problematic that all parties involved need to take extra precautions.

Architects are finding themselves in the middle while developers, consultants, builders and tenants are among those keen to ensure they’re not seen as responsible when issues arise, as in the recent Opal Tower building faults, which resulted in hundreds of tenants being evacuated from the Sydney high rise on Christmas Eve 2018.

Just who should be assuming the risk in such projects is an ongoing point of discussion. With a general consensus that the industry is weak in its concerted response to such issues, the overriding concern was that practitioners want to understand their risk profile. Are they going to get sued if they do something wrong?

One of the best ways forward could lie in the idea of collaboration and partnering with an industry body like the ACA to both provide a forum to discuss such concerns and also have a voice that can advocate for the industry as a whole. The ACA’s Angelina Pillai explained that the organisation would welcome the opportunity to present assistance options in this area.

Contracts

Another issue that continues to challenge the industry is the topic of contracts. A decade after the global financial crisis, unfair contracts, negotiation and fee setting remain constant sources of stress, according to the group. The difficulty of working in an industry where the customer sets the contract terms was discussed, as was the ongoing struggle with knowing how to set appropriate fees.

There are common mistakes the industry makes, added another, listing the way IP (intellectual property) is given away, agreeing to unlimited liability, contracting out of part 4A (which concerns appeals against tribunal decisions in the Architects Act 2003) and variation clauses that are impossible to adhere to as some of the most egregious examples. And again, partnerships with advocates like the ACA or solution providers like Deltek – which delivers insights and research into growth opportunities and helps firms win new business, recruit and develop talent, optimise resources and streamline their operations – could lead to solutions that would benefit the entire industry, and deliver more profitable projects across the board.

United we stand

Overall, the group agreed and disagreed in almost equal measure on the aforementioned topics, as well as other discussion points, such as the merits of architecture practices using business development managers as opposed to the practice leaders being the salespeople for the firms.

But the overwhelming takeaway and the one with almost universal appeal? Consensus and strength in numbers can make all the difference. As one practitioner put it succinctly: “It’s about the industry acting in one voice. If people all decide to do one thing, then that actually works.”

You can download ‘Insight to Action’ here.

Image: 123RF’s Corina Rosu © 123RF.com

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