AE-Resource: 2014

Monday, December 29, 2014

Thursday, December 18, 2014

Organizing the Sales Effort

Optimism is on the rise in the A/E business as 2015 holds promise of continued improvement in economic conditions. Some seem to think that a return to normalcy is just around the corner. But count me among the skeptics. The growth in new business opportunities is certainly welcome, but the competition for work isn't easing up.

One thing the Great Recession should have taught us is that most firms could stand an overhaul in how they do business development. When times were good, they got by with a loosely coordinated, ad hoc approach. The economic downturn exposed their shortcomings, although many continue to blame external circumstances rather than acknowledge their weaknesses.

For those of you who still see the need to rethink how you pursue new work, let me suggest a new year's resolution—get your sales effort better organized. Where to start? The specific strategy will vary by firm, but I've found that most will benefit substantially by taking the following steps:

Anoint your "sales force." In many firms, people's sales responsibilities are more implied than explicit. If this is true at your firm, the first step is to formally identify your sales force and define their respective duties (see below). Assigning responsibilities is not the only reason for doing this. Sales is often perceived as a lonely activity, which is particularly a problem with technical professionals who are already uncomfortable with the role. You want to make them feel part of an active team where there is sharing, support, and mutual accountability.

Fit people to the appropriate roles. There's a tendency to view sales as a monolithic activity requiring a specific skill set (which many technical professionals conveniently claim to lack). But in fact there is a role for almost everyone. Activities include:

Conducting market or client research
Building and maintaining a network of contacts
Participating in professional and trade associations
Making "warm calls" to prospective clients
Calling on existing clients for information and leads
Participating in conferences and trade shows
Helping develop your firm's intellectual capital
Developing tools and resources for clients
Public speaking
Writing (or supporting writing) for publication
Providing webinars and seminars
Developing and making sales presentations
Writing proposals
Negotiating fees and contract terms
Serving as a "client advocate" after the sale

The key is assigning these and other responsibilities to the right people. In fact, given the diversity of sales-related tasks, your sales force will likely include junior professionals and administrative staff. You might want to refer to the Sales Funnel as a way to think about organizing your sales force. In particular, make sure you have enough "above-the-funnel" activity to generate the appropriate number of sales leads.

Budget a specific allocation of time for their assigned responsibilities. Most firms do business development with leftover time, which is a formula for mediocrity. Sales time must be treated like project time, where there are certain tasks that need to be done regardless of interruptions or changes in schedules. Budgeting time also mutes the common complaint that selling detracts from utilization. The goal is to specifically devote a portion of people's nonbillable time to business development, not steal billable hours (although individual utilization goals may well change to accommodate their new sales assignments). Once you've made allocations, track "sales utilization" to make sure that adequate time is being expended.

Provide training and coaching. Although most professionals are turned off by the stereotypical sales persona, they typically default to many of the same behaviors—talking too much, listening too little, focusing on themselves—because that's all they know. Training is typically necessary to help seller-doers employ a client-centered approach that is both more palatable (to the professional and buyer alike) and more effective. But since improved sales performance ultimately depends on behavior change, classroom training alone won't suffice. You need ongoing coaching to reinforce application of the new strategies over time.

Manage your best sales opportunities. Research indicates that as many as 80% of sales leads are neglected or mishandled. You certainly can't afford that kind of inefficiency with your most critical sales opportunities. The leading A/E firms typically have some form of capture planning process to guide their efforts in closing on their best leads. This earlier post outlines a proven approach to maximizing your success on your top sales opportunities.

Hold regular sales team meetings. These meetings are designed to build the team, define assignments, review progress, and encourage accountability. Keep them short and to the point (usually no more than 30 minutes). Focus on sales activities, not proposals (you want to avoid mistaking proposal volume for productive sales efforts). I recommend weekly meetings at the start. Once increased activity and accountability appears sustainable, then it may be appropriate to go to biweekly meetings. Make sure that someone is in charge of the meetings so they don't drift off course.

Monday, December 8, 2014

5 Contrarian Steps to Winning the Shortlist Interview

How to differentiate your firm has long been a hot topic of discussion, with many concluding that it is increasingly difficult to do so in the A/E industry. But is the problem a matter of discovering what to do, or having the courage to do it? Conformity seems to be a powerful force in our business. How else do you explain the remarkable similarities in how we market, sell, write proposals, and conduct shortlist interviews?

For the sake of this post, let me focus on the latter, which puts us closest to the purchase decision where differentiation matters most. Can you take a different approach to shortlist interviews than your competitors—and win more than your share? Indeed you can, as I've learned in winning about 80% of the interviews I've helped firms prepare for over the last two decades. Below, I share five contrarian steps I routinely advise my clients to take:

1. Seek authenticity over polish. Clients typically ask you to spend the bulk of the time making a presentation. Odd, isn't it, that they give so much weight to something that most technical professionals are not that good at. Is the secret to winning the shortlist interview really about proving yourselves to be the more competent presenters? I think not.

Feedback from clients indicates that soft factors such as trust, personal chemistry, commitment to the client, and genuine interest in the project drive the final decision. Your competence was assessed during the proposal stage; now the focus shifts to making the client feel comfortable about the prospect of working with your firm on this project.

Public speaking, ironically, makes most technical professionals look uncomfortable. Focusing on helping them flawlessly deliver the presentation should hardly be the primary objective. More often than not, the net effect of that approach is a competent but detached presentation, often with the essence of phoniness. When the goal is to engage your audience and persuade them, I'll take a speaker who comes across as authentic over one who is merely polished.

So I push the shortlist interview team to find their comfort zone, where they are best able to present themselves as people you'd like to do business with. How? I few suggestions:

Make your presentation personal and interactive. I'll say more about this below.

Limit formal speaking parts. Don't make the mistake of concluding that every member of your interview team has to stand up and speak to PowerPoint slides. Even if they are all accomplished speakers (highly unlikely), that makes for a disjointed presentation.

Interview team members instead. Many technical professionals are much more impressive in an informal exchange than a formal speaking part. Ask them questions and have them share their insights instead of making them presenters.

Don't just talk; do something. Write something on the flipchart or white board, spread out a site plan on the table and speak to it, hand out a checklist that outlines critical steps of your approach. Actions are more engaging than words alone.

Practice until it looks natural. That's my goal rather than trying to turn technical professionals into compelling presenters. What client doesn't want to work with real people instead of the coached-up (or unprepared) ones they often see at this stage?

2. Engage the selection team in a dialogue. Your proposal was a one-way presentation, so why resort to a verbal monologue when you have the client in the room? The obvious answer is because they asked you to. But don't assume that's your only option. Simply ask if you can have a dialogue. In my experience, the selection team will agree 99% of the time.

Here's how: Ask, "To confirm that we're speaking directly to the issues that matter most to you, would it be okay to ask you a few questions during our presentation?" Or something to that effect. Of course, you will have already prepared your presentation in anticipation that it would include some two-way discussion—adding a few questions at critical junctures.

When your team and the selection team are conversing over the course of the shortlist interview, you have staked out a powerful advantage over the firms that simply follow the instructions. Dialogue has many benefits, including promoting comfort, helping you target your message, previewing the working relationship, confirming understanding, and uncovering and resolving concerns.

When you engage in a dialogue from the start of your presentation, the usual Q&A period at the end disappears because their questions have already been answered. Think about it: Would you prefer to have 45 minutes of conversation with the client or 15 minutes (of Q&A)? The answer is so obvious, I'm baffled why more firms don't ask the question: "Can we talk?"

3. Expand on your proposal. Another mistake that A/E firms commonly make is to spend the shortlist interview mostly rehashing their earlier proposal. If you want to increase your chances of winning, you need to tell the client more. Take this opportunity to advance your proposal to the next level.

This starts with a commitment to put in the effort. I don't understand why most firms spend far more time writing a proposal when the odds of winning are longer than preparing for a shortlist interview with much better odds. When I work with shortlist interview teams, they often comment that they've never spent so much time preparing for an interview. "That's why you don't win more of them," I respond.

So what's involved in building on your proposal? You might offer some preliminary design concepts, additional site information, more detailed cost estimates, further definition of your client service process, introduction of new solution options, or a response to perceived weaknesses in your proposal.

4. Talk about the working relationship. When the selection team is trying to assess what it would be like to work with your firm, why would you not talk about it? Yet A/E firms rarely do in either their proposal or the shortlist interview. That's another key opening to distinguish your firm from the competition.

Describe how you will deliver an exceptional client experience. For it to be believable, you need to outline specific steps and commitments you will make. I've been able to garner major wins over the years largely because our firm was the only one to address this, proposing a unique client service delivery process. Of course, this message won't resonate with every client. But the potential competitive advantage is too significant to ignore it.

5. Neutralize your liabilities. Client selection teams often face a difficult choice, to pick one firm among two or more that offer similar advantages. In a close competition, the client usually looks for reasons not to select you. Thus you should try to determine where you are most vulnerable to being deselected and address it head-on. Your competitors will typically avoid doing this.

Most likely, you have a sense of your potential weaknesses. Your credentials are not as strong, you haven't worked previously with the client, you didn't do the best job uncovering project insights during the sales process, etc. It's always a good idea to ask the client if they have any concerns or questions after reviewing your proposal that they'd like you to address during the shortlist interview. Sometimes they'll share that information with you.

There are a number of ways to address your vulnerabilities, including:

Lessen their impact by leveraging your strengths, assuming you have some notable strengths that can offset perceived shortcomings. Do this in the context of explaining your project approach and outcomes, not in bragging about your strengths.

Describe how you'll shore up an apparent weakness. For example, if you don't have an existing working relationship, describe the steps you'll take to build it quickly (see above.)

Indirectly highlight your competitor's flaws. This obviously requires some nuance, but can be very effective when done correctly.

Prepare for the toughest questions the client could ask. It's critically important that you anticipate the hardest questions that might come up during the interview, and spend time working on your answers in advance.

Clients say they want shortlisted firms to be well prepared, to personally engage the selection committee, and to show their enthusiasm. Nothing earth shattering there. But it's interesting how seldom those three traits are all evident. Much of the blame is due to misplaced objectives (e.g., focusing on your qualifications) and putting in too little effort.

Remember, the goal is to stand out, not fit in. Don't follow the crowd, become a contrarian. The following table highlights the differences:

Thursday, November 6, 2014

Getting Your Phone Calls Returned

There's a good reason you don't like making cold calls: You've been on the other end of those calls. Americans are united in their dislike of unsolicited sales calls, hence the Do Not Call Registry. So how are you supposed to initiate a conversation with a prospective new client?

Slowly emerging from the Great Recession, I can imagine that clients are more tired than ever of hearing from A/E firms who "just want to introduce" themselves. That's all the more reason not to answer the phone or return calls from strangers. No doubt this adds to the reluctance of many technical professionals to get involved in selling. But you need to be developing new business! So how can you get prospects to return your calls? A few suggestions:

Give the client a good reason to call you back. It's pretty simple, when you think about it. If the client sees a obvious benefit in returning your call, he's most likely going to do it. The reason most of your sales calls aren't returned is you haven't defined the benefit to the client. Do clients really want an introduction to still another A/E firm? You have to do better, and explain why there's value for the client in calling back. Which leads to my next point...

Identify a specific client need before calling. A cold call is driven by the seller's needs. The seller doesn't know what the potential customer needs, but she knows she has to make a sale. So she calls prospects that might have need for her company's product or services. It's a self-serving motive, disconnected from our needs, and that turns us off when we receive such a call. Same for prospective clients.

That means you need to make a preliminary determination of the prospect's needs before calling. "Warming the call" by learning about client needs beforehand enables you to speak directly to a matter pertinent to the prospect, instead of fishing for a possible connection. That gets you closer to getting your voicemail returned, but don't expect it until you get to the next step.

Offer something of value. It's hardly compelling to leave a message simply stating, "I understand you might be needing help in designing a new automated control system for your plant." That only describes a benefit if the client doesn't know any firms that do that kind of work. What are the chances of that? A better message would be: "We recently worked for a client that added an automated control system for a plant very similar to yours. We were able to reduce their costs by 45% by using an innovative design concept. If you'd like to hear more about that, please give me a call."

Yeah, coming up with a good reason for the client to return your call (what I call your "entree") isn't easy. But it works. It requires more work up front. So you can make 20 shotgun calls to prospects and maybe get 3-4 to return your call. Or you can offer an entree to 5 prospects and get 3-4 to return your call. Which seems the better strategy?

By the way, your chances of eventually making the sale are substantially increased when you take a more client-centered approach, starting with that initial contact.

Make it easy to return your call. Think of the things that frustrate you when someone leaves a voice message, and make sure you don't repeat any of the same mistakes. These could include not speaking clearly, making it hard for the prospect to catch your name. Or saying your phone number too quickly to write it down. Or perhaps the prospect can't get through should he call. Here are some suggestions for avoiding such frustrations:

State your name and phone number at both the start and end of your message. That means the prospect doesn't have to listen to the whole message again to get the number. Give this information slowly and clearly, spelling your name if there's a chance of confusion.

Tell the prospect how best to reach you. You don't want to play phone tag with someone you don't know well. If you offer your cell phone number and invite a call after hours if this is more convenient for the prospect, then you're hinting that you consider the call important.

Let the prospect know that the call will be brief. For example: "I can explain in 10 minutes and then you can decide if there's value in our meeting to discuss the matter further."

If you were referred, state up front why the referral was made. I would advise that you still offer your entree and not simply drop a name. The real value of the referral is when the prospect trusts the one who referred you as having the prospect's interest at heart. So don't let the referring party down; explain why he or she thought the prospect would benefit from talking to you.

Always try to schedule the next meeting or communication. One of the simplest ways to minimize this problem of unreturned calls is, when you're meeting or talking with the prospect, to (1) establish the basis for the next conversation and (2) if possible, schedule it. Otherwise, you may find yourself in the same predicament—competing for the prospect's time and attention—when the next contact comes around.

If the client won't commit to a next time, that probably tells you something about the likelihood of the relationship developing much further. It could be a sign that your next call won't be returned either.

Monday, October 27, 2014

Collaboration as Competitive Advantage?

The concept of a collaborative planning and design process is hardly novel. In fact, it sounds so commonsensical that it hardly seems worth promoting. Except for the fact that it is so needed in our industry.

Fragmented is a popular adjective to describe the AEC industry. It's easy to point out the adversarial relationship that often exists between designer and contractor. But designers make their own substantial contribution to the lack of collaboration among project parties. This is true even when the different disciplines reside under one roof.

Consider some of the evidence: Half of construction change orders, according to RediCheck's Bill Nigro, are due to coordination errors in the design phase. His research found an average of five coordination errors per contract drawing! Anecdotal evidence suggests that rework consumes 10-20% of project design budgets, with improper sequencing of work between disciplines being the most common cause.

We've all witnessed that last one. For example, since the electrical department is anxious to get started (their workload being light), the architectural department pushes work to that group before floor plans are finalized. When the preliminary floor plans are revised, the electrical engineers have to redo their design to reflect the changes.

Another example from my time with environmental firms: Geologists plan and execute a remedial investigation of a contaminated site. Their findings are passed on to the risk assessment staff who determine that they don't have all the data they need to do their work. The field crew goes back to the site to collect more information. Later the engineers get involved and find they need still more site data to design the remediation system. More samples, more costs.

These are hardly isolated situations; in my experience, they're quite common. Inefficiency due to the lack of an interdisciplinary collaborative process is prevalent in our industry. More typical is a compartmentalized, sequential approach where work flows from discipline to discipline with coordination limited largely to the points of handoff. What's needed is an interdisciplinary team that together guides the work through planning, design, construction, and startup.

This need has been the driver for the emergence of Integrated Project Delivery, which involves the owner, designer, contractor, and potentially others entering into a single, multiparty contract that forces the parties to collaborate. But the onerous contract terms have scared most parties away from using IPD. Interesting, isn't it, that the goal of better cooperation—the need for which we can all agree upon—is thought to be attainable only through contractual coercion.

Why can't your firm create and market its own collaborative process without having to resort to compelling parties to participate? Everyone is a winner when better collaboration is achieved, so it should be relatively easy to sell in concept. The difficulty comes in overcoming the culture of competition that has characterized the AEC industry for decades. What can you do? A few suggestions:

Start with mastering collaboration among your own staff. I've helped many firms address internal coordination issues over the years. The genesis of the problem is usually structural—how offices and departments are organized and incentivized. Look here for obstacles to collaboration. I've written about breaking down disciplinary silos previously, as well as removing competition among offices by going to a single profit center.

The secret to better collaboration is rethinking the usual sequential approach to planning and design, and getting parties engaged throughout. Designers can help strengthen planning. Planners can bring a valuable perspective to design. Architectural schematic design can be improved by early engineering input. Construction specialists can help designers reduce costs and improve constructability. And so on.

Commit to integrated project planning. All the relevant disciplines and stakeholders should have input into planning the work. Unfortunately, the work is often planned in stages (if at all!), with the different parties contributing only to the stage that directly involves them. No collective vision emerges, nor a shared understanding of precisely what each party needs to make the project successful. The more disciplines and stakeholders involved in the project, the more opportunities for disconnects when proper planning is neglected.

Strengthen collaboration with regular teaming partners. On several occasions, I've had the opportunity to help firms improve their working relationship with other firms—either with familiar teaming partners or members of a design-build team. The process always reveals some valuable, previously unknown insights about what each party needs from the other to be more successful. This happens even when the firms have extensive experience working together. They had simply never taken the time to explore how to make the working relationship even better.

Some areas to focus on: Aligned project goals, project planning, sequencing of work tasks, lines of communication, decision making, roles and responsibilities, interim deliverables, coordinated quality control, addressing problems, and delivering great client service.

Advocate for partnering sessions with design-build teams. Ideally, these should involve the owner and key members of the design and construction teams. The scope of discussion will be much the same as above, but make sure you start with goal alignment. I typically send the owners, designers, and builders to their respective corners and have them define success for the project. The goals emerging from each group are always different, sometimes in significant ways. Aligning these goals is critical to creating the environment for effective collaboration in other aspects of the project.

Sell clients on the benefits of your collaborative process. Most clients still favor the traditional project delivery model that promotes competition between partners. They seem to think it offers checks and balances that hold the parties more accountable. But the truth is that it dramatically reduces productivity—increasing costs, schedules, and headaches. Of course, the contractual relationship between planning, design, and construction partners may prevent you from extending your collaborative process over the full scope of the project.

But you can promote the advantages of that which you can control—if you have the evidence that it works. So it's vital that you compile data that demonstrate the benefits of collaboration. Start collecting this information now as a baseline, then compare it to the results that come from a more integrated project approach. Once you can demonstrate the advantages within your realm, you'll be in a stronger position to promote it from start to finish.

Thursday, October 16, 2014

Why You Should Consider Splitting the PM Role

Could your firm use a few more good project managers? It's a tough job and the really capable ones are in short supply. If only you could stretch your best PMs across more projects. Well you can.

Here's how: Divide the PM responsibilities among two people. Create one role that handles the higher-value aspects of project management—serving as primary liaison with the client, developing project strategy, leading the project team, ensuring adequate resource allocation, providing technical oversight, and responding to problems that may arise.

Create a second role that handles the more mundane tasks that occupy most of the PM's time, such as coordinating activities among team members, monitoring work progress, tracking budget and schedule performance, and carrying out other administrative duties normally reserved for the PM. In my experience, these tasks consume 60-70% of the PM's time on a project.

For this arrangement to work well, let me offer a couple suggestions: First, save this practice for your larger projects where there are significant project management hours to divide. Second, don't call either person the project manager. Whenever you're creating a new role (or service, process, etc.), call it by a different name. Some of my clients attempted this by adding the position of assistant PM. But their PMs tended to approach their job much as usual, relegating the assistant PM to mostly menial administrative tasks. I prefer the titles of project leader and project coordinator to distinguish the two roles from current practice.

So why should you consider doing this? There are several benefits:

Enable your PMs to work on more projects. Most A/E firms suffer from having too few good PMs. It limits their ability to win more work, creates bottlenecks in the work flow, and results in more project problems and lost profits. By splitting the PM role into two, you extend the capacity of your current PMs. They spend fewer hours per project, allowing them not only to work on more projects but give greater focus to the higher-value elements of those projects that really require their skill and experience.

Deliver better value to your clients. Clients love this arrangement because they're paying more appropriate rates for the PM tasks performed. Much of the work a $130-an-hour PM typically does on a project can be capably performed by a junior professional under appropriate supervision at $80-90. The savings can even enable principals and other senior managers to take on a more active role in your most important projects (see below).

Distinguish your firm from the competition. Because this approach appeals to clients, it becomes a significant competitive advantage in winning new work. Your firm is probably the only one offering it. When we first created the project leader/project coordinator roles at my former firm, we were pursuing work with a new client where the key decision maker had a previous relationship with one of our principals—when he was still managing projects. We gave him the role as project leader and won the job. Our project coordinator then performed most of the PM tasks at half the principal's rate. I believe this arrangement also contributed to several subsequent big wins for our firm across the country.

Provide hands-on training to your future PMs. One of the things I am most proud of from my time as operations manager is my role in helping prepare our younger professionals become the competent PMs they are today. They benefited from serving as project coordinators, where they performed the bulk of PM tasks without the risk of taking on the more difficult aspects of the role. They did so under the guidance of the project leader who also showed them how to handle the high-end elements of project management.

If you're wondering if this approach might benefit your firm, I'd encourage you to try it on a project or two. Pick a PM—hence project leader—who is willing to embrace the new role. Be sure to clarify the division of responsibilities (which may vary by project) and carefully track the results. Even if you split the PM role only occasionally, it's a strategy worthy of your consideration.

Tuesday, October 7, 2014

Beware of Misusing Personality Assessments

Years ago I came the closest I've been to leaving the A/E business when I became a finalist for the national sales manager position with the country's largest commercial wildflower seed distributor. Apparently the company was impressed with my business development background, but they expressed concern about my lack of related technical expertise. The other finalist was a botanist who had a limited sales background.

At a follow-up interview, I was asked to take a personality test. A few days later I was told that I didn't get the job because my personality profile indicated I was less suited for sales than the other finalist. That was my first experience with the misuse of personality assessments.

The use of personality testing to screen employment candidates has exploded in recent years, with an estimated 60-70% of candidates being tested. That's up from 30-40% just five years ago, according to a survey by Deloitte. Workplace personality testing has become a $500 million-a-year business and is growing 10-15% annually.

Such growth would suggest that these tests have a proven track record. But that's not the case. Research indicates that personality typing is a poor predictor of job performance or fit. Even the company behind Myers-Briggs, the most popular personality assessment, warns that their test shouldn't be used to screen potential employees. Besides being unproven as a hiring tool, they believe that it's use in this manner is unethical because it's not voluntary.

Myers-Briggs and similar tests have a fundamental flaw: They attempt to lump people into mutually exclusive categories. For example, you are either an introvert or an extrovert. But most people fall somewhere in between (hence the recent term ambivert). The dividing line between the two is arbitrary, as it would be if all of us were categorized as either short or tall.

There are also serious questions about the replicability of the tests. For example, studies have found that retaking the Myers-Briggs assessment as soon as just five weeks later has a 50% chance of reclassifying you as a different personality type. Reproducibility, of course, is a key measure of scientific validity. But the fact is that the science behind these tests is sketchy at best.

Even if personality tests were accurate, the assumption that certain personality types are a better fit for certain jobs is largely a myth. A salesperson, according to conventional wisdom, should be an extrovert—which conveniently excuses most technical professionals from the role since they are predominantly introverted. Except that studies have shown little to no correlation between personality type and sales success. Same is generally true of leaders.

Despite the above criticisms, personality assessments do have their place. They can be useful in helping us recognize our personality tendencies and how they compare with those we work with—assuming they agree to share that information. This awareness can help us significantly improve communication and collaboration.

Identifying employees' personal strengths is also very valuable. Gallup research has found that focusing on developing strengths is a better way to improve performance than the more common approach of trying to remediate weaknesses. You might consider the StrengthsFinder assessment that came out of the Gallup research. It is used by many of the world's leading companies.

With any of these assessment tools, however, you want to avoid the temptation to oversimplify. I think that's one of the primary reasons personality typing is so popular, because it seems to reduce the complexities of human personality down to a few understandable categories. But such a "paint by the numbers" approach to leadership is naive. People are not so easily pigeon-holed, which makes us both fascinating and sometimes a bit frustrating to figure out.

A shortcut to understanding others would be welcome, but none are really proven.

Tuesday, September 30, 2014

If Not Differentiation, What Then?

"How concerned are you about the commoditization of your services?" I posed that question to a room full of consulting engineers at a conference session I conducted last week. Almost everyone present indicated that it was a significant problem. "Enough to make significant changes in how you do business?" I asked. The group was much less sure of their answer to the second question.

Thus we have the conundrum of the commoditization trend in the A/E business. It's a problem we all like to complain about, but few are willing to try to do anything about it. And that's perfectly fine, because the consequences of commoditization are probably less painful for most firms than changing in response to it. As I see it, there are three basic responses you can make:

Stay the course, continuing to do things much as you have been
Become more efficient, enabling lower-cost delivery of your services
Differentiate, adding value to your services that clients are willing to pay for

Most firms, by far, stick with option #1, even as they talk about the need to differentiate. Some firms have embraced option #3, finding ways to distinguish themselves from the competition (I addressed possible differentiation strategies in a previous post). A much smaller number of firms settle for option #2, because most don't want to admit they've become a commodity.

But that reality is inescapable for several firms I've worked with over the years. While they admit that clients treat them like a commodity, they resist the characterization and continue to operate as if they offered differentiated services—putting themselves at a competitive and financial disadvantage.

Of course, my focus is on helping A/E firms differentiate. But if they can't or won't, isn't option #2 worth considering? There's nothing wrong with embracing a commodity market (such as most private land development) and redesigning your firm to succeed at it. It requires some hard choices, but the benefits go straight to your bottom line. Some possible strategies to consider:

Streamline project delivery processes. In most firms, there's much room for improvement here. For example, rework in our industry seems to consume between 15 to 20 percent of project budgets. That's unacceptable. Design-related change orders contribute about 4% of construction costs. Half of those change orders are attributed to coordination errors. See a trend? The first place to start in lowering the cost of your service delivery is improving how you manage projects.

Control overhead growth. The good news is that overhead is declining across our industry, reaching the lowest level in 2013 since the recession began. But many firms are still running lower utilization due to inadequate work load and a reluctance to further pare back overhead positions. The hope is that growth will soon return, but high overhead makes that more difficult in a commodity market. Alas, these firms may face some tough decisions to remain competitive.

Outsource select services to boost profitability. This is not a popular choice, but it may be a strategy worth considering. Start by evaluating the performance of the different departments and disciplines in your firm. Do some routinely lose money or otherwise hamper your firm's competitiveness? Some firms have realized they can be more profitable by outsourcing price-sensitive complementary services such as surveying or laboratory analysis. Certain overhead functions might also lend themselves to outsourcing.

Hire more paraprofessional staff. As budgets contract, it becomes increasingly important to fit the right people (hence the right billing rates) to the assigned tasks. Many of the tasks we perform can be adequately handled under appropriate supervision by less experienced professionals, non-degreed personnel, and even administrative staff. Other professional service firms—such as law and accounting firms—have cultivated the role of paraprofessionals. These are individuals who have related associate or vocational degrees, or simply relevant experience with no degree. Couldn't this approach work for our industry?

Employ some hoteling to reduce office space needs. Besides indirect labor, the biggest overhead expense in most firms is office space. Yet in many firms on any given day, a large proportion of offices and cubicles are unoccupied, particularly for firms that perform field services. The practice of hoteling is a growing trend among all types of businesses, including many professional service firms. This involves setting up shared work stations that employees use periodically when they are in the office. The growth of telecommuting has made this a practical alternative for many companies, saving millions in office costs. No doubt this suggestion will be greeted with skepticism in our industry, but might be worth considering as a commodity provider.

Offer more standardized design products. Why do cash-strapped clients like small towns and rural counties need to pay for custom designs for buildings like fire stations or community centers? Could they not shop for the design of their choice from a catalog of standard models, similar to how home buyers use house plan books? Obviously, this is not a popular concept with architects and engineers, but I've heard owners express interest in such low-cost options. Customizing every design or solution is difficult to do profitably when clients are seeking the lowest cost.

On second thought, maybe differentiation deserves more attention! Any of the efficiency measures above have merit, but are likely very difficult or distasteful to the vast majority of A/E firm leaders. That leaves two choices—stay the course or differentiate. If you're tired of more of the same, this blog is full of ideas on how to stand out in the crowd.

Friday, September 19, 2014

Do Clients See You as an Industry Insider?

What expertise do clients value most? A deep understanding of their business. This answer will surprise many in the A/E industry who think that expertise in their various technical disciplines is what is most valued. Obviously, clients expect you to know your business. But what usually matters more to them is how much you know theirs.

Client knowledge is a critical competitive advantage that many firms in our business undervalue. They're too busy filling the pipeline with proposal opportunities to invest in learning much about the clients they pursue. If you're looking for causes of the commoditization of your services, start here. The value of your work is much enhanced when you can meet clients' strategic needs. That requires an understanding of their business.

When I work on proposals, I always ask what the strategic drivers are behind the project. What are the business results that we need to deliver through the project? I'm typically disappointed with the answers I get. It's apparent that most technical professionals (especially engineers) are more interested in the what and how than the why. Yet the why—the desired business outcomes—is what clients really care about.

So how do clients perceive your firm? Are you viewed as insiders or outsiders when it comes to their business. Of course, I don't expect you to have a deep understanding of all your clients and their respective industries. But the important question is: Would you be seen as as an industry insider for any of your clients' businesses?

An industry insider is not only knowledgeable of that business but actively participates in it. So let's say that higher education is one of your core markets. Do you simply design facilities for it, or do you know trends driving that market from an insider's perspective? Do you understand how demographics will change future enrollment? Or how slower tuition growth is fueling greater competition among schools? Or how the student loan debt crisis might impact them?

If you think these (and other similar trends) don't really matter to your business, think again. Moreover, if you want to stand out among the many firms serving this market, leverage your facilities expertise in helping schools respond to these emerging challenges and uncertainties. Become a recognized industry insider. How? A few suggestions:

Research your clients' businesses. Given the easy access to market information on the internet, I'm perplexed by how little research many firms do. Don't have time? Make it a priority, and delegate some of the responsibility to others (e.g., administrative and junior staff). Firms that give priority to market research are more profitable and grow faster.

Talk to clients about their strategic needs and concerns. Don't limit these conversations to technical issues and personal chitchat. Find out what defines success for your clients, what issues cause them particular concern, and how their business is changing. Then determine how your firm can better help them achieve their pressing business objectives.

Get involved in their trade and professional associations. By involvement, I don't mean simply attending events. Become an active participant in committee work, especially those that are most strategic to their industry. For example, my previous employer was a key player in working through client trade organizations to help influence changes in environmental regulations that would save our clients millions of dollars in compliance costs.

Share your expertise through targeted writing and speaking. These same trade organizations typically sponsor conferences, seminars, webinars, and publications where you can share your insights on issues of importance to their business. To become a recognized industry insider, you should have something interesting to say and do so on a regular basis.

Develop other resources helpful to those industries. You might prepare relevant articles, white papers, and ebooks and share them through your email list. Or publish regulatory updates or planning checklists. Or establish a resource website specifically targeting people in those industries who might be interested in hiring you.

Build peer relationships within your clients' businesses. Partner with other service providers to offer distinct integrated solutions, as well as to share knowledge and insights about those industries. Especially consider affiliations with experts outside the AEC industry, since these are less common and may offer unique value to clients.

Hire people out of those industries. There's real value in having people on your staff who can really see things from the perspective of clients. They've been there. They often have instant credibility that can take you years to establish on your own. But do your due diligence; confirm that they are known and respected in their industry.

Don't confuse business development focus with becoming an industry insider. Market focus to many firms simply means seeking more sales opportunities within that market. But what I'm describing goes much deeper. Becoming an industry insider means being recognized as a contributor to your clients' business, not just another firm seeking to mine it for revenue. The core philosophy is this: Help clients succeed and they'll help you succeed.

Thursday, September 11, 2014

How to Improve Your Firm's Project Management

There is probably no operational shortcoming more widespread in our industry than the need to improve project management. Managing projects is a demanding endeavor, and many technical professionals struggle with its complexities. The result is a host of problems such such as dissatisfied clients, budget overruns, missed schedules, quality defects, increased claims, lost profits, and general organizational dysfunction.

Perhaps your firm is among the many seeking to improve how you manage projects. Where should you start? Having worked with several companies in this area, let me offer the a few suggestions:

Don't start with training. This is a common response, but a misguided one. There are some good project management training programs available, but you'll not solve your performance concerns simply by giving your PMs training. You need to first take steps to ensure that your objectives are clear, that systems are in place to support changes, and that you're prepared to reinforce putting training concepts into action.

Determine your priorities. You likely won't be able to address every significant project management deficiency at once. So determine which issues most need attention. Evaluate the extent of each problem, its ramifications, the relative difficulty in solving it, and the anticipated benefits in doing so. I recommend ranking the issues, then determining how many of those at the top of the list can reasonably be addressed at once. Later, after you've made significant progress on those issues, you can tackle the others on the list.

It's important to get adequate participation in identifying priorities. This should not be strictly a top-down process. You're going to need the buy-in of your project managers, so at a minimum they should be consulted. I advise going still further, involving a cross section of employees at all levels who work on projects. This will give you a more accurate understanding of the issues than talking to PMs alone, which will lead to better solutions.

Identify internal and external best practices. In most firms, there are project management practices applied on a limited basis that are worth replicating across the organization. Perhaps it's the project planning process in the electrical department or the cost estimating approach used in one branch office or how one of your better PMs manages client communications. Sometimes there are a few clients that demand a higher level of project management competency, and those practices may deserve consideration firm wide.

Looking internally for best practices has some real advantages. You can see the benefits firsthand and the individuals who employ those techniques can help teach them to their coworkers—thus internal best practices are typically easier to implement than those brought in from outside. Recognizing internal best practices encourages more PMs to step up and set an example.

It's also wise to look outside your firm for best practices. Consultants and trainers, who work with multiple firms and see a variety of approaches to project management, can be good sources. You should also talk with PMs you've hired from other firms, asking them what their former employers did that might be worth adopting. The Ultimate Project Management Manual published by PSMJ is another good resource. Don't be afraid to look outside our industry either. There are many good project management practices from other industries that warrant consideration.

Plan to stage the rollout of changes. As noted earlier, you can't expect to improve everything at once. That's why you start with determining your priorities, which should guide your implementation process. You might consider a two-tiered approach, identifying which changes are mandatory from the start and which will be initially recommended but optional. This enables PMs to see where the firm is headed in terms of reforming its project management practices, but keeps the pace of change manageable. Some PMs will immediately embrace the recommended changes, which will facilitate the ultimate rollout at a later date. You might also choose to pilot certain changes on a limited basis, such as in select offices or business lines.

Define performance expectations. While all firms track some parameters of project performance, I'm often surprised how little these metrics seem to matter. I've encountered many PMs who repeatedly fail to meet budgets and schedules, who have unhappy clients and disgruntled project teams—and yet continue to manage projects with impunity! Many firms have simply never really defined what they expect of PMs. This is a vital step.

Typical PM metrics include budget and schedule performance, project profitability and cash flow, client satisfaction, and repeat business. You should also track project team satisfaction, because an unhappy or dysfunctional team will be hard pressed to produce successful projects. Implementing regular project reviews is a great step toward improving PM performance. I also advocate establishing a deliberate process for preparing people for the PM role; too many simply end up in that role by default.

Update your project management infrastructure as needed. With changed project management practices, you'll likely need to modify the systems and tools that support those practices. This may be as simple as creating a new form to something as complex as changing your accounting system. Here's an important point: If you wish to discontinue certain practices, eliminate any forms, reports, or procedures that support them. This is the equivalent of "burning the boats." If you give people the option of not changing how they do things, guess what they'll do!

Now you can start training. Having identified what changes you're making and having taken the steps necessary to facilitate those changes, you're ready to provide PM training. The training, of course, should be customized to your firm's needs. Beware of training programs that focus too much on the technical aspects of project management (e.g., budgeting, scheduling, scoping, estimating, etc.). While these are certainly important, it's likely that your most entrenched project problems are related to the softer skills such as communications, client relations, and coordination with the project team.

Remember that effective training is a process, not an event. Expect to make a long-term investment in coaching, feedback, and reinforcement if you really want to see performance improve. But it's worth it. If you were only going to excel at one corporate initiative, improving project management is probably the one with the biggest payback.

Tuesday, September 2, 2014

Best Way to Improve Project Performance?

Dave Burstein of PSMJ is one of the smartest guys I've met in this business. So when Dave speaks, I listen. Several years ago I hired him to conduct a client survey as part of a comprehensive project management initiative I was leading for my former employer. When we met to discuss strategies for improving project performance, Dave offered several suggestions. Then he said, "If I was only going to do one thing, it would be instituting monthly project reviews."

We took his advice and implemented a process of third-party reviews for all projects over $50,000 in fees. The payback was immediate. During an initial training session to teach our senior managers how to conduct the reviews, our role playing exercise identified a looming problem with a major client. The project manager, one of our best, had simply overlooked the danger signs. Catching the problem and addressing it early saved us an estimated $600,000 in project losses.

I've been advising clients to do project reviews ever since. Well, trying to. It sounds so simple in concept that I've had trouble convincing clients of the substantial benefits. But having administered the review program for a national firm and participated in several reviews myself, I understand Dave's advocacy of them. So why are they so effective?

They provide an independent, expert perspective on how the project is progressing. Even the best PMs can miss developing problems, overlook solutions worth considering, or fail to be fully responsive to the client's needs and expectations. A review can avert a disaster, or help make a good project a great one.

They force PMs to properly track the status of their projects, something that many are negligent in doing. Preparing for the regular reviews means the PM must routinely evaluate how the project is doing relative to meeting goals, budget, schedule, cash flow, etc. Thus reviews provide an early warning system to identify problems before they become more serious—and difficult to solve.

Reviews are far superior to classroom training in helping PMs develop their skills. They are a great way to reinforce training, serving essentially as a hands-on coaching session. Done properly, reviews are welcomed by PMs. The tone of the reviews is crucial to their success. They are intended to be a collaboration between the PM and reviewer, not a fault-finding inquisition. The reviewer should serve more as coach than critic.

Review Content

I recommend keeping routine reviews to no more than 30 minutes unless problems are uncovered that take more time. In advance of the review, the PM compiles information on the following:

Budget and schedule status
Billing and collection status
Status of deliverables
Significant project changes
Potential risks or problems
Proposed corrective actions for variances
Assessment of the client relationship
Any other important issues

How Reviews Are Conducted

Typically, a senior manager is assigned to conduct the review. This is often the principal-in-charge or client manager. Ideally, the reviewer should not be heavily involved in the project so he or she can bring a relatively objective, third-party perspective to the review. For large complex projects, a review panel may be preferable. The reviewer and PM determine the optimum review interval, but monthly is suggested for most larger projects.

Dave recommended having the PM make a presentation to the reviewer, using a standard PowerPoint template to compile the typical review information. This provides regular practice for polishing presentation skills, plus it lends the review a bit more gravity. While the review should be supportive and comfortable for the PM, it's nevertheless serious business. Both the interests of the client and the firm are at stake.

How well your projects are executed determines how well your firm performs overall. Among the many elaborate tactics that your firm employs to try to improve performance, have you tried one of the simplest and most effective?

Wednesday, August 20, 2014

3 Dimensions of the Client Relationship

Firms survive when they find enough work to cover their expenses and generate a little profit. But firms thrive when they build enduring client relationships that continue to produce revenue and profit for the long haul.

Ever notice how most business development efforts seem driven by a survivalist mentality? They're mostly transactional, focused on winning projects rather than clients. And as those projects are being completed, there's the constant push to find more of them. Meanwhile, the firm's ongoing clients provide the stable base needed to create a sustainable business.

I've long advocated that firms should devote as much attention to building great client relationships as they do to chasing new work. The best firms in the A/E business do, but most I encounter seem to favor fishing over farming. If you're going to get serious about relationship building, it might be helpful to recognize three important dimensions of the client relationship:

Business relationship. As professional service providers, our foremost responsibility is helping our clients be successful. The true value of your projects is how well they deliver business results. Unfortunately, technical professionals are often prone to neglecting the business performance aspect of their designs and solutions.

One of the best ways to differentiate your A/E firm in the competition for clients is to demonstrate a keen understanding of the client's business and how your services will help achieve business outcomes. Divorced from the client's strategic needs, your services are likely to be viewed as a commodity. Commodity purchasers are much less likely to form the long-term relationships with service providers that you desire.

Working relationship. This involves how well the two parties work together, another aspect of client relationships that gets too little attention. The working relationship defines the client experience, which surveys suggest constitutes half of the perceived value that you deliver to clients. Yet the working relationship is seldom mentioned in sales conversations or in proposals. Most firms lack any kind of standards for delivering great client experiences, nor do they regularly solicit feedback from clients on how they're doing.

There are three critical steps to excelling at the working relationship: (1) benchmarking the client's expectations, (2) developing processes and standards for meeting those expectations, and (3) getting feedback on your performance. Do these three things and your firm will be in rare company.

Affinity is how much you and the client like each other. Friendship with clients is a wonderful thing, but it's overrated. You can have a very productive relationship with a client who is not a friend if you deliver business value and a great experience. When I speak of friendship, I'm talking about a relationship where simply spending time together is valued. There is a personal caring for each other, a natural attraction, and common interests.

In business, the term friend is commonly too broadly applied. Some seem to call everyone they know a friend. Others consider any client they get along with a friend. But getting along is a result of a strong working relationship, not necessarily a friendship.

Why are these distinctions important? I've seen too many friendships in business strained by the failure to deliver business results or tend to the working relationship. There are still sellers in our business who think that making friends is more important than meeting business needs. Too many firms think that quality technical work is all that really matters, without giving proper regard to the client experience. And our industry's neglect in linking our work to business outcomes is a significant factor in the commoditization of our services.

If your firm is serious about building more profitable, long-term client relationships, you'll want to avoid these common mistakes. Great client relationships result from helping clients succeed in their business or mission, delivering great client experiences, and—if the opportunity arises—being a good friend.

Friday, August 1, 2014

Is Your Sales Approach Aligned with the Buyer?

Years ago, I received a call from the environmental manager at a large manufacturing facility. He was interested in outsourcing operation of their wastewater treatment plant and wondered if that's something our firm could do. I was happy to respond that we could.

This seemed the breakthrough I had been waiting for. I had pursued this client, located in the small town where I lived, for years. Yet we had only been awarded a few small contracts. I called a couple experts in our firm and invited them to come to Colorado to meet with the client. I was about to learn another painful lesson about the need to understand where the client is in the buying process.

My biggest mistake was failing to account for the other decision makers involved—what's often called the "complex sale." My contact had done his homework and come to the conclusion that outsourcing was the way to go. So our team came prepared to talk about how that transaction would take place. But besides my contact, we would be meeting with the facility manager, engineering manager, and wastewater plant operator. And I had no idea what to expect from them.

Research suggests that people go through five stages in making a purchase decision (or most any kind of decision). These are:

Recognize the problem or need
Search for information about both the need and possible solutions
Evaluate the possible alternatives
Make a decision (or purchase)
Assess the decision (post-purchase evaluation)

In selling, it's important to recognize where in this process the buyer is and to align your approach accordingly. In the complex sale, of course, different buyers can be (and often are) in different stages of the decision process.

You can guess where this story goes. The environmental manager was ready to make a decision, and we came prepared to help him do just that. The facilities manager, however, was still searching for information, aware that there were problems but not sure what course of action to take. The engineering manager was a little further along, considering various options, with one being outsourcing...but he was leaning against that option. Finally, the operator was incredulous. "What's the problem?" he wanted to know.

It was a rancorous meeting, one we were hardly prepared to moderate. The outsourcing opportunity never materialized, nor did any other contracts with this client. My primary contact, the environmental manager, left the company shortly afterwards to become a consultant. Perhaps he thought he could do a better job than we did that day!

Obviously, I could have handled the situation better. Before committing to flying people from different parts of the country, I should have asked what concerns or questions the other decision makers might have had about the outsourcing option. If my contact didn't know (and he seemed surprised at their resistance in the meeting), that would have been a red flag suggesting that more consensus building was needed before pitching a final solution.

But I'm not alone in making such mistakes. In my experience, not many sellers among A/E and environmental firms excel in managing the complex sale. It takes time and can be difficult to navigate at times. That's all the more reason to give it priority. Understanding the players involved and where they are in the buying process enables you to calibrate your sales approach to maximize your chances of success.

Pages