LMNOP - 2016 THIRD QUARTER EVENTS

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PROFESSIONAL SERVICES FEES
FOR ARCHITECTS AND DESIGNERS:

IN TOWN HALL-LIKE SETTING LMNOP PANEL TACKLES CRITICAL INDUSTRY TOPIC

Contribution from Joseph Auld, Think! Architecture and Design

The LMNOP NYC September 20th program turned into exactly the lively discussion I was hoping it would be. “Professional Services Fees for Architects and Designers” was hosted by the Global Furniture Group in their Manhattan showroom. Not only was the panel composed of esteemed experts talking about issues that our industry faces on a daily basis; the discussion evolved into a town hall type debate, where the audience participated, varied views were presented and argued—and some possible solutions were discussed.

A panel of professionals helped elevate the dialogue.
John Fontillas, Partner, H3 Hardy Collaboration Architecture
Jennifer Meyer, Global Project Director, MetLife
Iris Montan, Project Manager, Prudential, Cushman & Wakefield
Terrence O'Neal, Principal, Terrence O'Neal Architect LLC
Ritu Saheb, Real Estate Developer/Architect, RS/RE Development

Jennifer Graham, President and a founder of LMNOP NYC, began the program by providing a framework for the evening’s discussion. She delivered an overview of the basics of fee structures and how the market can affect compensation, effectively establishing a common place for the audience and panelists to engage in a healthy conversation.

As the moderator, I had the honor of following her prudent introduction by presenting a number of hard-hitting questions to our panel. As a result, we highlighted several subjects that directly referenced the evening’s topic, including project management, global impacts, and questionable but common business practices in the building and design industry.

The Role of the Project Manager
Early in the evening, we discussed the role of project management firms, which are at times viewed as entities that can eat into a portion of professional fees. They were described as “somewhat taking responsibilities away” from architects. However, in recent years, especially as the industry becomes increasingly more complex, project managers are perceived as providing an important service, one that architects appreciate and find to be complementary to the project team. The panelists seemed comfortable with the architect/PM relationship, yet realized that it meant losing some control over the process.

Larger Factors in Play
Construction costs and the real estate market are additional factors that can have an effect on professional services fees, although it is difficult to control and prepare for these kinds of market forces. During the evening, panelists and audience members described scenarios where, for example, the volume of construction or the manufacturing of sheetrock in China had impacted sheetrock costs in America.

Such global impacts have the potential to eventually affect professional service fees. The panel concluded that there is little that an individual architect can do to change factors playing out at such a large scale.

Loss Leader, Good Practice or Not?
The audience was particularly excited about one subject: the concept of taking on work when the fees do not cover the cost—in the hope that this will result in future commissions. The business term for this practice is “loss leader.” I have personally witnessed this practiced many times in our industry. Unfortunately, participants in this night’s discussion could not answer just how successful loss leader is in generating additional income, nor how harmful it is overall to our profession.

Why Having a Background in Business Matters
Perhaps the most telling moment of the evening was when I asked the audience, “Who has had any business training?” Only a few audience members raised their hands. I found this troubling given that many senior staff members were in attendance in the audience and on the panel, including numerous principal level persons.

"Architecture is a business, and the professional aspects of a practice need to be treated like any other business."

I believe that if architects took courses in basic accounting, management, economics, human resources, and marketing, we would see a general increase in fees, salaries, and profitability. Our businesses would run more efficiently, and the architect’s share of fees in a project would increase. To increase “our share,” we have to educate ourselves in basic business practices. The result? Responses to RFPs would include “healthier” numbers. Similarly, our “per hour” fees would increase, ideally, in line with those of our engineering friends and specialty consultants.

Getting Outside Our Comfort Zone
In our industry, the topic of professional services has been a prominent issue for some time. It should be front and center for architects in the future, too. Furthermore, why are we only talking to our peers about this topic? We can look to other industries to learn how fees are calculated and compensation is distributed. Much can be learned from mining the knowledge of other professionals, instead of rehashing what architects already know.

Increasing our understanding of basic business practices has the benefit of increasing our comfort level with these issues. The objective is to reach the point where we are as comfortable discussing business reports as we are discussing the next Frank Lloyd Wright or Le Corbusier.

I want to thank John, Jennifer, Iris, Terrence, and Ritu for their contributions and insightful comments. My gratitude also to Global Furniture Group for hosting the event and to Jennifer Graham and LMNOP NYC for including this topic in their annual lecture cycle.

Michelle HillComment