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608: Is Regulation Killing Innovation in Architecture? with Rion Willard | Otter.ai

608: Is Regulation Killing Innovation in Architecture? with Rion Willard

Enoch Sears35min

Speaker 1

00:00

To raise your fees. The tools that you should be looking at are marketing and sales. Hello and welcome to the Business of Architecture. I'm your host, Ryan Willard, and today I'm going to be taking a look at some of the reasons why regulation of function in the architecture profession is problematic as well as advantageous to us as a profession and and ultimately, why it's a difficult strategy for us to depend on in relation to a the big problem that we're dealing with in the profession at the moment, which is to do with low salaries and low fees. This episode is sponsored by Smart practice, business of architecture's flagship program to help you structure your firm for freedom, fulfillment and financial profit. If you want access for our free training on how to do this, please visit smartpractice method.com or if you want to speak directly to one of our advisors about how he might be able to help you, please follow the link in the information we are looking for architect developer stories for the Business of Architecture podcast. So are you an architect developer with valuable insights to share? We're always on the lookout for passionate voices in the industry to join us on the Business of Architecture podcast. If you're ready to share your journey, lessons, strategies with our global audience, we'd love to hear from you. Reach out to us to explore being a guest on our show and help inspire other architect developers on their path. We'd be interested in hearing your story, whether you're at the very beginning of your development story, or whether you have $100 million portfolio of projects already in the bag, completed, we'd like to hear from you if you're working with the developers, or that you've developed a number of small houses, or you're working at a larger scale. Now, recently, there was the president of the Riba made a statement about the culture of low fees long hours in architecture. And unsurprisingly, this was met with a lot of commentary on LinkedIn and other sorts of journals and places. And Enoch and myself, we did a conversation with both of us, kind of discussed some of the elements of it, and I thought I would continue that conversation here as well, because it's really the thing that we are dealing with as a profession at the moment that is of the utmost urgency. The current issue is it's not just in the UK, right around the globe, that the return on your investment, let's say, for studying architecture and then becoming a professional architect in the working environment, is financially difficult. And there's lots of reasons why it's financially difficult. The number one being is that the salaries that people are paid are very low compared to the amount of investment time that they put into this work. I would argue that the real reason you know why this why any kind of conversation that we have about diversity and inclusion and equity in the profession needs to be following a conversation around fees, because the fees and raising our fees and charging proper amounts of money are the governing force for what dictates people's salaries. And you know, we've got this very difficult scenario where the fee, or the salary, if you like, of a graduate architect or recently qualified architect, compared to the living wage, they're not too far off, and it can become a very difficult existence, and it's Just unappealing, and certainly unappealing for people from different, diverse backgrounds, in order to engage with the with the with the subject, with the topic matter, to make that kind of financial investment and then for it not to yield an overwhelming result, it's like, Well, why would I do that? There are other professions. There are other routes that are going to be far more financially beneficial. I know I hear all the time people will say to me, Oh, we don't do architecture for the money. We don't do it for the profit. We don't do it for all these sorts of reasons. And my message by rallying cry is that we should be doing it for money and for profit, and that actually, profit and money are great markers of agency and with wisdom and architects to the best people to have money because they'll do good things with it, that. And it's the, you know, lot of money and the wisdom around design and where to be put in it that's a great. Combination. So to ignore the financial aspects of our careers is really, really dangerous and grossly irresponsible attitude to be taken. And certainly, if you're running a business, then you have a responsibility to be making profit. Profit isn't greed, okay? And I really advise people just to make that distinction very clear in their own minds, the profit is not greed. It is a necessity for running a business and for you to be able to invest back into your team, invest back into innovation, invest back into design, invest back into yourself and to provide a good lifestyle for yourself and your loved ones that profit is an absolute fundamental of doing that, and the failure to protect and to create profit in your organization is grossly, grossly irresponsible. We're not talking here about massive corporate greed that we might see in the large behemoths of business, where you've got billion dollar businesses and corporate CEOs taking 10s of millions of dollars and pounds home in their compensation, and then, you know, creating gross negligence throughout the rest of the of their organization. That is a very, you know, a kind of thin slice of business. And what we're discussing, and it's not to be conflated with, you know, architects running their businesses and ensuring that they're getting profit margins of at least 20% okay, so that should be, really where we're aiming, and it's a very reasonable amount. And, you know, ideally here at Business of Architecture, we encourage all of our clients to be aiming for a certain extent profit margin. This comes up each year, and we often talk about it here at Business of Architecture, how to increase your fees, like, what are the kind of things that we can be coming up? So this is outline some of the, some of the problems that will often hear or come across. And clearly, there's no shortage of articles that are written on the low salaries of architects. In the previous conversation, Enoch and I went into a lot of a lot of that. But off top of my head, I know, if I look at the RBA salary guidance reports, a architect with five years experience is averaging around 36,000 pounds in the UK, the living wage, I believe, is about 27 so you know, it's not a it's not an enormous salary, it's not an opulent lifestyle. For sure, if you're living in a major city, that's going to be quite a challenging amount of money to be living off, certainly with the kind of inflated rent prices that we're seeing across the somewhere like London, for example, where, you know 1200 quid, 1500 quid, is going to be not getting you an enormous amount. Okay, so you know, there's a there's a lot of investment that's gone into getting that kind of salary, and the remuneration for it is poor. We also then look on the business side of it, where the average sole practitioner in the UK is taking home 25,000 pounds that have a overall turnover, about 50 grand, and 25k is, I mean, again, that's under the living wage. It's absolutely terrible, terrible amount of money to be living off from very, very difficult, and you basically we have to be living like a student, which is not uncommon, sadly, with people running their own design and architecture firms. So that's the financial aspect of architecture that's kind of always been a long, persistent complaint. Again, in the US, it's a similar sort of story. The numbers are typically higher just because the economy is much more powerful in the in the US. But nevertheless, if we're in a city like this in New York, you know, a salary for an architect of 40, $50,000

Speaker 1

09:26

or maybe 6070, and that's going to be, again, that's going to be a tough amount of money to be living on in somewhere like here. And we see quite, a quite a range of divergence in people's fees. The other complaint, uh, or problem that we see in the industry, uh, certainly around fees and and salaries, is, well, you know, we're being undercut. We're being undercut on price all over the place, in the UK, that we see a common. Complaint is that we're professionals, architects, we're professionals, and we're being undercut by unregulated, unprofessional, unlicensed practitioners of something who are producing a very low quality service, which people are buying. In many cases, consumers are regretting. They're purchasing the decision afterwards, and they're left out in the lurch, and they're not able to do anything to kind of get recompensated for it, and they perhaps wish they should have had an architect. So what it means is that these service providers, they've got a much cheaper alternative for doing something, and even a lowly priced architectural service can't compete with this kind of market. We also see this in America. We see it on the Now, America has got a slightly different scenario, where that you require an architect's involvement, or a design or a construction professional stamp on buildings over a certain size, depending on what the state it is, or certain size and complexity. But we also see again, architects losing out to work or being undercut by Guess what? Other architects, and we see architects losing out to other services and other businesses who are providing something different or a lesser quality of service, but it's it's cheaper. So the possibility I want to kind of envision here is a profession where there is more examples of financial abundance, where salaries can be very high, where businesses are able to be turning 30% profit margins, an industry Where the professionals are well respected and it's a desirable profession, and it's well remunerated right across the board. We see that here Business of Architecture, we've got a number of clients who, you know, they're what they've been able to create and take home. It's not uncommon for us to be seeing business owners with, you know, quarter of a million to half a million dollars worth of salary in the UK, and typically, quite a bit less. And I'm, again, I'm really keen to see and hear from UK business owners. So anyone who is listening to this, and if you're earning a very decent six figure salary. I want to hear from you, because I want to have more examples of this where I know that it happens in, you know, larger firms. We know someone like Patrick Schumacher famously was taking home 5 million pounds. So that's a kind of Stark attacked extreme case. And I know that there are firms in the UK, certainly in the high end residential sectors, who are bringing home very desirable pay packets. And if we look at the AJ 100 you can kind of start get a sense of their sort of turnover of some of the larger, larger firms. So the possibility here is that there is a profession which has the potential to be very well remunerated and very well paid. One of the things that often comes up in this conversation is the need for regulation in the profession, and I'm going to just have an air of caution around this incessant desire that I hear all the time about we've got to regulate the we've got to regulate the function of the architect. And I'm not against it, as there are some brilliant benefits to doing it, but we've got to be very cautious with it. And if you are a business who is struggling with low fees. It is not a strategy that you can count on today for raising your fees. So one of the pros of having a Regulation A function of the architect, is that it would mean that there is guaranteed work, or this is the idea the regulation for the consumer, meaning they have to have an architect involved on the project. Means that there should be a study stream of projects, meaning that, well, we don't have to market ourselves and be aggressive in our salesmanship. We don't have to think too much about business development efforts. And there's a steady stream of projects providing financial stability. And of course, this means then that this would encourage more architects to remain in the industry profession, or it would allow more people to come into the profession as well. We might also see that it elevates professional status, so the mandatory involvement of the architect will then enhance the. See value of us and reinforcing the architectural role was a critical player in the built environment, and along with that, it kind of starts to foster respect for the profession and ensures that architects maintain kind of central and pivotal role across the physical landscape, and of course, having regulations where architecture involved, the highest standards for the built environment surely would go up. So ensuring architecture involved in all regulated projects then raises the bar for design safety functionality, which then benefits both the industry and society at large. For the consumer side, safety and quality assurance, then is raised because architects are bringing in their design expertise or making sure that thoughtful execution is being, you know, is being brought forth. This will reduce the risks that often are seen in construction projects. You know, there'll be a high level of compliance, a lower level of substandard construction, and there's a longer term value that can be deployed into the the built environment. And certainly we might see this in certain things like sustainability and a higher level of design and esthetics and just general overall functionality is being brought to the built environment. So quite compelling on the on the surface of that, and I think from the you know, a lot of architects will will cite that as an argument that would eradicate the alternatives. Okay, so the the unregulated, unlicensed professionals who are undercutting on prices. Now, I'm going to say that again, whilst there's some kind of good benefits here to there, and that all sounds quite compelling. Some of the issues that we'll see with regulation is going to be that, certainly for the consumer, we get higher costs. Okay, and often this argument about getting rid of the unregulated practices is really we're digging around in the lower end of the market in the first place. So if we're talking about economically sensitive clients who are looking for a cheap alternative, then being forced into using an architect now means that they're either going to not do any work at all because they've got smaller budgets, and they're now priced out of being able to use architectural services, there's going to be additional cost borne by the architects to comply with further regulations, which which then passed on to the consumers and making all projects more expensive. The the regulations then reduce innovation, and they reduce the availability of availability of alternative or something innovative coming from a different business.

Speaker 1

18:21

Um, angle, it puts us as architects in danger because it become over reliant on mandates. So regulations requiring architects might actually reduce the profession's incentive to innovate or differentiate. It can also end up commoditizing architectural services, reducing differentiation. And you know, there's, there's less differentiation between low and quality practitioners. And this will, we will see. What that means is that there still will be this undercutting of professionals that will happen in any kind of market. Okay, so there's still going to be the losing out to other professionals who are going to do it for cheaper. There will also be pushback from other professionals, engineers, designers, who might lobby against such mandates, which would cause various types of friction. The public perception of architects could also suffer if the regulation is seen as protectionist rather than value driven. There's also other concerns about administrative bottlenecks that could be produced, and certainly, if there was, you know, an under supply of architects in particular areas and under demand, then, you know, again, it just leads to poorer quality services being done. I think it's interesting to consider, certainly for smaller, simpler projects, the mandatory architectural involvement might not actually add that much significant value, which will then. Lead to more frustration of the perception of over regulation. And again, this is the sort of thing that would end up deteriorating the public perception of the architect. My main issue though, with the regulation of architects, and again, as I said, there's some really great things about it is in terms of raising our fees, I don't see it as a good strategy. So often when we're talking about the regulation, we're often looking at this lower part of the market. And clearly at this lower part of the market, the high touch architectural service is not a great fit in order to be able to get something which is meeting the the economic needs of this part of the clientele, there needs to be a kind of innovative business solution which is able to be scaled and is high quality, that can then be distributed and rolled out to people, to kind of force people into doing a High touch architectural service while, yes, there's going to be a great kind of product at the end of it, if it is so price sensitive, which everyone is saying all that was why we're losing we're losing out. Then it, it's, it's problematic, because either the the market can't support the kind of fees that we're looking for, or they just choose something different. And then we start to see either things, more dubious things, or kind of alternatives, or it just spurs on a different sort of way of getting around these kinds of, these kinds of mandatory regulations, which then creates an even more difficult scenario to be, to be did to be dealing with. So my thoughts around that really are that, as you know, an architect of traditional architecture service that to raise the for your fees, the tools that you should be looking at are marketing and sales and these are enormous lifelong fields of study and endeavor. They're hugely rich, they're hugely complex, but you're running a business, therefore these two activities need to be at the heart of what you're doing. They need to be the 25% of your time if you're a business owner. They need to be there. At the core not doing so is not living the role of the business owner. Okay, so I appreciate if you've started an architecture firm as an architect, that you want to be an architect, but you're no longer an architect, because you are now legally a business owner, and you've registered this organization, so you have responsibility to do making sure that you make a profit and you bring in money. And the way that we ensure that we bring in money and profit is with marketing and sales. So these are fields of endeavor that must be kind of taken upon now, nowadays there's, you know, an enormous amount of resources of consultants and organizations that support specifically architects in developing marketing collateral, developing marketing strategies, helping with sales. So it's interesting to consider with this question of raising fees, that actually your fee is a form of marketing, okay, so your fee is actually a way of positioning yourself in the in the marketplace, so a little bit of marketing strategy and making sure that you're going after projects and clients and the demographic that can actually support your your fees. Well, that would be the first point of, you know, business intelligence to deploy to make sure that you're able to go after the rights of people who have big capital to be able to pay for your high touch architectural service. The world an art of salesmanship, learning how to deal with how to deal with objections, how to negotiate, and doing this all conversationally. There's numerous podcasts that we've done on this in detail about kind of strategies that you could deploy. But again, it's a skill set, and certainly the salesmanship skill set, which is a leadership conversation for you to be able to influence outcomes, which can be deployed across all areas of a business. That's a that's a skill, communication skill, and to invest in that and to learn about that is enormous. Had a very interesting conversation not so long ago with Paul Eden, who is an architect turned marketer, and we spoke at length about behavioral economics and the art of positioning and perception, and the kind of psychological strategies and tactics that can be utilized to be able to create value in the consumer, and actually understanding what the consumers pain points and problems are is so imperative. Shift to us being able to communicate our solutions in a very up here, in a very valuable manner, for the for the prospect we often talk about, we need to learn how to communicate our value. And what that ends up kind of looking like is us as a profession, sort of trying to batter prospects with his reasons. Here's all the reasons why you need to have an architect or that. It's kind of we're talking very technical about things that are interesting and are of interest to architects. But when we fail the first step, which is just to meet the prospect or the client with where they are at, what are they looking for, what are their current problems and pains? And that is a skill. That's a skill of marketing. It's a skill of sales, in being able to articulate these problems and paint so I'll finish up here with some of the things that some of our clients have done, some strategies. As I said, my main point really here is that regulation change has some advantages. It could be very useful in some circumstances, but I don't want it to be a strategy that architects who are struggling against cheap competition can count on today. Okay, it's not we, you know, it's not going to change anytime soon. It's very admirable if you want to advocate for it and campaign for it, but it's not a strategy that you can count on today, and it's not also conclusive that it would produce the desired effect. I can only recount here my personal experience of working with hundreds of practices around the world that have struggled with losing work to cheaper alternatives, and the things they have done to improve the fees. So the first thing is that they make changes to their client acquisition approach, and this might include developing new marketing, informing the public about the virtues of hiring an architect in a thoughtful manner, and that's often discussing about the kind of problems that might occur.

Speaker 1

27:03

It often involves understanding the problems of the prospective client, what they're what they're dealing with, the reasons why they might be stimulated to start with a project. So if it's a commercial client, understanding their broader business agenda, the things that have been causing operational difficulties, a loss of profit, their stresses, their strains, their issues with hiring and actually becoming an advocate and an ally of that profession becomes massively valuable, and it's the place where We can start to enter into a higher level conversation about the where the architectural solution comes into it. Architects, we have an amazing ability to kind of visualize and strategize, and in many cases, the the buildings that we're creating for other organizations are fundamental components of their operations, so to not get involved in those higher level strategic conversations of another business ends up making us more vulnerable to just being a commodity to provide some drawings, and this, again, is a kind of constant frustration On the profession learning how to deal with price based objections in structured conversations. So again, this is selling a negotiation and utilizing a reliable framework that they've practiced until they are competent with it. So this literally means listing out hundreds of different objections that you get for why you are about to not win a project or to close a deal. And then using our kind of proven sales framework for dealing with these objections, going through them, and practicing those conversational techniques until they're embodied in you, and then start using them again, we see a lot of difficulty with negotiation in the architecture field, because most people are just sending out proposals and emailing stuff, and then there's no ability to deal with the objections. Or we just hate the whole idea of the, you know, the objections, or we don't understand where the objection has come from, and we haven't been skilled in the conversation to invite it earlier on and then inquire about it, etc, etc. We've seen other clients who have created new service offerings that remain profitable for them and accessible to a market. Certainly, if they're focusing on a lower income or very price sensitive markets, they might have partial services or diagnostic services or advisory services. So that might be, you know, an hour of consultation, or it might be a downloadable project planning pack, but it's something which has got scale to it, and there's a price to it, and it's once it's up and running, it's. Less of a service burden to the to the architect, and it can remain profitable, and it's also massively valuable for the consumer. This would include things as well, like, you know, Off Plan drawings. You know, there's a number of architects I've seen who have been very thoughtful with the production of Off Plan, a kind of ready to go architectural plans for certain environments. People can take those and then adapt them. I was interviewing a practice not so long ago where they'd actually developed their own piece of CAD software which was on their website. And client perspective, clients could go on and actually designed something which was using a kind of modular technology. They could design their own house, and once they hit submit, they've got a set of plans and drawings they can pay for. And depending on the complexity of what it was that they had designed, the kind of submission would come back and say, Hey, actually you need to have a little bit more of an advanced solution and architectural input for what it is that you're trying to do. So it requires some innovation to be able to serve these kind of lower market, you know, price sensitive clients. I wouldn't advise that's a great place for architects to be gunning for work. I do appreciate the benefit and the importance of architectural advice going into this end of the market, and certainly in terms of sustainability and improving the built built environment, but for practices struggling with low fees right now, no, it's not good. The other thing that we've seen that's proved very successful is that practices where they're fighting for low fees, they focus on alternative markets where profits and revenues can be much higher. They focus on solving bigger problems for clients with more money and those for whom it's important to so that to serve that lower economic situation, they can use their profits in doing so. So they can be massively creative in how they choose to do this, from either pro bono work or deliberate reduce fees. Or they can become housing developers. They start to invest their own profit back into, you know, projects which where they're the drivers of it. Or they become facilitators for investment. With the increased amount of time that they can they have by having a higher level of profit, they can then become facilitators for investment to improve the economic situations of specific locations and communities. And they can also advocate much more effectively for the regulation of function with their profits, if they choose to do so, and, of course, inform the public of the virtues of hiring an architect much more easily when they have financial resources to be able to deploy in doing that. So that is all for now. I'd love to hear some more of your opinions and thoughts on the regulation of function, why it's important for architects. And of course, for those of you who are interested in raising your fees, here at Business of Architecture, we run a program called the Smart practice, which contains a number of different modules which are all orientated around some of these deeper marketing and negotiation strategies that can be deployed into a business that's all for me. Thank you very much.

Enoch Sears

33:25

Hey, Enoch Sears here, and I have a request, since you are a listener here of the Business of Architecture podcast, Ryan and I, we love putting this podcast together. We love sharing information as much as we can glean from all the other industries that we're a part of to bring it back, to empower you as an architect and a designer. One thing that helps us in our mission is the growth of this podcast, simply because it helps other architects stand for more of their value spreads the business information that we're sharing to empower architects together, so architects, designers, engineers, can really step into their greatness, whatever that looks like for each individual. And so here my my simple ask is for you to join us and be part of our community by doing the following, heading over to iTunes and leaving a review of the podcast. And as an expression of our sincere thanks, we would like to give you a free CEU course that can get you one professional development unit, but more importantly, will give you a very solid and firm foundation on your journey to becoming a profitable and thriving architect. So here's the process for that. After you leave this review, send an email to support at businessof architecture.com let us know the username that you use to leave the review, and we will send you that free training. On the training you'll discover what 99% of architecture firm owners wish they would have known 20 years ago. Hello.

Speaker 1

34:59

Listeners, we hope you're enjoying our show. We love bringing you these insightful conversations, but we couldn't do it about the support of our amazing sponsors. If you're a business owner or know someone who would be an excellent fit for our audience, we'd love to hear from you. Partnering with us means your brand will reach over 40,000 engaged listeners each month. Interested in becoming a sponsor, please send us an email at support at businessof architecture.com the views expressed on this show by my guests do not represent those of the host and I make no representation. Promise, guarantee, pledge, warranty, contract, bond or commitment, except to help you be unstoppable. You.

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