Conversation #2 of my 100 Conversations had a structural engineer state that a focus of his ponderings related to “Engineers are good with numbers until you put a dollar sign in front of them.” This certainly doesn’t only apply to engineers. The reality is that most people who are closer to the beginning of their careers are focusing on learning their professions, rather than project management and profitability. If the proper company safety nets are in place (good fees and good project management), then the negative impacts of their ‘task delivery only focus’ is minimized. This blog post will be short, because a few years ago I had put together a mini-manual that tried to put profitability into context for staff. The main realization I had was that we miss our budget targets when unknowns are not managed properly.
It is important to state that profitability discussions need to be positive. No one WANTS to lose money. It’s just that a fully intentional approach to achieving profitability is often not in place. These posts relate to being fully intentional with how we engage our staff resources for a project.
So… conversation #2 inspired me to take that mini-manual and post it on this blog in three different parts:
Know what NOT to do – Part 1
Know what NOT to do – Part 2
Know what NOT to do – Part 3
Conversation #2 – Interviews
Another excellent part of our conversation dealt with how we subconsultants are sometimes on multiple teams. This means that sometimes we are on multiple interviews. Our lessons learned through seeing how different teams deal with the same interview lends some great lessons learned for interviewing. That will be an upcoming post. [ED: the post is here – Getting the Project: The Interview]
To serve our clients, we need to stay in business. To stay in business, we need to make money. To make money, we need to meet our budgets. To meet our budgets, we need to remain within expected scope. To remain within expected scope, a project needs to follow expectations. To follow expectations, everyone needs to be familiar with them and respect them.
So… to serve our clients, we need to meet and exceed expectations. Not just us, the client too.
Our fees aren’t a random number. We generate them based on expected scope. We try to establish what we will need to do, and how much effort it will take to do it. This then becomes our contracted agreement with our client. We have done our job correctly if we set quantifiable expectations. When the reality of a project drifts from these expectations, we assess what impact it will have on our budget… and as needed, we discuss modifying scope and fee with our client. We’re crafty with developing our fees, and the reality is that if something new is needed, it typically balances with something that might have gone away. We very rarely pursue additional services where we validate that scope is truly different enough to affect our fee.
We have also developed excellent coping strategies. We have internal processes in place where we have become incredibly efficient at certain project tasks (like drafting), and this provides some buffer for us when other tasks take more time (like more team meetings than expected). We have taken control over the things over which we can take control.
Then… there are the things we have no control over… like our prime and client.
We have all submitted scope/fees where our prime and/or client have asked us to reduce our fee. The typical way to do this is to modify/reduce scope (remember that scope equals fee). Then, during the project the client asks for the scope that they negotiated out of your contract… without the commensurate increase in fee. We’ll be kind and say they forgot…
What do you do?
Well… one approach we have is to shift our strategies and internal processes. This means that we might pull in our best CAD person who can speed through things faster than the staff we might have had on the project. BUT… we’re providing scope that the client/prime told us they wouldn’t need. Aw man… not fair! Oh well… we’ll be kind and say they forgot, and they reaaaallly need it. Maybe they have pressures to deliver and are between a rock and a hard place. We often see that our prime’s negotiated their team down in good faith with the client… and then the client puts pressure on them to deliver more than expected. It can be super hard to be in that situation. We never want to alienate our prime/client. The issue is that they often don’t contemplate the reality that they are alienating their design team. I think they’re just not fully aware of what they’re doing. They don’t realize that they might be compromising our ability to stay in business and serve them well in the future.
So… we all need to be open and honest, and have a great discussion about how we can minimize the pain for everyone. The client just squeezed the team, so the architect initiates a meeting with everyone to establish what we can do better. How can we be more efficient? Minimize changes… or at least lump them together so they can all be done at once. Have efficient meetings, or better yet reduce them. There are all of these strategies that could make the best of a poor situation. Heck… the benefit is that the prime might wind up minimizing their own fee loss by improving their team! And we all learn skills that allow us to be more efficient in the future. That means we can offer better fees, or that we can be more profitable.
The summary of all of this: Profit isn’t a dirty word. If I can help my prime be more profitable, sweet!! They’ll hopefully recognize that and see me as a valuable partner. Maybe they’ll also turn around and ask me how they can help our company be profitable. That hasn’t happened yet… but I’m looking forward to the first client/prime who prioritizes this discussion enough to make it a reality.