Download Otter for your meeting notes

211 Robert Yuen of Monograph and Sarah Hughes of Snow Kreilich Architects | Otter.ai

211 Robert Yuen of Monograph and Sarah Hughes of Snow Kreilich Architects

Enoch Sears56min

Speaker 1

00:00

I think we're gonna have a really big impact on amazingly well rounded, stronger architects and stronger architectural leaders in the years to

Speaker 2

00:08

come. Hello, and welcome to the Business of Architecture. I'm your host, Brian Willard and today I had the fabulous pleasure of speaking with Robert Yuen, who is the founder, co founder of monograph, and Sarah Hughes, who is the associate principal and Director of Finance and Operations at Snow acrylic architects. This was a brilliant conversation thoroughly enjoyed speaking, and picking the brains of these two shining lights of financial literacy and intelligence in the architecture sphere. It was really, really insightful. So a little bit about each of the guests today, Robert was trained in architecture quickly recognize the need for better business tools, and has been the one really driving and at the helm of developing monograph, a project management software to address the challenges that face architecture and engineering professionals. He has become a leading voice in the industry, promoting the importance of a&e business performance and helping firms improve their workflows and profitability. His mission is to always be in service to the design professionals responsible for our built environment, letting them focus on what they love and do best. I really, really enjoy speaking with Robert and I do feel, you know, this is the mission of Business of Architecture as we're very well aligned here. So monograph highly recommended piece of software, many of our clients use it and absolutely adore it. It's a beautiful piece of intelligence and is constantly evolving. It's a software company, who really are revolutionising the future of architecture and engineering firm performance. firms use monograph to make quick and confident decisions about budgeting and resources to drive their practices forward. Sarah appreciates the problem solving nature of architecture and enjoys the challenges supporting industry operation. She's got a very unique professional arc, so she's an architect turned accountant. So decade as a designer followed by another decade of small creative business financial consulting, has allowed her to understand a multiple sides of architecture. Practice, her education and experience have fueled her passion for promoting the value of architecture as a service and fair pricing models. Sarah is responsible for the company's project staffing, coordination, firm operations and growth, profit and loss tracking and financial goals management. She oversees project scheduling, and workload assessment. She enjoys implementing internal systems and interesting tools to make firm operations more efficient and transparent at all levels of practice. She is involved with many organizations and forums supporting small business needs, and architecture firm ingenuity. So this was, as I said, a absolute delight for me. We talked about all sorts of things but we really focused in on cashflow cadence, the importance of establishing a good rhythm, with money coming and going within your business. We all we are very aware of the feast or famine cycles architect's practices deal with and Robert and Sarah talk very intelligently, and insightfully about how to even out those flows. We talked about the importance of financial transparency, how to communicate what's going on with the finances and profit inside of your business, how to do it compassionately, how to do it intelligently how to do it, so there's no upset but also so people understand and have responsibility, about seeing and looking at the numbers that are being given to them. And we also talk about the importance of building a budget both for projects, and both for your finances in your business and their overheads. So sit back, relax and enjoy. Robert Yuen and Sarah Hughes. This episode is sponsored by Smart practice, business of architectures flagship program to help you structure your firm for freedom, fulfillment, and financial profit. If you want access for our free training on how to do this, please visit smart practice method.com. Or if you want to speak directly to one of our advisors about how he might be able to help you please follow the link in the information. Robert and Sarah, welcome to the Business of Architecture. How are you both?

Unknown Speaker

04:21

Well, thank you,

Unknown Speaker

04:23

Sam, you're doing great.

Speaker 2

04:25

Fantastic. Well, good to have you. We're good. Robert, happy to have you back again. You are the CEO and founder of monograph, which has quickly become certainly on on our side with our BIA clients one of their favored project management tools and software. It's a beautiful looking piece of kit and it's certainly something which is been well needed in the architecture industry. And Sarah, you're not an architect. Is that correct? cracked? A half fantast Take any work on the finance, side of snow, credit architects

Speaker 3

05:06

Correct? Well done. Got it right the first time. Yes, I used to practice 100 years ago. And then I switched gears and switched over to the financial side, and wound up doing finance and implementation and consulting for upwards of two dozen different a&e businesses within the twin Minneapolis Twin Cities area. And now I full time do the finance for snow crellick.

Speaker 2

05:38

Amazing, brilliant. Well, I think let to kind of kick off where we're kind of in a period at the moment of let's call it economic uncertainty. If we were to look at some of the writings of Ray Dalio recently, and his kinds of memoirs, on the changing world order, there's a kind of interesting macro economic picture that's being portrayed where the US and the West is, you know, things are changing and shifting, we've just come out of this crazy pandemic, which obviously had a big impact economically, but for most architecture practices actually left them, you know, in abundance really and working working very well. But now we're kind of, we don't know what the future is, basically, there's been talk of recession, for a long period of time. And I'm gonna assert that both of you have a pretty good grasp of knowing that architects aren't always the best financial observers, if you like in their in their businesses. So perhaps we can start there of, you know, having a kind of finger on the pulse inside of the architecture industry, what are what are practices, seeing with a shift in the the economy at the moment?

Speaker 3

06:57

I was actually just when you noted, we're in a state of economic uncertainty, I'm trying to think of a time in my 20. Plus your experience in architecture, when architects have ever felt there was economic certainty, because it is just, I don't know if it's geographical or generational or what have you. But even when times are good times are spoken of as though they are bad and disparate in the architecture practice. So I think we're just you know, running strong as always, it's always a state of flux. But I will let Robert speak to his his observations about the current state. there's anything specific.

Speaker 1

07:47

Let me see if I can roll with the punches here. The industry is probably always in a state of uncertainty, but the type of uncertainty changes. So the typology of uncertainty changes through cycles, and we're just dealing with a new typology. But I think that's really well put, like I've been an architect for maybe 10 years before starting monograph. And it's always been uncertain. I just think it's probably the typology of uncertainty, those changes, and there's good typologies like a ton of work, the phone's ringing, and how do I solve that problem? And there's other times when the phone's not ringing, and I have a different problem. But in either way, they're both classified as uncertainty.

Speaker 2

08:35

Absolutely, absolutely. And I think I fall prey to the being in the in the media, if you like sometimes, where we're always talking about some kind of drama, if you like, with the economy. And this is this is often something that's, you know, that we do we see it in the media all the time that there is a never ending narrative of doom and gloom, or something shifting and changing that we've got to be kind of heighten our awareness needs to be heightened around. In terms of running an architecture practice, what do you think are some of the key things that we should be looking at financially the kind of numbers that we should be really paying attention to, in any period of, of, of economic uncertainty, if you like?

Speaker 3

09:28

I can say on our end, based on the size of the firm that we are, we are about 40 people and the region that we are located in which is in the Minneapolis, Minnesota, like Middle America. What we have shifted to is to really continue to keep an eye on our cash flow 12 Ideally 18 months out at all times. And the reality is anything after six months given our size and the flux of the account To me, is really an educated estimation. But that's still a baseline that you can continue to look at and predict off of as you are marching along over time. I feel like it's the best way to, for our size and circumstance, it's the best way to really predict where you're going to have holes in your workflow, you're where you're going to have holes in your staffing, where you are going to have an abundance of staff that doesn't necessarily match with how much project fee and budget you have available. Even little things like really paying attention into your cash flow around the time of the holidays, we as architects tend to apply, like a general schedule and budget all the way through the course of a year. And it's like what, like we just kicked off summer, right? Like, we really need to see how many people are taking off time in the summer, we need to see how many people are really taking off those last two weeks of the calendar year, those have huge impacts. When it's not just one or two people, it's 30 people who's going to fill in the gaps. How are we going to get the work done that needs to be done. So that's what I've been using as of late, especially since 2020. And the huge disparity in cash flow that happened during that calendar year, cash flow tend to be the best predictor of how to engage with upcoming changes in both efforts, workload and overall economy.

Speaker 2

11:36

I'm gonna say that 18 months actually sounds like a really, really long time for practices. Yes,

Speaker 3

11:42

it is. And that's again, that's why I'm openly saying after six months, you are just saying we could probably predict six months reasonably? And then what could we have an educational estimate on for the year after that. And yeah, what our baseline cost, we know like, we know, our rent is probably going to be X amount all the way across, we know the cost of our health insurance is going to be X amount all the way across, we know that we have these three projects that have a locked in government contract that pays on target, the X amount of months, those are the things that at least you can have placeholders in there, it's not going to be for certain it's not something that you would ever use as some as a financial worksheet that you would send to a bank or something. But it gives you some groundwork that you can build on. And once you have that built out 18 months as you go each month, updating it from where you were and then added another month down the line, you find a lot of patterns. Architects are great with pattern recognition. They love that stuff. So you just give them opportunities to kind of plug and play and see like, here's the consistencies. And so what are we going to assume are the inconsistencies.

Speaker 1

13:00

Brilliant. I really love this topic. And I love love to dig in because I have a lot of friends that misinterpret cash flow, as in sum total. Yeah. So I think it's really important for us, I think, to touch upon, like, what does cash flow mean? And like the best way I can describe it, I love your help here, Sara, like I think I think of cash flow as cadence. How often do cash leave, and come in. And that's the most important part of cash flow is the cadence. So like you make payroll every, every other week or once a month, you pay rent once a month, every month. Those things I think most of us know, I think I will love for every architect to think about well, how often do you get paid? Yeah. Because like, if it's not monthly, why not? And if it's not monthly units on a face base, is it predictable, because then then you have issues around knowing your cadence of cash flow. If you don't know your cadence, the cash flow, you can't plan and it makes it makes the future scary. And we're all I'm trying to do here is try to make it less scary and like you gotta know your cadence. Cadence is important relative to cash flow.

Speaker 3

14:23

I think that from my experience of going in and out of so many firms over the course of a decade there's two main observations that I've seen that I could say university without hesitation about every firm. Every firm assumes the other firms know exactly what they're doing. And as opposed to themselves where they just assume they're doing it wrong, or they don't have all the information outside firms have. And two, they have all the information they actually need to make it a less scary situation. It's just either needing to take the time Time to do it, finding someone to take the time to lay the information out. And, most importantly, actually acknowledging how much information they truly have. So a product like monograph or any project management system, any financial system, it's all in there. It's just how do you whittle down what you need to make it worth your while and make it easily? Easily routinely accessible. So it's not a chore to look at your information?

Speaker 2

15:32

Well, I really love this idea of number one, having kind of, you know, accessibility to information so that you can start, you know, being able to establish what your cadence is with cash flow, and actually just thinking about cash flow as a rhythm as a heartbeat as a cadence. Because when we look at lots of architectural practices and how they bill, you know, it surprises me to this day, how many practices still build using some kind of milestone method, which is really vulnerable, it's, it's vulnerable to client changes and indecisions, its client, it's fundable to other, you know, good, well, meaning consultants not delivering their work when they said they were going to deliver it or something comes up and there needs to be a change. Or, you know, I know that in the US very similar to here in the UK, with your planning authorities, it's somewhat of an antiquated, perhaps a little bit more bureaucratic process. And decisions don't always get made as timely as we want them to, or, you know, you haven't put your North arrows on your drawings, and they all get sent back. And you've got to resubmit them or something like that. But that that all that means is that, you know, particularly with larger projects, with more complexity, that building on a milestone, like a delivery milestone, or even worse a project milestone, then that's a moving target, which then means that your cash flow is now going to be moving. So how do you what kind of advice would you give or how have you seen practices, even out or, or establish more rhythm, more predictable cadence with that with that billing?

Speaker 3

17:09

Don't build based on milestones. Genius. I can say the most successful billing cycle is 30 days, shorter. Sounds great, because it makes it out to be that maybe there's smaller payments, and they're more incremental, and there's a constant cash flow. But your clientele is less likely to pay on time, when those shorter increments, it's just the pattern that I've seen. And a lot of public companies and especially government companies, they they are dictating their terms to you, you are not dictating your terms to them. So 30 days is usually where everyone can, you know, come to an agreement 30 to 45 days, milestones for all the reasons you just listed. Not a great idea. And on top of all the reasons you just listed in terms of it being a very vulnerable situation in terms of incoming cash, add to it, that you bill on a milestone, that doesn't mean they're paying you right away. So then you add 30 to 45, to if you're dealing with certain types of clientele 60 to 90 days, you are suddenly and they know this certain types of clientele are basically using the architecture firm, as a source of free financing, they are getting all of this work interest free, upfront and the firm, the architecture firm is basically running an interest free bank loan. And that's not what architecture practices are set up to do. And yet it happens time and time again. So, yeah, don't do that.

Speaker 2

18:47

Yeah, no, I mean, I've, again, this this kind of frightens me and upsets me when I hear stories that particularly tend to be New York developers, but who are very skilled at knowing how to leverage their consultant team with not having not paying them or getting them, you know, kind of getting leveraging these sorts of, they're leveraging their risk, basically, in the architects not getting any upside of that risk. Well,

Speaker 3

19:15

yeah, they have high risk, high reward. But what it means as a consultant is we just have high risk. We're not We're not banking, any of their reward, we're just trying, the reward is you actually get paid for the work that you do. There's no extra terms in there that really benefit, the risk that's been put forward.

Speaker 2

19:31

So so even even if we're billing say, on a monthly cycle, and we're billing say, for the work that's done on a certain on a certain project, I'm guessing that as well as also vulnerable, it's vulnerable to the same sorts of things. You know, that milestone billing would be because you could be preparing to bill for, you know, $20,000 worth of work. And then for whatever reason, you only managed to get 5000 of your work done. So now you're billing for 5000 And now your cash flow has taken another hit for the same reason. And it's better than it's better than zero. Yeah, but how do we how have you seen practices kind of start to navigate that? Is there any innovations you've seen in in, in kind of billing or invoicing at all.

Speaker 3

20:19

I would say when we've had those types of situations, there projects that we can foresee that there might be a flux and the amount of work each month. And so when we lay out a contract, we actually have a payment, calendar payment schedule, in which case, we're still billing them monthly, but we're billing them in percentage of the project that we assumed by like, with within three to four months, we would be catching up in total. So we're not doing a full milestone where we're breaking out maybe the the milestone calendar into like four equal parts. So there might be one month where you're billing a little less, there might be one month you're billing a little more, but it's at least it's consistent. And if the client agrees to that, what you're internally doing, it's really the responsibility is on you, unless at the mercy of when the client is going to pay it for it.

Speaker 1

21:18

We should reiterate to like, knowing one month out, it's better than knowing something that six months compound compounded over time, or like a difference of 20,000 is way better than a difference of like 60, or 120,000. There's an order of magnitude of why cadence is important. I also think like, during good times, when that when the phones were ringing, clients will probably come knocking on the door for everyone. I think we've gotten a little bit lazy of maintaining client relationships, where I think it's much more important now. So you can get ahead of knowing what is the financial circumstance of your clients before the billing cycle, even hits. It's not very innovative. It's very old school and very traditional, but very important as a service industry as architects, that we serve clients, and like, you have to maintain that client relationship. And the tighter that relationship is, the more information you're gonna know, before it's late. And you can be very creative. If you know information early. If you have a client, hypothetically, saying like, we might have a rough month this month, making that payment, but it will be okay the following month. If you know that upfront, you can design in models and be creative in how you resolve those difficulties. Not having that relationship puts you on a defensive mindset. And make resolving that problem a little bit more harder to try to get ahead.

Speaker 2

22:51

I think that's great. And I think as well, you know, the more that you understand, say your client's financial mechanisms, how their financial cycles are working, you can actually I mean, I've seen practices in the past who have used this to their advantage where they've, you know, they've created offers, if you like with how they get paid. And if their payment structure, if you like is becoming more risky, then the price goes up, basically, and you might see this and, you know, kind of most extreme example might be an architect to doesn't receive any pay until after planning approvals, for example. But then they take a much, much bigger chunk of fee than they would have done if they were getting paid, you know, a monthly invoicing and I think a lot of developers start to like that, because it's deal making. And it's kind of if we're going to take the risk, then we can preempt taking risk and actually structure a deal. That's, that's win win.

Speaker 1

23:50

Interesting. I don't usually like those because that means as an architect, you have to figure out how to float. And yeah, architecture firms don't typically have enough cash to float for a very long period of time. This is why like, Cadence is so important, because I can know for this business, typology floating is very, very difficult. And it's very different than like a developers business where they're there. They have multi monitor cash reserves, where they can float for that return to come back. That isn't the case for most architectural firms and even harder for firms smaller than the one that your ad Sarah so like, it's really important that we don't merely entertain those options on what we actually have the cash to do so.

Speaker 2

24:41

Yes, I mean, that type of thing certainly needs to be inside of a strategy for cash flowing the rest of the projects, the rest of the office.

Speaker 1

24:50

And maybe I should add some context to what I said earlier, like I think in part has a little bit empathy. i I'm here in California and San Francisco. I'm really close to Silicon Valley Bank, if we all recall the news a few while ago that bank, they had a bank run. And if you were trying to invoice any clients that were banking, all of Silicon Valley Bank, well, they didn't have access to cash. Like, regardless if they wanted to pay you or not, they just didn't have access. I think knowing that and knowing that it was all going to be secured, and all of it was going to come back, but they're going to be at least two to three weeks late for things to kind of work out. It's just important information to know. So you don't immediately go into negative judgment that like, Oh, it's a bad client and our payments or like, look, we have the cash, we have an open relationship. And it's, it's a little bit out of their control.

Speaker 3

25:45

Say I would again, I would reiterate open communication, you don't have to open your books without still being able to have an open conversation about what your expectations are as a service provider, what their expectations are as a service receiver. And how you can coordinate together, it doesn't have to be one sides, giving it to the other it can be like this is what can usually work for the both of us.

Speaker 1

26:13

Oh, sorry. I was gonna say Sarah said something earlier in the call about like, specific geographies. So if, if you're an architect practicing in the Bay Area, like the first thing you do when you hear news like that was to call your client, like, how much exposure do you have to this? Like, we just want to make sure we get ahead of it. Like if you're a VC who has money Silicon Valley Bank, if you are a tech executive who might have money in Silicon Valley Bank, if you're a tech company and you're doing like ti work, do you have like, just understanding your exposure from your clients on having that conversation can derail any uncomfortable conversations later, was very geographical specific. That means like, architects know your surrounding know your local news and local current events. And it's going to help greatly in terms of navigating the next couple of weeks, next couple months.

Speaker 3

27:07

Oh, that makes me think of something Ryan had mentioned earlier in the conversation about how our new cycles are prone to pointing out the constant state of economic uncertainty combined with Roberts note about geography. I just sat in on a Leadership Council and there was a speaker that was speaking on behalf of the Minneapolis Chamber of Commerce. And he said, You know, every time you open up the Local Business Journal, the one that is circulated around the Twin Cities area is like, you know, they have great big headlines about how such and such company as such, and such law firm is moving out of the downtown area and taking less office space. And he said, I hate to tell you this, but that is not a headline that has been happening for 20 years. And it's because law firms don't need an entire floor because they don't need an entire floor of files, everything's now in a thumb drive, right? Like you said, so you have to understand the context, you have to understand your geography, you have to understand that even if it's in a financial news cycle, compare it to how it has been the last five years, 10 years, 20 years, and you will find that, that's just the state of change in technology. And that just means that new businesses can move in to that floor, it doesn't mean that people are moving out of the downtown area, they are taking up less space. And I think that's a key point in how architecture is working with the new cycles and the financial cycles and the local geography is you need to be aware of how space is being used in your local community, how people are financing it, how they're developing it, and then how you as a service provider needs to accommodate those changes.

Speaker 2

28:55

I again this this idea of kind of being very aware and attentive of your of your client and your industry. And your context really gives you a lot of Intel and intelligence in general of what's where the risks might be happening in your business so that you can kind of prepare for them. What are the sorts of things that a business should be doing internally, to ensure that cadence of cash is kind of keeping its rhythm? What sorts of obstacles to the architecture practices experience with that? Making sure that the work is getting done on time.

Speaker 3

29:33

On my side, building a budget, right? Building a budget that reflects the the cadence, the cash flow, the patterns that you've seen, again, I'm going to go beat the drum. architecture firms have this I'll have all this information and they just love pattern recognition. So like combine those two worlds and understand that you can build a reasonable budget and it can get as granular as you want. So I want it to be that most people that I've worked with, have their finances in QuickBooks, or QuickBooks Online, those a lot of those tools are built in, they can just tell you, this is what we would predict a budget would be based on past patterns, then you review it, and you see if it actually works for you. And you know, maybe what, you know, you pay your professional liability insurance, which is a usually got a big price tag once a year. So you know, you got to drop that into the middle of the year. And that's, that's a big piece of cash, you need to have like, just be able to plan, not just predict your cash flow in and out, but build a budget as to because building the budget tells you what you want your cash flow to be. It gives you more control, it puts you more on offense less on defense. So while I've been doing that 18 month cash flow, I have been building out a 12 month budget that's constantly shifting by one month at the first week of every month, I'm just building it out, based on what reality actually hit, and then how it's going to implement down the road.

Speaker 1

31:08

I think that's so smart. I would, I would add like for the audience out there, budgeting relative to your entire organization. And then budgeting, again relative to projects, or to typologies of planning and you should do both. Because like product, some projects might go array, and the company is still the company and you kind of need to understand both moving pieces. Some budgeting totally agree, Sarah, what I would add is once you do establish a budget track against it. I know a lot of friends that like work really hard on amazing plan, and they show me the problem is plan is so incredible is so detailed, and then you put it aside. Yep. And you don't actually track against it, I was like, I just want to pull my hair out. Because like the whole purpose of the plan is to measure against that plan, you lose the complete value of a plan where you don't actually use it and measure yourself against it. So like actually tracking, it's really, really important. And that's that could be your timesheet data, that could be your milestone data. That could be your effort, that could be your deliverables. It could be your money, cash in cash out. But regardless, the principle is tracking, it's really important,

Speaker 3

32:30

because the tracking also, it's not that it won't hold you accountable. But it also is a reminder of maybe some things that you forgot, maybe some things you didn't predict, because all of these are planning tools. They're not. They're not finite, they're they're meant to flow back and forth. And paying attention to your historical data, even if the data is just 30 days old. I actually think that's the best time to be looking back because it's still fresh top of mind. And you can remember why things happened the way they did. But yeah, then you can compare to what your predictions were. And sometimes it's really satisfying to see how close you are, or to understand why you were so far off. And that only helps you. I mean, you turn into your own best algorithm, it helps you just work the plan to a more accurate degree down the line. It's all Yeah, calibration, you're just you're only working to your own benefit down the line, there's no downside to it other than firmware from leaders don't want to take the time in which case, that's great, too, you just hire someone who's willing to do it. And the small you can be as small of a financial investment as high as having someone you know, four hours a month, whatever it is, but I I will also say this on repeat. The degree to which you invest and having someone maintain your financial data and keep it current will always pay you back at least two fold, if not tenfold if you're thinking I don't have the time to do this and or I'm going to do it when it's so far down the line. I don't have top of mind information that's really irrelevant. There's no way that that efforts paying me back so I'm not going to bother where they're showing Robert they're super detailed budgets that just kind of get set aside for a year. That's not doing you any good and all that time they spent putting that budget together is wasted and lost, right? But you pay someone if you don't want to do it yourself to really stay on top of it. All it's doing is working toward your benefit.

Speaker 1

34:46

I like to compare it to like working out. Not a lot of people like working out but we all know it will always pay dividends and you might not see the dividends on day one and you shouldn't right like it's it's about repetition, like repeating, repeating calibrating, and being aware. And over time, the benefits have always outweigh the initial effort that you put it. Just it's good. It's good hygiene.

Speaker 2

35:18

Absolutely, absolutely. It's interesting as well then, you know, kind of developing a budget and having budgets for for projects. And how does this get communicated to the people on you know, doing the work, for example, because this is often where there's a bit of a disconnect. And, you know, we were, we were kind of joking earlier, Sarah about timesheets. And this is I've spoken to many architects, practices offices, were just just trying to get people to do timesheets, and we've got all sorts of innovations and monographs, all sorts of wonderful tools on it to make it mean, it's so easy to actually record your timesheets, but yet, people have a reluctance to do it. And there's things like there's bits of spyware now that are available, and there's no time bro, and all sorts of other bits of apps that kind of, you know, a logging things. But I get the sense sometimes that there's maybe a bit of a disconnect between the business mechanisms, if you like, and this activity of doing a timesheet, or maybe it's just timesheets are boring to do, no one wants, no one wants to do it. And we haven't, we haven't made it sexy yet.

Speaker 3

36:28

I've found it's either that it's boring, that there's a worth some for some people, it's a level of self consciousness, worry that they spent too much time on something, or that they aren't being completely accountable for their time. So those are usually the hang ups in which case, those are individual issues, not necessarily the actual need, not the issue of the actual need. Yeah, you know, there's Yeah, you're right. There's all these tools, there's all these procedures, I like to overlay, solid dose of guilt and fear, which still doesn't always work to my benefit. One thing that I know I can speak of for monograph just because we are end users of it in terms of budgeting time, allotments is, there is the ability and we do this every single week as the project managers go through each one of their projects, and they a lot hours for each person on the team against the specific project and specific phase they're working on. So as individuals are entering their time, they can see how it's compared to the budget, my role has been a to have an overarching view of that, make sure it's being done, that it's within reason that no one's find out that no one doesn't have enough to do, but also constantly reminding individuals, teams leaders, that this is a tool, it is not big brother, it is a way for you to not only measure your own effort, but for us to learn from it. So if we said we need you to be working on this task, or this milestone or this phase for 20 hours, and it takes you 40 I need you to honestly put that in your timesheet. So we know next time, this was a huge average. And we understand why because maybe it tooks different levels of software implement implementation, it took a couple more meetings, whatever it was that we didn't factor for, we need this from you for future planning as much as we need it for you for the sake of like payroll or daily, you know, accountability. That's not what it is. It's it's needing people to understand that we need the information for the future efficiency of the company and which is subsequent future profitability for the company.

Speaker 1

38:51

two way street. Thank you, Sara, I think we have a really strong approach here and monograph where we work really hard to make it a an area where you want to constantly come back. And experience is great that you're going to be more likely to enter time. And that's a really different stance. And let's say like older school legacy software where like this experience was not so great. And you want to get in and get out as fast as possible. Well, that's the mindset, you're more likely to have dirty data, a little bit garbage in garbage out, which is not useful for the organization. When I was an architect, one of the things that it was a tough lesson for me, I worked. I worked really, really hard at a larger, larger organization, a lot of hours. And I didn't always put all those hours in. Then what happened was like when I got a new project assignment, they assume that I can do it on that same timeline and I kept working really, really hard. And I kind of shot myself in my own foot because I will wasn't honest with my team. And it's not the principal or the project managers fault, because they're they're planning of the data that I put in. And that, that gave me a lot of awareness. When I started monograph about three and a half, four years ago, I was like, I don't want to repeat that mistake, I really don't want the industry to continue to repeat, repeat mistakes I've made. It's important to have the integrity of the right amount of time. And it's also really important for project managers and principals to own mistakes when like we've miscalculated the scope. And that's okay, like, well, we're gonna take that as a learning lesson so that we don't repeat it for next project. But we don't fix the cycle repeats. I also caught a little bit on this, like historical divide, in terms of information, like financial information down to the designers, I think it's really time for that to go away. Yeah, I think it's really important for young designers to understand the implications of their value of their time. And the role it plays from a finance and ops perspective, they don't need to be the next Sarah don't need to be like 100%, full time and financing hours. But they do need to understand the value of their time and the implications of their time. And the way it impacts design decisions. I think like bridging that gap, and removing that divide will be a huge, it's a huge motif of mine. And I hope to accomplish as I continue to build monograph as one of our values.

Speaker 3

41:37

I will say when we rolled out within monograph, we got every project loaded in we got all of the time, and planning roll rolled in. And then we presented it to the company. And everyone assumed like, Oh, this is just what, what Sarah sees who's the admin of the account. And it's like, no, this is what everybody can see. Everybody can see what this project for Fi is how it's broken down by phase, you can see what other people are working on, you can see the time other people are dedicated to something because that was a lot of the feedback we would get even I know we're big for a small firm, but we're still relatively a small firm with 40 people. And we will get feedback saying, Well, why are there only three people on my project and that team has six people and you would have to point out well, this is the way the feet breaks out. And Morphe more scope, more need for more bodies. And when you don't have that understanding of not just what other people are working on, but the depth of the project and what it demands. It really can make some challenging work relationships and some hard internal feelings. And it's just like, it's all here, you can just look, it's it was never meant, it was never meant to be opaque. On our end, it's just we never had the tools to kind of present it universally, like project managers had a planning spreadsheet, and it stayed in the project managers folder. And a lot of times, bless them, it would stay on their desktop, and they even I couldn't see it. And then it was like some sort of Black Ops procedure to try to wrangle it away from them. And by the time I'd get it, it was so out of date. And it was the information wasn't live. And, you know, it's being able to have tools available that are live that you can tell people, the more information you put into it, meaning the more timely Your time is entered, the more it's going to be accurately telling you how this project is running. And so everyone has a bit of ownership in that. And I think it has been, I mean, we're new to it. But I think it's been a game changer in terms of communicating, as Robert was saying the importance of the value of the individuals, efforts on every project in every in every role.

Speaker 2

44:02

I'm a big fan of this conversation I do like the you know, I'm with you both on this being more transparent with your team members really establishes a much more healthy working culture and remove some of the mystery and helps team members be able to locate themselves within the business and what their work is actually contributing to Yeah.

Speaker 1

44:28

I think of it all as literacy like I've never met an architect that didn't know what needed to be done. Every architect I've met have always known what what drawing they needed to do. What what detail they need to finish what email they needed to write. What I just want to do it all at once. For literacy, yes. Where I think we're doing a good job is a little bit more on like getting everyone up to speed on financial lives. See? Right where I think like, it's really like no one has a problem with what tasks they have to do. Like, let's, let's just bridge that gap and link it back to financial literacy. What I'm really excited like, I think, I think we're, I think we're going to have a really big impact on amazingly well rounded stronger architects and stronger architectural leaders in the years to come. Because that that foundation was starting earlier. Which means it's going to be much more well rounded when young architects and young designers return to leadership positions, which I'm really, really excited for.

Speaker 3

45:39

Yeah, that's a good point, I would say, I mean, I never understood from financials, I was never privy to that. Because when I was practicing, I never reached that level of project manager, or senior project manager. I never understood the impact. I never even think I even knew what my billing rate was. And like, now, we're making it clear, I think it's even more important for the people that are just coming out of school, when they have no experience in firms, and they need to be reminded, we're actually a commodity. And it's great that you came out of a school and you had projects with no budget, no clients, no schedules, and somehow often, like no geography, or sometimes gravity that it's going to apply to whatever your design is, but we have all those things here. And you need to know how your effort is actually being translated into the means to be able to pay you. And we want to be able to pay you but you know, there's, there's limits. And so how can we help you learn with those limits?

Speaker 2

46:43

i It's so important. I mean, I'm, I'm often reminded of a time, a few years back where I had somebody, an employee, a young, a young guy, listening to the podcast, and was kind of getting frustrated at his lack of transparency with his boss. And he found out what his billing rate was. And he was shocked. And he found my phone number online or something, I don't know how I got my details, but he phoned me up and was in quite an upset state and felt like he was being ripped off because his he discovered that his boss was billing him out at about three times what he was getting paid. And, and it was very interesting, because it because clearly there was like, that's a that's like a as a result of a lack of transparency and culture. Because that that individual felt like they were being shafted, basically. And you know, and it's not, you know, well done to the boss, because that was, that's what he should be doing billing billing people out at three times his mount, but for the team member, we didn't land like that. And, you know, there was that's a kind of this old guard of architectural business, if you like, which has always been to kind of, you know, whether it was intentional or not intentional. And, you know, the tools have been there, there has been this this wall, if you like, of not disclosing information, I guess my next question would be is how much transparency? Like, is there a limit do we do we start sharing people's what everyone's getting paid? Or?

Speaker 3

48:16

Oh, I'm in the Midwest, I don't think that got overwhelmed. Our crew has a hard time making eye contact. So I don't know that sharing actual salaries. But I will say in wanting to share information, we started doing quarterly financial updates. And when I share them, I start, I start the end, it starts at the end of the year. Well, I mean, it's a cycle. But you could say in December, I project with pretty accurate certainty of where we're going to land at the end of the calendar year. And if that will lead to bonuses, profit sharing, things like that, and also how it compared to what we were predicting at the beginning of the year. And then in January, after the year has closed out, show what the actuals were and then actually show what's projected for that calendar year. And then each quarter, it's a comparison, and it's showing, as we were talking about before with budgets, it's this is what we were predicting here's where we actually landed and here's why. We've done things where I think I started every meeting explaining the difference between cash and accrual basis. So people understood just the basics of just because you've worked so so hard this quarter, it's might not actually show up on this quarters financials, it's going to be offset, because we are only reporting based on the money we took in not the service fee we generated and then we got paid for it. So if you're feeling that you worked really hard this quarter, and you're wondering why there's a deficit, you're going to expect to see it show up down the line and I've gotten some feedback fact that that was actually helpful for people to understand because they couldn't get why what they were physically experiencing wasn't showing up economically on a report. We have shared for the first time this year everyone's billing rate. And it was not because we never wanted to share that, but just never. Like, we just didn't think too. And then there was no reason not to. Because obviously, there are disparities in billing rates based on levels of experience and responsibility and role. And we thought it was important for people to understand why some people have fewer hours on a project, but they're at a higher rate, and people who have more hours at a project are at a lower rate and why that is, we've shared what our overhead percentage is, because we get audited by our local municipality. For our overhead rate anyways, we have to publicly present it. And that's built into our contract negotiations. So everyone knows what our overhead rate is. And so I suppose if someone really wanted to sit down and do the math and work it backwards, like this is what their billing rate is, and this is what's built. I mean, they could do it if they wanted to, and find out everyone's salary. I don't know that anyone necessarily wants to. Yeah, but we share. We share what our expenses are for all employee benefits, and that they are basically 80% of our expenses for the year goes to employ wages and benefits. We show how the rest of the expenses breakout. So I guess it's a long winded answer to say we share as much as we can, and we share what we feel will be helpful for individuals to understand how the firm is in terms of its financial health and where it could potentially go.

Speaker 1

51:53

Sarah couldn't have done a better answer. Thanks, Robert. I love the fact I really hope I want to reiterate to to our listeners, how often Sarah used to work why? Because I think that's the most important like when sharing information is to disclose two reasons why. Or I can go back to example, like why is someone's costs, someone's billable rate is three times their cost rate? Well, at the end of the day, that only maintains a 20% margin from the business. So like another way to describe it, if it's not three times, then our margins for the businesses actually substantially smaller, it can get to the point where we don't have a margin for profit. And that's not good for the business. There's a cost of doing business, like your benefits, like the rent of the building, like the equipment that you use. And that's baked in why there's always a leap from what it costs to pay you and what your billable rate is, but like spending a little bit time on the Y helps the entire industry.

Speaker 3

53:00

And this doesn't say our business development director, she is big on the why so she has taught me like when we are explaining things we want. Explain why. And it works not just for outward business development, but I'm finding it's very helpful for internal development is the key. So

Speaker 1

53:18

key to growth, for for a young designer to understand why the decisions are being made at the executive level means that they're better prepared to grow into an executive level later. And to like reiterate, let's say my version of like how much detail is too much detail. Just remember the goal of your firm owner, the goal is like we want to execute on projects at a really high degree. So we want to share enough information so the team can continue to execute at a very high bar. Second, I want to make sure that continue to invest in all of our talent across seniority. So from the youngest all the way to the most senior, the reasons we expose, information has continued to invest in the team. So they understand the why and get to the next level. Individual pay stubs, individual salaries, they're not going to further advance the company. And it's a little bit too personal and too in the weeds detail to share publicly. But that's my framework of thinking. And

Speaker 3

54:25

I'll say on the flip side, because I know that some legislation or rules just changed in New York. But as we go through the hiring process, and people put forward candidates put forward what they want to be paid. And if it's not, within a close percentage point of what we would be able to offer we I explained the whole math why like I work backwards and say, based on our region and our size and the type of work that we do. Here's where we fall in this bracket according to all of these different you know, data demographics, and here are Right, and here's the profit. And so this is what it comes down to. It's just, it's just math. It's not, it's not a personal attack on your abilities. It's not us wanting to thwart your financial advancement going from one firm to the other. It's just, this is actually what our firm can support. And the more that we can hire for what we can support, the more that we can do long term investments, and keep you for the long run, rather than being the kind of firm that hires for a project and then lays off when it's done, which is never are never part of our plan. Yeah.

Speaker 2

55:35

Brilliant, brilliant, perfect place to conclude the conversation there. We've just about hit our hit our time. But Sarah and Robert, thank you so much. That was very, very insightful. I thoroughly enjoyed your sharing your expertise. So thank you so much.

Unknown Speaker

55:52

Thank you. Thanks for having us.

Speaker 2

55:55

And that's a wrap. And don't forget, if you want to access your free training to learn how to structure your firm, or practice for freedom, fulfillment and profit, please visit smart practice method.com Or if you'd like to speak to one of our advisors directly follow the link in the information. The views expressed on this show by my guests do not represent those of the host and I make no representation, promise guarantee, pledge warranty, contract, bond or commitment, except to help you the unstoppable

00:0000:00