architecture & engineering industry study€¦ · 4 deltek clarity | architecture &...

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10TH ANNUAL INDUSTRY STUDY

40TH ANNUAL COMPREHENSIVE REPORT

In collaboration with:

Architecture & Engineering Industry Study

40THTHTH ANNUAL ANNUAL ANNUAL COMPREHENSIVE REPORTCOMPREHENSIVE REPORTCOMPREHENSIVE REPORTCOMPREHENSIVE REPORT

Deltek Clarity | Government Contracting Industry Study2 Deltek Clarity | Architecture & Engineering Industry Study2

TABLE OF CONTENTS4 Introduction

8 Executive Summary

10 Section One: Technology Trends

17 Section Two: Financial Statements

34 Section Three: Business Development

46 Section Four: Project Management

60 Section Five: Human Capital Management

82 Statistics At A Glance

Deltek Clarity | Architecture & Engineering Industry Study4

INTRODUCTIONThe 40th edition of the Deltek Clarity Architecture and Engineering (A&E) Industry Study shows that the industry is thriving in a healthy market, but still has room for improvement in several key areas of the business. Firms are seeing solid year-over-year financials and a stable market outlook, but continue to face challenges recruiting and retaining top talent to deliver projects. As technology begins to play a more prominent role in the industry, firms are starting to shift their focus to how technology will impact their business and the industry.

Although the report shows strong financials and a positive market, firms are facing challenges in every area of the business that center around three themes: people, processes and technology. Key initiatives for technology trends, financial management, business development, project management, and human capital management show that firms are committed to addressing these key challenges and continuing to drive their businesses forward.

Most firms identified four emerging technology trends that are important to their business—geo location, Internet of Things (IoT), data science, and big data—but they need a stronger plan for how to implement these trends into their businesses. The majority of firms are looking to implement technology into projects through either project management or project execution. But, many firms are in the early stages of developing a strategic plan, educating staff, and finding subject matter experts for technology trends.

Overall, most financial metrics continued to trend upward and firms continue to see success in diverse markets and project types. With many financial metrics showing year-over-year increases, firms have the ability to increase investment in their employees and current clients, especially top clients.

In business development, firms continue to struggle with limited time and increased competition. Despite these challenges, businesses are thriving and the markets

architecture and engineering firms serve seem to be strong. Teams are being more strategic about project pursuits and looking to diversify the clients they serve while continuing to nurture the key relationships they already have. With baby boomers transitioning out of many companies, it’s a pivotal time for companies to transition client relationships to the next leaders to keep their relationships healthy and the pipeline strong. Firms need to continue to be more strategic and deliberate about business development to win more projects in a highly competitive space.

Project management is at the heart of everything architects and engineers do, but with staff shortages and competing priorities, firms are struggling to equip designers-turned-project managers with the training and visibility into the key performance indicators (KPIs) they need to be successful. This means giving project managers the tools to keep projects on schedule and under budget while meeting client expectations. When it comes to project performance, not many firms are engaging with clients at key milestones to gather feedback and gauge satisfaction. Immature project management processes and slow adoption of technology create barriers for firms to excel in delivering exceptional projects. These are obstacles firms need to take seriously to stay ahead of the competition and position their company to win the next big project.

With a growing number of open positions, firms continue to struggle to find and secure talent. Industry leaders are re-evaluating total

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Deltek Clarity Architecture & EngineeringIndustry Study

compensation to attract top-performing candidates with compensation packages that are more closely aligned with the needs and wants of the modern workforce. Given the ongoing shortage of candidates, it has become increasingly important for firms to retain, develop and advance employees from within. Companies investing in learning, succession planning and professional development are emerging as leaders in the industry, while firms leaning away from adopting human capital management technology are beginning to lag behind.

This year’s Deltek Clarity A&E Industry Study takes a deeper dive into these benchmarks and trends. In addition to trending analysis on established industry metrics, this year’s report provides exciting new insights into a new technology trends section with challenges and initiatives, as well as new benchmarks for key areas of your business. These benchmarks and trends are imperative to firms who want to better position themselves for the next 40 years in the A&E industry.


ABOUT THIS STUDYDeltek conducts an annual survey of firms in the architecture and engineering industry to identify the key issues impacting the market, to highlight bright spots in the market, and to forecast future trends into 2019 and beyond. The survey was developed in coordination with industry experts and focuses on technology trends, financial statements, business development, project management, and human capital management.

The survey was sent to individuals identified as key decision makers at firms that support the A&E industry and was open for a 54-day period from January to March 2019. In total, 2,582 individuals engaged with the survey, with more than 700 companies participating in the study. The survey data were analyzed using descriptive statistics and simple statistical comparison tests. Throughout this report, there are a few key terms and definitions that will help explain the results of the study.

Firm TypeWe use the term architecture and engineering (A&E) to refer to all architecture, engineering and allied firms included in the study. We also break out two broad segments for comparison:

• Architecture (A) or Architecture/Engineering (A/E) firms are either pure architectural design firms or architecture-dominant firms that also provide engineering services. A/E firms (not to be confused with A&E, which refers to all design firms) are also known in the industry as “big A, little E” firms. In this edition, 32% of participants were Architecture or A/E firms.

• Engineering (E) or Engineering/Architecture (E/A) firms are either pure consulting engineering firms or engineering-dominant firms that also provide architectural services. E/A firms are also known in the industry as “big E, little A” firms. In this edition, 57% of participants were Engineering or E/A firms.

• Other refers to the companies in the industry that do not fit into the traditional definitions of A or E. This year, 11% of participants were other types of design or consulting firms.

Firm Size and RegionOverall, there was a diverse mix of participants by firm size. When looking at the size of the participating firms, Deltek defines small, medium, and large firms in the following way:

• Small: 1–50 employees (42% of participants)

• Medium: 51–250 employees (41% of participants)

• Large: 251+ employees (17% of participants)

Firms in this study were headquartered across the United States and Canada. Of all firms, 31% were in the West, 24% in the Midwest, 21% in the South, 15% in the Northeast, 7% in the Washington, DC, area, 1% in the Pacific, 1% in Canada, and > 1% in Puerto Rico.

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High Performers As in past Clarity A&E studies, a group of high performers were broken out for additional analysis. High-performing firms have a Net Labor Multiplier of 3.0 or higher and an Operating Profit on Net Revenue of 15% or higher. High performers constituted 31% of all participants. Throughout this report, we contrast high performers with “All Other Firms,” which consist of all participants except high performers, and should not be confused with “All Participants.”

Study NotesUnless otherwise noted, values in this report use the median value, which is the middle value of firms in a specified group—half the firms are higher and half are lower. Top Quarter and Bottom Quarter refer to the top and bottom quartiles—25% of firms were equal to or higher than the top value, 25% were equal to or lower than the bottom value, and 50% fall between the two. Per employee ratios in the “Statistics at a Glance” data profile section at the end of this report are calculated by dividing by the number of employees that firms had at the end of the year.

Data ProfileAt the end of the report are comprehensive tables, including key metrics from the study broken down by firm size, type, and performance.

Deltek Clarity | Architecture & Engineering Industry Study88 Deltek Clarity | Architecture & Engineering Industry Study8 Deltek Clarity | Deltek Clarity |

EXECUTIVE SUMMARYThis year’s report highlights three interrelated trends impacting the Architecture and Engineering (A&E) industry: people, technology, and process.

Firms are expecting more out of fewer employees who are stretched thin, leading to insufficient time and resources. Firms should also look to improve how they leverage technology to address firm challenges and streamline processes. Too often, firms are using outdated solutions or not leveraging the full capability of solutions to improve their efficiency and effectiveness. Finally, firms need a holistic view of their individual challenges and initiatives; one size does not fit all, and firms need to adapt best practices and existing processes to their businesses in order to enhance alignment and visibility across the company. The 40th Annual Deltek Clarity A&E Industry Study reveals how these key shifts are impacting what firms need to do to stay successful in a healthy and competitive market.

Firms are looking for ways technology can improve project delivery, but need a strategic technology plan to identify how emerging technology trends can drive their business forward.Geo location and the Internet of Things (IoT) were identified as the most important technology trends this year. Although the A&E industry is traditionally hesitant to adopt new technology, this year’s report shows more firms are focusing on technology trends and the potential impact they can have on not only projects, but their business as a whole. High performers and large firms are educating staff, identifying and prioritizing the trends that can better serve their projects, and creating a strategic plan to implement technology throughout their business. The firms that are investing time and money now into technology are creating the foundation to drive their company forward and developing a competitive advantage in the market.

Firms’ financial metrics increased across the board, with most impacts driven by talent management and staffing challenges.The A&E industry is growing at a healthy rate across many key metrics, with operating profit on net revenue and net labor multiplier both increasing this year. With positive financial metrics, firms can increase investment in their employees, focus on nurturing key client relationships, and improve business processes. Overhead rate, total payroll multiplier, net revenue per employee, and total employee cost were all up this year, stressing how many firms are both investing more in their employees and seeing higher returns from limited staff. The challenges firms identified this year show the need for firms to continue to align financial management initiatives with project management and human capital management initiatives.

99 9 9

Firms continue to struggle to find new opportunities early enough and need to be strategic about which potential projects to pursue. In a competitive market, firms need to be strategic about the opportunities they pursue to better position their firms to win. This is amplified by trends showing that most firms use the seller-doer business development model with project managers who constantly face conflicting priorities and that many firms do not have formal business development processes. With win rates decreasing and the net revenue growth forecast remaining steady, firms may be looking to diversify their client base, with a decreased reliance on the top three clients for revenue. Still, these clients are a substantial portion of the pipeline, and many firms cited major challenges in nurturing these client relationships.

Firms need to continue to focus on developing project management maturity, project leaders, and leveraging feedback from clients.This year, more projects were over budget and behind schedule than last year, highlighting the need for more emphasis on the discipline of project management. Firms continue to struggle with inexperienced project managers and insufficient visibility, with two-thirds of all firms stating that they had low or moderate visibility into schedule variance and client satisfaction. The top project management areas for improvement include project management processes, project manager training, and more clearly defined expectations. Less than half of firms measured client satisfaction and those that solicited client feedback did so irregularly. Firms need to identify how they can better equip project managers to be successful and refocus on project delivery.

Firms are struggling to find and recruit qualified candidates and are working to improve the employee experience by focusing on the development of existing top performers to increase the retention of top employees.Firms continue to struggle to find qualified candidates for open positions, quickly onboard new hires and assign them to billable projects. Employee turnover increased this year, highlighting the need to focus on career development and succession planning to retain top talent. Less than half of firms have succession plans and less than one-third have career development plans. Many human capital management challenges can be addressed by leveraging technology, including implementing talent relationship management, e-learning, and pulse surveys, to help businesses efficiently engage, monitor, and expand the skill set of employees.


SECTION ONE

TECHNOLOGY TRENDSFirms are looking for ways technology can improve project delivery, but need a strategic technology plan to identify how emerging technology trends can drive their business forward.

Traditionally, the A&E industry has been hesitant to embrace cutting-edge technology because it is costly, takes time to learn and may not be perceived as important to their clients. But more firms are adopting technology to differentiate their firm, increase efficiency, and attract new talent.

Many firms, particularly high performers and large firms are identifying technology trends as increasingly important to their business. Firms should start prioritizing technology as a strategic initiative and identify how and where they need to implement technology throughout the business, including educating staff, identifying key initiatives and implementing incremental changes to improve the business, delivering better projects and creating a competitive advantage with tech-savvy clients. Consistent with last year, most firms focused on technology trends that can improve project delivery, but firms are starting to identify how key technology trends can change their business. Firms with greater foresight, such as large firms and high performers, are focused on key technology trends like big data, the Internet of Things (IoT) and data science and creating strategic plans for implementing trends throughout the business, setting the groundwork now to be more competitive and profitable in the future.

Key Data Points from the Survey

• Geo location and the IoT were the most important technology trends.

• The top three technology challenges—cost of technology, prioritizing trends that are most applicable to the business and lack of time to invest in learning—illustrate that the industry is becoming more aware of key technology trends and their potential impact to the industry.

• Top technology initiatives show firms are starting on the right path to embracing technology with creating strategic plans, educating staff and developing subject matter experts as their top initiatives for the coming years. More education is needed for the industry as a whole about what the trends are and examples of practical applications for how they can positively impact the industry, their business and their people.

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Top Technology Trend ChallengesThis is the first year that firms were asked about their top technology trend challenges. Overall, firms rated cost of technology, prioritizing which trends are most applicable to their business, and lack of time to invest in learning about technology trends as the top three challenges, ranging from 57 to 49 percent. Employee education about trends and their application to A/E/C was similarly rated at 45%. These top technology trends are centered on prioritizing limited resources and education on the types

of technology that could benefit firms. As these technologies become more readily available, costs may not be as prohibitive as some firms may assume, whereas incremental steps to implementing new technology may alleviate some of the initial potential burden. As firms tackle the first few challenges, it is anticipated that some of the lower ranking challenges will rise to the top as a second phase of the technology adoption process, such as getting buy-in from firm leadership.

TOP TECHNOLOGY TREND CHALLENGES

54%

49%

29%

0% 10% 20% 30% 40% 50% 60% 70%

Buy-In From Firm Leadership

Lack of Champion to Lead Initiative

Client Education about Technology Trends and their Application to Projects

Employee Education about Trends and their Application to A/E/C

Lack of Time to Invest in Learning about Technology Trends

Prioritizing Which Trends are Most Applicable to Your Business

Cost of Technology (e.g., Equipment, Education)

16%

25%

57%

45%

First

Second

Third


Emerging Technology TrendsFor the second year in a row, firms were asked how important nine emerging technology trends are to their business, including a new item—block chain. Consistent with the top four categories from last year, the most important emerging technology trends identified were IoT and geo location, while big data and data science followed close behind. Focus on artificial intelligence (AI) decreased this year overall, but it saw a substantial increase in importance for large firms. Many of the other emerging trends were not yet on the radar for most firms.

• For small firms, the top trends were IoT, geo location and data science, with big data rated fourth—each consistent with last year. The importance of natural language processing, big data, and wearable technology have all decreased for small firms.

• For medium firms, the top trends were geo location, IoT, and big data, with data science rated fourth. There was an increased focus this year on machine learning, whereas there was a decrease in IoT and big data.

• For large firms, the number of firms that identified emerging trends as important increased in nearly every category, indicating a shift in focus for large firms. The top three were big data, IoT, data science and geo location in fourth. Large firms seem to be more focused on emerging technology trends than small and medium firms.

About the Top Emerging Technology Trends

The Internet of Things (IoT) is the interconnection of devices embedded in everyday objects, enabling them to send and receive data. It is an important emerging technology trend because connected devices offer the potential to better manage the building or project. If you think of the common phrase “if these walls could talk” and apply it to IoT, you can begin to see the value of a building under construction or an occupied building being able to send critical data to construction teams and building owners. The key is being able to extract and manage actionable data from the IoT devices to make informed decisions.

Geo location is more prominent now than any time in history. Firms can leverage geo location information to make things easier for their employees and clients. For example, geo location data can be used to determine an employee’s location, to track how long an employee is on a job site, or deliver valuable details about the client when you arrive at a project site or to the client’s office. With users’ permission, geo location can be used to automate a large number of activities and reduce the burden put on employees. Firms that can leverage this information to better manage projects and improve client satisfaction will have a competitive advantage because of the insight they will gain over time.

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IMPORTANCE OF TECHNOLOGY TRENDS TO YOUR BUSINESS

Block Chain

Natual Language Processing

Wearable Technology

Machine Learning

Artificial Intelligence

Data Science

Big Data

Geo Location

The Internet of Things 37% 22% 41%

37% 20% 44%

33% 20% 47%

32% 21% 47%

23% 22% 56%

17% 19% 64%

15% 17% 68%

8% 16% 76%

6% 15% 79%

Moderately important Not importantImportant


APPLICATION OF TECHNOLOGY TRENDS

45%

14%58%

49%

0% 10% 20% 30% 40% 50% 60%

None of the Above

Human Capital Management

Resource Management

Business Administration

Building Information Management

Financial Management

Project Information Management

Business Development and Marketing

Project Execution

Project Management

40%

21%

30%

44%

37%

34%

27%

14%

Application of Technology Trends This was the first year that firms were asked about which areas of their business they apply technology trends. Most firms are looking at implementing these trends into projects themselves through either project management or project execution. Nearly half of firms are looking to apply technology to improve business development and marketing, but not nearly enough firms are seeing the value of technology

to improve human capital management. Clients will soon expect companies to be tech-savvy, meaning firms that deliver streamlined services that use today’s most sophisticated technology will be a key differentiator. Embracing technology today can create a clear competitive advantage while many firms, including 14% that are not leveraging technology trends in any area of their business, are trying to catch up.

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TOP TECHNOLOGY TREND INITIATIVES

6%

44%

45%

53%

0% 10% 20% 30% 40% 50% 60% 70%

Indentify Championto Lead Initiative

Hire Sta� or Acquire Companywith Necessary Expertise

Develop Budget forStrategic Investment

Indentify and Develop TechnologySubject Matter Experts

Educate Sta� on Technology Trends

Create Strategic Plan forImplementing Technology Trends

30%

30%

66%

Top Technology Trend Initiatives Firms were asked to identify the top three initiatives their firms are employing to address technology challenges in the next three years. Two-thirds of firms rated creating a strategic plan for implementation as one of their top three initiatives, followed by more than half of firms reporting educating staff on technology trends as one of their top initiatives. Finally, the third highest initiative this year was identifying and developing technology subject matter experts (SME), which was rated by 45% of firms. This begs the question—where can firms learn about these trends and how do they implement their plans? Industry associations and industry partners are great resources for firms to start learning about technology. When asked what

types of education firms need, firms can help elevate the need for more education about these technology topics. Overall, it appears that most firms are trying to determine the best place to start; they are in the early stages of developing a strategic plan, educating staff, and finding SMEs. Once they have firmer footing in those areas, developing a budget for actually implementing those trends will become more important. Firms may be nervous to integrate technology into their organizations because of a fear of failure, but technology can be introduced to the business incrementally to drive user adoption and demonstrate the impact before widespread implementation.

First

Second

Third


A CLOSER LOOK AT THE TOP TECHNOLOGY TRENDS FOR LARGE FIRMS AND HIGH PERFORMERSHigh performers and large firms tend to be more forward-looking when it comes to emerging technology trends. This year, high performers reported that data science was most important, with more than half of firms rating it as the top emerging technology trend, followed closely by IoT, big data, and geo location.

Like all other firms, block chain was rated as least important. This is in contrast to last year, when the top trend was AI, and IoT was substantially less important. In comparison, more than three-quarters of large firms identified big data as the most important trend, followed by IoT and data science. Large firms may have more resources to invest in technology trends, more sophisticated IT teams or technological roles within their organizations that can dedicate time to learning new trends, and greater willingness to take a risk now for potentially better long-term benefits.

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SECTION TWO

FINANCIAL STATEMENTSFirms’ financial metrics increased across the board, with most impacts driven by talent management and staffing challenges.

Looking across financial statements in the A&E industry, many financial metrics are trending upward. The positive financial statements pave the way for firms to increase investment in employees, nurture client relationships more effectively, and improve business processes.

With increases in some metrics, such as overhead rate, total payroll multiplier, total employee cost, and average collection period, understanding why numbers are increasing in your firm is key to ensuring they are increasing for the right reasons or if corrective action is needed to get back on track. High performers are still doing exceptionally well in several key financial metrics. The few metrics that decreased this year may be attributed to additional costs associated with investments in staff, higher costs of doing business, and tax changes implemented within the last year. This year, additional challenges and initiatives were added to the study regarding finding and retaining qualified staff and training project managers on financial management. High ratings of these project management and human capital management-related challenges in the financial section reiterate the importance of alignment between leaders in finance, operations and human resources.

Key Data Points from the Survey• Average operating profit on net revenue was 14.4%, up from 13.2%

last year and the previous year’s 13.0%.

• Utilization rates increased slightly to 59.8% from 59.4% last year.

• The net labor multiplier increased to 3.01, a spike from 2.96 last year.

• Firm overhead rate rose for the third year in a row, increasing from 155% last year to 160% this year.

• The average collection period increased by four days to 75 days, although small firms dropped three days from last year to 73 days.

59.8%Utilization Rate - up from 59.4% last year

3.01Net Labor Multiplier - an increase from last year’s 2.96

14.4%Operating Profit on Net Revenue - increased for tenth straight year


Top Challenges Facing Financial LeadersThe top financial challenge reported by firms was finding and retaining qualified staff, which was a new challenge added this year. The next two top rated challenges were increasing profitability and managing growth, although both challenges were down 19 and 12 percentage points from last year, respectively. Succession planning and ownership transition and the newly added increasing financial knowledge/savvy of project managers/leaders were tied for the fourth highest challenge spot. In contrast, organic topline growth was down 14

percentage points, from 31% to 17%, whereas alignment with executive management saw a decrease of 12 percentage points, from 16% to 4%. Managing merger and acquisition (M&A) activity also continued to drop this year. Overall, the top challenges were more evenly ranked compared to last year, indicating that firms are contending with various areas of concern. The top challenges this year suggest firms are having difficulties with talent management and highlight the material impact of talent on company financials.

TOP FINANCIAL CHALLENGES

10%

4%

0% 10% 20% 30% 40% 50% 60% 70%

Alignment with Executive Management

Unpredictable Spending Environment

Managing Merger and Acquisition Activity

Organic Topline Growth

Cash Flow

Increasing Financial Knowledge/Savvy of Project Managers/Project Leaders

Succession Planning and Ownership Transition

Managing Growth

Increasing Profitability

Finding and Retaining Qualified Sta�

17%

51%

48%

38%

37%

37%

26%

7%

First

Second

Third

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Operating Profit on Net Revenue

14.4% +1.2%

Calculated by dividing pre-tax, pre-distribution profit by net revenue (total revenue minus consultants and other direct expenses).At 14.4%, the average operating profit on net revenue increased 1.2% from last year’s 13.2%. This continues a 10-year gradual climb from a low of 8.4% in 2009. Since firms must achieve at least 15% operating profit on net revenue to be a high performer, it is expected that high performers excel in this category. Once again, high performers have well exceeded the 15% threshold, with an operating profit on net revenue of 22.9%, which is 8.5% higher than the overall average and almost triple that of other firms. Consistent with other financial metrics, high performer numbers are up substantially as they continue to lead the way in the A&E industry.

HOW FIRMS COMPARE

TEN-YEAR TREND

22.9%

13.9% 14.5%

12.4%

0%

5%

10%

15%

20%

25%

16.2%

12.1%

E or E/AA or A/ELargeMediumSmallOthersHighPerformers

8.5%

14.4%13.2%13.0%

9.1%

11.1%10.1%

9.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2018201720162015201420132012201120102009

11.8%

8.4%

12.8%

2018 2017 2016 2015

Top Quarter 22.0% 19.2% 25.8% 27.4%

Median 14.4% 13.2% 13.0% 12.8%Bottom Quarter 5.9% 4.3% 4.4% 7.2%


HOW FIRMS COMPARE

TEN-YEAR TREND

58.6%

60.6%

56%

57%

58%

59%

60%

61%

59.4%

60.0%

59.1%59.3%

60.3%


54.5%

59.4%

56.5%

58.3%

50%

52%

54%

56%

58%

60%

62%

64%

2018201720162015201420132012201120102009

59.8%60.1%60.0%59.4%

59.9%

61.0%

Utilization Rate

59.8% +0.4%

Calculated by dividing the cost of labor charged to projects by the total labor cost of the firm.Although firms reported a slight decrease last year, utilization rates increased slightly to 59.8% this year, a subtle climb of 0.4%. Although small firms have the highest utilization rates across firm sizes, large firms had the biggest year-over-year increase of 1.3%. This slight bump in utilization rates coupled with net revenue increases could mean that firms are investing more in their employees (e.g., professional development). With the overall utilization rate hovering around 60.0%, firms should continue to monitor fluctuations in employee turnover and onboarding time, as these can significantly impact utilization. Firms with higher utilization rates tend to have lower employee turnover and higher net revenue per employee.

2018 2017 2016 2015

Top Quarter 66.8% 66.4% 67.2% 68.3%

Median 59.8% 59.4% 59.9% 61.0%Bottom Quarter 55.1% 54.9% 55.3% 55.4%

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TEN-YEAR TREND

HOW FIRMS COMPARE

3.013.01

2.962.96

2.99

2.91

2.95

2.85

2.70

2.75

2.80

2.85

2.90

2.95

3.00

3.05

3.10

2018201720162015201420132012201120102009

3.02

2.97

2.852.952.80

3.48

3.08 2.95

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

3.04


Net Labor Multiplier

3.01 +0.05

Calculated by dividing net revenue by direct labor, the cost of labor charged to projects.After a decline last year, net labor multiplier increased to 3.01. Similar to operating profit on net revenue, high performers drove the net labor multiplier up this year, although slight increases can also be seen across small, medium, and A/E firms. High performers are once again outpacing what is required and managing labor costs exceptionally well. One of the criteria to be a high performer is a net labor multiplier of 3.0 or above, meaning that the average firm has surpassed the high performer threshold for this metric, which is a positive sign for the industry overall.

2018 2017 2016 2015

Top Quarter 3.39 3.26 3.32 3.32

Median 3.01 2.96 3.02 2.96Bottom Quarter 2.61 2.56 2.74 2.65


1.77

2.06

1.65 1.691.79 1.781.82

0.0

0.5

1.0

1.5

2.0

2.5


HOW FIRMS COMPARE

TEN-YEAR TREND

1.74

1.781.791.79

1.741.751.74

1.58

1.5

1.6

1.7

1.8

1.9

2018201720162015201420132012201120102009

1.70

1.77

Total Payroll Multiplier

1.78 +0.04

Calculated by dividing net revenue total labor or utilization rate times net labor multiplier.This year, total payroll multiplier saw a slight increase to 1.78. The biggest change occurred among medium firms, whose multiplier increased 0.09 points from last year, although high performers are still consistently higher than other firm types. This year’s increase could be attributed to higher gross wages, retirement fund contributions and payroll taxes.

2018 2017 2016 2015

Top Quarter 2.00 1.87 2.03 2.03


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HOW FIRMS COMPARE

TEN-YEAR TREND

173%

162%

166%

154% 155%155%

161%165%

140%

145%

150%

155%

160%

165%

170%

175%

2018201720162015201420132012201120102009

160%160%

161%

156%

161% 160%

155%

159%

135%

140%

145%

150%

155%

160%

165%


158%

Overhead Rate

160% +5.0%

Calculated by dividing total overhead (before distributions) by total direct labor expense.This year’s overhead rate continued to trend upward with a 5% increase to an overall rate of 160%. High performers were on par with large firms this year, both with overhead rates of 161%. Large firms saw a 5% decrease in overhead rates, whereas high performers saw a 5% increase compared to last year. Small firms reported the biggest jump this year, with an 11% increase in their overhead rates. The overall increase may be due to firms making investments back into their business and into employees (e.g., wages, professional development, 401(k) contributions, health care) or it could be the result of inflated costs for offices spaces or other general costs of doing business. It is important that firms understand the details of their overhead numbers and monitor changes frequently because it can have significant downstream impacts on firm performance and the firm’s ability to win projects.

2018 2017 2016 2015

Top Quarter 186% 180% 183% 187%

Median 160% 155% 154% 155%Bottom Quarter 133% 129% 124% 121%


TEN-YEAR TREND

$120,500$117,900

$113,400

$132,731

$127,100

$129,700$121,900

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000

$140,000

$150,000

2018201720162015201420132012201120102009

$139,042 $140,189$144,000

$133,806

$147,390

$145,987$145,435

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000

$140,000

$150,000

$160,000

$170,000

$180,000

$141,530$139,130


$165,851

HOW FIRMS COMPARE

Net Revenue Per Employee

$144,000 +$11,269

Calculated by dividing net revenues by average total staff during the year, including principals.Net revenue per employee increased this year by more than $11,000. High performers had the highest net revenue per employee this year, with a $13,500 increase from last year. The overall increase is likely due to higher turnover rates, which leads to firms delivering more projects from fewer employees. This aligns with the project management challenges of staff shortages and competing priorities. In addition, increasing overhead rates and increasing gross wages could be contributing factors. Firms with higher net revenue per employee had lower staff growth and overhead rates.

2018 2017 2016 2015

Top Quarter $168,872 $152,796 $157,106 $156,079

Median $144,000 $132,731 $140,189 $139,042Bottom Quarter $120,144 $115,125 $118,430 $117,841

25

HOW FIRMS COMPARE

2018 2017 2016 2015

Top Quarter $110,247 $106,806 $105,881 $101,846


Total Employee Cost

$98,619 +$4,122

The sum of total labor and other labor-related expenses (taxes, insurance, etc.) divided by the average number of employees during the year. Excludes bonuses.

The average total employee cost increased $4,122 this year and this metric is beginning to grow steadily again after a slight plateau over the last two years. Firms of all sizes reported substantial increases this year with small firms reporting the steepest incline of more than $6,000 from last year. These increases are in line with other financial metrics this year, such as the increase in overhead rates. Firms that offered more benefits such as medical, 401(k)/retirement plans, performance bonuses, or paid overtime understandably had higher total employee costs.

$99,116

$95,503

$99,101

$95,266

$101,785

$80,000

$82,000

$84,000

$86,000

$88,000

$90,000

$92,000

$94,000

$96,000

$98,000

$100,000

$102,000

$104,000


$96,872

$100,561


74

60

62

64

66

68

70

72

74

76

78


75 75

73

75

7777

HOW FIRMS COMPARE

TEN-YEAR TREND

75

68

87

7573

7176

61

50

60

70

80

90

100

2018201720162015201420132012201120102009

7276

Average Collection Period

75 +4

Calculated by dividing accounts receivable by annual total revenue, times 365.After a six-year downward trend, firms had an overall average collection period of 75 days this year, an increase of four days from last year. Although firms were more comparable across the board this year, large firms reported an increase of nine days, whereas small firms saw a decrease of three days. Small firms have traditionally struggled in this area but appear to be setting the bar for all other firms this year. High performers also saw a significant jump with an eight-day increase compared to the previous year. Although it seems to be taking firms longer to receive payment for services rendered, firms may just have certain types of contracts that prevent them from collecting quickly. Firms with higher average collection periods were more likely to hold unit price and design-build contracts. The average collection period increase could also be driven by internal challenges that might be slowing down the process.

2018 2017 2016 2015

Top Quarter 95 94 92 97

Median 75 71 72 73Bottom Quarter 55 56 54 55

27

HOW FIRMS COMPARE

$4,664

$6,707

$7,666

$8,927

0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000


$7,643

$6,374

$7,368

Net Fixed Assets per Employee

$6,892 -$460

Calculated by fixed assets less goodwill and depreciation divided by the current number of employees.The average net fixed assets per employee dropped slightly this year. Overall, there was more variability across firm types and sizes with small firms seeing the biggest decrease of $864 and large firms experiencing the largest increase of $541. The overall reduction in net fixed assets per employee could be driven by recent tax changes, which are impacting depreciation and balance sheets.

2018 2017 2016 2015

Top Quarter $11,709 $11,339 $10,390 $11,664



FIRMS THAT PLAN TO COMPLETE A FIRM VALUATION IN THE NEXT 12 MONTHS

48.9%52.5%

58.8%

48.3%

0%

10%

20%

30%

40%

50%

60%

70%


46.6%

35.4%

45.4%

54.2%

62.8%

42.6%

52.6% 52.2%

0%

10%

20%

30%

40%

50%

60%

70%

50.8% 50.3%


FIRMS THAT HAVE COMPLETED A FIRM VALUATION

Firm Valuation

52.2% +2.2%

More than half of all firms this year indicated that they completed a firm valuation. There were notable differences between firms of different sizes—medium firms were far more likely to have completed a firm valuation than large or small firms, whereas last year large firms were considerably more likely to complete a firm valuation. Of those firms that have not completed a firm valuation, nearly half (47.5%) plan on completing one in 2019, with 58.8% of medium firms planning a firm valuation. This shows a continued focus on the next generation of the business. Firms that have completed a firm valuation are more likely to have a succession plan, which may include a merger or acquisition. Firms are becoming more sophisticated and increasingly aware that they need to be planning for the long-term future of the company.

29

HOW FIRMS COMPARE

2.05 2.12

2.60

2.98 2.96

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2.52


2.80

HOW FIRMS COMPARE

0.76

0.89

0.51

0.88

0.67

0.0

0.2

0.4

0.6

0.8

1.0

1.21.04 1.00


Current Ratio

2.60 -0.06

Calculated by dividing current assets (cash and near cash assets) by current liabilities (those due in one year or less).

Debt to Equity Ratio

0.83 +0.06

Calculated by dividing total liabilities by stockholders’ equity.

2018 2017 2016 2015

Top Quarter 1.43 1.38 1.33 1.69


2018 2017 2016 2015

Top Quarter 3.87 4.24 5.00 4.88



HOW FIRMS COMPARE

13.6%

21.7%21.6%

39.2%

8.9%

18.2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


22.2%

Return on Equity

21.6% +7.6%

Calculated by dividing pre-tax income (operating profit less bonuses, interest, and other income or expenses) by stockholders’ equity, times 100.

2018 2017 2016 2015

Top Quarter 43.8% 35.6% 47.9% 51.7%

Median 21.6% 14.0% 24.8% 28.8%Bottom Quarter -4.5% 0.2% 10.7% 11.1%

31

PRIMARY CONTRACTS HELD BY CONTRACT TYPE

9%

21%

58%

0% 10% 20% 30% 40% 50% 60% 70%

Integrated Project Delivery

Design-Build

Other

Cost Plus

Unit Price

Fixed Price

5%

15%

35%

Contracts Held by Contract TypeThis is the first year that firms were asked about the types of contracts where they are the primary contract holder. The majority of contracts that are held by firms are fixed price (58%) and unit price (35%). High performers were more likely to hold fixed price and unit price contracts, whereas they were less likely to hold cost plus and design-build contracts. Firms

with a higher percentage of unit price contracts also tended to have higher win rates and capture rates. As the markets change and industry evolves, firms will want to monitor changes and fluctuations in contract types to ensure their firms and project managers are well equipped to manage the contracts accordingly.


TOP FINANCIAL INITIATIVES

9%

6%

30%

34%

9%

52%

12%

51%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Other New System Implementation

Improved Risk Management Plans/Systems

New Financial System Implementation

Streamlining Billing Processes

Completing or Preparing fora Merger/Acquisition

Increasing Spending forTalent Acquisition and Retention

Organizational Changes/Realignments

Better Managing Growth

Better Forecasting

Training Project Managerson Financial Management

Business Process Improvement

40%

10%

21%

Top Initiatives to Address Financial ChallengesFirms ranked the top three initiatives to address their financial challenges; however, most of these top initiatives did not align with their top rated financial challenges this year. Business process improvement was ranked as the top initiative for the second year in a row, although the percentage of firms focusing on this initiative declined 20% this year. This year, participants were asked about a new initiative—training project managers on financial management. This initiative rose to the second highest ranked initiative and was chosen by more than half of all firms as one of their top three initiatives. There appears to be a need for alignment

between project management and accounting in firms and for project managers to have a clear understanding of project financials. The visibility project managers need in order to deliver successful projects is often controlled by the financial side of the business. Finally, better forecasting was the third highest ranked initiative this year at 40%. With the top challenges focusing on human capital management, more firms should consider prioritizing investment in talent acquisition and retention or tie in strategic human capital management goals with their overall process improvement initiatives.

First

Second

Third

33

FINANCIAL STATEMENTS

CLARITY OUTLOOKFirms reported notable increases in overall financial metrics, but also saw increases in employee costs. Firms should be asking themselves: Are your firm’s metrics going up for the right reasons?

Firm financials are impacted by challenges in other areas of the business, particularly project management and human capital management. Financial leaders identified finding and retaining qualified staff, increasing profitability and managing growth as their top challenges in the next three years. To effectively tackle these challenges, firms need to find ways to better align financial management, operations, and human capital management so that firm leaders can work together to tackle key initiatives and drive the business forward.


SECTION THREE

BUSINESS DEVELOPMENTFirms continue to struggle to find new opportunities early enough and need to be strategic about which potential projects to pursue.

In the architecture and engineering industry, firms have a plethora of opportunities and often struggle to be strategic and focus on the right opportunities to pursue. Given that 80% of firms cited client relationships as a top source of new business, firms identified time to nurture client relationships as a top challenge.

Despite the increased importance of strategic business development, less than half of firms have a formal business development process, and with many firms leveraging a seller-doer model, project managers face conflicting priorities and limited time to devote to business development. These challenges may be contributing to decreased win rates and a decline in the average percentage of revenue from top clients.

Key Data Points from the Survey

• Win rates declined from 50% to 48% from last year. Large firms and A or A/E firms experienced the largest declines in win rates.

• Revenue generated from the top three clients declined from 53% to 44%; small firms saw a decrease from 62% to 52% this year.

• The Net Revenue Growth Forecast was essentially unchanged from last year, declining from 5.2% to 5.1%.

48%Win Rate

44%Revenue from Top Three Clients

5.1%Net Revenue Growth Forecast

35

TOP BUSINESS DEVELOPMENT CHALLENGES

26%

49%

0% 10% 20% 30% 40% 50%

Excessive Administrative Time Maintaining Reports and Records

Finding the Right Teaming Partners

Lack of Intel for Opportunities to Position for Win

Not Enough Time to Effectively Respond to RFPs/RFQs

Increased Cost of Competing for Projects

Coordination Between Business Development and Operations

Limited Business Development Resources

Identifying New Prospects

Increased Competition

Finding Time to Nurture Client Relationships

42%

24%

20%

19%

23%

34%

8%

17%

Top Business Development ChallengesFinding time to nurture client relationships continues to lead top challenges for the second year in a row, with increased competition and identifying new prospects following close behind. Limited business development resources fell out of the top three after experiencing a 13-point drop from last year. Although resources have dropped, these challenges are indicative of the challenges of the seller/doer model where staff is increasingly

stretched thin as firms win new business. Overall, firms are still struggling with time, market intel and positioning for the win. With increased pressure to do more with fewer resources, business development time needs to be even more strategic and impactful. Firms need to be vigilant about which projects are worth pursuing, which clients are worth investing in and what markets will be lucrative.

First

Second

Third


SEVEN-YEAR TREND

6.8%5.9%5.8%

0.8%

5.0%

-2%

0%

2%

4%

6%

8%

10%


-1.9%

5.3%

5.6%5.0% 5.1%

0%

2%

4%

6%

8%

2019201820172016201520142013

6.2%

3.2%

5.3% 5.2%

Net Revenue Growth Forecast

5.1% -0.1%

The average net revenue growth forecast of 5.1% remained nearly unchanged from the previous year, as firms are expecting modest growth in an already strong economy. There was more variation in net revenue growth forecast when looking at firm size and type. Most firms reported small decreases of about 1 percentage point, but small businesses forecasted a decline of 1.9%. The decline reported by small firms could be attributed to the challenges of forecasting

work for a larger number of smaller projects as opposed to larger, long-term projects. High performers reported the largest uptick from last year with a 0.8% increase. With better alignment between finance and business development, firms will continue to see improvement in forecast accuracy, and business development teams can create effective plans to see the growth forecasts come to fruition.

37

RESPONSIBILITY FOR BUSINESS DEVELOPMENT

Other Staff

Design Team

Marketing Staff

Project Managers

Dedicated Business Development Staff

Executive Team 88% 9% 8%3%

68% 23%9%

61% 9%31%

50% 29%21%

21% 40%38%

13% 56%31%

Almost Always Responsible Somewhat Responsible Rarely Responsible

Business Development ResponsibilitySimilar to last year, firms are still primarily relying on executive teams and dedicated business development staff to bring in new business. The number of firms for which the executive team is primarily responsible for business development increased two points to 88%, whereas all of the other roles experienced declines in the frequency of business development responsibility. With higher turnover rates, some executives may be stepping back in

to support business development staff and alleviate burden on seller-doers. Only 19% of firms have dedicated business development staff, and more firms rely solely on seller-doers, with 39% of firms leveraging seller-doers, which was up from 31% last year. Although the seller-doer model offers some advantages in client relations, it limits time to locate new opportunities as project volume increases.


FIRMS WITH A FORMAL BUSINESS DEVELOPMENT PROCESS FOR STAFF

FIRMS WITH A FORMAL BUSINESS DEVELOPMENT PROCESS

(PG.44)

++z Formal BD Process

No Formal BD Process

54%

73%

43%

51%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%


46%44%

Firms With Formal Business Development ProcessesFirms were divided pretty evenly on whether or not they have a formal business development (BD) process. Large firms were most likely (73%) to have a formal BD process, whereas small firms were the least likely to have a BD process. Although there is no dominant BD process in the industry, there are still numerous advantages to a formal BD process. A formal, or structured process, can help track and maintain client interactions and reduce duplication of efforts by

engaging the right parties at key points in time. It also brings more focus to limited business development time and can lead to a higher return on time invested in clients and potential projects. More touch points with clients and a formal system to track these interactions can be a competitive advantage in a highly competitive environment—potentially being the difference between winning or losing the next big project.

52%48%

39

Win Rate

47.9% -2.1%

Calculated by proposals awarded divided by proposals submitted.The average win rate declined by about two points compared to last year. Slightly less than half of firms (48%) reported win rates increased, whereas 16% indicated win rates decreased. Architecture firms reported the largest decline of seven points, and large firms reported the largest increase, as they were up 5%. These trends are consistent with the business development challenges reported elsewhere—firms are being stretched by the amount of work they already have compounded with the challenges of hiring, which makes it difficult to respond to opportunities with high-quality proposals. Surprisingly, there are still 7% of firms that are not tracking win rates, which leads to wasted time and frustrated teams.

HOW FIRMS COMPARE

FIVE-YEAR TREND

WIN RATE CHANGE(PG.45)

++++z Increased

Stayed the same

Decreased

Do not track

7%

48%

16%

29%

45.1%

50.0% 49.7%

0%

10%

20%

30%

40%

50%

60%


42.8%40.9%

50.0%50.0%

47.3%50.0%

40.2%

47.9%

0%

10%

20%

30%

40%

50%

60%

20182017201620152014

45.0%


HOW FIRMS COMPARE

46.9%

37.8%

49.1%45.1%

0%

10%

20%

30%

40%

50%

60%


50.0%

41.7% 40.2%

Capture Rate

45.0% +0.4%

Calculated by total value of proposals awarded divided by total value of proposals submitted.The capture rate was nearly identical to last year, increasing by a half percentage point. While win rate focuses on the number of proposals submitted, capture rate measures the total dollar value of the proposals submitted compared to those awarded. High performers made the largest increases in capture rate, reporting a five-point increase to 50%, and

architecture businesses experienced the largest decline of 10%. For the second year in a row, large firms reported the lowest capture rate, suggesting that the competition is higher for the most valuable projects or the go/no go process should be reviewed to ensure that firms are devoting time to the right projects for their firm.

41

FORMAL GO/NO GO PROCESS

FIRMS WITH A FORMAL GO/NO GO PROCESS

(PG.48)

++16+z For all opportunities

For strategic opportunities

For new clients/prospects54%

15%

30%

68%

76%72%

68%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


65%

54%

84%

Formal Go/No Go Process

68% +1%

Formal go/no go processes help firms make better decisions about which projects to pursue and ensure they are not allocating time and resources to project pursuits with low win probabilities. The percentage of firms with a formal go/no process increased one point to 68% this year. Nearly all types of firms reported increases in the percentage of those employing a formal go/no go process. High performers reported the largest increase (15%) and large firms continued to lead, with 84% having a go/no go process. Small firms were still the least

likely to have a formal go/no go process. Of firms with a formal go/no go process, more than half (54%) use it for all opportunities, 30% employ it for strategic opportunities, and 15% employ a go/no go process for new clients or prospects. Although a clear majority of firms have a formal go/no go process in place, more than one-third of firms do not have a process in place, impacting win rates and potentially impacting firm profitability, if firms are not pursuing the right projects for their firm.


HOW FIRMS COMPARE

34%39%

0%

10%

20%

30%

40%

50%

60%

70%


41% 41%

52%

36%

46%

Revenue From Top Three Clients

44% -9%

A diverse client base is an important risk mitigation strategy, and firms should continue to diversify their client base even when things are going well with existing clients. Firms should be aware of the concentration of funds from a single client and the exposure to their largest clients’ successes or downturns. Reversing the large increase reported from last year, businesses reported that 44% of their revenue comes from their top three clients, a nine-point decrease from last year. This decrease indicates that firms are either strategically diversifying their clients or are not nurturing existing

relationships enough and competitors are taking away key clients or projects. Although small firms are typically more reliant on their top clients for a bigger percentage of their revenue, small firms saw a 10% decrease in overall revenue from their top three clients this year. Large firms and high performers bring in one-fifth or less of their revenue from their top clients. For firms that draw a high degree of revenue from a limited number of clients, monitoring the client relationship and project quality is paramount to reducing the risk of suddenly losing a major source of revenue.

43

POSITION IN MARKET OVER NEXT 18 MONTHS

0% 25% 50% 75% 100%

Other

Residential

Hospitality

Public Facilities

Industrial

Education

Federal

Energy/Power

Commercial

Surveying/GIS/Mapping

Health Care

Transportation

Water, Wastewater, Stormwater

64% 31% 5%

2%53% 45%

3%52% 45%

49% 47%

46% 50%

3%44% 53%

43% 51%

42% 46%

41% 52%

39% 55%

38% 59% 3%

36% 55%

32% 54%

4%

4%

6%

12%

8%

6%

9%

14%

Grow Remain Steady Decline

Market PositionFirms remained bullish when asked about how they expect their position in the market to change in the next 18 months. Overall, a higher percentage of firms expect to remain steady in a number of markets. Water, wastewater, storm water; transportation; and health care are key markets that respondents expect the most near-term growth. Surveying/GIS/Mapping and commercial markets fell from the top three,

but still show anticipated growth for most firms. Firms continued to anticipate a decline in residential and hospitality markets as well as the federal market. As firms evaluate their anticipated position in each target market for the next 18 months, firms should ensure their strategic plan and initiatives are aligned to help the firm continue to succeed.


TOP BUSINESS DEVELOPMENT INITIATIVES

22%

15%

14%

25%

0% 10% 20% 30% 40% 50%

33%

33%

24%

22%

14%

17%

Getting Buy-in Across Firm for Business Development

Investing in Market Intel and CRM Systems

Automating Time-Consuming Tasks

Improving Quality and Availabilityof Marketing Data and Materials

Improving Analytics on Business Development

Hiring Additional Staff

Improving Follow-Through Process after Identification

Expanding Geographically

Cross-Training Staff to do Business Development

Better Opportunity Identification

Strategic Networking to Expand Teaming Options

Earlier Identification ofOpportunities and Requirements

8%

27%

Top Three Business Development InitiativesIn a dynamic and fast-moving economy, earlier identification of opportunities and requirements continues to lead among top business development initiatives, followed by strategic networking to expand teaming options and better opportunity identification. These were the top three business development initiatives for the second year in a row. These initiatives closely mirrored the challenges that were cited previously, namely finding time to nurture client relationships, better opportunity identification, and identifying opportunities better. Companies are still primarily relying on existing relationships to source project

opportunities, highlighting the need to make business development a priority. Although businesses are challenged by the lack of time they have to nurture client relationships or to identify opportunities, few businesses are automating time-consuming tasks or investing in the market intelligence or CRM systems that allow them to identify opportunities earlier and respond to them more competitively. Overall, improving analytics and developing business development KPIs can help firms get the most from their business development investments and better position their firm to win more projects.

First

Second

Third

45

BUSINESS DEVELOPMENT

CLARITY OUTLOOKFirms are clearly stretched by the volume of opportunities and the time it takes to prepare quality responses to them. Businesses cited a limited amount of time to nurture client relationships as a top challenge to overcome and earlier identification of opportunities as the top initiatives for addressing this challenge.

Given the constraints that businesses encounter, efficient allocation of business development resources is essential. Firms should ensure that they are extremely strategic about going after opportunities that are a good fit for their firm and that they have a reasonable likelihood of winning. Accordingly, more firms should look to formalize their business development processes and implement go/no go processes for evaluating opportunities. Firms should also look to increase the diversity of their client base so that they are not at the whim of a few clients. The overall themes for this year are people, technology, and process, and when it comes to business development, firms can benefit from all three. By developing processes and leveraging technology to streamline administrative tasks, firms can be confident that the people investing in clients are investing in the right clients at the right time.


SECTION FOUR

PROJECT MANAGEMENTFirms need to continue to focus on developing project management maturity, project leaders, and leveraging feedback from clients.

Project management is at the heart of what architecture and engineering firms do, but project management is far from perfect. Broadening the skills of project managers, implementing better project management technology, and improving the maturity of the project management process are all areas that need attention in A&E firms.

The three leading project management areas of improvement this year are related to establishing more mature project management processes, providing project managers with training and clearly defined expectations, and assessing client satisfaction at key milestones of a project. Not enough firms have a clearly defined project management process, a project management office (PMO) or center of excellence, or formally trained project leads. This leads to firms losing future business in a competitive market and an increased risk of projects falling behind schedule. Less than half of all firms measured client satisfaction this year, and of the firms that did measure client satisfaction, the majority were still tracking client satisfaction irregularly. Notably fewer firms than last year are prioritizing client satisfaction as a top priority and, by not doing so, are putting potential business with repeat clients at risk.

The majority of all firms reported challenges with visibility into key project management areas, including schedule variance. The typical firm also had more than one-third of all projects behind schedule and more than one-quarter of projects over budget. The expectations of project leaders are at an all-time high and standard processes are not in place as a mechanism of support for many firms. Project leaders continue to struggle with competing priorities, staff shortages, and training inexperienced project managers. The natural progression of designers to project managers within the industry is not always supplemented with formal project management training to ensure project managers have the right visibility, skill sets or interest to successfully manage significant projects.

Key Data Points from the Survey• More than half of all firms have a high level of visibility on cost

variance, whereas nearly two-thirds of all firms stated that they had low or moderate visibility into schedule variance and client satisfaction.

• Firms reported 29% of projects were over budget and 36% of projects were behind schedule.

• Nearly three-quarters of all firms had less than 75% of project leaders with formal project management training.

• Only 48% of firms used a formal project management process for three-quarters or more of their projects. Overall, 20% of firms had a PMO or center of excellence.

• Only 46% of firms measure client satisfaction. The majority are still measuring client satisfaction irregularly compared to only 18% of firms that do so at key project milestones.

71%of projects are on or under budget

20%of firms have a project management office or center of excellence

54%of firms are not measuring client satisfaction

47

TOP PROJECT MANAGEMENT CHALLENGES

29%

49%

15%

0% 10% 20% 30% 40% 50%


Having the Right Software Tools

Schedule Viability/Schedule Maturity

Poorly Defined Scope

Managing Project Information (e.g., Drawings, Documents, Emails)

Collaboration and Communication

Insufficient or Poorly Executed Project Management Procedures

Accurate Project Cost and Timeline Forecasting (ETC/EAC)

Accountability

Inexperienced Project Managers

Staff Shortages

Competing Priorities (e.g., Project Mgmt, Design, BD)

10%

4%

11%

22%

42%

20%

7%

26%

16%

First

Second

Third

Top Project Management ChallengesAs in the previous year, firms this year ranked the top three project management challenges as competing priorities, staff shortages, and inexperienced project managers. These challenges all center on talent. Competing priorities continued to be the number one project management challenge. With staff turnover and staff shortages, project managers are expected to fulfill multiple roles, such as business development and design, in addition

to project management responsibilities. Staff is stretched thin and many firms are forced to deliver more with fewer people, putting top talent at risk for burnout. Compared to last year, there was a slight increase in the prevalence of inexperienced project managers as one of the top challenges in project management. There are fewer firms in which the majority of project managers have formal training.


PROJECT STATUS VISIBILITY

Client Satisfaction

Schedule Variance

Project-Specific KPIs

Cost Variance

35% 25% 39%

47% 26% 27%

40% 27% 33%

58% 26% 16%

High Moderate Low

Project Status VisibilityThe majority of firms identified a need for improvement in visibility of four key project performance metrics. Although cost variance had the highest level of visibility for project managers, only 58% of all firms had a high level of access to review cost variance, a 10% decline from last year. Firms should be well aware when the actual costs of their projects exceed expected budgets, but fewer firms are reporting this level of awareness this year. Similarly, nearly two-thirds of all firms stated that they had low or moderate visibility into schedule variance and client satisfaction. This means that many firms are not adequately tracking project milestones versus actual dates to ensure that client expectations are met. In addition, many project managers do not have a good sense of whether clients are content

with the project’s performance. Both of these issues play a critical role in whether the firm continues to win future business with these clients. Consistent with last year, there was another substantial decrease—from 45% to 35%—in the percentage of firms reporting a high level of visibility into client satisfaction. This is consistent with firms not having enough time to focus on their current client relationships and to monitor metrics on their top clients. Overall, these visibility metrics have a meaningful impact on other key project management metrics. Firms with a high level of project status visibility reported more projects being on or under budget. And those firms with a high level of visibility, specifically into project-specific KPIs, reported more projects being on or ahead of schedule.

49

HOW FIRMS COMPARE

70%67%71% 72%

66%72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


75%

Projects on or Under Budget

71% -9%

Firms this year reported that 29% of projects were over budget. This percentage is a 9% increase from last year, when one-fifth of projects were reported over budget. There was a decrease in the percentage of projects on or under budget this year by all firms, regardless of size or type. Drilling down to the project manager level, this begs the question whether those who are managing projects really have the information they need to keep budgets on track. Firms do not have the same visibility into their cost variance metrics as they did last year. When firms have issues with scope, inexperienced project managers or demanding clients, project budgets take a hit. Not closely monitoring budget versus actual costs throughout the project impacts the bottom line and speaks to a need for a more mature project management discipline. Firms with at least half of projects that used a clearly defined project management process, at least half of project managers with formal project management training, or a high level of project status visibility all had more projects on or under budget.


HOW FIRMS COMPARE

64%67%

62% 63% 62% 64%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


65%

Projects on or Ahead of Schedule

64% -11%

Firms reported that 36% of projects were behind schedule. With more projects behind schedule and over budget, firms need to take a closer look at common themes across projects that are heading in the wrong direction and identify strategies to get projects back on track. Last year, high performers were more likely than others to have projects that were on or ahead of schedule, but this year high performers experienced the most dramatic decrease in timely projects. Most firms, whether high performers or not, lack visibility into schedule variance. If firms do not have sufficient visibility, it is difficult to proactively manage projects and course correct as needed to keep internal teams on track with deadlines. Firms with more projects on or ahead of schedule were also more likely to have a higher percentage of projects that used a clearly defined project management process. The firms that excel at keeping projects on track also were more likely to have at least half of project managers with formal project management training and a high level of project manager visibility into project-specific KPIs.

51

OVERALL PROJECT REPORTING CONFIDENCE

PROJECT REPORTING ACCURACY

OVERALL PROJECT REPORTING CONFIDENCE (PG.59)

+++z High

Moderate

Low58%

33%

9%

Schedule

Overall Project Performance

Budget

Actual Cost

40% 34% 26%

68% 24% 8%

58% 33% 9%

74% 20% 6%

High Moderate Low

Confidence in Project Reporting AccuracyWhen asked what their level of confidence is in their firm’s ability to accurately report on overall project performance, 58% of firms felt confident in the accuracy of their project reporting. This is a 3% decrease from last year. Similar to last year, 33% of firms had moderate confidence and 9% had low levels of confidence. Inaccurate reporting of the project schedule appears to be contributing the most to this lower level of confidence in overall reporting accuracy, with only 40% of firms being highly confident about accurately reporting schedules. In contrast, more than 90% of firms felt moderately to very confident that they were accurately reporting the actual cost and budget of their projects. This suggests that there is still not enough visibility into project schedule variance and that project managers are not able to access the information they need to successfully manage their projects. Firms should look at what technology solutions are available to project managers and determine if PMs have the access they need to proactively manage projects and improve reporting accuracy.


PROJECTS USING A CLEARLY DEFINED PROJECT MANAGEMENT PROCESS

PROJECT LEADERS WITH FORMAL PROJECT MANAGEMENT TRAININGMATURITY OF PROJECT MANAGEMENT DISCIPLINE (PG 60-61)

++15+z+++z

75%-100% of projects

25%-74% of projects

0%-24% of projects

48%

37%

15%

MATURITY OF PROJECT MANAGEMENT DISCIPLINE (PG 60-61)

++15+z+++z 75%-100%

of project leaders

25%-74% of project leaders

0%-24% of project leaders

28%

37%

36%

Maturity of Project Management DisciplineProject management maturity continues to be a key area that firms need to focus on to improve the health of their business. The majority of firms lack three of the key elements for establishing project management maturity: a clearly defined process, a PMO or center of excellence, and formal project management training for project leaders.

Firms appear to be picking and choosing what types of projects use a clearly defined project management process. Consistent with last year, only 48% of firms use a well-defined process for three-quarters or more of their projects, whereas 15% use a formal project management process for less than one-quarter of projects. This variation stresses that firms might be using the project management process strategically based on the size, complexity, or cost of the project, but they could be putting other key projects at risk. For some projects, firms may choose to forego a project management process if they are not the prime, if the project is a quick turnaround, or the project management process is too complex. In this case, some firms may need to create variations of the process to accommodate the different types and sizes of projects. Firms where at least half of projects use a clearly defined project management process had more projects on or under budget and on or ahead of schedule.

Overall, 20% of firms had a PMO or center of excellence, which is a slight increase from last year, although this still leaves ample room for improvement. Large firms were still more likely to have this department established compared to small and medium firms, likely due to the availability of more resources and sophisticated processes. Also similar to last year, engineering firms were slightly more likely than architecture firms to have a PMO or center of excellence. Additionally, 36% of firms have less than one-quarter of project leaders with formal project management training. This signals a need for not only better procedures, but for more opportunities for project leaders to attend project management training. Firms where at least half of project leaders have formal project management training had more projects on or under budget, more projects on or ahead of schedule, and high levels of project visibility. At a higher level, firms with more project management maturity reported more projects on or under budget, demonstrating that more mature firms benefit from establishing a standard project management process.

53

FIRMS WITH PMO OR CENTER OF EXCELLENCE

16%16%

0%

10%

20%

30%

40%

50%

E or E/AA or A/ELargeMediumSmallOthersHigh Performers

14%14%

44%

14%

20%


INTERNAL PROJECT PERFORMANCE EVALUATIONS

INTERNAL PROJECT PERFORMANCE EVALUATION TYPES

CONSIDERING INTERNAL PROJECT PERFORMANCE EVALUATIONS

INTERNAL PROJECT PERFORMANCE EVALUATIONS (PG 62)

++z++z

+++zYes

No 51%

49%


++z++z

+++zYes

No 47%

53%


++z++z

+++z All projects

Strategic projects

New clients only56%

43%

1%

Internal Project Performance Evaluations This year, 51% of firms completed internal project performance evaluations, a slight decline from the number of firms who completed evaluations last year. Of the firms that currently conduct these evaluations, a majority of firms conduct these for all projects, whereas 43% reserve them for strategic projects only. Across firm size, large firms continued to complete more internal evaluations this year than other firms, which may be due to more sophisticated PMO offices, established processes, or additional resources. For firms that do not currently conduct these evaluations, 53% indicated they are not considering conducting them in the

next year. However, 35% more high performers considered internal project evaluations this year compared to last year. Internal project evaluations do not have to be a burden and their lack of utilization suggests firms continue to struggle in determining how to incrementally build quick and effective project evaluations into their project process. Firms that conduct internal evaluations are more likely to have a PMO or center of excellence. The firms that do not administer these evaluations are not doing enough to assess staff performance on projects or to determine the outcomes of a project, which could put future projects of the firm at risk.

55

PROJECT MANAGEMENT KPIs TRACKED

66%

42%

24%

16%

0% 25% 50% 75% 100%

Other

Earned Value Management

Schedule Variance

On-Time Delivery

Client Satisfaction

Estimate at Complete

Cost Variance

Effective Bbilling rate

Estimate to Complete

Average Billing Rate

Multipliers

Average Collection Period

Net Revenue

Profitability

84%

80%

59%

58%

58%

53%

33%

93%

94%

46%

Project Management Key Performance IndicatorsCompared to last year, there were subtle changes in the key performance indicators (KPIs) tracked for project management. When asked whether their firm tracks a series of KPIs, most firms reported tracking profitability, net revenue, average collection period, and multipliers. In contrast, firms were least likely to track on-time delivery, schedule

variance, and earned value management. Even though the least tracked KPIs stayed the same, even fewer firms tracked earned value management and on-time delivery this year, showing a nearly 15% decline. This echoes a lack of visibility into schedule-related project KPIs seen in other areas that are critical for delivering successful projects.


FIRMS MEASURING CLIENT SATISFACTION

MEASURING CLIENT SATISFACTION BY PROJECT TYPE

FREQUENCY OF MEASURING CLIENT SATISFACTION

Irregularly

At key project milestones

At the end of the project

Annually

All projects

Strategic projects

New clients only

Measuring Client Satisfaction

Not Measuring Client Satisfaction

CLIENT SATISFACTION (PG 65)

++z+++z

++++z46%54%


++z+++z

++++z52%

21%

9%

18%


++z+++z

++++z41%

6%

53%

Client Satisfaction Of the KPIs that firms were asked about tracking this year, client satisfaction is among those that helps project managers better understand project performance and the likelihood of winning the next project. Although most firms reported tracking client satisfaction last year, less than half of firms reported measuring client satisfaction this year – a stark decline. While these external evaluations can be perceived as a time-consuming exercise, technology can make gauging client satisfaction easier than ever. With 54% of firms not measuring client satisfaction, the potential burden is superseding the value of knowing where a company stands from the client’s perspective. Of the firms who measured client satisfaction, 53% of firms did so for strategic projects only, 41% measured

client satisfaction for all projects, whereas 6% of firms did so for new clients only. As for how often client satisfaction was tracked, just 18% of firms measured client satisfaction at key project milestones, while more than half of all firms measured client satisfaction irregularly. By conducting evaluations during the project at key milestones, firms have an opportunity to impact the project before it is complete, positively impacting overall client satisfaction and influencing the next opportunity with the client. If firms are struggling with where to start with measuring client satisfaction, they should begin with key project milestones, new clients, or on small projects and progressively build up this standard practice.

57

ASPECTS FIRMS DO WELL IN PROJECT MANAGEMENT

18%

18%

45%

0% 10% 20% 30% 40% 50% 60% 70%

Schedule Viability/Schedule Maturity


Having the Right Software Tools

Strong Project Management Procedures

Accurate Project Cost and Timeline Forecasting

Well-Defined Scope

Qualified Project Managers

Collaboration andCommunication

Manage Client Expectations

60%

33%

21%

31%

9%

17%

Aspects Firms Do Well in Project ManagementAs firms evaluate their project management discipline and aim to deliver better projects, it is important that they take a holistic view of what they are doing well and how could they strive to do better. The top three areas that firms reported excelling in this year are managing client relationships; collaboration and communication; and having qualified project managers. Firms identified inexperienced

project managers as a challenge, but most firms have several exceptional project managers that are key assets to the firm’s success. Another area firms believe they do well in is well-defined scope, which improved 10% as the fourth highest strength. Firms recognized for the third year in a row that schedule viability/schedule maturity is not one of the top things firms do well.

First

Second

Third


TOP PROJECT MANAGEMENT INITIATIVES

26%

12%

34%

10%

3%

11%

35%

32%

0% 10% 20% 30% 40% 50%

Formal PMP Certification

Develop Formal Project Risk Management Programs

Develop a PM Discipline or Center of Excellence

Invest in External PM Training

Invest in Better Software Tools

Hire More Production Staff

Develop and Track Formal KPIs and Project Status

Hire More Qualified Staff

Invest in Internal PM Training

Improve Project Information Management Processes

Develop Internal PM Best Practices

More Clearly Defined Responsibilities 37%

27%

17%

7%

Top Project Management Initiatives In addressing the top project management challenges this year, firms are still focused on initiatives that can improve the overall project management process through more clearly defined responsibilities and developing internal best practices. Firms are less focused on developing and tracking KPIs and project status this year and more concerned with improving project information management processes. The first and second top initiatives show that firms are focused on better defining a mature

project management process to allow project managers to focus more on what they do best: manage projects. Defining responsibilities meets the challenge of competing priorities well – if project managers know what is expected of them, they will be better equipped to prioritize tasks. Both developing project management best practices and improving information management processes will give inexperienced project managers the resources they need to do their jobs more effectively.

First

Second

Third

59

PROJECT MANAGEMENT

CLARITY OUTLOOKFirms need to start taking the maturity of their project management discipline seriously, as more projects are falling behind schedule and going over budget. Step one is empowering project managers with improved visibility into key project metrics, so they can proactively manage and deliver more successful projects that align with both the firm’s goals and clients’ expectations.

Happy clients are key to the future of a business, yet too many firms are not evaluating client satisfaction. Firms should focus this year on increasing visibility for project managers, standardizing formal project management processes, equipping their project leads with training and resources, and then holding them accountable for taking a pulse of their clients’ satisfaction. In the end, how can your firm cultivate a culture where inexperienced project managers are turned into superstars on the frontlines of managing their projects? Making these changes will not only deliver more profitable projects, but a better experience for both clients and the project team, simultaneously improving the chances of winning additional work from repeat clients in the future.


SECTION FIVE

HUMAN CAPITAL MANAGEMENTFirms are struggling to find qualified candidates and offer competitive compensation packages in a tight labor market. Focusing on career development, offering more learning opportunities, and modernizing performance management practices will help firms improve the employee experience and retain more high performers.

Low unemployment combined with the shortage of qualified candidates continues to put pressure on recruiters. More than one-third of firms are taking longer than 60 days to fill open positions and require an average of 41 days to ramp up new hires and assign them to billable projects.

These delays can drive up overhead costs, while lowering utilization rates at a time when agility can make the difference between winning the next project and losing to the competition. In response to the lack of available talent, firms are looking to increase retention by improving formal career programs and updating succession plans. HR technology has emerged as an integral aspect of a successful human capital management strategy. Utilizing talent relationship management tools, implementing a learning management solution, and leveraging pulse survey functionality can help firms assess the people side of the business and prepare for the future of the industry.

Key Data Points from the Survey• Employee turnover has increased by one point from 12.8% to

13.8%. This is the second consecutive increase reported this year.

• Staff growth has stayed consistent, dropping from 4.3% to 4.2% last year, but most firms also reported an increase in the number of open positions related to both growth and attrition.

• The number of firms with formal succession plans increased two points to 45% this year. Sixty-one percent of large firms had succession plans, whereas only 35% of small firms had them.

• The percentage of firms with career development plans increased one point to 30%. The percentage of firms with formal career development plans for high-potential employees increased from 3% to 12% over last year.

13.8%Employee Turnover

4.2%Staff Growth

45%Have Succession Plans

Employee TurnoverEmployee Turnover

61

TOP CHALLENGES IN ACQUIRING TALENT

72%

39%

22%

13%

14%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Developing a More EffectiveEmployee Referral Program

Faster Onboardingof New Employees

Making Better use of Social Mediaas an Acquisition Channel

Aligning Acquisition Goals with theStrategic Goals of Your Company

The Ability to Offer CompetitiveBenefits to Candidates

Matching Qualified Candidatesto Open Positions

The Ability to Offer CompetitiveCompensation to Candidates

The Availability of GoodCandidates in the Marketplace

46%

15%

15%

Top Challenges in Acquiring TalentThe top four talent acquisition challenges are unchanged from last year. The availability of good candidates in the market place is still a top concern for businesses followed by the ability to offer competitive compensation and match qualified candidates to open positions. Firms need to assess total compensation to attract top candidates with attractive and relevant benefits and rewards, in addition to salary. Benchmarking compensation packages against the competition is a necessary first step. Although the percentage of businesses citing the availability of top candidates was similar to last year, offering competitive compensation

experienced a nine-point increase to 46% suggesting that the tight labor market and low unemployment are pushing wages higher for top quality candidates. Given the shortage of good candidates in the market place, firms should consider focusing their efforts on increasing employee retention with effective post-hire initiatives such as development plans, learning opportunities, and modern performance management. As firms address talent acquisition challenges, they will be able to move toward proactively aligning talent acquisition with future project needs and firm-wide strategic goals.

First

Second

Third


TOP CHALLENGES IN MANAGING TALENT

19%

39%

0% 10% 20% 30% 40% 50%

Wellness Programs

Reward and Recognition Programs

Retaining Employees

Learning and Development Programs

Workforce Capacity and Planning

Performance Management

Employee Engagement/Experience

Succession and Career Development Planning

41%

33%

30%

3%

33%

40%

Top Challenges in Managing Talent In response to the ongoing talent shortage, firms are prioritizing the overall employee experience in order to help retain their existing workforce. Although the top challenge, succession and career development planning remains unchanged from last year, employee engagement experienced a 17-point increase and rose four places to become the second most cited challenge. Performance management dropped one place to the third position, but still experienced a four-point increase in the number of firms citing it as one of their top three talent

management challenges. Retaining employees also increased in importance with an eight-point increase over last year. Firms with formal succession plans tended to have lower employee turnover, so it is likely that this challenge will remain among the top three in subsequent years. Firms are starting to understand the relationship between strong human capital management practices and successful business outcomes. Firm-wide strategic initiatives to improve the employee experience will continue to define the high performers from all other firms.

First

Second

Third

63

HOW FIRMS COMPARE

5.6%5.6%

3.0%

6.9%

0%

2%

4%

6%

8%

10%


0.0%

5.4%

1.4%

Staff Growth or Decline

4.2% -0.1%

Firms are continuing to grow in headcount, although the pace has leveled off from the highs experienced in the preceding years. The overall growth rate of 4.2% remains virtually unchanged from last year, but key differences emerge depending on firm type and performance. High performers increased their advantage over other firms reporting a 6.9% growth rate, a nearly three-point increase over last year. This is likely because high performers have managed to attract more talent in a competitive market,

are able to fill positions quickly, and assign staff to billable projects considerably faster than other firms. The rate of staff growth was also associated with an increased number of open positions, suggesting that firm growth is creating a backlog of open positions. Small, medium, and large firms all reported growth rates within one percentage point of their rates from last year. These findings are consistent with the overall increases in employee turnover compared to last year.


HOW FIRMS COMPARE

14.3%13.2%

14.5% 14.4%12.9%

0%

5%

10%

15%

20%


13.9% 14.1%

Employee Turnover

13.8% +1.0%

The overall rate of employee turnover increased for the second year in a row, moving from 12.8% to 13.8%. The rate of employee turnover increased by about one point for all categories of firms except Others. High performers experienced the largest increase in turnover, moving from 11.9% to 14.3%. This increase in employee turnover is consistent with the stable economy, low unemployment, and the confidence that early to mid-career candidates have when choosing between

competing employment offers. The ongoing increases in employee turnover underscores the importance of succession and career development planning as firms work to retain employees or prepare for unexpected departures. Firms should benchmark their turnover rate against the industry, evaluating internal practices, compensation packages and growth opportunities to ensure alignment with the needs of the modern workforce.

65

NUMBER OF OPEN POSITIONS

REASON FOR OPEN POSITIONS

45+9+46+z Growth

Cannot fill existing positions

Both growth and cannot fill existing positions

46% 45%

9%

36+49+15+z More open positions

About the same

Fewer open positions

36%

49%

14%

Open Positions The number of open positions remained virtually unchanged from last year. The number of firms with more open positions increased by two points to 36%, whereas the percentage of firms with the same or fewer positions was within one point of last year. The majority of firms with an increased number of open positions cited both growth and the inability to fill open positions as the reason for the increase. This trend is consistent with the top cited acquisition challenge. The lack of

qualified candidates reinforces the need for firms to invest in retaining existing employees and expanding their skill sets to fill future roles. Overall, these findings illustrate the ongoing challenges that firms are experiencing as they attempt to find qualified professionals to work on new business, while still filling a large number of continually open positions so that their current employees are not over utilized or in danger of burning out.


AVERAGE TIME TO FILL POSITION

HOW FIRMS COMPARE – AVERAGE TIME TO FILL POSITION

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


10%

37%

35%

18%

9%

44%

28%

19%

15%

37%

29%

19%

8%

49%

29%

14%

4%

54%

29%

13%

11%

50%

21%

18%

9%

42%

32%

17%

0-30 days

31-60 days

61-90 days

>90 days

0-30 days

31-60 days

61-90 days

>90 days

11+44+29+16+z44%

11%16%

29%

Average Time to Fill Position The average time firms took to fill positions remained virtually unchanged from the previous year, with three-quarters of firms still taking 31 to 90 days to fill positions. The largest percentage of firms (44%) took 31 to 60 days to fill open positions, while only 11% of firms filled positions in less than 30 days. However, there is more year-over-year variation in the average time to fill a position depending on firm size and type. High performers experienced the largest increases in the time it takes to fill positions, with 10% now able to fill positions in less than 30 days, an increase from 0% last year. This

is critical because it means that these high performers are securing high-quality candidates before the competition. These firms have created successful referral networks among their staff and have incentivized employees to recommend strong candidates. Large firms experienced the largest increase in the average time to hire candidates in 31 to 60 days, which increased from 29% to 54%. Despite some improvements in the average time it takes to fill positions, hiring time still represents a key constraint as staffing inefficiencies contribute to delays in project initiation or progress.

67

TRACKS PERCENTAGE OF ACCEPTED OFFERS

PERCENTAGE OF OFFERS ACCEPTED

22+78+z Yes

No

22%

78%

84%79% 78% 79%

84%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


67%

75%

Percentage of Firms that Track Accepted OffersFor the first time, firms were asked if they track the percentage of offers accepted by candidates. Surprisingly, only 22% of firms track this metric. Tracking this metric will allow firms to evaluate the efficiency of their hiring operations and the overall attractiveness of their compensation packages. The average percentage of accepted offers was only 78%, which is low as an industry. There was considerable variation by firm type and size, with small and architectural firms leading with 84% of offers accepted, whereas large businesses reported the lowest percentage of accepted

offers with 67%. Given these comparatively low rates and the ongoing challenge of sourcing new candidates, firms should take the time to compare compensation and benefits packages against industry benchmarks. Firms should be asking themselves if they are taking too long to make offers or failing to cater their compensation packages to high-quality candidates. Overall, improving the percentage of offers that are accepted could expedite hiring processes and reduce the loss of time and effort spent evaluating candidates.


MOST EXPENSIVE BUSINESS PROCESSES TO SUPPORT

24%

38%

0% 10% 20% 30% 40% 50% 60% 70%

Employee Record Maintenance

Compliance Assurance

Succession Planning

Open Enrollment for Benefits

HCM Budgeting and Forecasting

Annual Performance Reviews

Developing Learning Programs for Employees

Talent Acquisition Process 63%

21%

19%

11%

40%

27%

Most Expensive Business Process The top three most expensive businesses processes are the same as last year. The talent acquisition process continues to be the most costly with 63% of respondents citing it as one of the top three most expensive processes, followed by developing learning programs for employees and annual performance reviews. The inefficiencies of hiring processes, including a sub-optimal percentage of offers accepted, continue to draw heavily on HR professionals and other organizational resources. The top three most expensive business processes offer

significant opportunities for improvement and the digitalization of HR should be viewed an important step toward streamlining these difficult areas. Firms leveraging learning management solutions to deploy eLearning courses can significantly reduce the cost associated with the development of learning programs. Modern performance management practices help firms move away from annual appraisals in favor of continuous feedback cycles and project-based appraisals.

First

Second

Third

69

TOP TOOLS USED TO DEVELOP TALENT

8%

43%

0% 10% 20% 30% 40% 50% 60% 70% 80%

High-potential Programs

Job Rotations

eLearning Opportunities

Leadership Development Programs

External Education Programs

Coaching and Mentoring

30%

23%

75%

54%

Top Tools Used to Develop TalentCoaching and mentoring remained the top method for developing talent, followed by external education programs and leadership development programs. These tools are essential for developing talent in a sector characterized by complexity. The top three tools are unchanged from last year and illustrate a pattern where employers favor time and resource-intensive programs to develop talent. Although these programs are important,

technology can augment employee learning at a fraction of the cost. While a blended approach to learning and development can have the most significant impact, only 30% of firms reported e-Learning as a top talent development tool. Balancing the approach to employee development will ensure that existing employees receive the training, feedback, and attention they need to succeed at higher levels within the organization.

First

Second

Third


LEVELS OF MANAGEMENT AT FIRM

79%

82%

0% 25% 50% 75% 100%

Lower Level Management (e.g., Supervisors,

Office Manager)

Middle Level Management (e.g., Department Head,

Branch Manager)

Top Level Management (e.g., President, V.P.,

Chairman of the Board)97%

Levels of Management at Firm New this year, firms were asked about levels of management within their firm and the generational composition of each level. Nearly all firms (97%) had a top level of management as well as a layer of middle management (82%) and lower level management (79%). Each level of management had a distinct generational profile. Generation X was most heavily concentrated at the top level of management, followed distantly by members of the baby boomer generation as they transition out of

the workforce. Middle level management had the largest concentration of Gen Xers (65%), followed by similar proportions of Gen Y/Millennials (14%) and baby boomers (19%). The lower level of management had the highest concentration of members of Gen Y/Millennials. Firms could improve retention with this group by assessing the structure of titles and offering micro-promotions as a means to prepare this group for mid- to high levels of management.

71

MIDDLE LEVEL MANAGEMENT BY GENERATION

TOP LEVEL MANAGEMENT BY GENERATION

LOWER LEVEL MANAGEMENT BY GENERATION

+4+57+39+z Gen Z/Digital

Gen Y/Millennials

Gen X

Baby Boomers

4%4%

>1%

57%

38%

1+14+65+20+z Gen Z/Digital

Gen Y/Millennials

Gen X

Baby Boomers

1%

19%

65%

14%

3+33+46+18+z Gen Z/Digital

Gen Y/Millennials

Gen X

Baby Boomers

3%

17%

44%

33%


HUMAN CAPITAL MANAGEMENT KPIS TRACKED

20%

22%

40%

43%

50%

4%

3%

1%

10%

18%

0% 10% 20% 30% 40% 50% 60%

Other

Resume-to-hire Ratio by Position

Time Lag Between Employee Process Steps

Lead Time from Hire to Billable

Applicant Satisfaction

Percentage of Your Workforce Being Promoted

Average Cost Per Hire

Percentage of Accepted Offers

Employee Engagement

Time to Fill Positions

Employee Retention

Involuntary Turnover

Voluntary Turnover

Revenue per FTE

5%

7%

15%

46%

Current Human Capital Management KPIs TrackedRevenue per FTE, voluntary and involuntary turnover, and employee retention continued to be the most widely tracked KPIs by a wide margin. Although these metrics are related to financial performance and organizational health, they do not offer a complete assessment of the overall performance of human capital management processes. However, some of the increases in the less frequently cited metrics over last year indicate that employers are becoming more concerned about the time and expense required to

hire and retain qualified candidates. The percentage of firms tracking accepted offers increased six points and the percentage of the workforce being promoted increased two points to 10%. Although more firms are beginning to track human capital management KPIs, half of firms are not, making it increasingly difficult to measure the success of people-centric strategies. All firms should consider tracking lead time from hire to billable in order to assess onboarding and new hire training practices.

73

TRACKS AVERAGE LEAD TIME

AVERAGE LEAD TIME

6+94+z Yes

No

6%

94%

49Days

37Days

39Days

7Days

0

10

20

30

40

50

60


35Days

43Days

42Days

Firms that Track Lead Time from Hire to Billable Very few firms are tracking the average time it takes to ramp up new hires and assign them to billable work. The longer and more arduous the onboarding process, the greater the delay before that employee is contributing to revenue. Large firms were the most likely (11%) to track lead time, whereas less than 10% of all other types of firms were tracking this metric. Among firms that are tracking lead time, the average was 41 days. High performers

had the lowest lead time of seven days, by far setting the benchmark for the industry, whereas medium sized firms had the longest lead time – 49 days. Onboarding includes all mandatory administrative tasks and training, but should also include a strategy to integrate the new hire into the firm’s culture. The process and necessary training should be smooth and repeatable for the most positive and effective onboarding experience.


CONDUCTS EMPLOYEE ENGAGEMENT SURVEYS

81%

58%

38%

11%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Applicant Satisfaction

Pulse Surveys

360 Evaluations

Employee Benefit Satisfaction Survey

Annual Employee Surveys

Employee Exit Interviews/Surveys

32%

15%

Employee Engagement SurveysNew to the survey this year, respondents indicated that they tracked employee engagement through numerous forms of employee engagement surveys. Most firms (81%) indicated that they conduct employee exit interviews/surveys and over half reported that they conduct annual employee surveys (58%). Since only 15% of firms are conducting pulse surveys, firms are forgoing

the opportunity to collect more frequent and actionable information from their staff. There is no one solution for measuring employee engagement. Employee retention is inextricably tied to employee engagement. Information and impressions collected from current employees will help firms understand the employee experience and make the changes that will have the greatest impact on the workforce.

75

PROFESSIONAL DEVELOPMENT OPPORTUNITIES OFFERED

77%

50%

42%

42%

11%

9%

2%

80%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Other

High-potential Programs

Rotational Job Assignments

First-line Supervisor Leadership Development Programs

Executive Experiential Leadership Programs

Middle Management Leadership Development Programs

Mentoring Programs

Formal Learning Programs

Ability to Participate as Volunteer for Commmunity Projects

Continuing Education Reimbursement

Professional Certifications

Conference Attendance

Professional Licenses

76%

72%

24%

23%

22%

Professional Development Opportunities For the second year in a row, the top professional development opportunities were professional licenses, conference attendance, and professional certifications. These opportunities are important for firms with highly specialized roles. However, these professional development programs focus more on the needs of the firm and less on the needs of the employee. Professional development investments need to extend beyond the maintenance of existing certifications and should align with current learning and development plans. Mentorship

programs offer an important opportunity for firms to facilitate knowledge transfer between senior and junior employees, but are leveraged by only 42% of firms. Middle management leadership development programs or high-potential programs for younger employees could be popular with millennials, yet only 24% and 9% of firms offer them respectively. Offering professional development opportunities that help employees expand their skills and competencies can have a material impact on employee engagement and retention.


HOW FIRMS COMPARE

WHO SUCCESSION PLAN APPLIES TO AT FIRM

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


7%

70%

9%

74%

8%

76%

7%

72%

9%

75%

12%

10%9%12%9%8%13% 10%

8%8%

6%8%8%9%11%

70%

5%

77%

53%48%

0%

10%

20%

30%

40%

50%

60%

70%


42%

50%

61%

44%

35%

Succession Planning Despite a two-point increase from last year, a minority of firms (45%) currently have a formal succession plan. High performing firms and large firms were most likely to have formal succession plans, whereas small firms were the least likely to have formalized succession planning. Among firms with formal succession plans, 74% applied to current leaders, a six-point increase over last year. Comparatively few (8%) of these firms applied their succession plans to all employees, meaning turnover

could have a significant impact at the project level. The applicability of succession plans was relatively consistent across firm types. Overall, 70 to 80% of these plans apply to current and next-in-line leaders. Firms with formalized succession planning practices tended to have lower rates of attrition than other firms. Although succession plans are important for key organizational leaders, plans can also apply to high performers and individual contributors at all levels of the organization.

All employees

High-potential

First-line leaders

Current leaders & next-in-line

77

LMS POSSESSION

FIRMS WITH SKILLS REPOSITORY

36%

30%

49%

0%

10%

20%

30%

40%

50%


31%

25%22%

33%

9%12%12%

0%

10%

20%

30%

40%

50%

60%


11%

4%

16%

57%

70%

Learning Management System

14% +1%

Overall, only 14% of firms reported using a learning management system (LMS). Although the overall percentage increased by one percentage point, there is some variability at the firm level. Large firms were most likely (57%) to possess a LMS, an increase of 34% from the previous year. Medium sized businesses experienced a three-point decline from the previous year.

The number of firms with a skills repository increased nine points to 31% this year. Large businesses were most likely to have a skills repository after experiencing a 35-point increase to 49%. High performers and small firms also experienced double-digit increases over the previous year. Skills repositories help firms to appropriately assign staff to proposals and projects, as well as identify skills and competency gaps within the organization.


TOP INITIATIVES IN ACQUIRING TALENT

34%

11%

14%

20%

21%

29%

45%

0% 10% 20% 30% 40% 50%

Increasing Your Internal HR Staff

Outsourcing More Recruitment Activities

Tracking Passive Candidates

Provide Better Benefits to be More Competitive in the Market

Creating or Improving Employee Referral Incentives

Improve Onboarding Processes and Procedures

New Talent Acquisition Solution

Improve Compensation Offering

Improve Perception of Firm in the Marketplace to Attract Better Talent

23%

32%

Top Initiatives in Acquiring TalentA&E firms continue to focus on improving their talent acquisition process in order to compete more effectively for scarce qualified candidates. Improving perception of the firm in the marketplace to attract better talent, improving compensation offering and new talent acquisition solutions were the top three most frequently cited initiatives for acquiring talent in the industry this year. Improving compensation

increased by seven points to become a top three initiative this year, whereas improving onboarding processes and procedures dropped two places to become the fourth most cited challenge. Firms seeking to improve talent acquisition could benefit from benchmarking compensation against the industry to ensure that extended offers are ultimately accepted.

First

Second

Third

79

TOP INITIATIVES IN MANAGING TALENT

44%

43%

29%

0% 10% 20% 30% 40% 50% 60%

Invest in a Human CapitalManagement Solution

Develop a Better Employee PromotionProgram to Reward Success

Create Mentorship Program

Improve Employee Rewards and Recognitions Program

Improve Employee ResourceManagement Programs

and Procedures

Create/Improve EmployeeEngagement Programs

Create/Improve Succession andCareer Development Planning

Develop More Formal CareerDevelopment Programs

22%

9%

21%

37%

27%

Top Initiatives in Managing TalentThe top initiatives cited by employers show a clear focus engaging and developing employees for longer term retention. Developing more formal career development programs is the leading initiative this year (44%), followed by creating or improving succession and career development planning and creating/improving employee engagement programs. Creating employee engagement

programs increased nine points to become the new third most cited initiative whereas succession and career development planning fell to second place while also experiencing a seven-point decrease from last year. Many firms are working to align talent management initiatives with current challenges and those who find success in this area will most certainly see impacts in all other areas of the business.

First

Second

Third


HUMAN CAPITAL MANAGEMENT

CLARITY OUTLOOKIn the current tight labor market, improving employee retention has become an important differentiating factor in the A&E industry. Employers should consider enhancing the overall employee experience by investing in integrated human capital management technology that will support talent acquisition, performance management, learning and development.

Firms should also consider leveraging technology for training and professional development needs to augment more time-consuming and expensive mentoring programs. Firms could also benefit from collecting more information from employees as a way to measure current engagement and gauge the success of existing initiatives. Overall, firms should look to achieve success by implementing employee-centric programs.


APPENDIX

STATISTICS AT A GLANCEAll numbers below are medians, unless indicated otherwise. Due to how medians are calculated, numbers may not always add up to 100%.

Key Performance Indicators

All Participants High Performers All Other Firms

Net Revenue Per Employee $144,000 $165,851 $133,806

Total Revenue Per Employee $186,965 $210,802 $178,842

Operating Profit on Net Revenue 14.4% 22.9% 8.5%

Operating Profit on Total Revenue 10.6% 18.1% 6.1%

Utilization Rate 59.8% 59.4% 60.0%

Net Labor Multiplier 3.01 3.48 2.80

Total Payroll Multiplier 1.78 2.06 1.65

Overhead Rate 160% 161% 156%

Staff Growth/Decline 4.2% 6.9% 3.0%

Employee Turnover 13.8% 14.3% 14.5%

Total Employee Cost $98,619 $95,266 $99,101

Net Fixed Assets Per Employee $6,892 $7,666 $6,707

Average Collection Period (Median) 75.3 75.1 75.5

Win Rate 47.9% 50.0% 49.7%

Balance Sheet Ratios


Work-in-Process per Employee $268,000 $415,263 $240,000 Total Assets per Employee $78,603 $87,483 $70,491 Total Liabilities per Employee $33,554 $31,497 $34,879 Total Equity per Employee $39,562 $47,587 $34,757 Return on Assets 9.3% 28.9% 3.0%Return on Equity 21.6% 39.2% 8.9%Backlog - End of Year per Employee $112,489 $129,929 $105,689 Backlog in Months 7.2 7.2 7.3Current Ratio 2.60 2.80 2.52Debt to Equity Ratio 0.83 0.67 0.88

83

Key Performance Indicators

Small (1–50 emp)

Medium (51–250 emp)

Large (250+ emp)

Architecture or A/E

Engineering or E/A

$139,130 $147,390 $145,987 $145,435 $141,530

$179,090 $191,534 $186,578 $218,272 $173,246

12.4% 16.2% 12.1% 13.9% 14.5%

8.6% 11.4% 9.6% 8.6% 11.1%

60.6% 59.1% 59.3% 58.6% 60.3%

2.95 3.08 2.85 3.04 2.95

1.77 1.82 1.69 1.79 1.78

158% 159% 161% 160% 155%

0.0% 5.6% 5.6% 1.4% 5.4%

13.2% 13.9% 14.1% 14.4% 12.9%

$95,503 $99,116 $101,785 $96,872 $100,561

$4,664 $7,643 $8,927 $6,374 $7,368

73.2 76.8 73.7 76.7 74.7

50.0% 42.8% 45.1% 40.9% 50.0%

Balance Sheet Ratios

Small (1–50 emp)


Large (250+ emp)

Architecture or A/E

Engineering or E/A

$63,900 $574,120 $4,421,350 $133,709 $410,312 $70,491 $78,318 $95,346 $83,926 $73,356 $25,614 $35,980 $43,430 $41,797 $30,484 $37,767 $39,972 $43,842 $39,180 $39,407 7.3% 13.0% 5.9% 8.1% 10.3%21.6% 22.2% 13.6% 18.2% 21.7% $90,495 $123,061 $143,116 $123,810 $109,091 5.6 7.7 8.4 6.9 7.62.98 2.60 2.05 2.12 2.960.51 0.89 1.04 1.00 0.76


Income Statement Detail (Per Employee)

Total Revenue All Participants High Performers All Other Firms

Total Revenue per Employee $186,965 $210,802 $178,842 Direct ExpensesConsultants per Employee $32,710 $43,024 $29,897 Bad Debt per Employee $284 $375 $248 All Other Direct Expenses per Employee $0 $0 $0

Total Direct Expenses per Employee $40,968 $36,146 $41,624 Net RevenueNet Revenue per Employee $144,000 $165,851 $133,806 Direct LaborDirect Labor per Employee $48,331 $46,333 $48,844 Gross ProfitGross Profit per Employee $94,879 $117,470 $85,399 Indirect LaborVacation, Holiday, Sick & Personal per Employee $7,804 $7,867 $7,754

Marketing per Employee $4,806 $5,220 $4,511 All Other Indirect Labor per Employee $18,425 $18,324 $18,908 Total Indirect Labor per Employee $31,556 $31,542 $31,961 Labor-Related ExpensesStatutory Taxes per Employee $6,385 $6,381 $6,400 Workers' Comp. per Employee $248 $215 $262 GroupHealth, Life, Etc. per Employee $6,703 $6,778 $6,640 401(k) Match, Pension Plan, Etc. per Employee $2,505 $2,614 $2,466

All Other Labor-Related Expenses per Employee $683 $631 $694

Total Other Labor-Related Expenses per Employee $17,043 $17,376 $16,576

Other Staff ExpensesProfessional Licenses, Registrations, Dues, per Employee $899 $938 $879

Marketing Expenses (Non-Labor)Marketing Expenses (marketing and business development expenses including materials, conference expenses, travel, etc.)

$1,510 $1,806 $1,381

85

Income Statement Detail (Per Employee)

Small (1–50 emp)


Large (250+ emp)

Architecture or A/E

Engineering or E/A

$179,090 $191,534 $186,578 $218,272 $173,246

$32,839 $33,777 $28,786 $64,237 $17,948

$110 $353 $417 $365 $241

$0 $0 $0 $0 $0

$45,072 $37,456 $44,456 $74,124 $28,016

$139,130 $147,390 $145,987 $145,435 $141,530

$46,820 $48,143 $50,343 $47,114 $48,952

$89,551 $97,541 $96,979 $95,443 $93,938

$6,942 $7,988 $8,713 $7,860 $7,856

$3,942 $5,464 $4,677 $6,433 $4,033 $17,753 $18,573 $19,737 $17,810 $19,078 $28,942 $32,439 $34,227 $32,147 $31,394

$6,167 $6,520 $6,444 $6,480 $6,364 $257 $236 $256 $217 $257 $6,428 $6,976 $7,020 $6,397 $6,997

$2,316 $2,614 $2,659 $2,280 $2,646

$640 $692 $693 $699 $682

$16,025 $17,320 $18,369 $15,978 $17,495

$816 $950 $989 $899 $933

$1,372 $1,531 $1,618 $2,452 $1,062


Income Statement Detail (Per Employee) Continued

All Participants High Performers All Other FirmsCorporate ExpensesProfessional Liability Insurance per Employee $1,714 $1,727 $1,708

Other Business Taxes per Employee $346 $360 $328 All Other Corporate Expenses per Employee $2,049 $1,957 $2,194

Total Corporate Expenses per Employee $4,126 $3,977 $4,294

Total Overhead

Total Overhead Expenses per Employee $74,518 $75,311 $74,043 Operating Profit

Operating Profit (Loss) per Employee $19,963 $38,310 $10,317 Interest, Bonus, Other

Interest-Net per Employee $149 $125 $158

Bonuses per Employee $6,226 $10,235 $5,236

Other (Income) or Expense $0 $0 $0 Pre-Tax Income (Loss)Pre-Tax Income (Loss) per Employee $7,752 $22,413 $3,350 TaxesTaxes per Employee $0 $10 $0 Net ProfitNet Profit (Loss) per Employee $7,482 $21,702 $2,958

87

Income Statement Detail (Per Employee) Continued

Small (1–50 emp)


Large (250+ emp)

Architecture or A/E

Engineering or E/A

$1,988 $1,472 $1,621 $1,833 $1,658

$369 $325 $266 $366 $322

$2,000 $2,000 $2,454 $2,441 $1,962

$4,657 $3,957 $4,364 $4,671 $3,957

$72,695 $75,142 $79,456 $75,311 $74,152

$15,656 $22,310 $18,858 $19,538 $20,497

$57 $218 $253 $93 $188

$5,304 $8,482 $6,253 $6,088 $6,718

$0 $0 $0 $0 $0

$6,839 $8,075 $6,839 $7,902 $7,593

$0 $6 $223 $0 $4

$6,702 $8,775 $6,117 $7,749 $7,091


Balance Sheet Detail (Per Employee)

Assets All Participants High Performers All Other FirmsCurrent Assets Cash per Employee $6,563 $10,841 $5,219 Accounts Receivable per Employee $38,074 $45,060 $35,906 Work-In-Process per Employee $5,230 $6,392 $5,050 Prepaid Expenses per Employee $1,853 $1,955 $1,806 Other Current Assets per Employee $288 $254 $289 Total Current Assets per Employee $58,105 $72,522 $53,824 Fixed AssetsFixed Assets (except Goodwill) per Employee $25,300 $24,545 $25,484

Depreciation per Employee -$16,769 - $16,782 - $16,603Goodwill (net of amortization) per Employee $0 $0 $43

Total Fixed Assets per Employee $8,927 $9,569 $8,699 Other Long-Term AssetsOther Long-Term Assets per Employee $0 $0 $0

Total Other Long-Term Assets per Employee $645 $651 $641

Other Assets per Employee $0 $0 $0 Total AssetsTotal Assets per Employee $78,603 $87,483 $70,491

LIABILITIES & STOCKHOLDERS’ EQUITY

Accounts PayableAccounts Payable - Consultants per Employee $4,040 $4,281 $3,899

Accounts Payable - Vendors per Employee $1,541 $1,269 $1,789

Total Accounts Payable per Employee $6,270 $6,535 $6,270

Accrued Employee ExpenseAccrued Employee Salaries per Employee $1,873 $1,895 $1,873

Accrued Employee Vacation, Sick, Etc. per Employee $2,178 $2,021 $2,265

Other Accrued Employee Expense per Employee $275 $226 $311

Total Accrued Employee Expenses per Employee $4,428 $4,066 $4,479

89

Balance Sheet Detail (Per Employee )

Small (1–50 emp)


Large (250+ emp)

Architecture or A/E

Engineering or E/A

$6,100 $6,695 $10,841 $7,511 $6,355 $37,238 $39,090 $36,490 $44,786 $35,430 $3,525 $5,803 $11,408 $3,804 $6,638 $1,067 $2,284 $3,261 $2,044 $1,791 $91 $343 $771 $413 $214 $55,227 $57,904 $71,005 $68,974 $55,476

$23,500 $25,397 $29,248 $25,018 $25,971

-$16,187 -$16,616 - $21,510 - $17,149 - $17,363

$0 $90 $3,454 $0 $377

$6,894 $9,555 $16,134 $8,140 $9,624

$0 $18 $0 $0 $0

$0 $1,163 $1,385 $285 $1,097

$0 $0 $0 $0 $0

$70,491 $78,318 $95,346 $83,926 $73,356

$3,529 $4,149 $3,918 $12,001 $2,208

$1,576 $1,327 $2,033 $1,304 $1,591

$6,822 $5,559 $7,594 $14,327 $4,289

$1,480 $1,958 $2,863 $1,613 $2,052

$636 $2,691 $3,005 $1,588 $2,898

$19 $494 $2,092 $254 $275

$2,853 $4,976 $8,545 $3,139 $4,844


Balance Sheet Detail (Per Employee) Continued

Other Current LiabilitiesAll Participants High Performers All Other Firms

Line-of-Credit and Short-Term Notes Outstanding per Employee $2,734 $2,155 $3,099

Current Taxes per Employee $0 $0 $0 Other Current Liabilities per Employee $2,205 $2,759 $1,869

Total Other Current Liabilities per Employee $6,550 $6,509 $6,578

Total Current LiabilitiesTotal Current Liabilities per Employee $21,366 $20,000 $21,649

Long-Term LiabilitiesLong-Term Debt per Employee $4,208 $4,330 $4,077 Deferred Taxes per Employee $0 $0 $0 Other Long-Term Liabilities per Employee $317 $4 $552

Total LiabilitiesTotal Liabilities per Employee $33,554 $31,497 $34,879 Stockholders' EquityStock & Additional Paid-In Capital per Employee $2,179 $2,812 $2,093

Distribution/Dividends - Current Year Only per Employee - $1,900 -$10,755 $0

Principal's Equity - Long-Term Notes per Employee $0 $0 $0

Previous Years Retained Earnings per Employee $29,538 $35,756 $28,045

Current Net Profit (Loss) per Employee $9,433 $17,225 $6,858

Other per Employee $0 $0 $0 Total Stockholders' Equity per Employee $39,562 $47,587 $34,757

Total Liabilities & Stockholders' Equity per Employee $77,292 $85,984 $70,491

91

Balance Sheet Detail (Per Employee) Continued

Small (1–50 emp)


Large (250+ emp)

Architecture or A/E

Engineering or E/A

$2,722 $2,435 $4,110 $2,697 $3,041

$0 $1 $10 $0 $4

$1,100 $2,729 $6,276 $2,741 $1,943

$5,165 $6,339 $13,310 $7,304 $6,174

$16,000 $21,828 $30,371 $31,733 $17,745

$1,644 $5,503 $4,513 $2,441 $5,438 $0 $277 $1,329 $0 $256

$0 $742 $2,748 $0 $495

$25,614 $35,980 $43,430 $41,797 $30,484

$834 $3,294 $7,948 $1,488 $3,667

- $921 - $2,434 $0 - $2,328 - $1,556

$0 $0 $0 $0 $0

$30,302 $30,280 $27,112 $28,352 $30,884

$11,298 $9,555 $7,817 $8,893 $9,317

$0 $0 $0 $0 $0

$37,767 $39,972 $43,842 $39,180 $39,407

$68,176 $78,589 $95,512 $83,066 $73,356


Business Development Metrics


Net Revenue Growth Forecast 5.1% 0.8% 5.8%Win Rate 47.9% 50.0% 49.7%Capture Rate 45.0% 50.0% 41.7%What percentage of your firm's net revenue is contributed by your firm's top three clients? Client A

18% 16% 17%

What percentage of your firm's net revenue is contributed by your firm's top three clients? Client B

10% 9% 10%

What percentage of your firm's net revenue is contributed by your firm's top three clients? Client C

6% 6% 6%

What percentage of your firm's net revenue is contributed by your firm's top three clients? Combined

37% 32% 35%

Project Management Metrics

What percentage of your firm's current projects are being reported as on or under budget? (Average)

75% 80% 75%

What percentage of your firm’s current projects is being reported as on or ahead of schedule?

75% 78% 75%

Firms that complete internal project performance evaluations (Mean) 51% 43% 49%

Firms measuring client satisfaction (Mean) 78% 69% 77%

Human Capital Management Metrics

Staff Growth/Decline 4.2% 6.9% 3.0%Employee Turnover 13.8% 14.3% 14.5%Voluntary Turnover 10.3% 11.3% 10.8%Involuntary Turnover 2.3% 2.2% 2.6%Average Time to Fill Position 31-60 days 61-90 days 31-60 daysFTE Breakdown by CategoryTechnical and Professional 43.0 59.0 41.0Marketing and Business Development 3.0 3.0 2.0Financial/Accounting 2.0 3.0 2.0Technology/IT 2.0 2.0 1.0Human Resources 1.0 1.0 1.0Administrative or Clerical 3.0 3.0 3.0Other Executives 3.0 3.0 2.0Other Employees 1.0 2.0 1.0

93

Business Development Metrics ct Management MetricsSmall (1–50 emp)


Large (250+ emp)

Architecture or A/E

Engineering or E/A

-1.9% 5.9% 6.8% 5.3% 5.0%50.0% 42.8% 45.1% 40.9% 50.0%45.1% 49.1% 37.8% 40.2% 46.9%

23% 15% 12% 20% 17%

11% 9% 7% 10% 10%

8% 6% 5% 8% 6%

47% 33% 26% 40% 35%

Project Management Metrics

75% 75% 80% 70% 80%

75% 75% 75% 75% 75%

43% 49% 77% 52% 50%

77% 77% 82% 70% 81%

Human Capital Management Metrics Capital Management Metrics

0.0% 5.6% 5.6% 1.4% 5.4%13.2% 13.9% 14.1% 14.4% 12.9%9.8% 10.9% 11.0% 11.3% 10.1%2.5% 2.0% 2.4% 1.9% 2.4%31-60 days 31-60 days 31-60 days 31-60 days 31-60 days

19.0 76.0 352.0 35.0 48.01.0 3.0 15.0 3.0 3.01.0 3.0 13.0 2.0 3.01.0 2.0 8.0 1.0 2.01.0 1.0 6.0 1.0 1.01.0 4.0 20.5 2.0 3.01.0 3.0 8.0 2.0 3.01.0 2.0 12.0 1.0 2.0


IN COLLABORATION WITHAmerican Council of Engineering CompaniesRepresenting thousands of companies, ACEC is the voice of the engineering industry in Washington, DC and throughout the nation. With roots dating back more than 100 years, ACEC is a federation of 52 state and regional councils representing more than 600,000 engineers, architects, land surveyors and other specialists. Their primary mission is to strengthen the business environment for our member firms through government advocacy, political action, and business education.

Association of Consulting Engineering Companies | CanadaThe Association of Consulting Engineering Companies (ACEC) is a not-for profit organization that has been the voice of Canadian consulting engineering companies since it was founded in 1925. We represent the commercial interests of businesses that provide professional engineering services, to both the public and the private sector. Our members’ services include planning, designing and implementing all types of engineering projects, and providing independent advice and expertise in a wide range of engineering-related fields. ACEC’s member companies directly influence virtually every aspect of quality of life in Canada-economic, social and environmental. Because engineering is a regulated profession, every individual employed by our members is required by law to act “with fidelity to the public interest.” ACEC is governed by its nearly 500 members: independent consulting engineering companies, organized into 12 provincial and territorial Member Organizations.

Society for Marketing Professional ServicesThe Society for Marketing Professional Services (SMPS) is the only organization dedicated to creating business opportunities in the A/E/C industries. With more than 7,000 members, SMPS provides leadership and professional development programs, industry research, business-building events, and vital marketing resources. Through SMPS, A/E/C professionals in North America tap into powerful networks to form project teams, secure business referrals and intelligence, and benchmark performance. The Society is committed to validating the practice of marketing and business development as essential to the success of all professional services firms.

The American Institute of Architects Founded in 1857, AIA consistently works to create more valuable, healthy, secure, and sustainable buildings, neighborhoods, and communities. Through more than 200 international, state and local chapters, AIA advocates for public policies that promote economic vitality and public wellbeing. AIA provides members with tools and resources to assist them in their careers and business as well as engaging civic and government leaders and the public to find solutions to pressing issues facing our communities, institutions, nation, and world. Members adhere to a code of ethics and conduct to ensure the highest professional standards.

www.acec.org

www.acec.ca

www.aia.org

www.smps.org

95

Deltek for Architecture and Engineering FirmsPowering Project Success for Architecture & Engineering Firms

For more than 35 years, Deltek has offered software and information solutions that deliver business intelligence, project management and collaboration. Deltek’s industry-focused expertise empowers firms to manage successful projects while maximizing productivity and revenue. Deltek customers include 90% of the ENR Top 10 design firms and more than 80% of the ENR Top 500 who use our solutions to:

• Find and manage federal, state, local, and educational opportunities

• Nurture client relationships and improve win rates

• Deliver projects on time and under budget

• Manage your projects and firm-wide information

• Find, recruit, and retain the best and brightest talent

• Streamline the financial management of their firms

• Gain complete visibility into all aspects of their business

Read the full Deltek Clarity Architecture & Engineering Industry Study at www.deltek.com/clarity-ae.

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Better software means better projects. Deltek is the leading global provider of enterprise software and information solutions for project-based businesses. More than 23,000 organizations and millions of users in over 80 countries around the world rely on Deltek for superior levels of project intelligence, management and collaboration. Our industry-focused expertise powers project success by helping firms achieve performance that maximizes productivity and revenue.

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