Moving Targets: Some Industry Benchmarks Hard to Pin Down

Mark Twain reportedly popularized the statement: "There are three kinds of lies: lies, damned lies, and statistics." The phrase refers to the persuasive power of numbers, particularly the ability to use statistics to bolster weak arguments. In the midst of an election season, we see this practice on display everyday.

I confess my love of statistics--and research in general--to support the advice I give to clients. And the technical professionals I serve seem to respond to the numbers as well. They give our conclusions the appearance of being objective, proven, reliable. As a consultant, they make my recommendations seem more authoritative.

Unfortunately, research (and the statistics it produces) often is not nearly so trustworthy as we may like to think. For one thing, it frequently conflicts. Some studies indicate one thing, others point to a different conclusion. Then there's the human tendency to pick the data that best supports the point we were already trying to make (that's what Twain was referring to). The "proof" we're looking for can be elusive if we're honest.

For example, one of my passions is raising the bar for client service among A/E firms. With almost 40 years of experience in our business, I've seen for myself plenty of evidence that there's room for improvement. But having a little data to support that observation is always helpful in persuading my clients.

I had it at one point: One survey indicated that only 16% of clients gave their A/E service providers an "A" grade for service. Another showed that 88% of A/E firm clients were open to switching from their current providers, the highest percentage among the professional service sectors included in the survey. These provided the compelling evidence I was looking for.

Alas, the two consulting firms that provided those numbers did another round of surveys, with remarkably different results. In one year, the percentage of clients giving their A/E firms an "A" rose to 56%! The firm that did the survey announced in a press release that "overall satisfaction with the industry's customer service has shown significant gains." I'm more inclined to conclude that their research, based on a relatively small sample of clients, is apparently flawed.

Likewise, the percentage of A/E firm clients open to switching dropped from 88% to 54%. To their credit, this firm was more guarded in their assessment of the apparent improvement. When I contacted them about the discrepancy, they admitted that the sample of A/E firm clients (you guessed it) was pretty small. The study was really oriented more towards the other professional service sectors covered.

What to make of this? Well, if you're among the many firms that use industry data for benchmarks and guidance, consider the limits of such "objective" standards. The numbers may not be representative for your firm or market, may come with a significant caveat, or may not be that accurate. The most frequently used benchmarks in our industry come from ZweigWhite and PSMJ, and in general I trust their numbers. They draw from reasonably large samples and their medians don't shift unpredictably from year to year.

Let me offer a few perspectives to ponder regarding the use of industry benchmarks and other numbers to guide your firm:

Use medians as references rather than goals. Many firms seem happy to aspire to be average. They target industry norms as goals and let off the gas when these are achieved, even as they sell themselves as being above average. Medians are helpful to determine where your firm stands relative to the industry. They may be appropriate goals if you're deficient in some areas. But overall, don't you want to do better than average? If you want to benchmark, try looking at the top performers in the business.

Recognize the norm may not be right for your firm. Reigning in costs in a weak economy, firms often look to industry medians as guides. For example, on average, A/E firms have spent about 4-6% of net revenue on business development. I've known firms spending above that range that felt compelled to cut their expenditures. But ZweigWhite found that some of the most successful firms spent closer to 10%. Other research indicates that companies that make higher investments in marketing during a recession grow much faster when the economy begins to recover. Whatever you spend, the important metric is ROI.

Use the right formula. If you're tracking performance against industry norms, be sure you're comparing apples with apples. For example, the industry median for proposal win rate is supposedly around 40%. But most of the time when I encounter a firm doing that well or better, it turns out that they're fudging the number--including noncompetitive, sole-source proposals in the mix. That makes me wonder how accurate that benchmark really is (which is supposed to include only competitive submittals). On the other hand, I wouldn't encourage a goal any lower.

Another illustration is firms that calculate utilization differently than everyone else (backing out overhead positions, for example). That makes it darn near impossible to determine how they're doing in comparison with their peers (which may have been the intent!).

Benchmark against your firm. The most important measure is progress. However your firm might compare with the industry, continued improvement should be your focus. In some cases, that may involve catching up with your peers. In others, it will mean going beyond the norm. The most valuable benchmarks are those you set for your firm, not what other firms are doing. As noted above, overemphasis on benchmarks can result in complacency once those thresholds are reached.

Don't limit your metrics to what everyone else is measuring. I do think it's helpful to benchmark against the industry, but don't stop there. There are a number of metrics that are not common (and therefore cannot be benchmarked) that are still worth consideration. I mentioned several such measures in this earlier post on tracking BD performance.

Also, as I've written about previously in this space, there is real value in measuring behaviors. This provides leading indicators of performance to complement the usual lagging indicators. I'm currently helping a client implement a behavior-based safety process which in part involves observing and recording safety behaviors. To date we've compiled a database of thousands of behaviors from which we can deduce trends and take preventive actions.

The moral of the story: Let us all strive to use statistics that do more to reveal truth than obscure it. At the same time, we should recognize the inherent limitations of so-called objective measures. After all, we are human. And the ramifications of how that affects our business is sometimes hard to calculate. Which makes it all the more interesting!

Maximizing Your Sales Leads

As noted in my last post, most A/E firms seem to struggle in identifying enough viable leads to keep their sales funnel adequately filled. The recession, of course, makes that task even tougher. All the more reason, then, to learn how to maximize your leads-to-sales ratio.

What is a good ratio for our industry? I've never found any benchmarks on this, and with good reason: It likely varies widely by firm, service areas, markets served, etc. The important measure is to see that your leads-to-sales ratio improves. So if you're not currently tracking it, let me encourage you to do so.

Here's an interesting number to contemplate: According to a survey by BPM Forum, about 80% of sales leads are dropped or mishandled. Their study didn't focus on our industry, but do you think we fare any better? Not in my experience, in large part due to the following factors:

• Most firms have no structured lead management process

• Firms often do a poor job of focusing their efforts on their best sales opportunities
  

• Technical professionals tend to relegate sales to leftover time, which in practical terms deems it a lower priority than project work

• Most leads in our business are "long term," meaning they take months to close (and to lose our attention)

• A/E firms generally don't market well, which limits their ability to indirectly engage the prospective client--an important lead management technique

If you see the above tendencies in your own firm, take heart--your competitors face the same challenges. So the opportunity is there to revamp your lead management practices and significantly improve your leads-to-sales ratio. Below are a few tips:

Don't just track leads; track lead follow-up activity. For many of you, this raises the age-old challenge of getting people to use the CRM system. The problem with such tools is that unless they're widely used their value as corporate resources is limited. I gave up relying on the technological solution long ago (I know, a heretic) and opted for a more direct approach: Organizing sales teams that meet regularly to review progress, devise strategy, and assign actions. The accountability and collaboration that comes with such an approach can dramatically increase productive sales activity.

Develop a plan for your best sales opportunities. One of my overarching business principles can be stated simply as "fewer better." This certainly applies to how I've long approached sales. I'd rather out-work the competition on 10 solid leads than try to spread attention across 50 of them, many of which will inevitably be long shots. The main problem with the volume strategy is that it typically fails to allocate enough focus on the sales opportunities you really need to close.

No matter how many current leads you have in the funnel, be sure to give special attention to your most important ones--those with the best odds, best revenue and profit potential, most promising clients, most needed. Develop what I call a "key opportunity plan" for each that outlines the client's primary needs driving the project, the key decision makers, your positioning with the client, and critical actions needed to advance the sale.

Of course, this plan will need to be regularly updated as things progress and new information is uncovered. You can download a template of such a plan, based on the best-selling book Strategic Selling, from my website at this link.

Bring value to every conversation with the client. Since most sales leads in our industry take months to close, you need several interactions with the client to stay firmly in the competition. That's your motive, but what's in it for the client to have multiple conversations with you? Don't assume that your ability to schedule a sales call with the client (especially in the public sector) indicates real interest in meeting with you. If you want to solidify your firm's position with the client, be sure to bring something of value to every client interaction.

This is what I call your entree: Sharing information, advice, or something else of value in exchange for the client's precious time. Ideally, every meeting regarding an active lead advances the problem solving process. It's the "pre-project," if you will, where you use your expertise and connections to help the client get off to a good start--and position your firm for winning the job!

Always try to establish the basis for the next meeting. If you're helping the client, he or she should be favorably disposed to continue the conversation. But the best way to keep the dialogue going is to schedule the next meeting or phone conversation each time you talk with the client. Have a good reason to meet, of course. For example: "Let me run some numbers on that design option and look a little deeper into the regulatory issues, and how about we meet to discuss what I find in about two weeks. What dates would work for you that last week of the month?" This is a simple step that can really help you stay engaged with the client.

Don't overlook the benefit of indirect client interactions. You can only expect so many meetings with the client, and you certainly want to avoid being a pest. So how do you stay in front of the client in between sales calls? Email. That's another way to deliver your helpful information and advice, and to keep the problem solving process active.

In some cases, this will involve doing some client- or project-specific research and reporting the results via email. Yet over several months, there may not be enough such opportunities to keep the momentum going. That's where your content marketing can come in handy. When you're constantly creating and collecting valuable content, you have a ready storehouse of information to draw from.

Much like you, the lead time on many of the consulting contracts I pursue can drag out for many months (if not years). As a sole proprietor, I have neither the time nor the money to travel much to make sales calls. So I rely on phone conversations and email exchanges. When things bog down and there's not much new to talk about, I've found it really productive to stay in front of the client by emailing relevant articles and white papers.

These often prompt the client to pick up the process again in moving towards closure. In fact, I just received an email from a large engineering firm out west, telling me to expect a call this week. This came shortly after sending them links to a couple of relevant articles. We started talking last summer and haven't had a conversation since November. But I've drawn on my content library to stay in front of them indirectly over the months.

It's well established in the literature that effective marketing can substantially help you not only develop new leads, but close on them. Don't overlook it's role in maximizing your sales leads.

Generating Sales Leads

The sales funnel is your firm's life blood. Fail to fill it adequately with sales leads and you'll experience a corresponding drop in revenues. How many leads you need varies by firm, of course. Yet every firm would like do better at both identifying leads and converting them into sales.

A/E firms often struggle above the funnel, not doing enough of the sales prospecting activities that generate solid leads. Many technical professionals readily admit that they lack both the skill and passion for prospecting. But their discomfort is largely with the common caricature of lead generation--making random cold calls and glad-handing at networking events.

There is much more to successful lead generation, and a role for virtually any willing professional. Here are what I'd suggest are the primary ways to identify new leads:

Talk to your existing clients. For most firms, repeat business constitutes roughly 80% of their revenues. Obviously, existing clients are the first choice in lead generation. Yet I've encountered many project managers over the years who were reluctant to ask clients about other work. They didn't want to risk spoiling the relationship by turning into the stereotypical salesperson.

Of course, you don't have to turn into a salesperson to seek new opportunities with a client. If you're truly focused on helping your clients, that will naturally lead to discussing other needs, problems, and solutions. Still, it might be helpful to have someone other than the PM--like your designated Client Advocate--to explore other ways to serve the client.

Don't fail to ask your clients about referrals or possible leads with their peers or colleagues. Referrals are the number one way that clients learn about professional service providers. A referral also helps short cut the trust-building process with a new client. It's well documented that the best way to get more referrals (in addition to providing great service) is to simply ask for them.

Do your research. Researching clients and project leads has never been easier, yet it's still widely overlooked as a lead generation technique. The objective is to get advance notice of client needs or a developing project before the RFP is released. You might be surprised how many doors such research can open for your firm.

A friend of mine used to be the city engineer for Minneapolis. He described a situation where they had a substantial drainage and flooding problem in one neighborhood. Despite articles about the problem in the StarTribune, not a single engineering firm contacted my friend about the issue until the RFP was published. If this could happen in a major city like Minneapolis, what about in the region your firm serves?

While the internet makes market and client research readily available, it can still be time consuming. There are steps, however, you can consider to ease the burden. There are ways to have the information sent to you. Google Alerts, for example, allows you specify certain search terms (e.g., the name of a prospective client) and have relevant links emailed to you. (To avoid being overwhelmed with email notices, be very specific with your search terms!). Twitter can also be an effective tool for research and lead generation.

Mine your network. One of the best ways to uncover new leads is to draw on the relationships you already have. I mentioned clients earlier, but you have many other potential sources for leads among the people you know. Sometimes it's just as simple as talking to them.

Most of us do an inadequate job of keeping in touch with those in our network (me included). We get too busy and distracted. Besides the potential for leads, networking is valuable because it nurtures the all-important relationships we've developed through our work. It's a shame to let those atrophy.

Networking works best when you have the interests of others in mind. Don't just call people to see if they can help you, but call to see if you can help them. Share leads, news, information, and insights. Not only is that the right thing to do, but it motivates others to return the favor, producing more leads and referrals than you'll get if you focus on your needs. Check out this earlier post on networking tactics.

Make effective use of marketing. Most clients don't hire A/E firms on a frequent basis, so it can be difficult to time your contact with clients when they have an imminent need. That's where marketing comes in. You can stay in front of the client on an ongoing basis through your marketing efforts, without being a pest.

But not any marketing will do, and few A/E firms market effectively. To achieve what I call Level 5 marketing--where the client is contacting you--you need to provide valuable content. The usual self promotion rarely works in this way. Clients contact you because you've already helped them through your articles, white papers, blog posts, email newsletter, conference presentations, webinars, etc.

Level 5 marketing can contribute a substantial portion of your sales leads. I witnessed this in my last marketing position, as Director of Corporate Communications for a national environmental firm. Our content-driven marketing strategy resulted in prospective clients calling us fairly regularly. Now that I'm on my own, the majority of my sales leads come through marketing--like writing this blog.

Next week I'll share some ideas for tending leads once you've uncovered them. In the meantime, you might appreciate this white paper on online lead generation from my friends at Hinge.

Thinking Like Clients

Imagine a few of your clients deciding to start their own A/E firm. They've had a lot of experience with firms like yours, so they have a pretty good idea what's involved. But these guys don't want to start just another A/E firm. They want to do something substantially different--to create the kind of firm they wish they'd had the opportunity to work with.

What would that firm look like? How might they do business differently?

If you want to know how to differentiate your firm, sell more work, retain more customers, and increase profits, the best advice I can offer is simply this: Think like clients. Try to look at your firm and how you conduct every aspect of your business through their eyes.

Obviously, the best way to understand how clients see your firm is to ask them. I certainly urge you to do that. But there's also value in using good ol' common sense, so long as it is applied from the client's perspective. Here are a few examples of thinking like clients:

Don't call me unless you have something specific to offer. You should know how it feels to be on the receiving end of a cold call. Yet you call me out of the blue wanting to introduce me to your firm. Do you think I don't know enough firms already? If you want to talk with me, do a little homework to understand my current needs and call only when you can offer some helpful advice or information specific to my problem.

Respect my time. Sure I like you, but I like my wife and kids better and they don't expect to get an hour of my time when I'm working. If you want to meet with me, give me something more than the usual drop-by sales call. Come prepared to deliver what you promised when you called--real help in solving my problem. And don't take more time than is necessary; keep the chit-chat to a minimum. By the way, that lunch invite you thought would spare me an interruption at the office--when else do you think I get a break during the day?

Don't expect me to read your whole proposal (or report). Try this: Do a total word count for your document and divide that by 250, which is about the number of words the average American adult reads per minute. So do you really think I'm going to spend over an hour reading your proposal? No, I think you know I'm going to skim and search for the information I'm looking for. So why did you make it so hard for me to do that?

Tell me when you can actually deliver the project, not what you think I want to hear. I know this is a little confusing. I pressed you to commit to an ambitious deadline that you probably knew you couldn't make. But you said you could and made me happy for a while. Now it's crunch time and your deliverable is late. If you had said no at the start, I could have adjusted the overall project schedule--even though I wouldn't be happy about it. Now I'm in a real bind.

Don't wait to tell me about a problem until it's a big one. I don't know if you've noticed, but project problems don't usually go away by ignoring them. They get worse. I want to you to tell me when you see a problem developing so we can intervene before it gets out of hand. Better yet, anticipate when a problem might arise so we can consider some proactive steps to prevent it from occurring.

Don't just communicate with me on a need-to-know basis. I almost hate to hear from you because it's usually bad news or late news. Yeah, I'm busy and don't want to be bothered with trivial updates. But I don't like hearing about important developments and activities after the fact. That sometimes leaves me with few, if any, options for responding to the situation. Give me a chance to be proactive.

Understand my business. It's not just an engineering or architectural project; it's a business move designed to address financial, operational, competitive, or political issues critical to our success. Sometimes you don't seem to make the connection. You focus on the technical issues that you're interested in and overlook the business drivers that I need to respond to. I don't just need a designer or specialty consultant; I need a problem solver who can see the whole picture.

These are just a few of the perspectives I've gained from clients over the years. None of them are hard to understand if you imagine yourself in the client's role. If you want to raise the value of your services, try mixing more empathy with your expertise.