Friday, January 23, 2015

Does Sharing Financial Data Improve Performance?

I'm working with a family-owned engineering firm that has tentatively decided to take a bold step: to start sharing financial information with all their employees. I must confess that it's been hard for me to understand their reluctance to do so. Most A/E and environmental firms that I've worked with over my career have practiced some degree of what's known as open-book management (OBM).

But I've been surprised to learn that my client is in a substantial majority. According to one survey of 1,300 chief financial officers with private companies, only 7% shared financial data with all employees. Another 17% shared this information with only select employees, while 76% provided no such data to their staff.

OBM is more common in the A/E industry, with 21% of firms sharing financial information with all firm members according to Zweig. Yet 36% of "fast-growing firms" practice OBM compared to only 8% of "no growth firms" and 13% of declining firms. Is there a trend here?

Zweig reports that 81% of firms that were Best Firms to Work For Award winners shared revenue data with all employees, whereas 65% shared profit data. Meanwhile, 85% of companies in Inc. Magazine's 2010 Top Small Company Workplaces practice OBM, as do 40% of Inc.'s Top 500 fastest growing companies.

There seems to be a significant correlation between doing OBM and being successful. And it makes perfect sense. Sharing financial information with employees promotes trust and collaboration. It gives employees a better sense of connectedness to the company's success. It enables them to make more informed decisions about how help improve performance and profitability. It improves employee engagement, retention, motivation, innovation, and corporate sustainability, according to a white paper published by the UNC Kenan-Flagler Business School.

Research directly linking OBM to improved financial performance appears to be lacking, but the anecdotal evidence is abundant. Spend some time reading on the topic and you'll learn of many companies who attribute their success at least in part to becoming more transparent in sharing information with workers. It's easy to see how OBM would help increase employee engagement, and the financial advantages of having a more engaged workforce are well demonstrated.

Clearly, the decision about whether to use OBM or not is a reflection of the firm's culture. One author suggested the change from keeping financial data private to sharing it with employees denotes a shift from a patriarchal culture to a participatory one. I think that's an apt description. The former is akin to playing in a game where only the coach knows the score. It's harder to build a high performing team when such information is withheld.

So if your firm is in the majority but you're open to, well being more open, where do you start? Here are a few suggestions:

Determine what information to share and how often. Despite the name, OBM isn't an invitation to open your books completely. Certain data, such as individual salaries, should be kept private. The fact is that you can achieve many of the benefits of OBM while sharing only limited information. The most important data is that which employees can act on—helping meet sales targets, reduce expenses, increase efficiency, for example. Sharing financial data quarterly keeps staff informed, but monthly updates probably have a greater influence on performance.

Educate employees about what the numbers mean. Most are probably not adept at reading balance sheets and interpreting financial trends. OBM advocates advise executives to focus on increasing overall business literacy among their staff, explaining what makes the firm successful and giving the numbers meaning. That's more reason for being selective in what is shared, to avoid overwhelming with too much data that people don't really understand.

Sell the importance of profitability. We live in an age when profit is under assault, characterized as a benefit enjoyed only by the affluent. Fortunately, 9 in 10 A/E firms have some kind of bonus or incentive compensation program in which profits are shared with employees. So that makes it easier to sell them on the importance of making a profit. But there are other purposes that profit fulfills relative to keeping the firm healthy and employees happy. Make sure that message is communicated along with the numbers.

Provide context. Explain marketplace trends, industry benchmarks, and what the firm's numbers over time indicate. Show employees how their work contributes to the bottom line. One of the greatest advantages of OBM is giving staff members as sense of ownership and control over how the company fares.

Don't withhold bad news, but maintain optimism. There is often concern that sharing the truth about poor performance with employees will be harmful. Won't they get discouraged and maybe even consider jumping ship? That's possible, but aren't they also a critical part of the solution?

The best approach in most cases is to share the bad news but couple it with encouragement that the firm is facing the issue head-on. Describe what corrective actions are being taken, or even better if appropriate, solicit staff input into what should be done. Of course, if laying people off or closing business units is potentially part of the solution, you'll have think hard about how much information to share in advance. 

Promote a culture that handles transparency responsibly. Many firms don't share financial information because they fear it may cause conflict or rivalry between offices, departments, and managers. If that's true, you're better off focusing on negative cultural and structural influences than withholding valuable information. OBM works better in firms committed to community and collaboration. Chances are your decision to share financial information indicates a desire to strengthen those cultural attributes. Don't let a little bad behavior discourage you from pursuing that goal. Instead, fix the root of the problem.

Monday, January 12, 2015

10 Steps to Revolutionizing Your Rainmaking

Forecasts of up to 10% growth in 2015 construction starts harkens back to the prerecession salad days. But many A/E firm leaders and business developers still aren't feeling it. They continue to struggle despite the reported market growth, finding that the competitive dynamics have shifted against their favor. They need a jump start, or even a makeover in how they approach winning new business. Maybe your firm needs the same.

That's what this post is all about, 10 steps that you can take to revolutionize your rainmaking and dramatically improve your success rate. Yes, that's a bold claim. But I can attest to the efficacy of each and every step, through both my experience and research. The real revolution, though, comes in combining these steps in a cohesive, game-changing business development strategy. Here's how to win more than your share:

1. Stop selling and serve buyers instead. There's a reason most technical professionals are uncomfortable with selling: They've been on the other side of the transaction! If you don't like being sold, what about prospective clients? The best way to sell is not to sell. Serve the buyer instead. Focus on meeting needs. Become a trusted advisor, a valued resource. Never waste the client's time, but always bring something of value to every sales call. 

2. Make relationship building a priority. Despite claims to the contrary, building relationships in the process of selling is still a vital objective. While you're likely to agree with that statement, your sales approach is probably more transactional than relational. That's the norm in our business. We focus on identifying leads, tracking RFPs, and writing proposals. The best firms, however, have a deliberate process for seeking and building relationships with buyers (and clients). They recognize that the secret to sustainable success is building more long-term relationships that produce a continuing stream of revenue.

3. Stop self-promotion and provide valuable content instead. The usual marketing activities suffer the same fundamental flaw as the traditional sales approach—they're self-centered. Brochures, newsletters, email campaigns, websites, advertisements, trade show exhibits, all with the same central theme: Look at us! A better approach is to divert most of that investment (say 70-80%) to creating content that informs, advises, and equips clients to succeed in their business. This approach obviously complements the service-driven sales philosophy described above.

4. Build your brand around distinctive customer experiences. Brand is all about perceptions, and perceptions are shaped by the direct and indirect encounters one has with a company, product, or service. You can't create brand in the marketing department. It's rooted in substance, not image. That's why most branding initiatives in our industry have negligible impact. If you're serious about your firm's brand (and you should be!), start by assessing the experiences clients have with your firm and devise ways to improve upon them. Then embody your brand in the way you market and sell—by serving the buyer.

5. Go beyond just meeting technical needs. Our tendency to focus predominantly on technical issues has had a profound effect on our industry. I think it's a key reason why A/E firms cannot command as high a labor multiplier (or profit) as most professional service firms do. If you want to distinguish your firm and increase the value of your services, learn how to address needs beyond the technical issues your firm specializes in. This will include meeting strategic needs—financial, competitive, political, and operational factors that impact the client's overall success. And don't neglect the personal needs of the client, including the buyer's desire for responsive service and a positive experience with your firm.

6. Encourage employees to nurture their network. Ultimately the things of enduring value that most of us take from our careers are the relationships we develop and the people we help along the way. That puts a different spin on networking. No longer should it be viewed as merely a business development activity designed to generate contacts and leads. Rather it is a commitment to build and maintain relationships (see above)—and that should be a goal for every member of your firm. Encourage them to establish the discipline of nurturing their network weekly. Relationships are the wellspring of both business and personal success. Multiply these benefits by fostering firm-wide involvement in networking, and watch your rainmaking take off as well.

7. Manage business development like project work. In most firms, marketing and sales by technical staff is done with leftover time. You would never handle project work that way. So why relegate so critical a function as bringing in new work to secondary status in your resource allocation? Business development tasks should be assigned and managed just like project tasks, with individuals' time specifically budgeted for that purpose. Since deadlines largely drive project commitments, you should also establish deadlines for business development tasks. These tasks and deadlines deserve equal priority with project activities. 

8. Involve staff at all levels of the firm. You can increase your business development effort without increasing your costs by redirecting more existing nonbillable hours to it. This is more easily accomplished when you recognize how the varied skills across your organization could be applied to winning new work. For example, administrative staff could conduct client and market research on the internet. Junior technical staff could create tools and resources for clients (as part of your service-centered approach to marketing). Spreading the effort no only enables you to get more done, but it promotes a "rainmaking culture" in which everyone is encouraged to contribute to meeting one the firm's greatest needs.

9. Increase your win rate by doing fewer proposals. Most firms submit too many proposals, pursuing opportunities they really have no chance of winning. This often results in spreading their proposal preparation staff so thin that they can't put together a strong proposal even for their best opportunities. With limited resources, you need to keep in mind that every hour spent on a losing proposal is time diverted from more productive tasks. The key principle here is this: Do fewer better. In my last job as corporate proposal manager, we compiled a 75% win rate by limiting our best proposal resources to only our best pursuits. Fewer proposals also allow your seller-doers to spend more time selling and less time working on losing proposal efforts.

10. Make your proposals client-centered and user-friendly. If you want to distinguish your proposals from everyone else's, this is a good place to start. The vast majority of proposals focus on the submitting firm rather than the client (yes, I understand that RFPs encourage this) and almost none of them are skimmable. The prevailing theme of your proposals should be how you will address the client's needs, concerns, aspirations, and priorities. Don't let RFPs fool you; clients care more about their interests than your firm. So keep the focus of your proposals on what what matters most to them.

Making your proposals skimmable not only makes them easier for clients to review; it facilitates good communication. Few clients read your proposals front to back, word for word. Yet most firms write them as if they think clients read them that way. If you make your proposals concise, skim-friendly, and easy to navigate, clients will notice. It's the competitive advantage that no one is talking about.

So there you go: 10 steps that can dramatically improve your rainmaking success. Radical ideas? No, mostly common sense that is strangely uncommon in the A/E industry. Your firm can take advantage of this shortcoming and stand out from your competitors. That is the objective, right?

Monday, December 29, 2014

Top Blog Posts of 2014

I was complaining to my wife about the latest "year in review" magazine edition I had received in the mail when I remembered that I always finish the year by reviewing my top blog posts over the previous 12 months. Oh well, there would seem to be a sizable audience out there who appreciate the look-backs even if I don't. So for you, I offer my 10 most popular posts of 2014. 

And let me take this opportunity to extend my heartfelt thanks to the growing number of you who read my blog regularly. Blogging on a weekly basis can be a real hassle at times, but you (and especially the feedback I receive from some of you) make it all worthwhile. May you have a prosperous new year. If I can help in any way, don't hesitate to ask.

1. Is Your Sales Approach Aligned with the Buyer? This post was a surprise first-place finisher, recalling how I felt bereft of good ideas when I wrote it. But the story I told to illustrate the point seemed to resonate, indicating that I'm not the only one who has experienced different buyers in a single client organization being in different places in the buying process.

2. Does Free Advice Devalue Your Services? I've debated this point with clients and colleagues for years, and the popularity of this post suggests that the debate still rages. It's an important question for those of us who are convinced that the best way to sell is to serve the buyer. My experience and research debunks the myth that helping prospective clients (for free) ultimately hurts your firm.

3. Hiring the Right Rainmaker. Many A/E firms turn to hiring a dedicated seller (or more) to make up for the shortcomings of their seller-doers. It makes sense, but is not a decision without risks. In my experience, more rainmaker hires disappoint than meet expectations. This post offers advice on how to make this option work for your firm.

4. 3 Dimensions of the Client Relationship. There are still many in our profession who seem to think that building client relationships through the sales process is all about making friends. But the other two dimensions of the relationship are more important—and often overlooked.

5. Creating Skimmable Proposal Content. This is the most important proposal differentiator that no one talks about—making your proposals easy to read and navigate. This post outlines a process for helping technical professionals, who tend to be overly verbose, create proposal content that can be readily skimmed by client reviewers (which is what they're going to do with or without your help).

6. Investing Nonbillable Time. Many firms mistakenly characterize nonbillable time as a hindrance to maximizing profitability. Nothing could be further from the truth. Putting nonbillable time to its best use is critical to sustained profitability and business success. Unfortunately most firms fail to take the steps necessary to do this.

7. Selling: It's Not About You. We all dislike the apparent self-interest observed in how most salespeople approach us. But do we repeat the same mistakes when we step into the seller's role? In my experience, yes. This post describes how to avoid the widely disdained sales stereotype, starting with shifting the focus from yourself to the buyer.

8. Why You Should Be Hoarding Content. Why aren't more A/E firms embracing content marketing? Because most of them are content poor. But there are many benefits of developing the practice of constantly accumulating good content that go beyond simply supporting your marketing efforts.

9. Collaboration as Competitive Advantage. Our industry recognizes the need for a more collaborative, cross-disciplinary planning and design process. But success in this realm is still rare. You can take advantage of this shortcoming by following the steps in this post in making collaboration a differentiator for your firm.

10. Is Advertising Worth It? Companies in other industries spend billions on advertising, so it must have value in our profession—right? Surveys of professional service marketers don't give much credence to advertising. Your marketing dollars are probably better spent elsewhere, as this post explains why.

Tuesday, December 23, 2014

Leaders Must Be Visible

Over the years of working with many different A/E and environmental firms, I've seen my share of invisible company leaders. They cloister themselves in their office, often behind closed doors. They seldom hold staff meetings and rarely visit the branch offices. They communicate primarily by email. Their internal interactions are largely limited to a few members of the management team.

And their firms usually suffer from their lack of engagement.

To better understand the harm done by invisible leaders, let's revisit some of the vital things that strong leaders do:
In other words, leadership involves engaging others. For many technically-oriented managers, it's easier to focus on the task list than to tackle the human dynamics that really make a company successful. The best leaders spend most of their time with other people because corporate success comes from collective effort that flourishes with conspicuous leadership.

So how do you become a more visible and effective leader? A few suggestions:

Don't succumb to the tyranny of the urgent. Perhaps the most common reason that managers fail to become visible leaders is busyness. All leaders face the predicament of having more things to do than time to do them, but visible leaders succeed in prioritizing the things that matter most. They are able to break free from the addictive pull of urgency, where tasks that need to be done in the near term take precedence over matters that are critically important but not urgent.

Stephen Covey's research found that executives of top performing organizations spent four to five times as much of their time on important-but-not-urgent issues as executives in typical organizations. Where do the latter executives spend most of their time? Working on tasks that are urgent, but not important—three to four times as much time as their counterparts in top performing organizations.

What you're likely to find among these urgent-but-not-important issues is a preponderance of tasks that pull managers away from leading others, tasks that tend to isolate them from those they should be engaging. As a leader, one of your highest priorities should be spending time helping other people be more effective. This, in effect, multiplies your impact through their efforts—what I call the Time Investment Principle.

Prefer conversation over email. The advent of email has greatly facilitated the communication of information, but it is frequently overused and misapplied to the detriment of the firm. The leader's most important communication responsibilities—engaging and motivating others—are ill suited for email. It lacks the emotional dimension that is critical for these communication tasks.

In conversation, body language, voice tone, and the words used all work together to convey the message. Email can only communicate content. There is no body language or voice tone to give words the added context and nuance that is possible in face-to-face conversation. This leads to a good deal of misunderstanding when email is used to communicate sensitive or emotionally-charged messages. Even emails that weren't intended to be sensitive in nature are often interpreted that way.

As a leader, avoid relying too much on email as a means of engaging staff. Meet with them instead, or have a phone conversation, when there is an emotional element to the message (e.g., trying to persuade, delivering bad news, dealing with controversy, reprimanding). Besides the inherent limits of email, most in our profession have their own limitations as writers. That doubly makes email a poor substitute for other more effective means of communicating as a (visible) leader.

Delegate responsibilities appropriately. Another key factor in keeping leaders invisible is their getting too involved in "administrative" tasks that would be better delegated to others. Micromanagers fall into this group. They spend too much time doing things that should be entrusted to others, and too little time helping develop staff capabilities to assume those responsibilities. The critical transition here is moving from doer to leader of doers. Many find this a difficult change to make.

But failing to delegate these mundane tasks prevents leaders from devoting enough attention to matters of strategic value to the firm. This is the most common failing in implementing strategy—leaders who are too busy with day-to-day operational tasks to help position their firm for greater success. Effective strategy ultimately requires engaging others in doing things differently going forward. It requires visible leaders actively working with and inspiring their colleagues. The first step involves relinquishing tasks that others can do and creating more "strategic capacity" to devote to the activities where you can provide the most value.

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:


 

Friday, November 14, 2014

Repeat Business Rate Is Overrated

My first client, a 35-person engineering firm, boasted a repeat business rate of 85%. Unfortunately, almost all that repeat business came from one client, a large energy company. When that company was acquired by a still larger one, the work began disappearing. Within a few years, the firm was out of business.

Most A/E firms tout their repeat business rate as a sign of distinction, an indicator that clients love them so much they keep coming back. But it is hardly a reliable measure of health. PSMJ reports that the median repeat business rate (percent of revenue from repeat clients) is 75%. Interestingly, that number has changed little in the last 10 years, even through the worst of the recession.

Given how A/E firms struggled during the recession (and many still are), any financial indicator that remained unchanged would have to be judged suspect. In fact, many firms undoubtedly saw their repeat business rate improve as revenues fell, because it was so difficult to acquire new clients. Has client retention held steady as the repeat business metric might suggest? The evidence indicates that holding onto clients is harder than ever.

So why does it matter? Well, firms often resist measuring client satisfaction or improving service because they can point to a favorable repeat business rate. Others (like my first client) find themselves vulnerable to a major client defection because they become too comfortable simply keeping busy without winning new clients.

A misleading metric like repeat business rate can have an adverse affect on your business. It can lull firm leaders into complacency, or obscure significant threats or weaknesses. The fact is that the best firms I've worked with had repeat business rates of 75-80%, as did the worst firms. In some cases it indicated satisfied clients and strategic relationships. In other cases it pointed to an inability to grow the business with new clients.

It's not uncommon for A/E firms to derive 80% of their revenue from a relatively small proportion of their clients (15-30%). So the reality behind the repeat business rate is that most firms suffer from a fairly high rate of client turnover. Of course, it's debatable what percentage of those clients have a realistic potential for becoming repeat clients. Some aren't prone to showing loyalty to any firm; others only sporadically have need for A/E services.

There's no easy way to measure client retention in professional services. If you're looking for marketing value, writing "68% of our clients hire us again" probably sounds better than "80% of our revenue comes from repeat clients." But what's a good number? You don't have any industry benchmarks. And the business value of that metric is questionable without bringing revenue or profit into the discussion.

This white paper by consultant Harry Mills describes some interesting ways to analyze the correlation between your revenue, profit, and clients. If you want meaningful metrics to gauge how you're doing with clients (in addition to measuring client satisfaction), I'd suggest starting there. If you happen to have any other good ideas for this kind of metric, please share them!