Trapped Value: Five New Ways to Offer Competitive Pay

Trapped Value: Five New Ways to Offer Competitive Pay

Over the past two months many AEC associations hosted their fall conferences. From those conferences we heard that the #1 challenge facing firms today is hiring. It is imperative to attract new hires with a competitive salary without going outside of your current operational funding. In other words, how can you hire qualified talent, when your firm doesn’t have readily available financial resources to offer competitive compensation?

Unlock Trapped Value

There is a new way to fund new hires with competitive pay or benefits.  It is called “trapped value”—trapped dollars that are currently within inefficient or missing processes in your firm’s operations that are kept from getting to your bottom line. Let’s look at five key performance indicators (KPIs) that can help you find and release these trapped dollars.

1. Optimize Utilization

Many AEC companies have challenges with scheduling and dispatching employees to optimize their time on tool. Tracking certifications for each technician can be challenging. To optimize utilization and avoid lost billing time, firms must ensure that the right technician is assigned to the right certified project. In addition, firms must have job specifications immediately accessible to the technician ahead of performing the work along with up-to-date work processes that are mandated by the client to fulfill the job request properly.

2. Increase Net Labor Multiplier

This KPI indicates how well a firm is managing its project profitability and fee pricing. Today, many AEC firms use this measurement along with managing overhead to help increase operational dollars. Again, this is about maximizing billing and fees along with taking out wasted dollars from each billing earned.

3. Lower Days Sales Outstanding

Getting paid on time is always elusive. Inaccurate invoices and inefficient invoicing/collection procedures can drive up the days sales outstanding and decrease your cash flow. If you could collect your money—and not be pressed to dip into your credit or capital dollars to fund new hires—that could be significant for your firm.

4. Lower Overhead

Most AEC firms see this KPI as an easy culprit to identify leaking margins and profits. At the same time, this is where investment in hiring, employee benefits, and professional services are critical to keeping the firm on track. Identifying the trapped dollars within costly processes can help drive this number down. It also can lead to increased employee satisfaction, which often directly impacts your customers.

5. Increase Net Operating Profits

This KPI is sits at the bottom of a funnel. Imagine if every process from the top of the funnel down could be optimized. Imagine if there were no instances of rework on projects, no instances of scheduling or dispatch issues, no technicians showing up for a job without the proper equipment or specifications. This number is the culmination of how well your firm manages and recovers trapped value. In a recent study by Deltek and ACEC, average AEC companies had a Net Operating Profit of 13% but a top performer is at 28%. Imagine if you increased your firms operating profit by up to 15%. What would that mean to your company’s ability to invest in new hires, existing employees, and in growth?

What this Can Mean for You

You can have a significant impact on your ability to attract and hire needed talent by identifying and releasing dollars trapped in inefficient or missing processes. Based on the five KPIs listed above using numbers from the Deltek/ACEC study, we calculated the trapped value for companies to be around $3.25M. If those companies focus on improving the KPIs, they can apply those trapped dollars to their bottom line.

To learn more about how to ensure an immediate impact on your key performance indicators to drive out profitable engineering watch our on-demand webinar “Don’t Stand Still: Capture Your Firm’s Trapped Value and Profits in 60 days!”

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To learn more about how Agile Frameworks’ MetaField solution can help you to streamline your project processes for greater efficiency and profitability, visit www.agileframeworks.com.