Full Sail Partners Blog | Deltek Clarity Report (2)

With the uncertainty of 2020 behind us, many AE firms are optimistic about the future and expect that investment in new technology will likely remain consistent. While a great number of firms are still in the early stages of moving to the cloud and making investments to support a mobile workforce, smaller tech savvy to large-sized firms have already implemented these technologies by 2021 and are seeking out IT solutions that improve project delivery and ultimately their bottom line. According to AE firms that participated in the 42^nd Deltek Clarity study, adopting new technologies to support firm growth and client needs is a priority, however, selecting which technologies will produce the desired results and provide a noteworthy return on investment seems to be a challenge.  

Clarity on Technology Trends for Small Firms

Small AE firms, those with less than 50 employees, reported in the Deltek Clarity study that investments in new and emerging technologies will likely see a reduction. Likely, because many of these firms made larger than expected technology investments in supporting the needs of a remote workforce to ensure business continuity during the pandemic. Therefore, many of these small firms are refocusing efforts and spending on revenue generating resources.

Furthermore, small firms typically have smaller budgets for all departments across the board. As a result, they tend to invest in new technologies that are usually more affordable and easier to deploy firm wide. Which brings up another key finding from the Deltek Clarity study – limited internal IT expertise. Small firms and even medium-sized firms both noted that one of the largest challenges with adopting new technologies is having internal experts to help navigate the sea of technology options that serve different and unique purposes. Even more, some firms are likely unaware of which operational processes can be improved with the assistance of technology.

Medium-sized Firms Looking to Go Big

AE firms with 51 - 249 employees, commonly referred to as medium-sized firms, indicated in their responses to the Deltek Clarity study that they are eyeing big data and artificial intelligence (AI) for future technology solutions to support their organizations. However, only 18% of firms reported having an actual plan in place. With a large percentage of firms citing the aforementioned and seemingly consistent theme of lacking internal champions to identify and thoroughly vet new technology. Overall, medium-sized firms as a whole are continuing to straddle between implementing less expensive and simpler technologies with big aspirations to embrace and invest in emerging technologies large firms are already utilizing.

Large Firms Seek Clarity with Big Investments

Large AE firms, defined as having more than 250 employees, will always lead the AE industry when it comes to adopting the latest and greatest technologies since they generally have larger budgets and the ability to spend. As such, larger AE firms that participated in the Deltek Clarity study stated they are continuing to move forward with making large investments in emerging technologies like geolocation, big data and data science with no indication of slowing down. More importantly, large firms revealed in the Clarity study that they have less of a challenge with employing internal technology experts that can provide guidance on future technology investments that are aligned with the needs of the firm.

Similarities Deltek Clarity Identified for All Firms

According to the 42^nd Deltek Clarity study, firms of all sizes have some shared challenges regarding technology initiatives. Unsurprisingly, data and cybersecurity lead the way like previous years and will likely continue to be the leading concern for AE firms well into the future. An encouraging finding in the Clarity study is the common strategy all firms are taking to mitigate these risks, with nearly half of respondents stating they are implementing new security policies and protocols. Even more, thirty-four percent of respondents said their firm is planning to outsource their IT administration and infrastructure. Although there are no fail proof safeguards against a cyberattack, being proactive can certainly reduce the risks which is what firms are trying to accomplish.

Do More with Technology and Deltek Clarity

One thing is clear from the Deltek Clarity study, AE firms of all sizes will have to continue to invest in technology just to stay competitive. For small and medium-sized firms that indicated they lack internal experts to help make technology investment decisions as a challenge, maybe they need to consider enlisting the assistance of a company that specialize in the technology needs of AE firms to help with these choices.

Lastly, big data and data science are quickly being adopted in the AE industry. As a result, AE firms will begin to see new technology solutions specifically tailored to meet their needs being brought to market over the next few years. Which adds more complexity for firms when it comes time to decide which technology solutions they should pursue in the future.

Overall, the majority of respondents to the Deltek A&E Clarity study shared an optimistic view about opportunities and growth potential in coming years. Conversely, the long-term effects of the global pandemic did shock the industry with handshakes and face-to-face meetings becoming collateral casualties. As a result, the loss of these interpersonal connections was far greater and impactful than many could have imagined, and this sudden mandate and frankly need to socially distance inevitably left its mark on the way people interact and nurture relationships. As a result, this year’s Deltek A&E Clarity results are that much more significant as they shed light onto the future of A&E business development tactics that firms have embraced and will likely continue to utilize well into the future.

Top Three Business Development Challenges

Finding time to nurture client relationships seems to be a list leader year after year for the A&E industry. However, the number of respondents that listed this as a top challenge grew five percent from prior years. Increased competition is second on the list with 22% of respondents putting this as their top BD challenge. While the third top challenge was identifying new prospects, with 15% of respondents listing this as their top challenge.

Interestingly enough, 14% of respondents indicated that their firm’s business development model has dedicated BD staff, 39% have a seller/doer model, and the remainder a combination of both. Even more, firms reporting having a formal business development process declined from previous years. Identifying the exact correlation on how these different BD models and lack of processes impacts these top BD challenges is difficult to measure, however there is with some certainty a direct relationship.  

Bidding to Winning

This year’s Deltek A&E Clarity study found that more firms are employing a formal go/no go process with an increase to 75.7% with 51% stating they use a formal process for all opportunities. For firms not using a formal go/no go process, 25% are considering implementing one in the future.

For small and medium A&E firms, proposal win rates decreased by nearly two percent from last year while large firms had an increase of almost two and a half percent. On the contrary, firms of all sizes saw an increase to their capture rate with a cumulative increase of three and half percent. These differences between win rate and capture rate can be attributed to the type of work firms are pursuing and the use of a more strategic go/no go process.    

Deltek Clarity on A&E Marketing Techniques

Respondents to the 42^nd Deltek A&E Clarity study indicated that they predict traditional marketing techniques like in-person trade shows and exhibits, and public relations initiatives will see a sharp decline in utilization with a transition to more modern techniques. Specifically, firms stated they will increase the use of client-specific marketing, social media, thought leadership and content marketing as the core to their overall marketing strategy. This is not to say that trade shows will be abandoned, but these will likely become more virtual and/or hybrid versions which can reduce their benefit and importance to A&E firms. Overall, it’s encouraging that A&E firms want to adopt more modern marketing techniques, but their willingness to make significant investments into these changes has yet to be seen.  

Deltek Clarity on the Future Outlook and Forecast of A&E Industry

Small firms expressed a bullish outlook when reporting on their revenue growth forecast while medium and large firms expected to experience gains in the coming years. When asked to look further out to nine years, respondents expected to see growth of five to six percent in most years indicating there is still some level of uncertainty in the market, but still being sanguine there will be an upward trend in the years to come. Generally, A&E firms are optimistic about the markets they serve and believe they will be able to increase their position within them.

Significant Deltek Clarity Business Development Findings

In summary, the 42^nd Deltek A&E Clarity study found that firms are going to need to continue to rely on passive sources for new opportunities which will require nurturing existing client relationships to win more work from them and to gain referrals as well. Firms will also need to embrace business intelligence tools and strategic business development models and processes to remain competitive. Additionally, the pursuit process itself has changed and became more virtual and digitized. As a whole, A&E firms have recognized the need to revolutionize their business development strategies if they want to remain relevant and viable in the future.

Understanding the full business development findings of the 42^nd Deltek A&E Clarity study truly requires comparing the results to one’s own firm. Make sure to download your free copy and use the Clarity Scorecard to benchmark your firm.

Simply stated, strong client relationships are fundamental for thriving professional services (PS) firms. Therefore, proactively creating a positive client experience (CX) should be at the core of a PS firm’s mission. As simple as this effort may seem, many firms fall short in terms of meeting client expectations which inevitably becomes detrimental to their bottom line. However, there has been an influx in forward looking PS firms that are now dedicating resources to CX.

With this rapid growth and interest in CX for PS firms, the creation of a community dedicated to connecting likeminded individuals and firms has risen. CXps is the only client experience association dedicated to professional services firms. What once began as an annual conference has now evolved into so much more. The CXps community is now a nationwide network that offers monthly virtual meetups, regional in-person events, a rapidly growing library of CX content and so much more.

As a client-focused firm, Full Sail Partners is a dedicated partner of the CXps community with several members of the staff actively participating in the network and others joining this year. Furthermore, the 2021 CXps annual conference was hosted virtually from May 25^th to May 27^th. During this year’s annual conference, trends and ideas were presented and breakout sessions allowed attendees to collaborate and share their perspectives. Additionally, Ryan Suydam with Client Savvy discussed the evolution of the CXps community and the future outlook of this rapidly growing network of CX professionals. If you are wondering what you missed, here’s what some of the Full Sail Partners’ crew members had to say about the CXps annual conference and community.  

“As a CXps newbie, I learned a lot!”

As a first timer, I have long understood the necessity for firms to ensure a good client experience, however the 2021 CXps virtual conference was the first time I was introduced to the idea of firms actually focusing on the concept of CX in their overall business strategies. During the small group breakout sessions, I was able to discover several things about CX. First, firms appear to always be seeking to increase profits whether they consider themselves to be mission, vision or purpose driven, therefore CX is significant for that reason alone. Next, that employees, no matter what level, need to have a good employee experience (EX) in order to facilitate a good CX. We also learned that a great story about a positive experience goes a long way in CX and encourages both employees and clients to be loyal to the firm. Attending this virtual CXps conference offered me new insight and perspective on the real complexity of CX.

              – Jennifer Renfroe, Marketing Associate

“The CXps conference is one I look forward to every year!”

The Client Savvy team did an excellent job revamping the traditional conference format into a truly virtual experience. In this experience, you worked hands-on with a community of peers to build your CX program together.

One session of the conference took us through making the business case for a CX firm initiative. We were inspired by Ryan Suydam to “win the heads” of our firm leaders to begin a CX program. Then we broke into small groups to discuss the challenges/opportunities of how a managed CX program can create value for our specific firm. We were provided a list of different options that ranged from easier ones like pricing our work to value, not market, and reducing non-value-added project work to more advanced methods like increasing share of wallet with clients and measuring client lifetime value. We were asked to pick one or two ways we can demonstrate the value that a managed CX program could provide.

During another session, we were challenged to “win the hearts” by using stories. Our firms have dozens of stories like the one great story of how a client was won or kept through extraordinary conditions. Andrea Mac from Prequal, LLC showed us how CX stories can optimize the value of client experience initiatives among colleagues and leaders. Again, we broke into peer groups to begin developing our story element library and how to use them.

The best thing about the CXps virtual experience was that it took somewhat nebulous ideas of client experience and put a framework and system around it. And, when you can do that, it helps A&E firms develop and grow a proactive and thoughtful client experience program at their firms.

– Lindsay Diven, CPSM, Blackbox Connector Sales and Marketing Manager

“Being a member of the CXps community gives you access to a wealth of knowledge!”

I’ve been participating in the CXps community for over a year after joining the 2020 annual conference. My first conference and the 2021 conference were both outstanding with great presenters. Whether it was your first time being exposed to CX concepts, or if you are a seasoned CX veteran, the conference has an incredible depth of knowledge for all experience levels.

Additionally, as a member of the CXps community, you are able to access the knowledge base that the Client Savvy team continues to grow and fill with reliable informational resources and contributions from members of the community. I personally contributed last year by creating a video, “How Marketers Can Use Client Feedback” for the Knowledge Sharing Modules (KSM) which Client Savvy releases on a monthly basis. Make sure to check out all the KSM sessions on their YouTube page.

This year, I’m looking forward to the regional meetups. During the “Making CX Happen” regional events, CXps community members will meet in-person to explore challenging CX problems PS firms face. I’m also a sucker for Ruth’s Chris Steak House.

– Ryan Felkel, Marketing Manager

It’s Never Too Late to Join the CXps Community

Did you miss the 2021 CXps Conference? No worries! You can join the CXps community whenever you’re ready to take the first steps to improving the client experience your firm delivers. There are several levels of membership, and your level of commitment and participation is completely up to you.

This year’s Deltek Clarity Architecture & Engineering (A&E) Study came on the heels of an unprecedented event with the global pandemic. However, the 42^nd Annual Deltek Clarity A&E Study showed that despite the challenges presented in 2020, many firms were able to persevere by focusing on fundamentals, maintaining contact with clients and managing costs. The move to remote operations, changes in workplace policy, and greater use of technology identified new areas for improving processes. Additionally, the Clarity Study indicated that firms are optimistic about future opportunities and growth potential moving forward.

The 42^nd Annual Deltek Clarity Study collected responses from A&E firms of all sizes in North America based on 2020 fiscal data. Here is an overall look at what was reported this year, but for more detail, the 42^nd Clarity Study can be reviewed in its entirety.

Clarity on Technology Trends

Throughout 2020, firms continued technology adoption and deployment as well as migration to the cloud according to the 42^nd Annual Deltek Clarity A&E Study. The top technology challenges included cost of technology, prioritizing which technologies would be most beneficial and dedicating a champion to evaluate which technologies would achieve firm goals. Furthermore, the Clarity Study noted that firms expect to increase investments in emerging technologies in project management and execution to reimagine ways of working to increase profitability. Not only will finding ways to leverage technologies in project management be important but also teams will need to be well versed in it to utilize it effectively and efficiently to bring significant returns.

Clarity on Financial Statements

Despite the use of tighter controls and leaner spending in 2020, the financial stability of firms was maintained according to this year’s Annual Deltek Clarity A&E Study. The results of the Study indicated that operating profits and utilization rates increased as net labor multiplier went down, and firms demonstrated no material drop-off in the ability to secure projects or maintain a strong pipeline. The key financial challenges for firms addressed in the report were finding and retaining top talent, in addition to driving and managing growth into the future. Learning during the last year, firms went back to basics and focused more on financials leading to improved operational efficiency and increased profitability.

Clarity on Business Development

The results of the 42^nd Annual Deltek Clarity A&E Study noted that business development (BD) resources were being stretched with responsibilities shared among staff, and cross-training employees grew in importance. Another challenge to BD was finding ways to nurture client relationships as in-person meetings and events were cancelled. Furthermore, competition increased for pursuits which caused a slight decline in overall win rates yet electronic proposal submissions freed team members up to focus on other projects. Firms also indicated in this year’s Deltek Clarity Study that they needed to carefully target their marketing efforts to meet client interests and needs. Additionally, using business intelligence (BI) tools and investing in Customer Relationship Management (CRM) systems would help prevent missed opportunities better positioning firms to win.

Clarity on Project Management

As workers went remote during the pandemic, keeping projects on track became a great concern. Coordinating with clients and keeping teams connected virtually was a new concept and firms needed to come up with a project delivery system that focused on meeting client needs. 2020 did not allow for focusing on enhancing project management best practices or finding experienced talent. Based on the survey results of the 42^nd Annual Deltek Clarity A&E Study, going forward, firms appear to be getting more serious about project management. Firms cannot afford to have project managers (PMs) without the necessary training, and a clearly defined process for PMs will help improve project success. Moreover, visibility into and better understanding of project financials can help PMs analyze performance and manage projects proactively while integrating with accounting staff.

Clarity on Human Capital Management

According to this year’s Deltek Clarity A&E Study, Human Capital Management (HCM) KPI tracking decreased overall in 2020 most likely because managers were having to support a remote workforce. Talent acquisition continues to be a top HCM challenge and firms need to find the right balance between in-office and remote workforce practices. Any steps that firms can take to help make the work/life balance more attractive will benefit future recruiting efforts particularly after a year of remote working. Additionally, investments in talent acquisition and performance management tools will help to tackle the ongoing challenges of recruiting, onboarding and retaining quality staff.

The 42nd Annual Deltek Clarity A&E Study Reports Positive Conditions

Even after a very challenging year, the industry outlook and market conditions are positive based on this year’s Deltek Clarity Study. In order to maintain financial stability and keep projects on track, the study shows that A&E firms focused on the fundamentals and stayed close to their clients. From the experience of this past year, new opportunities for improvement have presented themselves across the board. Firms have shown an interest in investing in the training and development of their PMs which will greatly impact project profitability. Realigning strategic marketing initiatives to incorporate virtual interactions when face-to-face are not always feasible will help firms continue to connect with their clients. Furthermore, firms began to provide remote and flexible work options for their staff which going forward will only encourage retention and attract new talent.

Financial statement data is vital for leadership teams. This data is the basis for measuring firm performance and influencing decisions regarding the firm’s future. There are several financial metrics that businesses track and rely on. Based on the findings of the 41^st Annual Deltek Clarity A&E Report, operating profit on net revenue has increased for ten years consecutively to 15.8%. This is a 1.4-point jump year-over-year. A variety of other important metrics were addressed in this year’s Clarity report as well. The Clarity report reveals where things measured up for 2019.

Top Financial Challenges

The financial challenges have remained similar year-over-year. This year the trend is towards challenges with increasing profitability, finding and retaining qualified staff, and managing firm growth. Although, finding qualified personnel and keeping turnover low is second to increasing profitability. It is also noteworthy that qualified staff is at the top of the list for greater than half of the respondents. Cash flow is floating in the ranks, but it seems that firms are managing it better than in years past. The unpredictable spending environment was only at 11% for 2019, though that is likely to change given the challenges many firms faced in 2020.

Building on Success

While there is economic uncertainty in the year 2020, the results show that firms strengthened their operations in 2019. Operating profit continues to rise steadily, as it has over the last decade. Of note, small businesses saw a strong increase, rising to 15.9% operating profit, up 3.5% from the prior year. The net labor multiplier has seen a minor increase as well, reaching 3.03 last year. That’s the highest multiplier measured for the industry in ten years.

Another significant metric tracked by firms is the utilization rate. It is calculated as cost of labor charged divided by total labor cost. This metric remained steady with the prior two years, except for Architecture firms that showed an increase of 2.3% points year-over-year. Employee retention is a factor within this metric. Firms with higher utilization also tend to show lower turnover rates as well as higher net revenue by employee. Does this show us that working employees are happy employees? Findings will show that investments in technology and training can keep employees engaged and productive in producing revenue.

Net revenue per employee is yet another metric to see a positive increase. This could be attributed again to the investment in technology and training, an already high productivity amongst employees, increased rates, or possibly better efficiency driving projects to completion. Since obtaining qualified staff remains difficult, firms are working with existing teams to accomplish more. Burn-out should be a consideration and cutting associated costs or wages could be disadvantageous.

With employee cost being a possible factor in retention it is important to track trends and analyze total employee cost as a metric. This is calculated as the sum of total labor and other labor related costs, (such as fringe benefits and taxes but excluding bonuses) divided by the average number of employees during a year. This returned data shows that there was not an overall noticeable change. Payroll expenses and employee numbers increased at higher percentages which in turn drove the decrease in overall cost. Where the year prior it had showed a small decline, we may see a more drastic change in 2020.

The average collection period calculation divides accounts receivable by annual total revenue, multiplied by 365. This is an important metric for cash flow stability and deserves a great deal of attention. There has been small improvement or decline in average days amongst all firms. In comparison, small businesses and high performers stand out as having notably improved. It is important to stay on top of the outstanding accounts receivable to maintain cash flow performance stability.

Preparing for the Future 

A&E firms have largely agreed that business process improvements and project management training have a strong impact on a firm’s financial health. In addition to those areas, better forecasting should continue to be a top focus area. Addressing and improving these key components can be the key to continued success, even in difficult and uncertain economic times. To read more about financial statement findings, visit the full Clarity report. 

Human Capital Management (HCM) is a vital process that must be taken seriously for firms to be successful. There are many aspects to HCM from talent acquisition, to employee learning and professional development to succession planning. Based on the findings of the 41^st Annual Deltek Clarity A&E Report, talent acquisition remains a major challenge for A&E firms and they must embrace technology and improve practices to attract the best candidates. This year’s Clarity report also addressed a variety of other hot HCM topics for A&E firms.

Tracked KPIs for Human Capital Management

According to the results of the report, the top four KPIs tracked by A&E firms included revenue per full-time equivalent (FTE), voluntary turnover, involuntary turnover, and employee retention. Identifying these particular KPIs shows that firms are concerned with retaining employees once they are hired. As a matter of fact, 74% of firms tracked revenue per FTE which indicates that financial-related metrics are being connected to HCM. However, only a minority of firms tracked other financial-related metrics. Those firms willing to look at the whole hiring and retention process will ultimately have less costly HCM systems thus making them more successful.

Managing Talent

Seeing that the top KPIs tracked are regarding turnover, it is no surprise that employers continue to focus on their initiatives for managing talent. The report stated that the top two talent management initiatives remained the same, develop more formal career development programs and create/improve succession and career development planning. Creating and improving mentorship programs moved to the third spot going from 28% to 45%. It is becoming clear to firms that knowledge must be transferred to those employees with less experience if they are to continue operating successfully. Unfortunately, however, only 10% of firms prioritized investing in a HCM solution even though 40% of firms currently use outdated HR solutions.

Surveys of Employee Engagement

Again, focused on the topic of retention, this annual Clarity report addressed employee engagement surveys. The results from the report indicated that 81% of firms conduct employee exit interviews and surveys. Only 60% of firms stated that they do annual employee surveys which means that the opportunity to address employee concerns is often missed. If those concerns were heard and addressed, then turnover could be reduced. Gauging employee sentiment is important to keep retention high so firms should move away from more traditional methods of survey towards more frequent survey models.

Talent Acquisition

Back to the issue of talent acquisition, the top talent acquisition initiative reported in the survey was improving the perception of the firm (54%) which is important since reputation helps attract the best candidates. Additionally, 41% of respondents picked improving onboarding processes and procedures which went up from 37% the prior year. On the other hand, the report showed that only 40% of firms were considering an enhanced compensation offering. Besides compensation, firms should consider leveraging technology to offer flexible/remote work options to attract candidates.

Firms Care About Human Capital Management

Despite a tough labor market, it does appear that A&E firms continue to improve their HCM processes. Acquiring and retaining top talent remains a priority for firms. They must continue to improve talent acquisition by tracking KPIs, considering enhanced compensation and leveraging technology. There should also be focus on succession planning and career development to ensure employee engagement and retention. For more detailed information on the 41^st Annual Deltek Clarity A&E Report, review it in full.

Projects are the bread and butter of A&E firms and well executed ones are an absolute necessity to remain competitive. Based on the results of the 41^st Annual Deltek Clarity Report, A&E firms are aware of the need for project management responsibilities to be more clearly defined. Project information processes must be improved and there should be more investment in project manager (PM) training. Additionally, PMs require more visibility into KPIs to meet performance expectations. Here are some snippets from this year’s report.

Project Management Challenges

The 41^st Deltek Clarity Report showed the top three project management challenges facing firms to be the same for the third straight year. Those challenges are inexperienced PMs, staff shortages and competing priorities. PMs are at the center of project management, so they need to be better trained and be knowledgeable of firm and industry wide best practices. For firms to deliver successful projects, PMs across all projects should be keenly aware of their responsibilities. They should also become experts in their practice and to bring in other members that complement the team.

Project Status

According to this year’s report, the number of projects that came in on or under budget is slightly higher than last year. With a six-percentage point increase to 72% for architecture firms and high performers coming in with 75% of projects on target or under budget, project status appears positive. Additionally, two-thirds of projects were recorded as being current or ahead of schedule which is up two percentage points from last year. Visibility into project financials and KPIs plus targeted PM training positively impacts project execution.

Tracked KPIs for Project Management

In the survey, and consistent with last year, most A&E firms track profitability (92%) and net revenue (91%). Next is average collection period (87%) and multipliers (80%). The least-tracked KPIs remained on-time delivery, schedule variance and earned value management. The report again indicated, based on these findings, that there was a need for greater project visibility. Increasing efforts to track those KPIs would in fact improve project success, business performance and client satisfaction. In particular, the failure to track schedule variance would be reflected in the percentage of projects determined to be behind schedule.

Measuring Client Satisfaction

Based on the 41^st Deltek Clarity Report, 54% of surveyed firms do measure client satisfaction. The majority of those which are not currently doing so are considering it for the coming year. Engineering firms are more inclined to evaluate client satisfaction, and the larger the business, the more likely it is considered. Of those firms that measure client satisfaction, 58% do so for all projects. Firms use a variety of means such as in person to electronic surveys. While the executive team is usually in charge of contacting clients (50%), large firms rely on the PMs (56%) to monitor client satisfaction. Lastly, firms that do not regularly measure client satisfaction will not be very effective with process improvement.

Well Executed Projects

As seen in the 41^st Annual Deltek Clarity Report, A&E firms understand that improving project management training and providing access to KPIs will lead to improved project performance. Additionally, leveraging tools to streamline project delivery and investing in both PMs and the whole project team will make the process much more efficient. When projects are well executed, clients are likely more satisfied, and firms earn repeat business. This ultimately keeps firms competitive in the A&E industry.

“The only constant in life is change.” In the business development world, truer words have never been spoken. The 41^st Annual A&E Deltek Clarity Report was conducted at the beginning of 2020 and shows how companies performed during the 2019 fiscal year. Since then, much has changed in the world. The United States is officially in a recession - defined as two consecutive quarters of negative economic growth. Recessions in the A&E industry have proven to be a high-pressure exercise in change management. So, what can we learn from the Clarity report and also from previous recessions in the A&E industry?

Business Development Trend Challenges

The Clarity report showed that challenges from a few years ago remain the same. Time is always a challenge, especially finding time to nurture client relationships. Competition for work continues to get tighter and many firms still struggle to identify new prospects. The A&E industry is overall accustomed to in-person interactions. That dynamic has changed drastically in 2020, requiring firms to identify new ways to develop connections and build relationships.

Getting into Position

Firms that participated in the study were asked to share in which markets they expect their firm’s position to grow, tread, or decline. Over the next 18 months, the transportation market takes the lead at 67% of firms expecting to grow there. Next up is the water/wastewater/stormwater market, followed by the health care market. Firms can remain flexible and be ready for a market shift given the election year and the global pandemic. Market research is always important, and now proves this notion even more.

Tracking the Hit Rate

The Clarity report shows that there’s room for improvement in how firms can use hit rate as a valuable metric. The six-year trend has varied from a 40% - 50% hit rate. Recently, more small and medium-sized firms have formalized a go/no go process, but consistency may be the biggest challenge. Formalizing the system can streamline processes, dedicate resources effectively, and drive the hit rate up. Firms should push business development teams to focus on quality of pursuits, rather than quantity. This is even more important when resources are limited to avoid burnout.

Bringing in the Work

As seen in the 41^st Annual Deltek Clarity report, most roles within a firm have some level of responsibility for business development. Executive teams take the lead on the responsibility along with business development staff if that is an option. Marketing groups seem to lead some efforts and the seller/doer model is common in A&E firms. Regardless of who is bringing in the business, only 41% of firms have a formal business development process. Streamlined processes could ensure teams are working efficiently and communicating effectively.

As part of broader marketing efforts, the study asked about marketing techniques for the first time. The survey showed social media posts are the primary marketing technique used by 87% of firms. Traditional trade shows and exhibits are a primary technique for 65% of firms. From there, thought leadership and content marketing are of importance as this showcases the industry experts. This will be a good one to track year after year to see where the trends take us. The survey also asked about the importance of these techniques over the next five years. Social media remains at the top, followed by thought leadership. Trade shows and exhibits surprisingly bump down to the number four spot. In today’s marketing, focusing on your online presence is even more critical.

The Outlook for Business Development

Change brings opportunities. Now more than ever, business development teams should concentrate on strategic planning to narrow in on how to refocus existing business opportunities and develop new business prospects. Firms focused on being flexible and adaptable will continue to flourish in our ever-changing world.

Every year, Deltek collaborates with ACEC, ACEC Canada, AIA and SMPS to conduct a study to measure the health of the AE industry. The 41^st Deltek AE Clarity Report provides a comprehensive assessment of the 2019 performance of AE firms. Furthermore, the study collected responses from more than 415 firms of all sizes within the AE industry. While many of you will eventually read over the findings, here is a summary of what you will discover in detail.

Clarity on AE Technology Trends

With no surprise, technology is a leading focus for AE firms. It seems like this is a trend every year, and it is now becoming even more important for AE firms to invest in technology to be competitive. Surprisingly, augmented and virtual reality is driving a deeper interest into technology investments for AE firms. Even more, firms that have been challenged by the costs of emerging technologies are finding them more affordable as they become more mainstream. According to responses from the Deltek Clarity survey, firms have accepted that the cost of investing in technology has a significant and beneficial impact on the efficiency of their operations.

Clarity on Financial Statements

2019 proved to be another great year for the AE industry in regard to financial performance. The report explains that over the past 10 years, the financial stability of the AE industry has remained strong and has shown growth. While many of the core metrics measuring financial strength demonstrate small changes from year to year, the changes are continuously positive. A significant finding is that operating profit on net revenue and net fixed assets per employee did rise in 2019. Furthermore, the benchmarks for operating profit on net revenue and net labor both surpassed the high performer thresholds which backs the findings of financial stability in the AE industry.

Clarity on Business Development

This section has some interesting findings. Win rates were down and so was revenue from the firm’s top three clients. However, there may be some factors that can explain these results. Is it because firms are lacking a formal go/no go process to improve new business pursuits, or are firms pursuing business in new markets? Are your firm’s top three clients doing less work? Perhaps it is a combination of all these things. But one thing remains certain, that business development continues to be a challenge for AE firms.

Clarity on Project Management

What, what, what? The 41^st Deltek Clarity Report found that AE firms, which are project-based businesses, have recognized they need to improve their project management capabilities. Yes, you read that right. Many AE firms are reporting they need to better define responsibilities and processes, develop better practices, and invest in project management training. How fantastic that AE firms are recognizing that project management and delivery is hindering the overall performance of their firm and acknowledging there is a need for change.

Clarity on Human Capital Management

Human Capital Management is a not a problem unique to the AE industry, and it affects nearly every profession. For AE firms, talent acquisition is the top challenge leaders face each year. Since a firm is only as good as the people it employs, acquiring and retaining top talent is essential to staying competitive. Unfortunately, talent acquisition is going to continue to be a challenge for AE firms since the number of available experts is limited. Also, AE firms continue to fall short due to lack of succession planning. This is something AE firms should evaluate as we approach a generational change and baby boomer retirements.

Learn More with the 41^st Deltek Clarity Report

For many, the Annual Deltek AE Clarity Report is a valuable tool used to benchmark the performance of your firm. It’s important to keep in mind that using this report from 2019 to compare to your current fiscal year of 2020 may give you skewed results as the global pandemic’s effects are still unseen and predicting the impact is nearly impossible. Good news though, you can still compare your 2019 results against the report findings, and Deltek plans on releasing the 42^nd Annual Clarity Report in 2021, which will most certainly shine light on the impact of the global pandemic.

Summary of Human Capital Management in 40th Annual Deltek AE Clarity Report

The results of the 40^th Annual Deltek AE Clarity Report regarding Human Capital Management (HCM) indicate similar trends from the past few years. There continues to be a tight labor market, and firms still struggle with finding qualified candidates. With the talent that they do hire, firms are working to engage their employees especially by offering better career development which ensures retention. Let’s take a look at some of the key findings regarding HCM.

Talent Acquisition Challenges

The top three challenges firms are dealing with regarding talent acquisition are the availability of good candidates in the marketplace, the ability to offer competitive compensation and matching qualified candidates to open positions. Continuously nurturing qualified talent is must in this competitive talent pool. Firms must also take a hard look at their compensation plan to ensure they can recruit the desired staff to fill open positions. Utilizing a talent management software such as Deltek Talent Management will help with these talent acquisition needs.

Issues Regarding Managing Talent

Succession planning, employee engagement and performance management seem to be the primary concerns for firms regarding managing talent. Unfortunately, the report showed that only 45% of participating firms in the survey had succession plans in place. Lower on the priority list for firms were learning and development and recognition. Both of these actually go a long way towards improving employee engagement and should be looked at more closely. Therefore, it is wise to keep in mind that performance management is easily trackable using a talent management software.

Developing Talent

It is clear from the study that firms are in fact encouraging the development of talent that they are able to recruit. 75% of firms reported that coaching and mentoring are used to develop their talent with 54% using external education programs. 80% of firms prioritize professional licenses with 77% making conference attendance a focus. With the addition of 76% endorsing professional certifications and 72% offering continuing education reimbursement, the results show that firms are interested in investing in their talent which is always a plus!

Human Capital Should be Smartly Managed

Having the best talent in place now and a plan for the future is the secret to success for any firm especially project-based firms. With the constant flux in project management, talent needs to be qualified, available and engaged. Additionally, learning and development is crucial to not only keep employees retained but to ensure that projects are run as efficiently as possible. For a more detailed look at the HCM results from the 40^th Annual Report available in the link below.