7 min read
In collaboration with the American Council of Engineering Companies (ACEC), Association of Consulting Engineering Companies Canada, American Institute of Architects (AIA), and Society for Marketing Professional Services (SMS), the software company, Deltek recently released the results of its 43rd annual report, Clarity: Architecture & Engineering Industry Study.
|
Key Takeaways
|
The survey included more than 540 North American A&E firms to analyze key performance indicators and market conditions to identify the most impactful contemporary trends in the industry.
Top Trends in the A&E Industry for 2024
1. Growing Pipelines and Revenue
Deltek's survey revealed an optimistic outlook of the A&E industry's currently rich market environment with increased client spending and expanding project volume. Demand is high, and firms predict an average of 17.6% growth in net revenue. According to Deltek's historical survey data, this is the highest growth forecast in a decade.
This type of potential growth means that firms will have access to all kinds of opportunities. This is great news, but it's important to remember that some opportunities are more valuable than others and certain opportunities are more relevant to your firm's future vision and goals than others. Be discerning about the types of clients and types of jobs you take on, keeping a close eye on which revenue channels are most profitable for your firm.
Additionally, with the increasing work volume, it will become necessary to increase capacity. This might mean bringing on more employees, improving efficiencies through automation and technology, or even expanding your office space.
With the growth, recognize that you'll be facing an increase in competition, as other firms grow alongside yours. Maintain focus on your firm's unique value proposition. Plus, remember that each client is dear, and continue to nurture relationships with your client base.
Read More: How To Know If Your Engineering Firm Needs CFO Services
2. Staffing Challenges
Financial challenges in the A&E industry tend to remain fairly consistent each year. This year, however, the challenge of finding and retaining qualified staff jumped into first position with 44% of survey participants listing it as their number-one concern and 23% listing it as their second-highest priority challenge. With an average increase in employee turnover of 13.6% across all firms, it's no surprise that staffing challenges have become a serious problem.
High turnover rates not only increase expenses with the direct cost of replacing an employee but also through indirect costs associated with the lag in productivity and drop in morale that occurs when an existing employee leaves.
Additionally, high turnover makes keeping up with increasing demand and growth while maintaining a high standard of service increasingly difficult. With too few employees and even fewer experienced employees, it can be difficult to deliver services efficiently and effectively while keeping clients satisfied.
Staffing challenges will likely continue into the upcoming year, which means that business leaders need to take action to attract new, talented employees while decreasing turnover and improving employee retention. This will likely mean increasing the amount budgeted for labor costs including hiring and onboarding, employee pay and benefits, and incentive packages. Additionally, A&E firms can look to creative ways to attract employees such as offering attractive benefits packages, hybrid offices, and flexible hours.
Additionally, A&E firms should look into utilizing technology to improve automation and increase operational efficiency in order to decrease some of the burden felt by existing employees as a result of turnover.
The Top 6 KPI Charts That Every A&E Firm Should Be Tracking
The AEC Scorecard™: The only scorecard designed for Architecture & Engineering leaders to make profit-driving decisions.
3. Improving Services, Deliverables, and Workflow With Technology
Investing in a range of technologies designed to improve core business functions in A&E firms, such as firm management and project management software, improves communication, team interaction, and workflow. These technologies can increase productivity and profitability by saving resources with greater efficiencies.
Additionally, firms aim to use emerging technologies and the subsequent workflow improvement and productivity increases to help alleviate the related challenges presented by staffing shortages, high turnover, and the subsequent increase in employee costs.
From most to least popular, the specific technologies trending with A&E firms in 2024 include:
- Geo Location
- Augmented/Virtual Reality
- The Internet of Things (IoT)
- Big Data
- Data Science
- Artificial Intelligence
- Digital Twins
- Machine Learning
- Robotic Process Automation (RPA)
- Wearable Technology
- Natural Language Processing
- Blockchain
Despite the benefits of implementing new technology, investments in tech only generate an ROI when the technology is implemented and used properly. Fifty-two percent of firms do not feel confident in their ability to implement new software systems, and most A&E firms report that a lack of time to invest in learning new technology is the primary challenge and barrier to utilizing new tech in their firms. Behind time for learning, firms report that other major challenges to implementing emerging technology include:
- Costs
- Identifying and prioritizing applicable technologies
- Lacking internal expertise
- Educating employees regarding trends
- Lack of technology leadership and buy-in
- Lack of corporate openness
- Buy-in from leadership
The primary solution to these challenges is for business leaders to find time to prioritize new tech in their firms while devising effective strategies for implementation and use that include team leads, training sessions, and complete integration into the company's policies and procedures.
4. Increasing Automation With More Integrations
Despite the enthusiasm behind new technology, the industry still largely relies on data entry across departments including operations and resource management (71% completely to moderately reliant), accounting and finance (69%), legal (43%), marketing (65%), administrative and management (76%), client and customer experience (28%), procurement (56%), sales (61%), human resources (63%), research and development (53%), and IT support (39%).
While some firms lack the tools to increase automation in these departments, others are simply not fully utilizing the technology they already have at their disposal. Firms can improve automation, save time, save money, and increase efficiency by maximizing the potential of their existing software tools through easy integrations in addition to increasing the automation tools they are using.
For example, most A&E leaders do not realize that their existing bookkeeping and accounting software systems (such as QuickBooks or Sage Intacct) likely offer a wide array of easily integrated applications that can streamline automation throughout the organization, automating not just financial data entry but non-financial data entry, as well.
Read More: How Much Should My Architecture Firm Pay for Controller Services?
5. Strategic Performance Analysis
With growth, increased demand, new technology implementation, and the challenges of staffing shortages, it is essential that A&E firm leaders zero in on productivity and performance analysis. There are millions of different metrics you could potentially track, but it is best to focus on the KPIs that are most vital to your business and its goals. Track KPIs for your business as a whole, as well as on a more granular basis, such as by individual project, client, job type, department, or employee.
In the A&E industry, you should be monitoring and setting goals for metrics such as:
- Net revenue
- Profitability
- Average collection period
- Multipliers
- Effective billing rate
- Cost variance
- Estimate to complete
- Estimate at complete
- Client satisfaction
- On-time delivery
- Schedule variance
- Earned value management
- Projects on or under budget
- Projects on or ahead of schedule
- Win rate
- Capture rate
- Proposal volume
These kinds of KPIs will help to keep all of your projects on track - and your entire firm on track, as a result.
Outsourced Accounting for A&E Firms: Discover How to Drive Profitability and Growth in A&E Firms
With staffing shortages and high turnover already creating serious challenges for A&E firms, there's no reason to add to the burden by managing an in-house, back-office staff. A&E firms can solve a myriad of issues such as staffing, growth, and automation challenges with one, simple solution: outsourced accounting.
With the right outsourced client advisory service provider, your firm's back office will be well-managed and fully integrated organization-wide with automated technologies designed to help you measure, track, and improve performance and productivity, keep up with increasing client demand, and bolster your human capital management strategy to improve employee retention and attract top talent to your firm.
An outsourced accounting firm can help you overcome trending challenges, take advantage of trending opportunities, and maximize your A&E firm's profits in 2024.
