Diagnosing the Gap

Why are architects and engineers less valued than other professionals? In my last post, I offered some pretty compelling evidence of the disparity between A/E firms and other professional service firms. The gap is apparent in more ways than simply lower fees. In talking with my colleagues (particularly those who like me have been around this business awhile) I know they just feel less valued by clients than they used to. They point to less loyalty, more pricing pressure, more onerous procurement practices, less collaboration, more unreasonable demands--to mention a few.

So how did we get here? I don't know that anyone can offer more than an informed opinion in response to that question. Here's my take:

Lack of differentiation. Fundamentally, it's the problem of the undifferentiated product. When clients have more options and see fewer differences between providers, commoditization inevitably sets in. It's a buyers market; they have the leverage and usually exercise it. And providers wind up feeling less appreciated. This trend is a natural phase in the product/service life cycle.

But what about other professionals? Aren't they subject to the same laws of supply and demand? Yes, they are. And other professions are complaining about many of the same challenges that we are facing. But they also have a few advantages that we don't (as I'll explain below).

Charging by the hour. Another factor that has contributed to this problem is our historic tendency to charge by the hour rather than on the basis of the value delivered. No doubt what we do is vitally important to society. But when we sell solutions in hourly increments it invites clients to try to squeeze out the same results (or adequate results) in fewer hours. True, we're moving increasingly to lump sum contracts, but the old stigma remains.

Greater willingness to negotiate price. Other professionals also seem less prone to negotiate down their price. Undoubtedly one reason we're feeling increased pricing pressure is that clients have learned how quickly many firms cave when asked to lower prices. Many A/E firm principals believe this practice is unavoidable if they want the work. But the best way to address client cost concerns is to negotiate scope, not price. Price establishes a sense of value. If we're willing to lower prices it suggests that we're not convinced our value matches the asking price.

Failure to adequately address strategic needs. One big advantage that many professionals have over us is that they help clients address their strategic needs. We tend to focus almost exclusively on technical needs. Strategic needs are those that affect the overall success of the client organization. They commonly relate to financial, competitive, political, or operational factors. Of course, our projects help meet strategic needs. But we often fail to make the connection. As a result, other professional firms have taken over some of the big-think, planning-oriented strategic roles that A/E firms used to fill.

I'm sure there are other contributing factors, but these seem to be at the root of the problem. So what can we do about it? That's what I want to address in subsequent posts. But the solution starts here: We have to believe we can do something about it. I see too many of my colleagues who seem resigned to accept things the way they are. It's a basic value equation--deliver more value and clients will reward us for it. You want to be more than good at what you do; you want to offer something clients can't get elsewhere. And, believe or not, that's not necessarily beyond our grasp.