IPD and design-build contractors should negotiate a trusting relationship, not merely a deal. Of course, contractors must focus on the client’s immediate issues of the project in question. This was discussed in the previous Garrison Report #2013-10: What Contractors Must Do to Compete Successfully. But for negotiations to be successful, there is a need for trust between the parties. More important than the deal is the building of the long-term relationship, and that can’t be achieved without trust. The benefits of repeat customers are immense, so how do we build trust for the long term?
The process starts with understanding that you can’t build a long-term relationship without establishing trust. A long-term relationship is a client relationship versus a transactional customer relationship. My favorite definition of client is “someone under the protection of.” This means a contractor in a client relationship must place the client first. It’s your responsibility to protect the client. If you think that’s asking too much, ask yourself how long you would keep your doctor, attorney, CPA and financial planner if you didn’t think they were protecting you? So why should a contractor-client relationship be any different?
Maybe one of the most difficult pills for a contractor to swallow is to tell the client they aren’t the right contractor for a particular project. Contractors may ask, “Why should I give up the work?” The answer is simple. You need to do what’s in the best interest of the client. When you do that all the time, you will have the trust of the client. In fact, referring someone else better qualified might be the best way to demonstrate to clients that you place them first.
I’m not suggesting that you merely roll over and surrender to clients. That could be detrimental to your company. A client relationship requires give and take. As the contractor, your role is to protect the client with regard to all construction-related issues, but the client must treat you fairly and with respect. If the so-called client doesn’t want to do that, then they are not really a candidate for a client relationship.
Let’s assume you have found a viable candidate. What must you do to develop that trusting relationship? It starts by being open and honest. The benefit is that once a client believes you have their best interest at heart, they will open up about their needs and expectations. This enables you to better understand how you can increase the value you deliver. Consistently providing superior value for a client will strengthen the relationship. When you collaborate over a period of time with the client, you will each learn more and more about each other. This added knowledge will enable both of you to be more efficient and allow you to better understand the client’s needs, which should result in increased value.
This means contractors must be forthright with regard to what they can deliver. Contractors must not overpromise. It’s easy it to be sucked in to saying what the client wants, but to gain the trust of a client as a valued partner, you need to tell them what they need to hear, not what they want to hear. When you promise to do something then don’t deliver, it’s much worse than saying you can’t do it from the beginning. When someone else can do something that you can’t, it’s your responsibility to recommend that person for the job. In creating a long-term relationship, you aren’t trying to do everything for the client, just the work you can perform at a high level. What you would like is the client to come to you first every time they have a problem because they know you will provide the best possible solution, whether you do the work or recommend someone else.
The cornerstone of building a partnership relationship is demonstrating that you understand the client’s business and needs. Unless your recommendations are focused on what’s in the best interest of the client, you will not develop the trust that this article is talking about. To achieve this level of sophistication, the contractor needs to understand the client’s business. A perfect example occurred when a contractor competing for a factory project went out and hired a lean-manufacturing consultant to review the prospect’s existing factory. The consultant’s review allowed them to reduce the size of the new factory and design a layout for the factory that was more efficient and profitable going forward. Doing things such as this increases the contractor’s credibility, which is a key ingredient of trust.
Typically there are many factors in a client’s decision. Of course, price is one of those. However, quality, timeliness, convenience, and operational costs are all factors that are often more important. Therefore, it’s essential that the contractor be able to quantify these factors to demonstrate to the client the true value proposition. Sustainability issues provide a perfect example. Instead of worrying about points for different levels of certification, worry about what initiatives will actually save energy and create a savings that justifies the investment. Many sustainable initiatives aren’t more expensive up front yet still produce energy savings. Others produce outstanding returns for the additional investment, while others aren’t worth the extra cost. As I heard a speaker in Abu Dhabi state at a conference on sustainability, “If it’s not cheaper, it’s not sustainable.” As a trusted partner of your client, you have the responsibility to guide them through the process. Your role is to help them develop the best sustainable project within their budget, instead of worrying about earning certification levels. One of my pet peeves is getting points for a bike rack where no one will ride a bike to work. This might work in Amsterdam but not in locations where the average worker must travel long distances to work.
Professor Dean Kashiwagi at Arizona State University and Director of the Performance Based Studies Research Group (PBSRG) argues that clients should not select contractors based on relationships. I agree. That may sound like a conflict with the above but not if you do what is suggested.
The initial time the client begins working with you, the client should use PBSRG’s criteria for selecting the contractor. If you are the only contractor negotiating with a prospect, then you should still act as though you had competition and follow the process to demonstrate the value you are delivering. This process includes past performance, leadership, a risk analysis and cost. However, if you do what I’ve stated above after you have been selected, your actions will generate consistently high grades in past performance and leadership. The risk analysis and cost are unique to each project. Therefore, if you want to be a true trusted partner, you need to perform the full risk analysis and cost review on each project to justify that you are providing the best possible value for the client. In essence, you should always prepare as though you had competition for a client’s projects. When contractors don’t do this, they are often surprised when a client says, “We think we will bid the next project.” And of course, if you can’t deliver the best solution, you should recommend someone else.
The scope of the best value performance developed by Kashiwagi is beyond the scope of this report, but I would suggest any contractor interested in truly being a value-based contractor should attend his four-day workshop in Tempe, Ariz., January 12–16, 2014, as it will change the way you think. To learn more about the conference, go to ksm-inc.com/best-value-conference.
The message is simple: if you expect clients to negotiate with you, then you need to demonstrate to them that you are delivering the best possible solution and provide what Kashiwagi refers to as “dominant proof.” Dominant proof is defined as evidence that regardless of who reviews it, the reviewer will come to the same conclusion. This is what value-based contractors are doing. What are you doing?
Special note: Just received the following message from Dean Kashiwagi concerning the 2014 Best Value Conference, Tempe Arizona, on January 12-16, 2014 at the Doubletree Hotel.
The 2014 Best Value Education and Training from the worldwide expert Dean Kashiwagi and staff promises to be the best ever. The expertise of Dr. Dean and his staff is unmatched. The 2014 Best Value Conference will offer the following:
by TED GARRISON
Ted Garrison, president of Garrison Associates, is a catalyst for change. As a consultant, author and speaker he provides breakthrough strategies for the construction industry by focusing on critical issues in leadership, project management, strategic thinking, strategic alliances and marketing. Contact Ted at 800-861-0874 or [email protected]. Further information can be found at www.TedGarrison.com.