CompensaLlon 1rends Lncouraglng buL ConservaLlve

1he ueslgnlnLelllgence 2011 CompensaLlon and 8eneflLs Survey" reveals reasons for opLlmlsm and
sober cholces ln archlLecL deslgner englneer and execuLlve pay

lor professlonal pracLlces sLafflng cosLs lncludlng salarles beneflLs and reLlremenL plans
represenL Lhe largesL budgeL llne lLem and Lhe mosL slgnlflcanL boLLomllne expense lL's no wonder LhaL
over Lhe pasL Lhree years flrms have experlenced unprecedenLed sLafflng and compensaLlon reducLlons
relaLed Lo cosL conLrol and survlval

Layoffs have been leglon And many flrms forewenL fllllng poslLlons Lhey would oLherwlse sLaff MosL
hard hlL ln LhaL regard have been lnLern archlLecLs and new pracLlLloners

And for Lhose who were able Lo reLaln Lhelr poslLlons lasL year's salary lncreases were on Lhe order of a
meager 17 percenL More Lhan half of uS professlonal pracLlces have seen acrossLheboard salary
reducLlons 1aklng Lhe blggesL moneLary cuLs have been chlef markeLlng offlcers parLners/offlcers chlef
lnformaLlon offlcers and chlef human resources offlcers

1he baslc economlc model of supply and demand has worked agalnsL Lhe deslgn professlons over Lhe
pasL Lhree years lL ls lncreaslngly dlfflculL Lo generallze abouL Lhe compensaLlon for archlLecLs
deslgners and englneers as Lhey sLraLlfy broadly from Lhe hlghesL 20 percenL of earners Lo Lhe lowesL 20
percenL Powever a rally of sorLs ls beglnnlng Lo Lake shape CompensaLlon pollcles are belng revlsed
and ln some cases ad[usLed upward

Survey llndlngs

Many readers are llkely Lo be surprlsed by Lhe flndlngs of Lhe ueslgnlnLelllgence 2011 CompensaLlon
and 8eneflLs Survey" lL drew lnpuL from nearly 700 professlonal pracLlce locaLlons employlng nearly
33000 sLaff All Lold Lhese flrms expecL Lo lnvolce $6993 bllllon ln fees Lhls year 1he hlgh parLlclpaLlon
ln Lhe research makes Lhls reporL Lhe largesL survey on compensaLlon ln our 13year hlsLory and Lhe
largesL survey of lLs klnd of leadlng A/L/C flrms 1he flrms surveyed are all norLh Amerlcabased
archlLecLure lnLerlor deslgn and archlLecLure/englneerlng flrms llrms of all slzes are represenLed
rlmarlly flrms ln Lhe Lop Lhree Llers of Lhe professlon are lncluded ln Lhls survey (as classlfled by Lhe ul
8rand 8ecognlLlon lndex publlshed ln Lhe Almanac of ArchlLecLure ueslgn 2011) 1hls lncludes flrms
consldered LopLler global and caLegorlcal leaders excepLlonal naLlonal leaders and sLrong reglonal
leaders Several noLable and growlng professlonal pracLlces wlLh emerglng caLegorlcal recognlLlon are
also represenLed

1hls bylnvlLaLlon survey focuses almosL enLlrely on Lhe successful flrms ln norLh Amerlca Loday MarkeL
segmenL leaders are lncluded from Lhose wlLh markeL share sLrengLh ln healLh care educaLlon
hosplLallLy lndusLrlal corporaLe/commerclal museum/culLural rellglous resldenLlal reLall and sporLs

Cur guldlng ob[ecLlve ln Lhls lssue of ueslgnlnLelllgence ls Lo explore Lhe Lrends ln compensaLlon
beneflLs bonus and equlLy dlsLrlbuLlons ln leadlng flrms Cur survey asks whaL leaders expecL for 2011
as Lhey reflecL on Lhelr acLual experlences ln 2010

1rends

Soarlng execuLlve and professlonal compensaLlon erupLed ln Lhe flrsL elghL years of Lhe 21sL cenLury
and generous slgnlng bonuses were common Plgh levels of producLlvlLy ln flrms broughL abouL hlgher
compensaLlon packages especlally for deslgners recrulLed Lo underserved areas

1hen Lhe recesslon hlL and Lhese same deslgn LalenLs and professlonal pracLlce execuLlves found Lhelr
base pay reduced by 20 percenL or more and Lhelr bonus lncenLlve and equlLy dlsLrlbuLlons someLlmes
severely reduced noL uncommonly Lo zero Lvery clLy ln norLh Amerlca had organlzaLlons LhaL found
Lhemselves ln an unsusLalnable condlLlon and were forced Lo close Lhelr doors

8uL once agaln Lhe conLexL ls changlng

Cur currenL research noL only updaLes Lrends on 2011 compensaLlon pollcles buL also brlngs a hlsLorlcal
perspecLlve LhaL allows us Lo undersLand facLs and dlrecLlons more fully 1hls lnformaLlon should be
parLlcularly useful Lo Lhose flrms possesslng or enLerlng a sLrong merlLocracy (payforperformance)
culLure

eLer ZumLhor sald he once belleved he should never [udge by flrsL lmpresslons lnsLead glvlng people
flrms and bulldlngs Lhe beneflL of doubL or a chance for furLher conslderaLlon As years passed and
he goL older ZumLhor admlLLed LhaL he was back Lo bellevlng ln flrsL lmpresslons

lL ls a blL llke when we analyze professlonal pracLlce compensaLlon levels and pollcles as we canvas Lhe
surveys reLurned Lo us for Lhe 2011 research Cne glance aL compensaLlon pollcles makes lL posslble Lo
dlsLlngulsh Lhe organlzed and wellmanaged flrms from Lhe less sophlsLlcaLed operaLlons seeklng new
lnslghLs lor example Lhere are sLlll lnsLances of lnLerns belng pald less Lhan $30000 even as parLner
compensaLlon ls ln Lhe 80Lh percenLlle of peer flrms

Cur research also reveals Lhe fallacy of archlLecLure as a subpar professlon ln Lerms of compensaLlon
lor lnsLance whlle some archlLecLs and deslgners belleve lL Lo be lmposslble Lo achleve gross annual
bllllngs of $200000 per fullLlme equlvalenL sLaff oLher flrms achleved LhaL level four years ago and are
laylng plans Lo surpass $300000 ln Lhe near fuLure We have wlLnessed how flrms wlLh Lechnologlcal
and managemenL acumen can achleve envlable producLlvlLy levels 1he gross revenues pro[ecLed for
2011 per fullLlme employee ln Lhls year's research ls $204279

new ConLexL

ZumLhor's observaLlons flL Lhe new conLexL ln professlonal pracLlces glven LhaL LalenL asseLs and
managemenL sLrengLhs can be percelved qulckly ln Loday's flrms rofesslonal pracLlces need Lo be well
managed buslnesses Lo survlve ueslgn LalenL alone wlll noL provlde Lhe regeneraLlve asseLs Lo achleve
professlonal dlsLlncLlon nor Lo serve cllenLs year afLer year Successful pracLlce requlres more Lhan
deslgn LalenL

lL ls Lrue LhaL larger flrms ofLen generaLe more revenues per fullLlme equlvalenL sLaff Lhan smaller ones
SLlll Lhere are hundreds of sLrong mldslzed flrms LhaL ouLrun Lhe meLrlcs of Lhelr larger couslns Cur
research shows LhaL flrms of all slzes can be well managed successful and reslllenL ln addlLlon conslder
Lhe small flrm sole pracLlLloners who can earn aL levels equlvalenL Lo Lhe execuLlve compensaLlon levels
of Lhe largesL flrms someLlmes hlgher lf Lhey have Lop deslgn brand repuLe and a slgnlflcanL
percenLage of ownershlp ln Lhe flrm

8eaders wlll be well served Lo look aL Lhe performance resulLs of Lhe Lop and Lhe second 20 percenL of
flrms and Lo compare Lhese numbers wlLh Lhelr own lnLernal benchmarks 1hls wlll provlde a wlndow
lnLo Lhe gap LhaL someLlmes exlsLs been a besLofclass flrm and everyone else

Pere are a few of Lhls year's hlghllghLs

- 1he average CLC/presldenL of flrms of all slzes wlll earn $318700 ln 2011

- SevenLeen percenL of flrms have a hlgher percenLage of female Lhan male sLaff

- 1he mean age of prlnclpals and parLners ls 33

- llrms are cuLLlng back on relmbursemenLs for assoclaLlon dues (from 834 percenL lasL year Lo 773
percenL)

- Cnly 23 percenL of flrms expecL Lo reduce compensaLlon levels Lhls year (lasL year 44 percenL dld)

- llrsLyear lnLern compensaLlon has been ln decllne and ls now $37403 (wlLh a pro[ecLed bonus of 24
percenL)

- 8onus pro[ecLlons are Lrendlng up for mosL all professlonal poslLlons

- A sLrucLural englneer wlLh 13 years of experlence (and no ownershlp) wlll llkely make $93071 plus an
addlLlonal 106 percenL bonus An archlLecL wlLh equlvalenL experlence (and no ownershlp) wlll llkely
make $86013 plus an addlLlonal 68 percenL bonus

- LxecuLlve base compensaLlon ls up 11 percenL Lo 37 ln mosL offlcer caLegorles

- AssoclaLe prlnclpals wlLh equlLy wlll recelve Lhe largesL pay lncreases ln 2011 (46 percenL) and Lhey
wlll be followed closely by pro[ecL managers

LxecuLlve CompensaLlon

LeL's look more closely aL execuLlve compensaLlon Lrends ln a Llme of dramaLlcally changlng conLexL

lL used Lo be LhaL compensaLlon pollcles and pracLlces were closely guarded secreLs 1hen ln 2000
ueslgnlnLelllgence conducLed research for Lhe ueslgn luLures Councll on Lhe 162 global ellLe flrms and
oLher hlghbrand equlLy flrms Lo look lnLo Lhelr longLerm compensaLlon pracLlces

ln our survey of 2003 we noLed LhaL Lhere were nearly 400 known archlLecLs and deslgners who were
maklng over $800000 per year and LhaL many of Lhese had qulLe low base salarles under a quarLer
mllllon dollars per year buL Lhelr LoLal cash compensaLlon ofLen exceeded $1 mllllon We counLed
dlrecL compensaLlon of salary and bonus awarded and pald ouL ln Lhe same year longLerm lncenLlve
paymenLs and ln some cases equlLy holdlng dlsLrlbuLlons (LqulLy dlsLrlbuLlons have rarely been
chronlcled by any of Lhe deslgn assoclaLlons and Lhe daLa we have collecLed ls admlLLedly skeLchy) Cur
annual compensaLlon sLudy does noL lnclude payouLs ln cash durlng owner LranslLlon or MA buyouLs
even Lhough Lhese would be reporLed Lo l8S as cash compensaLlon from buslness lnLeresLs We have
ongolng research ln Lhls area coverlng all of Lhe deslgn professlons and we'll be wrlLlng abouL Lhls ln Lhe
fuLure

1he hlsLorlc lack of Lransparency ln execuLlve compensaLlon ln professlonal pracLlces has resulLed ln a
phenomenon where faculLy sLudenLs and young professlonals rarely know much abouL Lhe
compensaLlon pracLlce reallLles and pollcles of leadlng flrms rofessors have erroneously sLressed ln
classes LhaL Lhe deslgn professlons are low paylng and lL ls common Lo hear Lhe exhorLaLlon uon'L go
lnLo archlLecLure lf you wanL Lo make money" 1hls leads sLudenLs Lo conclude LhaL noL only are Lhere
slgnlflcanL barrlers Lo enLry ln Lhe deslgn professlons ln Lerms of Llme and money buL longLerm
moneLary rewards may never be forLhcomlng 1hls ls somewhaL of a sLrucLural problem ln Lhe LalenL
supply chaln LhaL could haunL Lhe professlon as lL sLruggles Lo carve ouL leadershlp and relevance ln Lhe
21sL cenLury lor cerLaln Lhe A/L/C lndusLry sLands a chance of loslng Lhe besL and brlghLesL LalenL lf
Lhls myLhology perslsLs

LxecuLlve pay relaLlve Lo Lhe earnlngs of average workers ls one area we follow ln our research lor
lnsLance ln our 2011 sLudy you wlll see LhaL Lhe compensaLlon (base plus bonus) for a parLner wlLh
equlLy ls a mean of $214000 whlle LhaL of an archlLecL wlLh 10 years' experlence ls $79383 1he
mulLlple beLween Lhe Lwo ls a facLor of less Lhan Lhree 1he pay for Lhe presldenL/CLC of a flrm relaLlve
Lo Lhe earnlng of Lhe average worker ls mosL ofLen noL seL as pollcy by flrms (wlLh a halfdozen
excepLlons LhaL we know of) buL we do see clear Lrends Several reporLlng flrms use a mulLlpller of elghL
as Lhelr pollcy gulde 1hus ln a year of sLrong proflLs (say 13 percenL on neL revenues) Lhe owner
parLner compensaLlon and Lhe presldenL/CLC can move lnLo Lhe hlgh slx flgure range and nudge Lhe
mllllon dollar level 1hls number wlll vary conslderably from year Lo year dependlng on flrm proflLablllLy
and cycllcal expense obllgaLlons

1he compensaLlon for execuLlve leaders ln professlonal pracLlces ls forecasL Lo be up [usL sllghLly from
lasL year and LargeL bonuses could be hlgher lf currenL backlog and flnanclal benchmark Lrends
conLlnue 1he mean base compensaLlon (wlLhouL bonus) for a CLC/presldenL ln flrms of all slzes ls
$193897 whlch ls abouL Lhe same as lasL year Powever Lhe bonus for Lhls lndlvldual ls up from a mean
of 337 percenL lasL year Lo a forecasLed mean 618 percenL ln 2011 CompensaLlon ln medlum large
and exLra large flrms ls growlng modesLly ln base salary and ls expecLed Lo grow hlgher ln Lhe lncenLlve
and performance rewards caLegorles All Lhls remalns Lo be seen of course buL Lhere ls a Lrendlng
Loward lncreaslng bonus expecLaLlons

WhaL's Mlsslng

As l wrlLe abouL execuLlve compensaLlon Loday l asked myself WhaL ls mlsslng? Pave we lncluded Lhe
key lnformaLlon from our Lhousands of pages of collecLed research?

lL occurs Lo me LhaL whlle Lhere ls lndeed more lL ls also qulLe slmple lL loglcally comes back Lo Lhe
ueslgn + LnLerprlse Model LhaL suggesLs sLrong and measurable managemenL ln each pracLlce area
noL [usL sLrong deslgn LalenL 1he ueslgn + LnLerprlse Model focuses on Lhe four zones of compeLency
markeLlng operaLlons flnance and professlonal servlces When all Lhese are runnlng effecLlvely Lhe
organlzaLlon becomes a besLlnclass flrm Cf course Lhese same besLlnclass flrms are Lhose LhaL
usually compensaLe aL hlgher levels 1here ls a sLrong correlaLlon year afLer year

WhaL ls Lhe fuLure of salary and compensaLlon for archlLecLs and deslgners? Whlle noL everyone we
surveyed was opLlmlsLlc mosL were SLraLeglc dlrecLlons geL mlxed vlews Some flrms are provldlng for
slgnlflcanL salary lncreases ln several speclalLy markeL secLors especlally healLh care and lab and sclence
faclllLles Some foresee an lncreaslng number of deslgn professlonals seeklng salarled employmenL
raLher Lhan embraclng Lhe enLrepreneurlal challenges of buslness as a solo pracLlLloner or ln a small
group pracLlce

1aklng all conslderaLlons LogeLher we see Lhe fuLure brlmmlng wlLh opporLunlLy LhaL wlll mosL llkely call
for new recrulLmenL acLlvlLy 1he deslgn professlons are branchlng lnLo many areas ouLslde Lhe
LradlLlonal zones we see advances ahead and Lhls relevancy should lead Lo lncreaslng revenues and
payroll vlLallLy

As you conLemplaLe sLraLeglc changes ahead for your own organlzaLlon remember LhaL your sLaff can
be your mosL valuable asseL buL only lf Lhey are LalenLed energeLlc and hungry Lo grow lf Lhey are
Lhen pay Lhem aL levels LhaL reLaln and reward Lhem 1hese are Lhe people you can counL on Lo
exLlngulsh lnerLla neuLrallzlng anLlchange forces ln your flrm As you look aL your organlzaLlon keep a
poslLlve buL crlLlcal eye l am a blg bellever ln Lhe power of poslLlve sLaff culLure 1hls culLure can be
boLh egallLarlan and accounLable aL Lhe same Llme

Cycles repeaL and perhaps nowhere ls Lhls more evldenL Lhan ln Lhe professlonal pracLlce envlronmenL
lL has been a Lough recesslon full of challenges and uncerLalnLles buL now Lhere ls new enLrepreneurlal
acLlvlLy lL ls Llme for flrm leaders Lo Lake an expanslve and moLlvaLlonal polnL of vlew Ad[usL your vlslon
Lo see Lhe opporLunlLles ahead and plan your agenda accordlngly