This post will conclude my series on networking (although I’m sure I will return to it in the future) by saying a word about the value of these networks.
Earlier this week I heard that our largest competitor was discounting fees by up to forty percent. This is a company with a rich heritage and a successful track record, with a leadership of many accomplishments. I remember its former CEO telling me he would never discount fees. But this company has fallen on difficult times and is employing a strategy that depends on volume – like the automotive industry – has employed for years. While the strategy does drive volume there is no evidence from the automotive sector this has made for a healthier industry. The healthy companies are the German and the Japanese auto makers who resist discounting. But for a company that is selling brains, processes, networks and knowledge, the strategy is truly bizarre!
Commoditization is the number one problem our industry faces. We are under pressure from clients every day to justify fees. I actually welcome this discussion because it gives me the opportunity to talk about the ‘value add’ we bring to the table. And much of this ‘value add’ is derived from our networks. These networks that are formed over the years represent countless hours of investment in industry associations, political parties, religious organizations, trade associations, friendships and now social networks. Social networks, as I was reminded earlier this week by a member of the media who has been reading my blog, have to be built one person at a time just like conventional networks. Unless you truly get to know an individual and understand what makes him or her tick, and develop mutual trust, you don’t really have a network. You have a collection of acquaintances.
This type of deep knowledge and trust is worth more to my clients than 15 minute increments on a time sheet. Time does not begin to cover the investment that H&K, my family and I have made in the development of my networks. Headhunters understand this better than most. They bill on commission because they know that one phone call to the perfect candidate in their network is worth more than the time taken to place the call. Investment bankers operate on a commission basis because of the value of their skills and their business networks for putting a deal together. This is why lobbyists generally charge retainers and project fees.
Here is the kicker – we cannot operate like a bunch of widget makers. My colleagues in the industry have to understand our value and stand up for themselves. Colleagues that discount might win an extra contract but will erode the value of their services over time.
In the words of Sir Martin Sorrell, Chairman of WPP, “If you focus on price, you build commodities. If you focus on innovation and differentiation, you earn price premium and create brands.” I choose to differentiate H&K Canada through the diversity of our people – their networks and skill sets – and through our ability to integrate these people into best teams. There may be other and potentially better strategies but price discounting is not one of them!
Authored by: Mike Coates