Faster-growing and more profitable firms are most likely to have a formal leadership training program, according to PSMJ's recently released A/E Firm Leadership and Ownership Transition Study: How Today’s Most Successful A/E Firms Plan for Transition and Develop Emerging Leaders.
In this study, we were particularly interested in how (or if) firms conduct leadership development training. As such, we asked a number of questions related to the format and delivery of training programs.
Interestingly, we found that study participants—in their leadership/ownership transition activities—spend the most effort in identifying emerging leaders for accelerated development and formal mentoring of emerging leaders.
However, the study also found that a majority (66%) of participating firms have no formal leadership training. Meanwhile, among the 34% that do have formal leadership training, 17% of firms said that most or all of their emerging leaders go through a formal leadership training program, while another 17% said some of their emerging leaders go through a formal leadership training program.
When we asked firms if they think that formal leadership training has resulted in firm-wide performance improvement, the biggest response was: “We believe we have achieved firm-wide improvement, but haven’t tried to measure it.” The second biggest response was “We have seen improvement in the performance of some PM’s but not firm-wide.”
Then, we took a look at the effectiveness of leadership training, and found a distinct relationship between formal leadership training and firms’ financial performance. Specifically, we found that firms with a 2015 net profit rate of 20% of more, with a projected 2016 net profit rate of 20% or more, or a three-year growth rate in organic revenue of 20% or more, were the most likely to have some, if not most or all, of their emerging leaders go through such a program.
To put it another way, firms that said that some, if not most or all, of their emerging leaders go through a formal leadership training program reported higher profit rates for 2015 and 2016 than firms that have no formal training program (see above chart). Moreover, firms that said “some of firm of their emerging leaders go through a formal leadership training program” achieved the highest growth rate in organic revenue over the past three years.
With 100 participants and in-depth analysis on firm demographics and how a variety of factors impact leadership and ownership transition effectiveness and firm performance, this is the most comprehensive research of its kind that has ever been conducted in the A/E industry, certainly that has been conducted recently.
About the Author: Margot Suydam is PSMJ's Content Development Manager.
The report, A/E Firm Leadership and Ownership Transition Study: How Today’s Most Successful A/E Firms Plan for Transition and Develop Emerging Leaders, is available for $147 or as a free download to PSMJ newsletter subscribers, just another of the many perks of PSMJ membership.
PSMJ's has published a number of studies on best practices at architecture and engineering firms. Following are related blog posts with links to the full reports:
The Power of Strategic Planning Best Practices
How Successful A/E Firms Keep Clients Happy and Win New Work
How Firms Keep Projects Under Budget and Clients Happy