1. Getting sucked into the Commodity Trap. There is no intellectual property in a commodity – it can only be consumed. This means that if your design services are treated as a commodity, you have zero chance of differentiating your offer, or of value adding without doing it for free. You can’t win in this game, because there will always be a competitor more desperate, or more stupid, who will get the job. Don’t join the race to the bottom.
2. Failing to measure and track rework. In most design firms, the cost of rework exceeds profit – often by as much as double. Not tracking it (on time sheets) prevents you from doing anything more scientific than just guessing. And makes improving it impossible.
3. Setting design fees as a percentage of construction cost. Although this is the most commonly used method on the planet, it is also the most illogical. If you work extra hard to design a great project at less than the project budget, should you be paid less for your effort? In certain circumstances, such as a rising construction cost market, percentage fees will work to your advantage. But there is no real correlation between construction cost and design cost.
4. Tracking progress by hours rather than dollars. Some principals, not wanting to be open with staff about profitability, assign the number of hours allowed for design and documentation. Besides ignoring the complex relationship between experience, efficiency and salaries, this tactic psychologically denigrates the PM’s sense of overall project responsibility. It’s delegating responsibility without authority – always a bad idea.
5. Not allowing time for quality checking. An hour spent finding and fixing errors before a project goes to tender is worth ten after the contractor gets hold of it.
6. Charging unwarranted principal time to projects. In some firms, principals try to increase their “changeability” by loading hours onto projects that are running under budget. This does zero for increasing firm profitability, and it is highly demoralising for project managers who conscientiously try to bring in projects under budget.