The Garrison Report #2009-5


Client Relationships -
To Be or Not to Be?

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Virtually every book on sales advocates the building of relationships with your customers. Yet Dean Kashiwagi argues that buyers of construction services shouldn't award contracts based on relationships. This makes sense. Would you go to your golfing buddy for open heart surgery if he had a reputation as not that good a doctor? I think the answer is obvious. Clearly performance should be the most important factor. Saving a few dollars on the surgery if you don't survive the operation wouldn't do you a lot of good. In construction it's no different; saving a few dollars on initial construction but being exposed to all kinds of ongoing problems and added expenses in the future doesn't make sense either.

That doesn't mean the concept of building a relationship isn't critical to the complex construction process. However, what is not relevant is a relationship built around schmoozing. It's not about gifts or taking people to football games. In other words, it's not about befriending the client.

A relationship built around trust and mutual respect is much more important. How is this achieved? The obvious answer is delivering on what you promised. My favorite definition of a client is "someone under the protection of." This is the kind of relationship that is required. How long would you keep your CPA, your insurance agent, your attorney, or your doctor if you didn't think they were out to protect you? So why should your client keep his contractor if you don't protect him?

Think about how the above examples work. They probe to uncover the true problem. They don't merely respond to the most obvious symptoms or what the client or patient thinks is the solution. To do that would be irresponsible because, as experts, they have a responsibility to protect the client. However, once they understand the situation, they can offer the client the various options along with the risks and benefits of each.

For a contractor to think of a client as someone under its protection requires a paradigm shift in thinking from the former adversarial relationship mentality. But it also requires a shift in thinking by the client. Attorneys tell their clients they can't help them unless they know everything. Doctors tell their patients the more information they give them, the better they can diagnosis the problem. The construction client is no different. The more the contractor knows about the client's needs, the better it can help.

For example, the author once asked an owner why he didn't tell the contractor what his budget was. The response was, "They might spend it." Well, isn't the budget the amount you are willing to spend? It's not about spending the budget or not; it's about getting the most for the budget, and unless the contractor and design team understand what the budget is, it impossible to offer the best decisions or recommendations.

The more the contractor understands the client's needs, the more value it can deliver to the client. This value isn't restricted to construction services; it should cover the client's needs from cradle to grave. The construction cost represents about 11 percent of the total lifetime cost of a building. The maximum a contractor might be able to adjust the construction cost is 10 percent, and that's being generous, but even that amount represents less than 1 percent of the lifetime cost. Yet when owners focus on this 1 percent, they are usually ignoring the effect to 99 percent of nonconstruction costs.

If a prospect says that it needs to build a new 100,000-square-foot manufacturing plant, the typical approach is to focus on the physical plant and propose methods and materials to reduce the construction cost of the facility. Instead, why not start with the prospect's manufacturing needs - not building needs. Bring in a lean production expert to design the factory for maximum operational efficiency. This could result in a significant savings in the size of the building, therefore reducing construction costs beyond what others can do by merely tweaking the design. Further, this approach would save the prospect operating costs far into the future. Suddenly the value delivered would allow the contractor to increase its margins while still saving the client significant costs. This is the perfect win-win situation.

The relationship is necessary because without that relationship, the prospect may be reluctant to provide all the necessary information that the contractor can use to design the best possible solution. When salespeople start asking questions, most people are reluctant to give away information. But when they think of the individual as an adviser, this resistance is at least lowered.

How is this trust built? The contractor must always deliver more than promised and make the process as safe as possible for the client. To achieve this goal, the contractor may need to join associations critical to the client in order to learn more about the prospect's business. In essence, tomorrow's contractors must be experts on their clients' businesses as well as their own because this is the only way they can understand the clients' problems and deliver the greatest value.

It's virtually impossible to compete solely on operational efficiency. A contractor must instead develop a strategy that allows it to offer a service that differentiates itself from the competition. While there may be more than one way to attack a client's problem, if your solution is unique, then you can differentiate your company from the competition and avoid competing totally on price. Your challenge now is to offer greater value, which is a wonderful opportunity.

It's critical for a client to trust its contractor, but that trust shouldn't be built upon a hollow, schmoozing relationship. Instead it should be based on an objective analysis that allows the owner to trust the contractor because the contractor has demonstrated its competence and professionalism, a solid foundation for a relationship.

 

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