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OK. Let’s assume you have a profit plan. If you don’t have one in place, check out this post. Let’s also assume you’ve estimated your pipeline for the coming year. If not check out this post. Now you need to get a handle on the number of staff or Full Time Equivalent (FTE) personnel you’ll need to execute the anticipated workload.
Let’s start with the number of folks you currently have in your firm. Make sure to include all staff and all principals. In small to midsized design firms, principals are doers as much or more than many staff members. Be sure to include them in your FTE count.
Every person in the firm working full time over the course of the entire year would be considered one FTE. Anyone who works only part of the year, because they work part time every week, or are seasonal staff (students) would be considered a partial FTE. Add up all the full and part timers to determine your firm’s FTE count.
Here’s an example. Let’s say you have 9 folks employed full time in the firm, plus two students who work for 3 months over the summer, plus one admin person who works half time. The FTE calculation would be (9 x 1) + (2 x .25) + (1 x .5) = 10 FTE’s even though there were 12 different folks employed by the firm.
Now that you have a current FTE count, you need to determine how much work this number of FTE’s is capable of completing. This will of course depend on factors like the type of work, the level of learning and research required to complete the work, and the overall skill level of your FTE compliment.
Contract labour should also be considered in your FTE count. If you regularly employ contract workers you need to include their contribution to your FTE count. Say their time adds up to 50% of an FTE, they would be counted as 0.5 FTE’s.
Here’s a simple way to check your FTE capacity. Calculate your firm’s average net fee per year over the past 2-5 years. Then determine the average number of FTE’s in your firm in those years. If your average net fee is say $1.5M, and your average FTE count is say 10 FTE’s, that would mean your firm should be capable of $150,000 of net fee per FTE.
If your pipeline suggests that your net fees will be greater than your ability to complete the work, you have several ways to manage the workflow.
• Just say NO to lower margin work and/or difficult clients.
• Hire more employees
• Engage contract labour
• Become more productive
Each of these measures is easier said than done but those are your main options.
If your projected net fees are less than your ability to complete the work you can:
• Raise your prices
• Go get more work
• Contract out some of your staff to other firms that are busy
• Reduce principal pay until more work comes on-line
• Reduce the workweek until more work comes on-line
• Reduce FTE count, usually viewed as a last resort
Again, these actions are difficult to implement. Some can be undertaken on short notice and some will require lots of lead time. When most practitioners are asked what they would have done differently to deal with a smaller than expected workload, the answer is invariably ‘I would have acted sooner.’
The lesson here is to keep close tabs on your FTE count in relation to your pipeline.
For more detail on how your FTE count interacts with the other key measures of your practice, check out my book, Scoreboard Your Practice: 7 Numbers to Understand Your Design Firm’s Financials (Available at Amazon).
