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Workload vs. staff How do you get a handle on billable hours and overhead without losing yourself in spreadsheets? Rely on the gut instincts of your department managers.
I ’m honored The Zweig Letter asked me to be a contributor. In the 15-plus years since Crafton Tull (Best Firm-Multidiscipline #43 for 2015) began our subscription, we have drawn on the newsletter’s wealth of information to help our business too many times to count. I hope I can live up to the high standard of this newsletter.
Matt Crafton ENGINEERING INSIGHTS
First, the obligatory disclaimer: I’m the CEO of a mid-sized architecture, engineering, and surveying firm located in the central part of the United States. Like anyone, it is my personal experiences that shape my views, and my opinions may or may not be applicable to your firm, depending on its size, location, or services offered. Many of the needs and processes of larger firms are decidedly different from those of mid-size or small firms. I think probably the most difficult issue managers in the A/E/P and environmental industry have to grapple with daily is workload versus staff. The fastest train to the poorhouse as professional service providers is to have a bunch of people without enough billable work to do. It takes revenue generating work to cover expenses (especially that of payroll), so the more our people
charge time to overhead tasks, the less revenue we produce, and the harder it is to make a profit. Industry managers use many metrics to gauge whether their business is operating as well as it should be. From reading different publications and talking to my peers, it seems that each firm uses its own variety of measures to varying degrees. Our firm is no different. We look at project variance (budget overruns), as a measure of project management effectiveness. Our departments have goals for revenue, income from operations, and sales (new contracts). However, for my money, pound for pound, staff utilization (billable hours divided by total hours), gives the quickest insight to profitability. I know when we hit a certain percent utilization, we’ll be profitable, and if we don’t hit that number (say, during the
See MATT CRAFTON, page 8
THE ZWEIG LETTER April 4, 2016, ISSUE 1146
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