Full Sail Partners Blog

The 39th Annual Deltek A/E Clarity Report is Now Available

Posted by Jennifer Renfroe on Wed, Jul 11, 2018 @ 11:35 AM

39th Annual Deltek AE Clarity Report Each year Deltek conducts a survey of firms in the architecture and engineering industry to identify key issues impacting the market, highlight bright spots, and forecast future trends. Guided by industry experts, the survey focuses on financial statements, business development, project management, human capital management, and technology trends. This year, in total, 952 individuals took the survey, and nearly 450 companies provided input. Firms in this study are of varying sizes and headquartered across the US and Canada.

Key Findings in This Year’s Deltek A/E Clarity Report

Financial Statements

Firms’ financial statements reveal year-over-year stability in the industry, with most impacts appearing to be driven by talent management and staffing changes.

  • Average operating profit on net revenue was 13.2%, up just slightly from last year’s 13% and the previous year’s 12.8%.
  • Utilization rates dropped slightly to 59.4% from 60.0% last year.
  • The net labor multiplier saw a decrease to an average of 2.96, down quite significantly from a spike of 3.02 last year and back in line with 2015.
  • Firms reversed a five-year decline in overhead rate, increasing from 154% to 155%.
  • The average collection period dropped by one day to 71 days, although high performers increased by two days to a 67-day average.

Business Development

Firms are looking to diversify opportunities and their business development efforts to stay ahead in a competitive market.

  • Net revenue growth forecast was 5.2%, down just slightly from last year’s 5.3%.
  • Firms are using a diverse array of staff for business development, with 19% of firms using dedicated business development staff only, 31% sellers/doers only, and 50% using a mixture of both. However, only 46% of firms had a formal business development process for their staff.
  • Win rates improved to 50.0%, rising 9.8 percentage points from last year’s 40.2%.
  • The percentage of firms with a formal go/no-go process decreased from 75% last year to 67% this year.
  • More firms expect growth in surveying/geographic information systems (GIS), transportation, and commercial markets than any other industry, whereas nearly 60% of firms expect their position to stay the same or decline in the residential, education, and hospitality markets.

Project Management

Firms need to continue to focus on improving the project management discipline and increasing client satisfaction.

  • Two-thirds of all firms have a high level of visibility on cost variance, whereas more than half of all firms stated that they had low or moderate visibility into schedule variance and client satisfaction. Compared to last year, client satisfaction visibility decreased from 53% to 45%.
  • Firms this year reported that 20% of their projects were over budget and 25% of their projects were behind schedule.
  • Sixty-one percent of firms had high confidence in their overall project reporting abilities, down from 72% last year. More than 90% of firms felt confident they were accurately reporting the actual cost and budget of their projects, whereas only 69% of firms felt the same about the accuracy of their schedule reporting.
  • In terms of discipline maturity, only 47% of firms used a formal project management process for three-fourths or more of their projects. Overall, 18% of firms had a PMO or center of excellence. Additionally, only 39% of firms have less than one-quarter of staff with formal project management training.
  • Eighty-one percent of firms are measuring client satisfaction, and of these firms, 45% are conducting these measures for all projects and 49% for strategic projects only. The majority are measuring client satisfaction irregularly, compared to 22% of firms that do so at key project milestones. 

Human Capital Management

Firms are experiencing growth, but employee turnover—particularly voluntary turnover—has increased, making staff retention and improved talent acquisition imperative.

  • Staff growth is 4.3%, declining from 6.9% last year.
  • Employee turnover increased to 12.8%, up from 11% last year.
  • 34% of firms had more open positions, compared with only 15% with fewer open positions.
  • The average time to fill positions was 31–60 days, although for 15% of firms, it takes an average of 90 or more days to fill positions. Compared to last year, there was a 7-percentage-point decrease in firms that filled positions in less than 30 days.
  • Of all firms, 43% have a formal succession plan. For 68% of firms, their succession plan applies only to current leaders and next-in-line leaders, whereas for 7% it applies to all employees.

Technology Trends

In the first year tracking technology trends, firms are looking for better ways to collect data that can be leveraged for strategic decisions.

  • Geolocation and the Internet of Things (IoT) were the most important technology trends.
  • Most firms did not rank artificial intelligence (AI) or wearable technology as technology trends they are focused on, but it can significantly change the way we run our businesses when the time is right.

Benchmark Your Firm with the Deltek A/E Clarity Report 

While these are the highlights of the 39th Annual Deltek A/E Clarity study, the report goes into much more detail. Using these results, you can see how your firm has been doing not only compared to your previous year, but also to other comparable firms in your industry. With these industry insights, you can develop future goals to help your firm stand out against the growing wave of competition. For an in-depth view of everything included in the 39th Annual Deltek A/E Clarity report, download your copy today.

39th Annual Deltek AE Clarity Report  

Topics: Deltek Clarity Report, Professional Services

The 39th Annual Deltek A&E Clarity Industry Study Results: Focus on Human Capital Management

Posted by Jennifer Renfroe on Wed, Jun 20, 2018 @ 11:35 AM

39th Annual Deltek A&E Clarity Report Talent FactsAccording to the 39th Annual Deltek A&E Clarity Industry Study, one of the top three firm initiatives to address financial challenges is managing growth. Firms are needing to quickly expand departments, hire and train new employees, and find ways to retain them to prevent turnover. Not only are project managers dealing with staff shortages, but inexperienced project managers ultimately lead to client dissatisfaction and poor perception of firms in the marketplace. Firm financials are being directly impacted by issues with human capital management.

Turnover and Talent Acquisition

The results of this year’s Deltek A&E Clarity study show that human resources (HR) professionals are seeing higher voluntary turnover, more open positions with longer average time to fill plus difficulties with talent acquisition. Turnover has increased by nearly two percent compared to last year, and the percentage of firms that take 31–60 days to fill an open position went up by four points. Regarding talent acquisition, many firms are not focused enough on improving the efficiency of the talent management process. The majority are still using outdated HR systems with 63% of small firms having not updated their HR systems within the past five years making it a challenge to track KPIs. Talent acquisition remains the most expensive business process facing HR.

Drop in Utilization Rates

Additionally, firms have seen utilization rates drop slightly for the second year in a row, declining to 59.4% from 60% last year. This may be due to firms having a harder time recruiting, onboarding, and retaining talent this year and leading to higher employee salaries to attract the best talent at lower billable utilization. This shift in utilization rates is also reflected in the small increase in overhead rates. Firms should develop a strategic onboarding process to reduce the time it takes to get new hires assigned to billable projects. Another issue affecting financials is that increased turnover means senior staff are pulled to train new employees pulling them from their current tasks.

HR Stuck in Recruiter Mode

This year’s Deltek A&E Clarity report also noted that with growth management, HR professionals tend to get stuck in recruiter mode leaving little time to focus on other essential tasks to help keep staff engaged. Firms need to first properly train their staff, so they are productive. They must then find out what professional development and learning opportunities their employees are looking for to ensure retention. According to the study, only 13% of firms said they have a learning management system (LMS). This is down two percentage points from last year, when 15% of firms reported having an LMS.

Succession Planning and Retention

Another key aspect to employee retention is succession planning. The Deltek A&E Clarity study showed that of all firms, only 43% have formal succession plans. Therefore, firms need to focus not just on identifying tomorrow’s leaders, but also on engaging high-potential employees in a way that keeps them at the firm and lets them know that the firm is invested in their success. For 68% of firms with a succession plan in place, it only applied to current leaders or those next in line. Only 7% had plans that applied to all employees. Regardless of size, without a succession plan, the future of the firm is especially at risk if something happens to its current leaders or key staff.

Future Human Capital Management Strategy

Of particular interest, the Deltek A&E Clarity study suggested that to develop an effective future human capital management strategy, firms must evaluate what different generations want and need. With baby boomers voluntarily retiring, firms must change their approach to new hires by offering tailored benefits such as tuition reimbursement and the ability to work from home. Overall, firms that offered these and the more traditional benefits, including stock ownership options, medical, 401(k) or retirement plans, performance bonuses, or paid overtime, do have higher total employee costs. However, firms that did so would have higher employee retention rates, thus reducing the financial burden of turnover.

Clarity Outlook for Human Capital Management

Firm financials are being impacted by challenges in human capital management. In the next year, firms should focus on updating outdated human resource systems, appealing to the new workforce generation, providing strategic onboarding, offering top professional development and learning opportunities, and creating succession plans for all employees. For the future, financial leaders must manage growth by tracking the costs of talent acquisition and investing in their employees to prevent turnover. To really understand the true cost savings of employee retention, HR must continue to work closely with financial professionals. Lastly, make sure to download your free copy of the 39th Annual Deltek A&E Clarity Report now.

39th Annual Deltek A&E Clarity Report Deep Dive Into Human Capital Management 

Topics: HR, Deltek Clarity Report

Key Performance Metrics for Architecture and Engineering Firms

Posted by Amy Balassone on Wed, Nov 15, 2017 @ 10:00 AM

AE Firm Metrics Blog.pngHow does your firm measure up? That is the vital question many architectural and engineering (AE) firms should be asking themselves. It is challenging to manage what you are unable to measure! There are several key performance metrics that an AE firm should use to determine its current status. These measurements are important to not only keep you abreast of the condition of your company, but they also allow you to examine the past, so you can plan for the future. Let’s look at a few of the significant performance metrics.

Proposal Win Rate

A win rate offers insight into which business development endeavors are working.  A minimal improvement in your win rate can make a crucial difference in your profitability. Win rates will aid in determining the chances of sealing a deal. The capability of your company to gain new business is critical to your success.

Profit

Profit is one of the most important metrics in ascertaining the success of any company. Profitability metrics help AE firms determine if they are actively engaging suitable businesses. Profit is the measurement of gross income deducting all expenses.

Labor Utilization

The labor utilization metric helps evaluate acceptable staffing levels.  This metric offers insight into the performance of all employees, identifying which employees are under performing and which are over performing. To maintain an effective labor utilization rate, management should spend time reviewing both direct and indirect portions of the metric.

Net Revenue/Operating Income

Net revenue is the force that keeps a business thriving while the operating income is a measure of business capacity. This measurement determines the amount of income that a firm passes along to subcontractors for their services versus the amount that they keep for their own services. It is a noteworthy metric.

Backlog

To measure whether you are operating within your budget and track the remaining work your firm has, the backlog analytic is very helpful. For this metric to be effective, it is important to include both the proposals you hope to win as well as the current work that remains. This will allow your firm to get an accurate picture of your ongoing work and budget needs. 

Client Loyalty

For any business to grow and continue to be successful, client loyalty is a necessity. It is important for both word of mouth referrals and repeat business. Meeting client expectations, proactively engaging in client feedback and acting on areas that need improvement are all essential to keep loyalty.

Cost of New Business

Company growth is often the result of new business. There is almost always a cost involved with obtaining new business such as labor and materials. Measuring these costs aids in selecting which new businesses to go after and if the potential gain will outweigh the cost.

Measuring Up the Firm

Continuously measuring and monitoring key performance metrics on a regular basis is vital to the continued success of your AE Firm. While we have discussed some notable ones, there are endless measurable metrics for your firm. It is up to you to determine which metrics would most benefit your particular firm. However, make sure both staff and management have a clear understanding of the chosen company metrics and your goals.

38th Deltek AE Clarity Report

Topics: Deltek Clarity Report