Firm culture to outrank salary in staff satisfaction

Group of colleagues gathering in an office

Reading between the trendlines with AIA’s Chief Economist

Strong demand for design services, with billings to match, should provide momentum for firms in 2022. But AIA Chief Economist Kermit Baker, Hon. AIA, projects we’re going to continue to see some familiar headwinds: inflation, contractor labor shortages, and high prices and low availability for materials. In this latest installment of AIA’s ongoing series about economic trends, Baker outlines what this fulcrum between 2021 and 2022 means for firms, and why firm culture and workplace comfort surpassed compensation as the likely top worker satisfaction issue in architecture in coming years.

What did 2021 mean for architecture firms?

Toward the end of 2021, architecture firms surpassed payroll levels from the pre-pandemic era, which means they were hiring people because there’s work, and there’s work because there’s money. By the end of 2021, a full 80% of firms said that 2021 showed at least flat revenue and typically healthy growth, and the average increase in revenue was about 5% to 6%. They ended the year well, in other words. But that [outcome] was really uncertain at the beginning of the year, having endured 2020’s recession and dramatic cutbacks. Things turned a corner for the ABI in February, but there was no way to know where it was really headed.

Will the specter of inflation continue to affect design and construction?

Design and construction have been one of the victims of inflation, and you see it in all facets. Why is it such a problem now? The origin was pandemic-related disruptions to production such as plants shutting down or slowing down due to illness and staffing problems in 2020. Some bosses furloughed their workers in 2020. Facilities were having trouble getting raw materials and, therefore, couldn’t produce refined products. Economic history shows that there are occasional disruptions like this, as well as reactions, responses, and eventual corrections. But by late 2021, it became clear that the models have changed dramatically because this periodic disruption was lasting longer than most periodic disruptions. Treasury Secretary Yellen is talking about looking at the long term of inflation instead of the short term. Federal Reserve Chair Powell is thinking about changing his policies to address inflation head-on by tightening the supply of money available, for instance. As inflation ended up being a major part of 2021’s storyline, it will continue to be a major part in 2022’s future.

What’s the takeaway for firm principals who must respond to inflation at the firm level? How can they be proactive?

Architects don’t control the availability of materials or labor. If they design a building and it goes out to bid and contractors say, “Well, gee, I used to be able to get steel for X-dollars per ton and now it’s Y-dollars per ton, my bid will be higher. My subcontractors are more overextended than they used to be, so I will put this project at 18-20 months to completion rather than 12-16 months.” Owners aren’t going to be happy with that, and architects remain in the middle here. So the only thing architects can do is be attuned to market conditions and be transparent with owners. Translate the problem for them. Find ways to help them understand the risks involved.

Firm principals have new pressure points on the staff side, too. What does the ABI survey tell us about changing job satisfaction factors?

For workers, the simple theory has been that they’re going to work for the firm that offers them the most money. Of course, there are always exceptions to that—for instance, architects who might want a particular experience with a specific mentor might accept lower compensation for a position because of the high value of the experience. In other words, there are sometimes non-monetary compensations that are more valuable than salary.

In November, when we asked respondents to answer the question, “What do you think will be the most important issue for staff satisfaction in the coming years,” compensation was not No. 1 on the list. It was a close No. 2. The most important issue predicted for staff satisfaction in the coming years was firm culture and workplace comfort. Based on the survey results, non-monetary compensation, such as the quality of firm culture and workplace comfort, is more appealing and more valuable to more people because of the events of the last 18 months.

SURVEY RESPONSES, ABI NOVEMBER 2021

If work is ramping up and there’s a demand at firms for qualified workers, how might that influence a firm principal’s strategic plans for 2022?

In any sector of the economy, particularly one with a lot of small businesses such as architecture, the easiest way to fill positions is to lure someone away from a competing firm. That strategy doesn’t produce more workers in the economy, but it does drive up compensation, and generally compensation has mattered most. Now, it’s not about how much one will get paid, necessarily, but one’s alignment with their firm on its values.

Anecdotally, I’ve talked to a lot of architects over the past year who say they’re working harder than before. More work in the door means more work to be done, so that makes sense, even in light of firms staffing up. What does this suggest to firm owners about the culture of the office, if that’s a burgeoning issue?

One question that needs to be asked is, “OK, if you’re working harder, are you also working smarter?” Are architects and workers challenged because half their peers are teleworking and half are in the office, even with videoconferencing? Conversely, are workers challenged because their firm hasn’t adopted a flexible work arrangement? One interesting thing is that the sixth most commonly cited issue related to predicted worker satisfaction in coming years in our survey was the social, economic, and environmental impact of the work they’re doing. A decade ago, social, economic, and environmental impact no doubt was much farther down the list. Today, it’s a rising issue. Does that suggest to a firm owner or principal a greater internal emphasis must be given to values and the workers’ sense of purpose as a form of non-monetary compensation? I think it suggests that while people feel as if they are working harder, if they really felt strongly about the work they’re doing, then the hard work might also lead to greater satisfaction.

Image credits

Group of colleagues gathering in an office

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Graph showing breakdown of survey responses from the November 2021 ABI

ABI November 2021

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