Adapting to Talent Shortages and Changing Compensation Trends

April 20, 2006 · by James P. Cramer

Supply and demand economics are affecting a great majority of the professional firms in the AEC marketplace. Many of the worlds leading firms are getting more aggressive on salary offerings and are putting into place innovative profit sharing models.

Supply and demand economics are affecting a great majority of the professional firms in the AEC marketplace. Many of the worlds leading firms are getting more aggressive on salary offerings and are putting into place innovative profit sharing models.

In this issue of DesignIntelligence we are incorporating a diversity of perspectives about how to manage and conduct compensation administration. We begin with the annual compensation survey conducted by the Design Futures Council. In this survey we only survey those firms who are believed to be in the top 20 percent of “best of class” position in the design professions. To ascertain this distinction we take the following criteria: 1. the firms are known for recruiting and retaining the top talent in the design professions; 2. the firms are believed to be successfully managed as businesses and return a net profit pre-tax, pre-bonus of around 14 percent or above; 3. The firms are delivering quality design and customer satisfaction with a high client repeat rate or marketing hit rate; 4. The firms have a strong brand in their markets; 5. the firms are growing; 6. the firms are pacesetters on technology deployment and thus likely to have high performance statistics as measured by revenues per full-time equivalent staffing; 7. The firms have consistently high professional practice performance in the model of “design enterprise” including: finance, marketing, operations, and professional services.

Change brings opportunity. Demographic changes, generational changes, and talent shortages are putting increasing pressure on professional practices to develop transformational new policies as it relates to base compensation, profit sharing, and benefits. For example, the “Xer” generation (born 1965 to 1980) and the millennial generation (born 1981 to 1999) are greatly attracted to the “splash” benefit offering an extra week of vacation every five years of tenure so long as that week is added and used in the year of the benefit. And ageing professionals are increasingly interested in working beyond normal retirement zone well into their 70’s and 80’s. The healthcare benefits and creative opportunities bring an outlook for a quality of life for the baby boomer generation (born 1946-1964), many of whom wish to continue working in professional practice or to adjust their careers into a related creative zone.

Our leadership roundtable gains from different perspectives on diversity, talent, executive compensation, benefits, managing uncertainty, incentives, and creating organizational health during a time of tremendous redefinitional change for professional practices. The leaders we have interviewed have a variety of qualities, but among the most important is that they understand how to keep their organizations moving forward, rethinking the pathways to growth, and always staying agile for the uncertainty inherent in a world of flux.

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