P3s for the AEC Industry

I'm working on a book on public-private partnerships for PSMJ. Here's an excerpt from an article on the topic to appear in the PSMJ newsletter next issue:

California Governor Arnold Schwarzenegger is a proponent of P3s, having passed legislation that facilitates their use. In April 2009, Schwarzenegger announced a $32 million public-private partnership designed to reduce the health care worker shortage in the state. And in November 2008, he trumpeted a public-private partnership between the State of California and the Northern Sierra Partnership to fund environmental preservation while supporting economic growth. For the latter project, advocates raised $25 million in private funds.

These projects are notable for many reasons, not the least of which is the fact that they are a departure from the types of project that many people think of when P3s are mentioned – namely, toll roads or public works infrastructure.

The New York State Commission on Asset Maximization (NYSAM) (Albany, NY) wrote in December 2008, “Over the past decade, we have seen rapid advances in infrastructure, technology, and renewable energy development across the United Kingdom, Europe, Canada, and China due to innovative arrangements with the private sector that have helped deliver projects with greater speed, efficiency, and reduced costs. Alternative approaches have been used to deliver all forms of infrastructure, including non-revenue producing assets.”

P3 Opportunities and Risks

NYSAM was established by Governor David A. Paterson and charged with broadly examining whether asset maximization can benefit New York State, as well as whether any specific New York State assets are suitable candidates for public-private partnerships.

In its December preliminary report to the governor, NYSAM wrote, “A key goal of asset maximization involves the reallocation of risk from the public sector to the private sector. This shift incentivizes the private sector to pursue design, construction and management strategies that will increase efficiency. Additionally, it insures public entities from incurring additional unforeseen costs. At its most effective, it also protects public entities from incurring unforeseen and incremental costs.”

This shift of risk, which is a factor that makes P3s attractive to the public sector perhaps as much or more than for funding reasons, was the topic of a Design Professional Roundtable hosted by Donovan Hatem, LLP (Boston, MA). David Hatem, an attorney well-known for his expertise in A/E matters, predicts, “Interest in (P3) projects at the local, state and federal levels will continue and substantially increase in the next few years and continue strongly into the next decade.”

In his April 23 presentation, entitled “Public-Private Partnerships: Opportunities and Risks,” Hatem noted that private firms participating in P3s may find themselves on unfamiliar legal ground. “Risks not typically dealt with by private entities may be transferred to them in a P3. Some of this is not insurable risk.”

I'd be interested to hear your thoughts on P3s for the AEC industry. If you want to know more about the P3 book or the PSMJ newsletter, contact them at http://www.psmj.com/.
jag

Client Surveys: Do You Really Know What Your Clients Think of You?

As part of a research project last year, I interviewed a major developer client of one of my clients. The questions I asked were general -- essentially, "How do you feel about your architecture and engineering consultants in the following categories?" (The final product was a "report card" on A/E industry service.)

This developer told me that he was completely dissatisfied with the service he received from his architecture and engineering consultants. In particular, he was unhappy about how often their fee estimates ballooned with additional services and overruns. He told me that he had changed consultants before because of this problem and that he was thinking seriously about doing it again.

Wow!

The loss of this developer would have been a major blow to my client. But because this interview was confidential -- not to mention part of a project for another client -- I couldn't really come out and tell my client what I'd heard. I have managed to nudge my client toward rectifying the issues the developer has with them without breaking my pledge of anonymity. I also encouraged my client to open a dialogue with the developer about their performance. For now anyway, the relationship is salvaged. (We'll see what happens when development picks up again, however.)

This incident reinforced to me the tremendous value of client relationship surveys. In my days with a major management consulting firm for the A/E industry, I managed dozens of these surveys. Even when the results were largely a reassurance of what the client already knew, my clients told me it was money well spent.

Our preferred process for these surveys is to conduct them by phone. We schedule a time (but are always ready to do the survey when the contact person is) and request about 10-15 minutes of their time. We'll ask approximately 10-12 questions, making sure that these questions allow the interviewee the opportunity to provide constructive criticism in an open-ended manner. Surveys that are primarily quantitative, in my experience, are much less valuable and telling than those with qualitative data.

At their least, these surveys send a clear message to your clients that you care what they think. It also affords a firm the opportunity to make contact with clients (and in some cases, strong prospects) multiple times. In addition to the actual survey process, you can send an introductory letter, a thank you letter and even a summary of the results.

At their best, these surveys can provide information worth many times their cost. I remember a case where one of my client's largest customers was a Fortune 50 manufacturing company. My client had a tremendous relationship with the corporate office and worked all around the country for this manufacturer. As it happened, on the day I interviewed the manufacturing company's contact person, he had received word that the company's leadership had decided to begin decentralizing much of their construction project duties. As you might expect, this news resulted in a radical change in how my client now needed to market this company.

(I called my contact the second I hung up the phone, of course. I don't think he would have been too happy to find that gem buried in the report two or three weeks later.)

Sure, it was a coincidence that we happened to be in the right place at the right time for our client. But it was also an illustration of how important it is to be in constant touch with your clients -- especially your best clients -- and to continually ask them about their satisfaction with your services. In this case, a client survey costing a few thousand dollars probably saved my client millions.

A customer relationship survey can offer you many other benefits, but only if it’s done right. A third party with excellent interviewing skills should conduct the survey. The questions should be open (to allow for elaboration) and not be leading or softballs (e.g., "Did we meet or exceed your expectations?" Come on!). Much of the value from these surveys comes in the followup questions, so it's important to have someone who understands your business asking the questions. At the same time, if it's someone within the firm -- especially the client's primary contact -- the survey process can be strained and/or bog down. (The primary contact should be talking with the client informally all the time, anyway.)

Surveys can be anonymous, which ostensibly leads to more candid feedback, or completely open. I prefer the latter because the value of knowing who said what usually far outweighs the supposed "openness" benefits of a cloaked survey. Most of the time, interviewees tell me that they prefer to have their comments attributed to them.

Here are a few more benefits of client surveys:

Reassurance. For most good companies, positive feedback usually outweighs the negative in a customer relationship survey. And while everyone loves a pat on the back, there is also measurable value in this type of feedback. A well-designed customer relationship survey can provide you with needed reassurance that most of your customers think you're doing a good job. You can then take that information and concentrate on making sure you keep doing the things your customers like, and you can spread the word internally to help keep up morale. This is particularly important in these economic times.

Inside information. By surveying your customers you can find out about unannounced projects or opportunities, trends in their industry, and actual leads on new work. During a survey I did for an engineering firm, I interviewed a manager who had just been hired by an organization my client coveted as a customer. This manager felt stuck with the board's choice of consultants and told me, “If your client can do anything to help me get rid of my current engineering consultant, I’d be indebted to them for life." As soon as I hung up the phone, I called my client and relayed the manager's comment. My client said, “That information just paid for this whole survey.” Surveys aren’t always this fruitful, but you’ll usually get some leads if you ask the right questions the right way.

Marketing goodwill. Believe it or not, people like to be asked about what they do. Think about it. People spend day after day, year after year at their jobs, but unless they're celebrities, they're very rarely asked to talk about what they do. I’ve never conducted a client survey of any size that didn’t include at least one interviewee saying something like, “Tell them I think it’s great that they’re doing this.”

If you want to learn more, e-mail me at info@jagg-group.com.

Bridge Engineer Craig Finley offers his Perspective to Aspire magazine

Craig Finley, the founder and managing principal of Finley Engineering Group, Inc. (FINLEY) is the featured columnist in the Perspectives section of Aspire magazine's Spring issue. Published by the Precast/Prestressed Concrete Institute (PCI), Aspire is the organization's bridge-focused magazine.

In his column, the widely published Finley ties the concept of sustainability to efficiency in bridge design and construction. Quoting a long-time goal of the American Segmental Bridge Institute (ASBI), Finley writes that sustainability's interests are served when the project team "gets in, gets out, and stays out." Read more at:

http://www.aspirebridge.org/pdfs/magazine/issue_10/perspective_horsley_spr09.pdf

Design Consultants, Inc. cover story in MassBuilder on Low-Impact Development

Read it here from the 4Q issue of MassBuilder Magazine.

Rich Friedman talks branding at A/E Advisors CEO Roundtable

Posing the question, "What's so special about your company?", marketing strategy consultant Richard Friedman challenged the assembled AEC firm leaders to consider how their firms were truly different from competitors during a session at the recent A/E Advisors CEO Roundtable in Scottsdale, Arizona.

The key point in Friedman's session is that every firm differentiator needs to pass the "So what?" litmus test -- as in, if you recite the reasons your firm is better and the client thinks or says, "So What? How does that help me?", your "differentiator" really isn't one.

That came clear when Friedman asked the CEOs in the smaller-firm session (150 or fewer employees) what differentiated them from the competition. Many of the answers were the same as their competitors may have offered -- great client service, responsiveness, repeat clientele, and so on. While these factors are important, Friedman noted, they are not true differentiators. Consider the comment about repeat clientele; since an estimated 80% of all AEC projects are for repeat clients, the satisfied customer angle doesn't hold much water as a differentiator.

A few firms did have true differentiators. For example, an engineering firm CEO whose company focuses exclusively on airports explained that a high percentage of people in his firm -- himself included -- fly planes. So they are not only consultants to airports on runways and facilities, they are primary users!

Friedman cautioned that many firms seeking to communicate a differentiator will mistakenly focus on features of their firm (e.g., size, location, client satisfaction rate), rather than on the benefits they can provide to the customer (e.g., innovative project delivery, streamlined communications, specialized expertise).

A number of participants suggested that client surveys are a great way to learn how customers perceive your firm's differentiators. A client survey can help a firm identify its "brand" as defined by customers and peers. The consensus was that this approach is most effective and efficient done over the phone by a third party interviewer.

Another technique that the CEOs liked was the strategy of debriefing a prospect after winning a project, not only after losing one. When you've won the project, the environment is likely to be much less tense and more amicable than when you've lost. You can find out not only what you did well and where you could improve, but also how your competition did in those areas.

Among the action plan items to come out of the session were:

• Recognize that your project delivery process can be a very compelling differentiator in a crowded playing field (e.g., how they communicate with clients, continually asking how they're doing).


• Brainstorm your firm’s differentiators and value provided (in the context of the client’s needs) before every proposal.


• Structure your marketing and business development plans and implementation around client sectors, if possible.

Rich Friedman is managing principal of Friedman & Partners, a marketing and management consulting firm based in Massachusetts. The firm's web site is http://www.friedmanpartners.com/.

HR Consultant Barbara Irwin Launches a New Generation of Leaders at A/E Advisors CEO Roundtable

Should the primary attribute of a prospective A/E firm CEO be an aversion to the job? That was one participant’s half-joking observation when HR Consultant Barbara Irwin asked participants to list the qualities an A/E firm CEO should possess.

"The first thing I look for (in a future leader) is someone who doesn't want the job," said the CEO of a large, growing engineering firm in the Midwest. "If they want it too much, they're probably not right for the job."

That moment of levity occurred during Irwin’s session, “The Leadership Pipeline: Launching a New Generation of Leaders,” at the A/E Advisors CEO Roundtable in Scottsdale, Arizona, last week.

Irwin began the 90-minute open discussion by noting that firms needing money can borrow from a bank, but firms with a leadership void face a much more difficult challenge. This is why it is critical for the current upper management group to continually identify and groom the next generation of leaders.

The president of a West Coast firm said he expects his firm’s next generation of top managers to have the same traits he had when he was tapped as a future leader – “a moral compass, strong work ethic, and if something needs to be done, they do it. If I don’t feel these things are there, I won’t recommend them.”

Other qualities identified by the CEOs, all of whom were from firms with more than 150 employees, included:

· Vision
· Problem-solving ability
· Flexibility
· People skills, both internal and external
· Loyalty to the firm’s core principles
· Capacity to learn
· Drive

An East Coast CEO noted that creating a list of desired attributes for the next generation of leaders is a good way to thin the herd and move the transition process forward. “If you look at this list, you can consolidate the pool of candidates to a relatively small group. You can then spend time with the ones you’ve chosen and show them the business.”

The same CEO added that he sees value in letting the candidates know that they are in competition for the top job. “It’s a horse race and they’ve got to run.”

Irwin wrapped up the session with several action items proposed by the group. They included:

· Identify traits for different leaders at different levels within the firm.
· Develop a training program
· Assign individuals to sit on committees and boards.

Irwin led a similar session for CEOs from smaller firms (fewer than 150 employees) on the first day of the three-day conference at the Westin Kierland Resort in Scottsdale.

A long-time HR executive with A/E firms prior to forming her own company, Irwin is the president of HR Advisors Group, LLC. For more information about HR Advisors Group, A/E Advisors, or the CEO Roundtable, visit http://www.aeadvisors.com/.

A/E Advisors Keynote a Huge Hit

A/E Advisors CEO Roundtable keynote speaker Herb Meyer presented a fascinating, if sometimes chilling outlook on world economics and politics at the group’s three-day summit in Scottsdale, Arizona. Meyer, a former high-level U.S. intelligence official, is a frequent guest of television talk shows and the author of the book Real-World Intelligence.

Demographics played a large role in Meyer’s worldview; he explained that a birth rate of 2.1 is necessary to maintain consistent human population and that many countries are well below that level. Specifically, he offered statistical evidence that large, industrialized countries in Europe and Asia are “on a downward spiral” because their birth rates aren’t sufficient to sustain their economic standing in an increasingly aging society. For example, Meyer said, India will soon outdistance China in terms of economic power and influence because China’s birth rate is unable to keep pace with the population growth necessary to continue moving ahead.

Meyer also compared the conflict between radical Islam and modern Western Civilization as a “clash of competing operating systems.” He added that people could debate whether the Iraq War was executed properly and/or worth the expense, but that it is ultimately a “spectacular success” because it created a democratic state in the Middle East. He was less encouraged about the situation in Afghanistan, where the Taliban has regained power, and somewhat horrified by recent events in Pakistan, where the Taliban is attempting to wrest control from a government that possesses nuclear weapons.

The connection between Meyer’s assessment of the geopolitical landscape and the challenges facing the A/E business leaders in the room was often thin (which was just fine with the vast majority of the audience, based on their favorable reaction to his speech). However, he did offer a bit of sage business advice relative to the world events he discussed in his speech. Most notably, Meyer said that the middle class is expanding by millions of people worldwide every year and, to meet the needs of this explosion of consumers, companies that can create products and services that are “clever, inexpensive, and green” will take the lead.

Meyer’s keynote was the highlight of a three-day CEO summit sponsored by leading A/E industry consultants, A/E Advisors. The program featured a day dedicated exclusively to CEOs of firms with fewer than 150 employees, a day dedicated exclusively to firms with more than 150 employees, and a middle day where both groups came together to share their thoughts, ideas, and war stories as the industry tries to survive the current economic downturn.

Structural engineer Charles Thornton provided the other keynote presentation, advocating for the use of building information modeling (BIM) as well as for the ACE mentor program that exposes inner-city high school students to the A/E profession. Thornton, a co-founder of Thornton Tomasetti Engineers in New York City, also founded the ACE program.