Benchmarking: The Secret Weapon of High-Performing Firms
INTRODUCTION
Data, data, data. It’s probably not a coincidence that “data” and “dada” sound similar. For most AE firms, the way they treat their data is nonsensical, absurd, and non-aesthetic. It’s as if the Dada movement of a hundred years ago has returned to haunt our businesses.
For those firms that have implemented smart technologies, you're familiar with the wealth of information that data provides. We can track employee time, project details, financial information, etc. We know how every dollar is earned and spent, and we can estimate the hours and costs for our projects and the corresponding earnings. This data is a goldmine; benchmarking can help us maximize it. Most firms use their data for internal analysis and review. We previously discussed the importance of KPIs (key performance indicators), which are the first step in taming data. Without KPIs, you will be overwhelmed by data, like a swimmer adrift in the frigid sea. With technology tools, you have something much more valuable than a life raft: a speedboat that will carry you safely to shore. Your data becomes valuable information that guides you to make smarter decisions.
Over the past two decades, I have looked behind the curtain of more than 1,400 AE firms, and I can tell you the Wizard is hard at work making whizbang noises, throwing puffs of smoke, and attempting to dazzle everyone around him with the noise generated by the data. These wizards are about as effective as a three-hour meeting with no agenda, no one taking notes, and people coming in late and leaving early. If you skipped the meeting and instead organized your junk drawer, at least you would have achieved something.
I have a general rule: don’t bother preparing reports if the results are not going to have you change your behavior. This is what I see time and time again: firm leadership will call a meeting to review some reports that were created by some sorry soul who had to cull data from many disparate data silos and make it look convincingly impressive.
WIZARD
(proudly)
Okay, team, please refer to page 15 of your report, which shows our staff utilization over the past quarter. It looks like Evan and Jenny had the lowest utilization rates of the staff.
CHARLOTTE
Jeez. What a shame, Evan’s usually great. Let’s try better next time.
JASON
Wait, wasn’t Evan on vacation last month? I think that’s the issue, right?
WIZARD
(apologetically)
Oh yeah, I think that’s right. Look at page 34, where I show how the staff is using their paid time off. It looks like Evan was on vacation, and as for Jenny, hmmmm.
CHARLOTTE
Actually, Jenny left the firm three weeks ago. I think she took a job with a firm that let her work from home.
JASON
No, Charlie, that was Jinny. She went to OMG Architects. Jenny was the one we fired for using your stamp for one of her moonlighting projects.
GROUNDHOG DAY
Maybe that’s not based on actual events, but it’s not far from what I observe. People have good intentions, but really, it's a complete mess. If you can’t look at data and walk away with an action plan, you might as well join Jenny. Or was that Jinny?
My point is that people look at reports, talk about what (they think) the data tells them, and then return to work without changing their behavior. They feel like they had a good meeting because they were discussing “business,” but when they walked out the door and returned to their desk, did they act on that information, or did they return to “business as usual?” 99 out of 100 times, they do the latter.
WHAT IS BENCHMARKING?
We’ve all heard the term benchmarking, but what does it mean? It is a much different topic than KPIs. When benchmarking, we look at how your firm performs compared to other firms. How do you stack up against your competitors? Frankly, it’s not just your competitors; it's really how you compare against those who are at the top of their game. I might be an outlier, but I don’t think AE firms should limit themselves to benchmarking against other AE firms. Look at other professional service firms and see how you can improve.
Remember, you’re in business. Whatever service your business offers, you want to be great, you want to be profitable, and you want your peers to admire your achievement. So, why even limit yourself to comparing yourself to other professional service firms?
I’m not going to insult your intelligence because I know you can Google “benchmarking for AE firms” or even use AI to give you some insights. However, I want you to enact benchmarking, so I must explain what you should look for and what to do once you find it. Again, we don’t want to benchmark and then return to business as usual!
There are several organizations out there that provide us with benchmarking data. Thousands of AE firms are surveyed every year regarding their KPIs. Typically, these organizations categorize firms into three groups: small, medium, and large. They also often use pivot tables to analyze performance based on the types of services these firms provide. What we see happening is that small firms compare themselves to other small firms. They will look at their KPIs and see how they stack up against their colleagues. Medium firms compare themselves to other medium firms but might also look at the larger firms to understand whether they should aspire to become even bigger. They might also examine the various services their cohort offers and consider introducing new ones. This is a fine exercise; however, I’ve never witnessed a single example of a firm changing anything meaningful based on benchmarking.
Let’s say that a firm learns that the average utilization for an intern in their cohort is 87%. They look at their own KPIs and realize that they compare to 82%. Now what? Do you think setting a goal to improve utilization rates will change them? I don’t. At the end of a quarter or year, they’ll look at the new results and shrug their shoulders if it hasn’t changed or give themselves a pat on the back for hitting 88% even though they didn’t do anything meaningfully different in their organization to make the needle move. It just happened. Good job, Stan.
THE “GENIUS BAR” BREAKTHROUGH
Let’s take a minute to tell one of my favorite stories. When Steve Jobs returned to Apple in 1997, he had the radical idea of taking his fledgling tech company into uncharted waters by creating a boutique retail experience. All the pundits laughed at this approach and predicted the failure of his store concept. They claimed Apple was on life support, called for hospice care, and expected it to kick the bucket at any moment.
Back then, if you were looking to buy an Apple computer, it was in the darkest corners of a few electronic retail stores. All the Windows-based computers were front and center, and Apple was given the least retail presence. Worse yet, the salespeople had no idea how to talk about Apple computers, let alone explain Apple's unique selling proposition.
Meanwhile, Steve had become a loyal guest of Ritz-Carlton hotels partly because of their phenomenal concierge services. He knew that no matter what city he was in when he went to the concierge, he was always given access to the best information and had the ultimate guest experience. So, he decided to take matters into his own hands and have Apple employees show off Apple computers in an Apple-only environment where a concierge desk (Genius Bar) was available to give customers an experience that no computer company had ever imagined.
The rest is history. Up until that point, Apple had been playing the game all wrong. Even though they had superior hardware and software integrated into a single machine, from a benchmarking perspective, they were performing near the bottom of the industry. Data is just data. To succeed in business, you must be a leader and innovator. By comparing your margins to your competitors, you learn whether you are doing better or worse than they are. You don’t know why, and you don’t know what you should do to improve things. This is where having a business-thinking (not architect-thinking) mindset becomes critical.
Apple looked outside the industry for inspiration and saw not only a path to a better customer experience and loyalty but radically increased margins and brand value, which were otherwise nearly worthless.
YOUR FIRM’S BLINDSPOT
When I work with my clients, we always start with the Strategic Plan. During this exercise, we define the firm’s mission, vision, values, and goals. It’s incredible how every firm has similar goals: make more money, be more profitable, hire more (or better) employees, broaden the pool of prospects, improve internal processes, enhance the website, increase social media presence, and so on. I maintain a spreadsheet of the 21 KPIs I consider critical for every business, along with the industry averages for each one (broken down by firm size) in the AE industry. We examine how each firm compares to its cohort and walk away with a good or bad feeling, but no roadmap for improvement is provided. That’s what separates real business leaders from good and great architects.
When conducting the SWOT analysis, firms invariably examine their competitors to determine where they fall short. This exercise provides crucial insights for making informed decisions about where to allocate resources and how to prioritize improvements. This is what benchmarking looks like. Who am I directly competing against so I can stand toe-to-toe against them or have a battle card ready when a prospect is leaning their way? In addition, the SWOT analysis can include the firms that are aspirational to my clients.
This is the standard approach. Your blind spot is a symptom of your profession. It was a long, high hurdle for you to even practice your profession. The goggles you wear restrict your peripheral vision so much that you can’t see the business potential beyond the small sliver of space AE firms practice their profession.
IN CONCLUSION
Forget what the internet is saying about benchmarking. Sure, compare your firm to the best in the business so you can uncover some new opportunities and innovate your processes, which should elevate your practice. However, your goal is not to mimic others but to learn, adapt, and grow beyond traditional boundaries, like how Steve Jobs reimagined Apple and turned it around from being on its deathbed to becoming one of the most valuable businesses in the world. His genius wasn’t in benchmarking against his competition. He reimagined the industry by looking at the customer experience.
Please think about your client’s experience every single day.
Last week, I spoke with a filmmaker (I live in Los Angeles) who complained about how Hollywood portrays architecture. He said it was always about the building: marveling at how it looked in the city or landscape or how beautiful it was. He wanted to make a movie about how the architecture impacted the lives of the occupants and the people engaging with it. He was so right. Think about your clients. Create services that affect their lives and you will create significant value in your firm. The numbers will follow, I promise.
