Natural Selection vs. Intelligent Design

No, I'm not getting into that controversy (not in this space, at least). Instead I'd like to briefly explore the genesis of corporate cultures. It's apparent that some firm cultures are the result of intentional design. Others seem to have evolved more or less accidentally, the product of mostly unconnected, random circumstances. Most firm cultures probably fall somewhere in between, but more towards the "natural selection" model.

Does corporate culture really matter? Harvard business professors John Kotter and John Heskett have conducted some of the most extensive research on this subject. They found that firms with a strong (deliberate) culture built upon a foundation of shared values outperformed other firms by a large margin:

• Their revenue grew more than 4x faster
• Their rate of job creation was 7x higher
• Their stock price grew 12x faster
• Their profit performance was 750% higher

Other studies have reached similar conclusions. That's not surprising when you consider the prevailing definition of corporate culture. It is the "sum of values, habits, and rules that influence how things get done within the organization." In a strong culture, everything is aligned towards greater proficiency in getting things done. That's not to suggest mere efficiency and productivity. Strong cultures are rooted in a core ideology that lends not only to doing things right, but doing the right things.

Here's my thesis: Cultures that have evolved by natural selection are to some degree dysfunctional because they lack alignment of "values, habits, and rules." Make no mistake, some are still successful. Consultant David Maister contrasts two cultural models among professional service firms: (1) the "one-firm firms" and (2) "warlord firms" (love that description!). Warlord firms are built around individual entrepreneurs who loosely collaborate but generally build their own domains of practice. When these individuals are highly talented, the firm can prosper--but there's usually a cost.

Warlord firms tend to be inefficient, slower to adapt to market changes, prone to internal conflict, and less effective in developing junior staff. These cultures are often exposed when there's a downturn or other change and a coordinated corporate shift in strategy is needed. Warlord firms are also notorious for divergent levels of client service, since shared values and practices are much more difficult to achieve.

One-firm firms, by contrast, are characterized by their alignment around shared values and practices. These firms are clearly the product of deliberate design and dogged effort because such community is reached only by paddling against the current of natural organizational entropy. Yet in that type of culture basic human needs are met, and this is the secret of their enduring success. People are generally more productive when they work within a principled, collaborative, structured, and nurturing environment.

There's another important facet of culture to mention here. Corporate culture is a composite of both formal and informal systems. Formal systems include strategy, policies, and procedures. Informal systems include values, attitudes, and habits. When the two are not aligned, the informal systems always trump the formal ones. That's why most strategy fails. It prescribes a new direction without doing the hard work of changing persistent values, attitudes, and habits. Thus it succumbs to the process of natural selection.

So with that background, let me suggest a few steps to creating a stronger corporate culture. You can read more about this in the article "Cultivating a Strong Company Culture" on my website.

• Assess your current culture
• Fortify your company values
• Align strategy with your culture, or visa verse
• Commit to regular communication
• Take steps to promote a sense of community
• Hire for cultural fit (this is critical!)

Particularly if your business is down, this might be an appropriate time to consider your firm culture. Does it reflect the kind of company you want to have? Does it position you for sustainable success? Are there shared values that guide all corporate behavior? If not, what changes are needed? Answering these questions may be far more crucial to your future than usual substance of our strategic plans and actions.

Escaping the Activity Trap

The Activity Trap is a common occupational hazard in our business. You've undoubtedly been impaired by it and some of you are routinely entangled in it. It's a serious problem, costing us clients, profits, and peace of mind.

So what is it? The Activity Trap is what happens when we get so caught up in the busyness of doing tasks that we lose sight of the desired outcomes. Obviously, inadequate planning is a root cause. In my experience, poor project planning is a notorious shortcoming in our profession.

But the problem of the Activity Trap runs deeper than merely shortchanging an important step of the project delivery process. It has to do with prevalent mindsets in our ranks. Most engineers are inclined to view projects as a list of tasks to be done, giving too little focus to what they ultimately need to achieve. Most architects do a better job of thinking about outcomes but are prone to neglecting the work process, so they too fall in the Activity Trap.

I know these are stereotypes and not everyone fits the characterization. But the patterns are common enough to be problematic. What are some of the costs of the Activity Trap?

• Start with rework, which according to best estimates constitutes 15-25% of our project budgets. The most common cause, according to one study, is improper sequencing of work tasks (i.e., poor planning).

• Productivity in the AEC industry lags behind almost every other business sector. We have actually lost productivity over the last 30 years while other non-farm businesses have realized huge productivity gains. Suspected reasons: Poor planning and inefficient work processes.

• According to PSMJ, the most common cause of project-related problems is inadequate planning. These problems result in financial losses, increased liability exposure, and unhappy (and often lost) clients.

• In my own consulting experience, the primary source of stress and conflict in our offices is clumsily executed projects, most of which can be directly attributed to the impact of the Activity Trap.

To say we need to do better at project planning seems too obvious an answer. The problem, however, is not so easily solved. We all acknowledge that planning is important. So why don't we do more of it when it's so apparent it's needed?

I suggest we need to get back to the basics of client focus, problem solving, and leadership. Clients don't hire us to do tasks, they want us to deliver value and solutions. They want us to understand their problems in broader perspective than just our expertise. They face strategic, economic, operational, and political needs that should demand our attention and force us out of the usual default task execution. And they expect our project managers and principals to supply the kind of leadership that transforms our task-oriented culture to one driven by service and value.

But first we need to take an inventory the real impacts of the Activity Trap. That may well motivate us to then figure out how to free ourselves from it.

The Five Rs of Superior Service

What constitutes great client service? Ultimately that's up to each of your clients to decide. So if you want to deliver superior service, first you need to ask the client what that will take. I describe this process as "service benchmarking" and you can read more about it in this article.

But there are some basic principles of great service that are pretty consistent from client to client. These are what I call the Five Rs of Superior Service. Do these well and you'll go a long way towards distinguishing yourself as a "super server."

Reachability

Definition: Obviously a coined word (hey, I needed an “R”) referring to how easy it is for the client to contact you.

Illustration: When your client has a problem or question, you can assume that he wants to be able to reach you immediately. That may be impossible, but there are steps you can take to increase your reachability:

• Make a promise to return client calls within a specific time frame (e.g., 3 hours)

• Regularly update your voicemail greeting to include your whereabouts

• Always let the receptionist know where you are and whether you can be reached

• Have backups assigned to field questions when you are unavailable

• In some cases, offer to wear a pager for more immediate accessibility

Application: This is probably the easiest of the Five Rs to excel at. But based on my experience in calling my clients and colleagues, there’s much room for improvement (at least relative to the second and third bullets). The suggestions above are a good start, but ask your client specifically how he would like you to make yourself more reachable. This might be delineated in a written client service plan.

Responsiveness

Definition: This refers to your willingness to adapt to meet your client’s changing needs.

Illustration: Most technical professionals work hard at being responsive. They readily agree to scope changes, alter schedules and shift resources, and put in long hours to accommodate their clients. But the focus is on what I call “situational responsiveness.” We often refer to this condition as “fighting fires.” Fewer firms go beyond this kind of responsiveness to make systematic changes in response to client needs and expectations—what we’ll call “systematic responsiveness.” This involves proactive and long-term adaptations to better serve clients, such as changes in work processes, systems, and policies that are client-driven.

Application: A commitment to superior service should move your firm towards improving your systematic responsiveness. This enables a consistent level of service across your organization. This will involve actions such as the following:

• Systematically uncover client expectations that go beyond the technical scope of work (i.e., service benchmarking)

• Develop "service deliverables," converting service delivery into a set of tasks that can be managed, budgeted, and scheduled like technical work activities

• Seek regular client feedback leading to continuous improvement of project delivery and client service practices

• Ensure that invoices and project accounting practices align with the client's accounting system

Reliability

Definition: Reliability is the quality of trustworthiness that you demonstrate to your clients.

Illustration: Do you consistently meet client requirements and expectations? Do you always follow through on your commitments? For example, if you often extend client deadlines, even with the client’s approval, you are not proving yourself reliable. Your reliability defines the level of trust in your relationship with the client. Without it, you cannot deliver added value. Some ways to enhance the client’s perception of your reliability include:

• Avoid making commitments that you doubt you can meet, even when the client wants it

• Treat all missed targets and mistakes as service breakdowns, even if the client appears to be okay with it

• Follow a standard, careful process for assuring the quality of all client deliverables

• Communicate on a proactive, regular basis with your client

• Offer service guarantees to your clients (these need not be terribly risky to be effective)

Application: Consistent processes and standards are an effective way to improve reliability. But resist the temptation to go too far in this respect, which can stifle creativity and responsiveness. The best way to get buy-in is to allow staff to actively participate in defining the processes that can achieve client- and management-defined standards.

Recovery

Definition: Recovery refers to the actions taken in response to a service breakdown.

Illustration: No matter how diligent you are, you will occasionally experience a service breakdown—a design error, a missed deadline, a budget overrun, a misunderstanding. This is a critical juncture in the client relationship. Failure to respond appropriately may cost you the client’s trust, and ultimately their business. But a well executed recovery can actually strengthen the relationship.

Application: The following steps typically are key to effective recovery from a service breakdown:

• Take responsibility for the problem. This doesn't mean you necessarily have to take the blame. Sometimes service breakdowns result from circumstances beyond your control. But if it's your fault, admit it. Don't make excuses; that only makes the situation worse. Even if it's not your fault, let the client know that you will take responsibility for trying to resolve it.

• Make a commitment to correct the problem. You should, of course, determine what the client desires or expects you to do to fix it. It's wise to try to understand the implications of the problem from the client's perspective. Ask about how it specifically impacts them. Then suggest an appropriate plan for addressing the problem to the client's satisfaction. And commit to follow through.

• Take steps to prevent it from happening again. This demonstrates your commitment to continuous learning and improvement, which is at the heart of true responsiveness. As mentioned earlier, simply fixing the problem (situational responsiveness) is important. But taking steps to prevent it from recurring (systematic responsiveness) is where you can really show your devotion to delivering superior service.

Obviously, there may be serious liability concerns associated with service breakdowns, which can place limits on your recovery. Keep in mind, however, that satisfying your clients is one of the best risk management strategies available.

Relationship

Definition: Your relationship with the client is not simply a contractual obligation to provide a scope of services or work products. Indeed, the interaction between the two parties should be part of the value delivered. The best business relationships are characterized by the qualities of trust and mutuality.

Application: A good relationship with the client facilitates superior service delivery, and great service strengthens the relationship. Service is not an impersonal product like studies or designs. There are no defined codes or "standards of care" for service. It must be delineated and delivered at the personal, subjective level in the context of relationship. This lack of concrete objectivity may foil many technical professionals who often find clients an impediment to "just doing the work." But those who push the client relationship to the forefront are those who truly excel in this business.

Marketing the Experience Reprised

I just returned from an extended vacation in Colorado where I lived for 16 years. Near the start of our visit I spoke at the SMPS Build Business conference in Denver. My presentation was entitled "Marketing the Experience," a topic that is near to my heart. It seemed to resonate with others also, as people lined up to talk to me afterwards. I spent over an hour visiting with some of those who attended my presentation.

While this space was silent in the days following that event, my new blogger buddies Tim Klabunde and Mark Buckshon both offered a summary of my talk on their blogs. For what it's worth, I thought I'd offer my own brief review for those who didn't attend:

The Experience Economy. What goods and services produce the highest profits? Those that deliver a compelling, valued customer experience. Think of the entertainment industry, adventure travel, theme parks, etc. Is this relevant to the AEC industry? Client research suggests it is. Over half of clients indicate that they value superior service (i.e., the experience) over technical expertise (which is considered a given).

The Value Gap. Most AEC firms just don't get it. About 80% of them still believe their technical qualifications are what distinguishes them from their competitors. This misguided thinking creates what I call the Value Gap--the difference between what clients say they value and what most AEC firms think their clients value. Closing that gap presents what I believe is the best opportunity for differentiation in our business.

Delivering the Branded Experience. As I noted in a previous post, your firm's brand is rooted in clients' experiences with your firm. The "branded experience" is characterized by its consistency, intentionality, uniqueness, and perceived value to the customer. Rare is the firm in this business (or any other) that can consistently deliver the branded experience. But don't be discouraged, because very few are even trying. The two most important steps to providing the branded experience are (1) developing and implementing a structured client service delivery process and (2) routinely soliciting feedback from clients about how you're doing and what you can do better. The fundamental goal? Make every encounter with the client a positive experience.

Rethinking business development. With the above goals in mind, how do your business development efforts contribute to the branded experience? Well, keep in mind that for prospective clients, the marketing and sales process initiates the experience with your firm. For existing clients, it hopefully builds on the positive experience you've already delivered--or perhaps serves as a course correction. The figure below illustrates a way to rethink our business development process in light of the branded experience:

Two critical objectives are reflected in this model: (1) focus on building relationships versus pursuing projects and (2) attract new business by serving not selling. I doubt you'll quibble with either objective in concept. But the real key here is that the vast majority of firms--in practice--do more project pursuit than relationship building and more self promotion than serving. That's why both sides of the sales transaction generally find it distasteful. I outlined some of the basics of a service-centered approach to business development in two previous posts, one on marketing and one on selling. Expect more to come on this general subject.

Free services or freely serving? Some attendees apparently zeroed in on my suggestion that a service-centered approach to selling is essentially an uncompensated phase of delivering service to the client. Does that imply giving away free services, something some find unethical? The answer, I suppose, is yes--to a degree. I certainly don't advocate doing anything that devalues your services (something many firms do routinely by bidding and discounting their work). Quite the opposite! Service-centered selling elevates the value of your services by demonstrating how well you'll serve the client. Think of it as offering a free sample of the branded experience.

Consider this illustration: Would you buy a car without test driving it? No? Why not? Because you're not just buying the car; you're buying the experience of owning and driving that car. Similarly, the prospective client isn't just buying your expertise, he's buying the experience of working with you. Simply describing that experience is no more effective than watching a car commercial. Service-centered selling allows the client to sample the experience, and thus make an informed choice.

So what is your firm marketing? Expertise? For the most part, that's a commodity these days. The branded experience? That's still a precious rarity.

Managing the Sales Funnel

One of the most effective tools I've found for organizing a company's business development efforts is the Sales Funnel. At first glance, it simply looks like a cute way to illustrate the sales process. But keep in mind that each stage of the funnel represents a different set of activities--and a corresponding different set of needed skills. That's where I find it particularly helpful.


There are many variations of the Sales Funnel out there, most of them more complex than mine (aren't business graphics supposed to simplify things?). In my mind, there are four basic stages of the sales process:

• Stage 1: Prospecting. These are the activities designed to generate and uncover sales leads.


• Stage 2: Cultivating. Once you've qualified the lead (meaning it's real and you're interested), another set of activities follows to gain the client's trust.


• Stage 3: Closing. These are the activities that help the client make a final decision and negotiate the terms of the agreement.


• Stage 4: Delivering. You may not think of this as part of the sales process. But in my mind it is because the client will continue to evaluate the purchase decision (and that obviously affects future sales). Plus, remember that you haven't delivered what the client bought until the project's done.

So how does the Sales Funnel help one organize business development? I use it as a visual aid to frame the following questions:

• How effective is your "sales force" in each stage of the sales process?
• Is your firm committing enough time to each stage?
• Do you have the right people in the right roles in each stage of the process?

There's a lot to consider with each of these diagnostic questions. So let's focus on just a few common issues:

How effective? One of the basic realities of any kind of funnel is that what comes out the bottom depends on what you put in the top. The biggest problem for most firms is generating enough leads to adequately fill the funnel. Most technical professionals hate cold calls and "working the crowd" at networking events. But there are other, usually more effective, ways to generate leads. Networking among established relationships, including existing and past clients, is effective when you make this activity mutually beneficial (see Tim Klabunde's article "Rethink Networking"). You can also generate leads through effective marketing (see my previous post "Marketing for Leads"), although few firms have mastered this. Bottom line: You need to be reasonably effective at each stage of the funnel to be successful.

Enough time? No matter how effective your sales strategy, you won't get far unless you commit enough time to it. Many firms attempt to develop new business with leftover time. That means their seller-doers don't spend much time selling as long as they're busy "doing." You know where that leads, especially when markets tighten. A better approach is to budget people's time for business development and manage those commitments just like you do on projects. In fact, I encourage tracking "sales utilization." Using one's allotted time doesn't necessarily mean it's time well spent, but that's still better than "waiting until I can find the time."

Let me marry the first two questions to make an important point. When firms don't invest enough time above the funnel, they will often deceive themselves by chasing a lot of RFP opportunities that they have no real chance of winning. That's like cramming stuff in the funnel, trying to go straight from prospecting to closing without cultivating the client's trust. Not only does it rarely work, but it ties up valuable business development time that could be better spent elsewhere. Unfortunately, there are few shortcuts to sales success.

Right roles? As you might expect, the most common complaint I hear is "We don't have enough people who are comfortable above the funnel." But that often presumes that the only people who can be effective above the funnel are aggressive extroverts. Consultant Ford Harding surveyed over 100 highly successful sellers of professional services and found that there wasn't one pervasive personality type, nor one approach that worked for all. The secret is to fit the right people to the right roles. Some may enjoy socializing with prospective clients. Others are better at getting valuable information from their existing contacts. Still others can contribute by writing articles or doing internet research. And some are simply more effective in other stages of the Sales Funnel.

The Sales Funnel helps remind us that selling isn't nearly so monolithic an endeavor as many in our business think. There are many complementary roles and responsibilities, so that almost anyone equipped with effective strategies and a commitment of time can make a meaningful contribution to your business development efforts.