Two (new) places on the construction marketing spectrum

I've just posted a couple of worthy permalinks, representing two places on the spectrum in this blog's readership.

In the first, Chicago-based Anne Scarlett of Scarlett Consulting reports in her Scarlett Letter blog on some intriguing and high level AEC Marketing issues. Consider, for example, her recent posting where she offers some thoughts on what professional firms measure in assessing bonuses and achievements.

Earlier this year, I delivered a session to the SMPS Southern Regional Conference. I met a gentleman (Greg) in the audience that works for a large, multi-disciplined engineering firm (XYZ Engineering). I don’t have their exact revenue figures, but they have multiple offices across the U.S. and abroad. We discussed how the firm is structured from a financial accountability standpoint. Apparently–rather than individual offices serving as profit centers, and rather than one big profit center for the whole firm–this firm has opted to group their profit centers according to regions.

We all know there’s no ‘one size fits all’ magic to a firm’s financial and organizational structure. We also know that it largely depends on these factors: client type and location; design and delivery philosophy; shared resource preferences; long-term business goals; etc.

Circling back around to my conversation with Greg at XYZ Engineering. He shared that there are two layers of bonuses offered at their firm on an annual basis. OK, makes sense. I’ve seen firms with up to three layers of bonuses. But this was what surprised me: Greg told me that rather than measure actual profits, these regions consider two things to measure their success: billability and net revenue. Nope, not profit. They figure if the other things are there, the profit will be as well.

Now, I can think of all sorts of reasons why good billability factors and net revenue figures might not lead to a truly profitable business. So I found it curious that this large, highly reputable firm would measure it this way.

Months later, I’m still curious, and am taking this opportunity to reach out to you, dear readers, to hear your own perspectives on this topic. If you are willing to share (anonymous is fine; feel free to send a direct message if you prefer), then I’d love to learn more about how your organization is structured financially, and how that structure is helping–or hindering–your firm in this current economy. Any collection of data will be shared in future blogs for consideration.

I wish I had read Scarlett's blog before contributing my article on Metrics for the upcoming SMPS Marketer issue. I looks like Greg's company, in measuring "billability" and "net revenue" is seeking to establish Key Performance Indicators which may be within the capability of individual employees to influence and change. On the other hand, I 'm wary of complex, two-level bonus structures; how effective are these benefits, really, and how much do they actually influence behaviour rather than become seen as entitlements.

On a different level, Paul Lesieur of Silvertree Remodeling in Minneapolis called me about three weeks ago to tell me he had partnered with Rory Swann of Servicez Unlimited in Washington D.C. to establish a new site/forum for remodelers, Remodelcrazy.com. The site is now in operation; it is early going, but a true grassroots community is developing. Here is Paul's explanation of how the remodelcrazy.com idea developed.

I'm driving around last year thinking "What a crazy business and what a crazy remodel I'm doing for this couple".

Ding, Ding I grab a flat carpenters pencil three inches long and write down Remodel Crazy.

I get back and put the paper away and four months later I'm talking to Ridgewalker from CT (editor: CT is Contractortalk.com) who I don't even know and he tells me to get an open domain name for that was available that would help promote my business.

I get my domain and remember Remodel Crazy and buy and register RC.com.

Months go by and now I'm friends with some nutcase from Washington DC and we start talking and I tell him about Remodel Crazy.com and my dream is to build a great place for all the people in our industry. One thing leads to another and we get Len involved and here it is. It was just a little dream for a guy who feels like the best people in the world, its builders, don't get the proper credit and respect. The painters, carpenters, electricians, designers, and the solid vendors and associates who make it all click. All of us, this is for you. And I mean it.

Its new, and its gonna take some work, but nobody is more ready to tackle this than the Remodel Crazy crew.

So lets kick it!

White collar, blue collar, years of formal education, or the practical experience in the schools of hard knocks and success -- this industry creates opportunities and working relationships for everyone, and the two new hyperlinks here reflect its diversity.

What really motivates?

In a fascinating book, Made To Stick, Chip and Dan Heath test some of our assumptions about communications and marketing. Consider this example:

Imagine that a company offers its employees a $1,000 bonus if they meet certain performance targets. There are three different ways of presenting the bonus to the employees:

1. Think of what the $1,000 means: a down payment on a new car or that new home improvement you've been wanting to make.
2. Think of the increased security of having that $1,000 in your bank account for a rainy day.
3. Think of what the $1,000 means: the company recognizes how important you are to its overall performance. It doesn't spend money for nothing.

When people are asked which positioning would appeal to them personally, most of them say No. 3. It's good for the self-esteem -- and, as for No. 1 and No. 2, isn't it kind of obvious that $1,000 can be spent or saved? most of us have no trouble at all visualizing ourselves spending $1,000. (It's a bit less common to find people who like to visualize themselves saving.)

Here's the twist, though: When people are asked which is the best positioning for other people (not them), they rank No. 1 most fulfilling, followed by No. 2. That is, we are motivated by self-esteem, but others are motivated by down payments. This single insight explains why almost everything about the way incentives are structured in most large organizations.

Let's read between the lines on this one because it may provide some real clues about our marketing effectiveness. If we are offering tangible material benefits, we may think we are motivating others, but are they really motivated by this stuff -- or do they simply want the soft, meaningful, and human recognition you seek, as well? Maybe we could save the $1,000 and do some good with the money.

Rewards and innovation

Alfie Kohn

I wrote about 18 months ago about Alfie Kohn's provocative book, Punished by Rewards -- The Trouble with Gold Stars, Incentive Plan$, A's, Praise, and Other Bribes. This article in The Business Innovation Insider provides an important quote from Kohn:

Q:. What type of environment is most conducive to building a culture of innovation?
Alfie Kohn: The absence of rewards is necessary, but not sufficient, to create a culture of innovation. What we also need is what I like to call the "3 C's": choice, collaboration, and content. Choice means that employees should be able to participate in making decisions about what they do every day. Collaboration concerns the need to structure effective teams to facilitate both an exchange of ideas and a climate of support. Content refers to what people are asked to do. (As Frederick Herzberg put it many years ago, "If you want people motivated to do a good job, give them a good job to do.") A workplace characterized by these three features is one where the focus is on working *with* employees to solve problems and devise solutions -- as opposed to doing things *to* employees by treating them like pets.

My perception is that the closer you get to workplace business perfection, the less important 'rewards' in the most visible sense become. (Of course there is compensation -- I don't know of any successful business that will be around for long if it doesn't fairly compensate its employees!) When things aren't quite right, rewards can act like golden handcuffs -- holding things together, sort of. In the end, of course, the business crumbles under the weight of its negative environment.

Business people must tread carefully in moving to a 'reward-free' environment. Unless the other aspects are all in place, things will collapse -- and (significantly) if your business diverges from the ideal model to the, sadly, more conventional approach, you may find, if you have built a reward-free model, your now-disgruntled employees will leave you sooner than later.

I never contracted with the commission-only publishers described in my article, and now believe that all sales employees should be offered a fair salary to start. However, I haven't quite made the jump to 100 per cent salary just yet. I will however pull up an article explaining how one very successful business person has done this, and achieved great results.