TG&E staff celebrate Halloween

In a recent SMPS Listserve thread, one member asked about the possibility of using commission to create incentives for sales in the AEC space. Most members (including myself) agree that commission-only models simply don’t work for long-cycle projects especially when many people are involved in winning and working on the jobs.  See this earlier posting on the topic.

But Michael Wong, CPSM, LEED AP, Business Manager at Tom Green & Company Engineers, Inc. (TGCE), a mechanical, electrical, and plumbing engineering firm in Austin, TX, suggested this option:

“I think the best way to address this issue is that the whole firm comes up with a formula for incentive pay based on profitability of the company. That way, the company acts as a team for all project efforts. For example, in this situation, the marketing department is not just bringing volume, but also needs to pay attention to the type of projects that are brought in. This also gets great buy-in from the technical staff to assist with marketing efforts.”

I reached Mike by phone to learn more and discovered TGCE is a practitioner of Jack Stack’s “Open Book Management” philosophy. In this system, everyone in the business is made aware of – and participates in determining the company’s business direction. Employees see how individual and group efforts contribute to company profitability, and where waste hurts.

Tom Green

Mike said the profit sharing is a major part of the compensation structure at TGCE. This helps in retention – but he acknowledges, can make recruiting engineers and other staff a greater challenge, as new candidates usually have not been exposed to this method of management and must buy-in to the true team concept. And while being a true part of the team means being able to share in the spoils, it also means that all share in the risks of running a business. Therefore new candidates must not only be seeking a job, but also a place to develop their entrepreneurial spirit as well.

Of course, personal salary information is kept confidential, but employees certainly see the entire picture – from a big picture level to the ability to access information about projects throughout the organization. “We have a report that summarizes activity on every project on a monthly basis,” Mike says. “Basically everybody gets the summary. And project managers regularly get more detailed reports on their projects, and individual team members can request any information they are interested in reviewing.”

While everyone shares in the company’s success, there still is room for individual recognition and achievement. Incentive pay, for example, Mike says is about “half and half” — “half is for things like seniority and stuff like that and half is for recognizing individual efforts.” An example of the individual recognition is that each quarter, employees vote on a MVP – most valuable player. Bonuses and rewards are calculated on a “cash” basis, so the practice does not get caught in the trap of paying out money when it doesn’t have the matching revenue.

Open Book Management has many advantages, I think, for AEC practices seeking to balance the need for individual recognition and achievement with the understanding that the group is often more responsible for a business’s success than single stars. TGCE’s approach may be one worthy of consideration in your practice. For questions or comments, Mike may be reached via e-mail at mikew@tgce.com or phone at (512)345-7793.

Neither of these acceptances directly will bring in piles of cash (if any at all).  But both represent invitation to groups where not all who wish to enter can be invited.  We like to be liked.  We especially like to be liked or admitted into  exclusive groups reflecting our values and objectives.

There is a converse principle here which I’ve started applying in my marketing approaches.  When third-party organizations who might appear to be competitors approach me to promote their organizations or explore co-operative ideas, I watch my tendency to say “no”.  Instead, I now look for ways I can help, contribute, or support the initiative.  I say “yes”.

Sometimes, I sense, at the start this approach seems counter-intuitive and uncomfortable.  “Why should I help someone who might be my competitor?” is a natural question to ask.  But genuine selflessness and co-operation creates a positive karma.  Simply put, when we say “yes” to options which take us in new and interesting directions, our perspectives are enhanced and we see opportunities we might otherwise have missed.

There, after all, is some merit behind the story of the “Yes Man” movie.  Saying “yes” opens up possibilities, creates good-will and invites growth.  (Of course we don’t need to go nuts about this:  If the “yes’ requires me to spend lots of cash and/or time, I’ll evaluate it realistically.)

Next time, when you are preparing to “chase a bid” or start a set of cold calls, consider that you might get better results by offering support, assistance and resources and saying “yes” to others.  You might just end up receiving a few “yeses” in return.

Here are some of the answers (no one is identified here as they are responding on a semi-private Listserve, but all are credible and experienced marketers):

A consultant

I don’t have resources. But I have been in the industry for many years. It depends on whether you are referring to a start up or established business. And whether there is a plan in place or not. Starting from scratch is always more costly. Maintaining is less.

On average, your marketing/bd budget should be anywhere between 4-6% of total annual revenue.

That has always been my  theory.

A marketing service provider

3-5% sounds right based on my experience. That does not include the salaries of the marketing staff.  It also does not include coop funds that you might get from vendors if you are in an industry where vendors give out marketing coop funds. The coop funds are added to the funds allocated to marketing by the company.

An architect’s marketer

Totally agree with (previous responder).  One thing I might add…..the 4% would be for a well established market….if you are pursuing a new market sector, the spending can be as high as 10%.  We create separate budgets for each market sector that rolls into an aggregate budget and we track by individual markets.

A general contractor

Check the SMPS Marketing Survey…it has some information on % of revenue from the survey.  (Editor’s note:  I believe you would need to be an SMPS member to view this.)

A second architect’s marketer

I asked this same question of my colleagues in the Mid-Atlantic a few years ago.

I found that firms had varied mixes of marketing, sales, and BD costs.  Most, however, were spending a total of 7-14% of revenue on these combined efforts (including salaries).

Another consultant

7-14% has been my experience, but this really depends on the make up of your firm (size, services, market, and geographical locations).  A great reference is Lisbeth Quebe’s book Plan It (available at the SMPS Bookstore).  The book has great information on developing a marketing budget.

Once you read these responses, you’ll understand why the snappy answer to this question, “It Depends” is really not that far off the mark.  Are you counting salary costs — especially those of principals and rainmakers — and are you considering the interface between marketing and business development in calculating your numbers?  Are  you primarily maintaining existing accounts and relationships or are you breaking into a new market?  What is the “ticket price” of a typical transaction in your business?

In my Construction Marketing Ideas book I suggest a wide range of budgets for marketing and business development ranging from 5 to 25 per cent of projected revenues.  The highest number would apply in new business development or in businesses where business development expenses are for relatively small ticket items or which (by industry standards) require a high business development expense.  (Remember, I am counting salaries, including those of rainmakers and the portion of the Principal’s time in marketing and business development) for this figure.

If your marketing and business development costs are greater than 25 per cent, I would be concerned about sustainability.  After a certain point, you will have trouble delivering enough value to your current and potential clients to justify this leel of expense — when BD costs get too high, the only businesses that succeed are operating scams or near-scams.  Of course, you may have to spend more in critical or start-up situations; in these cases, i suggest your “budget” should more be in sweat/effort and creativity than cash.

At the low end, it is unlikely you are doing even the barest minimum if your marketing budget is less than five per cent.  In this situation, you have a largely captive and loyal client base, your princples and staff are spending more time on client service than business development, and you are using the budget mainly to keep a little more new stuff coming in the door.  The lower number also is reasonable if you exclude salaries and actual business development costs, assuming these are out of different budgets.

Forgive me in advance if this topic has been posted before.

Would you be willing to share whether or not you have personally worked within or your company has established a commission-based sales environment? I know it’s rare in the A/E/C industry but I wonder if there is a successful example of this. The thought is that it will separate the real rainmakers from those who cannot sell at all. There are a lot of variables and models to choose from. I’m not necessarily for or against it. I just want to have all the facts and potential pitfalls.

Thanks for your feedback.

Several responses echoed my own.

Although obviously I am not in the AEC industry directly, I have worked on the commission vs salary issue for many years in the publishing business and also have studied where the different formats work and where  they don’t.

In general I believe commission sales is problematic for professional AEC practices especially for business development on long cycle projects (which most ICI stuff is, of course).  Where commission is the norm is within the retail/consumer marketplace — the classic “Tin Man” selling siding, driveway paving and the like.  AEC practitioners, especially seller/doers will likely rebel against models where they must live on commission UNLESS they are true owner/partners and assume total responsibility for operating the business.  (After all, in a start-up situation, the owner/doer essentially is working on 100 per cent commission because everything is his/her responsibility and there is no income unless sales come in.)

The publishing world where I inhabit lives in two places.  Many publishers recruit and pay on a commission-only basis but I’ve moved away from that model because I believe it invites an environment where the reps focus purely on short-term sales and don’t work on developing long-term relationships.  However, I do my best to set hiring criteria/standards so that the reps would only be hired if they could actually perform on a commission basis.  In fact, we have two tracks, the commission and the salary, and when the sales rep achieves quota effectively he/she is working on commission.  At that point, the rep is “free” to set working hours and conditions but (and this is the good thing) the commission-earning rep has the discipline and habits of a regular employee so attends meeting, follows procedures and generally contributes to the business as a team member rather than someone out for the quick buck.

This issue is debated back and forth, but I think unless you are ready to give true and total ownership, commission won’t fly in professional practices.

Related to this point, however, is a question:  If commission won’t work in professional practices, and there is plenty of evidence that the most important element in repeat business is the relationship between project managers and staff and the client (in other words, the technical rather than sales staff), how do we (a) hire people with strong business development and rainmaking capacities and (b) how do we “motivate” technical staff to take charge of business development when opportnities stare in their face.

For the former, I can recommend Ford Harding‘s resources.  His organization specializes in developing rainmakers and in helping companies in the recruitment a special kind of sales representative:  The person with professional practice designation who is also great at selling.

Other resources include personality testing (I like salestestonline.com), an employee-ownership and open-book management business culture and possibly some staff training and internal bonuses/referral gifts for non-sales employees.  (Small amounts of money can work wonders in this regard. For example, we have a line in our office for accounts receivable which is only staffed part-time.  Rather than allowing the calls to go into voice mail, I bribe employees with a $5.00 phone answering bonus.  I could have been “efficient” and simply routed the line to the administrative desk, but this solution engages all the employees in the office with the account collection/client service function.  It has radically improved client service and our ability to pull in cash from people wanting to pay their bills by credit card over the phone.)

Mann travelled across the country to Boston from Everett WA with some simple psychological concepts on restoring trust and reconnecting when you’ve been through “hell” in business.  I’m sure I’m missing much of his main point, but he advocates creating positive, extremely rapid, feedback.  In other words, set really quick (and attainable) wins and then recognize/reward/honor these accomplishments.

You need to create a “culture of solutions”, he says.

Elements of this culture include:

• Solutions-based employee will become promotion of choice
• They make up the company and team of choice
• Invite solutions-based people to the party over the problem-based alternative (reward!)

Mann said characteristics of solution-based employees/leaders include:

• slow the process and accurately to define the problem
• highlight current conditions over the past
• guide “blame energy’ into defining the problem
• accelerate the group toward a solution
• strongly/verbally resists a return to the problem
• maintain a solutions-based approach throughout
• reward solution-based employees

Of course, these approaches work if trust can be rebuilt but not every situation is so simple  One of our small audience group described a situation of a company merger gone bad, when managers of two affected offices located in the same community simply could not tell what would happen next.  I can see how difficult morale and change would be if bad things are happening and you don’t have any control over the situation.  What do you do if your life is screwed up by external forces over which you have little if any direct control?

The answer, I’m sure Mann would advocate, is to take charge and apply the “culture of solutions” within your area of capability/responsibility as you make (if necessary) your exit strategy from the toxic environment.

Bad things quite often happen to good people.  We need to face reality, of course, but also need to get beyond the moment and tune into the positive energy and practical hope that we can find by working co-operatively for constructive solutions and ideals.

Mann’s final thoughts (as I prepared to pack up from the conference) are:

As we rebound and ebuild, remember these four things about everyone you meet:

1. they’ve lost something
2. they love something
3. they’re afraid of something
4. they’re dreaming of something big.

Image from myredsoxtoday.com

Yesterday proved to be a much more productive SMPS conference experience.  In addition to achieving progress on a significant new initiative (too early to report here), I learned more about the strengths and weaknesses of social media and gained some powerful insights into the real challenges and opportunities of marketing staff within architectural, engineering and construction businesses.

One speaker, Sally Handley, reminded me how new marketing is within this industry – as late as the 1970s, the American Institute of Architects essentially banned advertising and assertive marketing; and then, under Court pressure, only begrudgingly allowed practitioners to advertise in the most limited manner.  Not surprisingly, marketing practices within this industry are way behind other economic sectors.

I have lots of material for future blog entries, but will conclude this posting with observations about value shaped by two parallel non-SMPS experiences yesterday.

In our final conference day plans, Eric and I went to the Red Sox/Rangers Game while Vivian headed to a retailer for some clothing purchases.

The ball game we had chosen had been “oversold” and so I needed to purchase our bleacher seats at double face value.  (Expensive, but nowhere near as bad as hockey; these cheap seats were about as cheap as the absolutely worst hockey arena seats you could get.)  We decided to walk to the stadium from our hotel, about 25 minutes, an experience in its own right, through downtown Boston.

Arriving about an hour before game time, we had plenty of opportunity to soak in the Fenway Stadium atmosphere and of course purchase a couple of expensive ice creams and water bottles.  The game started, moving initially at a slow pace.  In the distance we saw thick clouds.  They moved closer and closer to the stadium.  Then Eric noticed some lightning.  We looked at each other and without hesitation, decided, “We’re outa here.”  Down the stairs we went, out the exit (to a surprised attendant who warned us we could not return), and to a taxi to our hotel.

We arrived 15 minutes later, turned the television on, and observed grounds crews rolling the tarp over the field as the rain delay started.  We smiled.  Sure, we missed seven innings of wet baseball, the crowded and chaotic concourse which presumably would have filled with fans waiting for the game to resume, and we avoided the challenge of either walking through heavy rain or hoping to find a (scarce) taxi to get home.  By the time the game ended (with a loss for Boston), I was yawning, tired, and ready for bed at 11 p.m.. The stadium had many empty seats.  In the hotel I met someone who had given up at the fifth inning.

Vivian’s day proved to be a lot more enjoyable.  The department store she visited seemed to want to pile discount on top of discount on high quality merchandise.  When things were done, she found many items (including a couple of Red Sox T-shirts for Eric and me) originally priced at $60.00 or more selling for $15.00.  The store offered her a credit card with an additional 15 per cent discount.  (Surprisingly, initially, the store had no trouble accepting her Canadian address and lack of any U.S. credit rating — it turns out the business has an affiliation with a Canadian counterpart). The savings were magnified by the fact that Ontario now has a 15 per cent Harmonized Sales Tax.  For the price of two innings, she picked up about seven great shirts for us!

I’m not going to suggest one experience/circumstance here is more valuable than another.  We certainly didn’t regret going to the ball game, and I felt no sense of being ripped off from the expensive (abbreviated) experience.  I’m also an advocate of perseverance in marketing and relationships, so here clearly I didn’t live by these standards.  (Then again, if attending a ball game is supposed to be entertaining rather than character-building, I suppose it made a whole lot more sense to watch this game on television than in person last night.)  From the retailer’s perspective, I’m not sure if the heavy price discounting we observed is good for the long-term health of the business and it may portend more disturbing circumstances for the U.S. economy.  How much price-shopping and discounting do we really want to see for AEC services?

This morning, after a complementary hotel breakfast (one of the gifts for the problems earlier this week) we’ll head home, getting back to Ottawa this evening.  I will begin adapting and absorbing the experiences ehre as I catch up on the pile of business waiting for my attention at the office.

Tomorrow, you’ll read my first “SMPS Conference Lessons Learned” report — I’ll explore how the new social media is either reshaping the industry or is simply overhyped.  What do you think my opinion will be? If you wish, please feel free to express your thoughts ahead of time.

Play Ball!

I’m writing this posting in a dark hotel room early morning, so can’t review notes and other details.  This rather significant limitation is offset by my clear memories of the general trends of discussion:  The challenge of drawing out and developing worthy long-term relationships in areas of market priority, so when RFP and bidding opportunities arise, you are on the inside track to winning these bids.  Members generally acknowledge that you are wasting your time bidding in open competitions if you don’t already have a relationship with the decision-makers in the selection boards.  This relationship-success is extremely important, especially in the current highly competitive environment where dozens of purportedly qualified bidders can compete for even a single small job; and where (if price competition rules the day) you have a faint chance of making any kind of profit by winning a “low price wins the job” competition, especially if it is relatively small.

The next challenge is building and developing the relationships and seeing the opportunities under our noses.  This is especially apparent when practices have multiple disciplines and decision-makers, where cross-selling and information sharing opportunities “should” exist but for one reason or another, they aren’t developed.  Can current clients also tell us where to head in the future:  What if a current client wants or could use a service you don’t currently offer, but could develop on demand?

Finally, how do you measure success and evaluate progress in these initiatives, which involve sometimes extremely long sales cycles, diverse connections and changing personalities?  Worse, how do you implement effective strategies when in a downsizing environment, your resources are curtailed and you must do more with less, as panicked executives and ill-informed project managers push you to crank out multiple RFPs and proposals on the faint hope that they could succeed, even if your “go/no go” analysis suggests this is wasted effort.

Problems, problems, problems.  Is there hope in this chaos?  This is where groups like SMPS play such an important role.  Besides knowing you are not alone in dealing with these challenges, you can find support, guidance and (yes) practical relationships to help you succeed.  (The latter is especially the case when you are combining local connections with a specialized discipline, where a national or international player might work best with a qualified partner with appropriate local connections.)

Today is the conference’s main day.  Hours of speakers, presentations, and a formal awards dinner.  No free WIFI in the convention center, so I won’t be able to write and blog as freely as I’d like.  But I’ll still learn much and have stories to share in the weeks ahead.

If you are in Boston and wish to share a connection or two, you can email me at buckshon@cnrgp.com.

Craig Park

Craig Park’s most recent blog posting, “Seven Steps to Reconnect” addresses the challenges of rebuilding and re-establishing potentially long-lost relationships.

This can be hard work, but is certainly easier than cold calling (assuming of course your relationships were positive and concluded well).  Still it takes discipline and organization to achieve the results you are seeking.

I hope I’m not stealing his thunder (and copyright) by giving away the final three steps.  (You can learn the others, of course, and their context, by reading his blog).

Step #5: What’s new and what’s changed?—exploring their current situation is critical—roles, focus, and even the “economic reality” (a nice way to say “how is this recession impacting you and your business?”) because learning their challenges is the critical to moving the business-to-business business to the next step.

Step #6: Book a meeting from a meeting—after all we’re both in this for “business” notwithstanding the professional friendship that comes from shared project experience—because unless we commit to building the relationship (“How can I help you?”), and the best way to reconnect is face-to-face. So don’t leave the call without a definite, time-defined, agreement to meet. Apply same strategy to that meeting as well.

Step #7: Share information willingly and freely—nothing builds trust better than helping a client win more work—whether “relevant” technical information (good), news in their market (better), or leads for opportunities (best). Helping clients succeed is the brand of the best consultants.

Step #7 should not be underestimated.  The difference between a pushy, irritating sales representative and an effective business-building consultant is whether your communications have giving and sharing at root.  If you are just using rote techniques to pitch your services you might-as-well apply for a minimum wage telemarketing job (and never call me!)

Liz Kupcha

But who said a business start-up is easy, especially in a recession environment.  So, she reports in her blog, she picked up the phone and sought some business.  I’m not sure if the calls she made were truly cold or were reconnections with existing clients, but the excuses for “not interested” still tell us a lot about the state of marketing in the AEC community.

• “We only work for the State.” Heellloooo…have you read a paper lately? The State doesn’t have any money.
• “We don’t do any marketing.” How do you get work?
• “We’re a small firm.” Yeah and…how do you pay your employees?
• “The economy is bad so we’re not doing much marketing.” Maybe I’m the victim of misinformation but I was taught that when things are slow, that’s the time to step up the marketing efforts.
• “The phone just rings for us.” What happens when it stops? What will you do then?

Kupcha writes:

I learned that companies have their respective thoughts (as misguided as I might find them) about the “necessity” for marketing or what constitutes “marketing.” I was trained that marketing consists of various activities that are conducive to a firm securing work. Some firms will openly embrace an assortment of items within a “marketing mix” while others will focus on one or two activities and be dismissive of the rest.

I’m not going to call folks out and say they’re wrong and I’m right but quite frankly, I fear for the futures of firms that keep all of their eggs in one basket.

I agree with Liz.  The paradox I’ve observed (and I’m sure she will also see) is that the people who need our marketing/consulting services the least are the ones most likely to be willing to pay for them.  In other words, they already “get it” and are looking for incremental rather than fundamental change in their approaches, and see our advice as worthwhile.

I also hope that Liz, in developing her business, is focusing her own marketing efforts close to home with respect for existing relationships and connections.  Going out in the wild cold world is tough especially in the AEC community’s relationship-focused world.

I’ve added her worthy blog to the Construction Blogs listings.  If you are in New York, you may also find value in attending her upcoming seminars/programs, referenced here.

Lets start at the beginning.  Design and Construction Network founder Tim Klabunde called me after I sent him a free review copy of my book, Construction Marketing Ideas: Practical strategies and resources to attract and retain clients for your architectural, engineering or construction business.

Without promoting, he wrote an enthusiastic review on Amazon.com and he suggested that we host a Webinar for members of the Design and Construction Network based on the ideas in the book.

Paul Lesieur, who co-ordinates the highly effective  Rendelcrazy.com site/forum also connected with me after receiving his free review copy.  He posted an enthisastic review on Remodelcrazy.com and his own Amazon.com review.  A few days ago, he asked if I could “comp” someone to the Webinar.  The person he recommended responded enthusiastically after the event with indications of more positive business dealings.

Finally, a local contractor who had advertised with us many years ago, connected with me and asked if he could attend for free based on his previous client relationship.  It took me all of one second to throw away the rule book (advertisers are supposed to have dealt with us within the past year for the free service) and invite him to attend without charge.  Not surprisingly, he, too, is interested in developing further relationships.

Free seems to be working really well here.  I give some stuff away and get  much more in return.

But there has to be some limit to this generosity, you rightfully should be saying now.  After all, if we give everything away from free who will pay for anything.  The individuals who attended the Webinar for free certainly knew the majority were paying full price to attend. As far as I can tell, we delivered genuine value to everyone who paid the registration fee.  The late Sonny Lykos, one of my best (if alas briefest) marketing mentors, advocated that most residential contractors ditch the “Free Estimates” offer because all it does is invite price-shopping, time wasting and the giving away of your valuable services.  And there are plenty of people out there who will clear your trade show booth and your time of every bit of value, delivering absolutely nothing in return but wasted effort.

The best answer I can give to the question of Free or Fee is in two parts.

1. “Does your Free have powerful leveraging opportunities?”
2. “Is your Free based on genuine generosity or simply an excuse for marketing laziness?”

In the most recent circumstance, I write this blog and invite everyone to read it for free — along with the weekly Construction Marketing Ideas newsletter — because the time it takes and the amount of people the initiatives reach make the entire effort worthwhile.  The writing also can be leveraged and recycled.

I don’t give the book away for free to most people, however.  I sent free review copies to people I know well who could influence others and/or who have helped me out in the past.  (I also give it free to our paying advertising clients who request it, based on the principle of value added services, a fundamental client relationship and branding principle.)

I’ll certainly also speak or email briefly with anyone who connects and give them some snapshot insights into my perception of their situation.  This free advice can be truly useful:  It will be an outsider’s first impression observation and may tell you where you need to head.  Don’t worry.  I never push a “sales pitch” for any of my paid services in these conversations or emails unless in rare cases I can offer more free resources which are far greater than the selling message.

This free stuff is strategic:  It generally combines truly limited time and effort (the book is written, it costs just a few seconds to send the letter with the review copy) and it usually has powerful leveraging or payback opportunities.  It isn’t a blind and blanket invitation for abuse or brain-picking.  (The one exception is if a community or non-profit charity connects with me and seeks support.  I put away all commercial considerations and figure out how I can help.)

Free Estimates doesn’t say much other than that you don’t value your estimating time.  You want your clients to appreciate this is a real cost of business and that if they are simply looking for a price-shopping estimate they should pay a design fee (offset by a rebate if they go ahead with the work with you).  This doesn’t mean you can’t give a brief ballpark estimate to avoid time wasting all around or you can elect to provide a free estimate for smaller projects or where you have an existing, solid relationship.  But generally, you want your potential clients to connect with you for reasons other than the Free Estimate.  You need your brand, reputation, and reliability to be well-established to achieve these results.

Free works from a marketing perspective, indeed.  Just learn how to use the word and concept strategically.  You are of course free to comment and connect with me by  emailing buckshon@cnrgp.com.