Measuring Productivity

Robert Peake , 11 March 2016

What is productivity and how should we measure it? Robert Peake reports on recent survey findings and suggests strategies for architectural practices.

The 2015 Management for Design Business Conditions Survey results showed that many architectural practices don’t have a clear understanding of what productivity means. Nor do they understand the most effective ways of achieving it. Getting to grips with how you define and measure productivity in your business can present real opportunities for productivity growth.

What is productivity?

Of the architecture and engineering firms surveyed by Management for Design, 39% are not measuring productivity. These businesses are either unable to define productivity or think that productivity is derived from sales and growth – but that’s putting the cart before the horse.

Those respondents that do measure productivity identified a range of means to do this.

How do you measure productivity?

2 - How do you measure productivity?

Cost reduction (identified by 6%) rarely increases productivity and, in and of itself, is not a clear way of defining productivity. This is because cost reduction may actually be an indication of staff attrition, or point to other significant factors that can potentially contribute to a decrease of productivity within the business.

Respondents who nominated more capability (19%) as a measurement for productivity were closer to the money and the 39% of respondents who measured productivity as a way of doing more with less, or with the same resources, are ahead of the curve. These businesses recognise that productivity and — as a direct result — profitability, are best measured by analysing the balance between output volume and input volume. These firms incorporate productivity into their business analytics, where data can have a real impact on strategic plans and growth strategies.

Measuring productivity

Firms that fail to accurately measure productivity are missing out on huge business insights and growth opportunities and run the risk of being outrun by competing firms. Architecture practices should take a closer look at how they measure productivity, how it should be measured, and how to maximise the potential for productivity gains and financial growth.

The AEC consultancy PSMJ defines productivity as “the ratio of output volume to input volume”. Firms should be measuring billable and non-billable hours alongside actual client billings. Productivity growth is best achieved when more hours are billed for less staff time, that is fees/hours worked.

Many firms don’t measure non-billable hours. We think this is an oversight. All hours spent on client work should be logged. This includes rework and out-of-scope tasks that often don’t end up charged to the client. Measuring all areas of input is the first step to ensuring that your analytics are truly meaningful. Once that stat is captured you can measure it with output and compare this ratio over time to get an accurate picture of productivity gains and losses in your organisation.

Survey respondents were also asked how they plan to improve productivity in the year ahead.

What are your plans to improve productivity over the next 12 months?

3 - What are your plans to improve productivity?

The main strategies identified are important for any architectural business. They are:

  1. More accountability for performance:
  2. Implement improved management systems:
  3. Improve utilization of resources:
  4. Identify and reduce inefficient work practices:

If you implement these four strategies over the next year, productivity will increase and useful insights will be gained into how to maintain and improve productivity in your firm into the future.

Robert Peake is a principal of Management for Design.

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