Managing Client Expectations to Reduce Professional Liability Risk
Learning Objectives - After this course, you should be able to:
- Identify the leading causes of professional liability risk pertaining to client dissatisfaction.
- Determine a client's highest project priority.
- Describe at least three ways to manage risk through external and internal communications.
Put yourself in this design professional's shoes for a moment. You're well known within the metro area for designing the kind of house that makes most luxury homes look like in-law apartments. A couple asks you to design a similar house for them, but they're on a budget. It's a seven-figure budget, but only about half of what you're accustomed to. Do you:
a. politely tell the couple that you don't accept projects in their budget range and refer them to an architect who does?
b. discuss their needs and wishes in order to determine whether you're the right architect for them?
c. give them a tour of your most expensive homes, which leads to the wife saying she wants exactly that type of home in a different neighborhood and within their budget, and then take them on as clients?
If you answered "c," congratulations! You're well on your way to a career filled with defending against claims. However, if you answered "a" or "b," you show some potential for avoiding costly claims through the art of managing client expectations.
Amazingly, the example above isn't hypothetical. It's just one example of the types of claims professional liability insurers see year after year, in which the failure of design professionals - engineers and architects - to manage their clients' expectations results in disastrous projects, costly claims and/or settlements, damaged reputations, and the like. In fact, the home the architect designed for this couple has yet to be built, due to disputes over many things, primarily the cost of construction. That architect may think twice before giving his next guided tour.
This article examines the ways in which design professionals can assess their clients' expectations for their projects, help their clients develop realistic expectations, and manage those expectations throughout each project.
Terri Buckley, Chief Claims Officer for the Design Professional group of the XL Insurance companies asserts, "You've taken steps to select the right client. Now you need to reduce risk by managing your client's expectations and including a clearly defined scope of services in the contract. All parties - especially your staff - need to understand the contract terms you've negotiated and how they relate to the client's definition of success."
The Risks of Unrealistic Client Expectations
Most seasoned design professionals have experienced the challenges presented by clients that want sterling silver projects delivered at plasticware prices, or that believe Rome was built in a day. But such unrealistic client expectations aren't the real risk. The real risk comes when you, the seasoned design professional, try to fulfill those expectations. Whether driven by the desire to get another project on the books, the fear that not satisfying a longtime client's unrealistic expectations might result in no longer working with that client, or the pride in being able to deliver the impossible, trying to fulfill such expectations puts your practice at risk. Here's another real-world example:
A small architectural firm headed up two similar projects for two different clients involving the fast-tracked design of medical clinics. Construction began on both before all the construction documents were completed. In the case of both projects, as expected with projects with overlapping phases, changes were required in previously issued drawings as new drawings were issued.
In the first case, the client was a developer and fellow architect, so he knew to expect such difficulties, and included a contingency in the budget. In the second project, the client wasn't as savvy and blamed the architectural firm for errors and omissions (E&Os), and demanded that the firm pay for the changes.
Following an internal post-project review session, the architectural firm discovered the main difference between the two projects: the first client had realistic expectations and a budget based on them, and the second had neither. In retrospect, if the firm had spent time up-front educating the second client about the realities of fast-track project delivery - in other words, "managing the client's expectations" - the outcome might have been different.
The fact is design professionals cannot afford to pay for someone else's unrealistic expectations. You wouldn't go into a big box store asking to buy a riding mower for the cost of a weed whacker and expect to get it, would you? Similarly, your clients should not expect to receive more than what they're paying for - whether that relates to the design itself, the time it takes to deliver the project or the scope of services you'll perform.
But how do you keep clients from developing such unrealistic expectations to begin with? Part of the solution involves finding out what's driving the client, before the project even begins. First, however, you have to put the right person in charge.