Facing the challenges of 2022

The world is changing, especially for design firms. The two-year disruption caused by the unpredictable impacts of the Covid-19 pandemic has forced both design firm management and employees to reassess how they provide services. A resurgent economy—provided an extra stimulus by the historic investment by the federal government in the revitalization and expansion of the nation’s infrastructure—has created an industry-changing need for efficiency in rapidly adding capital assets. The ability of workers, whether laborers or creative personnel, to demand changes in their work-life balance has increased along with the demand for their contributions. In addition, as the financial industry faces a reckoning about their commitment to and success with addressing environmental, social, and governance (ESG) issues, clients and others will ask design firms about their metrics in meeting ESG goals.

Integrating the Pandemic Impacts

Firms and their employees have mostly come to terms with the advantages and difficulties of working remotely. For some employees, the prospect of continuing remote work gives them a sense of better control over their time, including time with their families. Of course, many worry about the long-term effect of working remotely on their futures in their firms or in their professions. Many firms have realized that they can now use remote workers from a group they never could access before so firms have combed the nation for high-quality, and often lower-paid, employees and changed firm operations. Some firms have integrated the remote workers into ongoing design activities, while other firms have established virtual studios using only remote workers to meet specific project needs or expand the geographic and project type reach of the firm.

Designing for Explosive Growth in Capital Assets

As the demand for services increases and the accountability of those providing the services becomes intense, firms are looking at increased technology and labor changes to grow their businesses. The technology enhancements have their own risks as cyber liability exposures can dramatically affect design firm operations. The use of skilled labor also presents challenges. As rising costs in low-wage centers of production reduce the use of offshore outsourcing, some firms are looking at on-shore outsourcing. Some firms are looking to use “gig” workers to meet high demands or variable workloads as well as to avoid regulatory controls that are required with employees. Even the 2020 CNA professional liability insurance policy recognizes that “gig” workers will become an increasing part of the project delivery process. However, firms have to accommodate both federal and state labor laws and state regulations when delivering professional services.

Meeting the Needs and Goals of Employees

With unprecedented operational changes to how design firms deliver professional services, employees are continually reexamining their roles in making design firms productive and profitable, while firms are reassessing what it means to employ skilled personnel. The tradition of extensive workloads on younger professionals no longer is a ritual that many young professionals accept. Some are demanding more of employers, and one trend that firms might face is a movement of talent to unionization. Architects at New York-based firms have announced plans to unionize through the formation of “Architectural Workers United,” a coalition of New York City-based architects seeking to unionize their workplaces as a way to control working conditions and compensation. The unionization of engineering firm workers—even those working in privately owned operations—is possible as well. Grueling work hours at modest pay and a poor work-life balance are less acceptable in a time of high demand for professional services. The concept of younger employees thinking that they are joining an honorable profession that one day would put them into a leadership position no longer seems to be the operative paradigm.

The great recession showed many design professionals not in ownership positions that they were at risk of losing income, having benefits curtailed, and facing the prospect of immediate job loss because of “right-sizing” by firms. The Affordable Care Act gave some who saw their employment and hopes for advancement crushed by the recession a chance to start their own firms without sacrificing the security of healthcare. For the many young professionals who do not want to start a firm, they still want a role in firm decision-making, a share in profits, job security, and the right to a work-life balance that recognizes the changes in society and productivity of recent years.

Measuring ESG Success

Corporations have been adapting to the move from financial shareholder primacy to broader stakeholder capitalism as ESG goals become part of international requirements and regulations. Design firms, even though not usually publicly owned, will be facing the same need to balance growth, market share, and profits with meeting ESG goals dictated by clients, stringent regulatory environments, and employees who want their employer to be more than a revenue generator funneling profits to a select ownership.

The shift to the concept of broader stakeholder capitalism includes a focus on combating climate change and working toward greater worker advocacy, gender and racial diversity and inclusion, and other societal goals. Design firms, but perhaps more significantly the clients of design firms, will be balancing trade-offs in achieving ESG goals that comply with financial regulations and lending practices. The metrics used by clients in demonstrating compliance actions and results have not yet been finalized, but companies are already using independent external auditors who vet the companies for compliance with their stated goals. Depending on the metrics companies and their auditors choose, design firms providing services to companies will have to show their own assessments of ESG compliance. Both the clients of firms and the firms themselves will increasingly be accountable to external organizations, including regulators, industry associations, and trade bodies.

So far, 2022 appears to aggregate significant challenges to the traditional operations of design firms. How firms address their operational transitions, incorporation of technology and innovative uses of talent, treatment of professional staff and labor, and measurement of goals and accomplishments that comply with ESG pressures may be defining characteristics in achieving their preferred futures.

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