Below is the executive summary for the presentation and webinar I did on September 26, 2012.
Importance of a Risk-Value Based Business Strategy
Arranged and Hosted by: John M. Feeney, HPPIB
John Feeney has designed, sold and underwritten insurance on a senior level basis for 50 years and represents over 500 design professional firms. He has widely presented to the architect and engineering community, including a 2012 national AIA-sponsored webinar titled, “10 Winning Tactics for Making Intelligent Choices When Purchasing Business Insurance.”
The challenging economic climate has dramatically changed the landscape for many design firms with construction revenues off 35% from normal projections. Some firms have taken actions that are inadvertently impacting performance, quality, increasing risk, and even blocking progress towards recovery. This training session identified the importance demonstrating the value your firm brings to the project. Your firm’s value relates not only to project specific expertise but also should be demonstrated in the knowledge of the challenges and risks related to the project type.
• Construction Trends & Growth Areas
• Elements of Increased Risk & Liability
• Importance of a Risk-Value Based Business Strategy
• Benefits and Key Aspects of the Strategy
Add Value & Reduce Risk
In today’s competitive environment, it is vital that Client’s recognize the value a design firm brings to their projects. Based on recent surveys, fees for design professionals have eroded based on the competition for fewer projects opportunities. Many project owners have taken advantage of those market conditions playing firms against one another to lower fees as well as pushing them to agree to unfavorable contract terms that increases risk.
As the economic climate starts to recover, it is essential design firms differentiate themselves from competition showing value, project knowledge, insights of challenges and risks, and quality in the services offered. This approach places your firm in a better-prepared position for requesting higher fees. It also reduces overall risk for the firm, increases project performance as well as client satisfaction. This article will identify key elements supporting this effort.
What Value Does Your Firm Bring?
As a design professional, design services are at the core of your business – having the technical ability is an expected, baseline skill. Adding value relates to demonstrating the knowledge of a specific project type, associated challenges, and having the expertise to address those challenges effectively. This requires an experienced and knowledgeable staff, and efficient processes to manage the project. Every hour a member of your firm spends on the project should add value in some way. This only works if everyone working on the project knows the specific challenges, what is valued in the eyes of the client, and how each member plays their role towards project completion.
Key Categories for Reducing Project Risk
Based on SR Risk Assessments (SmartRisk firm specific risk analysis process) conducted of design firms, along with industry claim trends, the following categories have been identified as key challenges and risks for design firms, and the root cause of a significant number of claims from project owners. If a firm effectively manages the following project categories, the end result would be improved project performance, increased client satisfaction, added value as well as reduced risk.
Demonstrate how your project manager (PM) is sufficiently qualified, skilled and experienced to manage the project. Based on reduced annual revenues, and staff reduction, unqualified PM’s are being assigned to projects leading to poor performance and increased risk. Project Managers should serve as the primary contact with the client as well as work as the client’s advocate with the project team. They should be responsible to oversee the workflow and product delivery for the project.
Explain the efforts used to aid the management of the project in an organized, efficient and cost effective manner. Driven by slow economic conditions, some firms have reduced efforts on managing processes, programs and personnel effectively on projects. A professional services automation (PSA) application that includes project management, financial management and client relation’s management is a helpful project management tool.
Work Quality & Continuous Improvement
Based on the reduction at many firms of seasoned, qualified staff members, firms have reduced quality assurance, quality control efforts on projects. Show how your firm has a quality control process built into the development of the design documents that outlines the quality checks and peer reviews that are conducted throughout the development process. Senior representatives that are not involved in the project should conduct peer reviews. Encourage input from project team members on practices they apply to ensure quality is built into the project in their areas of responsibility.
Explain the selection process of project team members. Ensure the project is staffed with team members sufficiently qualified, skilled and experienced to perform their services. In the marketplace today, firms are assigning less qualified, experienced staff members driven by slow economic conditions. The strength of any project lies in the ability of the project team to support the clients project objectives. The capability of the team can make the difference between a well-managed, quality project compared to a problematic one that leads to delays, claims and litigation. Create a database of qualified consultants tracking the project types, services offered and performance. Make sure consultants are selected based on specific project expertise and constantly evaluate their status and staffing levels. Economic conditions have driven changes to staffing levels and personnel. A Project Manager once employed by a firm, may no longer be there, or if they are, may be overextended and not able to provide the needed time to effectively support your project efforts.
Project administration is often a subset of project management, however a breakdown in administration functions supporting project and client deliverables can lead to a disaster for the firm and project. Discuss and come to an agreement on administration elements and process. This includes developing the project scope, fees for your services, and a payment schedule including documents needed when invoices are submitted. Identify who would be responsible for the review and approval of invoices. Make sure support staff within your firm is aware of the administration commitments that they “must” comply with. Do not use boilerplate proposals, scopes and contracts. It is essential that they are developed andcustomized for the unique needs of each project.
Budget & Schedule
Discuss the project budget and schedule in detail with the client to ensure they are manageable, and realistic based on project objectives. Demonstrate the methods your firm will use to manage the budget and schedule. Ensure the project manager and project team are informed of its details. Use accounting software as a tool to help manage the budget. Set realistic timeframes from the beginning and stay on top of the project progress, tracking the status of hours billed compared to completed project milestones. View project schedules as a network of individual commitments (these are promises, not intentions) towards a common goal – project completion.
Explain the communication program that will be used with the client for the project. Poor project communication is one of the major root-causes of claims against design professionals. Set goals in your communication program with the client – listen to the client and obtain a clear understanding of their project goals and objectives. With this information, establish communication methods that will be used with the client, how often, confirming actions completed and/or status. Being responsive to the client should be a priority and establish this as a practice within the firm – the communication method and timeframe. Make sure you understand what constitutes “satisfaction” by your client. Manage those expectations, and if a clients requests are outside your scope of services, make you’re your identify that immediately, and in writing. This overall approach will improve the client/firm relationship, adding value and focus of your communication.
Weekly Status Reports
Explain how developing status reports is an important aspect of your communication effort with the client. Status reports should be made a fundamental part of your project scope and fee. The reports have many advantages including keeping clients updated, and identifying their project support. Status reports should be short, simple and sent at a specified time each week that has been agreed upon by both parties. Clearly describe actions taken, plans for the week, and issues that need attention. Context should relate to contract scope, fee, and schedule – and how this week’s actions are related to the previous week, and next week’s activities. Distribute completed reports to the client and key project team members.
To obtain insights on how you are doing during the project, and how you did in meeting the clients objectives at the end of the project – a client survey is recommended. Explain how you will be conducting surveys at 50% of the project and upon completion. Obtaining feedback is important to make sure you are on the right track, and if there are problems or concerns, they can be remedied before they becomes bigger problems. Keep surveys short concise with a scale to rate your firms performance in specific areas (Ex. 1 poor – 5 excellent). I suggest using the categories identified in this article as a starting point.
Meeting the client’s project objectives, and keeping them satisfied is critical for your firm and the success of the project. An important aspect is identifying project challenges, and risks that lead to problems and in many cases, claims and litigation on a project. This knowledge allows your firm to implement a scope of services that adds value as well as reduce project risk. This focued effort along