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?