We F*cked Up ~ Observations from SXSWi

| March 31st, 2010 | , ,

“You need failure more than you need success. Success breeds repetition. Failure breeds change.”

Going back through my notes from SXSWi in Austin, Texas, I find myself gravitating back toward a panel called We F*cked Up: Happy Cog and Friends, Exploring Failures, Together, where panelists from Happy Cog Studios, Seer Interactive, Airbag Industries, and Fastspot shared their stories of project failures. It wasn’t so much that I learned anything new from this panel that made it so interesting. It was that the web designers and developers on this panel validated so much of what Pelago has done to cope with similar problems.

Our small web design and development agency has experienced some of the same trials and tribulations of a multi-office creative firm like Happy Cog. And we’ve handled the problems in much the same way — even more effectively than these panelists in some cases. Here is what Happy Cog and friends had to say about failure, and how Pelago believes you can take your contingency planning one step further to avoid similar fiascos.

Own Your Mistakes

This is a no-brainer for any small business who expects to build an successful business with an established client list. Your clients are your bread and butter and you can’t afford to lose them. Especially the good ones. Greg Story made it clear, if you f*ck up, own it and apologize for it. Our experience at Pelago has been that most clients will forgive you immediately. The rest will likely follow suit once you’ve atoned for your mistake. The other panelists expanded on Greg’s comment, sharing don’t just apologize, apologize profusely. Greg Hoy added, don’t put your client in the position of playing bad cop, trust is the most important aspect of the client relationship.

Client trust is built on transparency and honesty. We’ve designed and developed over 300 web sites for more than 100 clients since the year 2000. We’ve made plenty of mistakes, but we’ve always been forthcoming with our clients when it happens. In fact, we’ve made some mistakes that we could have easily hidden from our clients. We chose instead to bring attention to our failure and work through it with the client until we’ve found a resolve.

You have to earn your reputation and respect if you expect to grow your web design and development agency upon an established client list. Wil Reynolds from Seer Interactive shared his unique methodology for earning a client’s trust. If Wil feels as though his agency is not performing as promised, he’ll call up the client and tell them to stop paying him, meanwhile, his agency will continue doing the work until they are happy with the results. What a brilliant idea for building strong and battle-tested client relationships.

The Curse of the Flat Bid

According to Greg Hoy, 80% of the issues that threaten a project to fail arise from scope. Yup. At Pelago, we learned this the same way the panelists did. We lost time and money trying to launch a project because its scope — no scope document is ever ironclad — was misinterpreted by the client. That was the last time we flat bid a project. Now we sign only time and materials contracts and project estimates.

The folks at Happy Cog have implemented a similar methodology for controlling project scope. I would call it “Pseudo Flat Bidding”. They provide the client with a scope and an estimate, then assign hours to each phase of the project. When the hours run out on one phase they will move over hours from another phase. When the hours run out completely they use change requests to handle the overages. Regardless of how you dress it up, the important lesson here is that flat bids just don’t work. The only way for a web design and development agency to effectively keep a project from spinning out of control is to bill hourly.

We feel so strongly about this we’re giving away our time and materials hourly maintenance contract as a PDF document. Download it and use it for your web design and development projects.

However, this whole point is moot if you don’t help your clients set their expectations from the beginning. As Tracey Halvorsen pointed out, agreeing to unrealistic expectations, or not addressing expectations at all just sets everyone up for failure.

Stick with What You Know

Tracey Halvorsen shared a story about launching an eCommerce web site that included functionality they had not developed before. It was a component to the web site that would send out an email to the client’s current customers. When the site launched the email went out as planned, but with all 5,000-plus customers in the To field. Oops.

Taking on more responsibility than your team is technically capable of handling is a big mistake. But it’s an easy mistake to make. Have we done it? Yes. It’s a tough predicament for any interactive design and development agency. Often times we don’t know how difficult a part of the process can be until we dive in and start development, or as in the example above, until the site has launched.

Be extra cautious when launching a web site project, especially a web-based application, when it involves some technological aspect you have not encountered before. And if you find yourself in over your head, find someone who knows it better than you do and hire them for the remainder of the project. It’s better to lose money wrangling in an over-committed project than to lose a client from failure.

Play Nice With Third Parties

We’ve had the privilege — and sometimes, the burden — of working third-party specialists in the interactive web design and development sphere. From branding specialists to SEO consultants, clients will often bring in a third party and expect a symbiosis to occur. Working in this type of environment can be extremely beneficial, but you have to be intentional and willing to teach and learn. Sometimes, you are going to be that third party, so give the same respect and patience you would want in their position. After all, this is a client project, not a turf war.

It is a given that the more parties involved on a project the greater the chance of failure. For example, you may have the web site designed and developed, sitting around and waiting to launch, while the copywriters are weeks behind on delivering the final edits. It’s easy to place blame and excuse yourself from responsibility. Don’t. As Greg Hoy advised, “If you see the third party doing something counterproductive, talk to them directly first to give them a chance to fix it. If that fails, then take it to the client.”

All parties involved should be focused first on the client’s success. This requires setting your ego aside and putting the clients needs first. Do this and the possibility of failure drops dramatically.

Severing the Client Relationship

I’m glad the panel addressed the topic of the design and development agency and the client going their separate ways in an amicable manner. It’s important that when failure happens the issue is resolved regardless of whether or not the client stays with your agency. Greg Storey explained why the client must always be let go in person or on a phone call, not in an email. As the panelists all agreed, the process of firing a client is a dreaded one. The sooner it’s over, the better.

I was surprised to hear Tracey Halvorsen share some advice gleaned from a conversation with a lawyer, which was to simply start charging the client exponentially more for the work until they go away. Aside from ethical and legal issues involved, this practice skirts the issue of termination clauses. Every contract you sign with a client should have a termination clause. Our contracts at Pelago state:

Either party may cancel this contract. If CLIENT cancels contract, fees paid
to date are non refundable. <snip>boring legalese</snip> (a) CLIENT shall remain liable to pay PELAGO CORPORATION the costs and fees that have accrued under this Agreement prior to the effective date of termination, and (b) all rights and duties of the parties shall survive the termination of this Agreement.

Including a simple termination clause in your contract will make it much easier to sever an unhealthy client relationship. The termination clause will not get you out of making that dreaded phone call, but it does give you the option to say “Look, this relationship just isn’t a good fit…” More often than not, that’s all it takes.

In Summary

This was an excellent panel and underscored the reason I was at SXSWi. Not only did it validate many of the business decisions Pelago has made in the past, it also gave us new ideas and insight on handling clients in the future. While it is true that making mistakes is a necessary step in the evolution of a small business, especially in the relatively new medium of interactive web design and development, it is always better to learn the hard lessons from those who’ve endured the fallout of their mistakes before you.

Notes From the Underground

Explore the links below to see what others at SXSWi had to say about this panel:

Photo credit: http://www.flickr.com/photos/-cavin-/ / CC BY 2.0

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8 Responses to “We F*cked Up ~ Observations from SXSWi”

  1. Rob Brandt says:

    Preach it! Flat bidding will ruin any project. The customer may THINK that’s what they want, but it really sets up an adversarial relationship between the contractor and the client. As soon as the ink is dry, the client has no reason not to try and expand the scope at the margins. The contractor has every incentive to take shortcuts in accomplishing the task. The contractor knows the client is going to try and push the scope, so the negotiated flat price gets padded to allow for this so the client isn’t even getting a good deal (if they behave). The client rightly fears that the contractor may cut corners so he feels he must “manage” the process with frequent phone calls and demands for documentation, which take up the contractors time, ruins his productivity and essentially expands the scope of the project, at least from the contractor’s perspective. I don’t see how the Pseudo Flat Bidding will help, as it’s just a way of fooling the client into thinking they are getting a flat bid when they aren’t.

    What’s needed is for both client and contractor to be collaborators, sitting on the same side of the table. For the contractor to charge a reasonable rate for their time, and for the client to recognize the value of the contractor’s time. Only then will the client ask for things they consider worth paying for, and the contractor be happy to do exactly what the client asks. Scope no longer is a monetary issue.

  2. Michael J Pratt says:

    I was at SXSW but missed the F*cked Up panel which sounds awesome. I have only encountered flat pricing and have been burned every time for the exact reasons you and Rob (above state) Of course, the problem introduced by variable pricing is the difficulty in knowing what an appropriate rate is. On top of that, you suffer, as a client when the skill set of the contractor i snot as good as you thought, ie you only have their previous work and reviews to go on. What’s hard to know is: are they good enough not to take forever doing something? (the converse being they aren’t good so it takes them longer which means you are billed more)

    Sometimes it feels like a no win.

  3. Ben Rowland says:

    I completely agree about flat billing — but I wonder what techniques you use to explain this to clients and convince them to select you as a vendor, especially when so many other firms will work on fixed bid? Many prospects I talk to are afraid of fixed bid, and to be fair, they have budgets to manage, so I understand their concern. I have sometimes done the first project as fixed bid, then switched to an hourly SOW (statement of work) for subsequent projects (I make sure to be very up-front with them about this before they hire us, of course). This seems to work okay — and after the initial project, I tend to have a better idea of how picky the client is and can definitely estimate better. The downside of this approach is that I nearly always lose money on the first project.

  4. John Reeve says:

    We tell our prospective clients up front that our bids are only for time and materials, but that we are usually within a 15% margin once the project is complete. We also make sure to explain that any changes to the scope or third-party delays will inhibit our ability to come in under budget. We are fortunate to have clients with whom we have a long history. However, when it comes to taking on new clients we have two rules. One, we don’t flat bid. And two, we don’t get involved in bidding against other shops. If the clients are going to be shopping their project around to the lowest bidder than that is a sure sign you don’t want to be working with them. You’ll be far better off if you spend the time and energy getting the clients you want, clients who will reward you with their trust and repeat work.

  5. Ed says:

    I work in the pharmaceutical business and we place specialist contractors on clinical research projects on an hourly basis throughout Europe. I could not agree more with you on the above conclusions and we treat these above items as if it were our bible. Stick to your core business, research and organise your business well, perform well, own your problems, make sure every hour worked is an hour paid ( I actually put it like that in mails, and apologise for being blunt, but it does get the message accross), and believe in short pain when it comes to severing ties (with clients as well as contractors). I would like to add that treating your contractors and clients as partners also goes a long way. If that feeling is not there from the beginning, it is sometimes also wise to sever the connection (as it wasn´t there to begin with).

    It makes me interested in your Intervals platform, as our beliefs seem to coincide. I am going to sign up and give it a try.

    Ed

  6. Wil Reynolds says:

    Just wanted to drop a note saying thanks for reviewing the session, sorry it took me a while to find it and just say thanks. Continued success in your biz!

    –Wil

  7. John Reeve says:

    Wil, thanks for commenting! I got the most out of your comments during the panel. We’ve always tried to emulate the client relationships you described, even before hearing about these methods from you. It helps validate what we are doing and encourages us to continue putting our clients first.

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John is a co-founder, web designer and developer at Pelago. His blog posts are inspired by everyday encounters with designers, developers, creatives and small businesses in general. John is an avid reader and road cyclist.
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Michael Payne

Michael is a co-founder and product architect at Pelago. His contributions stem from experiences managing the development process behind web sites and web-based applications such as Intervals. Michael drives a 1990 Volkswagen Carat with a rebuilt 2.4 liter engine from GoWesty.
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