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What can architects learn about billable work in the RIBA Business Benchmarking report?

Words:
Neal Morris

The proportion of staff time spent on billable hours is an important contributing factor to profitability

A survey on billable work is included in the RIBA Business Benchmarking survey for the first time.
A survey on billable work is included in the RIBA Business Benchmarking survey for the first time. Credit: iStock Photo

Architectural practices have seen strong revenue growth this year, the first increase for four years following the pandemic and its fallout.

The headline from the RIBA Business Benchmarking Report 2023 – Revenue and Profit - available to chartered practice members and published this week (December 6 2023) - is that the revenue booked by Chartered Practices is up 17% on last year, with growth recorded across the profession irrespective of practice size.

The welcome news on growth is tempered by rising costs that have squeezed profit margins to just 2% overall. Staff costs rose by 14% in the face of skills shortages, and fee rates have generally not kept up with inflation where they were not directly linked to rising construction costs.

While RIBA’s Business Benchmarking survey has always looked at charge-out rates, a new question this year asked practices about billable hours for different staff groups.

Read more about RIBA J's overview of the RIBA Business Benchmarking report

What did the survey find out about billable hours?

Profitability levels for architects do not tend to rise and fall in line with practice revenues, as past Business Benchmarking reports have shown, says Adrian Malleson, Head of Economic Research and Analysis at RIBA. It is a far more complex picture.

‘What we wanted to do with benchmarking this year, and this was at the request of members, was to look at some of the levers of profitability,’ he explains.

Clearly, at a time when fee levels are being squeezed and overhead costs are rising through inflation, the proportion of staff time spent on billable hours is an important contributing factor to profitability.

‘We are not saying to architects, this is what you might be aiming for, as each practice is different and working practices will differ depending on practice size,’ Malleson continues. ‘We are just presenting the data so that practices can compare themselves with others, which might help them make choices about how they want to run their practice.’

Sixty per cent of Chartered Practices responding to the survey say they record the time staff spend on billable work.

Over 70% of the hours of ‘Architects, Technologists and Assistants’ are spent on billable work.

A slightly smaller proportion of Associates’ time, 64%, is devoted to billable work, while Partners/Directors/Sole Principals spend on average less than half of their time, 46%, on work billed to clients.

In large practices of 100 members of staff or above, the average proportion of time that is billable rises to over 80% for Architects, Technologists and Assistants. As might be expected due to the time spent by senior staff on general management, these practices report a lower proportion of billable time for Partners/Directors/Sole Principals.

RIBA Chartered Practices can find a more detailed breakdown of billable hours by staff types in the full RIBA Business Benchmarking report 2023. This year also sees the introduction of separate summary reports for practice size groups alongside a suite of data visualisations.

Learn more about RIBA’s fee calculator

How do architects log billable work?

Billable work feeds into discussions about fees and value, and it’s important to acknowledge that different practices have different ways of working depending on factors like practice size and type of project.

For architects who might be prompted to examine their billable hours strategies in the light of new benchmarking data, we asked Laurie Chetwood, Chairman of Chetwoods Architects, what approach his practice takes:

What strategies do practices employ to accurately track billable hours for different projects and clients?

‘As with many architecture practices, correctly forecasting anticipated hours when providing a fee proposal is crucial. To aid us in this task we have a project management system, which enables us to provide a consistent resource plan that incorporates staff rates and overheads. The system assists with analysis of anticipated time, based on the project scope and programme requirements.

‘All fee proposals go through an internal multi-stage sign-off process to scrutinise any variations which need to be considered and accounted for.

‘All staff are required to complete weekly timesheets, which feed data into the software for tracking and future forecasting. Project leaders are responsible for regularly reviewing individual projects to guarantee that any challenges can be highlighted and discussed before they become a considerable issue.

‘Monthly reviews are held with senior management to assure project progression and accurate estimations. We have these systems in place so we can be certain that we are providing our clients with clear and competitive fee proposals which reflect the value and experience of our firm, while maintaining the profitability required to run and invest in our practice.’

How do practices ensure that high utilisation of time (the percentage of billable hours compared to total number of hours) is achieved?

‘Each month, every one of our teams produces a comprehensive report in a standardised format to ensure comparable data across our business. One essential aspect of this report is staff utilisation, which has a set target per employee that is based on experience.

‘These benchmarks allow us to pick up any considerable deviations quickly and discuss potential issues that may be arising. As well as internal reviews within individual project teams, regular practice-wide forums are also held to analyse imbalances. All of these processes combined ensure that we are making the most efficient use of resources and skills, while supporting those that may need additional help or understanding on a day-to-day basis.’

How do architects balance the need for accurate time tracking with the importance of maintaining positive client relationships?

‘From the outset we are completely transparent on what is included in our fee proposal and what work would be considered a variation or may incur an additional cost at a later date.

‘Our comprehensive review systems allow us to pick up on any problematic project cost issues quickly so they can be raised with clients at any early stage if necessary. In addition, we always take the time to understand how our clients operate and what their own internal processes are for signing-off additional costs, which allows us to be flexible in our approach and collaborate with clients in a considerate way when conversations around fees need to be had.’

What role does project complexity play in the decision-making process when establishing billable hours and rates?

‘Our project management system has been established for many years and in that time we have built up a large database of different projects across all sectors that are varying shapes and sizes, and have specific challenges. This assists us when setting up an initial resource plan for a new fee proposal. If a job is complex, we can look back at previous comparables to access key information, such as programme constraints.'

How do directors treat billable hours when their duties will differ to architects?

‘The cost of our Directors’ time is treated as an overhead in the practice, so their costs are built into our project management system through an overhead calculation.’

Read more about setting fees with RIBA Good Practice Guide: Fees

Thanks to Adrian Malleson, Head of Economic Research and Analysis, RIBA; Laurie Chetwood, Chairman, Chetwoods Architects.

This is a Professional Feature edited by the RIBA Practice team. Send us your feedback and ideas

RIBA Core Curriculum topic: Business, clients and services.

As part of the flexible RIBA CPD programme, professional features count as microlearning. See further information on the updated RIBA CPD core curriculum and on fulfilling your CPD requirements as an RIBA Chartered Member.

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