Monday, December 22, 2008

Are You Measuring the Things That Really Matter?

The connection between metrics and peformance is well established. The old axiom "what gets measured gets done" is true. What is less clear is whether most firms are tracking the best performance indicators.

Four underused measures come to mind. They each relate to goals that we can all agree upon. But somehow measuring performance in these four areas has not been a priority in most A/E firms. I'd like to make a case for adding these to the metrics you use, if you're not already.

Client satisfaction. Undoubtedly serving your clients well is one of your firm's core values. So how are you doing? Most firms can't answer that question with any certitude. Sure, they point to the fact that 80% of their work comes from repeat clients. But that's fairly routine in our business, not exceptional. The fact is that only one in four A/E firms routinely solicit performance feedback from their clients. Plus there's ample evidence that clients are not as happy with us as repeat business rates might suggest.

So here's a clear opportunity to measure something that really matters, and something that most of your competitors aren't. I provided some specific guidance on soliciting client feedback in a previous post.

Employee satisfaction. The second core value that I see most prominent among firms is some recognition of the central importance of the people who work there. In professional services, the quality of a firm is mostly dependent upon the quality of the staff. With a growing talent shortage (the weak economy notwithstanding), most companies realize that having satisfied employees has never been more vital.

So why aren't more firms asking their employees what they like and don't like about their employer? As with presuming client satisfaction, firm principals often overestimate how well they're serving this crucial constituency. Oddly, managers are sometimes reluctant to conduct an employee survey for fear that they'll learn the truth (usually explained as being hesitant to "stir the pot" or some similar metaphor). There's a mistaken notion that surveying employees creates problems rather than reveals them so they can be addressed.

Similar to clients, retention data can be misleading. Many employees don't leave for the same reason that many clients don't leave--it's hard to start over. But as important as employee retention is, that shouldn't be your primary goal for seeking satisfied employees. Research shows that uphappy employees exact a high cost in lost productivity, not to mention impossible-to-quantify opportunity costs (i.e., things you might have accomplished if your employees were more enthused about their jobs). And then there's the value of treating employees well simply because it's the right thing to do.

I advise conducting annual employee surveys so that you can both (1) track trends over time and (2) gage response to steps you've taken to address areas of concern. An important thing to keep in mind about employee surveys: You have to act on the feedback you receive. Fail to do so and you risk invalidating the whole process. This doesn't mean that you're committed to fixing every problem or shortcoming that comes to light. What employees want is that you acknowledge and value their feedback and take reasonable steps to address their concerns.

Supervisory performance. Why is this important? Because research indicates that bosses are probably the most important factor in defining the workplace environment. As Gallup puts it: "People join good companies and leave bad bosses." So if satisfied and loyal employees is your goal, then you should take steps to try to provide them effective bosses. A good place to start is to get feedback on how employees think their bosses are doing.

Typically this type of feedback is acquired through a 360-degree review, as part of the annual performance appraisal process. In this context, it is the feedback from supervisees that is key. Unfortunately many firms aren't seeking this kind of input. Once again, they may be making the mistake of assuming they know how employees feel about their bosses based on anecdotal evidence. Such evidence is rarely reliable. You have to ask the people whose perceptions matter.

I encourage firms to establish clear performance expectations for those in supervisory roles. Many managers are not judged on how they supervise and mentor others, but on other metrics such as utilization, sales, revenue, and profit. These, of course, are important measures of success. But don't ignore the crucial role that managers have in guiding and working with others in your firm. That relationship strongly influences your firm's overall performance.

Targeted behaviors. What? I doubt you've ever heard of such a metric. I borrowed the concept from the time I spent with my former employer developing and implementing a new behavioral safety process. Safety, like most performance issues, is usually monitored by tracking what is known as trailing indicators. These include measures such as OSHA recordable incident rates, lost work days, and near misses. Most other business metrics are also trailing indicators; they describe outcomes resulting from past actions.

To improve those metrics, of course, you need to change current and future behaviors. How will you know how well you're doing? By looking at subsequent trailing indicators? That will help, but after the fact. A better way is to monitor the current behaviors--a leading indicator--that you believe will yield better future results. In behavioral safety, this is done by a process known as "observation and feedback."

In this approach, someone regularly observes people working, checking in particular to see that they are doing the few "targeted behaviors" that are deemed most important to getting the desired results. The observer uses a checklist to document which of those behaviors are exhibited (judged on a pass-fail basis). Workers are provided with real-time feedback, either complementing them on doing things the right way or pointing out how they can improve. Rewards are provided to both individuals and teams according to their scores. This kind of approach (as part of an overall behavioral-based safety process) has helped numerous companies dramatically improve safety performance.

Could a similar approach be applied to other tasks and performance goals? I believe it could. It clearly defines what behaviors and methods are expected. It monitors work activity in real time, providing feedback and coaching, and rewarding good performance. It focuses on the most critical ingredient of organizational change and improvement--individual behaviors.

So as you look ahead to 2009, let me suggest you revisit the question: Are we using the right metrics to help us achieve the results that matter most? Hopefully I've inspired you to consider a few different options.

The Myth of Multitasking

Now here's a novel resolution for 2009--do less! Sound preposterous? Generally we charge into the new year with visions of achieving more than we did last year. Getting better results usually translates into doing more. In a weak economy, just holding your own may require working harder than last year.

Let me throw a little cold water on those plans. There's recent research that reaffirms what we've always known: We have limits. And for most of us, we're already there without adding any of those new responsibilities outlined in the latest strategic plan or corporate initiative or reorganization. Somehow, we've got to learn how to get more done in the same amount of time. The problem is, that's largely a myth.

"People can't multitask very well, and when people say they can, they're deluding themselves," said MIT neuroscientist Earl Miller in an NPR series broadcast in October. For the most part, according to Miller, we can't focus on more than one thing at a time. Our ability to switch attention quickly fools us into thinking we're multitasking, but we're really not.

So what's the problem? Psychologist Gerald Weinberg has calculated that when you try to work on two projects at once, you lose about 20% of your time to the task of switching between the two. Add a third project, and nearly half your time is lost. Researchers using brain imaging can actually see the brain struggling as it switches between tasks.

Ironically, the very technological tools (email, instant messaging, Blackberries, etc.) that were supposed to improve our productivity are contributing to the problem. They create increased interruptions that essentially have the same impact as multitasking. In a recent study by Basex, a business research firm, unnecessary interruptions were estimated to cost U.S. businesses $588 billion a year in lost productivity!

BBC reported that another study at the Institute of Psychiatry found that technology-induced interruptions can temporarily lower a person's IQ by 10 points. That's more than twice the impact of smoking marijuana.

All these findings point back to the premise I outlined in an earlier post entitled "Simplicity: The Leader's Secret Weapon." If you have a leadership role in your firm, let me encourage you to focus your efforts on enabling the effective use of time and attention. Simplify. Achieve more with less effort. Help your colleagues focus on their primary work. Minimize unnecessary interruptions.

There are a couple of tools on my website that can be very helpful in making people more aware of the problems described above. The Time Tracker helps you track your time usage over the course of a work week. The Interruption Tracker is used to track interruptions. Using these tools will enhance your awareness of the challenges you face in the battle for time and attention, and hopefully increase your resolve to do something about it.

Tuesday, December 16, 2008

Don't Waste the Client's Time!

In the midst of a recession, we can expect a significant increase in the number of sales calls as firms scramble to find work. Poor clients! Let's face it, most sales calls are a waste of the client's time. Here are a few of the classic time wasters:
  • Glad-to-meet-us sales calls. "I'd like to come by and introduce you to our firm. Who knows, you might discover something about us that you haven't seen in all the other firms calling on you."

  • Drive-by sales calls. "I'm going to be in your area next week, so since it's convenient for me, I wonder if we could meet."

  • Touching base sales calls. "It's been a while since we last met, so I thought it would be a good idea to get together again so, well, you won't forget about us."

  • Something's up sales calls. "I know you haven't heard from us for a long time, but I heard the RFP is coming out soon, so I thought it's time we visit again."

Of course, we're never quite so honest in asking for the appointment. But don't you think clients get the message? The sales call is primarily for our benefit, especially now that we really need the work.

In my experience, the average sales call lasts about one hour. That's a substantial chunk of the client's day. And what does the client get in return for spending some of his or her valuable time with us? Let me challenge you to make answering that question foremost in thinking about your next sales calls. Here are some suggestions:

Bring something of value to every sales call. This is what I call your entree, a valid business reason for the client to expend precious time meeting with you. Typically this will involve sharing information or advice relevant to a pressing problem or need. Offer your entree as a basis for scheduling any sales call. Of course, this means you need to do your homework to try to identify what issues the client is facing before making the initial contact.

Make serving the client the focus of the call. Don't treat a sales call with a prospective client much differently than you would a project meeting. You're there to help. There's no need to tell the client about what you can do; demonstrate it by doing what you do best. That's the best way to sell anyway.

Ask for only 20 minutes of the client's time. I know, that's hardly enough time to accomplish much. So you have to come prepared to maximize the time. But here's the beauty of this approach: Rarely will you only be there for 20 minutes. If you're providing value, the client will encourage you to stay longer when you say, "I promised only 20 minutes of your time and that time's up. Is there anything more I can help you with?" It's a great way to show that you're sensitive about the value of the client's time

End each call by establishing the basis for the next meeting. As hard as it may be to identify your entree for the initial sales call, it can be even tougher for subsequent meetings. So a key goal for each sales call is to mutually determine why a next meeting would be beneficial. Of course, this is much easier to accomplish if you've shown that meeting with you is valuable for the client.

Many technical professionals spend too much time trying to convince the client why their firm is a better choice. By respecting the client's time, bringing something of value to every conversation, and demonstrating your commitment to serve the client, you will do more to win approval than any sales pitch can ever accomplish. So before you make that next call to the client, be sure you won't be wasting his or her time.

Thursday, December 11, 2008

Training On a Tight Budget

Given the economy, your firm may be looking for ways to reign in overhead expenditures. Perhaps training is one of those "discretionary" items you're thinking about cutting. Let me urge you to reconsider. There are a number of ways to trim training costs without reducing professional development opportunities for your staff. Here are a few suggestions:

Plan training in advance. Your office undoubtedly receives a regular stream of brochures in the mail announcing various training programs. It can be hard to resist the impulse purchase when something good comes along. Reduce the temptation by conducting an assessment of your staff’s training needs every 6-12 months, and budget accordingly. Pick specific training programs in advance to the extent possible.

Utilize local colleges. Most colleges have departments that offer training services at costs substantially lower than private-sector suppliers. Some of the best bargains can be found at your local community colleges, which are increasingly providing high-level training in areas such as management, marketing, and technical skills. In some cases, the same trainers used by the pricey private sector firms also work through universities at a fraction of the cost.

Share the cost with another company. Rather than pay the full fees for having a training firm come to your office, split the cost with another company or two interested in joining you. This can be an especially useful strategy for small firms that lack the staff size to warrant a volume discount or an attractive per-person cost. There are also intrinsic benefits in training with another firm, such as sharing ideas on issues of mutual interest.

Control incremental costs. Ask the training vendor for a cost breakdown for their program, then seek to negotiate specific items. For example, the vendor may charge $30 each for three-ring binders. Offer to buy your own. You might be able to make copies of the program materials yourself at substantially less cost. It’s also a good idea to look into training at your office, or another economical location, rather than leaving the meeting place arrangements to the training firm.

Use “real-time coaching.” Provide on-the-job instruction and encouragement so that staff members can learn and be billable at the same time. Instead of sending them to a seminar on how to do better project planning, for example, bring the trainer in to teach them as they are planning an actual project. Besides saving money, this approach increases learning and practical application.

Train your own internal trainers. You may already have employees who competent in training and mentoring others. Take advantage of their skills. Others may need outside help in developing their training abilities. This requires an upfront investment, but can save money down the road. Plus internal trainers offer the benefit of being more familiar with your firm and your business.

Create or purchase computer-based training programs. This self-directed option has grown tremendously in recent years. While I'm less confident in the effectiveness of this method compared to other options, it probably still deserves a place in your training arsenal. Like training the trainer, this may require a substantial initial investment, but in the long run this can be a very cost-effective alternative. Computer-based learning works best when coupled with some kind of live follow-up like testing, on-the-job exercises, or discussion groups.

Another computer-based option is the internet. Despite its sometimes overwhelming variety of information, the internet can be a very useful training tool. There are many online training programs, as well as forums for exchanging ideas and networking with other professionals.

Monday, December 8, 2008

Level 5 Marketing

Marketing in this business suffers from low expectations. I find this true even among most marketing professionals. In the midst of a recession with the worst still ahead for most A/E firms, perhaps it's time to raise the bar in terms of what we expect our marketing efforts to achieve.

First let me clarify that I use the term marketing in the conventional sense. In our industry, we often use the word as a euphemism for sales. I'm talking about the complementary activities we do like public relations, writing articles, speaking at conferences, maintaining a website, sending out direct mail, etc. These activities support the sales process, but are distinct from it.

So what does your firm expect to achieve from its marketing efforts? Responses I commonly hear include: increase our name recognition, strengthen our brand, build our reputation. So how do you know how well it's working? Ah, now that's a tough question! Companies in other industries, however, don't spend millions on marketing and advertising for such nebulous outcomes as name recognition and reputation building. They expect it to motivate prospective customers to act.

Let me suggest that your marketing results increase as you progress through five basic levels:

Level 1: We have some materials. You have a brochure, resumes, project descriptions, a website. For some firms, that's about as far as their marketing efforts have taken them. And some struggle even at Level 1. But for firms with a strong client base, sound selling skills, and little ambition to grow much, Level 1 may well suffice.

Level 2: They've heard of us. Some firms do a great job getting their name out there. They send out regular press releases, advertise frequently, get listed in directories, sponsor highly visible events. This builds the aforementioned name recognition, which is certainly important. But it doesn't go far enough to attract clients' attention.

Level 3: They know what we do. Not simply the basic services you offer, but what you're really good at, what you specialize in. More targeted marketing helps establish your areas of expertise. People see you regularly associated with specific industries or building types or technologies, and they develop a sense of your core business.

Level 4: They're favorably impressed. This is a critical juncture in your marketing efforts, when people begin to favorably compare you with your competitors. That's the genesis of brand. Many proudly point to their repeat business rate of 80% (which everyone seems to attain!) as evidence of their strong reputation. But Level 4 involves building a reputation well beyond existing or past clients. People have never worked with you, but they've heard and seen enough about you to think you're among the best.

Level 5: They're calling us. In my mind, this is the one marketing metric that really matters. How many people are contacting you because of your marketing activities? Don't know? I recommend taking steps to be able to monitor response to your marketing. The easiest step is to establish a phone number and an email address used exclusively to receive inquiries from your marketing efforts. Encourage your colleagues to report when they get a call as a result of marketing.

If your marketing is really working, you should be getting increasing numbers of contacts from prospective and existing clients. So how do you get to Level 5? Simple answer: Serve the client. Provide content that helps them improve their business and achieve their goals. Shift your focus from the usual self-promotion to becoming a trusted source of information and insight. For a few more ideas on this, check out my previous post "Marketing for Leads."

Keep in my that you're never firmly entrenched in Level 5, or any of the other levels. Your intended audience will be in different places, from never having heard of you to seriously considering your services. The goal is simply this: You want to track a positive trend of greater contacts from clients in response to your marketing. Anything less is expecting too little.

Wednesday, December 3, 2008

The Intrinsic Value of Your Network

Recently I've run across many articles on networking. No doubt our faltering economy has much to do with the renewed interest in this topic. And rightfully so, for networking should be the centerpiece of your business development strategy, whether the economy is weak or strong.

I expect networking will also take on growing importance in how we recruit talent. No longer can this remain simply an HR function. Firms will need to draw on the collective relationships of their employees to find adequate new hires to fuel their growth goals.

But there is a value in tending your network that goes beyond merely meeting the current pressing needs of business. This came home to me, surprisingly, when I first went out on my own and was in desperate need of clients. It occurred to me during that time that attempting to jump start my networking efforts to drum up new business obscured the reason those relationships really mattered.

After 32 years in this business, I found myself pondering what my legacy was. What had I done of real value over all those years? What were my lasting accomplishments?

Unlike most of you, I hadn't designed much--some roads, sewer lines, parking lots. There were no buildings or bridges I could point to and proudly say, "I had a key role in that." I never started a company that would live on after I retired. Most of my greatest achievements as a manager or consultant had been or would ultimately be forgotten, usually swept away in the wave of a management or ownership change. So what exactly had 32 years on the job produced, other than an income?

That's when I had the epiphany that changed the way I think about networking. What really mattered after all those years were the relationships I had developed and the opportunities I had to help others. Those relationships aren't important today just because I might be able to mine them for information, a referral, or a new assignment. They have their own intrinsic value beyond whatever business benefits they might yield. They're valuable even if they don't help my business at all.

Upon recognizing this, I also realized something else: I had done a poor job of maintaining many of those relationships. I had moved on, or they had--a new job, a new location. I had lost touch with some of my favorite colleagues and clients. In some cases, I had no idea where they were now. Thanks to Google, I was able to relocate most of them. Unfortunately, I haven't necessarily done a good job keeping those relationships current (another victim of the curse of busyness!), but I keep working at it.

So now when I'm helping my clients improve their business development process or providing sales training or speaking at a conference on the subject, I always stress the importance of networking. But not just as a sales tactic. I encourage people to get serious about networking for the intrinsic value of those relationships alone. Bottom line: Make friends, take care of them, and you'll reap the rewards, both personally and professionally, for years.

This is not just advice for old guys or rainmakers or managers. It's sound advice for everyone. I urge young professionals to develop the habit of building and nurturing their network now so hopefully they won't struggle with it as much later as I do. It takes time and discipline. You must make it an immutable priority.

One final point: Yesterday I facilitated a meeting where the national business development director for one of the largest firms in our business stood up and implored everyone to focus on those important client relationships. But, he said, give first priority to the most important relationships of all--your family. Great advice! He too recognizes that our careers are summed up in the strength of the relationships we forge along the way, both at home and at work.

Tuesday, November 25, 2008

Recruiting Essentials

Even in the midst of economic uncertainty, many A/E firms continue to grow and add staff. Finding and hiring new talent is still difficult in a tight labor market. Most A/E firms add to the difficulty by failing to use some critical recruiting assets. Below are five strategies that I believe no truly successful firm can do without:

Define your value proposition. Why should someone consider working for your firm? It wasn't that long ago when there was little direct, immediate competition for the candidates you pursued. They usually didn't have another standing offer. And there was some pressure on the candidate not to pass up a decent employment opportunity; who knew when the next might come along? That is certainly no longer the case. You have to compete head-to-head with other suitors. Can your firm pass the comparison test?

That's why you need to understand your value proposition. What can your firm offer what the others can't? Tough question? Well it's a tough market, so you need to come up with an answer. At a minimum, you should address the following factors that today's workers value most:
  • Workplace environment. Do you offer personal attention, flexible hours, a supportive boss, effective teamwork, plenty of positive encouragement, enthusiastic coworkers, open communication, interesting work? Can you provide any evidence (e.g., employee surveys, workplace awards) that yours is a special place to work?

  • Career development. Does your firm have a strong training program, clear career paths, active mentoring, ongoing performance feedback, meaningful incentive compensation? Are these distinctives documented? Can you demonstrate that there's no better place to build a career?

Yes, the standard is high. That's why the process of developing your value proposition is so critical. You need to determine what your firm can realistically do to distinguish itself in the intense competition for talent.

Create recruiting-oriented marketing materials. With your value proposition in hand, you now need to communicate it effectively. There are two primary audiences for your message: (1) specific candidates you are pursuing and (2) unidentified prospective candidates out in the marketplace. Both can be served by targeted marketing materials such as brochures, fact sheets, website, and video. I'm surprised how many companies in our business are seriously deficient in this area. Yes, just as in the pursuit of clients, marketing materials are no substitute for skill in face-to-face selling (interviewing) and building relationships (see below). But they still fill an important need.

At job fairs, for example, you definitely need recruiting-oriented materials to hand out. Do you think a promising candidate is going to remember your sales pitch among the several firms he talked to? What about your website? According to PSMJ, 23% of visitors to your site are prospective employees. Only 5% are prospective or existing clients. Which audience does your website focus on? And don't overlook the value of marketing materials to your own employees involved in recruiting. These materials reinforce your value proposition for those who must take it directly to candidates.

Commit to some aspect of the "We find them" approach. There a two basic recruiting strategies: (1) the traditional "They find us" approach that amounts to placing your ad in various places hoping to attract qualified candidates, and (2) the "We find them" approach that involves identifying and actively pursuing the people you want. Many firms in our business use the latter approach when they hire a headhunter. Other firms avoid headhunters because of the costs, or concerns about the ethics of directly recruiting from competitors (see this article on ethics in recruiting).

I'm convinced that the passive "They find us" approach will not be adequate for growing firms as the availability of qualified engineers, architects, and other technical professionals continues to tighten. So how will you find the people you need? Much the same way that you find clients. With clients, you identify who you'd like to work for and actively pursue them through a sales process. A fundamental difference with prospective employees, of course, is that they aren't advertising their availability as clients advertise requests for proposals.

In fact, most aren't even looking. According to one study, 54% of workers are passive job seekers, meaning they would seriously consider another job offer. But only 16% are actively looking. That means only a small percentage of prospective candidates are going to see your ad no matter how widely you broadcast it. If they're not looking for you, you need to go look for them. The best place to start is leveraging your relationships.

Develop and leverage relationships for recruiting purposes. Your greatest recruiting asset is your employees who know people. They all have former colleagues and classmates, friends, neighbors, and family members who could become a valuable addition to your firm. The secret is getting your employees actively engaged in the recruiting process. I know, most firms offer a referral bonus for this purpose. But most lack a true "recruiting culture" where everyone is constantly looking for candidates to join the firm.

This gets back to having a genuine value proposition. Are your employees passionate about your firm? That naturally spills over in their active engagement in recruiting (with a little direction). At my last place of employment, I felt I was working for the best firm in the business. So without prompting, I pursued friends and former colleagues who I thought not only would be great hires for our firm, but would be grateful for the opportunity. We succeeded in hiring a couple of them. Now imagine multiplying that effect by the number of your current staff.

Most firms are focusing more attention on their recruiting efforts at universities. This is another place where strategic relationships are important. You should get to know deans, department heads, and professors by getting involved with on-campus activities. This can include speaking in classes and studios, providing free seminars for students, joining curriculum advisory boards, sponsoring student professional groups, and funding scholarships.

The important point is this: Begin transitioning from activity-driven to relationship-driven recruiting. Sure, there's a lot of things you should be doing. But the ultimate goal of all your activity, as it should be in business development, is to develop strategic relationships.

Offer a competitive compensation package. That's pretty obvious. I only mention it because so many firms still come up short in this area. If yours is among them, I feel your pain. It's not a simple problem to fix, and it has ramifications well beyond recruiting. While compensation is not the most important factor in hiring and retaining talent, it is still very important.

Some firms, for various reasons, find it difficult to keep pace on salaries and benefits. Small firms often struggle. So do firms that provide mostly cost-sensitive commodity services. Other firms are constrained by high overhead. The problem of salary compression is growing, where the labor shortage is driving up salaries, throwing existing pay scales out of whack.

Solutions to this problem are elusive and beyond the scope of this article. But you have to deal with the problem nonetheless. Here are some suggestions:

  • Pay for high value. In other words, be willing to invest above the norm for special talent. This is particularly true for those who have demonstrated ability to bring work in the door or who are dynamic leaders (where their impact is multiplied among those they lead). Focus on ROI, not just qualifications or pay scales.

  • Deal with underperforming employees. What does this have to do with recruiting? Paying for underperforming employees limits your ability to pay for better performers. Plus they occupy positions that could be more capably filled by others. Of course, one of the reasons we don't let poor performers go is we're afraid we can't find suitable replacements. That's another reason to be continually recruiting, regardless of openings. Keep the pipeline full and you have more options.

  • Hire more technicians. Many technicians represent some of the best values for the salary. They generally command lower pay than degreed professionals, but can perform most of the same functions (given a similar level of experience). Finding good technicians may not be any easier than finding degreed professionals, but they potentially provide better ROI for the money.

  • Close the gap with incentive compensation. This involves offering a lower base salary with the opportunity to earn above average compensation through performance-based incentives. Generally, this option appeals to only to a small segment of prospective employees, but they tend to be top performers who are confident of their ability to maximize their pay. For this option to gain traction, you usually have to meet the following criteria: (1) the base salary should be within the lower range of industry averages, (2) the earning potential through incentives needs to substantially above the norm, and (3) the performance metrics need to be clear and objective.

If you simply can't compete on salary, you'll have to compensate with a compelling value proposition. You will need to be such an attractive place to work that people are willing to give a little on compensation. In this case, you want to have the candidate "hooked" on the benefits of joining your firm before the subject of compensation comes up.

Wednesday, November 19, 2008

Investment Time on the Rise?

The average employee has 79 unbilled days a year. Surprised? That’s based on the industry median utilization of 60%, and doesn’t include vacation, holidays, or sick leave. That means the average 100-person firm has 7,900 days of unbilled time that can be applied to various corporate functions and initiatives (you can do the math to determine what’s available in your firm).

So what is your firm doing with all that time? In the current economy, many firms are running lower utilizations, which obviously is a drag on the bottom line. But another way to think about it: Investment time is increasing. That’s time that can be invested in stepping up marketing, strengthening client relationships, improving your project delivery practices, or developing your staff. These are all actions that will help you better compete in tumultuous times. Are you managing investment time effectively?

Some suggestions:

  • Eliminate nonproductive time. There is a distinct difference between nonbillable and nonproductive time, although some in our business seem to equate the two. When workload drops, redirect people's time to productive nonbillable tasks. Treat these tasks like projects, with budgets, schedules and accountability.

  • Build teams to increase effectiveness. We do projects in teams because they increase productivity and collaboration. Nonbillable tasks generally warrant a team approach as well. Of course, it's important to assign an effective and committed leader to each team. Avoid the mistake of overloading current leaders with too many responsibilities; this is a time to help develop other leaders at various levels.

  • Broaden involvement in business development. Since generating new work is a growing concern for most firms in this economy, redirecting nonbillable hours to this function is a likely priority. This doesn't just mean more sales activity. There are many opportunities for people at all levels of your firm to get involved: performing internet research, creating intellectual capital, networking with existing acquaintances, getting marketing resources (e.g., resumes, project descriptions, contact lists, etc.) in order.

For more advice on capitalizing on your investment time, check out my article "Investing Nonbillable Time."

Wednesday, November 12, 2008

Improving Your Win Rate

As a performance metric, proposal win rate seems to invite its fair share of skepticism. Some question the reported industry median of 40%, claiming it's skewed and unrealistic. Indeed, part of the problem is inconsistency in how the number is derived. Many firms mix project add-ons and sole source awards into their calculation (it should include only competitive proposals). In my own informal surveys, as well as my experience working with different firms, I find that most fall short of the 40% benchmark. Twenty to thirty percent is more common.

Still I think win rate is an important metric. Even if the 40% mark is a bit inflated, I recommend that firms strive for nothing less. According to PSMJ and ZweigWhite, the top performing firms achieve win rates of 50 to 60%. If your goal is to be among those top tier firms, then I'd suggest a target of 50%. To conclude that these numbers are unrealistic is to sell your firm short. I've reviewed hundreds of proposals over the years, and I can attest that there is much room for improvement.

So how can you improve your win rate? Below are some general suggestions based on my experience as a corporate proposal manager and consultant:

Submit fewer proposals. This is the easiest, and for many firms, the most effective step toward improving your win rate. This assumes, of course, that you're currently submitting proposals that you have a very low probability of winning--which I find is true of most firms. Cutting back on proposals is difficult for many. We can all point to one of those rare exceptions where we won one we had no business winning. So we keep trying, hoping to hit the jackpot once again.

But keep this in mind: Every hour spent writing a losing proposal is an hour diverted from doing something more productive. The primary goal in being more selective is to redistribute your limited business development resources to activities with a higher probability of success. My philosophy is to do fewer things better. If you're only winning 30% of your proposals, might you be better off if you cut the number of submittals in half and put twice the effort into the proposals you do submit? (By effort, I mean both the sales process in advance of the RFP and the proposal itself.)

I'll offer evidence this works. I worked with a 100-person engineering firm over several months helping them overhaul their business development process. The year I started, they submitted 136 proposals and won 26% of them. I encouraged them to be much more selective and helped them institute a formal go/no go process. The following year, they reduced the number of submittals to 80 and won 46% of them. Business development costs remained static despite a substantial increase in sales activity. Here's the good news: Sales increased by $3 million.

Position your firm in advance of the RFP. A simple way to reduce the number of losing proposals is to implement a "no contact/no go" policy. That means if you haven't been talking to the client before the RFP is released, it's automatically no go. You might allow a few exceptions to the policy, but very few. When I suggested this policy at a client workshop some time ago, the firm's CEO said, "If we followed that policy, we wouldn't be doing enough proposals to sustain our business." I asked him how many proposals they'd won where they hadn't been talking to the client before the RFP. "It's pretty rare," he admitted.

I've never seen data on it, but would estimate that most firms win less than 5% of such proposals. In other words, it's a waste of time. You'd be better off devoting that time to building a relationship with other clients with upcoming opportunities. I've had several clients confide in me what we've always suspected: They have a pretty good idea who they're going to hire before the RFP ever goes out. What does that tell us? Win the proposal before you write it!

The best way to do that is to become an indispensable resource to the client. Offer advice, insight, and information. Demonstrate your expertise, don't just tell the client about it. Also, demonstrate your commitment serving the client well (it's usually not that hard to out-serve the competition). Don't wait until after contract award to be useful to the client. Instead make it difficult for the client to consider anyone else.

Ask the right questions. One of my favorite questions for the proposal team is, "Why is the client doing this project now?" I seldom get a satisfactory answer. One firm principal even suggested recently that it didn't matter; all that counted was that his firm could do the job. They didn't win, as you might guess. If you don't know the why behind the project (and we often don't), then you'll be hard pressed to come up with the best what and how.

It helps to recognize the three levels of client needs. Technical professionals, especially engineers, are prone to focus on the client's technical needs. But these only partially define the project. There are always strategic needs that drive the need for the project. Strategic needs are those that relate to the overall success of the client's organization. They may be financial, competitive, operational, or political in nature. Finally, you don't want to overlook personal needs. Each client contact has different priorities, expectations, and concerns. In composite, these largely comprise the terms of a successful project.

Your proposal should address all three levels of client needs. I could recount several stories where the technical issues--the things we're inclined to emphasize--really weren't that important to the client (I'm sure you could too). They were more interested in how we could meet their strategic and personal needs. So you need to ask the questions that enable you to uncover these perspectives. You might want to download the form "Key Proposal Planning Questions" from my website to help in this regard.

Make your proposal stand out. The objective, naturally, is to be different. Why else would the client select your proposal? Yet I've found a remarkable sameness in the numerous proposals I've reviewed. I'm not suggesting anything outrageous. In fact, I see two obvious, straightforward opportunities to set your proposals apart:
  • Focus on the client, not your firm. The vast majority of proposals I've seen center on the preparer: "Look at us! Aren't we something special." I recognize that the client usually invites such self-promotion in the RFP. The selection criteria weigh heavily on qualifications and experience. Be responsive, but don't fall into that trap. Demonstrate your qualifications through superior knowledge of the client and the project. Address the client's priorities and concerns (of course, this requires that you did your homework up front). Use personal language--the word "you" is the most persuasive in the English language. Make the client the centerpiece of your proposal, not your firm.

  • Make it skimmable. Do you really think client reviewers read your proposal cover to cover? I don't either. They skim, looking for the key information they need to make a decision. Unfortunately, most proposals are not easily skimmable. They require too much reading, too much effort. Put the most important messages in your proposal in skimmable form--bullets, boldface, graphics and photos, short paragraphs, etc. Study USA Today for ideas. Also, it's helpful to know how the client handles your proposal. Which sections are read first? What information is used in the initial screening process? Then construct your proposal (with custom-labeled tabbed dividers) to make it easy to navigate.

Of course, there is much more that I could say on this topic. But grasping the principles outlined above is a good start. For a more comprehensive treatment of the topic, check out my white paper Preparing Winning Proposals. And for strategies once you've made the shortlist, you might find the article "You Made the Shortlist: Now What?" helpful.

Got any other winning strategies you'd like to share? I welcome your ideas!

Monday, November 3, 2008

Management Communications in Tough Times

Even in the best of times, management communications with staff are often problematic. I've conducted and reviewed several employee surveys and have found management-to-staff communication to be among the most commonly identified shortcomings. When a firm faces tough challenges, the need for effective communication is even more crucial. Unfortunately that's when many managers struggle most in this area.

In the current economic crisis, many A/E firms find themselves in difficult circumstances. Some have laid off staff or reduced hours. Others have closed offices. Backlogs and revenues are declining. Expenses are being cut. Understandably, employees are anxious. The stress resident in many firms only contributes to the problem. Even in firms that are currently doing well, there is concern about the future.

Good communication between management and staff is critically important in times like these. Let me offer some suggestions:

Increase interaction with staff. Faced with tough challenges, many managers become distracted and distant. They're too busy dealing with problems to spend much time talking with their employees. But that's a problem in itself and it neglects one of the most important responsibilities of being a leader. In tough times, managers should increase, not decrease, communication. And much of this communication should be live, not dispensed in emails. Meet often with employees. If you're responsible for multiple offices, visit them regularly. Effective leaders become more visible in tough times.

Help other managers improve their communications. In larger firms, it's difficult for the CEO and other corporate officers to interact adequately with multiple offices or departments. Unit managers need to communicate for the company at the local level (although this doesn't replace the benefit of communication from corporate management). The CEO or other officers can help this local communication in two key ways: (1) support frequency by communicating regularly with unit managers and informing them about what needs to be communicated to staff, and (2) support consistency by providing talking points to unit managers so they can convey the same messages across the organization.

Be honest, but accentuate the positive. There's a tenuous balance to strike between being open about the problems your firm faces and creating an atmosphere of optimism. Too much bad news can overwhelm and demotivate. On the other hand, too much positive spin comes across as insincere and dishonest. You must try to mix the right proportions of both. Here's my advice: Be honest about the problems, but spend more time talking about what's being done about them.

A lesson I learned from working in risk communication is applicable here. People willingly assume certain levels of risk but resent being subjected to risks involuntarily. The issue is more one of control than risk. So a key strategy is giving people some sense of control over the risks they face. Similarly, employees can handle a certain level of setbacks and problems if they feel they have input or involvement in addressing those problems. Focus much of your communications on the positive actions the firm is taking and how staff can contribute.

Keep your vision and values at the forefront. Detours are easier to endure when you know where you're going. Some firms handle adversity by moving into "survival mode." It's akin to throwing the cargo overboard to help stay afloat in a storm. These firms lose sight of their vision (if they have one) and focus on the present calamities. It's easy to get stuck there. A better approach is to renew your vision and blend corrective actions with your strategy for the future. There's no need to shift from "success mode" in tough times.

It's also important to make your values a recurring theme in your communications in difficult circumstances. Why? Because your values should be an anchor in stormy seas. Markets may change; the firm may undergo changes. But the one thing that shouldn't be subject to change are those immutable principles that guide all corporate activity. Keep reminding staff what you stand for and that these things are non-negotiable. Of course, walk the talk! Strong corporate values give employees a much-needed assurance in uncertain times.

Beware of the convenience of email. Because it's easy to distribute a message across the firm via email, managers are often tempted to use it improperly. Sensitive, emotionally-charged messages are better delivered in person. If that's not practical, a conference call would be the next choice. Why? Because body language and voice tone provide important context for communicating sensitive messages. It's hard to convey concern and empathy by email, for example. Plus it's beneficial to give employees the immediate opportunity to ask questions.

Another downside of email convenience is the tendency to spend too little time crafting important communications. Which leads to my next point...

Appoint a communication team to screen all potentially sensitive company-wide emails and memos. We have probably all seen important emails or memos that were unclear, misleading, inaccurate, sloppy (typos), or even inflammatory. These communications often do more harm than the good that was intended. It's a simple fact that many technical professionals, including A/E firm executives and managers, are not strong writers. Even among those who are proficient, it's still wise to have others preview important company-wide communications before they're delivered. I would suggest that CEOs have someone check all written company-wide communications from them, because any message from the top executive can be considered important.

Remember that communication is two-way. The effect of communication is not determined by how it is delivered, but by how it is received. I have sometimes been blindsided, thinking I had eloquently made my point only to find that it had been grossly misinterpreted. You've probably experienced the same thing. That's why effective management-to-staff communication must have a feedback loop. This can be done formally or informally (both is probably best). The key things are to make sure you (1) actively solicit feedback, (2) listen empathetically, and (3) respond appropriately to what you hear. If employees think you are listening and care about them, they will be more tolerant of any shortcomings in getting your message across.

Experts at Experiences

Earlier I posed the question: Does the Experience Economy apply to the A/E business? I offered evidence why I believe it does. Then Joe Pine, co-author of the best-selling book The Experience Economy, responded to my blog posting by offering still more:

Interestingly, two of our Experience Stager of the Year award winners were A/E firms! In 2005 we gave the EXPY to HOK Sport Venue Event for the great work they have done in creating stadiums that fans perceive as authentic. That was for "what" they did. In 2007 we gave it to TST, Inc., of Fort Collins, CO, for "how" they do their engineering work!

TST--led by president Don Taranto and head of marketing Ed Goodman--created The Engineerium to provide an incredibly different, engaging experience around helping clients realize their dreams ("dreamscaping" they call it)...TST is the shining exemplar of experiences in the A/E industry.

Pine and his co-author Jim Gilmore award the EXPY each year to the company that they believe best delivers the "branded experience." The award dates back to 1999. It's interesting to note that A/E firms comprise two of the nine winners to date. Other winners include American Girl Place, Geek Squad, The LEGO Company, and Joie de Vivre Hotels.

You can learn more about TST's approach in the CENews article "Getting Out of the Commodity Zone." Hopefully that will help inspire you to ask the question: Where can our firm fit in the Experience Economy?

Tuesday, October 28, 2008

Getting Feedback From Clients

The branded experience is consistent and intentional. This requires standards, process, and managed effort. I outlined one proven approach in my last post. The branded experience is also viewed as distinct and valued by the client. The only way to know what the client is thinking is to ask.

That's simple, but often ignored, advice. Most A/E firms don't regularly solicit feedback from their clients. I presume they believe they either (1) don't need to or (2) don't care to know. Of course, no one would ever admit to not caring what the client thinks. Yet surveys indicate that clients often feel like their A/E providers don't really care. In fact, PSMJ reports that two-thirds of clients who defect do so because of perceived indifference.

Client surveys also debunk the notion that we can safely assume we understand what our clients want without specifically asking. In conducting such surveys myself, as well as facilitating several "partnering" sessions, I can testify that there are commonly problems about which the A/E firm is unaware. In my mind, no firm will succeed in providing consistently great service (experiences) without a regular program of seeking client feedback.

A critical first step in understanding client expectations comes at project outset, in a process I call "service benchmarking." This involves asking the client specific questions about how you can optimize the working relationship and deliver a great experience. From this information, you define what actions are needed to meet client expectations. Then you need to periodically ask, "How are we doing? What can we do better?"

There are two primary means of collecting feedback from your clients that I suggest:

Ongoing dialogue with the client. This should be your primary method for getting feedback. It involves regular conversations with the client at intervals mutually determined during the benchmarking step, plus a final debriefing at the end of the project or major project phase. This activity is best handled by someone other than the project manager, typically the principal in charge or other senior manager. This person assumes the role of Client Advocate (see below).

Formal client survey. A standardized questionnaire is used primarily for tracking service performance trends across the company. While this is highly recommended, you should not use the formal survey as the primary means of gathering client-specific feedback. It's too impersonal for that purpose (although the Client Advocate can personally administer the survey, which makes it more personal and responsive).

The Client Advocate's Role

Many firms assume that their PMs can adequately monitor client satisfaction. But even the most diligent PMs can be sorely mistaken about their client's perception of their performance. Clients are often reluctant to voice their unhappiness to the PM, especially if the PM is perceived to be part of the problem.

That's why I advocate assigning every key client relationship a Client Advocate. Preferably this is someone who is not directly involved in the project work (except potentially in an advisory or oversight role). Otherwise they lose some of the objectivity and independence needed to function effectively as Client Advocate. This person's responsibilities include:
  • Monitors client satisfaction. Keeps in touch with the client from time to time (as mutually agreed upon), checking to see that the client remains fully satisfied with the firm's performance.

  • Ensures responsiveness. Acts as an in-house advocate for the client, seeing that the firm is fully responsive to client needs and expectations.

  • Acts as third-party liaison. Serves as the point of contact when the client has a problem or concern that he or she prefers not to discuss with the PM.

  • Conducts the periodic formal survey. Administers the formal survey and follows up to see that the firm responds to client concerns or suggestions that are uncovered in the survey.
The Formal Survey

Following are some suggestions for maximizing the success of the formal survey as part of your process for gathering client feedback:
  • Define appropriate interval. Either annually or biannually is recommended. The proper frequency will be guided in part by the nature of both the project and your relationship with the client.

  • Solicit the client's involvement in advance. Explain the purpose of the survey, its value to both parties, and the minimal time involved on the client's part. For long-term clients, request their ongoing participation.

  • Distribute the questionnaire electronically. Doing the survey in person or over the phone obviously has advantages. But I'm assuming your Client Advocate has already been talking to the client. The formal survey serves a different purpose and is more easily distributed by email--either as an attachment or with a link to a secure web site (Zoomerang.com is an excellent resource). Filling out the survey should be hassle free, requiring no more than about 10 minutes of the client's time.

  • Contact non-responders. Request responses within a week, then have the Client Advocate call or email to ask if the client received the survey (a not-so-subtle but friendly reminder). This will significantly improve your response rate. Remember, you've already had the client agree to participate.

  • Address problems promptly. When client concerns or complaints are uncovered (and undoubtedly this will happen from time to time), you need to respond promptly and appropriately. In fact, you should define the process for addressing client concerns before sending out the survey.

  • Share the results with your clients. A great way to demonstrate your commitment to great client service is to send a summary of the survey results to those clients who participated. Include in that summary the actions your firm plans to take to improve service.
For a questionnaire to use for this purpose, check out this one on my website. I developed it jointly with PSMJ and have used it with good results for several years.

How to Get Started

This best feedback will come from clients who are: (1) convinced that your firm is indeed committed to client service improvement and (2) are willing to actively help your firm improve. These are clients who recognize the value of a strong working relationship and are willing to invest a little of their time in making it happen. Don't expect all your clients to participate. But take steps to engage those who will.
  • Start with your best clients. The best way to generate momentum for this process is to start with those clients who have a mutual interest in strengthening the working relationship. Pick an easily manageable number of clients to start, where you're confident you can be fully responsive to whatever feedback you receive. Then expand to other clients when you're ready.

  • Build accountability into the process. Make sure your Client Advocates are fulfilling their roles, keeping in touch with the client, promptly responding to any client concerns, and seeing that the project team is meeting expectations. Anything less and the process will quickly lose credibility with both your clients and your employees.

  • Communicate client feedback to the staff. Everyone in your firm should be engaged in continually improving service and striving to deliver the branded experience. Feedback from clients is the fuel that keeps the fires of continuous improvement burning. Give all employees a stake in helping your firm become a service leader. Share feedback, lessons learned, and success stories.

Wednesday, October 15, 2008

The Experience Trumps Expertise

If Starbucks can transform a commodity like coffee into a high-end product, can we not do the same with our services? Does the Experience Economy apply to the A/E business? Let's consider the evidence.

As reported in their book Clientship, authors Kennedy and Greenberg asked over 500 A/E firm clients this question: "If you consider that we provide you value in two ways and that together they equal 100%, how would you divide up the value between our technical skills (what we do) and our client-service skills (how we do it)?" The prevailing response was 50/50. In other words, the experience is every bit as valuable to clients as the expertise. Other surveys in our industry have come to similar conclusions.

If you're inclined to think this overstates the value of the experience, consider this: When your firm has lost clients, was it because of technical shortcomings or inadequate service? When I've asked that question of principals and managers in our business, they overwhelmingly agree that it's service-related problems 70 to 80% of the time. So we get it. Right?

Not so fast, my friend. Another survey asked firms to identify their primary competitive advantage. Eighty percent said it was their technical capability; only 20% said it was how they served clients. We clearly place more emphasis on technical excellence than on service excellence (i.e., the client experience). That bias is evident in our business development strategies, our proposals, and our marketing materials. It's evident in the disproportionate amount of time and money we invest in technical improvement versus service improvement.



This suggests that our priorities are out of step with those of our clients. There's a substantial gap between what our clients say they value and what we think they value.  I call that the Value Gap, it it represents an exciting opportunity to distinguish your firm. Indeed, I believe that closing that gap is the best differentiation strategy available to most A/E firms.


So where do you begin? That's the subject of upcoming posts. Next up: The prized product of the Experience Economy is what is commonly referred to as the branded experience. What is it and how do you create it? Stay tuned.

Tuesday, October 7, 2008

Three Value-Adding Strategies

Value drives business success. The most successful companies are those that provide distinctive value. And the more value delivered to the customer, the more value is typically returned to the provider in the form of revenues, profits, loyalty, etc. The management mandate seems clear: Find ways to create more customer value than your competition.

Yet value creation as a strategic objective is rarely mentioned in the A/E industry. We prefer concepts like quality, expertise, and experience. Unfortunately, these assets typically don't differentiate us; rather they are expected. Added value, by contrast, differentiates. Could our lack of attention to value creation be a root cause of our inability to measure up to other professions? (See these earlier posts: "What's Wrong With This Picture?" and "Diagnosing the Gap")

So what do we mean by value? A good working definition is: Value is the perceived benefit received minus the associated cost. Added value, then, is when one receives more benefit for the cost than was expected.

There are a couple of important points to take from these definitions:
  • Value is a personal and subjective concept that exists in the customer's mind (if you need proof, consider the crazy things that sell for a premium on Ebay!). Value cannot be accurately quantified monetarily (although purchase price is one measure). Nor can we presume what our client values; we must uncover it.

  • Since value exists in the mind, it is delivered in both tangible and intangible forms. But ultimately it is always experienced in the mind. This is a hard concept for many technical professionals to grasp. We often consider technical excellence our most valuable "product." Yet just as excellent food in a restaurant with poor service equals low value, so it is with a solid project delivered with seeming indifference by the A/E provider.

With these concepts in mind, let's consider what my research suggests are the three most common value-adding strategies. These are not specific to our industry, but they are certainly all relevant to us.

Satisfy unmet or emerging needs. This is the classic sweet spot in the product/service life cycle. When you are among few firms that can meet a client's need, the solution you deliver is of high value. Yet supply and demand are only part of the value equation. One study of professional firms found that the less the client understands the problem, the more valuable the solution. Getting involved early in helping clients solve emerging, unfamiliar problems is a clear opportunity to provide higher value (hence reap higher profits and greater loyalty).

Among the three value-adding strategies, this is easily the one most commonly pursued by A/E firms. No doubt your firm has periodically added new services to address emerging markets less populated by your competitors. Unfortunately, this strategy is typically short-lived. As the need becomes better known, more firms move to meet it. With more choices of providers, the perceived value (and profit) declines. A/E firms are also routinely slow to respond to emerging opportunities. By the time most invest in new services, their competitors usually already know about it and are doing the same.

Meet clients' strategic needs. Strategic needs are those that affect the overall success of the client's organization. They commonly relate to financial, competitive, political, or operational factors. Given the critical nature of strategic needs, clients are usually willing to pay a premium for good solutions. That's one reason, I'm convinced, why other professional firms demand higher multipliers than we do--they meet strategic needs.

A/E firms once played a much larger role in this arena, but we have forfeited many of the high value, strategic services to other professionals like management consulting and accounting firms (even banks in some cases!). The role of "trusted advisor" is at the heart of meeting strategic needs. Many A/E firms find themselves merely filling orders for design services rather than helping clients define their needs and choose the optimum course of action. We are often focused to a fault on doing what we do best, unable to connect our work to the strategic needs that drive our projects

Provide distinct, valued customer experiences. This is the fundamental asset at the core of what is commonly called the Experience Economy. Businesses that command the highest profits these days usually have tapped into the Experience Economy. Consider the entertainment industry (including spectator sports), theme parks, adventure travel. Consider how the "Starbucks Experience" multiplied the value of a commodity like coffee. A five-star restaurant, as I mentioned earlier, is defined as much by its ambiance and service as by its food.

Among the three value-adding strategies, in my opinion, this one holds the greatest promise for our industry. While A/E firms routinely claim to provide "great service" (i.e., a great client experience), rare is the firm that has embraced this strategy as a management priority. In subsequent posts, I will outline why there is so much potential for adding value through superior service and what is required to ascend to the ranks of the truly differentiated.

Thursday, October 2, 2008

Responding to the Financial Crisis

The languishing economy took a frightening turn last week with the implosion of the financial markets. As Congress scrambles to pass a rescue bill, many economists are predicting that the worst is yet to come. For most of us, this is the greatest economic uncertainty we have faced in our lifetimes.

The A/E industry has been faring reasonably well up to this point. In fact, some sectors of our industry are still quite strong. What impact will recent events have on our business? No one knows. But we can expect the reverberations of the current crisis to spread.

The biggest concern is the availability of credit. Even if government intervention frees up some capital, fears will persist, bringing increased caution on the part of lenders. How deep or how long this problem will be is a matter of speculation even among the experts.

So what can A/E firm principals and managers do in the face of such uncertainty. Here are a few suggestions:

  • Stay close to your clients. Keep informed about how the crisis is affecting them. Look for opportunities to help, even if it involves meeting needs outside your normal scope of services. Subcontract additional expertise if you need it, or make referrals. The point is to make yourself as indispensable as possible. Become the trusted advisor. And, of course, make sure you keep service levels high.

  • Reactivate your network. Relationships are critical in uncertain times. If you're like most who have neglected their network, this is a good time to renew your commitment to keeping in touch. Make serving others the primary objective in reconnecting. Offer information, advice, referrals--simple encouragement may suffice! Networking has always been a key growth strategy. Now it may serve as your safety net.

  • Keep communication flowing with employees. Undoubtedly recent events have increased anxiety in your organization, especially if your business isn't doing particularly well. It's important to keep employees informed, or better still, engage them in helping address the emerging challenges. Organize brainstorming sessions to come up with ideas to increase service, improve efficiency, explore new opportunities. Transparency is always recommended, but don't overwhelm with bad news. Spend more time talking about the positive changes the company is undertaking.

  • Step up business development efforts. If you're cutting costs, don't start here, as many firms are prone to do. Most companies have much room for improvement in how they develop new business. The current economic climate can provide the needed incentive to finally make some real headway. This is a good time to better organize your sales effort. For advice on how to do this, check out this previous post.

  • Be diligent in managing cash flow. Poor collections have been a persistent problem in our industry, with receivables averaging over 70 days. Add to that the failure to get invoices out in a timely fashion. Consequently, many firms are forced to borrow to make payroll at times. Such loans may become more difficult to obtain. So now is the time to improve your firm's cash flow management. Obviously, many clients are also facing financial challenges, so collections will be more problematic for some. That's all the more reason to get serious about it.

None of these suggestions are novel. You've heard them before. The point is that uncertain times call for getting back to those things you can count on. Has your firm been neglecting any of the above? This would be a good time build on the good business practice foundations that will help your firm weather the storm that appears to be brewing on the horizon (or may have already arrived for your business).

Friday, September 26, 2008

Diagnosing the Gap

Why are architects and engineers less valued than other professionals? In my last post, I offered some pretty compelling evidence of the disparity between A/E firms and other professional service firms. The gap is apparent in more ways than simply lower fees. In talking with my colleagues (particularly those who like me have been around this business awhile) I know they just feel less valued by clients than they used to. They point to less loyalty, more pricing pressure, more onerous procurement practices, less collaboration, more unreasonable demands--to mention a few.

So how did we get here? I don't know that anyone can offer more than an informed opinion in response to that question. Here's my take:

Lack of differentiation. Fundamentally, it's the problem of the undifferentiated product. When clients have more options and see fewer differences between providers, commoditization inevitably sets in. It's a buyers market; they have the leverage and usually exercise it. And providers wind up feeling less appreciated. This trend is a natural phase in the product/service life cycle.

But what about other professionals? Aren't they subject to the same laws of supply and demand? Yes, they are. And other professions are complaining about many of the same challenges that we are facing. But they also have a few advantages that we don't (as I'll explain below).

Charging by the hour. Another factor that has contributed to this problem is our historic tendency to charge by the hour rather than on the basis of the value delivered. No doubt what we do is vitally important to society. But when we sell solutions in hourly increments it invites clients to try to squeeze out the same results (or adequate results) in fewer hours. True, we're moving increasingly to lump sum contracts, but the old stigma remains.

Greater willingness to negotiate price. Other professionals also seem less prone to negotiate down their price. Undoubtedly one reason we're feeling increased pricing pressure is that clients have learned how quickly many firms cave when asked to lower prices. Many A/E firm principals believe this practice is unavoidable if they want the work. But the best way to address client cost concerns is to negotiate scope, not price. Price establishes a sense of value. If we're willing to lower prices it suggests that we're not convinced our value matches the asking price.

Failure to adequately address strategic needs. One big advantage that many professionals have over us is that they help clients address their strategic needs. We tend to focus almost exclusively on technical needs. Strategic needs are those that affect the overall success of the client organization. They commonly relate to financial, competitive, political, or operational factors. Of course, our projects help meet strategic needs. But we often fail to make the connection. As a result, other professional firms have taken over some of the big-think, planning-oriented strategic roles that A/E firms used to fill.

I'm sure there are other contributing factors, but these seem to be at the root of the problem. So what can we do about it? That's what I want to address in subsequent posts. But the solution starts here: We have to believe we can do something about it. I see too many of my colleagues who seem resigned to accept things the way they are. It's a basic value equation--deliver more value and clients will reward us for it. You want to be more than good at what you do; you want to offer something clients can't get elsewhere. And, believe or not, that's not necessarily beyond our grasp.

Tuesday, September 23, 2008

What's Wrong With This Picture?

Architecture and engineering are among the most respected professions. But they are not among the most valued. Why would I say that? Consider the following evidence:
  • A/E firms have a labor multiplier well below that of other professional firms, such as attorneys, accountants, management consultants, and advertising agencies. The median in our industry is 3.0 compared to 5.0 for other professionals. The mark-up on labor costs is certainly one measure of perceived value.

  • Not surprisingly, A/E firms are among the least profitable of all professional service sectors. According to BizStats.com, only employment services and travel arrangement and reservation services have lower profit rates. Even administrative support services have higher profits!

  • Price competitions obviously contribute to lower profits. One survey found that 68% of A/E firms had participated in procurements where cost was the primary selection criterion. Imagine what it might be if we didn't have Qualifications-Based Selection rules in place.

  • Our clients are also less loyal than in other professions. A study by RainToday.com found that 88% of A/E firm clients were open to changing their current providers, the highest percentage among the professional service sectors they investigated.

  • Several client surveys concur that clients see little real differentiation among firms in our industry.

These facts lend credibility to the growing sense among us that our business is becoming increasingly commoditized. This was a pervasive concern even before the economic downturn. In an environment of tighter funding and more scrutinized spending, we can expect to have to work even harder to deliver distinctive value.

Why are our services less valued than those of other professions? I don't have any ready answers, but I do have some reasonable theories. In subsequent posts, I plan to outline what I believe to be at least a big part of the problem, and what we can do about it. I hope you will contribute to the discussion.