Managing your way to profitability
Dynamic leadership, talented employees, exciting projects and appreciative clients mean little if a firm is stressed and struggling with its bottom line, says Jennekin Dicks. Managing profitability well can make all the difference.
Imagine you are visiting the happiest, most harmonious design practice ever. What would you expect to find?
It will likely be a beautiful, creative space, perhaps with a dynamic leader and a dedicated team of talented people. Perhaps the practice has branded and marketed cleverly and found their niche, where appreciative clients have great budgets and repeat projects. (Wouldn’t that be nice?) Obviously there will be project boards displaying elegant design outcomes and prestigious awards will line the walls.
What if I said to you that I have seen these and many more desirable ingredients like them in design practices, and that none of them can guarantee a happy, harmonious place to work? At least not in the long run.
An overlooked truth
Beyond all these wonderful and worthwhile things, I have found that there is one often overlooked truth in creating a harmonious design practice: how we manage profitability matters far more than we’d like to think.
Yes, I know, the general fear is that a profit focus will create a tension with all the other things we care about. And it’s true – the common route to profitability management can do exactly that. Yet there is another path that actually takes us towards all the things we care about and not away from them.
It takes us to a place where the business is not stressed, where marketing and training budgets create exciting opportunities, where there is time to focus on great design, where leaders are optimistic and not only set exciting visions for the practice, but also follow through on them. It’s a place where information flows and where people work together happily.
Anyone can take this route, but there are two very definite self-imposed barriers, which have historically kept many from enjoying all the results described above.
Barrier 1 – A defensive mindset
The common assumption is that a consistently profitable practice is a mark of the superior skill of individual project and practice leaders. It is NOT. It is a team effort littered with mistakes and learning by everyone. It is a gleeful uncovering of those mistakes and finding ways to avoid them next time around.
When we work in a space where profitability is about personal excellence, we naturally assume that setbacks will communicate a lack of personal excellence. An honest look at unpleasant numbers is therefore best avoided, usually by citing all the reasons why it really wasn’t our fault – a demanding client stretched the scope unfairly, the other consultants caused delays and rework, half the team were inexperienced and slow…
These and many other reasons are certainly valid, but the problem is that when we adopt a defensive mindset, it stops us from asking questions and seeking better ways forward as a team – both in the project team and as a business overall. For example, we could ask ourselves whether a closer look at internal communication habits could prevent rework in similar situations. Or we could consider whether staff confidence in dealing with scope creep in client conversations could be better supported with targeted mentorship.
When we don't create the regular opportunity to ask ourselves these kinds of questions, underlying problems repeat in more or less the same way and consistently eat away at our profitability. And we assume there is nothing we can do about it.
We need to get rid of the defensive ‘me’ mindset and replace it with a collaborative ‘we’ mindset. We can do this by creating the right types of forums where we regularly and supportively discuss the detail of cost outcomes, so we can learn together.
Barrier 2 – Low or no systemic rhythm
Profitability management needs consistent and accurate data. And that data needs regular review and discussion, always followed by effective decision making.
When I talk about ‘system’ in a business, I talk about melody and rhythm. (Yes, I really do.) The melody is a unique set of habits of how we organise ourselves in any one organisation. The rhythm is the pattern and speed at which these habits repeat. To manage profitable outcomes, we need to carefully consider what our habits are and how we repeat them.
That specific melody and rhythm is our own unique profit song. What does yours sound like? Is it perhaps a cacophony of cymbals against a backdrop of tiny, out-of-tune violins? Or long uncomfortable silences broken by a couple of clarinet bleats? Or is it a beautifully conducted, elegant masterpiece you could listen to all day?
The truth is that anyone who cares about their profession and their business can be an extraordinary conductor of their own profit song. And anyone who cares about the work they do and the practice they work in can be an extraordinary musician in that orchestra.
To do this, you have to understand and respect the music and you have to practise the song together. Simply put, involve yourself in the process of cost planning and cost reviews, help create the systemic rhythm, learn together and make it better together.
I have seen it often enough to know it is true: when we focus on this healthy type of profitability management, we swiftly create a culture of learning and support. This is the culture we need not only for sustainable profitability in a fast-moving world, but for every other good outcome we seek. Want to be ready for disruption in our industry? This is how you get ready.
Let’s be honest
When it comes to profitability, you may be partially responsible for the unfair hand you have been dealt. Yes, there are economic and industry factors, but not everyone bows to them. We do have a choice, and that choice is in how we respond to these internal barriers of defensiveness and lack of healthy, consistent internal action.
We can choose to support our own good actions every day to eliminate fear, build knowledge-driven understanding and create a happy, rhythmic beat in our profitability management.
Believe me, it’s much easier to get right than you think.
Jennekin Dicks is the owner of Brisbane-based consultancy Management in Action. She is a former architect who changed career paths to help people access dynamic progress in their businesses. She does this with a ‘systems for people’ focus. She consults, writes, presents CPD talks and workshops, plus drives internal change projects for her clients. Specialised topics include certified management systems (QA, OHS & Environment), profitability management and Safety in Design.