ASHRAE Journal - February 2015 - 45

TECHNICAL FEATURE

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

costs. Overhead, as a percentage of
TABLE 1 Comparison of key financial indicators 2013 - 2014.
direct labor costs, is holding steady
(MEDIANS)
2014
2013
% CHANGE
near 160% (Table 1). Direct labor costs
Net Revenues per Total Staff
$127,607
$125,589
2%
have increased 6%, exceeding the
Net Revenues per Direct Labor Hour
$103.95
$101.66
2%
growth of the consumer price index;
Direct Labor Costs per Direct Labor Hour
$33.84
$31.90
6%
profits (earnings before bonuses,
Total Costs per Direct Labor Hour
$87.91
$86.50
2%
discretionary distributions, and
Equity per Total Staff
taxes) have increased 14%. Balance
$31,659
$21,666
46%
sheets are improving as evidenced
Operating Profit (Net Revenues)
12.97%
11.42%
1.6%
by the substantial amount of equity
Overhead Rate (before Incentive/Bonus)
160.59%
159.56%
1.03%
that firms are carrying per total
Chargeability (Payroll Dollars)
59.56%
59.69%
-0.1%
staff, which increased from $21,666
Backlog Change
9.00%
7.00%
2.0%
to $31,659, between 2013 and 2014.
Gross Revenues Change
7.00%
8.00%
-1.0%
A detailed historical comparison
Staff Size Change
3.57%
2.70%
.87%
of several of these key financial
Net Direct Labor Multiplier Achieved
indicators is provided in Figure 1 and
3.07
3.02
.05%
Table 2.
Average Work-in-Process Days
18.00
25.51
-7.5%
The great news is that the gap is
Average Collection Days
66.55
70.12
-3.6%
closing between the target and the
Source: PSMJ's 2014 Financial Performance Benchmark Survey Report
achieved direct labor multiplier
(Figure 2). If the target is less than
$120
the achieved direct labor multiplier the result is a net
revenue deficit (less profit than expected), which was
$100
Profit
a -1.6% median in 2014 results. If the target is greater
$80
than the achieved direct labor multiplier, the result is
Overhead
$60
a net revenue surplus (higher profits than expected).
$40
The improved results in Figure 2 generally indicate that
firms are achieving better fees for projects and/or those
$20
Direct Labor
projects are being more efficiently managed, reducing
$0
the net revenue deficit.
Unfortunately, the A/E industry is still struggling to
earn a reasonable profit, but it's headed in the right
Net Revenue
Direct Labor Costs
Break Even
Per DLH
Per DLH
Costs
direction (Figure 2) and has seen a gain of 36% since the
low point in 2010.
FIGURE 1 Historical direct labor benchmark trends. Source: PSMJ's 2014 Financial
Performance Benchmark Survey Report.

Compensation Trends
Annually, for the past 32 years, PSMJ Resources, Inc.,
has conducted a management compensation survey that
solicits data from both engineering and architectural
firms for 17 management positions, from chairman of
the board to junior project manager. Historical Total
Compensation is presented in Table 3 for the past six
years. It's important to note that compensation rates
generally increase with firm size, so use the information
in the table with caution. The table is presented to demonstrate trends only, and for more detailed information,
a full compensation study would be needed.

TABLE 2 Comparison of key financial indicators, 2010 - 2014.
(MEDIANS)

Net Revenues per Direct
Labor Hour

2014

2013

2012

2011

2010

$103.95 $101.66

$100.32

$94.69

$86.63

Direct Labor Costs per
Direct Labor Hour

$33.84

$31.90

$31.31

$30.99

$30.99

Total Costs per Direct Labor
Hour (Overhead + Direct
Labor)

$87.91

$86.50

$88.73

$86.06

$87.78

Operating Profit (Net
Revenues)

12.97%

11.42%

9.31%

9.86%

9.49%

Source: PSMJ's 2014 Financial Performance Benchmark Survey Report
FEBRUARY 2015

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ASHRAE Journal - February 2015

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