Hard Lessons

It's so much better to learn from others' mistakes

I remember when I first got involved with ASFE, almost 35 years ago. The organization's risk management consultant was a fellow named Ed Howell, a self-described "insurance game" maverick. He developed techniques to help lower ASFE members’ exposure to the frequent, severe negligence claims that made professional liability insurance unavailable to them. Bringing limitation of liability to design and environmental professionals was Ed’s idea. In fact, the whole concept of loss prevention -- a euphemism for litigation avoidance -- came from Ed.

I can remember telling other engineers about Ed Howell's concepts and the success ASFE members experienced by becoming actively involved in risk management. They would shake their heads and say oh so smugly, "Y'know, John, the real secret to avoiding liability problems is to perform good work," implying, evidently, that my good friends in ASFE were just a bunch of schlubs.

"Well, you have a point there," I’d say, in an effort (usually unsuccessful, then as now) to be diplomatic. But I knew they were wrong, and every now and then something would happen to prove that point, sometimes with all too much impact.

A mentor of mine was a well-known structural engineer who practiced for 35 years without even the hint of a claim. Then one day, a partially completed building collapsed. He wasn’t the structural engineer of record; his partner was. And, truth be told, his partner had done nothing wrong. The collapsed building was the third to use the same set of architectural and structural plans, and the prior two were constructed without incident. But not this one, not with 14 workers dead.

Be Careful What You Sign
The collapse was a disaster for which someone clearly had to pay. Would it be the contractor whose foreman openly admitted that he had been erred? No. The contractor was the company that had employed the dead and injured and, as a consequence, its liability was limited to whatever sums workers’ compensation insurance paid on its behalf. So, who was left? One of the parties was the structural engineer, whose first claim, occasioned by a somewhat innocuous document he should not have signed (“everybody signs these”), cost him everything. “Engineer Negligent in Death of 14” the headline read. And just so you know, his financial liability was not limited to what professional liability insurance would pay. He learned the hard way that, as a licensed professional, he was personally liable every time he signed his name, even for documents other than plans and specs.

Learning about risk management the hard way is unpleasant, to say the least. It’s so much better to learn from others' mistakes. And that’s where ASFE really broke some ground.
To this day, I remember the gasps that filled the room when Bram McClelland – a big, bold Texan and the father of off-shore geotechnical engineering – stood before his peers and related the story of how he had made a serious mistake -- one that had nothing to do with the technical aspect of his business. It was, he said, "hubris" and "a failure to apply personal diplomacy."

Bram apparently took a somewhat arrogant, "how-can-you-possibly-question-me?" attitude toward the representative of a client from his state’s "oil patch." The representative was questioning the fee. Bram got his fee, but he never heard from the client again. As Bram pointed out, he lost a portion of his fee, a sum that was not insignificant. But more importantly, he lost a client, and that cost him millions. "You may be an engineer,” his case history pointed out, “but never forget that you’re in the service business, too.”
I find it funny, when I speak to engineers about risk management today, that so many still don’t have a clue of what it’s all about. Their attitude seems to be that, "as long as we don’t have claims, we’re doing OK.” Oh, really? Every new client that’s attracted to your firm is a potential client for life, worth somewhere in the neighborhood of $5 million to $25 million. When that client is not delighted by the service you provide and chooses to try the next firm on the list, you’ve just lost millions.

Take Full Care of the Client
How do you delight a client? That depends on the client and the client representative. One size never fits all. That’s a principal reason why you need to communicate with client representatives and learn what you need to do to help make them heroic in their own organizations. Heroic? How do you do that? Well, one way is through expectations management, following the simple dictum, “Underpromise so you can overdeliver.” When client representatives accept your fee of $10,000 and your delivery date of August 1, they ship the information “upstairs” where it affects the budget and timing of something far larger. How good does it make client representatives feel when they're able to bring in the project ahead of schedule and under budget? When they’re able to delight their clientele? They’re delighted, of course …with you.

So what does a delighted client representative have to do with risk management? Just about everything, because a client representative who wants to work with you does not want the relationship to end. Would you? When you find the ideal provider, would you discontinue the relationship to search for someone who may be able to do it better (even though you have no complaints at all) or for less (even though you have no complaints in that department, either)? Probably not. So the more you serve the client, the more you get to know what the client wants and needs, and the more you can tailor what you do and how you do it to those wants and needs.

What if someone could outperform you, technically? What if your deliverable, while excellent, is not the absolute best? Actually, there’s no what-if about it: It’s not the absolute best. But no matter, because few client representatives are in a position to evaluate the degree of quality in a technical deliverable. Does your deliverable do what it’s supposed to? That’s an important consideration. If it does, you’re in the ballpark. If your deliverable does what it’s supposed to well, then you’re in the game. You are more likely to do well if your relationship with the client representative is such that you have a better scope of service to work with, a better schedule, and a better budget, because, with few exceptions, that’s what it takes to deliver high quality. Does what you’ve designed or recommended get built without problems? If so, you’re in the batter's box. Can it be built faster than expected or for less? Yes? Home run! And you delivered your instruments of professional service early and for less than the full fee agreed to? GRAND SLAM!

So, is risk management about technical deliverables or is it about relationships? Certainly it's more about the latter than the former but don’t for a second believe that because you have the gift of gab, your risk management worries are behind you. Other issues need to be considered, starting with the initial opportunity of the first project. First and foremost, you need to learn about the client and ask, “Do I want to deal with that client and its representative? And if I do, do I want the project being offered?” If, after careful consideration, your answer is “Yes,” great.

Saying No Can Be a Good Thing
But careful consideration is the key. You must be willing to turn down the client or client representative whose reputation is not the best, and the project that has to be performed too quickly, too inexpensively, or with capabilities or experience you haven’t mastered. Remember: Once you’re into the project, getting out may be difficult. Remember, too, that you can be the best design professional ever, but that won’t prevent people from alleging any number of things that a trier of fact wants to believe, because you have the financial wherewithal to make an injured party whole. Which, unfortunately, is what happened to that structural engineer, whose great relationship with the owner’s representative did not prevent him from signing something he shouldn’t have.

Smart firms focus on risk management -- that's why they join ASFE -- and do their best to make sure that everyone in the firm understands what it means and how to apply it for the benefit of all on every project. True: Technical proficiency has to be where it starts, but it’s only where it starts. If that’s where it ends, you have much to learn and, regrettably, you may wind up having much to teach.

This article originally appeared in the 03/01/2007 issue of Environmental Protection.

About the Author

John P. Bachner is executive vice president of ASFE/The Best People on Earth. He authors several columns for engineers and allied professionals and is a frequent seminar leader and instructor. ASFE is a not-for-profit trade association comprising geoprofessional, environmental, and civil engineering firms, design/build contractors, and educators.

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