Friday, December 18, 2009

ABI Ends Up and Down Year on a Down Note

The American Institute of Architects' Architecture Billings Index (ABI) dropped more than three points in November, proving itself unable to sustain the positive momentum it generated the previous month, when it reached its highest mark since August 2008.

The November rating of 42.8 fell from its October rating of 46.1 and was the lowest rating since 41.7 in August (September's rating was 43.1). That August 2008 watermark came just before the fall 2008 credit crunch affected not only the AEC industry, but the entire economy.

As a leading indicator of construction activity, the ABI reflects the approximate 9- to 12-month lag time between architecture billings and construction spending.

The 42.8 mark indicates a continued decline in the demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry score was 58.5, the same mark as in October.

"There continues to be a lot of uncertainty in the construction industry that likely will delay new projects in the near future," said AIA Chief Economist Kermit Baker. "Perhaps the President's plan calling for loans for small business, funding for instructure projects, and rebates for homeowners making energy-efficient improvements will help speed a recovery in the construction industry."

Anything that would bring a measure of stability to the AEC industry, let alone growth, would be a welcome sign these days. The index was 42.9 in May, dipped to 37.7 in June, increased to 43.1 in July, dipped to 41.7 in August, climbed to 43.1 in September and 46.1 in October, and fell to 42.8 in November.

Numbers that constantly move up and down make it difficult for architecture firms to make strategic decisions with any certainty that their fortunes are turning for the better.

Regional averages were as follows: South (46.4, up from 46.1 in October, 42.7 in September, 44.1 in August, 43.4 in July, and 40.5 in June), Northeast (45.0, up from 44.3 in October, but down from 47.4 in September and 45.2 in August and up from 37.8 in July and 42.8 in June), Midwest (43.7, up from the 43.0 mark where it stayed the previous three months), and West (41.1, down from 42.8 in October, but still up from 36.0 in September, 37.5 in August, 39.7 in July, 39.9 in June, 39.4 in May, and 39.2 in April).

The November ABI breaks down by sector as follows: institutional (47.0, down from 48.7 in October, but up from 43.9 in September and 37.5 in August), multi-family residential (45.8, showing the continued uptick from 45.4 in October, 45.1 in September, 43.4 in August, 40.7 in July, and 42.7 in June), mixed practice (42.8, the highest it has been since July and up from 39.1 in October, 36.3 in September, 41.4 in August, but down from 42.9 in July, 43.5 in June, 44.5 in May, 44.2 in April, and 44.0 in March), and commercial/industrial (40.7, down from 41.7 in October, but up from 39.0 in September, and down from 45.6 in August and 42.9 in July).

Ed

SMPS Announces Call for Entries for 33rd Annual National Marketing Communications Awards Program

The Society for Marketing Professional Services (SMPS) is accepting entries for its 33rd Annual national Marketing Communications Awards (MCA) competition. The MCA Program is the longest-standing, most prestigious awards competition recognizing excellence in marketing communications by professional services firms in the design and building industry. The early-bird entry deadline is March 1, 2010. Both SMPS members and nonmembers are eligible to enter.

Two new entry categories have been added to the MCA Program for 2010: Recruitment & Retention Communications and Social Media. As the name implies, Recruitment & Retention Communications are programs designed to recruit potential and retain current firm employees through print and/or electronic communications. Social Media entries will shed light on how A/E/C firms are using social media tools to provide a platform for collaboration, knowledge sharing, and interaction with clients, partners, employees, and others. Detailed descriptions and submittal requirements for all 20 MCA categories can be found here.

In addition, SMPS is pleased to offer an entry fee discount to small firms with 25 or fewer employees companywide. These changes, based on feedback from past participants, respond to profound shifts in professional services marketing and current economic challenges firms are facing.

Each year, this competitive awards program receives hundreds of entries from around the country and globe. Firms can select among 20 different marketing communications categories, and there is no limit to the number of categories that a firm can enter. Most categories are open to both print and electronic projects. Consistently popular categories over the past few years have been corporate identity, holiday piece, internal communications, promotional campaign, and Web site.

Entries will be evaluated on March 20, 2010, by a jury of experienced architects, engineers, contractors, marketers, business developers, graphics and PR professionals, and industry clients. Jurors use a numerical scoring system based on five criteria in order to evaluate effectiveness and return on investment, in addition to quality, message, and design.

Visit www.smps.org/mca for detailed competition information, including categories and submittal requirements, a comprehensive FAQ, and a downloadable brochure and entry form, plus examples of past winning entries.

Award winners will be announced and honored on July 15 at a black-tie Awards Gala during Build Business: “Reinvent. Retool. Rebound,” the 2010 SMPS National Conference in Boston, MA. Winning entries will be prominently displayed throughout the conference. Industry editors and association executives will select the Best of Show, and all conference attendees can vote for the People’s Choice award. Award winners will be publicized via press releases sent to national industry publications.

Tuesday, December 15, 2009

Social Media in Government Agencies

Our CEO and founder, Frank Stasiowski, passed along this article from Federal Computer Week magazine that looks at using social media in government agencies. Here are some excerpts:

• Interviews with government officials, employees, consultants and interested observers suggest that although the true value of Government 2.0 has yet to be measured or even fully imagined, there will be no turning back the clock to a previous era. Much like the emergence of the World Wide Web some 15 years ago, the latest version of online interaction and information sharing promises to insinuate itself into every corner of government.
• As one of the [Open Government Initiative] directive's key principles, “every agency will be directed to publish and engage the public in their open-government plans,” said Aneesh Chopra, Obama’s chief technology officer. Furthermore, agencies must deliver “a structured schedule of how data will be released to the American people in a machine-readable format.”
• For Godwin of USA.gov, social-media technology will likely lead to government employees and the public working together to solve problems. ... That concept could become the norm governmentwide, Godwin said. “I really see it moving in the future from an outreach to solving mission-related problems together,” she said. “I think it is a long journey. I don’t think we are going to get there in 2010.”
• Institutional hurdles must be addressed before those lofty goals are achieved. For example, some agencies still block access to social-media tools. Concerns about security and employee productivity are the two main reasons for such bans. Agency leaders must balance when information must be kept behind firewalls and when it is acceptable to venture into the public domain with tools such as YouTube and Twitter.
• Ignorance and indifference are other major hurdles for social media, Drapeau said. Agencies will need to offer training that shows how the tools can change the way government employees do their jobs, he added.
• “Part of the problem is [that] the people who are thinking about social media the most are the people who are the most interested in it,” he said. “But there are still a lot of people who this affects, and they don’t really know what’s going on."
• One clear sign that the federal government is committed to increasing the use of social media is the work GSA is doing to create a citizen engagement platform. GSA plans to offer best practices, assistance with selecting social-media tools and perhaps government-hosted technology through the program, said Martha Dorris, GSA’s deputy associate administrator of the Office of Citizen Services.
• “What we’re trying to do is create a program to help other agencies in conducting dialogues with the public,” Dorris said. “We know the open-government directive is coming out very shortly, and agencies are going to be creating plans on how to engage the public in making policy decisions within their agencies.”

Ed

Scary Look at the Recession

Haven't seen this anywhere else on the Web, so I figured I'd share it with you here. It's a month-by-month timeline of how employment rates change by county from 2007 to 2009. Notice how the map gets darker (i.e., unemployment rates increase) as the months pass. Scary stuff.

Ed

2010 SMPS National Marketing Communications Awards (MCA)

Communicating during extraordinary times: Tell your story. Society for Marketing Professional Services is accepting entries for the 2010 Marketing Communications Awards. Recognizing communications innovation by design and building companies, the competition encompasses 20 categories, including brochures, websites, social media. Discounted Entry Deadline: March 1. Details: www.smps.org/mca. Questions: molly@smps.org, 800.292.7677, x231.

Monday, December 7, 2009

Surviving by Strategizing

Good blog post on the Building Design and Construction Building Team 360 blog from over the weekend about AEC strategies and tactics for 2010.

Robert Cassidy offers seven suggestions that AEC firms should do to survive 2010 while waiting for the economy to turn around, which he predicts will happen in either late 2010 or 2011.

Each of the seven is pretty solid advice ("1. Don't do anything stupid. This may seem obvious, but desperate times often lead to stupid decisions, like opening up new offices in so-called 'burgeoning markets,' either geographic or by market sector....Competitors who really do know those markets are already firmly in place and holding on tooth and nail; they won't be satisfied just crushing you, they'll do their best to emulsify you.") but the first three are the best (the other two are "doing well in a lousy economy" and "look to your strengths").

We're all in this mess together, but one resource that can help you navigate through it is PSMJ's 2010 AEC Firm U.S. Market Sector Forecast. It offers advice and insight into how your firm can improve its performance in 2010. Check it out here.

Bad news for the AEC industry

Interesting article this morning on the American Banking News web site that claims research firms are reporting that defaults on U.S. commercial property loans are surging, standing at the worst level in 16 years. The reports also indicate things will worsen in 2010 and 2011.

A report from Real Estate Econometrics states that the percentage of commercial real estate loans in default across the nation has risen to 3.4 percent in the third quarter, rising more than half a percentage point from the second quarter. That 3.4 percent default rate is the highest since 1993, when it stood at a 4.1 percent default rate.

There's a lot more to the article but this is bad news for the AEC industry because as the number of defaults increase, you can expect their lending standards to tighten, making it harder for potential clients to access capital and leaving possible projects on the drawing board.

Wednesday, November 18, 2009

ABI reaches highest mark in more than a year

The American Institute of Architects' Architecture Billings Index (ABI) reached its highest mark since August 2008 with its October rating of 46.1, up sharply from 43.1 in September and 41.7 in August. The August 2008 watermark came just before the fall 2008 credit crunch affected not only the AEC industry, but the entire economy.

As a leading economic indicator of construction activity, the ABI reflects the approximate 9- to 12-month lag time between architecture billings and construction spending.

Even though the ABI has improved for two consecutive months, the October rating of 46.1 indicates a continued decline in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry score was 58.5, following the 59.1 mark in September.

"This news could prove to be an early signal toward a recovery for the design and construction industry," said AIA Chief Economist Kermit Baker. "On the other hand, because we continue to get reports of architecture firms struggling in a competitive marketplace with a continued decline in commercial property values, it is far too early to think we are out of the woods."

While Baker says it is too early to think we have emerged from the economic downturn, two straight months with an improved ABI rating stops the up-and-down pattern of the past several months. The index was 42.9 in May, dipped to 37.7 in June, increased to 43.1 in July, dipped to 41.7 in August, went back up to 43.1 in September and has now improved to 46.1.

Numbers that constantly move up and down make it difficult for architecture firms to make strategic decisions with any certainty that their fortunes are turning for the better. Clearly, two months with improved ABI numbers is not a large enough sample to determine with any certainty if conditions will continue to brighten, but any positive sign is one that will be welcomed by architecture firm leaders.

The new projects score was 58.5 in October, down slightly from 59.1 in September, but both months are ahead of the 55.2 in August, 50.3 in July, and 53.8 in June.

The bright spots regionally were in the South and West, posting their highest numbers in several months while the Midwest held flat for the third straight month and the Northeast dipped.

Regional averages were as follows: South (46.1, up sharply from 42.7 in September, 44.1 in August, 43.4 in July, and 40.5 in June), West (42.8, up sharply from 36.0 in September, 37.5 in August, 39.7 in July, 39.9 in June, 39.4 in May, and 39.2 in April), Midwest (43.0, the third consecutive month at that number), and Northeast (44.3, down from 47.2 in September and 45.2 in August, but up from 37.8 in July and 42.8 in June).

The October ABI breaks down by sector as follows: institutional (48.7, up sharply for the second straight month from 43.9 in September and 37.5 in August), multi-family residential (45.4, up slightly from 45.1 in September, 43.4 in August, 40.7 in July, and 42.7 in June), commercial/industrial (41.7, up from 39.0 in September, bbut down from 45.6 in August and 42.9 in July), and mixed practice (39.1, up from 36.3 in September, but down from 41.4 in August, 42.9 in July, 43.5 in June, 44.5 in May, 44.2 in April, and 44.0 in March).

Ed

Wednesday, October 21, 2009

AIA Architecture Billings Index posts slight improvement

The American Institute of Architects' yo-yoing Architecture Billings Index returned to its July level with its September ABI rating of 43.1, up from 41.7 in August and matching its 43.1 number from two months ago.

That July number was a six-point increase over June, so it's starting to look like August's number represented merely the latest in an ongoing up-and-down pattern that has plagued the ABI for the past several months. The index was 42.9 in May, dipped to 37.7 in June, increased to 43.1 in July, dipped to 41.7 in August, and went back up to 43.1 in September. Any score above 50 indicates an increase in billings.

This type of pattern makes it difficult for architecture firms to make strategic decisions with any certainty that their fortunes are turning for the better.

Then again, the new projects score in August was 59.1, its highest level since September 2007 and up from 55.2 in August, 50.3 in July, and 53.8 in June.

"The fact that inquiries for new projects are so high is an encouraging sign that we may be seeing new construction activity entering the design phase," said AIA Chief Economist Kermit Baker. "But that optimism has to be tempered by the fact that the marketplace is so competitive that firms are broadening their search for new projects, thereby inflating the number of inquiries that they are reporting. However, some larger stimulus-funded building activity should be coming online over the next several months, partially offsetting the steep decline in private commercial construction."

Regional averages were as follows: Northeast (47.2, up from 45.2 in August, 37.8 in July, and 42.8 in June, but still below the 48.3 in May), Midwest (43.0, matching its 43.0 in August but up from 36.9 in July), South (42.7, down from 44.1 in August and 43.4 in July, but up from 40.5 in June), and West (36.0, down from 37.5 in August, 39.7 in July, 39.9 in June, 39.4 in May, and 39.2 in April).

The September ABI breaks down by sector as follows: multi-family residential (45.1, up from 43.4 in August, 40.7 in July and 42.7 in June), institutional (43.9, up sharply from 37.5 in August, 37.1 in July, and 37.0 in June), commercial/industrial (39.0, down sharply from 45.6 in August, 42.9 in July, and 39.5 in June), and mixed practice (36.3, down sharply from 41.4 in August, 42.9 in July, 43.5 in June, 44.5 in May, 44.2 in April, and 44.0 in March).

Ed

Saturday, October 10, 2009

It's funny until someone loses an account

Interesting thing happened this week at PSMJ...for the last several years we've used the same company to do our credit card transaction processing. Their services are behind the scenes and about as commoditized as you can get. Other than the transaction statements they send to our bank, we never hear from them.

We were approached by another transaction processing outfit that is going to deliver this commodity service for lower fees and they demonstrated how they can save us a couple thousand dollars a month. We called the first company to tell them we were switching over at which point we got a message asking us to consider their counter-offer and to give them an opportunity to keep our business. I am not going to consider it and here's why:

First, I am a little angry because I feel like these people have been ripping us off for years. We've been loyal customers, you'd think they'd want to take care of us. When I do business on a commodity service, I want to be made to feel special...like I have a choice. Second, the sales rep for the new company is my boss' nephew - so not only are we getting a special deal from the new company, we're getting it from someone with whom we have a connection.

Remember, don't get fat and happy with your client base. Treat them like gold because no matter what you think, you really have no idea how tenuous your bond may be.

Until next time,

Bruce

Thursday, October 1, 2009

The needless hand-wringing over social media

Has anyone stopped to think that the insistence of some people to make social media a “cornerstone” of a business development or client relationship-building plan like serving Kool-Aid with Steak au poivre at a four-star restaurant? Does anyone really think that a design firm is going to go out of business because its Marketing Director doesn’t have a Facebook page or its PMs are not “tweeting” project status reports to clients?

With a few exceptions, social media has proven to be a very sophisticated toy with some business potential. Even serious business-minded people are using it almost exclusively for social communication – loading Youtube videos of cute pet tricks and finding out who is going to the high school reunion next month. In fact, people using social media for straight-up business communications look awkward and out-of place – like a 40 year-old at a high school dance.

I keep getting frantic messages from people who “ought to know” that we should be doing something about social media…what are we doing about social media? We’re behind in our development of social media! SOMEBODY HURRY UP AND EXPLOIT SOCIAL MEDIA BEFORE IT’S TOO LATE!!!

Relax. In social media ­– as with most technology – it probably doesn’t pay to be an early mover. Unless you can really figure out how to leverage it, you are probably better off standing off to the side and seeing what others are doing. It’s not like a value-add design service where if a competitor gets a leg up it could take you months to catch up. In this communication medium, you can close the gap in a matter of days or a couple of weeks.

So what should you do? Use social media to get to know people better in a non-threatening, casual way. Make notes about what you learn about clients and prospects and integrate this intelligence into your normal business development strategy. Also, listen and ask questions about how your clients and prospects use social media. They – not opportunist “social media” consultants – will be a far better barometer of what you should be doing.

In the meantime, if anyone wants to “friend” me on Facebook – I am out there. You’ll get to hear all about the NFL and my son’s rock band…sorry, no cute pet trick videos.

Until next time,
Bruce

Thursday, September 24, 2009

Why design isn't king anymore

Media blogger Charles Warner wrote in today's Huffington Post that media content is no longer king. Among other things, the proliferation of content of all types of quality on the Web was key to arriving at this point.

Warner goes on to assert that mystery of parsing out the good bits of content has been solved by Google, which has become the largest media company in the world by being an aggregator of content, not an originator, a creator of content. In other words, the content is the commodity - the ability to make sense of the content is the bankable function.

Using Warner's piece as a backdrop, think about how the proliferation of design of all types of quality is commoditizing your business. I hear all the time about firms re-inventing themselves to get into markets that are thriving. In western Canada, The Trade, Investment, and Labour Mobility Agreement (TILMA) is creating a climate in which projects that would have attracted six or seven consultants are now attracting 25 to 30. And for as long as we are in slow recovery, this is going to be more prevalent for the next 12-18 months.

So how do you become the Google of the markets you serve? For starters, you need to become a separator of wheat from chaff for your clients. Make sure your marketing people, your PMs, and your principals are authorities on your clients' businesses. All things (design) being more-or-less equal, your competency as a business partner is what gets and keeps good clients. Once you have established your firm as a business consultant that does design, you'll see significant improvement in your proposal and presentation skills as well as your ability to choose the right clients and projects.

Warner goes on to explain that individual media brands (like Stephen King) don't even need Google...but I will leave turning your firm into the Stephen King of the A/E industry for another day.

Bottom line: let the others worry about commoditization - you should embrace it - and use it to your advantage.


Until next time,

Bruce

Wednesday, September 23, 2009

So much for that ABI turnaround

The American Institute of Architects' Architecture Billings Index gave back some of the increase it registered in July as its August ABI rating was 41.7, down slightly from 43.1 in July. That July number was a six-point increase over June, so while things were a bit sluggish in August, they are still above what they had been in June.

That said, the August numbers represent the continuation of an up-and-down pattern that has plagued the ABI all summer and is indicative of the changing nature of the economy. The index was 42.9 in May, dipped to 37.7 in June, increased to 43.1 in July, and now dipped to 41.7 in August.

This type of pattern makes it difficult for A/E firms to make strategic decisions with any certainty that their fortunes are turning for the better.

Then again, the new projects score in August 21 was 55.2, up from 50.3 in July and above the 53.8 in June.

"While there have been occasional signs of optimism over the last few months, the overwhelming majority of architects are reporting that banks are extremely reluctant to provide financing for projects, and that new equity requirements and conservative appraisals are making it even more difficult for developers to get loans," said AIA Chief Economist Kermit Baker. "Until the anxiety within the financial community eases, these conditions are likely to continue."

Regional averages were as follows: Northeast (45.2, up sharply from 37.8 in July and 42.8 in June, but still below the 48.3 in May and 47.1 in April), South (44.1, up from 43.4 in July and 40.5 in June), Midwest (43.0, up from 36.9 in July), and West (37.5, down from 39.7 in July, 39.9 in June, 39.4 in May, and 39.2 in April).

The August ABI breaks down by sector as follows: commercial/industrial (45.6, up from 42.9 in July and 39.5 in June), multi-family residential (43.4, up from 40.7 in July and 42.7 in June), mixed practice (41.4, down from 42.9 in July, 43.5 in June, 44.5 in May, 44.2 in April, and 44.0 in March), and institutional (37.5, up from 37.1 in July and 37.0 in June).

Ed

Friday, September 18, 2009

A good client and staff recruiting tactic

Earlier this year, the Boston University Mens' Ice Hockey team won the NCAA National Championship. Their long-time coach Jack Parker originally planned to raise his team's championship banner during one of the first home games of the season vs. Notre Dame. Recently Coach Parker changed his mind and opted to raise his banner during a scrimmage game against the US Under-18 Development team.

Why would he do that? The game will be sparsely attended by alumni and fans and the event will likely pass without much media fanfare. Here's why it's a brilliant move:

Many of the players on the US Under-18 Devlopment team are blue-chip college prospects and have not committed to college yet. What better way to showcase the program than to make these players a part of recognizing the achievement of the sport's ultimate goal? What will these players be thinking as they watch BU's championship banner being raised to the home rink's rafters? Do they see themselves on the other bench wondering what it feels like to be a champion?

What's the lesson for A/Es? Start making your successes into targeted recruiting tools. PR is great, placing articles and getting media coverage is important, but you need to look at every excellent thing you do as a direct opportunity to show prospective clients and employees that you are the best. For example, when you win a Design Award, have the celebration at a college where you can recruit top graduates. When you open a new building project, recognize it at a meeting of your clients' affiliated organizations. These are the people that need to see your success and more importantly, envision themselves as an integral part of the next one.

Have a great weekend!

Bruce

Thursday, September 17, 2009

Balfour Beatty to buy Parsons Brinckerhoff

Yes, you read that headline (printed this morning on MarketWatch and Reuters, among others) correctly.

According to an article posted a few minutes ago on Marketwatch,com, the London, England-based engineering firm Balfour Beatty said earlier today that it will acquire Parsons Brinckerhoff for $626 million and will finance the deal with a rights issue.

The acquisition and rights issue, taken together and before exceptional items, are expected to enhance earnings per share in 2011, Balfour Beatty said. The rights issue will be fully underwritten on a three for seven basis and will raise approximately 353 million pounds ($583.19 million U.S.).

"The acquisition of Parsons Brinckerhoff represents the realization of a number of key strategic objectives for Balfour Beatty. In particular, we believe it makes us one of the world's major players in professional services, substantially strengthens our U.S. presence and puts Balfour Beatty in an excellent position to take advantage of increased infrastructure spending," the firm said.

Shares jumped 8.1 percent in London on the news of the deal.

Ed

Tuesday, September 8, 2009

Are you really on the same team with your staff?

It's usually not a good idea to extrapolate flabby sports metaphors to the business world. We are not professional athletes. If we were, we'd all be making a heck of a lot more money...

Today, I am making an exception: I heard an interview this morning with NFL quarterback Tom Brady who was being asked about some recent personnel changes on his team and about how players view the coaches in general. Brady said that its sometimes hard for the players to picture that they and the coaches are on the same side. Makes sense when you think about it - coaches at spend inordinate amounts of time offering criticism of what the players have done, and most coaches at the professional level have not matriculated into School of Sensitivity Training. Brady said that once players get beyond the bad feelings associated with receiving bushels of blunt criticism, it becomes easier to develop a collaborative relationship with them. Of course, there is a catch: a coach decides when a player gets shipped out, thus ending the relationship. And this is not a rare occurrence...in fact, it's how most coach-player relationships end.

Think about your own organization - if all you do is criticize your players the natural progression for them is to assume that you could wake up tomorrow and get rid of them. You could have very productive valuable people on your team who, after some periods of time of hearing nothing but negativity, be convinced that you plan to get rid of them at the first convenient moment. Don't believe me? Do an anonymous poll: Do you think you could be let go from the firm for non-performance this year? I promise you there are more people than you think who believe they could be - even when it could be farthest from the truth.

The first thing you need to do is make it clear that your stars are stars. Second, you need to recognize when people do something good - this is FREE, by the way. Lastly, you need to be transparent - people need to know where they stand and feel confident that you are indeed on the same side. Rather than playing not to lose, you need your people to play to win.

Bruce

Friday, September 4, 2009

Wake me up when September ends

With apologies to Green Day (that's a rock band for all you silverbacks out there) I have to share with you today an example of exactly what not to do when you are out of the office for prolonged periods of time.

This morning, I sent an email to a C-level business consultant who had his Out of Office AutoReply set with the following message:

I am away from my office until October 1 and will have very limited e-mail access. If you need help right away, please call xxx-xxx-xxxx and ask for _______.

Leaving an Out of Office AutoReply like this telling potential clients you will be inaccessible for a month is not a good idea. At the C-level in a client-oriented business, you need to create the perception that you are always available. If I were a client looking to work with this guy's firm and he were my only contact in the organization, I would be inclined to take my business someplace else. I think it's also worth noting that this consultant's business has not exactly been drowning in cash lately.

Here at PSMJ, there is a team of people who have access to each other's email - as well as info@psmj.com and customerservice@psmj.com and we check with other constantly to ensure that no opportunity falls through the cracks -and we're selling $47 books, not trying to win six- and seven-figure design projects. Sure, this is financially driven, but it's also common courtesy.

If you or your bosses do stuff like this, you need to look at a different options.

Have a great Labor Day weekend,

Bruce

Wednesday, September 2, 2009

The AEC industry loses an icon

The AEC industry is mourning the loss of Ralph Peterson, the long-time chairman and CEO of CH2M Hill, who passed away last night at his home in Denver.

We got an e-mail this morning letting us know of Peterson's passing. Peterson has battled cancer for many months. "He loved our company and all of its employees very much. His passion, dedication, and leadership built CH2M Hill into the place that we are all so proud of today. He was an industry icon."

Our thoughts are with the Peterson family, the CH2M family, and Peterson's friends and colleagues who like us are saddened by his passing.

Ed

Monday, August 31, 2009

How 'bout that Cowboys scoreboard?

Here's how you know you are talking about work too much at home...my wife (who is in the financial software industry) and I were talking about the problem of punts hitting the giant overhead scoreboard in the new Cowboys Stadium. Her first reaction: Would using BIM to design the stadium have stopped that from happening?

I am not 100% sure about this, but given that the stadium's designer, Dallas, TX-based HKS Inc. is one of the truly outstanding pioneers in delivering projects using BIM I would think that they probably used it. But that's not the point. The point is that HKS Inc. could have designed the building in crayon on brown paper bags - some punts are still going to hit that scoreboard.

The next question, this one from my 16 year old son: Isn't this the architect's fault? And the answer is no and yes. No because the scoreboard was built to the client's specification - it's 90 feet above the field of play (the NFL requires 85 feet). Yes because all it would have taken is for the designer to have an out-of-work NFL-caliber kicker start jacking balls into the air and figuring out how high the scoreboard really needs to be. Maybe this happened...but I have not heard.

Ultimately, the scoreboard will be raised (I hear the cost of permanently moving the structure will be around $2 million). But what is the real cost? How much does a "do-over" of an NFL play cost - when there is a possibility every time that a player could be severely injured? What about the potential negative press to the Cowboys and to HKS Inc.?

Saving your client these costs and headaches is what separates you from the pack. It gets you repeat work and attracts new clients to you (particularly if you can quantify the savings). Sometimes it's as simple as kicking a few balls into the air.

Until next time,

Bruce

Wednesday, August 19, 2009

ABI shows dramatic turnaround in July

The American Institute of Architects' Architecture Billings Index leaped nearly six points in July to 43.1, signaling an improvement in business conditions.

In fact, the increase more than offset the nearly five-point dip in June. The index was 43.1 in July, 37.7 in June, and 42.9 in May, so the numbers are the best they have been in a long time. Any score above 50 indicates an increase in billings.

The new projects score fell from 53.8 in June to 50.3 in July.

AIA Chief Economist Kermit Baker cautions against getting overly optimistic about the July numbers. "In addition to a very competitive marketplace, architects continue to report that lenders have still not yet fully opened credit lines and that the stimulus funding has so far provided limited project activity for the design community overall," he said.

Regional averages were as follows: South (43.4, up sharply from 40.5 in June), West (39.7, down slightly from 39.9 in June and remaining remarkably consistent over the past several months with 39.4 in May, 39.2 in April, and 36.1 in March), Northeast (37.8, down again from 42.8 in June, 48.3 in May and 47.1 in April), and Midwest (36.9).

The July ABI breaks down by sector as follows: mixed practice (42.9, down from 43.5 in June, 44.5 in May, 44.2 in April, and 44.0 in March), commercial/industrial (42.9, up from 39.5 in June, but down from 43.1 in May), multi-family residential (40.7, down from 42.7 in June, 45.5 in May and 43.2 in April), and institutional (37.1, up slightly from 37.0 in June, but down from 38.0 in May and 43.2 in April).

Ed

Friday, August 14, 2009

Happy Friday!

We've got some good news to report on a summer Friday afternoon.

Our friend and former SMPS National President Donna Corlew landed a job earlier this week as Southeast Regional Marketing Manager with environmental engineering and consulting firm Brown and Caldwell. Donna checked in with us earlier this week to let us know of the good news.

Brown and Caldwell is a 60-year-old firm headquartered in Walnut Creek, California with offices across the country and more than 1,500 employees.

Corlew had been out of work for almost a year after her previous employer closed its Nashville office, forcing her out of a job.

Congratulations, Donna!

Ed

Wednesday, August 12, 2009

HOW TO GROW YOUR FIRM IN THIS “SUDDENLY BETTER” ECONOMY

In a survey this week to 284 CEO members of the DESIGN PROFESSIONALS LEADERSHIP ROUNDTABLE (LinkedIn Group), 39% said things will be BETTER by 12/31, 48% said things will be ABOUT THE SAME, and unlike 3 months ago only 11% think things will be WORSE by year end (2% no opinion)….This is a dramatic POSITIVE shift in sentiment likely based on the suddenly rapid increase in the number of PROPOSAL opportunities seen across the US in the past 3-4 months by most AEC firms. Whatever you think things will be like in 5 months, here is some PSMJ advice to ponder right now as you approach year end STRATEGIC PLANNING for your firm.

If you think things will be BETTER by 12/31 you should:

1. Upgrade your staff IMMEDIATELY stealing every great person you can from everywhere BEFORE the industry gets going again. Including PARTNERS and PRINCIPALS from other firms
2. Make that ACQUISITION you’ve been debating about….do it NOW while prices are still low
3. Lock in a 5-10 year commitment from your bank on your Line of Credit INTEREST RATE before rates goes through the roof
4. Lock in your space lease rate for 10 years
5. TRAIN all your people NOW on Project Management while things are still somewhat slow so EVERYONE is in prime form as things get busier

If you think things will be ABOUT THE SAME by 12/31 you should:

1. Get even more PERSONAL with past clients being certain that you PERSONALLY telephone them just to stay in touch
2. INVENT new consulting ‘products’ to help your clients with other aspects of their business
3. Expand GEOGRAPHICALLY but slowly….taking what you do locally very well to a new place….pay attention to your HIT RATE as you expand
4. Focus on CHARGEABILITY and YOUR MULTIPLIER making everyone chargeable….get rid of non-chargeable people
5. Enhance your proposals even more adding MORE VALUE to each proposed task…Do NOT cut price…ADD VALUE…

If you think that things will get WORSE by 12/31

1. Go immediately to a 4 day work week cutting compensation by 20% and rotating to teams days off on Monday and Friday so your office is ALWAYS open
2. Contract out all non-billable activities like accounting and eliminate staff in those categories saving all fringe benefit costs
3. SELL the company now before things get worse
4. Increase your bank Line of Credit now using historically better financials than you’ll have at year end
5. Terminate ALL non billable PRINCIPALS….after all…they cost the firm the most to keep…

Whatever you think the industry condition will be by 12/31/09, there is one CERTAINTY….Things will probably NEVER be like they were in 2007 again….Our whole AEC industry is about to be re-invented with new and younger people at the controls, with new technology emerging to the forefront like BIM and use of SOCIAL NETWORKS, and constant BLACKBERRY communications 24/7 ….all shaping an industry going through MASSIVE baby boomer driven re-capitalization over the next decade.

What will emerge will be a leaner and completely different profession made up of global joint ventures, huge consolidators (AECOM and STANTEC), tiny specialists able to deliver all over the world, linked experts working at home, private/public partnerships, new players, and younger more agile clients eager to embrace everything new……all of this at a time that America faces insurmountable deficits, crumbling infrastructure and an exploding non English population growth….

Who will emerge as the NEW FIRMS and NEW LEADERS in our industry ??? BOLD RISK TAKING will be needed and historically that does not come from older more mature firms or owners….Try to remember the names of the top design firms of the 1980’s that no longer exist if you can….Real change comes from the na├»ve boundless energy of younger more energetic entrepreneurs who know no better than to take a risk and start up….

The biggest challenge facing CEO’s right now is to UNLEASH the young…..and SHED the old…..at a time when business is down…..but the world has always faced this dilemma …hasn’t it ???

Do you have the courage to do it in your firm ???

FAS

Monday, August 3, 2009

How scary is this?

Checked out the AIA's Twitter page this morning and found that they are on furlough this week.

Scary stuff.

Given that AIA exists on the strength of its members, this means that some combination of membership fees, educational programming, or product sales are insufficient to keep the lights on and the doors open this week.

Apparently, the AIA's Architectural Billings Index is not just a measure of how well architecture firms are doing. It's also a function of how well the AIA itself is doing.

How about you? Has your firm taken any cost-cutting measures this summer to keep things operating as we head into the fall?

Let us know!

Ed

Tuesday, July 28, 2009

SMPS Foundation Announces 2009-2010 Board of Trustees

The Foundation of the Society for Marketing Professional Services (SMPS) has announced its 2009–2010 Board of Trustees. The new board takes office on September 1, 2009.

Foundation Board Officers (elected for a one-year term) are:
President: Paula M. Ryan, FSMPS, CPSM, Director of Marketing, Braun & Steidl Architects, Columbus, OH
Vice President: Michelle H. Fitzpatrick, FSMPS, CPSM, Principal, Marketivity, Inc., Portland, OR
Secretary: William C. Viehman, AIA, LEED AP, Principal, Perkins + Will, Atlanta, GA
Treasurer: Craig E. Park, FSMPS, Assoc. AIA, Vice President and Chief Marketing Officer, Leo A Daly, Omaha, NE

Trustees include:
Monica Bell, Senior Vice President, HDR CUH2A, Atlanta, GA
Thomas D. Boogher, CPSM, Executive Vice President/CMO, PSI, Oakbrook Terrace, IL
Larry D. Casey, CPSM, Corporate Senior Vice President of Sales, Skanska, Rockville, MD
Diane C. Creel, FSMPS, Retired, President/Chairman/CEO, Ecovation Inc., Victor, NY
Larry E. Gramlich, Partner, Troutman Sanders LLP, Atlanta, GA
Janice Tuchman, Editor-in-Chief, Engineering News–Record, New York, NY
Rhodes B. White, FSMPS, CPSM, President, White Consulting, Charleston, SC

The SMPS National Board of Directors selected Incoming President-Elect Carolyn Ferguson, FSMPS, CPSM, President, WinMore Marketing Advisors, Kingwood, TX, to serve as SMPS National Board Liaison to the Foundation in 2009–2010.

SMPS Foundation Trustees support the mission of the Foundation by promoting the organization and its projects and by leading the organization’s fundraising efforts. For more information on the Foundation and current projects, visit www.smpsfoundation.org.

About the SMPS Foundation
The SMPS Foundation is the principal nonprofit organization that identifies, researches, and educates the design and construction industry on emerging trends and issues in marketing and business development. As a not-for-profit 501(c)(3) organization established by the Society to promote research and education that advances the body of knowledge in the field of professional services marketing, the Foundation works to develop a greater understanding of the role and value of marketing in the A/E/C industry.

The SMPS Foundation actively promotes recognition of professional services marketing as an essential element of the modern A/E/C business model. It seeks to identify and evaluate evolving marketing practices and to provide marketers with information and tools needed to achieve effective results in the changing business environment.

Each year, the Foundation funds original research to educate the industry and contribute to the body of knowledge on professional services marketing. To access the Foundation’s research on professional services marketing, visit www.smpsfoundation.org.

For additional information, please contact Foundation Marketing Manager Michele Santiago at 800.292.7677, x245, or michele@smps.org.

SMPS Announces 2009-2010 National Board of Directors

The Society for Marketing Professional Services (SMPS) has announced its 2009–2010 National Board of Directors, composed of senior marketing and business development leaders representing the architectural, engineering/planning, and construction industry. The new board takes office on September 1, 2009.

2009-2010 SMPS National Board of Directors

President Thomas E. Smith, Jr., AICP, FSMPS, CPSM, President,
BonTerra BonTerra Consulting, Pasadena, CA

Past President Dana Birkes, APR, FSMPS, CPSM, Vice President, Business Development/Marketing, The Flintco Companies, Inc., Tulsa, OK

President-Elect Carolyn Ferguson, FSMPS, CPSM, WinMore Marketing
Advisors, Kingwood, TX

Secretary/Treasurer Barbara D. Shuck, FSMPS, CPSM, Vice President, Marketing Director, Emc2 Group, Architects Planners PC, Mesa, AZ

Chapter Delegate Kevin Hebblethwaite, CPSM, President, EDI Ltd., Atlanta, GA

Fellows Delegate Judith Nitsch, P.E., LEED AP, FSMPS, CPSM, President, Nitsch Engineering, Boston, MA

At-Large Delegate Donna Lynn Jakubowicz, CPSM, Corporate Marketing Director, Barton Malow Company, Southfield, MI

President Smith has served SMPS since 1984 in various capacities at both the local chapter and national levels. His goals for the coming year are “to continue to demonstrate the value of membership and participation in SMPS, expand the ways in which we communicate cost-effective program opportunities, provide members with ready access to national and regional economic trend data and forecasts, and expand the use of emerging technologies to make it easier to connect with each other, and in so doing, to expedite access to opportunities for increased business for our firms.”

Smith maintains: “SMPS continues to become stronger every year. With nearly 7,000 members in 58 chapters throughout the United States and in Canada, the organization is poised to reach even more professional services marketers and business development professionals in the A/E/C industry.

“At this time, our members are facing increasing challenges caused by the current U.S. economic climate. A/E/C firms are laying off staff, including marketing and business development professionals, in order to reduce operating costs and to survive the recession. One of our key challenges as an organization is to help our members retain their employment by demonstrating, in new ways, their value to their companies’ business success. For those members who have lost their jobs, our mission is to provide them with improved job skills and easy access to networking systems and employment opportunities that will expedite their job search and return to work.”

Subscribers to PSMJ's A/E Rainmaker newsletter have access to PSMJ Resources Editor in Chief Ed Hannan's exclusive interviews with SMPS President Tom Smith and others from the SMPS Build Business conference.

In a perfect world...

My July 2009 column in Metal Architecture titled Reload your team: Use the downturn to improve the quality of your staff discussed strategies for using the availability of outstanding staff created by the recession to weed out underperformers among your current employees. The article failed to point out some obvious concerns, most notably that in the messy reality that characterizes most of our businesses - it is very important to protect yourself and your current employees throughout the "upgrading" process. Here is an excerpt from feedback that I have received:

"...let the survivors [of the lifeboat drill] know what you have done and assure them that there are now more cuts in the foreseeable future.” That statement is double talk for “You are lucky today and there are more cuts coming.” I do not know if you have ever heard a boss say that, I have twice and have been on the receiving once. I can assure you that your statement will only start talk, slow work progress and have your quality people start looking around.

As for parting with Non-performers, and they work at the company’s discretion, you have many legal issues and hoops to jump through. Keep in mind that if you bring in another person after you terminated one to fill that position you have opened up your company to legal actions. This can disrupt your company’s performance due to water cooler talking as well as time off for depositions etc. Firms need to let people go in a gentle way to keep their name in good standing within the community. You do not want to be known as a “Hire Fire” company.

Good points all. Here is my response:

In many instances the boss' statement about there not being more cuts is indeed doubletalk. That said, it's also an opportunity for real leadership to come through - particularly from C-level people in the organization.

We recently worked with a firm that confronted its management team with a choice: lay off 10% of the workforce and everyone else go to a 4-day work week (with a corresponding 20% salary cutback) or lay off 25% of the workforce and keep everyone at their current salary. The advice we gave them was to cut 25% of the people and be done with it - but only under the condition that the CEO be in the office every day, motivating staff and helping them overcome the challenge and be inspired to come to work. The CEO of this firm wouldn't commit to providing the required leadership (which I guess tells you something about him) and he went with the 10% layoffs and 20% paycut plan. It has been a disaster - productivity is way down and people are either looking around or waiting for the other shoe to drop.

There certainly are legal issues associated with letting people go and replacing the exact job soon after. There are ways to do this without exposing the firm the unnecessary legal risk. As for being known as a "hire and fire firm", that is indeed a concern - moreso when times are good and people are in high demand. The best way to address that is through clear communication and ongoing reviews of expectations of everyone in the firm. If the outstanding people are confident that their performance is directly proportional to job security - not only will they stay above the fray in the "water cooler talk", they will also be less tolerant of non-performance. Of course, the outcomes in these cases are not absolute - they are influenced by prevailing firm culture and leadership style -but clear communication sows the seeds for the desired outcome. This is particularly true when dealing with personnel issues.

I would be very interested to hear other opinions on this issue.

Until next time,

Bruce

Wednesday, July 22, 2009

ABI: So Much For the Recovery

Three straight months of apparent stabilization in the American Institute of Architects' Architecture Billings Index did not lead to an uptick, after all.

Instead, the AIA reported this morning that the June ABI rating was 37.7, down more than five points from the 42.9 rating in May. This score indicates a continued overall decline in demand for design services as any score above 50 indicates an increase in billings.

"It appears as though we may not have yet reached the bottom of this construction downturn," said AIA Chief Economist Kermit Baker. "Architecture firms are struggling and concerned that construction market conditions will not even improve as soon as next year. There has also been little movement in terms of stimulus funding allocated for design projects having the desired impact of leading to new work."

The new projects inquiry score was 53.8, the fourth straight month with a score in the mid-50s. May's new projects inquiry score was 55.2, but as we mentioned last month, Baker said at the time that the higher level of inquiries could actually be a negative indicator, as it means clients are playing the competitive field against itself for greater savings, driving down prices for architectural work as a result.

Going further, with billings remaining well below their break-even index of 50, the Architect's Newspaper article we referred to in that post claims that for the time being, this means that payments are continuing to decline. At the time of the article, it had been that way for 16 consecutive months.

The June ABI breaks down by sector as follows: mixed practice (43.5, down from 44.5 in May, 44.2 in April and 44.0 in March); multi-family residential (42.7, down from 45.5 in May and 43.2 in April); commercial/industrial (39.5, down from 43.1 in May and 41.7 in April); and institutional (37.0, down from 38.0 in May and 43.2 in April).

Regionally, the ABI breaks down thusly: Northeast (42.8, down sharply from 48.3 in May and 47.1 in April), South (40.5, down from 41.3 in May and 45.0 in April), West (39.9, up from 39.4 in May, 39.2 in April, and 36.1 in March).

Ed

Tuesday, July 21, 2009

What does Walter Cronkite’s career have to do with winning design work?

I am often accused by my family and co-workers of wringing metaphors to death and today I am offering up a real doozy.

I had a college professor who told me once that the world as he knew it changed in 1968. 1968 gave us the tragic assassinations of Dr. Martin Luther King and Senator Robert Kennedy. It brought us President Richard Nixon. And in Vietnam, 1968 brought us the Tet Offensive – a series of military engagements engineered by America’s enemies to demonstrate the futility of trying to drive Communist interests out of South Vietnam. CBS News reporter Walter Cronkite was a first-hand observer of the Tet Offensive.

Until 1968, mainstream print and electronic journalists were expected to report “the facts” – the who, what, why, when, where and how of events they were covering – and Cronkite was no different. In fact, the professional detachment with which Cronkite reported the news made him one of the most trusted men in America. But after witnessing the events of the Tet Offensive, Cronkite did the unthinkable: he made a personal commentary to Americans and stated clearly that from his perspective, the war seemed unwinnable.

The repercussions were felt immediately. President Lyndon Johnson said “If I have lost Cronkite, I’ve lost America”. Cronkite’s assertion gave instant validity to American voices that had opposed the war in Vietnam from the outset. A man who reported the news spent a few weeks in Vietnam and his interpretation of what he saw was valued more highly than the opinions of political and military leaders who had been dealing with the Vietnam for many years. How could this be?

It boils down to a single word: TRUST. In periods of uncertainty, people will believe in someone they see and hear every day – someone who has treated them with respect and taken a fair and even-handed approach to all problems great and small.

Think about this as you evaluate your relationships with your clients. Are you worthy of this level of trust? How do you demonstrate it? Do your clients recognize it? You’ll know you have achieved it when your client explains a problem to you and values your opinion more highly than people who have been dealing with this problem for much longer and at a much more intimate level.

Until next time,

Bruce

Wednesday, July 8, 2009

The Dull Edge of Experience

If you needed a surgical procedure and went to see a physician and she told you that she had performed the operation you needed 27 years ago and was therefore qualified to perform yours, how confident would you be about agreeing to employ that physician?

Obviously, this is a rhetorical question – but I ask it to draw attention to the mindset that many design firm professionals have about experience – and how too many people confuse experience with relevance. The most glaring example of this mindset is when people insist on highlighting the fact that project team members have 30 years experience doing X. Being around a long time and having had experience doing something can separate your firm from competitors. What most people don’t understand is that it may actually put you in the back of the pack. Here’s why:

Once you have had a successful experience doing something, you are highly unlikely to change how you do it – even if there have been significant improvements to the process – and this makes you a liability. A few years ago, I had to hire a newsletter editor for a weekly news-driven niche publication. I found a candidate who had 30 years experience in a similar niche, worked on tight deadlines, and had many accolades to show for his efforts. He was a complete disaster and I had to let him go within a few weeks. How could this happen? It turns out that this person was doing his work the same way he was 30 years ago! Because he was a good writer, his employers continued to accommodate him through the years – even as his peers began using computers and the Web to find information and communicate. For my purposes, his experience was completely irrelevant because he couldn’t do the job I needed today. Now whenever someone – a candidate, a vendor, a consultant – tells me they have 30 years experience my hackles go up immediately. I start thinking that this person is very likely to be out of touch – and probably cluelessly so – because he is likely being accommodated by the people around him. My inclination is to dismiss this person and go to the next person that has communicated their relevance, rather than their experience. This is probably not entirely fair, but it is what it is.

This is not to say that everyone out there with a lot of experience is out of touch and not thinking dynamically. In fact, two of my most influential mentors – Professor Hans-Christian Lischewski, former CIO at Perkins & Will and Charles Nelson, my colleague at PSMJAustralasia have 70 years experience between them and are the most forward thinking people I know. Their experience demonstrates a track record, their thoughts and actions prove their relevance today.

So next time you want to tout your experience, take care to make sure that it is communicated as relevance – in every context of your practice.

Until next time,

Bruce

Thursday, June 25, 2009

ARCADIS buys Malcolm Pirnie

A huge M&A deal hit the newswire this morning, as ARCADIS, the Dutch engineering and consulting firm, said it is taking over Malcolm Pirnie, the privately held White Plains, New York-based water and environmental consulting firm, with everyone from The Wall Street Journal (subscription required) to The New York Times to the Reuters news service picking up on it.

According to the ARCADIS press release, it has signed "a merger agreement to acquire 100 percent of the shares of Malcolm Pirnie...currently owned by about 80 internal shareholders. At closing, Malcolm Pirnie will be a wholly owned subsidiary of ARCADIS U.S." The release states that Malcolm Pirnie has more than 1,700 employees, 2008 gross revenues of $392 million, net revenues of $294 million, and profitability close to ARCADIS' overall target EBITA margin of 10 percent. ARCADIS has more than 13,500 employees prior to the deal. According to an ARCADIS spokesman, the company does not see redundancies among the workforce of the two firms.

ARCADIS spent $222 million to acquire Malcolm Pirnie, including $135 million in cash and $86.8 million worth of shares to shareholders and some employees of Malcolm Pirnie, according to The New York Times article. The cash offer is financed by Rabobank, ING and RBS, according to the release.

SNS Securities analysts commenting on the deal wrote, "We expect that ARCADIS...will be able to bring Pirnie's margins in line with company margins through synergies, thereby creating value."

The deal is contingent on Malcolm Pirnie shareholder approval but it is anticipated that it will be completed in July 2009. "The major shareholders comprising ownership of 48 percent of the outstanding shares have provided irrevocable support of the merger," according to the release.

To get an idea of the scope of this deal, consider that Malcolm Pirnie's roots trace back to 1895, the firm has more than 60 offices and is represented in most of the top 20 major metropolitan areas of the United States. The firm's client base is heavy in the public sector, including municipalities and the federal government, balancing nicely with ARCADIS' existing private-sector client base in the United States. "Together, we are well-positioned to benefit in the short-term from the government stimulus package," says ARCADIS CEO Harrie Noy. The firm also works in Asia, the Middle East, Puerto Rico, and Chile.

ARCADIS says the integration process should take about 18 to 24 months, again demonstrating the size and complexity of the deal. The acquisition also puts ARCADIS in the top 10 of consulting engineers in the international water market as well as in the top 10 in the U.S. design, consultancy, and engineering market. "Although the impact of the economic downturn in the short term is still uncertain, the long-term outlook for our business is positive," Noy says.

According to the Reuters article, Noy says ARCADIS is not adjusting its target for a 10 percent operating (EBITA) margin in 2009, but also did not say whether the company would meet it.

Ed

To learn more about PSMJ's merger and acquisition services, click here or contact Susan LeComte at slecomte@psmj.com or by phone at 614-764-1400, ext. 105.

Interesting take on ABI

An article posted yesterday to The Architect's Newspaper web site posited the notion that the AIA Architecture Billings Index results that show a recent uptick in inquiries might actually be signaling not renewed interest in work, but more competition for what little is available.

Indeed, AIA Chief Economist Kermit Baker points out that the higher level of inquiries could actually be a negative indicator, as it means clients are playing the competitive field against itself for greater savings, driving down prices for architectural work as a result.

Going further, with billings remaining well below their break-even index of 50, the article claims that for the time being, this means that payments are continuing to decline, now for 16 consecutive months. "And, with much of the stimulus spending already underway-- it was credited for the jump earlier this year-- there appears to be little economic activity to further buoy the industry out of the current decline," the article states.

To find out how to use short-term and long-term market trends in the design and construction industries to secure new projects, check out PSMJ's upcoming webinar: A/E/C Industry Trends: How are the trends impacting your firm? on July 14 at 1:30 p.m. Eastern Daylight Time.

Wednesday, June 24, 2009

ABI sees inquiries for new projects rise, but no overall improvement

Even though the decline is design services billings has stabilized, the American Institute of Architects' Architecture Billings Index also indicates that any economic recovery has also flat-lined.

The AIA reported this morning that the May ABI rating was 42.9, nearly identical to the 42.8 mark in April. This score indicates a continued overall decline in demand for design services as any score above 50 indicates an increase in billings.

However, one bright spot for the architecture industry is the new projects inquiry score of 55.2, the third straight month with a score in the mid-50s.

"The design and construction marketplace is extremely competitive right now," said AIA Chief Economist Kermit Baker. "Prospective clients are casting a wider net, causing numerous firms to bid for the same project, which is why the high level of inquiries is not necessarily translating into additional billings for project work at many firms."

The May ABI breaks down by sector as follows: multi-family residential (45.5, up from 43.2 in April, 39.4 in March, 33.3 in February, and 29.5 in January); mixed practice (44.5, up from 44.2 in April and 44.0 in March); commercial/industrial (43.1, up from 41.7 in April, 35.0 in March, and 32.0 in February); and institutional (38.0, down from 43.2 in April).

Regionally, the ABI breaks down thusly: Northeast (48.3, up from 47.1 in April, 41.8 in March, 32.3 in February, and 29.8 in January), Midwest (41.5, up from 40.1 in April, 37.5 in March, and 35.0 in February), South (41.3, down from 45.0 in April), and West (39.4, up from 39.2 in April and 36.1 in March).

Ed

Tuesday, June 16, 2009

Lead, follow, or become commoditized

I have been interviewing Circle of Excellence firms this month and asking the question, “where do you see the A/E industry headed over the next 3-5 years and beyond?”

The first couple of COE firm execs I queried went directly to “there will be more design-build projects”. The opinion of these top execs is that a design firm has two choices: 1) develop a strategy to lead D-B projects that includes things like changing firm culture to accept the risks and educating clients on the merits of D-B projects in order to make the client comfortable with their designer as lead; 2) accept the role of sub to CMs who lead D-B projects, but offer value-added services (e.g., program management, master planning, facilities management, etc.).

These top firm execs agree on one thing: to do nothing means succumbing to commoditization and being compelled to lower fees –even in market sectors which are hot (e.g., government work) or have pent-up demand (e.g., health care) and in which design firms should be able to charge reasonable, but healthy fees.

The tactics for overcoming this challenge are fairly straightforward – and frankly, are not materially different from what PSMJ has been advising clients to do since the beginning. It comes down to the usual things: relationship-building with clients, CMs and other players in the building process, training staff in the technology that makes it possible to lead in the D-B process (BIM), marshalling financial resources, and choosing the right people (or acquiring the right firms) to affect this type of strategic move.

More on this in the August issue of the Professional Services Management Journal and in the book "2010 and Beyond: Preparing Design Firms for the Upturn" coming this fall.

Until next time,

Bruce

Tuesday, June 9, 2009

PSMJ Quarterly Economic Forecast Shows Improvement, But Not Positive

PSMJ's expert management consultants are only one week into gathering the numbers for the second quarter PSMJ Quarterly Economic Forecast and here's what they've found thus far:

With almost 300 participants thus far, while the numbers may change a bit, it's unlikely the trends will reverse.

The data is much better, but still not really positive. In general, negatives are less negative, and small upward trends are now much more positive.

Overall revenues quarter over quarter are still negative but less so.

Revenue projections for the coming quarter have turned slightly positive.

Backlog levels are still turning down, but not as much so.

Proposal activity overall is much better, and is at a level that will sustain backlogs and revenues as proposals turn into projects.

The moving up markets include transportation, energy/utilities, environmental, water/wastewater. They are all more positive than last quarter (can we say stimulus?)

The markets that were virtually flat last quarter, health care, government buildings and education have improved to a decent positive level (stimulus again).

Of the negative markets, only heavy industry showed relatively strong improvement, even though it is still negative. Commercial users did rebound a bit, but is still very negative.

Light industry, commercial development and housing are still well in the tank, and even tough the rate of decline is less than last quarter, it is still a deep decline. (Is it possible that the decline in housing could actually go below zero new housing units?)

All in all, much better than last quarter, but still not sunny days are here again territory.

For more information on PSMJ's Quarterly Economic Forecast data, check out the July 14 webinar A/E/C Industry Trends: How are the trends impacting your firm?

Design Firms See 22 Percent Decline in Operating Profits

Newton, MA (June 9, 2009)—Median operating profits for architecture, engineering, and construction firms fell to 11.8 percent, a 22 percent decline from the previous year, according to the 2009 PSMJ A/E Financial Performance Survey.

Published by PSMJ Resources, Inc., the premier management consulting firm for the A/E/C (architecture/engineering/construction) industries, the 2009 PSMJ A/E Financial Performance Survey features more than 100 performance benchmarks, with approximately 30 different benchmarking groups shown. Respondents to the 2008 PSMJ A/E Financial Performance Survey reported median operating profits of 15.19 percent.

Firms in the 2009 Survey in the upper quartile had operating profits of 21.4 percent while firms in the 90th percentile had operating profits of 30.6 percent. “Those numbers (in the 75th and 90th percentile) indicate a number of firms may have heard about the recession, but did not want to participate,” says William Fanning, a PSMJ Resources, Inc., consultant. “The upper end is doing just fine.”

Firms who work primarily in architecture and those who work in engineering (survey) each reported median profits of just 9.5 percent. But, in the lower quartile, those numbers drop to a 1.3 percent loss for architecture and a 3.4 percent loss for engineering (survey). Fanning attributes those numbers to the tough times in the commercial and land development markets.

Engineering (prime) firms reported median operating profits of 11.6 percent and Fanning believes that industry has weathered the storm. “Engineers kept trucking along. They’re in good shape, certainly better shape than architects primarily due to less exposure to commercial markets,” he says.

When it comes to staffing, most firms cut staff as their profits declined. In fact, in the entire survey, the median staff size change was a decline of 1.21 percent. Those firms engaged in architecture cut an average of 3.1 percent of their staff while those engaged in engineering (prime) cut 3.7 percent of their staff. On the lower end of the survey, firms cut 10 percent to even 20 percent of their staff. Yet, those firms on the upper end added anywhere from 6 percent to 13 percent. “Obviously, if you aren’t making money, you are probably cutting staff,” Fanning says.

Now in its 29th edition, the 2009 PSMJ A/E Financial Performance Survey includes data from 217 firms in the United States and Canada. The Survey provides detailed data and analysis on operating profits, overhead rates, utilization, financial ratios, marketing costs, and much more.

About PSMJ Resources, Inc.
For more than 35 years, PSMJ Resources, Inc. has offered publications, educational programs, in-house training and management consulting services to A/E/C professionals worldwide. PSMJ Resources conducts more than 200 educational seminars and conferences annually, supported by major professional societies, including AIA and ACEC. Headquartered in Newton, MA, PSMJ Resources provides more than 150 titles in book and audio, and publishes three newsletters about A/E/C firm management. PSMJ Resources also produces the industry’s preeminent annual surveys on management salaries, financial performance, fees and pricing, and benchmarks for the design firm CEO. On the web: www.psmj.com

Thursday, May 28, 2009

PSMJ Resources Inc. Announces 2009 Circle of Excellence

PRESS RELEASE - FOR IMMEDIATE RELEASE

PSMJ Resources Inc. Announces 2009 Circle of Excellence

Newton, MA—May 28, 2009—PSMJ Resources, Inc., the premier management consulting firm for the A/E/C (architecture/engineering/construction) industries, today published the 2009 PSMJ Circle of Excellence.

The PSMJ Circle of Excellence is determined by weighting each firm’s ranking in the overall PSMJ A/E Financial Performance Survey with respect to thirteen individual benchmarks. These benchmarks are indicative of performance in the various aspects of business operations, including cash flow, overhead control, business development, project performance, staff utilization, and overall profitability.

“The PSMJ Circle of Excellence is not determined by firm revenue, profitability, or sheer size – nor is it determined by any subjective criteria. The thirteen benchmarks that determine the PSMJ Circle of Excellence were chosen to reflect that the firms are well-managed, have a strong client base, and are led in a responsible and sustainable manner. PSMJ believes that clients prefer to work with well-run firms because they are more likely to provide superior service and value,” explains H.E. “Dan” Daniels, PSMJ’s survey editor.

The 2009 PSMJ Circle of Excellence reflects the performance of 44 participating design firms, 38 of which have agreed thus far to have their names published.

They are as follows:

Aillet Fenner Jolly & McClelland Inc
Architectural Engineering Consultants
Barr Engineering Company
Bassetti Architects
Bernardin Lochmueller & Associates Inc
Clark Nexsen
Desmone & Associates Architects
Dietz & Company Architects Inc
Eskew Dumez Ripple
Fentress Architects
Frisbie Architects Inc
GLHN Architects & Engineers, Inc
Greeley & Hansen LLC
Group 2 Architecture & Engineering
Hankins and Anderson Inc
John Portman & Associates Inc
Jones & DeMille Engineering
Klohn Crippen Berger Ltd
Larson Design Group (LDG)
Luckett & Farley Architects & Engineers
MTE Consultants Inc
P2S Engineering Inc
Phillips & Bacon Inc
Plunkett Raysich Architects
Powers Brown Architecture
Ready Engineering Corporation
Reynolds Smith and Hills Inc
Rivers & Associates Inc
Rowland & Broughton Architecture
Ruby + Associates Inc
Smith Carter Architects & Engineers Inc
SPEC Services Inc
Stanley Consultants Inc
Thomas Miller & Partners, LLC
Wardrop Engineering Inc
WHR-Watkins Hamilton Ross Architects Inc
Williams Blackstock Architects
Wright-Pierce Engineers

In addition to publishing the PSMJ Circle of Excellence, PSMJ Resources Inc. will hold its third conference highlighting the business practices of these outstanding firms in March 2010 and will feature as speakers the leaders in PSMJ Circle of Excellence firms.

CONTACT:

Bruce Lynch
Vice President, Publishing
PSMJ Resources, Inc.
10 Midland Ave.
Newton, MA 02458 USA
Email:blynch@psmj.com
Phone: 617-965-0055, x 150

Now in its 29th edition, the 2009 PSMJ A/E Financial Performance Survey includes data from 217 A/E firms in the United States and Canada. The Survey provides detailed data and analysis on operating profits, overhead rates, utilization, financial ratios, marketing costs and much more.
About PSMJ Resources, Inc.

For over 30 years, PSMJ Resources, Inc. has offered publications, educational programs, in-house training and management consulting services to A/E/C professionals worldwide. PSMJ Resources conducts more than 200 educational seminars and conferences annually, supported by major professional societies, including AIA and ACEC. Headquartered in Newton, MA, PSMJ Resources provides more than 150 titles in book and audio, and publishes three newsletters about A/E/C firm management. PSMJ Resources also produces the industry’s preeminent annual surveys on management salaries, financial performance, fees and pricing, and benchmarks for the design firm CEO. On the web: http://www.psmj.com/

Thursday, May 21, 2009

ABI Shows Uptick in New Project Inquiries

The American Institute of Architects' Architecture Billings Index held its ground in April after an eight-point jump in March while new project inquiries continued to grow.

As a leading indicator of construction activity, the ABI reflects the approximate 9- to 12-month lag time between architecture billings and construction spending.

The AIA reported the April ABI rating was 42.8, down from the 43.7 mark in March. This was the first time since August and September 2008 that the index was above 40 for consecutive months, but the score still indicates an overall decline in demand for design services (any score above 50 indicates an increase in billings). Meanwhile, the new projects inquiry score was 56.8.

"The most encouraging part of this news is that this is the second month with very strong inquiries for new projects. A growing number of architecture firms report potential projects arising from federal stimulus funds," said AIA Chief Economist Kermit Baker. "Still, too many architects are continuing to report difficult conditions to feel confident that the economic landscape for the construction industry will improve very quickly. What these figures mean is that we could be seeing things turn around over a period of several months."

In fact, Baker's comments about the construction industry's economic landscape not improving very quickly mirror comments made earlier this week by Associated General Contractors of America Chief Economist Ken Simonson. Simonson expects the recession will affect the construction industry until at least 2010, saying that the government must repair the credit system and housing market for the economy to recover.

Simonson's comments about the credit system needing repair echo those made today by PSMJ CEO and founder Frank Stasiowski, who predicts this recession will lead to mortgage interest rates of around 10 percent and credit card interest rates around 25 percent.

But, as for the April ABI highlights, it breaks down by sector as follows: mixed practice (44.2, up from 44.0 in March), institutional (43.2, up from 42.9 in March), multi-family residential (43.2, up sharply from 39.4 in March, 33.3 in February and 29.5 in January), and commercial/industrial (41.7, up sharply from 35.0 in March and 32.0 in February).

Regionally, the ABI breaks down thusly: Northeast (47.1, continuing an ongoing upturn from 41.8 in March, 32.3 in February and 29.8 in January), South (45.0, up from 43.4 in March, 35.5 in February and 34.4 in January), Midwest (40.1, up from 37.5 in March and 35.0 in February), and West (39.2, up from 36.1 in March).

At this point, it appears as though smaller firms have already made their cost-cutting moves and are positioning themselves for the economic upturn that many industry watchers, including PSMJ consultants, say is coming soon. It also appears, from seeing the quarterly results posted by the publicly held AEC firms, that the larger firms who were cushioned by their larger backlog, are now dipping into that backlog and making their cost-cutting moves. We have heard anecdotal evidence of firms such as CH2M Hill, HDR, and other well-known firms having to lay people off in the last month or two.

Where does your firm stand? Let us know.

Ed

Friday, May 15, 2009

SMPS Announces New National Officers, Directors

We got this one too late to fit into the June issue of A/E Rainmaker, so we'll put it here...

The Society for Marketing Professional Services this morning announced that its Nominations and Elections Committee had selected three candidates to fill open positions on the 2009-2010 National Board of Directors:

* President-Elect: Carolyn Ferguson, FSMPS, CPSM, President, WinMore Marketing Advisors, Kingwood, TX
Term: Sept. 2009–Aug. 2012

* Secretary/Treasurer: Barbara D. Shuck, FSMPS, CPSM, Vice President, Marketing Director, Emc2 Group, Architects Planners PC, Mesa, AZ
Term: Sept. 2009–Aug. 2011

* Chapter Delegate: Kevin Hebblethwaite, CPSM, President, EDI Ltd., Atlanta, GA
Term: Sept. 2009–Aug. 2011

As further provided by the SMPS Bylaws, in the absence of a nomination for any of the open positions on the Board by the petition process, the above slate of candidates selected by the Nominations and Elections Committee is elected by acclamation for the offices and terms specified above.

Four current directors will continue on the National Board in 2009–2010 in the following positions:
* President: Thomas E. Smith Jr., AICP, FSMPS, CPSM, President, BonTerra Consulting, Pasadena, CA

* Past President: Dana L. Birkes, APR, FSMPS, CPSM, Vice President, The Flintco Companies Inc., Tulsa, OK

* Fellows Delegate: Judith Nitsch, P.E., LEED AP, FSMPS, CPSM, President, Nitsch Engineering, Boston, MA

* At-Large Delegate: Donna Lynn Jakubowicz, CPSM, Corporate Marketing Director, Barton Malow Company, Southfield, MI

Newly Elected Foundation Trustees
The Nominations and Elections Committee also solicited candidates for the open seats on the Board of Trustees of the SMPS Foundation.

Two current trustees were nominated and re-elected:

* Paula M. Ryan, FSMPS, CPSM, Director of Marketing, Braun & Steidl Architects, Columbus, OH
Term: Sept. 2009–Aug. 2011

* Rhodes B. White, FSMPS, CPSM, President, White Consulting, Charleston, SC
Term: Sept. 2009–Aug. 2011

Four remaining vacancies on the Foundation Board of Trustees have been filled by appointment, as provided for in the Foundation bylaws:

* Monica Bell, Senior Vice President, HDR CUH2A, Atlanta, GA
Term: Sept. 2009–Aug. 2011

* Thomas D. Boogher, CPSM, Executive Vice President/CMO, PSI, Oakbrook Terrace, IL
Term: Sept. 2009–Aug. 2011

* Larry D. Casey, CPSM, Corporate Senior Vice President of Sales, Skanska, Rockville, MD
Term: Sept. 2009–Aug. 2011

* Diane C. Creel, FSMPS, Retired, President/Chairman/CEO, Ecovation Inc., Victor, NY
Term: July 18, 2009–Aug. 2010 (filling the remainder of a term vacated by the
mid-term resignation of a trustee)

Current trustees with continuing terms on the Foundation Board in 2009–2010 include:

* Michelle H. Fitzpatrick, FSMPS, CPSM, Principal, Marketivity, Inc., Portland, OR

* Larry E. Gramlich, Partner, Troutman Sanders LLP, Atlanta, GA

* Craig E. Park, FSMPS, Assoc. AIA, Vice President and Chief Marketing Officer, Leo A Daly, Omaha, NE

* Janice Tuchman, Editor-In-Chief, Engineering News–Record, New York, NY

* William C. Viehman, AIA, LEED AP, Principal, Perkins + Will, Atlanta, GA

The SMPS National Board of Directors selected Incoming President-Elect Carolyn Ferguson, FSMPS, CPSM, to serve as SMPS Board Liaison to the Foundation in 2009–2010.

Monday, April 27, 2009

Architecture firms struggling from Boston to Wichita

Two articles that came out last week in The Boston Globe and the Wichita Business Journal talked about the fate befalling most architecture firms these days, the struggle to keep the doors open while projects are few and far between.

Let's start with the Boston Globe article. In that story, Nancy Jenner, the acting director of the Boston Society of Architects, estimates that the average layoff rate in Boston architecture firms is already pushing a whopping 30 percent! In some, it is more than 50 percent! Firms say that with no new projects out there, things will only get worse in the next three to six months.

In that article, Kermit Baker, chief economist for the American Institute of Architects, says that from the level of peak architectural employment in July 2008 through January 2009, architects lost jobs at double the rate of lawyers and accountants. That's according to U.S. Department of Labor figures for the nation as a whole.

Some firms in the Greater Boston area have cut salaries from top to bottom. Others have switched to a four-day work week. Some no longer bring interns aboard. And other firms offer unpaid furloughs to select employees, aiming to keep them around for the future when things turn better.

The article talks with architects who were laid off at Cubellis (which the article claims has dropped from 500 people to about 300 and closed some offices entirely) and Arrowstreet (which has gone from 170 people to around 50 or 60 people.

Meanwhile, the same story holds true in Wichita, Kansas, where although firms are describing the cuts as minor and say recent business activity has shown signs of a rebound, they remain wary. Market instability is keeping some projects from even reaching the drawing board, the article cites local Wichita-area firms are saying.

One firm cut 6 of its 104 employees while other firms have laid off employees as their largest clients such as Cessna Aircraft Co. slow down work during the recession or even file for bankruptcy in the case of mall owner General Growth.

The article does conclude, however, by saying that many of the firms are hopeful that a couple of solid projects can either lead to more hiring or at least stemming the flow of layoffs.

It's a good attitude to take. If your rainmakers are out there finding potential projects and your marketing staff does a bang-up job in its proposals, you can find yourself shortlisted, selected, and on the road to recovery in no time!

Ed

Deltek lawsuit alleges violation of noncompete agreement

According to the latest Washington (D.C.) Business Journal, Deltek, Inc. is suing three former employees who established a company called Iuvo Systems Inc. Deltek alleges the employees violated noncompete agreements and unfairly use some of its trademarks.

Deltek filed its complaint against Chantilly, Virginia-based Iuvo on March 25 in U.S. District Court for the Eastern District of Virginia.

According to the article, defendant Tom Truong, a former consulting manager at Deltek, created and registered iuvosystems.com on February 1, 2008. Iuvo provides consulting services that help businesses manage databases and other software, including Deltek products. Its customers include government contractors, engineering firms, construction companies and financial businesses. Truong was employed by Deltek until March 2008.

Attorneys for Truong and two other former Deltek employees named in the lawsuit filed a motion April 20 to dismiss Deltek's claims against them.

In its suit, Deltek states that one of the employees, who was employed as a managing director until August 2008, "assisted Truong and/or (the other employee) in the formation of Iuvo." The defendants also allegedly received confidential or proprietary information from an unidentified source within Deltek.

Truong and the managing director, Edward Muldrow, signed two-year noncompete agreements preventing them from directly or indirectly competing with Deltek as "an employee or consultant of any firm or corporation engaged in a business which is in competition with the company or its subsidiaries."

The agremeent also states that employees "shall not provide consulting services to any Deltek customer other than as an employee of (the company)."

The defendants' attorneys argue that the agreements are unenforceable and that Iuvo has used Deltek trademarks in good faith to "fairly and accurately describe its services." But Deltek claims the use of its trademarks by Iuvo is confusing to customers who may think that they are getting services from Deltek or that Deltek is affiliated with or endorses Iuvo's services.

Deltek is seeking a court order that would, among other things, stop Iuvo's promotion and sale of similar products, the alleged unfair use of Deltek trademarks and alleged false representations that Iuvo and Deltek are affiliated.

The company, Deltek, is seeking at least $1 million in compensatory and punitive damages, three times the amount of Deltek's damages and Iuvo's profits, as well as attorney's fees, costs and interest.

The District Court has scheduled a hearing for May 2 to determine whether to grant the defendants' motion to dismiss the case.

Ed

Build it and they will come

Interesting article in Business First of Columbus, the weekly business journal covering the Columbus, Ohio area, that talks about the fervent activity surrounding a proposed convention center hotel.

The Franklin County Convention Facilities Authority wants a national design architect and a Central Ohio design firm to administer the $160 million project. Last week, the agency sent a request for proposals to 58 firms interested in the project and is also seeking candidates via the Internet to submit proposals by the May 19 deadline.

Not surprisingly, local architects told the newspaper that they expect heavy competition for design contracts. With the agency planning to select architects as soon as June while also looking for construction management firms in May and selection in July, there's plenty of activity and, by extension, many interested firms chasing the money.

The authority's request for qualifications divides the architectural duties, with the project's design work targeted primarily for a national firm. Meanwhile, a local firm will share in preparing construction and bid documents and do construction administration.

The article quotes Karlsberger, DesignGroup, and NBBJ Design architects and partners and is an interesting read. Given that there are very few projects out there, it's not surprising that they believe many national firms will be submitting proposals.

Ed

Wednesday, April 22, 2009

As economy improves, firms start hiring

Interesting poll question posed by PSMJ CEO and founder Frank Stasiowski on the LinkedIn networking site, but perhaps what's even more intriguing are the responses.

Frank asked, "With signs of economic recovery, firms are beginning to hire again. Are you?" Answer choices include: hiring right now, advertising but not hiring, hiring within three months, hiring in six to nine months, or not hiring for a long while.

The question has generated 85 responses since Frank posted it two weeks ago. Here's a breakdown of the responses:

Hiring right now (21 percent)
Advertising but not hiring (3 percent)
Hiring within three months (18 percent)
Hiring in six to nine months (30 percent)
Not hiring for a long while (25 percent)

What this means is that roughly three-quarters of firms are either hiring right now or plan to hire sometime in 2009.

What the question does not ask, but should imply is that even if you are not hiring right now, now is the perfect time to post some job openings to see what candidates are out there. And if you find quality resumes coming across your desk (given the overall unemployment rate and the sluggish times seen by the AEC industry, there are plenty of worthy candidates looking for work), you need to bite the bullet and add them to your payroll now.

Remember, if you don't make the hard decisions, it is all but certain that your competition will add to its workforce, putting you at a further disadvantage beyond your already-trimmed employee headcount and disappearing backlog.

How many tea leaves do you need to see (the AIA Architecture Billings Index, three-quarters of firms saying they plan to hire sometime in 2009) before you are convinced the economy is turning around?

Disagree? Drop me an e-mail at ehannan@psmj.com.

Ed

ABI improves; bellwether of economic upturn?

The news came out this morning and it confirmed the chatter PSMJ's management consultants have been hearing for the past few weeks: fortunes are improving in the AEC industry.

The American Institute of Architects released its monthly Architecture Billings Index this morning and the ABI was up more than eight points in March. Indeed, after a series of historic lows, the March ABI rating was 43.7, up from the 35.3 mark in February.

This was the first time since September 2008 that the index was above 40, but the score still indicates an overall decline in demand for design services (any score above 50 indicates an increase in billings).

Perhaps most impressive was the new projects inquiry score of 56.6.

As a leading economic indicator of construction activity, the ABI reflects the approximate 9- to 12-month lag time between architecture billings and construction spending.
"This news should be viewed with cautious optimism," said AIA Chief Economist Kermit Baker. "The fact that inquiries for new projects increased is encouraging, but it will likely be a few months before we see an improvement in overall billings. Architects continue to report a diversity of business conditions, but the majority is still seeing weak activity levels."
Regionally, the ABI breaks down as follows: West (36.1, down from 36.4 in February), South (43.4, up sharply from 35.5 in February and 34.4 in January), Midwest (37.5, up from 35.0 in February), and Northeast (41.8, up dramatically from 32.3 in February and 29.8 in January).


The sector index breakdown is as follows: mixed practice (44.0, up from 40.1 in February), institutional (42.9, up sharply from 36.8 in February), multi-family residential (39.4, up dramatically from 33.3 in February and 29.5 in January), and commercial/industrial (35.0, up from 32.0 in February).

This news comes in the wake of chatter among PSMJ consultants and on the LinkedIn networking site among A/E industry professionals that the economy is turning around. Also, the stock market seems to have risen from the floor reached a few months ago, although it has not returned to the levels it was six months ago. And the American Recovery and Reinvestment Act (the official name for the stimulus bill signed into law in February) seems to have boosted flagging spirits among AEC firm leaders. Proposal activity is ramping up (see PSMJ's Q1 2009 AEC Market Forecast) and projects are moving forward.

Here's what you need to take away from all this: If you are still cutting costs and reducing staff, your firm is likely headed in the wrong direction. The firms that will emerge victorious from this economic downturn are the ones who took those cost-cutting actions several months ago and are now submitting proposals, firming up teaming arrangements, and hiring staff. Yes, hiring staff.

Letting people go 6 to 12 months ago was a difficult, but necessary pill to swallow. In some ways, it's even tougher to convince yourself that getting your people trained is a worthy expense. But, trust me (and trust PSMJ), if you aren't doing everything you can NOW to prepare yourself for the influx of projects that is forthcoming, rest assured that your competition is ready to take your projects, take your people, and perhaps most importantly, take your profits.

Ed
 
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