PERCENTAGE OF EXECUTIVES rate their board’s overall performance as excellent or good.
GOVERNING TO SUCCESS
Effective corporate governance doesn’t happen by accident
�� Management consultants and business experts talk a lot about “corporate governance.” But what does this really entail, and how does it relate to the success or failure of an AEC company?
An article on the University of Pittsburgh Law School’s website, titled “Corporate Governance: What It Is and Why It Matters” explains it this way: “At its core, corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. It encompasses the relationships among various stakeholders, such as shareholders, management, employees, customers, suppliers, and the community at large. The goal of corporate governance is to manage the business to maximize long-term value while safeguarding the interests of all stakeholders.”
As hot a topic as governance is in some quarters, many AEC firm leaders expect these important principles to simply happen on their own, without any strategic action or input. Governance by osmosis.
To create a firmer foundation in your company, you need to focus more intently on the elements of governance and ensure that your house is fully in order. Here are some challenges we face as an industry, and solutions
Source: PwC’s 2024 Board Effectiveness: A survey of the C-suite to try.
BUILDING AN EFFECTIVE BOARD OF DIRECTORS
Challenge: Establish a board of directors that provides strategic guidance while respecting the firm's operational autonomy.
Solution: Whether your board is all from inside the company or not, having a complementary mix of skills, experience, and perspectives is essential. Aim for diversity in expertise, including members skilled in finance, marketing, human resources, technology and project delivery. Regularly review and refresh board composition to ensure it meets the evolving needs of the business –
this isn’t the Supreme Court and positions should not be for life. Encourage open communication, collaboration and transparency among the board and between it and the staff.
ENGAGING OUTSIDE ADVISORS
Challenge: Identify and integrate outside advisors who offer valuable insights without disrupting internal dynamics.
Solution: Whether it is an outside board member or a strategic consultant, stress industry knowledge (or at least the ability to understand its
uniqueness). Set clear expectations and objectives for their involvement. Don’t automatically defer to their arguments or expertise – outside advisors tend to be naturally strong-willed, so don’t let yourself get steamrolled. Regularly assess the relevance and wisdom of their advice and adjust as necessary to maintain alignment with strategic goals. [See Burstein’s Take on Page 4 for more on this important topic.]
BALANCING SHORT-TERM AND LONG-TERM GOALS
Challenge: Avoid the temptation to let short-term results conflict with long-term objectives.
INSIDE
Govern
Survey Snapshot: Directors..12
Member Spotlight: Doyle.....13 AEC THRIVE in Austin............13 P2P: Board Comp.................14 50 for 50: More Predictions..14
Solution: Develop a balanced scorecard that includes both short-term and long-term performance metrics [see the February 2024 issue of PSMJ for an example]. Communicate the importance of long-term goals to all stakeholders, including shareholders, employees and clients. Encourage a culture of innovation and creativity by investing in technology, training and new initiatives brought forward by emerging leaders.
Continued on page 2...
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COMMITTING TO SHAREHOLDERS
Challenge: Align the interests of shareholders with the broader goals of the firm.
Solution: Maintain transparent and regular communication with shareholders. Articulate the firm’s long-term vision, and demonstrate how it benefits shareholder value. Create a shareholder advisory committee to provide ongoing feedback and build a sense of partnership.
DEFINING CEO RESPONSIBILITIES
Challenge: Clearly delineate the responsibilities of the CEO while allowing the flexibility to respond to changing market conditions.
Solution: The CEO isn’t a king, but many firms hand the reins of the company to their top official to do as they please. In healthy companies,
the CEO leads the company, and the board governs the CEO. Develop a well-defined job description for the CEO, outlining key responsibilities, performance metrics and reporting relationships. Regularly review and update this description to reflect changes in the business environment. Ensure that the CEO engages with the board and other stakeholders to create a unified approach to governance.
MITIGATING RISK
Challenge: Identify and manage risks across all areas of the business, from financial and operational to reputational and strategic risks.
Solution: This is one of the main reasons that AEC firm leaders wake up in a sweat at 2 am. It is critical to implement a comprehensive framework that includes risk identification, assessment, mitigation and monitoring. Encourage a proactive risk culture in which employees at all levels can
identify and report potential risks. Regularly review and update risk management practices to ensure they remain effective.
AFFIRMING ETHICAL LEADERSHIP
Challenge: Ensure that leaders at all levels of the organization uphold the highest standards of ethical conduct.
Solution: Solid ethics start at the top and are led by example. Beyond that, AEC firms can institutionalize a clear code of ethics and conduct, and communicate it to all employees. Insist that firm leaders exhibit ethical behavior in decision-making and all internal and external interactions. Institute a zero-tolerance policy for those who fail to uphold these standards. Proactively provide training on ethical issues and establish mechanisms for reporting and addressing unethical behavior.
PROMOTING SUSTAINABILITY
Challenge: Integrate sustainability into the core business strategy while balancing financial performance and competitive pressures.
Solution: A firm’s sustainability strategy should fit within the firm’s stated values and longterm goals. Set measurable targets and regularly report on progress. Engage employees, clients and other stakeholders in sustainability initiatives to build a shared commitment to sustainable practices. Create and support a Sustainability & Resiliency Committee that represents a diverse cross-section of the firm.
MANAGING AND SECURING DATA
Challenge: Make the most of the data you create, and protect it from threats.
Solution: The common perception is that data management is the responsibility of the technology staff and not a matter of governance. This overlooks the reality of how important data is to the healthy function of an AEC firm today. The board and firm leaders must ensure that the massive amount of data being collected and created is managed efficiently, well organized and
CEO CORNER
thoroughly protected. Categorize data based on sensitivity and importance. Ensure that only authorized personnel have access to sensitive data. Conduct periodic audits to identify and mitigate security vulnerabilities. Educate employees on data security best practices and compliance requirements.
BUILDING THE BEST POSSIBLE TEAM
Challenge: Create a talent acqu-isition structure that attracts and retains the people best suited to your firm’s goals and culture.
Solution: The firms that are more successful at recruiting pay close attention to all aspects of the process and recognize that acquiring the best talent requires a full-firm focus. Recruiting needs to be approached thoughtfully
and strategically. Firms with low turnover create a place where people feel welcome and believe they can succeed. While the concept of DEI has fallen out of favor in some corners, it still makes strategic sense to pursue and promote diversity and inclusion. Offer continuous learning and development opportunities. Craft a positive work environment that encourages employee engagement and satisfaction, including a clear, perceptible future career path.
DELIVERING FINANCIAL STABILITY
Challenge: Keep the firm on solid financial footing and ensure transparency in reporting.
Solution: The Board and firm leaders can strengthen
WHAT'S THE DEAL WITH
��Because most AEC firms are considered small or midsized, concepts such as ESG (environmental, social and governance) can fly under the radar with firm leaders. But with Millennials and GenZ occupying a greater percentage of the industry’s workforce, and the perception that ESG principles are something these generations care more about than their predecessors, should we be paying more attention?
Proponents of ESG say it is a cornerstone for sustainable success. So what is it and why does it matter?
ESG in AEC
Like other similar initiatives (e.g., DEI), ESG is often misunderstood and misapplied as a term. IBM says that ESG simply refers to “a set of standards used to measure an organization’s environmental and social impact. It’s typically used in the context of investing, although it also applies to customers, suppliers, employees and the public.”
The AEC industry has a substantial environmental footprint, from energy consumption and greenhouse gas emissions to waste generation and natural resource depletion. The actions of larger firms reflect this as they tend to stress a commitment to ESG more
financial governance by maintaining meticulous financial records, practicing open-book management to keep staff and executives informed of the firm’s financial status and outlook, demanding accurate and forward-looking budgets and forecasts, and establishing strong internal controls to prevent fraud and financial mismanagement. Never take your eye off the ball because the unthinkable can happen.
Finally, make a point to discuss governance among the leadership team, including defining it and brainstorming ways to improve. The first step to good corporate governance is understanding what it is. Then identify the areas that need the most attention in your firm and act on them. ��
ESG ?
than smaller firms do. Gensler has a 37-page ESG Report available on its website, for example.
Publicly traded firms offer substantial amounts of information on ESG’s impact, to some degree because they must. The U.S. Securities and Exchange Commission (SEC) requires all public companies to disclose information on ESG-related risks, and has issued guidance and rules about disclosure expectations.
Jacobs has a page dedicated to ESG on its website that features over two dozen documents featuring ESG. AECOM does
as well, including categories of documents for commitment and overview, reports, events and presentations, and thought leadership pieces.
What Role Do CEO's Play in ESG
Many AEC firms follow the principles of ESG even if they don’t identify them as such.
Sustainability. It is incumbent on the CEO to help create and maintain a culture of sustainability within their organization, including reducing carbon emissions, enhancing energy efficiency and promoting the use
“Larger firms that focus on ESG principles may have a competitive advantage with generations of potential employees that appreciate and value its objectives.”
of sustainable materials. Encourage employees to adopt sustainable practices, imple-ment a strong environmental management system, and ensure that sustainability considerations are integrated into project planning and execution.
Social responsibility and community engagement. This is another critical pillar of ESG that many firms have naturally built into their culture. Our projects almost always impact local communities, so we need to adhere to the highest standards of social responsibility. Actively
involving local communities in the planning and execution of projects helps our work meet their needs and expectations. It is important that they feel heard, so overcommunicate and provide more outlets for participation rather than less.
Safety. Worker safety is a major concern in the AEC world. We need to ensure that we’re not only complying with regulatory requirements, but also implementing best practices in occupational health and safety. Regular training, robust safety protocols, and a zero-tolerance approach to unsafe practices are essential.
Diversity and inclusion.
There is a lot of talk right now about the pros and cons of DEI programs, but most experts agree that diverse teams benefit from a wider range of perspectives, leading to more innovative solutions. Despite the potential pushback and temptation to play it safe, CEOs should champion initiatives that promote
gender diversity, racial equity and inclusion across all levels. This can be achieved through targeted recruitment, mentorship programs and by creating an inclusive workplace where all employees feel valued and respected.
Good governance. Lead with integrity, transparency and accountability. Strong governance structures ensure that ESG principles – consciously or otherwise – are embedded into the company’s strategic decisionmaking processes and that the organization remains accountable to stakeholders. Install a robust governance framework. Establish clear policies and objectives, and assign specific individuals to achieve them.
Going All In on ESG
The concept of ESG is a major factor in the investment world, but is somewhat overlooked – even feared – in certain corporate environments. For this reason,
larger firms that focus on ESG principles may have a competitive advantage with generations of potential employees that appreciate and value its objectives.
Given that we’re already meeting many of the standards established in ESG compliance, it makes sense to adopt its terminology and integrate its concepts into our core corporate strategy. Align ESG objectives with the company’s mission and values, and include ESG metrics in performance evaluations and incentive structures. By embedding ESG into corporation operations and culture, you can continue and expand upon the good things your firm is doing, while potentially benefiting from the business, recruiting and public relations opportunities that ESG offers. ��
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BURSTEIN’S TAKE
OUTSIDE DIRECTORS? SHOULD YOUR FIRM HAVE
��In the past few years, there has been a strong trend toward the use of outside Board members, especially in larger firms (see graphic):
This trend has been fueled by a realization that traditional all-internal Boards are plagued with several problems that can be mitigated by having one or two outside Directors:
• A Board of Directors is intended to provide oversight of a company’s CEO or Managing Partner. However, when the Board is comprised solely of internal members, the CEO (or Managing Partner) is the day-to-day boss of the other Board members. So it’s very difficult for Board members to actually provide constructive oversight of the CEO.
• If a founder or small group of shareholders owns controlling interest in the company, they are almost always Board members. Without an outside Director, such a Board often acts in the interests of the largest shareholders, rather than the interests of the firm as a whole.
• When all the Board members are internal, there is a tendency to spend too much time in Board meetings on operational issues, rather than truly strategic ones. (If your Board spends 30 minutes discussing the relative merits of buying a new desk for the receptionist, you have definitely gone down this rabbit hole.)
“When all the Board members are internal, there is a tendency to spend too much time in Board meetings on operational issues, rather than truly strategic ones.”
Source: PSMJ 2023 A/E Management Compensation Benchmark Survey Report
We have found almost universal agreement that selecting the right external Board member(s) can greatly mitigate these concerns. In fact, even in cases where an outside Board member didn’t meet expectations, almost every firm we know has replaced that person with another outside Board member.
So who should you select as an outside Board member? Here are some common profiles:
• A recently retired CEO or other senior executive from an A/E firm that is similar to the kind of firm you would like to become. For example, if your strategic goal is to become a 300-person regional firm, find a Board member recently retired from such a firm. (Of course, there should be no conflict of interest with their former firm.)
• A recently retired senior executive from a client group that your firm regularly serves. For example, if your firm mostly serves the K-12 market, engage a Director who has often served on selection boards for a school district.
• Someone who has a lot of expertise in a critical area that is lacking among your internal Board members. For example, if you feel your Board is weak on financial management issues, engage an outside Director who really understands the financial aspects of the A/E industry.
In terms of compensation, here are the results from the PSMJ 2023 A/E Management Compensation Benchmark Survey Report:
If you are intrigued with the idea of engaging one or two outside Directors, start by adding non-voting advisors to your Board. If they seem to provide valuable input (which is almost always the case), you can the move to make them full-fledged voting Board members.
David Burstein, P.E., is a senior consultant and managing director with PSMJ. You can reach him at dburstein@psmj.com. ��
WHEN OUTSIDE BOARDS GO BAD
��The addition of outside board members is like natural gas. If you manage it well, it’ll get you cooking. If you don’t…kaboom!
Karl Tonander, former CEO and current COO of 270-person engineering, environmental and geomatics firm Souder Miller & Associates (SMA), has seen both sides of that story. He has an outside board member tale of woe that ends happily.
In 2015, as the firm was looking for a way to redo its governance structure, a management consultant advised the firm to add an outside board member. As was the case for many AEC firms – and still is for some – the entire board at the time was male, Caucasian and nearing retirement age. Although the firm had several strong female candidates who had risen through its ranks, the CEO agreed with the consultant, and the board’s first woman was a young professional woman from outside the firm.
The CEO at the time wielded substantial power over the board and the then-220-person organization, and the new board member was closely aligned with him. “He ran it more as a sole proprietorship,” says Tonander. “If you didn’t go along with him, you fell out of favor fast.”
CASE STUDY OF A COUP ATTEMPT DODGED & A HAPPY OUTCOME
Not long after this, the CEO successfully proposed adding two more independent external members, leaving four inside and three outside members. Peace reigned for a couple of years. “It was actually kind of nice to see some of the input from the outside board members,” recalls Tonander, who was COO during this time.
The firm had bigger problems, however. By 2019, it was suffering from the results of an ill-advised acquisition (spearheaded by the first outside member) and its financial performance was poor, to the point that its continued existence was in question. “Out of desperation,” according to Tonander, the thenCEO brought in a fourth outside board member who promised to infuse capital into the company to help it stay afloat. This left the board’s balance at 4-3 in favor of external members.
“That fourth outside member had a mission, but he didn’t tip his cards,” says Tonander. “The very first thing he did was oust the CEO who brought him in. He came in promising to recapitalize the company, so in some ways he bought his way on the board.”
This occurred in April 2019. The firm’s CFO was also fired and Tonander became CEO. In the following few months, two of the outside directors who were aligned to the prior CEO (including the one that led the failed acquisition) resigned. They were replaced by two new outside directors with allegiance to the activist outside director.
In the fall of 2019, the activist director led another move to replace
Tonander and the new CFO, while attempting to take ownership of the firm and sell off some lucrative segments. Management, the firm’s employees, its stockholders (about 60% of which was in an ESOP at the time) pushed back. At the 11th hour, one of the outside directors joined them, and after a brief legal battle, the activist director and the two outsiders who voted with him resigned before they could officially be voted out.
“We’ve seen the Yin and Yang of outside board members,” says Tonander. “As difficult as it was, the outside board member experience was necessary to remove the original CEO. That second battle also galvanized the company and brought the staff together in a way that may not have been possible otherwise. It was a bit of trial by fire for everyone.”
Despite the positive impact that outside board members can have (including to some extent in this case), SMA currently has no outside board members and may not for some time. “The trauma of these events led to a massive distrust of outside directors –ironically including the director that saved the company,” says Tonander. “I don’t know how long it will take to get past that.”
Tonander served five years as CEO before stepping aside in April and returning to his former position as COO. He plans to phase into lesser roles as new key staff members come up to speed. “It’s part of my mission to set an example that CEO is not a lifetime position,” he says. “It should rotate fairly regularly – perhaps over a five- to eight-year span to allow different perspectives and
avoid concentration of influence. At this point, I’m here if they need me. I’ll do my numbers thing and work on mentoring junior management at the pleasure of the new CEO and the other officers.”
With the pain of the coup attempt in the rear view, SMA is thriving. The organization restructured in November 2023 as Azurite Professional Community, which owns SMA as well as two other units that were previously owned by SMA. About 175 of the 270 total employees are assigned to SMA.
“It’s a very weird, compelling story,” says Tonander. “It was crazy going through it, but we’ve come out of it in excellent shape with a higher level of employee engagement and several savvy senior managers. We’re profitable and successful. We went through something absolutely insane, but now we’re doing great“ ��
“We’ve seen the Yin and Yang of outside board members. As difficult as it was, the outside board member experience was necessary to remove the original CEO. That second battle also galvanized the company and brought the staff together in a way that may not have been possible otherwise.”
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ASK THE EXPERT
EMPLOYEE HEALTH INSURANCE CONTRIBUTION
��After 32 years with the company, a PSMJ member recently assumed the role of Chief Financial Officer for a four-office A/E firm based in New York State.
The CFO writes, “I’m wondering what my peer firms are contributing towards employee health benefits. We feel like we have a really robust program but…with insurance costs skyrocketing, we are considering stripping it back a bit.”
PSMJ Managing Director and Senior Principal Dave Burstein replied, “PSMJ has studied various employee benefits to see which ones correlate with reduced employee turnover. It turns out that the only employee benefit that correlates with low
turnover is the amount that firms pay for health insurance.”
Here is the result of our analysis:
•The median firm in our study had 12% employee turnover. They paid an average of 90% of employees’ health insurance premiums and 64% of dependents’ premiums.
•A group of high turnover firms (averaging 24% annual turnover) paid an average of 85% of employees’ health insurance premiums and 55% of dependents’ premiums.
•A group of low turnover firms (averaging 3% annual turnover) paid an average of 99% of employees’
“The study shows that firms that pay more for their health insurance had lower turnover.”
health insurance premiums and 65% of dependents’ premiums.
“The study shows that firms that pay more for their health insurance had lower turnover,” says Burstein. “Stated a different way, the lowest turnover firms paid more for employee health insurance and dependent health insurance than the high turnover firms. Is that cause and effect? Hard to say. But that's a pretty strong’ correlation. So if you're going to spend money on benefits trying to reduce turnover, that's probably a pretty good place to spend it.”��
R X FOR "TECH FATIGUE"
EIGHT WAYS TO BUILD TECHNOLOGY MUSCLE AND STAMINA IN AN AEC FIRM
��As an AEC firm leader, it’s understandable to be equally sympathetic to and frustrated by employees who complain of “technology change fatigue.” Just as they reach a level of proficiency and comfort with a program or software product, they feel blindsided by some new and improved version or alternative thrust upon them, and they have to adjust yet again.
Sorry folks; that’s life and business in 2024. “I hope we can stop talking about technology fatigue soon,” says PSMJ Senior Consultant Brian Burnett. “Technology impacts every part of an A/E business, so it must be addressed, front and center. This whole situation is like a technology bullet train screaming down the track, with firm leaders standing on the platform unable to get on board; it’s becoming a bit scary to think about what’s at stake.”
The way that technology is driving project work for AEC firms in 2024 differs from other eras in two important ways – 1, technology is advancing faster than in the long-ago days when we moved from drafting to BIM to 3D/digital; and 2, the effect of technology on productivity, efficiency and competitive advantages is more powerful than ever.
“The hardest part of this is that
the value and challenges of emerging tools and tech vary significantly among different roles in an engineering enterprise,” says Michael Complita, PE, PMP, who is principal-in-charge at Elliott Bay Design Group. “I recently read a fascinating article about how toplevel leaders, especially those with a significant business development role, are challenged the most by the continual change. They likened it to the old analogy of ‘drinking from a fire hose’ except now the hose is spraying at you from many different directions.”
including business development, project delivery, etc. How can this topic be addressed properly unless it is central to a firm’s strategic planning? It can’t if the subject is relegated to a sub-tier topic. The stature of technology must rival all other parts of the business.
Andria Lynch, BIM Manager with architecture firm TMP, says that a key to aligning technology goals with strategic business goals is having people in leadership who understand and can articulate how technology influences the firm’s success.
Often though, these individuals tend to look at new tools through more of a ‘what can I do with it’ perspective vs. ‘how can our entire team benefit from/leverage it.' This is where the technology strategic planning also comes into play.”
Burnett offers a different analogy: “All the things that can change in a relatively short period of time; and all the new tools used for countless different things are like hundreds of scoops of ice cream stacked on a cone, all melting together into a gooey blob. And they just keep coming. You need to be disciplined and strategic about what you do to keep it from getting really, really messy.”
Here are Burnett’s eight suggestions for countering technology change fatigue in your firm.
1. Never say “fatigue” again! Get rid of the word. Yes, this is hard work, but the challenges aren’t going away. The topic must be hit with full force. Be bold, be confident, get strong!
2. Make absolutely sure that technology is addressed in your strategic planning,
“It makes a world of difference,” says Lynch, who has held top technology roles with three firms over the course of more than 15 years. “Two of the principals and I spend a lot of time discussing goals and strategies for the firm and how technology fits into it. These are very high-level conversations, and we keep each other informed. They advocate for technology with other principals, who in turn advocate for it with other users.”
3. Perform an inventory of your firm’s technology prowess. A formal front can’t be created until you know the team that you have. Get a full understanding of what everyone can do. Identify the “power users,” or those people who are really good at a particular type of technology, so that they can lead the company in better productivity and efficiency. Consider “Technology Ambassadors” who introduce people to the use of tools and who are a resource to help guide future decisions.
Complita says, “We have a number of individuals I would say fit into the ‘technology ambassador’ concept.
4. Get organized in a messy way! Spend time creating a web of teams and councils that are tasked with exploring specific topics. Have an overarching council that pulls everything together. Don’t pile everything on a few people; share the load with more people involved. Things are going to get a bit messy with this type of system-wide strategy.
In a blog post from April 10, 2024, International Data Corporation (IDC) offered its advice on how to overcome technology change fatigue and reignite enthusiasm for innovation? “It’s essential to adopt a strategic and phased approach to digital transformation, prioritizing initiatives based on their potential impact and feasibility. By breaking down transformation efforts into manageable components, organizations can reduce complexity and focus their resources on areas that will deliver the greatest value.”
5. Don’t let the older generation be a roadblock. The future of technology is in the hands of GenX, Millennials and GenZ. Give them leadership roles on this topic. Listen to them. Let them experiment. This doesn’t mean that Baby Boomers should be excluded from the process; just don’t allow any biases or hesitation around technology keep you from moving forward.
“I think it’s more a barrier that users create for themselves,” says Lynch.
“The saying is you can’t teach an old dog new tricks, but why not? Those responsible for implementing technology have to make it a priority to teach, and technology users of any generation have to be receptive to it.”
6. Make absolutely sure that any organizational structure you establish around technology is directly tied to the firm’s governance and corporate decision-making roles. It’s understood that the board makes final investment and strategic decisions, so for everything to work well the firm needs to ensure that the board is communicated with and involved with the bigger efforts.
Require that board members disperse throughout the firm to participate in important meetings and decisions.
7. Get trained! For people to accelerate their technology learning and the application of their knowledge, the firm must invest in training. Yes, people learn by doing, but training speeds up the process. Now is not the time to be timid about spending money for training. Lynch says that TMP invests time and money to educate employees about new technologies and methods, but also works hard to elicit feedback that can help guide the program. The firm adjusts its approach based on the responses it receives
and the staff’s experience. It then relies on those who excel at the technology to serve as advocates to bring along colleagues who adapt to the change more slowly. Everyone learns at a different pace.
8. Get really good at analyzing the J-Curve and ROI for your big technology investments. It takes some analysis rigor to have a strong handle on the firm’s technology direction. The J-Curve helps determine the magnitude of the investment and how long it takes to reach breakeven financially.. Get good at analyzing the parameters of the curve, and don’t ignore the ROI exercise even though it might be challenging.
These tools take time to master, but it can only happen if you’re willing to make them a formal part of your technology investment planning. If you’d like to discuss this topic with others in the PSMJ Pro Network, consider logging on to one of our monthly Technology Peer Connect video sessions. Check the PSMJ Pro portal for schedules. You can reach Brian Burnett at bburnett@psmj.com. ��
A study by software company Egnyte finds that the AEC industry is seeing “striking growth” in cloud storage adoption, which is driving a need for improved data management practices. The 2024 AEC Data Insights report notes, “This evolution is fueled by several factors, including the widespread adoption of advanced technologies, an increasing reliance on dataintensive processes such as building information modeling (BIM) and the escalating use of high-resolution media in project workflows.
The report states that cloud storage adoption among AEC customers grew from 3.34 TB in 2018 to 25.64 TB in 2023. “This transformative trajectory underscores the industry’s burgeoning demand for increased storage capacities, which is driven by the imperative to manage large datasets, facilitate seamless collaboration, and adhere to evolving compliance and archival requirements,” the report authors stated. They listed the following factors driving the surge.
•Advanced Technologies: The industry-wide adoption of advanced technologies, such as BIM and realtime collaboration tools, necessitates the use of robust cloud storage solutions to facilitate seamless data exchanges and collaboration.
•Data-Intensive Processes:
The prevalence of data-intensive processes within the AEC industry, including high-resolution imaging and complex simulations, contributes to an expanding data footprint, driving the need for increased storage capacities.
•Compliance and Archival Needs: The imperative to store vast amounts of project-related data for compliance and archival purposes further amplifies the demand to increase storage capacities.
•Cloud-Based Collaboration:
The shift toward cloud-based collaboration tools drives increased digital collaboration and data growth.
According to the report findings, contractors are using the most cloud storage, followed by engineers, architects and owners (see attached graphic).
“Looking ahead, the trajectory of data storage is expected to be influenced by several emerging factors,” the report concludes. “The anticipated rise in litigation and liability will require firms to extend the retention period for construction documentation. Secondly, evolving business usage patterns – notably the repurposing of office buildings into mixed-use spaces – will demand intricate retrofitting, leading to the sustained need for detailed
construction information. Thirdly, the increasing prevalence of video and reality-capturing content, which consumes significantly more data storage than simple drawings or photos, is poised to contribute to a substantial surge in storage requirements.”
As new technologies emerge and these programs become an even more vital component of AEC projects, cloud storage needs should grow exponentially, the report states. You can access the report here: https://www.egnyte.com/blog/ post/unveiling-insights-from-the2024-aec-data-insights-report ��
AEC GIVES BACK
"This is the first in a series of articles celebrating the way that firms in our PSMJ Pro Member Network contribute to their communities."
STANTEC WEEK IN THE COMMUNITY MARKS 11 YEARS
��On June 17, more than 5,900 Stantec employees volunteered their time to 400 community organizations on the firm’s 11th annual Stantec in the Community (SITC) Week. It is part of the company’s Community Engagement program, which supports approximately 2,000 organizations throughout the year and provided $7.8 million in support in 2023.
“Stantec in the Community Week is one of my favorite times of the year. It’s a great opportunity to do something different and connect with employees as we join together to support some of the most important causes and organizations in our communities,” said Gord Johnston, Stantec president and chief executive officer. “Community Week has become a key part of our culture at Stantec, and I know our talented teams look forward to rolling up their sleeves and making a tangible impact in our communities.”
PSMJ Pro Network members Brent North and Suzanne Crysdale assert that Stantec’s commitment to giving back is one of the things that they believe sets the firm apart.
Crysdale, a Vice President and Architecture Discipline Leader, says that Stantec’s approach to community involvement is intentional
and complete. “It’s a very structured, top-down event,” she says. In her eight years with the firm, Crysdale has participated in several volunteer programs, including working at a food bank and helping to clean up the shorelines of Toronto’s islands.
North, Vice President Emeritus, notes that Stantec’s strategy of growing through acquisition creates an environment in which community involvement is one way to cement the relationship between acquirer and the acquired. It also inspires the company to offer substantial leeway to how, where and what type of contribution employees make.
“One of the corollaries of the acquisition strategy is that each office that joins us already has some kind of local engagement in the community,” says North. “There isn’t a one-sizefits-all model.”
North offers the example of a young female employee in a Texas firm that joined Stantec a few years ago. She was very involved in a program that benefited the educationally disadvantaged community in her city, and after the acquisition, other staff found her cause so worthwhile that they joined her. She built a team of volunteers over the course of several weeks, not only providing much-
needed community support, but also gaining real-world experience in the profession.
North says that the Vancouver (British Columbia) office where he spent most of his 43-year Stantec career was situated between the affluent downtown area and a disadvantaged part of town. Even before it committed to Community Week, the firm encouraged its staff to perform pro bono work to provide a facility for a charitable organization in the city.
“The firm paid most of the staff time, though we did volunteer some of our time as well,” says North.
Other global initiatives undertaken by Stantec employees during the 2024 SITC Week include:
•Ronald McDonald House. Employees in the U.S. and Canada volunteered in support of the program, which features nearly 400 facilities that are a “home away from home that provide comfort, support and resources to families who travel far from home for the medical care their child needs.”
•Dress for Success. Employees in Delft, Arnhem, Oosterhout, Eindhoven, and Sittard, Netherlands contributed to the program, which provides free clothes for disadvantaged job seekers.
•Cendtro de Madres Adolescentes Villa Vida. Employees in Lima, Peru, provided various services including tree planting, painting and bio-garden care for the organization, which is committed to the recovery
and comprehensive development of child mothers who are victims of sexual assault.
•Healing Transitions. Employees in Raleigh, North Carolina, volunteered for this organization, which is a sanctuary for people struggling with addiction and homelessness.
•Native Forest Restoration. Stantec staff based in Hamilton, New Zealand, worked to restore native forests.
Throughout the SITC program’s 11year history, over 54,000 employees have volunteered more than 128,000 hours with 2,500-plus organizations around the world, Stantec says.
In July, Brent North (center) volunteered to drive the instrument truck for Brockton School’s World Music Program at the Summa Cum Laude International Youth Festival in Vienna and Prague.
If you have a story about your firm’s community involvement, we’d love to hear it. Write to Sarah Montague at smontague@psmj.com. ��
"Community involvement is one way to cement the relationship between acquirer and the acquired."
ESTABLISH A SOLID A.I. POLICY ENSURE
��Many firms have implemented (or begun implementing) A.I. use policies, but many still have not. And among the policies that do exist, many could be much better. Following is an edited excerpt from PSMJ’s 2024 book, A.I. Meets AEC: How to Harness Artificial Intelligence to Supercharge Your Firm, advising on ways to develop an ironclad A.I. policy.
“You need a policy in the organization about how A.I. is used, and how that use is governed,” says Lud Eng, Director of Information Technology for Stratus, a multi-disciplinary engineering, architecture, and consulting services network of firms. “A.I. systems can still confidently provide incorrect information, so it’s particularly important to review it before it goes anywhere.”
“You need everyone in the organization on board with the same understanding of where they can
use the tools, and where they can’t. Everyone must be clear on how to review and validate results before they impact a project or decision –well before a client would ever see them.”
Martin Gardner Architecture got ahead of the A.I. curve. “When ChatGPT came out, it opened our eyes to needing to be as early an adopter as we could be on some of the generative A.I. platforms,” says MGA COO Justin Hoff. “We had a lot of junior staff, five or six years graduated, who really wanted us to be early adopters, and to get our arms around A.I. as quickly as possible. I, and others on our leadership team, said, ‘Hold on.’ We purposely slowed it down. We knew we needed to make some type of policy before some of the staff started using ChatGPT, Midjourney and some of the others out there.”
Taylor Design is a 100% employeeowned firm, and they treat their staff like the owners they are. The firm’s leadership gives people guidelines to follow, then trusts them to do the right thing. This is their approach to social media, which has resulted in exceptional, positive engagement, and the firm employs a similar policy for A.I.
“We released an A.I. policy to the company early [in 2023],” says Senior Associate and Director of Design Technology Steve Bennett. “We realized quickly that it was a hot topic that we needed to get in front of. We held a lot of open discussions and roundtable meetings. I went to each of our five offices, surveyed people. We settled more around principles of A.I. use, rather
YOUR PEOPLE AREN’T PUTTING YOUR FIRM AT RISK
than hard and fast rules. It basically comes down to, ‘Use A.I., but don’t do dumb or harmful things with it.’ It’s principles like not sharing sensitive information with an A.I. program.”
Bennett continues, “One of our core values is entrepreneurialism. We don’t have the kind of rules that a large company might have. That’s the only way to remain nimble enough that we can compete with larger firms that have more resources. A lot of our work is in healthcare, so there are obviously privacy concerns that you may not have in other types of work, but so far, we haven’t blocked any sites to prevent people from using certain types of A.I. Even if we did, that isn’t going to completely prevent people from using A.I. If people want to give information to get information from an A.I., they will find a way around methods preventing them.”
The strictest guideline in Taylor Design’s A.I. policy is to verify the accuracy of any A.I.-generated content in client-facing deliverables.
“If we’re using it in a proposal and use ChatGPT, we have to vet that it’s correct. We want to be sure that the program hasn’t produced any hallucinations (which occur when a large language model perceives patterns or objects that are nonexistent or imperceptible),” says Bennett.
To create a more detailed policy in your firm, or to ensure the one you have works, consider the following guidelines (which are explained in more detail in the book):
• Establish Purpose and Scope.
•Stress Ethics.
•Address Legality and Compliance.
•Address Data Quality.
•Encourage Transparency.
•Focus on Security.
•Build in Training.
•Let the Benefits Flow.
•Communicate frequently and Solicit Feedback.
For a more in-depth look at A.I. use policies, including 43 actual examples from AEC firms, consult PSMJ’s book, 2024 A/E Artificial Intelligence Policies. You can find it here: https://go.psmj.com/2024ae-artificial-intelligence-policies. ��
SURVEY SNAPSHOT
EXTERNAL BOARD MEMBERS/DIRECTORS
“Independent board members, if carefully selected, are more likely to act without bias.”
��As explained in the PSMJ 2023 A/E Management Compensation Benchmark Survey Report, external board directors (also called “independent” or “outside” board member) are “not involved in the inner workings of the company and can be key contributors based on their experience or expertise working in or with other businesses. Ideally,
a person in this position can provide an objective view or alternative perspective on board issues.”
As indicated in the accompanying table – which is reference in part in Dave Burstein’s column on Page 4 –only 25% of responding firms report having an external board member/ director. According to the survey,
the average number of independent board members for firms that have them is 2, with a range of 1 to 3. As expected, it is more common for larger firms to have external board members/directors.
Of the firms that have external board members/directors, more than half provide a fee per board meeting. These firms don’t typically grant an annual equity retainer, provide an additional cash retainer, or pay for annual committee fees, but close to two-thirds reimburse board members for travel expenses.
Independent board members, if carefully selected, are more likely to act without bias. They can improve board governance, provide a fresh look, and offer a level of expertise that may be missing in a privately held or family-owned firm. It is crucial that these members are truly “independent,” and have not been selected to support an individual’s agenda, but instead have been selected to provide input on what is best for the firm.��
Source: PSMJ 2023 A/E Management Compensation Benchmark Survey Report
��
Biggest challenge in your career so far?
I think within most organizations and teams, there are people that you identify are ready for a change, and that maybe are not healthy for your organization. When you deal with people and care about them, outside of work, it's difficult to help them find that reality. Although I understand my responsibility as a leader to work through these situations, I find it quite challenging. For organizations to be successful and become highperforming, it's critical and not something you can ignore.
What is a key tip you could provide to an emerging leader?
Realize that time and experience are going to be your greatest opportunity for development. This requires some patience. More importantly, learn to embrace your challenges/adversity because those times are your most important opportunities to improve. The best leaders that I've been around are always assessing situations to better prepared for the future, and not dwelling for long on any failures.
AEC THRIVE HEADS TO AUSTIN
��PSMJ’s annual growth, profit and success summit AEC Firm Leaders returns September 2527 at the JW Marriott in Austin. Robert Kaplan, Vice Chairman of Goldman Sachs and former President and CEO of the Federal Reserve Bank of Dallas, is delivering a keynote speech on the “Overlook/Outlook Economic Analysis.“
Kaplan is one of more than 30 speakers at this years THRIVE, including the always popular “Where Are We Headed?” general session from PSMJ Senior Consultant Dave Burstein.
This year’s THRIVE features an unprecedented three pre-conference workshops – AEC MarketPRO, which is focused on best practices in marketing and business development; AEC
MEMBER SPOTLIGHT
SEAN DOYLE
POSITION: CHIEF OPERATING OFFICER FIRM: MCKINLEY ARCHITECTURE AND ENGINEERING
YEARS IN THE AEC INDUSTRY: 5.5
What's your favorite moment of your career so far?
I can't think of any one moment that resonates to be my favorite. I'd say with a lot of sincerity, my favorite aspects of my job are watching individuals pursue their goals and accomplish them.
Who or what inspired you in your career?
As a family, our faith is important to us and that has guided me for quite some time. I really enjoy working with people and helping them to pursue whatever it is they’re trying to achieve. I coached for a long time at both the high school and collegiate level and enjoyed helping to build a team. Daily, I'm inspired to figure out where our team is trying to go, what barriers may be in front of them, and helping to remove those barriers. I enjoy watching individuals achieve what they set out to do, after working hard to get there.
Guilty Pleasure: What can you not live without?
Oh man, this is a tough one as I don't imagine you're looking for the cliche of my wife and kids. My guilty pleasure is probably playing tournament poker. I have played in the World Series of Poker a few times. It's a hobby that I always hope I can continue to enjoy. Although I only get to play a few times a year because I have young children, but I like to think I'll play more as they get older.
Future prediction: What is coming in the industry within the next 10 years?
The AEC industry is going to be faced with the opportunities and challenges of technology, with AI at the forefront. I think the priority of having a strategic vision that is established with strong leadership is a must, and organizations need to be sure they have the right people leading those conversations. It will be a dynamic environment that will require ongoing conversations and decisions to ensure success.��
A.I. Foundations Workshop, which examines the latest developments in artificial intelligence and other emerging technologies; and the AEC Servant Workship, which offers insight into the best ways to recruit and retain top-level talent.
PSMJ PRO members get a $100 discount on conference registration. Use the code PSMJPRO2024. For more information or to register, visit https:// go.psmj.com/thrive-2024 ��
SEPTEMBER 25-27, 2024 | AUSTIN, TX
COMPENSATION OUTSIDE BOARD
��Kevin Shelley, a principal and COO with Schmidt Associates, asked the PSMJ Pro network for feedback about external board compensation.
“Independent board members, if carefully selected, are more likely to act without bias.”
He wrote, “We are a 130-person AE firm with a 7-member BOD that includes 2 external board members. We are looking for feedback on how others handle compensation for members?”
Parrish S Boren, CEO of Marx|Okubo, replied, “We have 230 employees and are 100% ESOP. We pay our outside directors $35K per year for 4 meetings and an expectation of reasonable interim meeting communication. All travel, etc., is paid by us as well for in person meetings.”
Garth Cressman, CEO of WalterFedy, said his 300-person AE firm pays $2,500 per meeting for four meetings per year, plus expenses. He jokingly added, “Parrish S Boren If you are looking for additional Board members I am available!”
Chris Razzell is Founding Director of ASPECT Studio, a 220-employee firm that is 70% founder owned and 30% employee owned. He wrote, “Our board has 3 executive directors and we pay our two non-executive directors $25K (USD) per year for 4 full-day meetings (1 per quarter) and 4, 2- to 3-hour subjectspecific meetings (such as valuation and dividend declaration). Reasonable interim communication is included in the fee. We reimburse all travel and accommodation.”
Karl Tonander, COO of Azurite Professional Community/SMA/Gallatin Operational Solutions added, “We have about 270 employees, are nominally 50% ESOP, and have no outside directors at present. However, any board member that is not a VP (or higher) receives a $10k/year stipend paid quarterly. When we did have outside members, this is also what they received.” (For more about Karl’s firm’s experience with outside board members, go to Page 5.)
According to Lodestone Global’s 2024 Private Company Board Compensation Survey, the median total compensation for board members in private company’s was $50,400 up 2.4% from the $49,200 reported last year. That was 9.7% higher than the previous year. The increase is the result of a +2.7% increase in the U.S., offset by a +2.1% increase internationally.
The PSMJ 2023 A/E Management Compensation Benchmark Survey Report found that the average compensation per meeting for outside board members in the industry is $2,000 (based on 43 firms). The survey also found that only 9% of responding firms provide additional compensation for employees who serve on the board, with the average annual amount of compensation at $6,000 (based on 23 responses).
Make sure to take advantage of the online discussions on the PSMJ Pro Portal Network at https://www.psmjpro.com/home ��
50 PREDICTIONS FOR 50 YEARS
1. The growing emphasis on wellness and mental health will influence the design of spaces, leading to more mindful and human-centric architectural solutions.
2. The development of new energy storage technologies will enable buildings to become more selfsufficient, reducing reliance on external power sources.
3. The advent of autonomous vehicles will necessitate the redesign of urban landscapes and transportation infrastructure, requiring innovative engineering solutions.
4. The increasing threat of climate change will drive the need for resilient and adaptive design strategies, leading to a focus on disaster-resistant architecture and infrastructure.
5. The exploration of space and extraterrestrial habitats will inspire new frontiers in architectural and engineering design, pushing the boundaries of what is possible in extreme environments.
6. The integration of renewable energy systems, such as solar and wind power, will become standard in building design, leading to a more sustainable built environment.
7. The development of advanced computational design tools will enable architects and engineers to create more complex and innovative structures, pushing the boundaries of what is achievable.
8. The rise of urban agriculture and vertical farming will influence the design of buildings and urban spaces, leading to more sustainable and food-secure cities.
9. The increasing focus on circular economy principles will drive the adoption of cradle-to-cradle design practices, minimizing waste and promoting resource efficiency.
10. The use of advanced nanotechnology will lead to the development of self-cleaning and self-repairing building materials, reducing maintenance and prolonging the lifespan of structures.
11. The emergence of bio-inspired design will lead to the creation of structures and systems that mimic natural processes, improving efficiency and sustainability.
12. The development of advanced energy harvesting technologies will enable buildings to generate and store their own power, reducing reliance on traditional energy sources.
13. The growing demand for affordable housing solutions will drive innovation in construction methods and materials, leading to more accessible and sustainable housing options.
To read the rest, visit https://go.psmj.com/blog/50-aec-predictionsfor-the-next-50-years