As the business landscape continues to change and evolve, engineering firms will need to work smarter and faster than ever before to keep up.
With 38% of projects over budget and 35% behind schedule, according to the 42nd Annual Deltek Clarity Report, architecture firms are focusing on the fundamentals. This includes tracking metrics and adopting new technology to keep a closer pulse on performance and profitability. Many architecture firms have a long ways to go, as only 25% currently see their business as digitally mature. A staggering 76% of firms envision digital sophistication in five years, according to the report.
The success of engineering firms can be quantified in many ways, but one thing is certain: high-performing firms are tracking essential metrics so they can keep projects on track, reduce scope creep, and boost firm performance and profitability.
Ten essential metrics that high-growth engineering firms are tracking, along with industry averages, include:
- Operating Profit on Net Revenue – 19%
- Net Labor Multiplier – 2.97
- Overhead Rate – 146%
- Total Payroll Multiplier (Revenue Factor) – 1.75
- Utilization Rate – 61%
- Projects On Budget/On Schedule – 65%
- Net Revenue Growth Forecast – 4%
- Win Rate/Capture Rate – 48%
- Employee Turnover Rate – 12%
- Staff Growth/Decline – .05%
To determine if a firm is in high-performance mode, it is essential to compare these key performance indicators with the firm’s overall averages from last year.
Using these metrics to determine if a firm is a high, middle, or low performer can help to establish a baseline. Then, determine which metrics can be improved upon and by how much. Tracking the metrics on a monthly basis to keep tabs on a firm’s overall performance and adjust business strategies as needed can be a helpful tactic to see increased growth. Sharing this information with a team to make them a part of the process - striving for one unified goal - can also boost morale and stimulate determination.
To learn more about key performance indicators and industry trends, peruse the 42nd Annual Deltek Clarity Architecture and Engineering Study.
This leading market trends report provides insight across core business functions, including financial management, project management, business development, human capital management, and technology trends that help architecture and engineering firm leaders more effectively run their businesses – so they can boost profitability, utilization, and growth.