A prolonged soft market has taken its toll on many design firms. This has left the salary and compensation explosion for design firm staff a distant memory. There are some signs of life in the employment market for top people but those expecting a big holiday bonus may have disappointments in store.

Among design firm managers, the only positions that saw any increases in median salaries over the past two years were for project managers and market-ing directors, according to a recent sal-ary and compensation survey published by ZweigWhite, a Natick, Mass.-based management consulting firm. "We still aren’t seeing the big salary increases of five years ago," says Laura B. Rothman, ZweigWhite’s managing editor.

Some jobs have taken real hits. Median salaries for information technology managers have fallen 8.5% in the past two years. "Design firm IT spending fell from 3.9% of net service revenue in 2002 to 3.2% in 2004," says Rothman. This belt tightening has had a corresponding impact on IT staff pay, she adds.

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Endangered Bonuses

Rothman believes that the real story is how design firm bonuses are shrinking. Median bonuses for five of the seven management positions surveyed by ZweigWhite declined over the past two years, some radically. For example, in 2001 the median bonus for principals surveyed was $32,000, compared to $10,000 this year, according to the survey.

There should be no big surge in raises in the near term. "We are seeing raises basically in the range of inflation–around 3%," says William Fanning, research director for PSMJ Resources, a Newton, Mass.-based management consulting firm. As for bonuses, he believes that they will be flat next year. "We see about 50% of the firms we survey staying the same, about 20% cutting them and 30% increasing them."

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How Design Firm Managers Salaries Look And How thier Bonuses Look

There still is demand for people with the right market experience. "We are finding clients looking for engineers with land development experience across-the-board, from project engineers to project managers to vice president of engineering," says Justin Roy, executive search consultant for SullivanKreiss, a Northborough, Mass.-based executive search firm.

Other positions in demand are mechanical and electrical engineers with experience in mission critical data centers. "That market slowed a little, but with all the bank mergers going on, there seems to be an uptick," Roy says.

However, compensation remains tight. "A lot of people in the job market are experiencing sticker shock," especially those hired at premium rates during the late 1990s’ construction boom, says Carolyn Richman Peart, vice president of Cook Associates, a Chicago-based executive search firm.

Peart says design firms are becoming increasingly sophisticated in hiring. "They are hiring with an eye on long-term strategic goals," she says. When a firm hires simply to fill a position on a particular project, compensation will be flat. But firms will pay for individuals who bring business development and client skills into the mix and fit a firm’s strategic mission, Peart says.

Many experts believe the building recession that began in 2001 is creating a "lost generation" in the design industry akin to one created when few new people came into the industry in the early 1990s. "In the early 1990s, people could generally find something to do," says Frank Daly, director of architecture and design for S.R. Clarke Inc., a Fairfax, Va.-based executive search firm. Now, he fears people are leaving, creating a talent gap.

This gap could result in shortages in some positions once the buildings market picks up. As this new ‘lost generation’ matures, those remaining will be in high demand. "Once the economy gets going, there will be another price war for talent within a couple years," Peart says.