Tuesday, July 15, 2008

The Changing Business Landscape

When tracking business trends, the first inclination is to look at the numbers. But what people are thinking matters more because that's what ultimately drives actions. Case in point: The most recent statistics available from PSMJ indicate that the A/E business as a whole has weathered the current economic downturn fairly well. But a different picture emerges from their annual CEO Roundtable.

At the most recent roundtable, CEOs were asked to identify their top challenges for 2008. Here are the top seven:

  1. Making sure we keep our pipeline full of new work in the face of economic slowdown
  2. Keeping cash flowing while our clients operating expenses rise sharply
  3. Protecting the investment that we've made in young staff by providing them with interesting work and a solid career path
  4. Clients seem to be taking forever to pay our invoices
  5. Our PMs are not getting paid enough for change orders
  6. Figuring out how to diversify our service offerings and client base to mitigate economic risk
  7. Sustaining the growth we've experienced over the last few years

Notable by its absence is any mention of the difficulty of finding qualified staff. This has been the top concern among A/E firm principals for the last few years according to surveys by ZweigWhite and ACEC. That doesn't mean the problem has gone away, although many firms are laying off staff. But it does suggest a substantial shift in thinking in light of current economic conditions--even among firms that are still doing well.

Downturns do have their benefits. They tend to force us to reflect on our core strategy and operational practices, making needed changes that might be neglected in good times. Granted, some firms take reactionary steps that are poor choices for the long term. But the best firms will often emerge even stronger from times like these. So what are you thinking about the business these days?

3 comments:

Ed said...

Mel,

Interesting stuff...my contention/response would be that A/E firm leaders don't have to worry about finding qualified staff right now because they know their colleagues are downsizing and putting good people on the street.

But it is good fodder for discussion. I'll be curious to see what others think.

Ed Hannan
http://psmj.blogspot.com

Mel Lester said...

Ed,

I certainly don't disagree with your point about staffing being less a concern in our current economy. My main hypothesis (perhaps not stated clearly enough) is that perceptions about the business may have turned more dramatically than the business itself. Most of my clients continue to do quite well, but they are still anxious about the not-too-distant future. Your organization's own numbers through 2007 do not suggest a significant downturn in our business overall (at least a few months ago).

So is the apparent shift in priorities among CEOs based on market realties or market uncertainties? I suggest more of the latter. As we continue to hear more bad news about the economy, it's natural to assume it will affect our firm's business even if it hasn't yet. So some are probably sitting tight on new hires even if they're currently short-staffed.

Do recent layoffs substantially improve the availability of talent? That's debatable since firms usually don't let their better performers go until things really get bad. There are certainly more people available, but they may not assuage the long-standing concern about "finding enough good people."

Thanks for responding. I appreciate the dialogue!

Mel

Justin G. Roy said...

Mel,

Great post. I have to admit, I am a bit surprised that finding quality staff was not included. Though we are in an economic downturn, staffing your firm with the right people is just as important. I think there has been a shift from we-need-bodies to we-need-top-talent.

I agree that some firms are downsizing, but unless they are going out of business, I would be shocked if they are asking the best of the best in their firm to leave. Granted some do, however, I would question why an Architecture or Engineering firm would let go of a rainmaker or seller-doer at this point in the game.

As a recruiter for the A/E industry, I find most A/E firms are looking to hire at this level right now and it is getting quite difficult to find. Not only are you talking about a type of individual who is rare in the industry, but add that to the fact that most firms are holding on to these people pretty tight.

- Justin G. Roy