The "A Team" Approach: How a simple change can improve profitability.

by Simon Berry July 21st, 2021
  • There are 4 main types of employees in any professional service firm
  • Reallocating the nature of work between the different types can drastically improve profitability

The A Team

We are going to be using the hot 80's TV show, The A Team, to illustrate our point:

If you have a problem, if no one else can help, and if you can find them ... maybe you can hire The A-Team.

The 4 types of A Team players

For this exercise, I pulled a few million anonymised timesheets from our database and plotted the employee utilisation vs their cost. Each dot represents an employee. If they are paid more, the dot moves to the right, and if they work more on fee-earning projects the dot moves to the top.

The four types of employees in a professional service firm are:

Murdock

If it's got wings, I can fly it.

Murdock was the A Team's pilot. Without him the A Team would be unable to get to their jobs and more importantly unable to escape trouble.

This is the administrative role (bottom left quadrant). The bookkeepers, practice/office managers, receptionists, assistants, etc. They don't typically work much on projects and aren't highly paid - yet without them, the business would fall apart.

We define this cohort as spending less than 50% of their time on project work and being in the lower third of the cost range. About 15% of employees fall into this category.

These are the unsung heroes in a practice, the employees that ensure the business ticks along. They know what processes to follow and execute on those processes again and again.

BA Baracus

I ain't gittin on no airplane!

BA was the A Team's mechanic and muscleman who did all the heavy work. He was famously afraid of flying and had to be drugged before he could be put on a plane.

This cohort (top left quadrant) is the general technical staff. The junior to mid-level architects, engineers, project managers or cost consultants. They are highly focused on delivering project work yet are not that highly paid.

70% of staff will fall into this category, which we define as spending more than 50% of their time on projects and being in the lower third of the cost range.

And, like BA, they don't want to (or are not ready to) fly. They want to focus on getting their job done and aren't (yet) interested in the other functions like business development or company administration.

Faceman

Hello Ladies!

Face was the smooth-talking 'scrounger' who could get his hands on anything. He arranged all the A Team's supplies and equipment and sourced vital information and intelligence.

In your practice, these (top right quadrant) would be the project leaders. They are, ahem, the face of your business to the outside world. They are out there keeping clients happy, keeping projects running and even winning new work.

This cohort is defined as those spending more than 50% of their time on projects and being in the top two-thirds of the cost range. 10% of employees are Faces.

While their cost may be high, they are generally highly focused on fee-earning project work - and are highly skilled in the services that clients are ultimately buying from your firm.

Hannibal

I love it when a plan comes together

Hannibal was the leader of the A Team. He was a brilliant tactician and a master of disguise.

These are the bosses - i.e. the owners / partners / directors / principals (bottom right quadrant). They are responsible for running the business, managing staff and the long term strategy of the firm.

They are highly paid, yet don't do a lot of direct project work (top two-thirds of cost range and less than 50% of time spent on projects). These are quite often the founders of the practice (or in older firms, the 'stars' who have been promoted to key leadership roles because of their project-related success). They are typically the main reason a client chose the firm in the first place. So it is ironic (and costly) that they are pulled away from project delivery by the burdens of running a business! Only 5% of all staff fall into this category.

Why this matters?

Yes, the above profiles are a bit tongue in cheek but there is a serious side to this discussion.

If your team members are not doing the appropriate type of work for their role then your business is likely to suffer. For example, if you have a highly paid technical team member (aka Face) doing too much non-project work (aka Hannibal), their effective cost rate on projects will shoot up - and your project profits will evaporate.

To illustrate this point, let's take a look at the two career paths available to BA:

Option 1: Promoting BA to Face

As employees progress through their careers, they become more proficient in their craft. There is obviously an expectation on the employee's behalf to be remunerated accordingly - as well as it making business sense to reward your best talent in order to retain them. This will therefore mean that you pay them more and more as they become more skilled and more valuable to you and your clients.

The obvious implication of paying an employee more is that their cost rate (and therefore the cost to deliver a project) goes up. In the case of the blue arrow in the above graph, the employee's salary increased sixfold. Yet critically they have managed to maintain the percentage of time that they spend on projects at 80% - they have not been burdened with any additional non-project activities. The impact of the salary increase on project costing is therefore 6X - which, if assuming this is over a number of years, is well worth it - as the Faces of your business are a key driver of project excellence and new business.

Option 2: Promoting BA to Hannibal

It is a societal norm that has resulted in the expectation that getting promoted means becoming a manager (aka Hannibal). And while it is true that you want your best staff in charge of running your company, there can be serious implications on your profitability.

The red arrow in the above graph represents the exact same increase in salary level. Yet along with the promotion, we have changed the type of work that the employee does. They have moved from spending 80% of their time on projects to just 20%. In effect, they are now spending a further 60% of the time "running the business"' rather than working on fee earning jobs. In my experience, few people understand the devastating impact of this promotion. The previous example (blue arrow) resulting in a 6X cost rate increase. In this example (red line), once we allow for the impact of the reduction in utilisation, the effective cost rate increase of the employee to projects is a whopping 24X!

The solution: Improve profitability by offloading to Murdoch

There is no getting away from the fact that your business needs Hannibals. However, with a bit of informed reallocation of work, you can massively reduce the impact of the low utilisation of your senior (aka expensive) staff.

The trick is to identify the non-project work that your Hannibals are doing (using timesheets!) and reallocate the genuine administrative work to a Murdoch. For example, let's assume a director is spending 20% of their time coordinating future billings across all projects, raising monthly invoices, chasing payments and other project financial management tasks. If you reallocated this work (which is all pretty procedural) off to an administrative staff member, the director would be able to spend 20% more time on projects (1 day a week!), but their cost rate to projects would reduce by 50%!

The graph above shows just how massive the impact of utilisation is on project cost rates. It is not a linear increase, but an exponential one!

Put another way, it is exponentially cheaper to pay Murdoch (even if it means hiring a new Murdoch) to do 1 hours worth of admin work than it is to pay Hannibal to do the same 1 hour's worth of work. Hanibal can then spend that hour delivering high-quality project work that delights existing customers and attracts new ones!

Tracking staff utilisation is critical but easy

At the end of the day, projects are what generate income for your business. So all time costs have to be covered by project income. Any time spent on non-project work has to ultimately be funded by projects. This non-project time burden (aka utilisation rate) should be incorporated into your staff cost rates and should be closely monitored to ensure that staff are working effectively. A simple change, like transferring an administrative responsibility from a Hannibal to a Murdock - can drastically improve your practice's overall profitability.

If you need a system to help you track, monitor and control staff utilisation - take a look at Fresh Projects. Our project cost management software, which is tailor-made for built environment professional services firms, will quickly highlight the different A Team players that you have! And help you reallocated work to maximise your profitability.

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