3 Steps to Architecture and Engineering Growth and Profitability

The 43rd Annual Deltek Clarity A&E Industry Study results are in! This year’s study indicates a positive outlook with flourishing project pipelines. Continued growth and profitability will require firms to keep a sharp focus on addressing talent gaps, tapping into digital transformation trends, and being more strategic in the opportunities they pursue.

With a stronger focus on emerging areas of business development, architecture and engineering firms must shore up gaps and advance delivery in project management, human resources and financial management to meet new business needs. Firms continue to refine financial strategies to reduce project delivery costs and drive topline growth.

Explore three key takeaways from this year’s Deltek Clarity A&E Industry Study, including how firms are zeroing in on people, financial performance, and technology.

Focus on People - Industry Staffing Challenges

At the end of the day, it’s all about people. The people you trust to deliver your projects and the clients you focus on every day.

The industry is seeing staffing shortages across all areas of the business and also have an additional focus on acquiring, retaining and developing people. Sixty percent of firms cited their #1 acquisition challenge is the number of good candidates in the marketplace and 13.6% of firms saw employee turnover increase last year.

The accelerated pace of project wins and growing project workloads collide with a changing workforce model. Accordingly, project management and execution functions are feeling stretched, challenged by both the quantity of projects as well as the bench strength to deliver.

Finding and retaining qualified staff is a top challenge for 78% of financial leaders. While firms are looking to hire more qualified staff across the business, companies need to look for ways to upskill and retain existing staff while improving efficiencies so they can deliver more projects with fewer people by leveraging technology to fill the resource gap.

There’s never been a better time to focus on people and to get creative in your employee recruitment and retention strategies. With only 25% of firms leveraging a Human Resources Management (HRM) solution, there’s opportunity to tap into technology to drive strategy and success.

Financial Performance - Impact of Rising Costs

Firms surveyed are projecting 17.6% growth in net revenue for 2022, the highest year-over-year projected growth in more than a decade, up from 4.2% last year. Yet, last year’s average operating profit on net revenue in North America was 12.8%, down more than six percentage points year-over-year. With strong growth projections, firms are getting creative in capturing and translating opportunities into bottom-line growth.

While firms demonstrated an ability to leverage their direct labor costs into increased revenues, the economic realities of those increased costs – along with growing employee attrition – hindered their ability to fully capitalize on available growth opportunities. Firms must focus on ensuring the growth in their future workload generates strong financial returns.

Industry Technology - The Tipping Point

Firms are looking at increasing their time and investment in emerging technology trends with 31% of percent of firms citing their top technology initiative is to create a strategic plan for implementing emerging technologies.

Firms focused on project-related functions are looking to improve productivity and project efficiencies with 34% planning to invest in augmented/virtual reality specifically related to project execution.

While only 3% of those surveyed consider their firms to be digitally advanced today, an additional 29% believe that they will get there in the next five years. Yet, 56% of firms cite the lack of time to invest in learning as their top technology challenge.

Investing in technology tools – including more effective use of existing tools – can help firms manage and execute projects more efficiently, align business development and financial processes, and better manage resources, especially for the 8% of firms with a lack of technology and the 36% in the technology exploratory phase.

About the Deltek Clarity Architecture and Engineering Study

For 40+ years, Deltek has delivered industry trends and best practices that help architecture and engineering firms benchmark their performance and drive results. The Deltek Clarity Architecture and Engineering Industry Study is the longest running industry report designed exclusively for the industry to deliver key challenges impacting the market, highlight bright spots, and forecast future trends so architecture and engineering firms can benchmark performance and drive results.