Best practice: Remember Buffett’s adage: ‘Price is what you pay for, value is what you get’, says Roger Zogolovitch
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I recently enjoyed judging the AJ100 Awards, where the criteria was to demonstrate the ‘added value’ the projects gave to their clients. I was delighted by the level of invention that the architects showed, but disappointed that none of the architects had received any financial benefit at all from their efforts.
Having spent a long career as a developer and using my skills in architecture to my financial benefit, I find it unbelievable that architectural ‘value’ is still somewhat of a mystery or, even worse, an ‘embarrassment’ to current practitioners.
Let’s be clear – architects add value through their imagination and clarity of thought. A client’s brief is often vague and superficial; the architect interprets it to make their building. If the client went to any of the management consultants to solve the same ‘problem’ inherent in the brief, that first step alone would capture a big fee.
We analyse the site; we deal with the sclerotic planning and we gain the planning consent. Despite the fact that the RIBA gave up the planning function to the Royal Town Planning Institute, we have allowed planning consultants to use report after report to justify their fees. Remember: it is our architecture, persuasive enough to the wider public to demonstrate the quality of development, that finally tips the balance and delivers to the client the required consent.
Do we get financially rewarded for this clear confirmation of adding ‘value’? Maybe some do, if they have been working on spec, driving the project forward and investing their own equity alongside the client. Sadly, many get rewarded by being marched off the job, while the client, having got their value, either sells the site on or moves along to a ‘delivery’ team to make the project more ‘commercial’.
Financial reward in a market economy exists when suppliers can ‘monetise’ their value to their clients. This relationship is done so well by bankers and surveyors, who simply link what they do to the deal. They arrange the loan, make the sale or make a letting, creating a clear value point for the client. For both they are taking fees off the back of the transaction value. To explain this further: when a surveyor charges a fee as a percentage of the sale his fee is only charged when that sale is made. The client receives his £10 million through the sale and happily parts with £150,000 as 1.5 per cent of that sale to his agent.
We need to be able to be part of that approach. As a fundamental, we need to understand the key tool of the ‘development appraisal’ to enable us to present the added value element of our services to justify our claim to transactional fees. We need to be part of the project decision-making, a valued part of the client team, rather than endlessly discounting fees to get work.
We must make better use of our legal rights for establishing and holding onto our intellectual property. It’s what we do on a daily basis. We generate original ideas, concepts and ways of making buildings look good. We need to understand and use the EU’s simple rules for registering trademarks, designs and, when possible, patents. We need to look at those client appointments and ensure that we retain our copyright, licensing it to the project, obviously, but not giving it away.
We must change our thinking. We need to understand the client’s commercial drivers and come alongside. We should become comfortable in identifying and declaring those places where we can and do add value. We need to understand how to put fees on risk and negotiate fee bonuses as reward. We need to remember that great quote from Warren Buffett, the Sage of Omaha: ‘Price is what you pay – value is what you get.’
- Roger Zogolovitch is creative director of Solidspace