It’s not the Great Resignation that’s reshaping the A/E industry

It’s the Great Reassessment. And it’s playing out in two ways that will have massive impacts for years to come as a result of (a) baby boomers “finding” themselves as if it was the Summer of Love all over again and (b) the most useless employee manual ever written.

The boomer reassessment: There are still five million fewer Americans employed than before the pandemic lockdowns. And three million of those are baby boomers who retired early. Many of them left the workforce for good because of pandemic-related health concerns. Many more, though, chose to retire early because they could—and that choice is playing out in the A/E industry big time.

Retirement (and serenity) now: Baby boomers own over 53% of the nation’s wealth—primarily through real-estate and stock investments. Both asset classes soared in value during the pandemic. This allowed many boomers to move up their planned retirement from somewhere between “three to five years” down the road to, well, now. Boomers also control the majority ownership positions in most A/E and environmental firms. And guess what? Those valuations also soared during the pandemic—on average about 20%. So, A/E industry boomer owners and principals are wealthier than ever before. And they are thinking seriously about how to enjoy it while they are still healthy enough to do so.

I’ve always wanted to paint in oils: And who can blame them? After dedicating 30 years of hard work to building their firms—including navigating the Great Recession a decade ago (exhausting and scary for the firms that survived, bankruptcy for those that didn’t) and making it through the last two crazy years—many are reassessing their lives and are eager to hang it up and embrace the next part of the journey earlier than anticipated. They want to do the things that they sacrificed when they worked 50-to-60-hour weeks growing their firms. Spend time with their grandchildren to make up for the hours they didn’t devote to their own kids (while driving to and from town planning board meetings, which are now held on Zoom anyway, making boomers even more resentful of the time they gave up in the past—don’t get me started). Travel to “the homeland” (everyone has one). Work on their golf game. Volunteer in their communities. Become the artist they always wished they had been. With greater wealth on paper, all of these are now not just a reality—but also affordable (supply chain issues aside). And since the pandemic, boomers have been running—not walking—to the exits.

Transition plans accelerated: Starting this year (seriously, the calls started coming on January 4, after the New Year’s resolutions were made) many owners—let’s call them post-pandemic sellers—decided they were done with the stress, risk, and hassle of owning and running their firms. They wanted to sell their ownerships and de-risk. (These apparently are really good times for folks who sell tail insurance.) They envisioned a mask-less, stress-free future (which often included either a lakeside cabin or a 30-foot yacht) where if (when) there was another public health or economic crisis they wouldn’t be the ones on the hook and scrambling to keep everything together. For many, their first choice was to try to accelerate their internal transition plan. But more often than not, they encountered Gen-X and Millennial next-tier leaders who were not on the same accelerated schedule. They had neither the accumulated wealth nor leadership skills (nor the desire nor risk tolerance, let’s be honest) to take over the firm.

Flooding the market: Unable to transition internally, these owners have taken to selling their firms externally. This new cohort of sellers is a sizeable percentage of the record number of M&A transactions that the industry is experiencing. They are also benefitting from the record-high valuations currently at play in the market. (If you’re gonna sell, sell high.)

This trend will continue into 2022 and beyond: These are crazy times for the industry. Demand for A/E services nationally continues to be off the charts and outstrips the supply of qualified technical and managerial talent to do the work. Clients want everything now. Owners are stuck in the middle. They are enjoying record profits. But for many, their business is all-consuming—and exhausting. More and more boomer owners will reassess their lives and choose to sell—and most of those sales will be external. Forty percent of those will be to private equity. The reassessment by A/E industry boomer owners and the choices they are making will accelerate the migration of the industry from employee to non-employee ownership.

The work reassessment: If your employee manual was last updated before February 2020, it’s likely hurting—not helping—your ability to retain and recruit talent. First, it doesn’t incorporate all of your new (and ever-changing) client- and government-required pandemic-related protocols (check it—it doesn’t). Second, it fails to recognize just how dramatically the work-life dynamic of your employees— and importantly their families—has changed over the past 18 months.

Family matters: (Dear reader: I just wrapped up the final chapter of Ulysses—so, fair warning, long sentence ahead.) No matter where your A/E firm is located, what type of work it does, whom it serves, or what size it is, your employees and their families are navigating a post-pandemic world of new and sometimes conflicting professional and personal opportunities (my spouse can work from anywhere at a time of their choosing, so we’re relocating to Canada, but I still want to work for this firm because I Iove the work we do and the team), constraints (my spouse and I are unhappy with what’s happening in our public schools, so we will be homeschooling our kids, and I’ll be working less hours for the next year), choices (I hate commuting—it’s a waste of my time and detrimental to theenvironment; I can be more effective working from home, my boss and I both know that, and I’ll only work for a company that offers me that option, so don’t tell me to come “back” to the office because both you and I know that it makes no business sense, and don’t tell me we need to do it for our great culture, ‘cause we both know you can’t define culture, and I know you like to work from home too…), and options (our family’s stock portfolio has blown up over the past year allowing us to work just two days a week, and now I want to dedicate my time to taking care of my aging parents; I’m essentially a professional gig worker and will supply my highly transportable technology skills on my terms to whatever firm I want; let’s talk). This massive socio-economic reset in their personal lives is causing employees all across the A/E industry to reassess their relationship with “work.” Your employee policies and procedures manual has to recognize this new world that your employees and their families are navigating.

Intentionally flexible: The talent supply for the A/E industry is not going to get better any time soon. So existing talent is at a premium. The A/E workforce is in a curious “post-burnout” mode, with utilization continuing at record levels as it has been since June 2020. With the passing of the Infrastructure Bill, this dynamic is going to continue for years. Designers and scientists love the work that they do and want to keep doing it, but if they are going to be working flat-out, they want to do it on their terms that work for them and their families. So, instead of looking to their managers to organize how they work, designers and scientists are dictating the terms of how work gets done. All of Morrissey Goodale’s strategy work right now is pointing to a future that belongs to those firms that can be intentionally flexible in their business models and talent management/development systems, many times using variations of a holarchy structure. Leadership and management teams are in for several years of deprogramming from the old ways.

This article originally appeared on Morrissey Goodale’s website. Morrissey Goodale is a CFE Media content partner.

Original content can be found at www.morrisseygoodale.com.

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