Deltek Clarity A&E Industry Study: Key Characteristics of High Performing Firms
When a C student becomes an A student or a bench player becomes part of the starting lineup, there is a turning point when the average person decides good just isn’t good enough. The book “Good to Great” by Jim Collins identifies factors that allow some companies to move from good to truly great and why some companies never make the leap.
Architecture & engineering (A&E) is no different. There are truly great firms – best places to work, top design firms, top emerging firms, etc. What makes these firms great and separates them from everyone else? In this year’s Deltek Clarity A&E Clarity Study, we broke out a group of high performers to see what makes them successful. We started with firms that have a Net Labor Multiplier of 3.0 or higher and an Operating Profit rate of 15% or higher. This year, more than 25% of participants are high performers.
Let’s take a look at some key areas where the high performing firms stand out among the competition.
Net Labor Multiplier and Operating Profit
As mentioned above, high performers have a net labor multiplier above 3.0. In fact, the average for high performing firms this year is 3.34, compared to 2.86 for all other firms, showing that they are exceeding the definition of high performer.
High performers far outperformed all other firms in operating profit with nearly three times the profitability – 25.9% for high performers compared to 9.3% for all other firms.
Higher operating profits are clearly achievable for all other firms.
- How can your firm move from a firm with a good multiplier and profitability to great?
- What is holding you back?
- What can you do to incrementally move the numbers?
- What are your numbers now and what are achievable goals for next year?
Winning the War for Talent
High performers are doing more than successfully managing their bottom line. They are also keeping their top performers and recruiting new all-stars. On average, high performing firms reported a 10% increase in staff, compared to just 3.1% for other firms. They also have a lower employee turnover rate at 11.6% compared to 14.3% for other firms. These numbers indicate that personnel aren’t just moving around from company to company, but these firms are truly growing and expanding their businesses.
The war for talent is heating up. As the economy continues to recover, employees are more confident and see more opportunities to make a job change in the growing market. Firms are being challenged to compete for qualified staff and find creative ways to keep their exceptional talent right where they are.
- What makes your firm different? Why do people love to work there? Ask them.
- Why are people leaving your firm? Do you conduct exit interviews?
- Are there personnel issues or compensation issues? Where do you need to focus your attention?
- What is attractive about your company to a potential employee? Why would they take a leap of faith?
Project Management Maturity
As we’ve discussed throughout this series, successful project management is key to an A&E firm’s success. So how do A&E leaders rate the maturity of their firms’ project management discipline? High performing firms were three times as likely to say their project management discipline was very mature.
In organizations with mature project management capabilities, firms have more systematic approaches to managing scope, schedules, resources, costs, risk, quality and communication. It’s no surprise that high performing firms are confident in their project management capabilities. This can be the reason they have stronger financials and lower turnover rates. Teams are working together in a more streamlined approach and staff may have a better understanding of expectations.
- What do your project managers do well?
- Where is there room for improvement?
- If you ask your design teams, what are the biggest challenges they face?
- How can you take your project management from good to great? How do you define success and measure progress toward it?
Room for Improvement, Even for High Performers
Although there are many areas where high performers excel, there is still room for improvement. Here are a few areas where even the “great” may be able to take some lessons from the “good:”
- Average collection period for high performers is six days slower than all other firms and 15 days slower when compared to large firms.
- High performers are also less likely to have a go/no go process, which can be costing them significant time and money chasing the wrong opportunities.
To learn more about high performers and how your firm measures up, visit the 36th Annual Deltek Clarity AE Industry webpage where you can:
- Sign up to follow this blog series
- Download the full report
- Register for the two-part webinar series (available on-demand)
- Sign up to participate in next year’s study for a sneak peek at the report
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