The business environment for A&E firm is changing due to growing competition, fee pressure, technology advances and hybrid work arrangements. Most A&E firms struggle to adapt to the fast pace of change. In working with A&E firms of every size and discipline all over the U.S. and Canada, I see 5 main challenges that are causing firms to fail to achieve their strategic goals and financial targets.  

I would like to propose some unconventional “solutions” to these problems. Hopefully I can stir up some good discussion and motivate some firms to think outside the box: 

CHALLENGE 1 – DIFFICULTY HIRING AND RETAINING STAFF 

This has been a problem for many years in the A&E industry and most firms have tried a lot of different strategies to find talent and retain employees. This challenge causes many other problems including having to turn away work, burning out employees with long hours, failure to develop employees because of tight schedules, hiring mediocre employees, and project issues due to inexperience and turnover.  

Two alternative ways to consider this issue include developing employees faster, and limiting the types of projects you agree to take.  

Many companies outside of the A&E industry, such as tech companies, start employees in “management” training right out of college. Most firms in the A&E industry wait 5-8 years to start any kind of leadership or business training needed to be an effective project manager (PM). In my experience, initiating business training at an earlier stage in one’s career fosters loyalty, develops crucial skill sets, and greatly impacts the success of projects. 

Also, I believe it does not make sense to hire mediocre employees to work on unprofitable projects with bad clients. Many firms are spread so thin, they ignore their best clients while tending to their most demanding, and often, least profitable clients. By weeding out your lowest profit clients and projects, you can take some of the pressure off your employees and end up with higher profits, and ultimately, happier clients and employees. 

CHALLENGE 2 – COMMODITIZED SERVICES 

The A&E industry has become commoditized due to fee pressures and an inability to differentiate services. When firms compete without clear differentiation, price becomes the most important factor in selection. 

As a result, many firms are forced to compete on price. This is often because they are focused more on the solutions they deliver, and the technical aspects of their work, and not the outcomes and results the clients want or need for their projects. By developing a Winning Advantage that clearly differentiates your services from your competitors based on value, you can justify higher fees and improve your ability to win in a competitive situation, or avoid one altogether. 

By training your team to sell on value, rather than price, you can get better clients that appreciate your work and raise your prices. Check out my book, RAISE Your Value: 5 Steps for Architecture and Engineering Firms to Uncover Hidden Value, Design a Winning Advantage and Charge More, to learn my 5-Step process to develop your Unique Value Proposition (UVP) and overcome commoditization and competition.  

CHALLENGE 3 – PROJECT MANAGERS (PMs) NOT TRAINED FOR SUCCESS 

PMs in the A&E industry are challenged with having many responsibilities that they are not trained to be successful at including business development, project financial management, staff supervision and client relationship management. None of these essential business skills are taught in college. To add to this, many firms lack structured processes and systems, and fail to hold employees accountable to ensure consistency, quality and predictability of project success.  

Developing PMs is often put on the back burner because of the lack of time discussed above in challenge number 1 – staff shortages and turnover. However, providing the right training can help make up for staff shortages by eliminating wasted time, building confidence in PMs, reducing project mistakes and disputes, and increasing revenue by controlling scope creep and reducing write-offs.  

Many of your current challenges with project profitability can be addressed with business training focused on daily behaviors and implementing processes and systems with accountability. It is almost impossible to hold a PM accountable if they are not adept and confident in reading project financial reports and using systems effectively to control project costs. Check out how our Find the Lost Dollars business management training program has helped hundreds of A&E firms address this challenge and increase profitability in 12 months or less. 

CHALLENGE 4 – NO STRATEGY TO GET BETTER CLIENTS 

The pursuit of new work in the A&E industry is often not strategic in nature. Many firms continue to work with unprofitable clients that don’t appreciate their work, refuse to approve change orders, and delay paying on time. This does not make good business sense, and is leading to low profit margins and possibly, employee turnover.  

Selecting clients that value your solutions and are willing to pay more to have a trusted partner on their team is key to growing and thriving financially. 

Most firms could fire the bottom 20 percent of their clients, which would relieve their struggles to find staff and probably increase their revenues and profits in a year or less. 

Developing and implementing an intentional strategy to get better clients, rather than the pursuit of revenue, is a game changer and will elevate your firm faster than almost any other strategy you can execute. 

CHALLENGE 5 – PERFORMANCE NOT REWARDED ON THE RIGHT METRICS 

Incentive programs based on discretionary factors, or the wrong metrics, will have the opposite effect than desired. Performance programs based on annual reviews, discretionary bonuses and office or team-based metrics will discourage employees from performing higher or reward the wrong behavior. 

Annual reviews should be a thing of the past. No one likes them and they often focus on behaviors or problems that happened months earlier, rather than instant feedback which is more effective at teaching and helping employees learn from their mistakes. 

Discretionary bonuses disempower employees because they believe there is little they can do to influence their own compensation. They see poorly performing staff get the same bonuses they do, and often assume it’s because the boss likes them better. 

Using metrics based on the how the team or office is performing does not incentivize employees to collaborate or raise their individual efforts. Using a hybrid metric, based on the performance of the entire firm, an employee’s team and achievement of their own goals, will create more collaboration, teamwork and incentive personal performance. It also improves your ability to hold employees accountable and makes it easier to be transparent with firm financial data. 

Sometimes you may need to evaluate your organizational structure and how you report financial data to even the playing field. For example, a firm organized around teams will discourage sharing of resources. 

OVERCOMING THE CHALLENGES 

To overcome these 5 challenges, you will need to do an assessment of what is going on in your firm that is causing your metrics to be less than desired. I recommend asking a series of questions designed to uncover where people, processes and systems do not support your teams.  

If you need help assessing where you can be stronger, consider my Business Management Assessment that will provide a wide range of data and feedback from your employees and enable you to quickly break down where problems exist and get suggestions for addressing them. 

At AEC Business Solutions, we are passionate about helping our clients solve challenges just like these and have lots of ideas that we would love to share with you and your team.