The Results are in for the 39th Annual Deltek Clarity A&E Industry Study
The survey is complete. The results have been analyzed. And now I’m pleased to be able to share the insights gleaned from the 39th Annual Deltek Clarity Architecture & Engineering (A&E) Industry Study!
Last week, we unveiled the results during a live webinar, providing a comprehensive overview of this year’s key findings (you can catch the on-demand version here). We covered top level results, new technology trends and highlights from each of the four main sections: Financial Statements, Business Development, Project Management and Human Capital Management.
About the Study
In case you’re not familiar with Deltek Clarity, it is the longest running and most comprehensive study in the industry. It is produced in conjunction with ACEC, ACEC Canada and SMPS; and this year, we had nearly 450 firms of all shapes, sizes and disciplines participate from across the United States and Canada. The study covers several key areas of A&E businesses, providing key performance indicators (KPIs) that can be used to benchmark your firm against others in the industry.
This year, a little more than 30% of our participants came from architecture firms and nearly 60% from engineering firms. The remaining 9% were from other firms that are critical to the delivery of projects, but don’t fit neatly into the other two buckets. When looking at size of firms that participated, 39% of firms were small (0 - 50 employees), 41% were medium (51 - 250 employees) and the remaining 19% were large (251+ employees).
Below you’ll find just a few of the highlights I covered during the presentation. For additional detail, I highly encourage you to register for the upcoming deep dive webinars taking place now through the end of July.
Architecture & Engineering
Business Development Highlights
Overall, firms appear to be investing more in business development (BD) and marketing and it seems to be paying off. At a high level, firms are looking for ways to diversify opportunities and BD efforts. The competition isn’t going away and firms are trying to find ways to be more methodical and effective – and we’ve actually seen some progress in this compared to last year.
- Top Challenges: The top three challenges remain the same as last year: finding time to nurture client relationships, limited business development opportunities/time, and increased competition.
- Position in Market: What does the position in the marketplace look like for firms over the next 18 months? The overall message this year is growth. Last year, Surveying/GIS/Mapping was in the fifth spot and shot to the top this year. This is also the first year that we pulled Federal out of the mix of fill-in responses and it showed up near the top of the list. Last year, every market except one had more than 20% – and sometimes up to nearly 50% – of respondents expecting their work to decline in these markets.
- Net Revenue Growth Forecast: Overall, firms are expecting their net revenue to grow at about the same rate as last year: 7.5%, up from 5.6% last year. Small firms are leveling off this year (0%) compared to last year’s expected decrease in net revenue, and medium and large firms are at about the same numbers as last year in terms of expected growth (6.9% and 7.5% respectively). As a BD person, this is critical to know because with this number, how are you going to achieve it? Where are you going to find those extra clients and extra opportunities?
- Win Rates: This is another bright spot for BD this year. We calculate win rates based on how many competitive proposals are awarded divided by the number of competitive proposals submitted. This year, win rates are up 9.8% this year to 50% after a three-year decline.
Project Management Highlights
Overall, firms are moving in a positive direction when it comes to project management (PM), but there are definitely some areas for improvement.
- Top Challenges: Competing priorities, staff shortages and inexperienced project managers were ranked as the top three challenges this year. Accountability was also added to the list for the first time, taking the #4 spot. Firms may be struggling with what that accountability should look like as well as how to hold PMs and project teams accountable.
- Projects On or Under Budget: The good news is this metric is moving in the right direction. Firms reported 80% of projects as on or under budget, an increase of 7% compared to last year. With the exception of a slight dip two years ago, this continues an upward trend for the past five years. For the first time in this year’s report, we asked about projects on or ahead of schedule and those results will be discussed in the PM deep dive webinar.
- Clearly Defined PM Processes: One of the biggest themes that emerged this year is the need for better processes and procedures for project management, or at least processes and procedures that teams can and will use. Only 47% of respondents reported using clearly defined PM processes on 75 – 100% of their projects, while 37% of firms use them on 25 – 74% of projects and 16% of firms only use them on a quarter of their projects.
Human Capital Management Highlights
This is an area that firms should pay particular attention to this year, as the changes in these metrics are having a direct impact on every other area of the business. Overall, firms need to put more focus on the full human capital management process, specifically the post-hire process with employees rather than just recruiting and onboarding to be successful in the war for talent.
- Staff Growth/Decline: The rate at which firms grew last year was a little slower than the previous year, down to 4.3% from 6.9%, but the industry is still on a growth trajectory.
- Employee Turnover: The war for talent isn’t slowing down and employees have a lot more options. This year, firms reported employee turnover at 12.8%, up 1.8% from last year.
- Number of Open Positions: As firms are trying to not only keep their current staff, but also continue to grow, there are a fair number of open positions across the industry reinforcing the idea that employees have choices. In fact, 34% of firms reported having more open positions than last year, while 50% of respondents said it was about the same as last year and 15% reported fewer.
Financial Management Highlights
Finally, this year we are seeing another year of financial stability. But, changes in other areas of the business are starting to impact financial statements such as project management challenges and staffing changes.
- Top Challenges: Increasing profitability and managing growth remain at the top this year, but succession planning crept up to the #3 spot, while mergers and acquisition activity dropped to #7.
- Utilization Rates: This is the second year in a row that we’ve seen a decrease in utilization rate, down 0.7% to 59.4%. Although we’ve seen minor decreases year over year, firms need to dig into this and see what’s happening. This could be linked to increased salaries because the demand is greater and new recruits can request higher salaries or it could be because of increased turnover.
- Overhead Rates: Overhead rates are up slightly (155%) and up more than slightly for large firms (166%). Again, changes in metrics on the talent side can be impacting your numbers, so it is critical to know what’s in your overhead rate.
Join us to Learn More
All attendees of the 39th Annual Deltek Clarity A&E Industry Study Webinar Series will receive a copy of the full report, offering succinct analysis on more than 50 A&E specific KPIs. Be sure to check out each of the webinars in the series covering trends in Business Development, Project Management, Human Capital Management and Financial Management and share them with your colleagues to gain additional insight and help your firm succeed.
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