Contract - September 2014 - 24

PHOTO COURTESY RICHARD POLLACK

COLUMNIST

Developing a Fee Strategy Focused on Quality

by Richard N. Pollack, FAIA, FIIDA

All too often, I hear from architecture and design firms that they have
taken a project for significantly less than what they anticipate their
services and associated costs to be. One client recently told me that he
dropped his proposed fee by 31 percent to get a project. The rationale
is often couched in language such as, "We just want to get in the door
with this client, and we'll make it up on future projects with them for
more appropriate fees."
But using that as a justification merely serves to reinforce that
designers do not make the hard choices to increase our worth and
associated compensation. In the long run, taking a low fee project
hurts the firm, and has an impact on the professional overall. If you
accept a low fee for a first project, your client will expect a similar
fee for future, comparable assignments. To reverse that approach,
designers-entrusted with the health, safety, and welfare of the public
in our work-must change the paradigm to be paid a fitting fee for
creative solutions to client's needs.
To ensure that you get appropriate fees that generate good
profits and allow your staff to be properly compensated, the firm
must establish a compensation philosophy with associated
strategies and tactics. Two very different philosophies and strategies
are: Take any project to generate revenue and keep staff busy and
the doors open, or position the firm to only pursue the best projects
and a particular client or project type.
I admit that when I founded my own firm my attitude was the
former, but over time my philosophy changed. My colleagues and I
realized that we only wanted to work for good clients and on interesting
projects. The firm's initial direction was to pursue most any project that
we learned about through commercial real estate brokers. Therefore,
we had no need for extensive market research or hiring subject-matter
experts. It was also pretty boring; a quarter of our work was helping
landlords secure new tenants for their buildings, and the remaining
three quarters included administrative and back office space for
clients such as financial institutions.
Eventually, I had an epiphany and made the decision to
significantly up our game. The new strategy was to position the firm
as an A-plus design studio competing with major firms for significant
projects and clients. Tactics included pursuing tech companies, hiring
more experienced staff, firing landlord clients, and raising hourly rates
and fees. These tactics were developed in tandem to avoid 'chicken
and egg' complications. For example, we worked hard to hire the best
new professionals even though we did not have the extra cash. To

24

grow and redirect a business, money and time must be invested-it
cannot be a minimal attempt doomed to failure.
Admittedly, it was hard to not run after all the typical types of
projects we had previously done, but we added controls to avoid
backsliding. We also developed a 'Go/No Go' policy that required a
potential project's in-house champion to fill out a business case that
included the following criteria, which was then circulated to all the
principals for concurrence:
* Is the project in sync with our firm's philosophy?
* Is the competition appropriate for us, and are competing firms
invited that we expect will submit a low-ball fee?
* Do we know the client and/or the client's representative, and do
we know that they 'get us' and our philosophy and approach?
* Do we know whether the client will select a firm based on
qualifications rather than the lowest fee?
The key override was to concurrently raise our proposed fees
for these bigger and better projects for higher-end clients. We
accomplished that by:
* Updating and prominently highlighting our front-end programming
strategy to be more in sync with a client's value proposition and
business drivers;
* Creating a graphic showing our fee as a percentage of a project's
total cost over a 7- or 10-year lease, usually only 0.5 percent!
* Upping the look and content of our proposals;
* Providing detailed fee projections showing how the fee was
derived; and
* Dramatically improving our presentations through staff training
and associated graphics (no PowerPoint!).
Using all of these tactics, the firm was able to obtain more
sophisticated, higher-level design projects; have more projects in
design magazines; raise staff capabilities; add staff and other office
locations; and most to the point, raise fees and profits.
Richard N. Pollack, FAIA, FIIDA, writes a regular column for
Contract on business practices in design and professional
development. Pollack is the CEO of San Francisco-based Pollack
Consulting, which supports firm growth and success through
improved business development, winning presentation techniques,
recruitment of top talent, business coaching, and ownership
transition implementation. His website is richardnpollack.com.

contractdesign.com

SEPTEMBER 2014
http://www.richardnpollack.com http://www.contractdesign.com
Contract - September 2014

Table of Contents for the Digital Edition of Contract - September 2014
