What (average) professionals can learn from (better than average) builders
Karen and I recently built a new home for our seachange on the coast. Well we had a builder build for us actually. No big deal for many I guess but it was for us not only because we have lived in the same home for 38 years but we have never built before.
the initial decision
Didn't really know what we wanted initially (at least I didn't) except a modern beach home that would also accommodate-and encourage- family and friends to drop in.
We soon learnt that making the decision to build was the easy part. What to build, when to build, how much to spend and who to build it for us were quite difficult and at times overwhelming decisions. We had no shortage of advice from family and friends-mostly helpful.
our first crack
We were originally attracted to a quality volume builder. We looked at their menu of designs and prices online (several times), visited their display homes (several times) and eventually found a design we (mostly) liked.
Meetings with various people in various roles from the building company followed, mostly to choose finishes and materials from selected offerings. We realised we could essentially choose from their initial offerings (representing the published prices of our chosen design), or "upgrade" if we wanted to better quality fittings & materials. We seemed to be picking the upgrade offerings and understandably the final price was starting to bear little resemblance to the original pricing ( "Jetstar" pricing?).
We received a breakdown of all the pricing line by line and what was included and what was included not in the build. When we started to have some doubts about the original design and discussed some possible changes in design it was apparent that changes:
a) were not really encouraged, and
b) if "allowed", were going to add significantly to the price and timeline.
Ultimately- and this is no reflection on the quality of this builder- we decided the designs offered weren't really going to satisfy our needs entirely. At our age we felt we really only had one crack at this and wanted to build a home we really liked with as few compromises as we could afford.
next crack: new builder and the value conversation
Six months down the track and we had to start all over but as it turned out those 6 months were far from wasted as the experience had made us focus much more on what we liked and what we didn't like.
This time we met with a local builder whom we didn't know (but knew of) and had seen their builds over many years. Our first (long) meeting was mostly all about why-whydo you want to build a new home?why now? why this many rooms? why us? etc. We also moved onto the whats-what are you trying to achieve? what do you like? whatdon't you like?
Then came the master of all what questions -what is my budget for this?
We had some questions of course- mainly the when questions (when will it be completed?), a few how (how will you construct this or that?) but I can’t remember us asking any who questions, such as who is going to be our project manager, who are the tradesmen working on our home, etc? Even though some of these who answers were volunteered by our builder we really didn't care who was working on our home so long as they produced the outcome we were anticipating.
feeling comfortable: mutual understanding
With no legal commitment but with a "good feeling" to go on (we hoped reciprocated by our builder), we proceeded to the next step which was some design drawings based on our initial value conversations and a general understanding of scope.
Karen and I were both very surprised as to how close the initial concept drawings came to what we wanted. The builder came up with some things we had not even considered but which he thought fitted in with what we are trying to achieve. We were grateful we spent a fair amount of time with the builder beforehand asking and answering many questions.
Our builder also showed us his gantt chart not just of our project but also the other projects they were working on so we could see where our project stood timewise compared to the others to allay any fears that our builder might be overstretched. A nice touch.
Off and running: terms agreed
The next phase as they say is history. Terms orally agreed to (including timing, price, payment terms, communication, etc), contracts signed, and demolition followed by construction.
Needless to say this was not a cost plus but a fixed fee contract. Sure there were processes for agreed variations and we had read all the horror stories about builders’ variations, but we were reasonably confident (hopeful?) that the considerable time spent up front with the builder would minimise the chances of any major variations and "misunderstandings".
We of course didn't know what our builder’s actual costs were-we couldn't care less-but we did know the price. (The price was higher than the original builder but was within our budget).We assumed the builder was making a profit on the build as the last thing we wanted was a builder under financial stress maybe having to cut corners, not engaging the best tradespeople-or worse still.
Of course once construction started we wanted to see the finished product asap. We were interested in the progress and spent many weekends visiting the site and looking at the weekly photos our builder posted on an online portal for us to satisfy our curiosity.
We not only talked to our builder and our project manager when on site but also the tradespeople who were often working at weekends. We formed the opinion that each of them took great pride in their work, genuinely liked working for our builder (some have for many years) and were enthusiastic about our project.
Our builder and project manager kept us regularly informed as to progress, especially if there was a delay on anything of note, but otherwise we kept out of each others way.
Nothing ever goes according to plan exactly and as it turned out we did have a couple of variations to scope and price but our builder gave us plenty of forewarning, some options to consider and we were satisfied any price increases and change of scope were entirely justified-and needed.
I don't know if there was additional scope creep although I do know there were several things we asked the builder to do and some other things our builder did voluntarily, that were not specifically included in the contract and which we were never charged for. Another nice touch
After Action Review
Our builder sought feedback from us at regular intervals as well as immediately prior to and after handover. If being picky there were a couple of minor issues but overwhelmingly we were absolutely ecstatic with our new home, the timeliness ( 1 week later than the initial date), the quality of the build and how we as customers were treated. So much so that last week we organised drinks and nibbles for our builder and his tradespeople and their partners to thank them sincerely for making our home a reality and to show them the finished product.
Would we recommend our builder? You betcha. Unreservedly for anyone valuing a quality custom build from someone who knows the ins and out of the local environment and "culture". Equally I understand that will not be important to everyone. After all value is subjective.
Lessons Learned For Professionals
So what you may ask has any of this got to do with a professional firm?
Much I think. What our experience with this builder showed us was:
- the critical importance of a value conversation(s) upfront before any commitment by anyone and how asking the right questions showed us both how much our builder knew and how much our builder cared,
- we were not price sensitive buyers-a mistake made by the volume builder-but we were value sensitive,
- we wanted something tailored to our needs-not off the shelf-even if we didn't appreciate that at the beginning,
- go with your gut feeling which came early on for us from a sense of trust and empathy,
- regular communication of the things that really matter took away a lot of our anxiety,
- going that extra mile and not "nickel and diming" us on everything additional added markedly to the trust factor,
- we didn't care about our builders actual costs nor how many hours he or his tradespeople worked on the job.We agreed the price up front and the only time we cared about was turnaround and completion time.
- outcomes and results trump inputs & activities every time from a customers perspective, and finally
- if a builder can quote a fixed fee for building a custom designed house, surely all professionals can give a price up front for their work?
Again this whole experienced emphasised for me that value is truly subjective. Not everyone will like our new home-but we are not everyone. Neither are your customers.
@ChisConsult "Influencing motivated professionals to make a difference"
This article first appeared in the Law Council Of Australia Law Management Hub and the original post can be read here.
“Pricing occurs before you start any work. Billing occurs after your work.”
While pricing has by far the greatest impact on any firm’s profit (more than managing a firm’s fixed or variable expenses) the legal profession has always been a little different to many other businesses and industries when it comes to billing. Most lawyers were brought up on retrospective billing of our services. We either relied on an antiquated Scales of Costs model or, at least since the 1980s, time-based billing. Neither of those billing models required lawyers to price, so it follows that most lawyers had very little, if any, training or experience in how to price their services or even how to sell their services to clients.
Instead, lawyers were constrained by cost plus accounting, benchmarking studies and comparisons of hourly rates with other firms. Systems training consisted of exposure to increasingly sophisticated processes to enable us to more accurately record our time to support such retrospective billing models. Indeed, most firms built their business model around these retrospective billing practices, deviating from them only when market forces (competitors and deregulation) or powerful clients demanded either a fixed fee, or, at the very least, more certainty and predictability around the cost of their legal services.
As a profession, lawyers have been fortunate that our clients accepted these retrospective billing practices where, if the fee bore any relationship to the outcome, it was a mere coincidence. Some less powerful clients still do. Any retrospective billing premised on activity rather than outcome has its obvious downsides both for law firms and their clients. No one likes surprises and, let’s face it, ‘bill shock’ happens far too frequently in our profession. Even if an independent third party deems our fees ‘fair and reasonable’, that is little comfort to a client if the client was not expecting the magnitude of the fee. Even if the fee can be extracted from the client, it does little for the lawyer-client relationship. If a client does not like our fee, are we better off knowing before we do the work or after?
The world has changed and even the legal profession is changing. While Scales of Costs have mostly outlived their usefulness and the billable hour still predominates, more and more clients, competitive market forces and even the regulators now expect lawyers to be either far more accurate in their estimate of legal costs or to provide fixed fees and up-front pricing. In my 25 years as a practising lawyer, I cannot remember ever using the “P” word – pricing – in my firms. Now pricing rolls off the tongue in most firms. Many lawyers have now had experience in, exposure to and/or education about various forms of pricing. An increasing number of firms employ or use professional pricers.
Most of us know about the deficiencies with time-based billing, even if we do not always like to admit it (for example, it rewards the slowest horse in the race; promotes inefficiencies; discourages genuine collaboration; puts a cap on any law firm’s profit). In an era when many firms are investing heavily in technology to improve internal efficiencies and make things happen quicker, it makes absolutely no business sense whatsoever to keep billing by time.
For more than a decade, I have believed in and advocated for this move to up-front pricing. As painful as it may be for some lawyers initially, mainly due to the unlearning and relearning required, it is well overdue and will ultimately prove to be hugely beneficial for both the legal profession and its clients.
A large number of firms have already made or are making the transition to non-time-based pricing. While recognising the many challenges in moving away from a business model that leverages people x time x hourly rate, firms that have embraced the change testify to the improvements in their practices. The benefits are numerous, but the major ones include:
- better and more transparent relationships with the right clients;
- a more collaborative and creative approach to finding solutions for their clients;
- improved cash flow as clients pay more quickly;
- reduced if not total elimination of cost disputes with clients;
- higher profits as you become more competent and confident in your pricing; and
- team members who are more content.
My advice to any law firm worried about pricing your services up front? Read what you can about pricing (there is a mountain of material and information out there now about pricing in the legal profession), talk to colleagues and other professionals (not just lawyers) who price their services up front, experiment (you will make pricing mistakes) and continue to learn. You will never, however, be able to become more competent and confident in your pricing until you understand the real value you are providing to your clients and then being able to articulate and communicate that value.
After all, if your client does not understand the value you are providing to them whose fault is that?
@ChisConsult "Influencing motivated professionals to make a difference"