Systems and people overwhelmed, overloaded

Morrissey Goodale is providing A/E leaders with news and perspective on COVID-19 and its impact on the industry. This week, they examine how dispersions could change the A/E industry.

By Morrissey Goodale March 3, 2021

If you feel like there is just “more” of everything right now and you and your team are overloaded and overwhelmed – well, it’s not just you. Here is what we are seeing and hearing around the country.

A/E firms are maxed out and an increasing number are declining new work: Nationally, demand for design and environmental services is at an all-time high. Unprecedented levels of capital flowing into the residential sector and other areas has driven demand throughout the industry. At the same time, the supply of A/E services (a combination of available talent, time and applied technology) has reached capacity. So, many firms are turning new work away because they cannot in good faith take it on for the foreseeable future. (Note: If you are the president and/or CEO of a general civil/site engineering or surveying firm operating under capacity and can take on more profitable work then contact us at the email or number below and we will connect you with firms that are overcapacity and looking to outsource work.)

Acquirers are overwhelmed with opportunities:  In a harbinger of the massive wave of consolidation that is about to turn the A/E industry upside down, buyers do not have the bandwidth to properly process all of the opportunities that are coming their way. Whether through intermediaries or direct contacts, buyers have never seen anything close to this level of sellers before. This “oversupply” may put downward pressure on deal multiples. It also puts the industry in a position of “peak” consolidation activity.

The best firms are being relentlessly pursued by buyers:  Pre-pandemic we would regularly hear from CEOs of firms in hot regions (e.g., southern states) or hot markets (e.g., life sciences, data centers): “Yeah, I get one, maybe two inquiries per week from potential buyers, but I never respond to them.” Now, these CEOs are telling us that they are getting multiple inquiries daily from potential buyers or their intermediaries. The bifurcation of the market is upon us with unicorn firms commanding premium pricing and dictating terms of transactions.

Texas and Mississippi firms brought to a standstill: A/E and environmental firms in Texas and Mississippi have lost at least a week of productivity, revenues, and profits in February due to the ice storm last week and its aftermath. Many had zero internet access for the duration. VPNs were unavailable. Numerous firms had their offices completely closed down. Many still have employees cleaning up from home damage.

“Doing” is king, “Learning” is diminished: Leaders, managers and employees are maxed out. Right now, there is more work than they can process. CEOs are faced with a barrage of strategic decisions and options. Managers know they should be elevating and developing their people – but they instead are doing the work of the people that they have been unable to hire. Capacity is the fundamental constraint. Firms cannot afford waste in their systems or they will not be able to sustain their greatest resource…their talent. In every position, the workforce is “doing” and “reacting” more so than in 2019, while “learning” and “reflecting” is in decline.

Human resource departments under water: Chief people officers and their teams are overwhelmed with position recs. They are struggling to keep up with the demand for new staff. The needs are everywhere— production, PMs, regional managers, division managers, top executives— there is no end to it. More A/E firms than ever have brought on– or increased the number of– in-house recruiters. Everyone is chasing the same dwindling pool of talent. It’s a sellers’ market right now. Top talent at every position level has tremendous leverage at the negotiating table.

The not-so-distant drumbeat of cyberattacks:  In the boardroom and the information technology (IT) department (which is now apparently either in a bedroom in Billings, Mont. or “the cloud” – wherever that is), cybersecurity is top of the agenda. The discussion alternates between the hysterical “it happened to insert national iconic industry firmname here, so we HAVE to spend $1 million NOW to protect ourselves!” to something more sanguine. However, the threat of cyber-attack leading to operational shut-down and the inevitable ransom demand is pervasive. It’s similar to the Y2K event of 20 years ago. But this time it’s much more sinister and is unending.

Decision-fatigue on the rise: Weekdays blend together. Workdays start earlier and bleed into the evenings. Work weeks run into weekends. Your iPhone screen time report is frankly depressing. Your daily briefing from Cortana shows you have zero time to collaborate with colleagues – because you’ve used it all up working. Every Zoom call has at least one person showing up late – not because they were stuck in traffic but because their last call “ran over – sorry!” The science shows that the longer people work the poorer their decision-making becomes. This is not a great place for a professional services industry to find itself.

What does it all mean? Taken together this combination of overloaded and overwhelmed means our industry is generating record profits with a workforce that is burning out. Quality is inevitably declining, and future liabilities are building due to more mistakes being made by our people working longer hours in an environment where maxed out QA/QC systems are failing.

Coda: Is this “overwhelmed and overloaded” dynamic the New Reality? Or is it a peak or bubble? A possible federal infrastructure package later this year would support the former. However, if you listen carefully, you can hear more and more management teams around the country reacting to internal financial reports that show a slower start to 2021 compared with 2020. Could this be the peak?

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

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