Sustaining the AEC Industry in a New Environment

By Tyler Thompson

The AEC industry has a unique relationship with the environment and sustainability.  We are the designers of the world around us, but buildings account for nearly 40 percent of carbon emissions every year.  However, in many ways, the AEC industry is leading the way in the fight against climate change.  Part of this entails examining our own processes and the reverberating effects they have on the natural world.  Likewise, this process of self-examination can also be applied when talking about our ability to both recruit new talent to the AEC industry and retain the staff we already have.

There is a tendency to blame the current lack of growth in the AEC industry on the ongoing effects of the pandemic.  However, data from our 2022 Recruitment & Retention Report of AEC Firms indicate that our problems with R&R started before the pandemic and were only exacerbated by it.  Prior to the pandemic in 2019, we were already experiencing a slight decrease in growth rate versus 2017-2018.  Once the pandemic hit, this momentum was exaggerated, but it’s clear that the pandemic is not the only catalyst for this decline in growth rate of firms.  This is only supported when you look at the AEC industry compared to others.  Our data shows a massive spike in layoffs in 2020 (3.1 percent), but this number is relatively low compared to spikes in the U.S. unemployment rate of roughly 15 percent in April 2020 and roughly 7 percent in December 2020 according to the U.S. Bureau of Labor Statistics.

This forces us to ask the question: what is behind the decline in the growth rate of AEC firms?  Voluntary turnover, which entails staff leaving a firm under their own accord, decreased during the pandemic, but this is likely because of the unpredictability of the job market and a sense of security in their current role or position.  Now, as expected, voluntary turnover has returned to pre-pandemic standards.  This is worrisome because the same trend isn’t reciprocated in the “Joining the Firm” rate.  The “join the firm” rate is still decreasing.  According to data from our 2022 Recruitment and Retention Report of AEC Firms, this trend began in 2019 after a banner year in 2018.  This again shows a trend that was exacerbated by the pandemic, not started by it.  

AEC firms are having difficulty retaining talent, which has led to firms including more open positions to fill relative to the last two years.  If you compare the open position measures to pre-pandemic levels, it mostly compares to 2017, the year before the AEC industry experienced a boom in employees, which should give hope that history can repeat itself.  In addition, our data indicates that faster growing firms have been able to take advantage of their staff growth momentum while declining firms are struggling to keep up.

The increase in open positions has also led AEC firms to be more reliant on and willing to listen to employee recommendations for candidates.  As a result, AEC firms are spending more time and resources to create plans and procedures around incentive plans for this effort.  Our data indicates that 79 percent of AEC firms offer some form of referral compensation for employees, which is the most common bonus plan.  In 2021, 15 percent of firms responded “no” when asked if they compensate current employees for referring candidates.  This number decreased to 11 percent in 2022.  The other notable trend is that while firms offering a referral bonus after a set time increased, firms offering a referral bonus with “no stipulation” decreased.  This suggests that firms are more clearly defining their referral compensation plans as their importance is recognized.  

When firms aren’t relying on anonymous applications or employee referrals as a recruitment strategy, they either have their own in-house staff or hire an outside firm.  This is typically dependent on staff size–usually a reflection of company revenue–and how much money can be dedicated to recruiting strategies.  All firms with more than 100 employees had an in-house recruiting staff and the large majority of firms with 50-99 employees (89 percent) did as well.  

While the bigger firms have their recruiting staff, they still may use outside firms as an additional source or strategy to their growth plans.  However, firms with 25-49 employees are interesting in that they are the only staff size category that is more likely to hire an outside firm than have their own internal recruiting team.  This is interesting when compared to the “join the firm” rate and suggests that firms sized 25-49 are experiencing a block or pause in staff growth.

However, in the face of these looming challenges, the AEC industry is starting to rise to the challenge and adapt to changes in the modern working environment by reexamining the policies that attract and retain talent at their firms.  As firms continue to examine their own strategies and policies for R&R, the sustainability and long-term health of the AEC industry depends on the innovations born from the current moment.  The success of recruiting new talent and retaining current employees depends on our ability to correctly assess our new working environments and respond accordingly.  Changes in R&R policies show us that that AEC industry is taking steps in the right direction, but these short-term steps must be backed by long term goals and vision.

Tyler Thompson is the Research Manager at Zweig Group. He can be reached at research@zweiggroup.com.