July/August 2019

Communities: Private Practice
Talent Acquisition and Client Retention Present a Test for AEC Firms

As we enter the second half of 2019, architecture, engineering, and construction firms will continue to face an intensely competitive marketplace. Firms that can tackle talent acquisition and project management challenges and increase access to business resources will be the ones to rise to the top, according to a recent Deltek Clarity AEC industry study.

The study provides a snapshot of the industry’s financial outlook and explains how firms can find qualified staff, increase client satisfaction, and improve project management and delivery. Firm leaders who implement a business development process with strategies aimed at earlier identification of project opportunities and requirements and who also prioritize client engagement will fare the best in this competitive environment.

Financial Outlook

Firms report that there’s a struggle to find new project opportunities early enough and project win rates have dipped slightly—from 50% last year to 48%—with large AEC firms reporting the largest declines. These firms also report that revenue generated from their top three clients dropped from 53% to 44%, with small firms experiencing a 62% to 52% decline.

Companies reported that their financial metrics increased across the board, with talent management and staffing identified as the most challenging areas. Luckily, positive financial statements will allow firms to increase investment in employees, nurture client relationships more effectively, and improve businesses processes.

The survey found that the average operating profit on net revenue was 14.4%, which is an uptick from 13.2% last year and the previous year’s 13.0%. The firm overhead rate did rise for the third year in a row, increasing from 155% last year to 160% this year. The overhead can be linked to the average total employee cost for firms, which is $98,619, an increase of $4,122. This increase is related to firms offering more benefits such as medical, 401k/retirement plans, performance bonuses, and paid overtime.

To deal with financial challenges, firms should implement initiatives to train project managers on financial management; seek better business forecasting and growth management; increase spending on talent acquisition; and, if needed, realign the organization.

Talent Recruitment and Retention

Because of low unemployment in the AEC industry, more than one-third of firms report that they are taking longer than 60 days to fill open positions and require more than 40 days to get new employees ready to get involved with billable projects.

Study participants report that their challenges in this area involve the ability to offer competitive compensation to candidates; ability to match qualified candidates to open positions; and properly aligning acquisition goals with the strategic goals of the company.

In the meantime, firms that are struggling to recruit qualified candidates are focusing on improving the employee experience by developing their top performers to increase retention. Firms that want to boost their ability to recruit and retain qualified design professionals must also improve perception of the firm in the marketplace; improve compensation offering; develop new talent acquisition solutions; improve onboarding processes and procedures; and create or ramp up employee referral incentives.

Project Management and Delivery

Study participants revealed that 71% of projects are on or under budget; however only 20% of firms have a project management officer or center of excellence, and 54% of firms are not measuring client satisfaction. Firms that fail to adequately measure client satisfaction risk losing future business opportunities, particularly from repeat clients.

The top project management and delivery challenges involve competing priorities (project management, design, business development); staff shortages; inexperienced project managers; accountability; and accurate project cost and timeline forecasting.

To deal with these challenges, firms should increase visibility of their project managers; standardize project management processes; equip project leads with training and resources; and ensure that there is accountability for gauging client satisfaction.

Technology Trends

Technology can improve project delivery, but firms need strategic plans to identify how emerging technology trends can drive their business forward.

What are the latest technology trends that firms should be aware of? The “internet of things,” geolocation technology, big data, data science, artificial intelligence, machine learning, wearable technology, natural language processing, and blockchain. The survey found that firms plan to apply some of these technologies to improve business development and marketing.

The top technology challenges faced by firms involve dealing with the cost of technology; prioritizing trends that are the most applicable to the business; and the lack of time to learn about most technology trends and properly train for use of the technology.

High-performing firms will be the ones that embrace technology with creative strategic plans, adequately invest in staff education, and develop subject-matter experts. Prioritizing investment in education will be the key since this technology implementation will have a positive impact on the AEC industry.

Access the full 2019 Deltek Clarity Architecture & Engineering Industry Study at www.deltek.com.