At a recent American Council of Engineering Companies (ACEC) meeting, the talk at our table was about the value gap. Clients and municipalities are cost-conscious, and rightly so. They are mandated to get the best possible price for a project.
Engineering firms, on the other hand, must provide competitive pricing in order to compete in the marketplace. But the lowest price doesn’t accommodate the cost of value. That’s the value gap.
As described at the ACEC lunch, the cost of value is the work that a firm does to ensure that a project is successful. Work that is often invisible to the client and frequently unbilled.
For example, firms manage vast amounts of project data. They carry the cost of hosting the data, keeping it secure, and tagging it so it’s easily retrieved. Project data management is a valuable service. Yet firms rarely bill for it because clients don’t associate the cost of this service with the value it provides.
Firms end up owning relationships with entities hired by the client. Think public utilities or construction companies.
The firm takes on the responsibility of collaborating with the entities they had no hand in hiring. To ensure that the project succeeds, the firm keeps the client informed about, well, everything: work order changes, potential cost overruns, delays and so on. This level of collaboration and communication consumes firm resources but clients don’t equate the cost of this service with the value they receive.
As the conversation died down, firm owners and project managers shrugged their shoulders, agreeing that they just couldn’t be competitive if they included the cost of value in a Request for Information (RFI). They’d be out of the running. And that’s bad for business.
In his seminal book “Managing the Professional Service Firm,” David H. Maister devotes an entire chapter to How Clients Choose [a firm]. It’s entirely relevant to closing the cost-value gap.
Maister writes, “From the buyer’s perspective, the two stages [of selecting a firm] are experienced as qualification and selection.” Master goes on to say that qualification is a rational, logical process based on the evaluation of a firm’s competency.
Firm selection, on the other hand, is much more personal and intuitive. It is largely based on the firm’s ability to be helpful to the client. As Maister puts it, “Give me some new information.” Information that I [the client] will find useful, that will help solve my problems. And it has to be the kind of information that I can believe in, that’s documented and demonstrable.
Consider running your firm in the cloud. If you’re trying to manage people, projects, and billing with spreadsheets and disconnected applications, it’s a time-consuming hassle to collect accurate data. This applies equally to your firm management and your ability to document costs and demonstrate value to your client.
In their paper, “The Industry Software Revolution,” authors Brian Feinstein and Trevor Oelschig write, “The value of running your firm in the cloud is its ability to connect people on a job site or anywhere in the world with shared data in a collaborative environment.”
Think about connecting your project delivery workflow with an online app. In order to sell your value to a client, you have to know what it costs you to deliver services. An online time and billing application can capture data at every point in your project workflow, as shown in this diagram.
Many service professionals, regardless of industry, are experts in their particular field but they don’t start out as experts in managing a firm. An online time and billing application is kind of like an MBA in a box. Except there’s no box because it’s in the cloud. Regardless, this type of application provides real-time visibility into what’s going on with a client’s project. Exactly the kind of data that you need to communicate your firm’s value.
Calling upon Maister one last time, here are 7 ways you can use your command of data to help you communicate your firm’s value.
- Tell the client something they don’t know.
Give your client context. Without disclosing proprietary information, draw parallels between similar kinds of projects. Let your client know how their project compares to another in terms of budget vs actual, staffing allocation usage, even project data file size. Tell the client something they don’t know.
2. Tell the client something they need to know.
Give your client a heads up. If a project budget is at risk for an overrun that’s something your client needs to know. But when you alert the client before there’s a budget overrun and you have ideas about how to prevent it, that’s more than something they need to know. That’s valuable.
3. Bring useful information to meetings.
Use your command of data to inform and advise during meetings, even those that come up at the last minute. You can open up a dashboard to confirm a project budget Not-to-Exceed (NTE) amount. Or show your client that the hours actually worked on a project task are getting close to the hours allocated. Then deliver even more value and help your client arrive at a solution.
4. Show what you’re doing and why it matters to the client.
Set up a regular cadence of communication with your client. It doesn’t matter how easily you can access project information if you don’t form the habit of communicating it to your client. It’s important to share project status updates and discuss options to avert potential problems like a cost overrun. It’s just as important to listen to your client. Be there. Fully present. And listen. That’s invaluable.
5. Involve the client in major project milestones.
Give your client something to celebrate. Create a shared sense of accomplishment. Review the project information with your client—things like project stages, due dates, staffer assignments, budgets, and percent complete. Nothing communicates value like success.
6. Inform the client about consequences of a change in scope.
Be constant, steady, and reliable in your client’s changing landscape. Use the data you’ve captured across many client projects to accurately forecast the cost of a change in scope. You’ll be of value to your client and you’ll be confident that your firm can afford to take on the work if offered.
- Be helpful beyond the specifics of the project scope.
This excerpt from“Manage Your Manager,” a training by Dr. Todd Dewett says everything that needs to be said on the subject. “Being a helpful person is not only the right thing to do in a professional context, but it’s one of the best ways to ensure that long term, the people you’re helping will be willing to help you.”
Learn more about using data to communicate your value. We’re here to help. Because if you succeed, we do too.
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BigTime Software delivers real-time, metrics-driven time tracking, billing and project management for more than 2,000 professional firms, tracking over $2 billion (USD) worth of billable time each year.