Tags: run architecture firm
Episode 174

Running an Efficient Architecture Firm with Eric Behr

Enoch SearsNov 11, 2016

Today is the second half of my interview with architect Eric Behr. Eric Behr is a principal at AB Design Studio based out of Santa Barbara, California. He is the Director of Studio Operations.

Go here to watch the first half of our interview on Lessons in Scaling an Architecture Firm

Today you'll discover important lessons in running an efficient architecture firm like:

  • How to identify project issues BEFORE they become a problem
  • The secret of keeping your projects on schedule and on budget
  • Eric's #1 tip for running an efficient office

Resources for today’s show:

AB Design Studio, Inc. http://www.abdesignstudioinc.com/
Brooks Atwood Design: www.pod-design.com
Bitrix24: Online intranet and CRM www.bitrix24.com
A.I.M. Architectural Information Management: www.architectronica.com

Interview Transcript and Members Only Resources:

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Eric: Everybody is very busy, and schedules are never in a way that we have got a lot of time to just sit down, and talk things through. Having a clear open line of communication, that is in an organized fashion internally, has really helped us keep things running smoothly, so that we can identify issues, and address them before they become problems.

Enoch: Business of Architecture, Episode 174. Hello, I am Enoch Sears, and this is the Podcast for Architects. Where you will discover tips, strategies, and secrets for running a profitable, and impactful, architecture practice. I would like to invite you to discover how to double your architecture firm income, and create your dream practice of freedom, and impact, by downloading my free, four part architecture firm profit map. As a podcast listener, you can get instant access by going to FreeArchitectGift.com.

Today, we talk with Eric Behr. Eric is a principal at AB Design Studio, based out of Santa Barbara California. He is the Director of Studio Operations. Today is the second half of my interview with Eric Behr. Eric Behr is the Director of Studio Operations, at AB Design Studio, an architecture firm based out of Santa Barbara California. Now, let's get down to business. Fantastic. You say you have something called the AB Handbook. What is the name of your process?

Eric: Yes, that is what we have been calling it. It is an ongoing work in process. Yes, that is what we are creating, in terms of AB Hand Broker, and AB Playbook. The rules of the game that identify, in written format, how we do what we do, so that it can be clearly distributed to the team.

Enoch: Tell me the nuts, and bolts. I would like to dive into the nuts, and bolts, of what that is. What format, or file, are you using to do that? Tell me how you guys create that document, make it effective, and implement it? Let's have a chat about that.

Eric: Sure. Yes, right now, as I said, it is a work in progress. We have a lot of pieces, and a lot of different formats. What we're working on right now is consolidating it into, basically, a cloud format. Where we are using a software where it would be inherently saved on the cloud, in the software, so that it's easily accessible with search commands.

Enoch: What software is it?

Eric: It is called Bitrix24, actually. It is an online platform. Right now, most of our how to's are in the format of word documents, and Excel spreadsheets. We use a program called AIM, which is Architectural Information Management. Which, is a major tool in our toolbox for managing our projects. We have got a lot of information saved on this program, as well. We are working on consolidating all that into a more concise single platform, that is more easy, and accessible. It contains things from how we do our draft invoices, to like I said, our 3D rendering styles, and our drawing standards, to how we type an update letter to the client, or how we request systematic designs, sign off, things of that nature. That allows us to give the project manager the tools they need to execute a project, without having to figure that stuff out on the fly.

Enoch: Fantastic. Like you said, it is a work in progress. We all know that this stuff takes time, and it will probably continue to develop. You're taking these disparate pieces right now, you're putting them onto this Bitrix24 cloud based platform. What procedures do you have to help make sure that people implement things? Because, I know that one of the challenges of having really good processes is that people, if they are not monitored, people would just result to doing whatever they know how to do, and they won't get updated. Do you guys have any systems in place to make sure that you're constantly updating those things, and people are using them?

Eric: We do, yes. One of the major accountabilities, once I took on the promotion to the level I'm at was again, this AIM program. Architectural Information Management, is the program that we use to really track our project process. Like you said, monitor all of our projects, and our staff, so that we can be sure that things are going as they need to go. I have created a lot of custom recording through this software, that will alert us when projects are nearing the contracted fee, or exceeding the fee, so that we can be alerted on an ongoing basis, if projects are in jeopardy of needing more fee.

We run a Monday meeting, every Monday morning, that I run with the entire staff, where we go through each project in the office. The project managers record a quick update on where things are at, in terms of scope, schedule, and budget. We use that as a check in, to identify that the projects are going through the right processes, and that all the right steps are being taken. Then, we identify projects that potentially may need, like I said earlier, a focused discussion, where we will identify those projects, put them on an agenda, and we'll get them out on the table with the firm owners, to make sure they are getting the attention they need. We use that weekly project. We call it a Work In Progress, a WIP, meeting to check in on all the projects, and make sure they are going the direction they need to.

Enoch: What do you feel is the key to keeping projects on schedule? These ones that start to get off track, what do you feel are some of the things that you bring, and you say, “Okay, this is the first thing we are going to look at doing here?”

Eric: I think the key is, projects are all about having a managed process. We estimate to the clients how long something is going to take, and how much it is going to cost. It is always a moving target. The key to having a project get completed on schedule, is managing that schedule throughout the process. Rarely will a project end, and get wrapped up, on the date that we initially estimated. Sometimes, it is sooner. Sometimes, it is later, but as that target moves, the key is staying in communication, managing that with the client, so that their expectations are adjusting as the process adjusts. Same with the costs. We estimate as best we can, how much effort something might take at the beginning of the process. As you well know, I'm sure, those things change throughout the process of a project.

Managing that on an ongoing basis, whereas the scope changes, we are in communication with the client about how that affects our time, and our fees. That is in a broad sense. In terms of managing that within the office, we are looking at, that is another part of the Work In Progress meeting each week, is looking at, what are our deadlines? What are the projects that are needing attention on a weekly basis, and how do we overlap them all so that all of the demands have been met? That is a group effort, where we get organized each Monday around who needs who for help, and we get organized around which deadlines we should prioritize. Then, again, we communicate that to the client, and set their expectations. If something needs to push a little bit, because we have got something else to work on, we are making sure we are looking at that globally, and managing that ongoing, and communicating that back to each of our clients.

Enoch: It sounds like your firm strikes me as one which has invested time, and effort, in getting these systems set up, and investing in itself, shall we say.

Eric: Right.

Enoch: What would you say would be some of the key things that you really think help things run smoothly around there? You mentioned your Monday morning meetings. You mentioned some of the software tools you have. What else?

Eric: I think a big thing is focusing on communication. There is so many different tools at our disposal now, for communicating. There is emails. There is text messages. There is phone calls. There is all these different apps. We have been exploring how best to have a system in place for internal communications, and I think we have landed on some tools that have been pretty successful for us, and that has really helped, just so that we are all staying on the same page. Everybody is very busy, and schedules are never in a way that we have got a lot of time to just sit down, and talk things through. Having a clear open line of communication, that is in an organized fashion internally, has really helped us keep things running smoothly, so that we can identify issues, and address them before they become problems. That has been important.

Outside of that, I think it is mostly the things I have already mentioned, in terms of just having clear processes, and procedures, for how we do things. Then, getting organized as a group around everything that needs to get done, and making sure that we are working together. I think one thing that we have really tried to emphasize, is each one of our projects isn't someones project. It is the offices project. We really emphasize the collaborative environment, so we don't have one project manager working sixty hours one week, to try to get three projects done, while another project manager might have a light work load that week. Working his standard eight hour day.

If somebody is over there with a little bit more to do that week, we are making sure that we are all pitching in to help them get their work done, so that as an office, we are staying balanced. Again, collaborative environment. We are not putting anything too much on one individual, and putting them on little islands. We try to avoid the cyclone effect of having very separated departments, and people, so we got everybody out in one big space, one big room, where we can all hear what is going on, and see what everybody is doing, and really emphasizing that team environment, so that we are all pitching in to help each other out.

Enoch: What financial information does the firm leadership share with the employees, and staff?

Eric: Another great question. Because, again, I have only worked in a couple of firms, and so I don't have a real firm understanding of what other firms are like. We, at AB Design Studio, are very open book. Especially, when it comes to the financial part of our projects. Each project has fees that we're contracted for, and then we track our fees that we are using on an ongoing basis, and we are very open with all of that. We have software. Again, this AIM program that allows us to track on a day to day basis, where we are at, in terms of our financial situation on our projects. We are publishing that to the entire office, so everybody is very clear.

For example, we may have twenty thousand dollars to use in systematic designs, and we are working to a design exercise. Everybody in the office is very clear where we are at, so maybe we have already used ten thousand dollars, and we have ten thousand left to complete the exercise. That is something that we are making sure is well known to the entire team, every time we are meeting on that project. We ask our project managers to run all their own invoicing each month, on all of their projects, so again, pretty open book in that regard, where we are asking them to review the time that has been put on the project, and put forth an invoice that will go to the client to bill for those services. It seems having, again, staff members that have been added to the team that have a lot of experience working elsewhere, it seems to be much more transparent than what they are used to, here at AB Design Studio.

Enoch: Are salaries transparent?

Eric: Salaries are transparent, at the executive level. Myself, and probably our administrative staff, are all aware of those numbers, as well as some owners, of course. It is not something we openly disclose with our architectural staff members, on an ongoing basis.

Enoch: Right, right, okay. Salaries is kept, that is not necessarily shared with the whole firm. However project fees, project budgets, you are saying is there is a great effort to make sure that everyone understands that information.

Eric: Correct.

Enoch: Okay. When you're a young staff member in architecture, even if you have been at a firm for a while, and you don't understand the overhead that goes into running a practice, it is easy to look at those large numbers, and say, “Wow. They are billing me out at one hundred, and sixty, dollars an hour, and here I am earning twenty five dollars an hour. Wow. Someone is making a killing off of this.”

Eric: Yes.

Enoch: How do you counter that mindset in your culture, or do you?

Eric: Yes, we do. One of the customer reports I helped create, we call the Staff Net Revenue. It, basically, breaks down each persons contribution, in terms of how much money they are bringing in on a monthly basis, based on their individual efforts, and how much of their time gets billed out each month. Then, that is directly compared to how much they are costing the company with overhead, factored in along with their salary. Then, you see the difference. You are seeing if they, individually, were a profitable situation each month, or if they were a loss, basically, for the company.

We run that report every month, and we publish that to each of the staff members. We have an all hands on deck meeting each month, where we actually go through those numbers, along with some other key performance indicators. We reward the top performers each month in a group meeting, and give out funny little prizes, and things like that. I think that report helps set the context to each staff member, in terms of, like you said, the overhead, and put in context the fact that that hundred dollar difference between their billing rate, and their hourly compensation, isn't going straight into the owners pockets.

Enoch: Yes. It sounds like a powerful software that you're using, right now. I tried to look it up. Is this something that is available? I think there is AIM, Architecture Information Manager and the website is Architectronica.

Eric: That is the one, yes.

Enoch: Okay. Great. It sounds like you're happy with this program. You're continuing to invest in it, in terms of, and it sounds like it has some pretty powerful reports that you're using?

Eric: Yes. It is one of the most major software's that we use to run our company. It is a software that Josh, and Clay, helped develop early on. The creator of the software, Barry Isakson, was working with Josh, and Clay, when they were at their previous company, before they left, and started AB Design Studio. I think the firm they were working with then, were one of the first firms that were working with this software. Josh, and Clay, having been in an executive level at that firm, were largely involved in shaping the software, and forming it into a way that it was customizable to how they wanted to run their company.

I have stepped in, to help continue to evolve the software. I work directly with the software creator to customize, make custom reports, and to tweak it to do things that we want to do. We use it for pretty much everything, in terms of, it is our contacts database. It is our time card. It is our documents software. Instead of Microsoft Word, we use this program. Then, we manage our project budgets, and our project projections, and our overall staffing matrix, and workload, all within this one software. It has been a major tool for us.

Enoch: You mentioned the net revenue per employee. Which, I think that is a great number to look at. Especially, to create that culture of, “Hey, lets gamify this. Lets compete. Let's see if we can up that number for you, individually.” Make some additional accountability. What other KPI's just off the top of your head, what are some of the other major KPI's that you're constantly monitoring?

Eric: Yes, so I mentioned staff net revenue. Another individual employee based KPI is staff utilization rate. Which, is similar to staff net revenue, but it is how much of their time is being spent towards billable activities, versus non billable activities. That is a percentage. We have a group target, as a staff

Enoch: What is your target?

Eric: Seventy five percent, of one hundred.

Enoch: That's on the higher side of normal.

Eric: Yes, we have been tracking well, and hitting that number, or coming pretty close, most of this year. The staff net revenue, we track individually, as well as as a group. We have a group goal of sixty five percent. Which, is how much time gets actually invoiced, versus just being potentially billable. That target is sixty five percent as a group. Individual targets, we put more around eighty percent, for each person to try to have a target to aim for. The other big KPI we monitor each month, is simply our fee revenue. How much fees we are billing. We have a target for that, that we are tracking against each month, and have some games set up with the staff with rewards in place when we hit that, and so forth.

Enoch: Tell me about fee revenue. Because, that is one thing that is a little bit more backwards looking. The fee you're charging today results from the inputs that happened in the past. How do you gamify the fee revenue? How does that work?

Eric: As part of our AIM software, we project our efforts on each project on a monthly basis. The first day of the month, we sit down with a clean slate, and we basically put in what we call work plans for each project. Which states what the goals are for the month. What we are trying to get done. Who is going to be working on it. We start inputting how many hours we anticipate each staff member to spend, throughout the month, on that projects. Then, that gets calculated into a projected fee for the month. We set that up in the first week of the month, as what we think we can do. Then, we can run reports that total all those projects up into a total projected revenue. I can then print off that report, and I meet with the firm owners, and we will go through it carefully.

We will look for opportunities to potentially increase our projections. We will look for either projects that may start up, that aren't in there yet, or projects we think that could move faster, and further, or projects that potentially we need to slow play a little bit, so that we can focus on other projects that would lead to a more higher billing situation. Again, we do that with the owners. It is a back, and forth, between me, and the owners, and me, and the rest of the staff, in terms of shaping our projected scenario that has us hitting our goal. Then, once that is on paper, it gives us a roadmap to go execute. Then, we spend the rest of the month trying to execute on the plan that is in place, that has us invoicing at the end of the month, and a spot that has us at the goal that we have set. That allows us to be somewhat forward looking, in that regard.

Enoch: Great, so you talked about your staff net revenue. Where do you hit, in terms of just average, your staff net revenue, where are you guys at?

Eric: In terms of a percentage?

Enoch: No, just in terms of a revenue number. In terms of dollar amount.

Eric: Our goal each month, is two hundred and fifty thousand. At least it has been, for about the last year. We have plateaued. We tried to stabilize the number of staff we have, and so we have been keeping our goal around two hundred and fifty thousand, a month.

Enoch: Per month.

Eric: Three million a year.

Enoch: Yes. You're saying that that would be all gross revenue combined, is what you're saying there?

Eric: That is just our fees.

Enoch: Right.

Eric: Without reimbursable expenses, that sort of thing.

Enoch: Yes. Go into the staff net revenue number. Are you tracking, it sounds like you are, exactly that number of, if Enoch works at your firm, how much did Enoch bring in this month?

Eric: Yes.

Enoch: For the year. I know that generally architecture firms, if they are hitting one hundred and twenty thousand dollars per employee, then they are doing a good job. Where are you guys at, with that number?

Eric: I don't know if we have tracked, it in terms of an average per employee, per year. That is interesting. I hadn't heard that way of looking at it before. It would be something I would look at. We are looking at, on a monthly basis with individual employees, and it shifts based on the billing rate. Project managers, we're typically trying to get about twenty thousand a month out, of a project manager. Our job captain, project captain level, was more like fifteen thousand, and then our production staff, in that nine, to twelve, thousand range a month, is the goals that we have in place. The majority of them are hitting them each month, and some aren't. It is depending on which projects they are working on, of course, as well.

Enoch: Yes. I think that is fantastic. I am a numbers oriented guy, in terms of when I was working for other architects, I always really liked to have that number, that goal. Because, I am very goal oriented. I like to see that I am achieving something, right? I want to feel valuable. I want to know that I am contributing. I think that is very empowering for your employees, and your staff there at the office, to be able to say, “Okay, look. The benchmark for project manager, whatever, is twenty thousand dollars a month.” That may look like a lot of money, maybe getting paid less than that, but look. We have overhead in here, but if you really want to excel, see if you can get that number higher than that. That is one way you can measure your own performance. That is very, very, very cool.

Eric: Yes. It is a neat report, and it is a neat way of looking at it. Like you said, set them a goal. They can see if they hit it. Then, they see if the staff member did twenty two thousand dollars, they can compare that against what their burden is on the office, and see how much net profit they are bringing in as part of their contribution. That is an exciting thing for someone to be seeing, and it is a rewarding feeling to know you're a profitable situation for the office.

Enoch: Yes it sounds like you guys might be at about that mid six figures range, per employee. Because, just based upon the ranges you gave me in a twenty thousand dollars a month, would be two hundred and forty thousand dollars a year, but those are your higher paid architectural staff. Then, you said on the lower end, there is about nine thousand. Somewhere in the middle there, sounds like you guys are probably around the two hundred thousand dollar, in terms of a goal, for the year. Does that sound about right?

Eric: Yes. It does, yes.

Enoch: Cool. Well, you know Eric, thanks for coming on today it has been a fabulous conversation. I really like to hear what you're doing the at AB Design Studio. We talked some about the bookkeeping, accounting, financial, KPI's, which is awesome. I am curious, since you are the operations manager of the studio, the studio lead shall we say, what is the software that you guys are using right now, just to produce your CD's. What is your workflow like?

Eric: We are using ARCHICAD. We actually transitioned to that recently. My first four, or five, years at AB, we were Autocad, and Sketchup based. We had a little bit of Revit, which we were trying to get to take hold in the office, but it was a struggle. Then, at the beginning of this year, we made the decision to transition full force into ARCHICAD, which is huge in Europe. It is becoming more, and more, popular here in the United States. We had been working with a company called Graphisoft, to help us implement that into our company. I think they are up to two hundred firms in the Southern California area, in terms of companies they are working with on ARCHICAD. It seems to be growing, here in our backyard.

Again, software, some love Revit, but we find it a little bit more designer friendly, a little less technical, and a little less constraints, and a little bit more freedom. We love that it is directly related to Rhino, and Grasshopper, so you can model something in Rhino, kick it into Grasshopper, and then bring it right back into ARCHICAD, and use it for your construction documents. We are still in the learning curve of the software, but it has been pretty amazing for us, so far. We are excited about it.

Enoch: Very cool. Have you guys developed all your own custom templates for the software, to get your studio up to speed, per say?

Eric: Yes. We took our templates, and standards that we used for our Autocad drawings, and applied them into ARCHICAD. We are learning how to tweak those, to make sure we are getting the most out of what ARCHICAD has to offer. That is a little bit of a work in progress as well, but we have got something in place that allows us to function, and operate. We're finding that we have got a regular, ongoing support with some people at the Graphisoft company. We have got a team of people who meet each week with one of their representatives, to ask questions, and troubleshoot, and problem solve, and continue to make sure we are refining our process. That has been going pretty well.

Enoch: All right Eric, just to end up here, I would love to hear from you personally. In what area of your life do you feel like your growing right now? What person are you looking to for inspiration? Are there any books right now that you are focused on? It could be something as simple as, “Hey, man. I am starting to mountain bike more, or I am taking a walk every day, getting some fresh air, or I am developing a workout routine.” In your own personal life, and your own personal growth, what is happening right now? What tips can you give us that might inspire us?

Eric: I think in my own personal life, right now I am just focusing on being a good husband. I just got married, less than a year ago, so that has been a, not a big change I wouldn't say, but just a big moment in my life. That has been a major focus. After the wedding, I decided after all that planning was done, and everything was behind me, that I would begin my architecture exam. I started that process last November. I'm about halfway through. I got four tests down. Planning on wrapping up the last three, before the end of the year here. Then, taking the California Supplemental next spring. That has been a big focus, trying to get that process complete, and get licensed, and be officially an architect. Which, is exciting.

Then, just enjoying. I moved out here from Missouri. I think a big focus of mine is really just taking advantage of everything that California has to offer. I am a big outdoors man, and being able to experience the outdoors in a place like Santa Barbara, three hundred and sixty five days a year, is amazing. That is a focus of mine, as well. I'm making sure I take advantage of that. I taught myself how to surf, and I try to get out there before work, a few days a week, and get out into the mountains.

I also recently bought a scrincher van, and I am converting that. Here in Santa Barbara, owning a house is a bit of a pipe dream, at the moment. I decided to buy a van, that I could customize, and build. That has been my creative outlet, in terms of my own personal project. I am designing, and building that into a camper van, with some comforts to take out in the mountains, to go camping. That has been a lot of fun, as well. Something that I am getting a lot of enjoyment out of. Yes. Between starting up a family, and taking my tests, and enjoying the California outdoors, along with helping run AB Design Studio, that keeps me plenty busy.

Enoch: Fantastic. Eric, if there is one resource that you could point our listeners to, in terms of their success in their lives, do you have something that comes to mind?

Eric: I don't have one thing in particular, as a quick answer to that question. Josh, and Clay, take personal coaching every bit as seriously as business coaching. I have been fortunate enough to have them point me in some pretty helpful directions. They recommended I take the Landmark Forum, which is a very powerful experience that gave me some tools for succeeding in life. They have enrolled me in a business group called Vistage. Which, I meet in once a month with other key executives that are helping run other companies, here in town. We meet together, and there is guest speakers that deliver very helpful, and powerful, messages. Then, we are able to troubleshoot the ongoing issues that we are dealing with. That has been a major resource for me, both professionally, and personally. I would recommend both Landmark Forum, and the Vistage group for people to, yes.

Enoch: That is fantastic. I also want to put out a plug there for the group that I run in my platform, Architect CEO. Which, is very similar to Vistage, except for the fact that it is made up primarily, almost exclusively, of architects around the world that share information, yes. If any of our listeners are looking for one of those peer groups, that is very, very powerful. I highly recommend Vistage. There is Entrepreneurs Organization, Architect CEO, my platform, as well. We have some great support, very, very valuable, so thanks for that. Eric, appreciate both those recommendations, Landmark, and Vistage. Thank you for joining us today on Business of Architecture.

Eric: Thanks for having me.

Enoch: That is a wrap. Thank you for listening today. If you are looking for more time, freedom, impact, and income, as an architect, get instant access to my free four part architect profit map, by visiting FreeArchitectGift.com. The sponsor for today's show is Arch Reach. The client relationship management tool built specifically for architects. If you want to systematize your marketing, and business development, Arch Reach will help you do it. Visit archreach.com to learn more. The views expressed on my show by my guest, do not represent those of the host. I make no representation, promise, guarantee, pledge, warranty, contract, bond, or commitment, except to help you conquer the world.


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Enoch Bartlett Sears is the founder of the Architect Business Institute, Business of Architecture and co-founder of the Architect Marketing Institute. He helps architects become category leaders in their market. Enoch hosts the #1 rated interview podcast for architects, the Business of Architecture Show where prominent guests like M. Arthur Gensler, Jr. and Thom Mayne share tips and strategies for success in architecture.


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