2023 is a year of change for the RIBA Business Benchmarking Service. The changes are significant, but not radical. This article outlines those changes and what they mean to you.
The RIBA has been measuring the performance of the architectural sector for over fifty years, most recently with the RIBA Benchmarking Service.
The RIBA Benchmarking Service helps Chartered Practices measure their financial and operational performance against industry averages. It’s available only to Chartered Practices, and part of becoming a Chartered Practice is committing to complete a Benchmarking return each year.
The Service provides individual practices and the RIBA with a detailed set of performance standards (or benchmarks) on which to base decisions.
Top-level figures from 2022 include:
- 38,000 people were employed by Chartered Practices and collectively they generated over £3bn of revenue.
- Payroll continues to be the largest cost, sitting at around 62% of all expenditure.
- Each fee earner generates, on average, £17,000 of profit.
- Private Domestic work dominates the commissions of small practices; if you are a small practice then this is the most competitive area.
The annual benchmarking report gives the detail, showing how profit, revenue and cost vary by region and size of practice. Practices can use this to gain insight into areas where they may be falling behind or excelling, compared to their peers. You may not want to be the highest-performing practice in your region but knowing where you stand can help determine the type of people you hire, how much you pay them, which markets to go for (and which to ignore), and how much to charge per hour.
There is a wider benefit from the service. The RIBA seeks to increase the revenue coming into practices, increase the salaries of its members, and increase the diversity of the profession. By being more diverse we better represent the community we serve. Profit sustains the profession; creating more profit allows investment in training, innovation, and low-carbon designs. The data from the Benchmarking Service also informs how the RIBA can achieve its goals and how well we are doing.
What will change?
The changes we are making this year are based on detailed consultation with members, and the feedback you’ve kindly given us over the years.
From this year, it will be easier to complete your return. A new user interface, with some of the answers pre-loaded, will speed up completion and provide more accessible guidance.
Practices need to maintain profitability to survive and grow, so we have renewed our focus on the simple equation of Profit=Revenue-Costs.
On the revenue side, new questions about staff utilisation allow you to see the effect of varying charge-out rates and staff utilisation (the main drivers of revenue). You will also be able to see how the sources of your new commissions compare. Core metrics, such as work types and sectors remain in place.
On the cost side, we have condensed the number of overhead items to be reported. But we have added an expanded list of practice roles so you will be able to compare salary rates with more granularity. With payroll accounting for 62% of costs, this focus makes sense. Overall, the revised questions will help you will better see how your costs compare and, with this, be better able to decide on what you can do about profit.
We have also expanded questions about staff development and conditions, to allow you to see how well your staff development and reward package compares to others. This goes together with a greater focus on EDI.
Gone this year is the question on the RIBA 2030 Challenge. It was a tough one to let go but, as the 2030 Challenge develops and becomes more refined, Benchmarking becomes less its natural home. Instead, practices should download, complete and return the 2030 Challenge spreadsheet.
Overall, changes in the Benchmarking service were practice-led and will better equip practices with the insight to drive business success.
The next round of data collection will launch in May of this year. We will remind you how to take part and how to log into the service nearer the time. For now, you may want to review the data from 2022. Here is a link from where you can download the report.
If you have any questions, the Benchmarking inbox is always open.