Getting a Raise While Protecting Your Job (CAD Manager Column)31 May, 2007 By: Robert Green
Show your value to your employer in dollars and cents.
In the past three installments of "CAD Manager," I've talked about building a list of action items, justifying those items financially and putting your action items into motion. As I've developed these concepts, I've tried to stress the importance of cost savings in your action plan so that your company will achieve greater efficiency as your plan becomes reality. In this month's installment, I want to talk about using the cost-saving ideas in your action plan and the ROI (return on investment) concepts I covered previously to secure your CAD management job and to enhance your compensation while doing so. Interested?
CAD Management ROI Glossary
Compute Your ROI
How many of you know what your ROI is? I have been asking this question for years when I speak to groups of CAD managers, and I can recall only 10 hands going up out of thousands. On the other hand, almost all department-level managers can give you a pretty good idea of their financial performance and ROI levels when asked. So why would a CAD manager want to compute his or her own ROI, you might ask? The answer lies in these questions: "What does a CAD manager do, and why do we need one?" Have you ever heard these questions?
Wouldn't it be awesome to answer these questions like this: "Last year I spent 50% of my time working on a variety of tasks, including standards implementation, CAD software automation, targeted training programs that reduced project costs and several major in-house projects that eliminated using outside resources. These tasks generated $135,000 in savings, which, based on 50% of my salary, generated a 270% ROI for the company." Do you think this sort of logic would help you demonstrate your value and help you achieve better compensation? You bet it would. Let me show you how.
You may recall from last month's article ("Making Big Changes," Cadalyst, May 2007) that I defined ROI as being the cost savings that an action item can produce divided by the cost of implementing the action item. Now I want to define a slightly different ROI value that is specific to the CAD management job. If you look at the parameters I've defined in the sidebar titled "CAD Management ROI Glossary," you'll see that the savings and cost parameters used to compute a CAD manager's ROI are slightly different than that of a general investment. But the concepts are the same.
The key items are converting your action items into actual cost savings by implementing those ideas, as well as reducing your costs while keeping track of everything to compute your ROI. Let's look at an example.
Turn a Profit
Let's say that a CAD manager works 30% of the time on projects deemed as overhead costs, earns an annual salary of $60,000 and has worked on several cost-saving projects during the past year. The first project involved installing new plotting gear, and by using in-house implementation the CAD manager was able to save $12,000 in outside labor. The next project involved standardizing block-element libraries and making the management of those libraries very efficient using standardized tool palettes, all of which resulted in an $8,000 savings in user labor. The last project involved automating plotting routines using some custom programming, and it saved $11,000 per year in user labor.
Let's walk through the CAD management ROI calculations based on the glossary terms using the numbers provided above.
Total savings. The total savings simply are the sum of the savings numbers I've outlined—in this case, $31,000. All these savings qualify as realized savings because they were achieved only because of the CAD manager's efforts. Any time a CAD manager reduces external costs or saves user time, it qualifies as a realized saving.
Overhead cost. The CAD manager's $60,000 annual salary will be adjusted up for taxes, benefits and insurance using my standard 25% value to achieve an annual adjusted salary of $75,000. Simply multiply the adjusted salary by the 30% overhead rate to get a final overhead cost of $22,500.
CAD manager's ROI. To determine the CAD manager's ROI, simply divide the $31,000 of total savings by the $22,500 overhead cost to obtain an ROI of 137%. You may alternately note that this CAD manager paid for his/her overhead costs and returned an $8,500 profit to the company, if you prefer.
ROI computation can have many worthwhile benefits, and you can maximize them using the context of the above example. Reducing your overhead may be related to increasing your ROI in a way that you might not expect—but your management will love.
Savings drive the equation. Because your CAD manager's ROI is simply the savings you realize divided by your overhead cost, there's no way to generate a positive ROI unless you're saving money. This concept sounds simple, but it's amazing how many CAD managers coast by maintaining the status quo without regard to saving money in the CAD environment. How about you? Are you actively looking for savings opportunities and managing your CAD environment to achieve savings like the CAD manager I profiled above?
Tracking savings. Even if you enhance productivity and achieve savings, are you keeping score? If you're not tracking the savings you realize, you'll never get credit for them. And you'll never be able to compute your ROI accurately.
Low costs maximize ROI. If ROI is savings divided by costs, then lowering costs for the same amount of savings will produce a higher ROI, right? But lowering your CAD management costs can be vexingly difficult because your salary is fixed, and you can only get so much CAD management done in a given amount of hours. Sadly, many CAD managers find that the only way they can lower their costs is simply to perform CAD management duties in off hours or by staying late and not counting the hours in their costs.
Billable versus overhead. When you work on a project as an engineer, architect or designer, your time is charged to a project budget and is deemed to be billable by the accounting department. On the other hand, when you work in a general support environment in which you aren't working for a specific project, you're deemed to be nonbillable, and your time is seen as an overhead cost. And as we've seen, the CAD manager's ROI is computed based on overhead costs, not project costs. Therefore, reducing your overhead by working on billable projects will help you achieve lower costs and higher ROI values.
Banishing overhead. Your challenge now becomes converting time that previously was spent on overhead (work on menus, programming and standards formulation) and turning those tasks into project billable time. The easiest way I found to accomplish this is going to the project managers, department heads and lead architects who control the project accounting and asking them what you can do to make their projects more profitable by saving them money. You'll need to educate them about why CAD management can save them money, but I know you can do it. Once you've agreed on how to help your project teams save money, they should be happy to bill your time to their projects. And when that happens, overhead disappears. Try it—it really does work!
A Successful Plan
I hope you've enjoyed my series about building your workplace action plan and justifying your plan and job using ROI metrics. I know that these concepts are new to many CAD managers, but I promise that if you view your job from a financial perspective, you'll get your management's attention and respect. Go back through this "CAD Manager" series, reread all the concepts and take the time to devise an action plan list that is based on savings. Then track those savings and your costs in spreadsheet form.
After you've computed your own ROI value and, perhaps most importantly, documented the savings you've been able to generate, it's time to get serious about your next performance review. Armed with your ROI spreadsheet and a newfound emphasis on savings and cost reduction, I think you'll find you'll be taken much more seriously. Go get that raise!
Robert Green performs CAD programming and consulting throughout the United States and Canada. Reach him at email@example.com.