Between the trend lines
AIA’s Architecture Billings Index continues to post extraordinary numbers, and the question is not what’s next so much as what isn’t next, according to AIA’s Chief Economist Kermit Baker, Hon. AIA. In the following interview, Baker offers context to the numbers and explains why firm leaders would be wise to think about prosperity as an opportunity to reinvest in their employees at a time when everyone’s expectations about the work environment are in flux.
Billings are up, and design contracts are right behind them. If firms are feeling flush, how can they reinvest in themselves for long-term stability?
I was surprised that the ABI numbers started to go up as soon as they did many months ago, but I am, of course, glad to say that we have a solid foundation for growth activity. This is not a blip. Five straight months of strong numbers, design contracts, and inquiries continue to break records, too. Six months ago, firm owners worried if they were going to make payroll or rent. They worried about the length of the downturn and if they’d survive. Now, they’re worried about hiring qualified employees fast enough, retaining key talent, and the logistics of moving forward with active projects. So, to answer the question, I think firm owners and leaders need to be thinking about their employees in terms of reinvestment.
How should firm owners be thinking, as employers?
A lot of project architects are going to be looking up and sticking their heads out of the bunker, if they haven’t already, and they’re asking themselves why they’re still there and where else they might like to go. So, if I’m a firm owner, I might be thinking about the firm’s value overall as a place of growth, the stories I want to tell about the firm’s viability and attractiveness, and doubling down on the sense of team that I want to create. There are only so many architects we can produce from schools, so there’s a labor shortage that we have to think about, too. So firms that can find efficiencies through technology can help them satisfy their internal demand to get work done and the external reality of fewer architects and designers that may be qualified to work for them. If I can’t pay my employees more because I’m still going through a transition financially, then I need to think about other things that can enhance staff camaraderie and loyalty. Over the last few months, a lot of firms have started to add what I’d call “quality of life” benefits to their stated values. More work from home. Casual Fridays. Office team-building that’s fun and also productive.
It seems that the notion of “quality of life” isn't just what architecture firms want to ensure as businesses for their employees, but it’s something they’re selling as architects to their clients. In other words, the notion of a quality life in a quality environment is particularly important for architecture firms to get right. How does that trend with conversations you’ve been having with firm leaders?
It seems that this idea of a higher quality environment, no matter the purpose, is something that everyone is interested in. Clients, employees, owners, and even indirect client groups like patients in a clinic, students in a school, or workers of all sorts in offices, restaurants, or flower shops. So it’s about the physical office space dimension, but it’s also about the stated purpose to create a better environment. It’s about the intent and about following through with that intent to create a greater sense of value for everyone. Mapped onto that is the question among bosses, “Do I need people to be in the office to do their work?” as well as the question among workers, “What do I want out of the work environment?” Value is a carrot and stick equation at the end of the day.
How does this boom part of the cycle compare to other cycles?
We’ve been doing the ABI since 1995, so we can track several recessions pretty well. From an architecture firm perspective, the dot-com and the Great Recession had a distinct pattern: work softened quickly, and work recovered slowly. So, for this generation of firm leaders, this pattern sunk in psychologically, and it has affected their behavior now even though this current recession has recovered so much quicker than its predecessors. I’m concerned that a lot of firm leaders have said recently, “I’m not going to get ahead of myself,” and I’m concerned they’re too slow in reacting. The ones who have reacted quicker are going to have a better year.