Invest in our workforce

It’s time to reevaluate every penny of our cost structures and ensure that our investments are going to our workforce.

It’s no revelation that rising costs and inflation are upon us amid concerns about labor shortages. The impact of these increased expenses – from the price of lumber to office supplies to food – affects every employee, every client, and every project. This is a time to reevaluate every penny of our cost structures, which means a disciplined approach to inflows and outflows of cash and energy, and ensuring that our investments are going to our workforce.

It is also important to consider the scarcity of resources side of the equation within our own businesses. Gallup reported in a recent analysis that 48 percent of America’s working population is actively searching for or watching for new employment opportunities, bringing on the topic of the impending “great resignation” in most industries across the country. It is incredibly difficult to find staff; enrollment in most career fields within our industry is at most optimistically level, but otherwise it is shrinking if not free-falling. There are a few topics that need to be unpacked here such as the real need to commit to culture and put employee experience first.

With expertise constrained, capacity to perform limited, and, in some circumstances, ability to execute outside of our industry’s control, we are reminded that we have the ability to chart our own destinies. If you are a principal, rainmaker, or business developer, make sure your clients are aware of the inflection point we are dealing with. There is no reason for our industry to race to the bottom when backlog has spiked to a median of 9.3 months, a 10-year high according to Zweig Group’s 2021 Financial Performance Report. The second highest year in the last decade was 2019, with a median of 7.9 months of backlog.

First, we ought to ensure that our pricing matches the offering. Negotiating needs to be a core competency to succeed as a leader of a design firm; our clients know how to push back and we have got to match in kind. Second, it’s time to underscore delegation. If you are doing a single thing that someone below you is capable of doing, you are further short-circuiting your company’s margin.

According to our research, backlog is overwhelming, staff are experiencing burnout, utilization is at a record high, and employee feedback responses in our Best Firms To Work For research indicate that we have had an understandably difficult time maintaining meaningful mentorship programs in our industry during the pandemic. Additionally, wages are not rising at the same clip as operating expenses. Many of the firms that Zweig Group works for today are well capitalized; but perhaps the totally novel circumstances of our industry and economic factors are causing us to pause before investing in “overhead” like employee engagement or training, which feels like a real risk to medium-term value. Instead, this is a good time to benchmark against revenue factor instead of utilization, to better tie the return on the labor dollar to efficiency evaluations that are more holistic than purely focusing on the number of hours billed.

And, if we have to make nightmare deadlines work, don’t compromise the margin to do so. Time is so valuable; if clients want to jump to the front of the line, that must be of value to them. Your best clients will want you to retain the folks they enjoy working with and will join you in finding solutions if you bring them into the conversation – they are very likely dealing with extremely similar challenges too. Evaluate your fees and, if it is time to raise them, do so with confidence that being the lowest cost service provider is not as great of a market position to take as being the best partner to your clients. Your staff have so many more options – don’t burn them out or expect them to be eager to give up another night or weekend so a PM or principal can get something done on time without monetizing that objective.

If your business does not resemble the above remarks, it is time to be viscerally aggressive in recruiting. Triple down on taking care of your colleagues – send firm-wide kudos, pay bonuses, hear out weird benefits, hand-write thank you notes, buy dinner if people are working late to hit a team deadline – celebrate relentlessly. Without talented teams, the incredible work our industry achieves would not be possible.

Jamie Claire Kiser is managing principal and director of advisory services at Zweig Group. Contact her at jkiser@zweiggroup.com.