Accelerate Your A&E Firm Performance with Benchmarking - Part 1

Posted by Megan Miller on March 31, 2020

Accelerate AE firm performance with benchmarking

When you think about benchmarking or your effectiveness at setting and achieving goals for your architecture and engineering firm, you may think that you are absolutely hitting the mark. Or, if benchmarking is relatively new to your company, you might be seeing some benefits, but still have a ways to go.

For some of you, maybe you have heard about benchmarking, but it seems like something that is off in the distant horizon. A daunting task that someday you will get to, but may not be a priority for your company today.

If you aren’t sure where to start, making small changes to get your firm started on the path of successful benchmarking is a step in the right direction. Think about the state of your company today and ask yourself these three questions:

  • What are the top three goals for your company this year?
  • What activities or tasks have you outlined to help your firm achieve these goals? 
  • How are you measuring success against these goals on a regular basis?
 

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One of the fatal flaws often encountered when setting business goals is not making them realistic and achievable. It is often difficult to know what is realistic, and that is where benchmarking comes in. If you know where you stand, then you can compare your goals with other firms that are similar to you, and see how you measure up. This allows you to set realistic targets that your firm can work towards.

The numbers themselves aren't the most important part of benchmarking. It’s understanding your numbers. First you need to know what your numbers are. Then, determine where you want them to be. And finally, establish the clear action items to help get you there. For example, one of the things we often talk about when it comes to benchmarking is if you talk to any person that is in finance, they would love to see 100% utilization. But, it simply isn’t realistic or attainable.

By looking at what other firms are achieving, you can determine a realistic target and time frame. It might not all happen at once, but if you can see continued incremental progress towards whatever that goal is, and you've established that that goal is realistic, then you are going to be more successful and you're going to have more of your team on board moving towards that target.

Why Benchmarking?

Why is benchmarking so important? Think about some of these questions.

  • Are your firm’s targets realistic?
  • Are you tracking the metrics that matter most to your business?
  • Where are your key strengths and competitive advantages?
  • What are your weaknesses?
  • How can you take your firm to the next level?
  • How can you course correct mid-year to adjust for unexpected challenges?
  • Are your metrics balancing appropriately?

Another important aspect of benchmarking is the need for balancing your metrics. So if your utilization target is high, what else is sacrificed to achieve that goal? Does it prevent necessary business development time or make it difficult for employees to have time for professional development? There has to be balance among these metrics for you to be successful, because not all of them can be at the absolute top. Consider which ones you want to reach and why, and how that aligns with what your company needs to achieve this year.

Moving the Numbers

The most critical aspect of benchmarking is what you are learning through the process. What are your numbers telling you and what is the story behind the numbers? If you have a target and it's not where you want it to be, how do you get to that target, and what is happening that is preventing you from hitting the numbers? What you can glean from your metrics? Are employees charging time to projects they shouldn't be, or maybe you are not allocating enough hours for a certain task and it is impacting utilization? This gives you the opportunity to see what's happening and then dig in to find out if there's process failures, further education that needs to happen, or if there are targets that aren't realistic. It gives you the opportunity and the platform to open discussions that otherwise wouldn't happen.

So how do you move the numbers? If your company wants to increase your average utilization rate, what will it take? What is happening today, what are the challenges that your teams are facing, and what has to change? Looking at each key performance indicator or metric, who is your champion for change? Who can get the right people involved to map out a plan and monitor your progress?

What Will You Do About It?

Once you know where your numbers are today and where you want them to be based on the benchmarks and your own goals, it’s time to set your goals and track progress. Do you have the tools and resources to be able to see if your utilization is changing and to be able to see how your overhead numbers are fluctuating and what may be impacting that?

How often are you reviewing your metrics and comparing them to your goals? This can’t be an annual thing, but needs to be an ongoing process so you can adjust and course correct as needed. The industry and your business are constantly changing so you need to be able to adjust accordingly and drive toward your specific goals.

You’ll also want to plan how you will share progress. If you set specific goals, how will you help employees understand whether or not they are hitting the mark, and how they, individually, are contributing to the success of those numbers? I encourage you to be more liberal with this information to enable your teams to be part of the solution. They might also have great ideas and insight into what’s standing in the way of success for your business.

Key Metrics and Trends

There are numerous resources available to benchmark your company and many firms often struggle with which KPIs to focus on. Although there are some top metrics all firms should monitor, it’s critical that your key metrics align with your strategic goals.

As you review your metrics, I encourage you to check out the Deltek Clarity Architecture & Engineering Industry Report – one of the longest running and most in-depth benchmarking resources in the industry.

 

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For more than 40 years, Deltek has delivered industry benchmarks across various areas of the business including financial, business development, project management, human capital management, and technology trends. We work in collaboration with several industry organizations including ACEC, ACEC Canada, AIA and SMPS to ensure we are tracking the metrics that matter most.

Stay tuned for Part Two of this blog series where leading practitioners at Kleinschmidt Associates and the M Group share how they got started with benchmarking and how to leverage the Deltek Clarity A&E Industry Study to increase business performance and measure firm health.

 

 

About the Author

Megan Miller is a senior product marketing manager with Deltek and works with architecture & engineering firms around the world to help them improve their business processes through technology and thought leadership with resources like Deltek Clarity and Deltek's leading project-based software solutions. Connect with Megan on LinkedIn.