More than just technical excellence, leading an A/E firm requires a broad-based skill set that also includes marketing, finance, human resources, and more. None of this comes to you overnight. It comes through time and experience and a well-built program for identifying and grooming future leaders. This complimentary e-book is designed to synthesize some of our most insightful and action-oriented advice for future A/E firm leaders.
1. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone | (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
E.BOOK SERIES
Five Must-Have Skills for
Future A/E Firm Leaders
2. The future of the A/E industry depends on you.
How is that for a little bit of pressure? But, the reality is that the A/E industry is at
a crossroads. The Baby Boomer generation is retiring at a faster pace than mid-level
professionals are rising to the leadership ranks. That puts considerable pressure on
ownership/leadership succession plans and means that demand for future leaders is
outstripping supply. That spells opportunity for those who can rise to the challenge of
leadership.
More than just technical excellence, leading an A/E firm requires a broad-based
skill set that also includes marketing, finance, human resources, and more. None of
this comes to you overnight. It comes through time and experience and a well-built
program for identifying and grooming future leaders. This complimentary e-book
is designed to synthesize some of our most insightful and action-oriented advice for
future A/E firm leaders. We’ve organized it in an easy-to-follow and logical format.
You first need to understand what it takes to be a good leader in this industry. You
then need to apply that understanding to creating a strategic framework, to keeping
the backlog coffers full, and to making sure you turn a profit. Lastly, never forget the
importance of inspiring others to lead and succeed.
We just scratch the surface here, but do hope that you find it to be useful and
informative. These are unprecedented times of changing demographics in the A/E
industry. Will you rise to the occasion?
E.BOOK SERIES
4. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Stretch Yourself
Most managing partners developed their technical and
leadership skills in the trenches of project design. Whether
inherited or earned, those who gain the position of managing
partner must play a crucial role in a firm’s continued success
and growth.
Those who progress from designer, to manager, to leader,
invariably must learn to stretch themselves and take on the
challenge of learning new roles and developing new skills.
This section will discuss this transition, and the keys to
accomplishing it.
To be successful in the transition to firm management and
firm leadership, you must recognize at a minimum, four
points:
1. The informal atmosphere that the small firm can
maintain is no longer possible for a growing firm. Or, if you
are moving up through a larger firm, you must appreciate
that the relationship you have enjoyed with your coworkers
has radically changed. By necessity your professional
relationship with them will become more formal and
business-like.
2. Your management and leadership style influences the
firm’s ability to attract and retain top talent. While there
are examples of successful firms with autocratic (dictatorial)
leadership, the trend is clearly toward a more participative
management style among the most successful firms.
Young professionals will only stay under the strong
hand of a centralized, autocratic management style as
long as it is convenient to them. As soon as they reach a
certain professional and financial level, the most capable
professionals will move to a more acceptable leadership
environment.
2
PART ONE:
Developing Your
Leadership Skills
5. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
3. You must become a team builder. The skills needed to build
an effective team are substantially different from those required
to become proficient professional designers. Some leaders have
natural talent, but most have to work hard at it.
4. The key to achieving success in any business is directly
related to bringing in new work—new clients. Whether or
not you enjoy the marketing and sales aspects of business, you
must develop your ability to manage clients, establishing and
maintaining relationships with them built on trust and mutual
respect. The one who “owns” the client has the clout, every time.
Know Thyself
Rapid and constant changes in design and construction have
created the need for assessing and redefining one’s corporate
role. The continual enhancement of your own knowledge base
and competencies is a must if you are to keep pace.
Career management is the process of evaluating who you are
and how your skills align with the needs of the marketplace.
Patricia Lee Burke, vice president of Portland-based
Drake Beam Morin, offers the following seven concepts.
Understanding them will help you to establish a career plan:
1. Self-Assessment–The key to managing your career is
knowing yourself. Evaluating your values, interests, skills,
knowledge sets, communication style and personality every five
years will help to keep you on your chosen career path.
Use this information throughout your career. Career
consultants can also administer and interpret numerous
assessments and provide valuable feedback.
2. Goal and Objective Setting–Create a career plan based on
your self-assessment. Develop a list of goals you should achieve.
Next make a list of objectives (i.e., to be an owner of the firm),
mapping out how you can reach your goal. Objectives should
have a time-frame and should be measurable and quantifiable.
This process is not dissimilar to the planning of a project, with
phases and time lines.
3
6. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
3. Alignment of Objectives–Constantly evaluate your goals,
objectives and needs. Look at how realistic they are based
on your finances, your current position and how they can be
accomplished. Again, this is similar to project activities such
as reviewing phases or ensuring that budgets are being met
and client needs are understood.
4. Market Assessment–Evaluate the needs of your present
employer and the broader workplace. This will help you to
understand the challenges you face as well as opportunities
that arise.
5. Skill Strengthening–Investigate what skills you need to
keep current in your field. Even if you have exactly what it
takes, recent changes in the industry or in your firm could
make your skills less valuable. Don’t become complacent.
Follow the old saying, “learn something new every day.”
6. Plan, Implement and Review–Create a plan that includes
a series of small steps, options, and alternatives (similar to
a project schedule). Put your plan into action and review it
periodically. Read business publications, network, and attend
professional association meetings. Again, consider help
from career consultants. They are more objective, have vast
resources at their fingertips, and can identify opportunities
within your given field.
7. Develop a Punch List–Those who successfully manage
their career, view themselves as “internal consultants.” We
are no longer a career-oriented society of workers. We are a
work-oriented society of workers.
There will always be jobs, and there will always be work.
Keeping abreast of what is happening elsewhere and
continually sharpening your skills and knowledge are the
keys to managing your career. Remember, your employer
owns your job, but you own your career.
4
7. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Nine Essential Skills of Highly
Effective Design Leaders
It is not easy to be the best. It requires hard work and a
boldness of action that defies normal practice.
For 40 years, PSMJ has studied leading-edge architectural
and engineering firms of all sizes, advising and consulting
on all areas of business operations. We have discovered
something that is both profound and apparent—that the
most successful firms, those firms with the best practices, are
fundamentally different from the average performers.
Every year, at least half of the top 10 percent of firms in our
PSMJ surveys were also top performers in preceding years.
This gives us the opportunity to study them and identify
what makes them so successful, and size is not a criterion.
The following are the characteristics we see in the best firms,
which we call our “benchmark firms.” While no firm does
all the things we describe, our benchmark firms do many of
them. These firms:
1. Have a purpose with a vengeance. The best firms have
strong and visionary leadership, sometimes even dictatorial
leadership. Although innovative and creative, these firms
don’t place a particularly high value on design awards. They
let their clients define quality. And they exceed promises
made to clients. These firms have flat organizations with lean
project teams and highly billable principals.
2. Use guerilla marketing. The top firms are proactive in
their marketing: They don’t wait for RFPs. They identify the
clients they want to work for and develop tough strategies
to capture them. Once they have clients, they don’t let them
go. Principals stay very close to their clients and endeavor to
know their business better than the clients themselves. Their
goal is to establish such a strong relationship with clients that
they get 100 percent of their clients’ work wherever in the
world it occurs.
5
WHAT DOES IT TAKE
TO BE A LEADER?
Good followers usually don’t make good
leaders. But few firms focus on defining
the traits that will be necessary for its
future leaders, or on developing young
professionals to take a leadership role.
The following traits define good leadership
within an empowering organization
focused on growth. What leadership traits
are most important to help achieve your
goals?
• Vision. Leaders create a vision for the
firm, “paints a picture” of the future that
inspires and motivates others.
• Focus. Leaders spend their energy in the
few critical activities that will really
make a difference to clients and to the
firm over the long term.
• Values. Leaders embody the personal
and professional values that you want to
perpetuate in your firm.
• Client Relations. Leaders understand
what provides value to clients and they
motivate staff to excel in those areas.
They inspire confidence and trust in
clients and potential clients.
8. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
3. Build kick-butt project managers. The best firms push
authority down to the lowest level. The project manager’s
job is to make sure the client is ecstatic—and the firm makes
at least the expected profit. These PMs stay on top of their
jobs’ financials. The PMs that rise to leadership positions
at benchmark firms are not just very good at managing
projects—they also excel at selling all the services the firm
has to offer to the client. They know their clients and exceed
promises all along the way.
When problems arise, these project managers don’t hide
behind their desks. They take responsibility and communicate
with their clients. They do not allow for surprises later on in
the project.
4. Value their people. Firms that deliver services live or die
by their people. Benchmark firms recruit only the best people
to work for them. And they keep these best people motivated
by giving them room to grow—these firms’ leaders are most
often developed from within. These firms have lower than
average turnover, though not the lowest. These firms invest
in their top people—they really understand that people are
their most important asset, and they act like it. And they don’t
tolerate non-performance.
5. Are highly profitable. Benchmark firms know that
nothing else matters if the firm is not financially successful.
Lump-sum contracts and incentive clauses are the way they
do business. They manage cash. They keep on top of their
receivables. They charge according to value provided, not cost
incurred. They control costs, sacrificing neither the long term
for the short, nor the short term for the long.
6. Embrace Technology. Before these firms decide to
implement new technology, they make sure there is buy-
in from all of the management and commitment to see it
through. Management understands that adjusting to new
technology can be a great frustration for many employees,
and they make it their job to build support for the transition.
6
9. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
These firms make sure that there is a short implementation
period to set up the technology and train users. This swift
transition allows for immediate payback on the technology.
7. Have an ownership transition plan in place. Benchmark
firms always think about the future and have ownership
transition plans in place that reward performance over
loyalty. They understand that a solid plan can take up to
ten years to carry out. At the same time, all employees
understand what is expected of them before, during, and
after the transition.
When it comes to choosing new leaders, these firms define
criteria for leader selection leading to the top position.
When clearly stated, the leadership selection plan lets junior
employees know where they stand and what it takes to get to
the next rung.
8. Consistently Benchmark. The top firms constantly
benchmark their performance against well established
business performance measures. They don’t just look at
industry data, but also dig out the benchmarks within their
7
LEADER OR MANAGER?
There’s a difference between leadership and management. Firm leaders and potential
successors should consider the following:
THE MANAGER THE LEADER
Does things right Does the right things
Makes the system work better Creates a better system
Expects obedience Motivates to encourage commitment
Looks for people to get things wrong Looks for people to get things right
Focuses on the job at hand Focuses on achieving the vision
Looks for short-term results Looks for long-term effectiveness
10. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
firm’s size, type of service, geographic location, marketplace,
and type of clients served. They don’t just find themselves
as part of an elite group of firms; they work at getting there.
Also, these firms tie their reward systems directly to the
achievement of these goals. They don’t reward their staff for
“median” performance.
9. Lead others to accomplish strategic plans and business
plans. The planning process in top firms includes all key
people. Staff is allowed to offer input on how to reach
measurable business goals, and they believe in the vision and
purpose of the firm.
These firms allow for flexibility in their plans, as they know
that unforeseen changes naturally occur. They also return to
repeat the planning process by assigning smaller goals, such as
six-month strategies and action plans or one-year objectives.
Finally, even when these firms find themselves at the top of
their field, they don’t rest—the best firms find ways to do great
things even better.
8
11. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Effective Strategic Planning
PSMJ studies show that 60-70 percent of A/E/C firms don’t
do any form of strategic planning.
Most of the others are superficial in their planning,
concentrating on budgets, schedules, and day-to-day
tactics rather than defining an exciting, attainable vision
for the future that will motivate their staff and lead to high
achievement.
Strategic planning is the process that allows the design
organization to establish its goals and objectives for the
future. The normal recommendation is that this period be
three years. Your firm’s principals should define a direction
and purpose and ultimately a workable plan.
By arriving at a common understanding and agreement
on the future of the firm, the various members of the
organization can establish their necessary contributions. Each
is also able to reconcile personal goals with the firm’s.
Participants in the process usually include all equity holders,
major functional managers, and perhaps those senior
employees who are demonstrably committed to the firm for
an extended period of time. At the same time, it is usually
more effective to limit attendance to no more than twenty.
Strategic sessions usually culminate in the establishment of
objectives in connection with revenue, profits, employees,
markets, disciplines, geographic markets, branches, clients,
ownership, professional achievements, etc. There is also a
definition of the firm’s strengths and weaknesses in order
to capitalize on strengths and minimize the impact and
importance of weaknesses.
9
PART TWO:
Building A
Successful Strategy
12. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
From this overall, but detailed, vision the firm can generate
its specific annual operational plans: business plan, budgets,
marketing plan, human resources/personnel plan, and
ownership strategy.
Let’s establish an optimistic viewpoint—design professionals
can establish ambitious goals and, through careful planning,
achieve them. Risk and return can be appropriately balanced.
It is wise to include a knowledgeable, outside facilitator.
His/her task is to draw out full participation from all
involved and insure that a reasonable and balanced plan is
developed—a plan that is both ambitious and achievable.
Strategic planning sessions are usually divided into three (3)
parts:
1. Statement and articulation of the firm’s current status.
This includes a listing of the firm’s current strengths and
weaknesses. Any plan must take advantage of strengths,
correct weaknesses or make them irrelevant, or develop
new strengths in light of always changing competitive
environments.
2. Determination of specific characteristics and
achievements of the firm at the end of the period covered
by the plan. This is a “picture” of the organization at the end
of a time period. The participants can commit to the goals
because it is consistent with their individual objectives.
3. Development of a process for the achievements of
the firm’s objectives. This includes the assignment of
responsibilities and tasks to individuals and a process for
“revisiting” the goals to make sure that their achievement is
not “lost” in the pressure of daily operations.
10
13. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Here are a few of the major milestones for successful strategic
planning:
• Decide who should be involved in the process. You’ll benefit from
the ideas of others.
• Question everything about the way you currently do business.
• Consider using an outside facilitator.
• Schedule two to three days, off-site, where the strategic planning
team can work uninterrupted.
• Hold the strategic planning meeting and devise the preliminary
strategy.
• Minimize the paperwork. Keep the plan as simple and easy to
grasp as possible.
• Finalize and write the plan.
• Communicate. Share the plan with the entire firm.
• Demonstrate a total commitment to following and supporting the
on-going planning process.
• Schedule two or three one-day sessions during the next year for
progress checks and adjustments.
Successful firms plan regularly, then adjust, modify, update,
criticize, mold and work on variations of business plans.
PLANNING IS:
• Participatory
• Ongoing
• Critical to your firm’s success
PLANNING IS NOT:
• One time
• A written textbook
• Elaborate or involved
• Put in a book on the shelf
11
14. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Your Firm’s Cultural Climate
Thorugh more than three decades of research, PSMJ has
found that design firms tend to lean toward having either
a culture of empowerment or a culture of control. The
empowering firms typically achieve the highest sustainable
levels of rapid growth.
Most principal owners are sure they want their firms to grow.
However, many owners exercise so much control over so
many areas that they inhibit their people from taking the
very actions necessary to create the growth they desire. On
the other hand, some owners sincerely believe that they are
creating empowering organizations, but haven’t aligned the
firm’s values, strategies and tactics, so they’re sending mixed
messages about what they expect of their people.
This is important for ownership transition because you need
to define your objectives for the firm. Your position on the
empowerment versus control spectrum determines whether
or not you will achieve your objectives. It determines what
kind of leadership the firm needs, how you will choose and
develop these leaders, what kind of ownership you will
encourage, how you will finance the transition, and the terms
of your buy/sell agreement. So it’s extremely important for
you to understand the culture that you are perpetuating,
and to have an opportunity to change it if it’s not taking you
where you want to go.
What Is Empowerment?
In an empowering culture, all individuals know that they
directly influence the success of the company. They have the
information they need to understand the big picture and their
role in it. They know what is expected of them, they have the
freedom and authority to act to achieve their objectives, and
they expect to be held accountable. In the most empowered
design firms, they have an ownership stake.
12
15. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
CULTURAL TRAITS: EMPOWERMENT VS. CONTROL
In our recent studies of design firm culture, PSMJ has
discovered several measurable and monitorable traits that
determine whether firms are empowered and propelled
toward rapid growth, or are controlled and placing obstacles
in their own way. Most firms exist somewhere between
the two extremes. Understand where you are, and if you’re
consistent.
Empowerment vs. Control
13
CULTURAL TRAIT
Openness of Financial
Information
Recognition
Ownership
Ideas Processed
What the Principals Do
Fun vs. Work
Intolerance of Non-Performers
Training
Management Style
People Hired
The CEO
EMPOWER
Staff members know financial results;
each person understands how he or
she contributes to profitability.
Rewards are given frequently and
publicly, achievements are celebrated,
people understand what behavior is
being recognized.
All people are encouraged to become
owners.
Everyone creates new ideas,
participates in strategic planning.
Principals concentrate on leadership
responsibilities, with little project
involvement.
People have fun, party; the
atmosphere is dynamic.
People have high expectations of
themselves and others; peer pressure
on non-performers is immense and
they leave quickly.
Training is abundant, frequent, and
for everyone; as much as 15 percent of
the budget is invested in training.
Spirit of entrepreneurship and risk-
taking are encouraged throughout.
New people are able to take risks and
have an entrepreneurial spirit.
The CEO concentrates on strategic
leadership, shares decision-making
and information, trusts people to do
their jobs.
CONTROL
Only the owner knows how the firm
is doing.
Recognition is less frequent, often
secret, and may seem arbitrary.
Owners control large shares, prohibit
others from owning until they have
“earned” it.
Ideas come from the top; only
partners do planning.
Principals are involved in everything.
The atmosphere is serious; the focus
is on productivity alone.
Non-performers last a long time;
the boss makes all the personnel
decisions and may be unaware of the
situation.
Training is an expense to be
restricted; partners decide who will
benefit.
Entrepreneurship and risk-taking are
allowed only at the top.
New people are good followers, easy
to control.
The CEO is involved in everything,
makes the decisions.
16. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES 14
Characteristics Of Empowerment Vs. Control
An empowerment versus a control culture defines every
corner of a firm’s operations, from its legal form to its
marketing, as well as a firm’s growth potential.
Practice-Versus Business-Centered
Culture
Another way to compare two firms’ cultures is as practice- or
business-centric. A practice-centered firm tends to prioritize
design first and finance second; it will tell you about its awards
and its benchmarks for client satisfaction. Those are not
unimportant at a business-centered firm, but such a firm puts
a priority on growth.
The challenge is this; most sellers are inherently practice-
centered firms, especially the ones who aren’t thinking of
selling. They’re focused on the practice of architecture and
engineering. Most buyers by the very nature of seeking
acquisitions are business-centered firms.
Growth Potential
Form
Ownership
Culture
Atmosphere
Leadership style
Financial information
Marketing
Project delivery methods
Turnover
Buy/sell agreements
EMPOWER
High
Corporation, Limited Liability
Corporation
Broad ownership
Empowering at all levels
Openness
Entrepreneurship encouraged at all
levels
Shared broadly
Empowered marketers can commit
resources
Team-oriented toward strong project
manager
Embraced; people come and go
Stock transactions. Driven by desire
to share ownership
CONTROLLING CULTURE
Low
Subchapter Corporation
Closely held
Benevolent dictatorship
Secrecy
Benevolent dictatorship
Kept secret
Must get approval, ask permission
Partner involvement; discipline-
oriented departments
Discouraged. Tight non-compete
agreements
Stock control. Driven by desire to
protect owner retirement
17. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES 15
Here are some examples of how such firms behave differently.
The firm receives a check for $50,000, unexpectedly.
• The business-centered business distributes it to the partners
as a bonus.
• The business-centered practice invests it in updating its CAD
hardware and software.
• The practice-centered business upgrades the office, installing
new carpeting, paint, furniture, etc.
• The practice-centered practice takes the staff on a field trip
to see some of its best projects.
The firm receives an RFP from a well-known charity for
a project that’s a sure-fire award winner, but, the charity’s
financial condition is shaky.
• The business-centered business sends a letter telling the
client the firm is unable to respond.
• The business-centered practice tells the client it can respond
only if the client agrees to a 50 percent up-front payment.
• The practice-centered business tells the client it can only
negotiate an agreement on a sole-source basis.
• The practice-centered practice submits a proposal and hopes
for the best.
The business-centered buyer will likely need to exercise
patience with a seller who is new to the sales process. In turn,
the seller must carefully consider that its culture is unlikely to
remain intact. Both sides must be prepared to accommodate
the other, but also be prepared to walk away in the case of a
mismatch.
18. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Keep this in mind when you are planning any strategies—
particularly ownership transition strategies—moving forward.
Why Business Plans Are a Waste
of Time—And What You Can Do
About It
General Dwight D. Eisenhower is famously known for saying
“Our plans are worthless, but planning is everything.” He was
one of the greatest planners in history, and yet when he planned
the D-Day invasion—arguably the most complex military
planning activity in the history of warfare—he knew that the
plan was going to be overtaken by events almost immediately.
Eisenhower’s insight illustrates that even though the plan itself
often quickly needs to be adapted, the process of planning is
extremely important to an ultimate winning strategy. Too many
business leaders today lose sight of this, often focusing on
having the right plan, instead of on having the right planning
process that really improves performance. That’s why most
business plans are a total waste of time: because the planning
process isn’t given its proper due.
One way to ensure that you’re paying attention to the nuts and
bolts of the planning process in creating your firm’s successful
business plan is to create a list of desired actions (for you and
your company) before you even begin drafting. Identifying the
improvements that need to be made is paramount—and the
actions you end up taking will ultimately drive the numbers.
16
t MOST ACQUIREES MOST ACQUIRERS u
Practice-centered
Practice
Business-centered
Practice
Practice-centered
Business
Business-centered
Business
19. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Here are some top action steps to guide you in creating your
business plan:
• Improve client’s satisfaction and loyalty
- Send client evaluation forms to every client every three months
- Have client sponsors visit all strategic clients every two months
- Invite clients to attend a lunch-and-learn program
• Increase the number of quality proposal opportunities
- Present papers to groups at local and regional conferences
- Call past clients at least every year
- Become more active in local society of American Military Engineers
• Improve proposal hit rates
- Develop go/no-go criteria
- Teach our business development and marketing proposal classes, a
strategy called IFBP (discussed on next page) to use on every proposal
to improve the chance of winning
- Customize proposal resumes
• Increase chargeability
- Establish a target for every employee in terms of hours per year
- Require employees to forecast their time for the following week, in
addition to submitting timesheets and what they did the previous week
- Initiate monthly conference calls with other offices to increase
opportunities for work sharing
• Increase direct labor multiplier
- Increase the billing rates for expert witness services
- Require each project manager to do an earned value analysis report,
every month for all jobs of over $100,000 in fees
- Project manager’s performance evaluation
17
TIPS FOR SUCCESS
Reward The Right Behavior
Make sure that your recognition system
actually rewards the behavior you want
to encourage in your firm. If you want
to encourage teamwork—but all the
public recognition goes to people who are
outstanding individual performers—you’re
sending a confusing message about what
employees actually have to do to succeed.
Empower Or Control, But Be
Consistent
If you want to create an empowering
organization, make sure you’re not
exercising too much control. If you want
to hold onto control, make sure you’re
not sending mixed messages by being
empowering in some areas but not others.
Most firms fall somewhere in between
the two extremes. Most important is to be
aware of what you’re doing: don’t create the
wrong atmosphere just because you haven’t
given it much thought.
20. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
How To Double (Or Better) Your
Strike Rate With The IFBP Method
Charles Nelson AIA, LFRAIA
There is a fantastic methodology you can use to dramatically
increase your proposal strike rate—some firms using it say as
high as 80-90%. But to succeed you must do something very
few design firms do. I’ll come to that—the methodology first.
Here’s how it works:
Issues
Critically, forget all about YOU and how great your firm is.
These are CLIENT issues, not about what you want to sell
to the client. To address the client’s hot button issues, you
absolutely must look beyond the RFP; you need to deeply
understand the client’s industry and business model in that
industry—and if you don’t, find out.
Then you need to find out who the stakeholders are that can
affect the client’s project. Consider them, because they are
critical to project success.
“Vitally” important isn’t a list of 20 or 30 items—it’s the top
5-7; those that will make or break project success.
18
PART THREE:
Developing a Winning
Proposal Strategy
My definition of a
stakeholder: Any
person, or entity,
who can directly or
indirectly slow down
or stop a project.
21. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Features
What unique experience and skills does your firm have with
respect to that short list of Client hot-button issues? Unique
means just that—the stuff the client can’t get anywhere else.
And if you think that designing 30 schools in the last 15 years
makes your school-designing skills unique, start over. The
competitors that matter will have just as long a list. It’s about
the unique problems you solved in those designs, provided
they will resonate with the school selection committee.
Every hot button issue you’ve identified must correspond to
something your firm has an answer for.
Benefits
If you’ve nailed the first two points, the third is almost
unnecessary—but it may not be that obvious to everybody
who has a say in selection. So spell it out. Not what you can
do for them—but what will be the outcome it you do. They
have a very different emphasis.
And if you’ve done that, forget about the 17 trays of slides of
your past projects. That’s not this client, this project.
Proof
Here’s the hard part: Are you just alleging that you can solve
the problems you’ve identified, or do you have proof? Very
few firms have any proof, for the simple reason that they
rarely, if ever, measure anything (we’re artists, we don’t look
back). “Proof” means data.
19
22. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
You only have to measure one or two things, if they are
things that are important to the client. Example: If you are a
structural engineer that specializes in high-rise office towers,
the two most important things you can measure are:
• NLA – “ Net Lettable Area.” It’s a measure of building
efficiency, and a 2% or 3% difference in the NLA means a
lot to a developer; and
• Weight of steel per units of floor area—a measure of cost
efficiency.
Every project type has “metrics that matter.” For shopping
center developers, it’s the number of weeks the project will be
open for pre-Christmas trading; that trumps everything else.
There are two powerful psychological aspects to measuring
besides generating data to substantiate your claims to
relevance:
• Because so few firms measure anything, your data will
look great because there won’t be much to compare it to.
• Critically, the mere fact that you chose to measure
something important to the client tells the client that
you are thinking about the stuff that matters to her, and
therefore she can rely on you to stay focused on it
throughout the design process. You can’t put a dollar
value on that kind of message.
Template The Process
Once you’ve worked your way through this methodology for
one project type, or one client, save it—the next one won’t be
identical, but it will be similar, and you’ll have the starting
point for the next proposal.
20
23. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Here’s the template: Keep one for each project type, and for
each client for whom you do multiple projects.
Besides speeding up the proposal process in the future, it will
prompt you to keep measuring and recording valuable data.
Benefit: The Toughest
Piece Of “IFBP” by Eric Snider, P.E.
I have just returned from facilitating a great three-day event
sponsored by PSMJ. The event was the “Successful BD and
Marketing” series of programs. It came home to me again
and again during the program how much those of us who
develop business for our firms rely on PSMJ’s critical analysis,
IFBP. Issues, features, benefits, and proofs form the basis of
every proposal story and presentation dialogue. It also was
driven home numerous times the essential weakness in our
thinking: how to relate a benefit with assurance and clarity.
Allow me to elaborate.
First let’s recap the fundamentals. Whether developing a
strategy for pursuit of a future client, a current proposal, or
an upcoming presentation/interview, the power of IFBP is
in its ability to direct your thinking toward the client instead
of yourself. Every client has two or three ISSUES that are
causing a project to move forward. We, either individually
21
24. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
or through our firms, offer FEATURES to solve those key
issues. Those features offer BENEFITS to the client in
choosing us over our competitors. And we can provide
PROOFS that should further convince the client that we are
his best choice. And the IFBP process does not generate a
random list of items. Instead, each IFBP group is a string.
That is, each issue should be addressed by at least one
feature, which you can relate to a client benefit, and provide a
related proof. The next “string” supports another key issue.
Now, usually we know the client well enough to list his key
issues. And we certainly know our firm well enough to
describe our features that directly answer the key issues.
(Don’t waste your client’s time by listing features your firm
has that do not address the key issues!) And usually we
can back the features up with proofs (testimonials, awards,
successful project schedules and budgets, etc.)
The toughest job for us is to think like the client. In the IFBP
string, that means describing the BENEFIT from the client’s
eyes. Too often we just restate the feature: “We feature a
portal that will enable real-time checks on budget.” My
suggestion is to always start your benefit statement with,
“You, the client (use their name) will benefit…” By starting
with “You” it forces the writer/speaker to shift the focus
to the client. A caution, though: Do not follow the “You”
phrase with a “because we” phrase. In the above example,
“You, Madison County, will benefit because we offer a portal
that will enable real-time checks on budget.” That shifts
the emphasis back to you and away from the client’s issue.
Instead, continue to think from the client’s perspective: “You,
Madison County, will benefit by having real-time access to
budget updates through our client-focused portal, assuring
you the most current and accurate information, saving time
and money in the process.”
22
Five Reasons This
Program Is Different
(AND BETTER) Than
All The Others
Participants learn collaboratively from each other
using case studies of firms just like yours.
You really work in a TEAM with other professionals
dealing with real life issues, NOT just theory.
We provide you with a “Digital Toolbox” with
templates and forms to help you implement what
you learn when you get back to your office.
Each seminar leader has 30+ years of experience
leading successful A/E organizations.
No ivory tower theory; just practical techniques
that really work.
u
v
w
x
y
SEE FULL COURSE DESCRIPTION,
DETAILED AGENDA, AND
REGISTRATION INFORMATION AT
THE END OF YOUR E-BOOK.
25. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Sometimes someone in the BD program suggests that “it
is obvious” to the client what benefit they derive from our
feature. I contend that, if the client has time to stop and
think about all the features statements we make, he can
likely shift our feature into a benefit, but clients must do
their day jobs while also reviewing proposals or listening to
presentations. So it helps the client clarify his thinking as he
skims our proposal or half-listens to our presentation. Go
ahead and state the obvious… after all, it is only obvious to
us!
Differentiation in Your Proposal
by Wally Hise
Make your document stand out from the rest of the pack.
Writing proposals is hard work! It takes a team of people
to provide ideas, assemble information, create graphics,
review and revise the document, and ultimately publish your
submittal. After all of this effort is completed and you catch
your breath, have you ever stepped back and flipped through
the document with fresh eyes? Does it scream “I’m a winner”
or plead “Please don’t put me at the bottom of the pile.”
Clients are finding it more difficult than ever to see tangible
differences between you and your competitors. One way to
put your proposal at the top is to clearly differentiate your
firm in a manner specific to the project or contract you
are pursuing. Many of my peers ask for a “message” in the
proposal. I find that this is often nothing more than a catch
phrase or tagline, repeated throughout the document. I
prefer to develop a differentiation strategy.
23
26. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Areas of Potential Differentiation
People Training
Experience Products / Services
Systems / Processes Clients
Technology Organization
Geography / Location Pricing
The pinnacle of differentiation is to establish your firm as
unique. I’m not suggesting that you profess to be “uniquely
qualified” as many writers do. Being unique, in the purest
form, means possessing a quality or qualities that that no
other firm has. This is rare in our business, unless you have
a proprietary technology or patented approach that can’t
be copied. Instead, you will likely find a combination of
attributes that, when packaged and articulated, most other
firms cannot claim or match. The table lists some areas of
potential differentiation that you might consider as you
develop your strategy. These may fit in one of three broad
categories.
What You Do – products, services, capabilities, and
experience all fall under this heading. It can be a broad
capability such as geotechnical engineering or landscape
architecture. It might be a niche service like healthcare
consulting or transit planning. Many of the things you list
on your web site and show in marketing collateral belong
here.
How You Do It – the way in which your firm approaches
projects or accomplishes work tends to be more process
oriented, and may be a way to set you apart from others.
Specific tools used to track projects, approaches to managing
staff and workload, and systems that enable you to deploy
teams quickly are some examples.
24
27. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Who Does It – this refers to individuals and groups of
people. Your technical experts may offer a valid point of
uniqueness, depending on how specialized their experience
is. You may employ a team of Ph.D. archeologists, or a
group specializing in claims analysis. Another approach
is to use lower level staff, maybe temporary employees, to
provide a cost advantage.
Similarly, other items noted in the table can be helpful as you
think through your differentiation. To illustrate an approach,
I’ll share the example of a proposal we recently submitted
to a Government client for a construction management
contract. Arguably, this is a commodity service provided by
many companies. It’s difficult to say that our team, inclusive
of specialty subconsultants, does it better than any other
firm. How can we possibly differentiate in this arena?
The fact that we have 650+ people in 18 offices throughout
the region doesn’t make us stand out. Having a deep bench
of staff in the required disciplines, in and of itself, isn’t
unique. Neither is having staff who bring experience from all
points of view—Government, consultant, and constructor.
But when combined, these three features offer a compelling
foundation for our proposal and approach, and could be
matched by only a few firms, if they choose to package their
team in a similar way. I refer to this as “relatively unique,”
and sometimes that’s the best we can do. Of course, each
attribute was paired with a client-oriented benefit statement
to make our story even more powerful.
As our industry becomes increasingly commoditized, firms
look more the same. While this trend continues, the value
of differentiation can’t be overemphasized. A successful
differentiation strategy will help separate your firm from the
crowd, lessen price sensitivity, and articulate real value that
you deliver to clients. Who wouldn’t want to read about that?
25
28. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
You Have At Least Three Unique
Differentiators! by Eric Snider, P.E.
When we consider what differentiates one firm from
another, it is easy to get caught up in the game of straining
and stretching to turn a normal run-of-the-mill service or
project into something unique. As a result of the unbridled
effort, we sometimes overlook the three things that set your
firm apart from everyone else… and I mean everyone. Let’s
consider them individually:
Your people. This may sound like a “Duh” statement. But
how often have you struggled to find something unique
to say in a proposal or presentation? If you can call out
something unique about one of your staff that will be
assigned to the client’s project, you have a true differentiator.
The unique item may be a project, a degree, a certification,
or some other unique aspect of the person. Call out the
uniqueness several places, including in bold on the resume
sheet.
Your project portfolio. Again, “Duh!” may be your reaction.
Yet no one—no one!—else has your list of completed
projects. And along with the completed projects list should
go a sterling list of references for those projects. The idea is
to flesh out what is unique about the client’s project and find
one of your own that closely matches. The old truism is that
engineers want you to have performed the exact same project
many times and architects want you to have similar but not
identical projects in your portfolio.
Your team cohesiveness and history. This one is a little less
“duh” and a bit more on details. If you truly have a multi-
firm team put together, show how you have worked together
in the past as a strong and unique team. Those relationships
and their duration will be unique items for the client to
consider when weighing you against your competition.
26
29. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Of course, you must show the client why the team you have
proposed provides the best value proposition. On the other side,
if you have a long and successful relationship with the client
organization or with key individuals in the organization, you
should leverage that strength by focusing on it in your proposal
or presentation. Again, the depth and levels of relationships are
unique to you and your firm.
Do you have other unique differentiators? Of course, and it
just takes time to “peel the onion” back to discover them and
how they relate to the client’s project. But if you are looking
for a good place to start, use the three discussed here—people,
projects, and team—to get your creative juices flowing.
27
30. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES 28
How Does Your Proposal Hit Rate
Compare to
Other Firms Like Yours?
by David Burstein, P.E.
Proposal rate measures the percentage of proposals awarded to the firm in
relation to the total number of proposals submitted to clients (including
both competitive and noncompetitive proposals). This metric provides an
excellent starting point for benchmarking your firm’s business development
effort. Compare your firm’s proposal hit rate with those from similar firms,
based on PSMJ’s 2013 Fees & Pricing Survey.
PROPOSAL SELECTION RATE (HIT RATE)
(Percentile) 25th Median 75th
Overall A/E Industry 20% 36% 57%
Architectural 15 30 60
Architectural/Interiors 32 38 45
Engineering (Prime) 20 38 57
Engineering (Subconsultant) 23 35 60
Engineering (Survey) NR 35 NR
A/E 26 37 67
Environmental 31 38 75
All U.S. 21 37 75
Northeast 31 38 50
South 15 35 53
Midwest 20 38 63
Southwest 16 31 54
Mountain 30 35 54
West 23 45 65
Canada 25 50 65
Private 27 40 67
Government 20 32 50
Mixed 20 43 60
Transportation 14 20 35
Government (Buildings) 20 30 50
Energy-Utilities 20 42 71
Commercial (Users) 30 36 80
Housing 50 75 90
Healthcare 13 27 41
No Specialty 20 36 55
You can now do an in-depth analysis of your firm’s hit rate to determine
the underlying factors in the rate being achieved. For example, a very low
hit rate might indicate that (a) your firm is doing a poor job of selecting
which clients or projects to pursue, (b) your firm is not creating a substantial
method of differentiating itself from your competitors, or (c) you’re not
pricing its services at a competitive rate. At the other extreme, with a very
high hit rate, your firm may not be pursuing enough opportunities to allow
it to grow and achieve its strategic goals.
31. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
How to Budget for Success
In the past, A/E firms rarely would go through an annual
corporate budgeting exercise to plan the upcoming year’s
financial actions. All firms should prepare an annual budget
and use it as a management tool to “steer the ship” in the
desired direction.
A well conceived and executed budget offers many benefits:
• Provides a benchmark to measure achievements and
shortfalls
• Helps the firm set directions to meet short term goals
• Provides mechanisms to develop long term strategies
• Serves to change corporate direction
• Allows the firm to implement strategies to correct less
than desirable results
The budget process is also an excellent way to foster
teamwork and to obtain a “buy in” mentality of the firm’s
actions and direction. Because most firms focus on
maximizing their billable hours, the strategic planning tasks
tend to be relegated to only a few people. Although this idea
makes sense, it leaves some staff members feeling “left out” of
the business process. A well-planned budget process involves
everyone and provides valuable input, thus improving overall
morale.
The budget also helps to set accountability for department
heads, functional areas and other partners. It’s hard
effectively to hold people to a budget if they don’t buy into
its creation. The process helps achieve consensus and is
an excellent way of educating other members to the firm’s
business aspects and goals.
29
PART FOUR:
Budgeting for Success
32. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
The budget process should be the responsibility of the
financial partner and the “controller.” If the firm is large
enough, a committee consisting of the financial partner,
controller, bookkeeper, and one other partner or associate
should be established. Selecting an additional partner
or associate allows for additional input from a different
perspective. Ideally, this other partner/ associate won’t be a
senior level person.
As you work through your budgeting process:
• Begin the process during the 10th month of the fiscal year,
and plan on completing prior to the year’s end (requires
utilizing actual and projected data for the current year).
• Establish a committee and set up responsibilities.
Prepare a timetable with tight, reasonable deadlines.
Allow the participants time in their schedules for the
process.
• Don’t expect them to do everything in the evening or on
weekends.
• Prepare input forms for department heads, personnel
responsible for functional areas and all partners/
principals.
• Hold a meeting to explain the process, forms and the
timetable.
• Make the financial officer available for “coaching” or
assisting individuals as they work through the process.
• The managing partner should have adequate input into
the process and should review responsibilities.
• Present the final budget to owners for ratification.
30
33. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Pricing to Maximize Profits
by Frank Stasiowski, FAIA
An excerpt from The Value Pricing Imperative for Design Firms
The best way to fight commoditization? Sit down, look
your client right in the eye and say: “Of course we cost
more.” Consider the fees that your firm has paid out to other
professionals in the last six months. How much does your
accountant charge per hour? Your outside counsel?
Maybe you contracted for some training on your building
information management system. The trainer may cost you
$200 per hour, plus another $50 per attendee per diem; for
five trainees and eight hours, that’s $1,800 for one day—
minimum. That trainer likely charges for travel as well, and
maybe ancillaries like a print manual.
Architects and engineers are willing to pay good money for
professional services. Why, then, is it so difficult for them to
charge more for theirlicensed, professional services?
Design professionals must close the gap between their fees
and those of other professionals. Fees must adequately
cover training, professional development, ample profit, and
future liability. The productivity improvements from BIM,
3D CAD or 4D CAD have tended to benefit the client, with
lower price and speedier delivery, more than they have
benefited design firms. In order to stay competitive in today’s
marketplace, design professionals must price their design
services according to value, not cost.
There are several ways to change the way you’ve traditionally
approached pricing, including:
• Cost pricing;
• Parity pricing;
• Sociopolitical pricing;
• Strategic pricing;
• Negotiated; and finally,
• Value pricing.
31
34. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
In value pricing, price is determined partly by the value the
client perceives in the service to be delivered, and partly by
your cost and profit considerations.
Ramsey Fayad described true value pricing this way:
The concept of value pricing is relatively simple. Value
resides in the eye of the beholder and when, in the eyes of
the beholder, it is delivered, a premium may be charged. In
essence, value pricing demands only a better understanding
of client needs, constraints, and competitive threats.
Why then is value pricing not broadly accepted and
practiced? Because it demands shifts in attitudes,
perspectives, and effort, all of which challenge the natural
inertia of wanting to continue doing what has always been
done.
In the professional design arena, it is typically perceived to
be safer to follow clearly defined existing procedures than to
adopt new and untried ones for fear of offending clients.
Any proposal that makes the project easier, safer, faster, or
cheaper to achieve client objectives should include a value
premium. From the client’s point of view, the extent of the
value premium in question will depend on:
• The clarity with which the design professional defines his
or her proposed contribution.
• The extent to which the proposal appears to reflect an
understanding of current client needs.
• The extent to which the proposal convincingly contributes
to the nominated objectives in the judgment of the client.
• The relative importance to the client of the nominated
objective(s).
Don’t fall into the commodity trap—value price your way out
of it.
32
35. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
How To Increase Fees When Clients
Use Price For Selection
The following material is for informational purposes only.
Before taking action that could have legal or other important
consequences, PSMJ Resources suggests you speak with a
qualified professional who can provide guidance that considers
your own unique circumstances.
Some clients will always select the lowest price in choosing
an A/E firm. These clients will obtain quotes from several
firms and pick the low hourly rate as the winner. Clients who
have “purchasing agents” in control of selection, or who must
approve the decision made by a selection group, are always
likely to base selection on perceived prices for services.
So How Can You Avoid Playing The Cut-Rate Game?
First, recognize that clients who use price as the sole selection
criteria cannot be converted into “relationship” clients.
They will not be open to mutually supportive working
arrangements.
Second, realize that you can’t possibly be a winner every time
in competitions like these. Some other firm will always quote
lower; there are just too many firms out there.
Cut Your Costs, Keep Your Profits
Once you have accepted that price will be the sole selection
criteria, how do you respond (assuming you have not decided
to avoid responding altogether)? The overall goal is to make
your proposed prices look low, while not compromising your
basic pricing.
Here are some high-leverage proposal tactics that, in a low-fee
competition, will allow you to quote lower hourly rates, while
keeping a higher profit potential:
• Make your price (or rates) dependent upon being paid 50
percent of the fee up front as a retainer.
33
36. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
• Make the payment terms 10 days—rather than 30—from
date of invoice (with a high late payment penalty).
• Don’t just limit your liability; include a “hold harmless”
clause shifting responsibility to the client for design
errors.
• Eliminate any redesign that would go over construction
budget bids. State that this will be an additional service.
• Add a higher percentage markup to subs and
reimbursables.
Try Some Fixed-Price Tactics
If you are quoting a fixed-price fee, try these scope
modifications:
• Have all project meetings at your office, thus eliminating
local travel time. Include any travel time as an additional
service.
• If you prepare zoning permitting applications, do it as an
additional service.
• Clearly state that you will use “proven design solutions,”
and then reuse as much as possible from prior projects.
Studies and new solutions will be additional services.
• Be very clear in stating the number of things you will do
as basic services. It’s not enough to say “monthly
meetings”; you need to say “6 monthly meetings of two
hours each, attended by the project manager.”
• Flatten your hourly rates by lowering the principal rate
and raising staff rates. Clients who are price-sensitive
often focus only on the highest rates.
The Best Tactic: Offer Choices
What happens when the client calls and says, “You have the
job, but we can’t pay a retainer”? The secret is to be prepared
with pricing options. Be ready to say, “We can skip the
retainer, but the fee increases by 2 percent.” Even better, if
your proposal offers the choice of either a 50 percent retainer
or a 2 percent additional fee, you can refer the client to that
part of your proposal.
34
37. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
A key to this approach is to include a standard “terms and
conditions” page in your proposal, and then send it along
with your price quote. Think along the lines of airline tickets
or rental car agreements that print limitations on the back
(although we do not necessarily recommend using 4-point
type).
Does this sound like we are advocating you act like a
contractor who relies on change orders? Quite frankly—yes.
In low-bid situations, if you don’t strictly define what your
price includes, and then charge for services beyond that
price, you sacrifice profit. This applies to all businesses, not
just A/E/C firms. Your other choice is simply to say “no”
when asked to bid in a price-only competition. If you don’t
want to limit your services or quality, this may be the more
profitable way to go.
35
38. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Increase Operating Profit by
7 Percent
by William Fanning
It’s simple math—if you raise your overall prices by 1 percent,
your operating profit dollars increase by 7 percent. That’s 7
percent more dollars for incentives/bonuses or to invest in
your firm. If you increase your fees by 2 percent, operating
profit increases by 14 percent. The process continues, with
each 1 percent fee increase boosting operating profit dollars
by 7 percent. Is a 1 percent revenue increase reasonable? It is
easier to achieve than you might imagine. While some of your
clients might not agree to higher fees, a 2 percent increase for
only half of your customers will achieve the overall 1 percent
increase.
Need proof?
Still unsure a 1 percent increase is wise? Consider these
points:
• According to the 2013 PSMJ A/E Financial Performance
Benchmark Survey Report, the median revenue per hour
for the profession is $105.03. Thus, a 1 percent increase is
a mere $1.05 an hour.
• Our database indicates that 25 percent of firms achieve
a median of $117.18 per hour; that’s 11 percent above the
median hourly fee. If 25 percent can achieve revenues 11
percent above the median, firms can afford to raise prices
by 1 percent.
• The typical firm billing multiplier is 3 times labor. A 1
percent increase would only raise your target multiplier
to 3.10. Currently, the majority of all firms set their target
multiplier at this level or higher, so it can be done.
Testing The Math
Here is how you determine the effects on your firm:
• Determine your current revenues per hour by dividing
your net revenues by your total direct (project) hours from
your utilization report.
36
39. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
• Multiply your average hourly revenues by 1 percent, then
multiply this by the total direct (project) hours.
The result is your additional dollars of operating profit,
(assuming you do not increase your costs while changing
your fees).
Weigh The Alternatives
Considering the benefits of this fee increase, is there any
cost you could cut that would have the same impact on your
profits? If cost reductions seem to be a greater challenge, then
raising fees is likely a better investment of your time. Look
at it another way: how much more work would you need to
generate to equal the profit gain if the additional work creates
the same level of profits as your current work? If increasing
your prices would generate $10,000 in profits, and your
existing profit margin is 10 percent, then you would need to
produce an additional $100,000 in net fees to get the same
dollar increase in operating profits. Would you rather put out
the marketing effort to sell this much more work, or would
you rather spend your time making current projects more
profitable?
How you spend your time to improve your firm profitability
will impact your results. Price is one of the areas where better
management has a direct impact on your bottom line. But
improved pricing will not happen unless you take charge in
your own firm. The market is structured so that your
price is your responsibility.
Improving the management of the pricing function in your
firm is the goal of smart pricing. (Smart pricing can be
defined as listening to your customer and understanding the
project objectives so that you can separately price—hopefully
higher—those services that are important to the client.)
37
40. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Seven-Step Strategy To Negotiate
Your Contract
Many clients, as you negotiate a contract, want to
immediately get to the “bottom line” - the price! It is both
foolish and imprudent on your part to respond to this
request. Instead, as you negotiate a contract with your client,
follow these seven steps in order, making sure each step is
complete before you move to the next one. Take as much
time as you need.
Whenever the client asks for the price, defer until everything
else is clearly understood by you and your client. Whenever
possible, don’t reveal your costs, but quote a price that
reflects the value of what you will accomplish.
Step 1. Define the project scope. Ask questions. Write down
exactly what you will do and your client’s expectations at each
part of the scope. Break the scope into segments (or tasks) so
that no segment represents more than 5 percent of the total.
This helps everyone understand what your firm is providing.
Step 2. Set a project schedule. Ensure that all elements of the
scope are reflected in the schedule and no more.
Step 3. Identify the project team. Name each person who will
work on the project and what that person will do; estimate the
hours and the fees for each person, and the totals. Don’t show
these figures to the client; they’re only for your estimate.
Step 4. Define work quality. Quality is somewhat subjective,
but you must define some objective criteria. For example, offer
three design alternatives, making it clear that the client must
pay for further designs, identify codes and standards, types of
computer analyses, etc.
Step 5. Discuss project risk. Whether or not you discuss this
with your client, you should analyze it within your own firm.
Ensure that the party (you or the client) clearly understands
who is responsible for each risk element. You might, for
example, be taking the risk that this project will use all your
people and you’ll have to turn down other work; or perhaps
you’ve never worked on a project like this before, or are
assigning less experienced people to do parts of it to keep fees
PART FIVE:
Leading Your Team
38
41. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
low; or perhaps you need to provide for major changes in the
scope once the project is under way. In any case, list each risk
and determine which party has the responsibility.
Step 6. Make sure everyone understands the contract terms,
specifically compensation, invoicing, change order process,
payment timing, dispute resolution and indemnification.
Step 7. Quote the price. Actually quote a range for price if
possible.
This seven-step process should benefit both you and the
client. If possible you should establish this agenda with
your client at the start of the negotiations so that you both
understand the process.
This will help both of you to cover all approximate subjects
(e.g., scope, schedule, etc.) that forms the basis of the price
before you are forced to commit to the price itself. Starting
from the price and working your way back to the scope leads
to unhappy clients and unprofitable jobs.
Delegation
This concept ranks as the project manager’s main tool in
the challenge to “get it all done.” It’s also, however, the most
com¬mon and significant shortcoming of project managers.
Always:
• Begin with preparation and systematically plan your own
tasks and what to delegate.
• Think about the activities the team member will need to
do to complete an assignment.
• Specify responsibilities.
• Grant the team member enough authority to complete the
assignment.
• Be certain the individual has the resources to do the job.
• Determine if you’ve given too much or too little authority
and adjust appropriately.
HOW TO GIVE
EFFECTIVE FEEDBACK
1. Express issues clearly. Pinpoint
problems whether they are undesirable
behaviors, inappropriate actions or
undesirable ways of doing things. Then
pinpoint proper behaviors, appropriate
actions or desirable ways of doing things.
2. Avoid labels. Labels such as “lazy,”
“bad attitude,” “insecure” and “not a team
player” do not describe performance. They
focus on personality and attitudes rather
than actions.
3. Demonstrate respect. Be tough and
set standards, but be fair. Avoid ego
involvement issues and focus on specific
expectations and goals to describe what
you want to achieve.
39
42. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
• Ask the individual if you’ve provided enough information.
• Focus on what the task is, not how to do it.
• Take time to review completed assignments.
• Thank a team member and show that you notice high
quality work.
• Assign one person responsibility for any given assignment.
• Give the individual enough latitude to make decisions.
• Let at least some portion of the individual’s work stand.
• Discuss (when necessary) sub standard performance with
a team member.
Interviewing Tips
1. Organize the interview process. One person (usually the
would-be boss of the interviewee) should be responsible for
orchestrating the interview.
Before the interview begins, each interviewer should receive
a copy of the candidate’s resume, guidance as to the purpose
of the interview, and the scheduled time for the interview. A
disorganized interviewing process is a definite turn-off and
may cause the candidate to decline any offer.
2. Put the candidate at ease. Remove coats, roll up sleeves.
Have a cup of coffee together. Exchange small talk. The more
at ease the candidate feels, the more honest the interview
process will be.
3. Arrange interviews with one or two of the firm’s best
people who will be peers of the new employee. The purpose
of this interview is to get into in-depth technical discussions.
The firm’s top people will be able to assess the candidate’s
technical knowledge.
40
43. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
4. Avoid standard interview questions. Standard questions
test how well the candidate interviews, not how good an
employee he/she would be.
5. The last person to interview the candidate should be the
principal of the firm who oversees the group interviewing
the candidate. The purpose of this interview should be to
express the firm’s interest and sell the candidate on why he/
she should work for the firm. This will greatly improve the
odds of the person accepting an offer if it is made later.
6. Each interviewer should put his/her impressions in
writing (see sample interview evaluation records).
7. The person who will be the applicant’s boss (if he/she is
hired) should collect all the interview evaluation reports
and determine if the firm wants to make an offer to the
candidate.
8. By the time the firm has decided to make the candidate
an offer, it should be 100 percent in the selling mode. Make
the offer in person or by phone, being sure to take the time to
sell the company while making the offer. Then follow it up in
writing (see sample offer letter).
41
44. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
Decision-making
Even though you might have had little or no training in the
area of decision making, it’s a task you perform many times
a day often with significant consequences. Use these four
quick steps to make intelligent decisions:
1. Frame. Define the choice and determine what criteria
would cause you to prefer one option over another. Think
about the viewpoint from which you and others will look
at the issue, and decide which aspects they might consider
important.
2. Gather intelligence. Seek the knowable facts and
reasonable estimates of the “unknowables.” Avoid
overconfidence and the tendency to seek information that
confirms your biases.
3. Come to conclusions. Even with good data, people cannot
make good decisions using seat of the pants judgment. A
systematic approach leads to better decisions than do hours
of haphazard thinking.
4. Learn from feedback. Keep track of your expectations;
systematically guard against self serving explanations and
review the lessons of your feedback.
J. Edward Russo and Paul J.H. Schoemaker, Decision Traps: The Ten
Barriers to Brilliant Decision Making and How to Overcome Them,
Doubleday, New York: 1989.
42
45. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
21 MUST KNOW CONCEPTS
The demands placed on today’s project managers are growing exponentially. To remain on the cutting edge, or even maintain
your competitiveness, you’ve got to learn new concepts and master both new and traditional management techniques.
Why? Today’s professional service firm has moved into the mainstream of business. The market forces that apply to IBM and
Wal-Mart now apply to you. The seemingly protected world in which professional design and environmental services once
worked is gone, and professional ethics and technical competence will not protect you from cutthroat competition. It’s time to
move on and raise your personal bar to a new height.
Here are some of the theories that are in usage, plus some specific advice on implementing the strategies these theories
pro¬mote. Included are some great reading sources.
USE THIS CHECKLIST TO START WITH THE LITTLE THINGS:
Best time to call a contractor………... 7 a.m.
Best time to call a client…………….. Tuesday, 8:45 a.m.
Best time to run a meeting………….. 11 a.m.
Best day to hold meetings…………... Tuesday
Best time to do manpower planning... Monday, 8 a.m.
Best day to mail invoices…………… 23rd of the month (to get paid by the 1st)
Best time to open mail……………… 4:30 p.m.
Best time to eat with clients………… At breakfast
Best meeting format………………… Standup meetings
Best way to control meetings……….. Take meeting minutes yourself
Best position among six firms
competing in a presentation………… Last
Best form of contract……………….. Lump sum, with a well defined scope
Best employee………………………. One who initiates action
Best length of workday……………... 9 hours maximum
Best day to avoid interruptions……... Saturday
Best time to get things done………… Before office hours
Best way to avoid conflict………….. Straight communication
Best title on a business card………… None at all
Best time to fire someone…………… Monday, 9 a.m.
Best project manager………………... One who instructs team daily
43
46. 10 Midland Avenue, Newton, MA 02458 USA | (800) 537-PSMJ / (617) 965-0055 telephone
| (617) 965-5152 fax | info@psmj.com email | www.psmj.com web
Five Must-Have Skills for Future A/E Firm Leaders E.BOOK SERIES
40 years of helping A/E/C firms achieve
business success.
PSMJ Resources, Inc. is the world’s leading authority,
publisher, and consultant on the effective management
of architecture, engineering, and construction firms. With
offices in the United States as well as the United Kingdom
and Australia, PSMJ offers over 150 titles in book, audio,
and video format. In addition, the company publishes
several monthly periodicals and delivers dozens of
seminars, roundtables, conferences, webinars, and in-house
training sessions every year for A/E/C professionals around
the world. PSMJ’s sought-after consulting expertise covers a
range of critical business areas such as strategic planning,
project management, valuation, succession planning, and
mergers & acquisitions. PSMJ is also active within the
community, utilizing our resources and the contacts at our
fingertips within the A/E/C Industry to help those in need.
ABOUT PSMJ
Contact Us:
For more information on how
PSMJ’s Advisory Services Team
can help your firm, please call
or email Kim Pazera, Vice
President, Consulting Services,
at (617) 965-0055 or
kpazera@psmj.com.