BE EFFICIENT AND EFFECTIVE:
“Efficiency is doing the right things, effectiveness is doing things right” Peter Drucker
To be great at design and attract the right client mix is not enough when designing the best version of your business. You have to manage your projects and deliver value to your clients. Let’s be honest, this part of the business design process isn’t usually a strong suit of the average design studio. But don’t be overwhelmed or discouraged. Dig into operations like it’s a design project and simply aim to move forward. Improving operating performance comes down to designing the right processes (efficiency) and having the right people to deliver (effectiveness). Below we’ll deep dive on creating operating metrics to track the efficiency and effectiveness of your studio.
EXERCISE: ESTABLISH YOUR PEOPLE STRUCTURE
The operation of your business is dictated largely by your people. Even if you’re a solo freelancer, looking at your working structure can be enlightening. Build a people structure by following these steps:
– Download our People Structure Template [Tools]
– Try to distill your billable and non-billable work into categories, not tasks. For example, rather than logo design, just have a category for creative design.
– For simplicity, we recommend max 8-10 work categories
– Think about where people spend their time, regardless of their roles
– If you’re using time tracking, dig into the last 6-12 months to analyze time spend
– Include your contractors – they are part of your billable people structure
– Fill out your people structure as it exists today
– Are people spending time in the right areas to be effective?
– Are you efficient at working on billable projects?
– Do any categories receive too much time or too little?
– For each role, where should people be spending their time to be efficient and effective?
– Are there holes in your people structure that must be filled? If so, consider allocating a contractor to fill that space.
– As a benchmark, the minimum studio billable target should be 60%-70%.
DIAL-IN THE RIGHT METRICS
Billable Time %: The percentage of total time that is spent on billable work.
Calculation: billable hours / total hours
Effective Billable Rate: The $ rate that your studio earns per hour of billable work
Calculation: revenue / billable hours
Revenue Capacity: The total revenue per month that can be completed
Calculation: billable hours * target billable rate (studio rate)
Key Time Allocation: The % of time allocated to a selected important work category. Example: focus to increase time spent on business development or quality control
Calculation: selected category time / total time
Revenue per Team Member: The amount of monthly revenue spread amongst all team members
Calculation: revenue / # of team members
Project Quality Rating: The amount of monthly revenue spread amongst all team members
Calculation: revenue / # of team members
Team Engagement: A rating of the team engagement in the business
Calculation: rate out of 10
Current Performance Deep Dive:
Once you’ve designed your people structure, deep dive into the last 6-12 months of performance:
– In your current structure, why do people spend time the way they do?
– Does your studio have an effective workflow process?
– Does your studio use the right software tools? Too many? Too few?
– Do people clearly know their roles? The tasks they are intended to perform?
LOCK IN YOUR GOALS
OK, it’s time to lock-in your goals in each of these above mentioned metrics. Set 1 year goals that are achievable yet motivating.
– Billable Time %: at least 60%
– Effective Rate: depends on positioning. Freelance $65-100, Studio: $100-200
– Revenue per Team Member: depends on business structure. Min $10,000
– Revenue Capacity
– Team Engagement
– Partner Engagement
– Key Time Allocation
– Project Quality Rating
TRACK AND CALIBRATE
Building true value and making great decisions comes down to tracking your actual performance against these goals. Mine your data in these metrics every month, and compare both the current month and year-to-date performance to your goals. Learn and adapt. If you’re weak in an area – put an increase level of focus and intention into improvement. If strong – learn what you can do to maintain that level of strength.
Internal tools are an important part of tracking your operations. Consider these:
– Harvest: http://www.getharvest.com/ – time tracking software
– 10000ft: http://www.10000ft.com/ – project management software
– Streamtime: http://streamtime.net/ca/ – studio management software
If you use time tracking, or are open to it:
– Fill out the people structure table every month with actual time data. It will be an enlightening exercise and will provide a comparison against your goal
– Use the categories from your people structure as the high level tasks in your time tracking software
If you don’t use time tracking: consider task tracking such as provided in 10000ft. You can still get an idea of your billable efficiency
And there it is. You’re set-up to track the effectiveness of your operations and learn and adapt on your way to creating the best version of your business.