Top 3 Trends for A&E Firms and How to Use Those Insights to Remain Profitable

Architecture and Engineering firms are facing continued pressures and challenges, even with substantial growth expected. Industry insiders see three top architecture and engineering (A&E) trends based on the latest research from Deltek, the American Institute of Architects (AIA) and the American Council of Engineering Companies (ACEC).

In a recent webinar, Megan Miller, Director of Product Marketing at Deltek, and industry experts Michele Russo, Vice President of Research and Practice at the (AIA) and Daphne Bryant, Executive Director of ACEC Research Institute discussed how firms can use insights from the latest industry trends to increase profitability for their A&E firms.

Despite Staffing Challenges, Firms Expect Substantial Growth

2022 was a strong financial year for A&E firms, and substantial growth is expected to continue this year. Firms are projecting 10% year-over-year growth in operating profit according to the 44^th Annual Deltek Clarity Architecture and Engineering (A&E) Industry Study. Even with the sunny forecast, a few clouds may be on the horizon. “Despite continued growth, firms are still dealing with rising costs and continued people challenges, so they need to be more selective in the type of work they pursue,” said Megan. According to the Q2 ACEC Engineering Business Sentiment Study, inflation, concerns of a recession, and political uncertainty are playing strongly among the minds of engineering firms polled.

While the view for 2023 is still optimistic, firms will need to continue to focus on resource management to ensure they can deliver the projects with limited staff. According to the Q2 ACEC Sentiment Study, nine out of 10 firms say they have open positions quarter after quarter and one out of 10 positions are going unfilled. Respondents from the Clarity Study reported that 39% of firms report having more open positions than last year. “Firms are hiring as fast as they can, but there are just not enough workers to fill open positions needed for projects and new positions firms are creating to support growth,” Daphne added.

Experts agree the key to staying profitable is to be selective in the work pursued and to monitor projects closely by having visibility into project performance. Resource management is essential as firms need to balance the costs of hiring talent to support projects as salaries are rising year over year.  Firms will need to utilize staff to focus on project delivery and leverage tools and software to automate routine tasks where available.

Firms Prioritize Retaining and Training Current Staff

Respondents from the Deltek Clarity A&E Industry Study report that finding and retaining staff continues to be a top concern with nearly two-thirds (65%) identifying it as one of the top three challenges they are facing this year. With salaries rising and competition for new hires continuing, firms are looking for better ways to upskill current staff and create a more attractive workplace to increase engagement and ultimately retain critical staff.

In a switch from last year, Deltek Clarity Study respondents report spending more time investing in current staff with hiring new employees becoming less of a focus. In addition, firms are concentrating on employee training and upskilling and are offering various programs to engage workers beyond compensation and benefits. According to Michele, “when you are building staff, you need to balance hiring and retention at the same time. One of the ways you can do that is through training and with professional development to engage employees.”

 “We see 61% of firms having to fill vacant positions. The Q2 ACEC Study shows that firms experienced a turnover rate of about 7% on average over the past year. Firms are really struggling on both fronts, so it makes sense to try to retain people you have so at least you don’t need to fill additional positions, added Daphne”

According to the ACEC Study, 92% of firms are reporting salary increases for new hires of about 10% versus last year, so salary inflation doesn’t seem to be ending anytime soon and firms are finding it’s not easy to find qualified staff.

“You can't just go out and hire somebody and make them an engineer. There's a lot of schooling, on the architecture and engineering side. We are starting to see firms looking at non-traditional hires outside of engineering like project managers and people with strong technical or data skills, specifically, data scientists are starting to pop into the mix,” said Daphne. Firms will need to be competitive on more than salary when looking for staff due to rising costs. Investments in learning and development will need to be implemented to keep employees engaged, and projects on schedule and profitable.

Increased Investment in Tools for Project Management

The Deltek Clarity Study shows firms have a bigger appetite for technology this year, with 53% of those polled indicating project management as a key area of investment over the next 12 months.

The ACEC Study indicated eight out of 10 firms were using engineering collaboration tools that allowed them to work together more effectively and efficiently to improve communications. Those tools brought the most value to the firm by producing higher quality designs and more client and team satisfaction, while driving that competitive edge from an engineering standpoint.

In the AIA report, Technology, Culture & the Future of the Architectural Firm, architecture firms identified three main pain points they were solving using technology solutions. These three challenges include:

• Project tracking and construction specification changes
• Managing project schedules
• Project reviews

“Firms are recognizing these challenges and what the tools can provide them but are also reporting that they are not being used effectively because employees are not trained to use the tools,” Michele said. The Deltek Clarity Study also found that 55% of those polled said implementing new software systems is a top technology challenge. Firms need to have better tools, processes and resources to empower project managers, but technology is constantly changing, requiring ongoing training and strategy for adoption.

This year, training existing staff, using automation, and investing in the right technology are top of mind for many firms. Staying up to date on trends is important, but identifying which trends will have the biggest impact on business success is key to staying profitable and competitive.

Invest in the Right Technology

Deltek offers solutions built specifically for the A&E industry that gives you the insight to help your firm plan for challenges and capitalize on potential growth. Whether it be resource planning or project management, let Deltek help you find the best tools to support your business needs.