Term
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Definition
| FORMAL AND HAVE WELL- DEFINED STRUCTURE. LESS OPPORTUNITY FOR PERSONAL CHOICE AND PERSONAL EXPRESSION |
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Term
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Definition
| MAXIMIZE FLEXIBILITY AND CREATIVITY |
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Term
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Definition
| CONSIDERING FINANCIAL GOALS, PURPOSE, SIZE, OPTIMAL STRUCTURE, AND THE BEST POSSIBLE INTEGRATION BETWEEN SOCIAL SYSTEMS AND THE TECHNICAL SYSTEM PRODUCTION |
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Term
| PROFIT SATISFACTION MATRIX |
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Definition
1. HIGH PROFIT HIGH SATISFACTION
2. HIGH PROFIT LOW SATISFACTION
3. LOW PROFIT LOW SATISFACTION
4. LOW PROFIT HIGH SATISFACTION |
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Term
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Definition
| PLAN THAT ARTICULATES WHAT BUSINESS IS BEING CONDUCTED AND HOW THE BUSINESS WILL MAKE MONEY |
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Term
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Definition
- WE CAN DO IT BETTER, FASTER, CHEAPER
- WE DO PROJECTS THAT ARE NOT COMPLEX AND HAVE MANY REPEATABLE ELEMENTS
- WE EMPLOY MORE JUNIOR AND TECHNICAL STAFF |
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Term
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Definition
- WE KNOW WHAT WE ARE DOING
- WE CAN DO UNIQUE, COMPLEX PROJECTS BY APPLYING OUR ACCRUED KNOWLEDGE
- WE EMPLOY A MIXED AND BALANCED STAFF |
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Term
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Definition
- WE HAVE SPECIAL KNOWLEDGE
- WE SERVE AS EXPERT CONSULTANTS OR ARE DESIGN STARS
- WE EMPLOY MOSTLY HIGHLY EXPERIENCED STAFF |
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Term
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Definition
| PROFITABILITY IS DEPENDENT ON VOLUME AND PRODUCTIVITY AND IS RELATIVELY EASY TO OBTAIN ONCE SYSTEMS ARE IN PLACE |
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Term
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Definition
NON ROUTINE AND COMPLEX DESIGN PROBLEMS, ABILITY TO ORGANIZE AND DELIVER SIGNIFICANT AND COMPLICATED PROJECTS.
DELEGATING DOWN: TASKS THAT MANAGER OR PRINCIPALS DO COULD BE PERFORMED BY SOMEONE WHO IS PAID LESS; STRATEGY TO IMPROVE PROFITABILITY |
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Term
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Definition
DEEP KNOWLEDGE OR EXCEPTIONAL TALENT
PROFITABILITY OFTEN DEPENDS ON HIGH HOURLY RATES FOR SERVICE |
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Term
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Definition
| SITUATION WHERE BOTH THE PARTNERS AND THE STAFF FEEL OVERWORKED AND UNDERAPPRECIATED |
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Term
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Definition
| WHAT CAN HAPPEN WHEN THERE IS UNDERINVESTMENT IN ADMINISTRATIVE PURPOSES THAT CAUSES THEM TO REMAIN INEFFECTIVE AND UNIMPROVED OVER TIME |
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Term
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Definition
| SITUATION WHERE PARTNERS BECOME INADVERTENT ADVERSARIES( UNINTENTIONAL ENEMIES), DESPITE THE OBVIOUS BENEFITS THEY EACH RECEIVE FROM THEIR PARTNERSHIP |
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Term
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Definition
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Term
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Definition
| CONCIOUSLY OR UNCOUNCIOUS DETECT SOMEONE ELSE'S EMOTIONS THROUGH THEIR ACTIONS, OUR MIRROR NEURONS REPRODUCE THOSE EMOTIONS |
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Term
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Definition
| ACCRUED BOOK VALUE, WEIGHTED AVERAGE NET REVENUE ( GROSS REVENUE MINUS DIRECT PROJECT COSTS) AND WEIGHTED AVERAGE NET INCOME ( NET REVENUE MINUS ALL EXPENSES) OF THE FIRM |
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Term
| WEIGHTED NET REVENUE AND NET INCOME |
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Definition
| DETERMINED BY TAKING AN AVERAGE OF FIVE YEARS PAST, AND ADDING MORE WEIGHT TOWARDS THE RECENT YEARA |
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Term
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Definition
EQUALS THE DIFFERENCE BETWEEN THE FIRMS ASSETS AND ITS LIABILITIES
LISTED AS OWNERS EQUITY |
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Term
| GROSS DOMESTIC PRODUCT GDP |
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Definition
NEGATIVE FOR TWO CONSECUTIVE QUARTERS
SUM TOTAL OF ALL GOODS AND SERVICES PRODUCED IN THE NATION |
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Term
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Definition
| INTERPLAY BETWEEN SUPPLY AND DEMAND |
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Term
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Definition
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Term
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Definition
| REIMBURSABLE, OR PASS THROUGH, PROJECT RELATED EXPENSES, SUCH AS CONSULTANTS OR PRINTING |
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Term
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Definition
| GROSS REVENUE MINUS DIRECT PROJECT COSTS |
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Term
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Definition
| COSTS OF LABOR FOR WORK ON PROJECTS |
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Term
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Definition
| COST OF ALL LABOR OTHER THAN DIRECT LABOR |
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Term
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Definition
DIRECT LABOR DIVIDED BY TOTAL LABOR, FOR AN INDIVIDUAL STAFF MEMBER, UTILIZATION RATE CAN BE CALCULATED USING EITHER HOURS OR PAYROLL DOLLARS
The utilization rate is the percentage of hours spent on billable projects vs. the total number of hours worked. It is not a measure of productivity. A reasonable goal for the entire staff would be a utilization rate of 60 percent to 65 percent, and for professional and technical staff—including principals—a reasonable goal would be 75 percent to 85 percent. |
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Term
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Definition
| COSTS ASSOCIATED WITH PAYROLL, INCLUDING PAYROLL TAXES, HEALTHCARE, AND RETIREMENT PLANS |
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Term
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Definition
| TOTAL OF ALL SALARIES, BOTH EMPLOYEES AND OWNERS |
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Term
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Definition
| RENT, UTILITIES, MAINTENANCE, SUPPLIES, ETC |
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Term
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Definition
GENERAL OFFICE EXPENSE PLUS INDIRECT LABOR, PLUS PAYROLL BURDEN
The overhead rate is the cost of non-project-related expenditures (indirect expenses, including indirect labor) expressed as a percentage of total direct labor. It’s perhaps the most critical of all the performance factors. If it is unknown or calculated incorrectly, it is impossible to accurately determine the architecture or engineering firm’s profitability. The lower the overhead rate, the higher the profit margin. A target of 150 percent to 175 percent of total direct labor (1.5 to 1.75 x total direct labor) would be acceptable. Managing indirect expenses will reduce the overhead rate. A rate that exceeds 1.75 should be cause for concern and immediate action. |
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Term
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Definition
NET REVENUE MINUS SALARY EXPENSE, MINUS OVERHEAD EXPENSE BEFORE TAXES AND DISTRIBUTIONS
Net multiplier. The net multiplier represents the actual revenue generated by the architecture or engineering firm, expressed as a percentage (or multiple) of total direct labor. If the net multiplier is greater than the break-even rate, the firm is earning a profit. If it is less than the break-even rate, the firm is losing money. |
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Term
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Definition
| EMPLOYEE BONUSES AND OWENRS' SHARE OF PROFIT |
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Term
| CHARGEABLE RATIO ( FIRMWIDE UTILIZATION RATE) |
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Definition
| DIRECT LABOR DIVIDED BY TOTAL LABOR FOR THE ENTIRE FIRM, EXPRESSED AS A PERCENTAGE |
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Term
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Definition
| NET REVENUE DIVIDED BY DIRECT LABOR EQUALS THE EARNINGS ACHIEVED FOR EACH DOLLAR OF DIRECT LABOR. IF THE MULTIPLIER ACHIEVED EQUALS2.45, THEN THE FIRM EARNED $2.45 FOR EVERY $1.00 IT SPENT ON DIRECT LABOR |
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Term
| OVERHEAD RATE (BEFORE DISTRIBUTIONS) |
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Definition
| TOTAL OVERHEAD (GENERAL OFFICE EXPENSE PLUS PAYROLL BURDEN PLUS INDIRECT LABOR) DIVIDED BY DIRECT LABOR |
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Term
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Definition
| DIRECT LABOR DIVIDED BY DIRECT LABOR, ALWAYS EQUALS 1.0 |
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Term
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Definition
OVERHEAD DIVIDED BY DIRECT LABOR PLUS DIRECT LABOR RATE (1.0)
IF THE BREAK-EVEN MULTIPLIER IS LESS THAN THE MULTIPLIER ACHIEVED, THE FIRM IS BEING PROFITABLE
Each employee of the engineering or architecture firm has his or her own break-even cost, which represents the actual cost of each person’s employment. It’s equal to the overhead rate plus each person’s hourly salary, represented by the unit of 1.0. If a firm has an overhead rate of 1.5 (150 percent), then the break-even rate for each employee is 2.5 x hourly salary (1.0 + 1.5 = 2.5). For an hourly salary of $10, the break-even cost would be $25 per hour. To develop an hourly billing rate for each employee, divide the break-even cost by the complement of a desired profit margin ($25 ÷ 0.8) = $31.25 (for a profit margin of 20 percent). |
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Term
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Definition
| THE COMPLEMENT OF THE PROFIT GOAL DIVIDED INTO THE BREAKEVEN MULTIPLIER. FOR EXAMPLE, A BILLING MULTIPLIER THAT INCLUDES A PROFIT FACTOR OF 15 PERCENT WILL EQUAL THE BREAK EVEN MULTIPLIER DIVIDED BY .85 |
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Term
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Definition
| NET INCOME (BEFORE TAXES AND DISTRIBUTION) DIVIDED BY NET REVENUE EXPRESSED AS A PERCENTAGE |
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Term
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Definition
| ANNUAL NET REVENUE DIVIDED BY THE AVERAGE NUMBER OF STAFF MEMBERS AT THE FIRM DURING THE YEAR |
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Term
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Definition
THE REMAINING UNBILLED(UNEARNED) VALUE OF SIGNED CONTRACTS
The backlog volume is the unbilled dollar value of an architecture or engineering firm’s current fee contracts. Because monthly invoices continually reduce the firm’s backlog volume, it is essential to continually replace invoiced fees with newly contracted fees. A desirable target for backlog volume is equal to, or greater than, the firm’s budgeted annual net operating revenue. |
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Term
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Definition
| TOTAL INCOME THAT COULD THEORETICALLY BE GENERATED BY THE FIRM BASED ON HOURS WORKED, UTILIZATION RATES, AND BILLING RATES OF ALL BILLABLE STAFF |
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Term
| INTEGRATED PROJECT DELIVERY IPD |
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Definition
| EARLY STAGE COLLABORATION BETWEEN DESIGNERS AND BUILDERS TO DELIVER A PROJECT AS A JOINT VENTURE UNDER A SINGLE CONTRACT WITH THE OWNER |
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Term
| ARCHITECT LED DESING BUILD |
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Definition
| A FORM OF INTEGRATED PRACTICE IN WHICH ARCHITECTS OWN AND DIRECT THE DESIGN AND CONSTRUCTION PROCESS |
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Term
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Definition
| ARCHITECTS ARE NOT ONLY THE DESIGNERS AND BUILDERS OF THE PROJECTS, THEY ARE ALSO THE OWNERS |
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Term
AIA 2007 CODE OF ETHICS AND PROFESSIONAL CONDUCT
ETHICAL STANDARD 2.2 PUBLIC INTEREST SERVICES |
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Definition
| MEMBERS SHOULD RENDER PUBLIC INTEREST PROFESSIONAL SERVICES, INCLUDING PRO BONO SERVICES, AND ENCOURAGE THEIR EMPLOYEES TO RENDER SUCH SERVICES. PRO BONO SERVICES ARE THOSE RENDERED WITHOUT EXPECTING COMPENSATION, INCLUDING THOSE RENDERED FOR INDIGENT PERSONS, AFTER DISASTERS, OR IN OTHER EMERGENCIES |
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Term
AIA 2007 CODE OF ETHICS AND PROFESSIONAL CONDUCT
CANON VI OBLIGATIONS TO THE ENVIRONMENT |
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Definition
| MEMBERS SHOULD PROMOTE SUSTAINABLE DESIGN AND DEVELOPMENT PRINCIPLES IN THEIR PROFESSIONAL ACTIVITIES |
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Term
AIA 2007 CODE OF ETHICS AND PROFESSIONAL CONDUCT
ETHICAL STANDARD 6.1 |
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Definition
| SUSTAINABLE DESIGN: IN PERFORMING DESIGN WORK, MEMBERS SHOULD BE ENVIRONMENTALLY RESPONSIBLE AND ADVOCATE SUSTAINABLE BUILDING AND SITE DESIGN |
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Term
AIA 2007 CODE OF ETHICS AND PROFESSIONAL CONDUCT
ETHICAL STANDARD 6.2 |
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Definition
| SUSTAINABLE DEVELOPMENT: IN PERFORMING PROFESSIONAL SERVICES, MEMBERS SHOULD ADVOCATE THE DESIGN, CONSTRUCTION, AND OPERATION OF SUSTAINABLE BUILDINGS AND COMMUNITIES |
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Term
AIA 2007 CODE OF ETHICS AND PROFESSIONAL CONDUCT
ETHICAL STANDARD 6.3 |
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Definition
| SUSTAINABLE PRACTICES: MEMBERS SHOULD USE SUSTAINABLE PRACTICES WITHIN THEIR FIRMS AND PROFESSIONAL ORGANIZATIONS, AND THEY SHOULD ENCOURAGE THEIR CLIENTS TO DO THE SAME |
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Term
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Definition
| the legal structure of an architectural firm |
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Term
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Definition
| the way the firm organizes to complete its work |
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Term
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Definition
| the accepted principles of correct professional conduc |
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Term
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Definition
| the practices and legal responsibilities pertaining to employing others |
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Term
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Definition
| the use of marketing and public relations to increase business |
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Term
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Definition
- The business is owned by an individual
- The business may operate under the owner’s name or under a company name
- Setting up a sole proprietorship requires only a name and a location for the business, company stationery electronic systems needed, business licenses required by the local jurisdiction
- State and local requirements must be met if employees are hired
- Advantages:
- Ease of setup
- Total management control by owner
- Possible tax advantages to the owner because business expenses losses may be deducted from the gross income of the business
- Disadvantages:
- The owner is personally liable for the company’s debts and losses
- raising capital and establishing credit will depend entirely on the owner’s personal credit rating and assets |
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Term
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Definition
- (of income, profit, or interest) without deduction of tax or other contributions; total.
"the gross amount of the gift was $1,000"
synonyms: total, whole, entire, complete, full, overall, combined, aggregate; More
before deductions, before tax, pretax
"their gross income" |
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Term
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Definition
- Two or more people, called general partners, share the management, profits, and risks of business.
- Income is shared among the general partners and is reported on personal tax forms
- Each general partner is also personally liable for business debts and liabilities
- General partners invest in the business, manage it, and are financially responsible for it |
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Term
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Definition
- one general partner and at least one limited partner
- Investors who receive a portion of the profit,
- but who have no say in the management of the company
- are only liable to the extent of their investments
- Superseded by the limited liability company
- take the place of (a person or thing previously in authority or use); supplant.
"the older models have now been superseded" |
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Term
| Corporation: C corporation |
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Definition
- Association of individuals that exist as a legal entity apart from its members
- Can be created only in accordance with statutory requirements
- To form a corporation, formal articles of incorporation must be drawn up by an attorney and filed with the appropriate state office
- The specific regulations and requirements are governed by state law
- 3 levels of participants:
- Stockholders: owners of the corporation in proportion to the numbers of shares they own
- Directors: elected by stockholders, have the fiduciary duty to act in the best interest of the stockholders and are responsible for broad policy decisions
1. 1. Fiduciary:
involving trust, especially with regard to the relationship between a trustee and a beneficiary."the company has a fiduciary duty to shareholders”
- Officers: elected by directors, carry out the day-to-day management of the corporation
- Financially and legally independent from its shareholders
- Each shareholder is financially liable only for the amount of money he or she has invested in the corporation
- If the corporation is sued, the personal assets of the shareholder are not at risk
- Continuity that is independent of any changes in shareholders, directors, and principals
- Easy to raise capital for corporation through the sale of stock
- Generally taxed at lower rates than individuals
- Corporation and shareholders are taxed separately; corporation on its profits and the shareholders on their dividends
- Corporate income taxed twice
- Disadvantage: initial cost to establish the business and the continuing paperwork and formal requirements necessary to maintain it |
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Term
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Definition
- Does not retain profits and pay out dividends in usual manner
- dividends
1. 1.
a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves)
- S corporation chooses to allocate (distribute) its income and losses directly to shareholders in proportion to their holdings
- S corporation status is limited to small business corporations
- To qualify for S corporation status, a corporation must be a domestic company with no more than 100 shareholders |
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Term
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Definition
| similar to other corporations, except that liability for malpractice is generally limited to the person responsible for the act |
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Term
| Limited liability company LLC & Limited liability partnership LLP |
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Definition
- Similar business structures that combine the advantages of a partnership or sole proprietorship with the limited liability of a corporation
- Each is formed like a partnership
- Members: this who invest
- Managers: those who manage
- Advantage: liability is limited to a member’s investment, a member has no personal liability
- LLC- not a separate entity in the eyes of the federal government, so the business itself is not taxed
- Profits and losses are passed through the business to each member who must report a profit or loss on his personal federal tax return
- Some states may tax the LLC
- Members of LLC are considered to be self employed
- Must report and pay self-employment tax for Social Security and Medicare
- Members of an LLC can elect to be classified as S corporation
- LLC is easier to set up and operate than a corporation |
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Term
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Definition
- temporary association of two or more persons or firms for the purpose of completing a specific project or achieving a specific goal
- The joint venture should be based on a formal, written agreement that describes the duties and responsibilities of each firm, how profits and losses will be divided, and how work will be completed
- Treated like a partnership
- Not itself a legal entity independent for its members
- It cannot be sued as a corporation can
- Profits may be taxed as partnership
- Or the individual members of the joint venture may be taxed separately
- Teaming agreement ( memorandum of understanding) should be developed that defines roles, responsibilities, contractual relationships that will be established if the firms are awarded the project and the joint venture is formed
- Can also be used if the firm wants to form a prime-consultant agreement |
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Term
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Definition
- egal concept, defined as the level of skill and diligence that a reasonably prudent architect would exercise in the same community, in the same time frame, and given the same or similar facts and circumstances
- Law requires architect to practice with reasonable care
- Ex: architect designing a building in Florida should incorporate hurricane resistant detailing |
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Term
| Departmental organization |
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Definition
- horizontal organization or flat organization
- Staff organized into departments, each of which specializes in a different function
- It can be difficult for employees gain breadth of experience or to share knowledge outside their specialties |
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Term
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Definition
- vertical organization or tall organization
- Organized around groups of employees called studios
- Each studio is responsible for completing an entire project, from initial planning to production and construction administration
- Outsourcing: Is contracting with another company to do some of the work needed for a project |
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Term
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Definition
- most local jurisdiction require every business to have a license, including those offering professional services
- Serves as basis of taxation
- A corporation must be registered with the state in which it practices
- Each corporation is issued a corporate identification number by state agency, typically the secretary of state’s office
- Certificate of authorization ( COA) : offer services to the public
- For a limited liability corporations and professional limited liability corporations an LLC certificate may be required |
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Term
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Definition
- If a business has employees, it must withhold taxes for each employee and forward this money to the Internal Revenue Service IRS
- A business with employees must file IRS form SS-4, application for employer identification number ( EIN)
- This number is used to tax filings and other correspondence with the IRS
- The business must submit a copy for the Form W-4, Employees Withholding Allowance Certificate, for each employee
- This form which is completed by the employee, indicates the number of deductions the employee is claiming
- Form W-2, Wage and Tax statement, showing all wages paid in the previous year to the employee along with deferral, state, city and FICA taxes withheld
- For sole proprietors and some partnerships, federal and state income tax must be filed as estimated taxes every quarter
- Must pay self-employment tax to cover Social Security and Medicare taxes |
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Term
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Definition
- AIA Code of Ethics and Professional Conduct
- Over the decades, some of the prohibitions in the original 1909 Code of Ethics have been dropped. An architect may
* compete for projects on the basis of fee
* advertise, as long as no misleading or false statements are made
* supplant or replace another architect on a project (though intentionally seeking to interfere with another architect’s contractual relationship with a client may be illegal in some cases)
* be involved with construction, as on a design-build project
* offer free design services for the purpose of securing a commission, as long as the prospective client is not deceived or misled (for example, by implying that an informal preliminary sketch is actually a fully thought-out solution to the client’s needs) |
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Term
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Definition
| broad principles of conduct |
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Term
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Definition
| specific goals toward which members should aspire in professional performance and behavior |
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Term
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Definition
| specific mandatory statements that members must follow |
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Term
| Canon I, General Obligations |
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Definition
* maintain and improve their knowledge and skill
* seek to raise architectural standards in aesthetics, education, research, training, and practice
* respect and seek to improve society and the environment
* exercise learned professional judgment
* uphold human rights
* not discriminate on the basis of race, religion, national origin, age, disability, or sexual orientation |
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Term
| Canon II, Obligations to the Public |
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Definition
* uphold the law in the conduct of their professional activities : includes federal copyright act, which prohibits copying architectural works without the permission of the copyright owner
* never try to influence a public official with a payment
* never accept payments or gifts intended to influence their judgment
* never help a client with anything fraudulent or illegal
* promote and serve the public interest
* render (fulfill) pro bono services ( those fulfilled without expecting compensation) ( ex: indigent persons, after disasters, or in other emergencies)
* be involved in civic activities
* strive to improve public appreciation of architecture |
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Term
| Canon III, Obligations to the Client |
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Definition
* serve their clients competently and professionally
* exercise unbiased judgment
* Serve clients in timely and competent manner
* not accept projects beyond their professional capacity
* avoid conflicts of interest
* be truthful in professional communications
* keep clients informed about their projects
* maintain client confidentiality |
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Term
| Canon IV, Obligations to the Profession |
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Definition
* uphold the integrity and dignity of the profession
* practice with honesty and fairness
* not sign and seal documents for which they do not have responsible control
* not knowingly make false statements
* be honest about their qualifications and about the work they claim credit for |
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Term
| Canon V, Obligations to Colleagues |
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Definition
* espect the rights of their colleagues and acknowledge their professional contributions
* provide associates and employees with suitable working conditions and fair compensation
* nurture fellow professionals through their education, internships, and careers
* give credit to others for their professional work |
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Term
| Canon VI, Obligations to the Environment |
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Definition
* be environmentally responsible
* promote sustainable design in their professional work
* advocate sustainable buildings and site design
* use sustainable practices within their firms and encourage clients to do the same |
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Term
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Definition
| Each employee of the engineering or architecture firm has his or her own break-even cost, which represents the actual cost of each person’s employment. It’s equal to the overhead rate plus each person’s hourly salary, represented by the unit of 1.0. If a firm has an overhead rate of 1.5 (150 percent), then the break-even rate for each employee is 2.5 x hourly salary (1.0 + 1.5 = 2.5). For an hourly salary of $10, the break-even cost would be $25 per hour. To develop an hourly billing rate for each employee, divide the break-even cost by the complement of a desired profit margin ($25 ÷ 0.8) = $31.25 (for a profit margin of 20 percent). |
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