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CAD Management in a New Economy, Part 2
9 Jun, 2010 By: Robert GreenEvaluate whether the outlook for your company is improving and cope with changing demands at work.
In the last edition of the CAD Manager's Newsletter, I discussed feedback I've received about the effect of the economy on CAD managers. If you haven't read the last installment, you may wish to do so before you proceed further.
In this issue, I'll share some ideas for predicting recovery at your company — and a few ways to secure your position there — based on the new realities we all face. Here goes.
Reading Economic Trends
CAD managers need to understand that the stressful operational changes they're experiencing, including staffing cuts and increased production demands, won't abate until after the economy improves. Why? Because hiring always lags behind new business activity.
If that's the case, how do you know when things are getting better or worse? Here are the guidelines I've always used, which haven't failed me yet.
Proposal activity. Is your sales department quoting more jobs or being solicited for more proposals? If so, that's an indicator that the market may — and I stress may — be starting to improve for your company. Of course, cranking out proposals is only good if your company actually gets some of those jobs, but generally speaking, more proposals indicate a better economic forecast.
Book-to-bill ratio. Various industries call this metric by different names, but the concept is to compare how many new jobs you're getting (booking) with how many jobs you're completing (billing). A book-to-bill ratio higher than 1 means your company is bringing in more work than it is finishing, which implies growth for the company. Conversely, a ratio lower than 1 means your company is completing projects faster than they are bringing in new ones, and portends bad developments — like layoffs.
LIBOR rate. The London InterBank Offered Rate (LIBOR), a measure of how much banks charge each other for loans, is also used to compute short-term interest rates for business credit and mortgage equity lines. In every recession I've observed, the LIBOR rate will drop as the economy bottoms out; as a result, loans become easier to secure.
If you're technically inclined and like to follow stocks, the LIBOR rate offers an interesting barometer for industries that require a lot of bank loans, such as construction and heavy manufacturing. If you're working in one of those industries, a high LIBOR rate is bad news. Currently, the LIBOR rate is trending back up as bad economic news from Europe and fears of global inflation cloud the picture. You can keep tabs on the LIBOR rate on the Money Cafe web site.
Interpreting Staffing Changes
Since most companies are seeing only a slight improvement in business right now, if any, they are hesitant to hire new workers. And if companies aren't hiring new personnel, it only stands to reason that any new project work will be divided among existing staff members, including the CAD manager — and that means more production work for you.
Now let's draw a few conclusions based on these market realities, comments I've received from CAD managers, and observations I've made in the field:
Caution is king. Businesses are being extremely cautious about hiring new staff; keeping expenses down helps them survive in a down market. Interviewing and hiring people takes time and costs money, so it only makes sense that businesses will put off hiring until they are absolutely sure that they'll have enough work (see my explanation of the book-to-bill ratio above) to support new staff. While it may seem obvious to you that more staff is needed, your company may be less certain.
Big skill sets save jobs. If you're working now, it's because your company believes you have the kind of broad and multifaceted skill set that it needs to complete and bill projects. Chances are that your production skills are what saved you from becoming a statistic during the downturn.
Being billable rules. Think back to the people who were let go from your company during the big downturn in 2009; I'll bet they were employees with high rates of overhead who simply weren't project-billable. In today's economy, you're either making the company money (billable) or costing the company money (overhead). If you aren't billable, your days are numbered.
Managerial skills are valued. With all the emphasis on being billable and production-ready, you may think your company doesn't value your management skills, but that's not true. Companies value technical employees with management savvy very much, but they can't employ you just for your management skills — they need management plus technical.
Whether you like the new market environment for CAD management or not, it is what it is. In this market, you'll simply have to adjust accordingly and be happy that you're working. And if you aren't working, embracing these realities will help you get back into the work force more quickly and easily.
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