Practice Management Member Conversations

Mr. Booth's response below is the de facto response of the profession, and not unexpected. It is not unusual for such discussions to be diverted to esoteric subjects and away from business.

Words like "champions," "pride" and "good design" are subjective descriptors that have little meaning in the context of a business discussion, as he said, they are personal in nature. In order to discuss the subject of the business of architectural practice, such subjects, although very important, need to be placed aside temporarily, and allow a focused conversation on the quantitative aspects of practice.

The profession of architecture is often compared to that of medicine, but in truth it is quite different. Physicians personally deliver their services directly to the consumer who derives the entirety of value in that single transaction. Architects services are never complete until the services of another group, builders, complete the transaction. The services of architects then, do not represent the entirety of the value proposition that the client is purchasing. Architects market based on relationships, then have others, usually interns, junior architects or unlicensed professionals deliver the service. The firm principals with the relationships are really brokers of the services. In fact, architects are more like car sales people than car designers or physicians.

Architects, understandably, are always focused on the magnitude of their fee, which to the owner, only represents a small fraction of the cost of the "product" they are purchasing. Even the most sophisticated of clients do not understand the complexity of design or the delivery of design services, and they do not value it as they do construction, which produces a tangible result. It is not surprising that they want to pay as little as possible for design services just as car buyers want to pay as little a commission on the purchase of a car as they can.

The standard reaction from architects to this dilemma has been to suggest that we try to educate clients about this unfair situation. Again, this is another diversion away from the subject of business. In the marketplace, educating your market has never been successful in any industry at improving pricing power nor improving profitability. There is a simple fact that must be understood. The seller wants the highest price for their product and the buyer wants to pay the lowest price. The only way the price will increase is when the seller improves his pricing power based on a limited supply, or the perception of greater value, neither of which does the profession of architecture possess currently. So the question is how can we get it?

The main obstacle to gaining this pricing power is the lack of any quantitative measure of our value, so the way to create the desired result is to shift the basis of competition back to something quantitative.....pricing. Architects aversion to price competition comes from having practiced in the context of qualifications based selection (QBS) and the devastating results of trying to compete based on price within that context. However, once the context of QBS is eliminated, the price based competition horizon will look quite different. Firms will be able to, and will have to demonstrate the actual value they bring to the building process. Principals will return to practicing architecture rather than acting as brokers and relationship managers. The art and science of architecture will become the focus of practice once again and clients will be forced to pay a fair price for the value of those services. The law of supply and demand will force firms to adopt only those technologies that truly add value, and that clients are willing to pay for. And clients will see what they are paying for and judge the value accordingly. Hence software and hardware upgrades.

Qualifications Based Selection, once thought to be the savior of the profession has become the scourge of the profession, and it is time for it to go.