Risk Management

When someone uses the term risk management the first thing that comes to my mind is insurance. There are other types of risk as well. Two such risks we face every day as remodelers are the financial and relationship risks we encounter by not being upfront and honest with our clients.

The most obvious way to avoid this or any type of risk is to not accept any work. But without work, we would all be out of business. So how do we reduce and manage the risks associated with not being forthright? We do this by being upfront about three things: education; budget, and process.

Education
With the advent of the Internet and the proliferation of cable TV programming, it is extremely easy for consumers to get information — and misinformation — about the design and build process and the products and services we offer. If we rely on our clients to educate themselves through these sources, our risk increases. They will have expectations that are not realistic. We have to educate our clients about goals and objectives, timelines, process, and budget. This upfront education is essential in reducing risk. So we take as much time as we need to accomplish this.

Budget
Talking about money and budgets is intimidating to most clients. Most clients don’t have any idea how much remodeling actually costs. Even if they have remodeled in the past, the cost of the same remodeling project today has escalated in price. In talking with clients, I like to use the example of a car. Unless you have purchased a car in the last two or three years, you don’t know that the cost of a new car has increased exponentially. So we are very upfront about the total cost to the client, as well as our project costs.

We are very candid with our clients about our costs. We open our books to our clients. All costs and their respective subcontractors are listed. Yes, they can look at the costs and conclude that we are making money. We are not afraid to show this. We tell out clients that our profit is their insurance policy that we will be around several years in the future if they need our expertise again. Additionally, the best clients expect and want us to earn a profit, and appreciate our forthrightness.

Process
Another area where we try to reduce our risk is by stressing to our clients that it is in their best interest to have all of their selections made on time, in order to keep the process running smoothly. Letting the selection process slip is a disaster waiting to happen. A one-week delay in the beginning of the project can lead to months of delay on the back end. When we sit down with our clients, we reinforce the importance of meeting their deadlines in the selection process. We review the milestones set in our construction schedule and re-review them when they have to make selections. If they miss that deadline, we guarantee we will not finish on time.

To further reduce process risk, our production coordinator also works with the client sending e-mails three weeks out, then two weeks out and then a few days before each selection needs to be finalized.

When we talk with our clients about process, we talk about the importance of our time as well. We spend as much time with our clients as they require, whether that is an hour or 60 hours, as long as the time is mutually beneficial to both parties.

So we stress the fact that if they have to cancel a meeting (for whatever reason) just call and give us reasonable notice. This is about respect, respect that each one of the parties has for each other.

Finally, I want to thank the many people that have contacted me (either by e-mail or phone) over the last six months. I find it very rewarding to know that more than my family is reading my column.

I have tried very hard to answer all my e-mails and phone messages in a timely manner and truly appreciate talking with any and every one of you.

Michael A. Menn, AIA, CGR, CAPS is a principal in Design Construction Concepts. DCC is an award winning design/build firm that was honored as the Chrysalis State and Midwest Remodeler of the year in 2003. Menn is a licensed architect, remodeler and frequent industry speaker. He can be reached at michael@dcc-ltd.com.

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