How are AEC firms reacting to COVID-19?

Christy Zweig Niehues

The situation is changing quickly, but versatility and fast decision-making have become necessary.

On March 12th, Zweig Group launched a survey to see how AEC firms are reacting to challenges presented by the situation surrounding the coronavirus (COVID-19). As of March 20, 133 firms from nearly every geographic region of the U.S., size range, and AEC discipline, had responded to the survey.  The majority of the respondents to the survey were firm leaders, directors, and managers with decision-making capability in their organizations. Please note that the numbers reported below are likely to change rapidly as the situation progresses and we continue to gather responses to this survey.

On Sunday, March 15, 2020, just 9 percent of firms had suspended all business travel.  By March 20, 21 percent of firms had suspended all business travel, with the majority of firms (46 percent) conducting business travel on a case-by-case basis.  Eighteen percent stated travel policies remained unaffected.

With many organizations across all industries encouraging or requiring employees to work remotely, more than 11 percent stated they do not currently allow for any employees to work remotely and had not issued any policy changes in response to COVID-19.

WGI, a 600-person national design and professional services firm, was early to institute policy changes: “At WGI our number one priority is the health of our associates and their families.  Our Crisis Management Team is working hard to review countless sources of information from a diverse array of experts and communicate across 18 offices in eight states in a calm, consistent, and clear voice.  The reality is that there is no crystal ball that provides perfectly clear guidance on how to proceed.  The data and trends are alarming and the COVID-19 pandemic is a very fluid and quickly changing situation.  In real time we must evaluate the data before us and use our best collective judgement.  Our goal is to implement a plan that addresses the potential serious health and operational consequences without adding to the fear and overreacting,” said Michael L. Davis, senior vice president and chief strategy officer, WGI.

Firms that already have the policies and technology in place to allow for remote work have a leg up, but are still seeing some challenges related to the virus.

Blackstone Consulting LLC, an environmental firm with 55 employees, has a completely remote workforce.

“Being a nationwide consulting firm allows us to be in many markets, and the flexibility is incredible for employees,” said Stephen E. Manelis, principal, Blackstone Consulting LLC.

Manelis also cites investments in technology for virtual meetings, presentations, and the ability to share documents, as important steps in allowing for this type of workplace to flourish, as was an intentional hiring strategy of individuals who are “self-starters” and appreciate teamwork.  Another benefit of this strategy: “It’s very good for retention – we have very little turnover here,” said Manelis.

First analysis of the Zweig Group survey on week one, reported the average amount of workforce at an AEC firm that could work remotely was only 55 percent.  By March 20 this had risen to 62 percent.  Obstacles to remote work included a workforce that routinely works on-site at project locations (for example, land surveying, construction sites), and a lack of computers/equipment that could be used away from the office.

As far as planning for an economic downturn, Blackstone’s remote workplace has a few other advantages: “Looking at our own fixed costs, knowing that we don’t have leases really helps us, but still, a lot of revenue is derived from traveling and we have to be very careful right now and do not want to contribute to the spread of this virus.”

As of March 20, 40.6 percent of the Zweig Group survey respondents stated that no projects had been cancelled and no cancellations or delays were currently anticipated. Only 9.7 percent of firms had cancelled or delayed a project, but 30.8 percent were experiencing client-related delays, and the other 23.3 percent were still considering.

67 percent of respondents felt their revenue would be impacted in 2020 by an average decrease of 16 percent, and nearly 78 percent of firms stated they felt the virus would affect their overall business development activities in the next 12 months.  Firms are reacting quickly, with 57 percent reporting they are considering budget changes by an average amount of 25 percent.

Despite fears surrounding the logistical challenges presented by firms’ individual and government mandated responses to try to stop the spread of the virus, most firms are feeling OK about the economy at present, with a slim majority, 38 percent, stating economic conditions in their market are “the same” as one year ago, and 35 percent of firms stating economic conditions are “somewhat better.” On the other end, 17 percent reported that conditions are “somewhat worse.” Small percentages reported they felt the current economy was much worse or much better.  Looking forward, the bulk of respondents, 47 percent, stated they felt that the economy would be in “somewhat worse shape” in another 12 months.

The best advice of all?  “‘Crisis does not make leaders, it reveals leaders.’ Those firms with open eyes and a plan can address the challenges and perhaps come out strong,” said Davis.

Christy Zweig Niehues is director of Research & ECommerce at Zweig Group. She can be reached at czweig@zweiggroup.com.