Volume 4 - May 2018

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Price Versus Value

 

Through some amusing, frustrating and curious recent events, I have become compelled to revisit the phrase Price Versus Value.  I am in a business where experience is critical to timely and effective resolutions to projects and problems that are electrical.  The challenge for some of us is to get the customers to appreciate the value they receive.  That is not said to dismiss price, because you eventually have to pay for everything, but realize that price is not always what is appears.

 

In the electrical world the average person understands there are electricians and engineers, those are broad categories and they really don’t allow any room for highly skilled specialty personnel that may not be one nor the other. We fall into that dark hole in the middle, whenever asked what we do, it has to be generalized towards one of the two main “electrical” categories.  One day we are working alongside electrical contractors, ensuring equipment is installed and setup properly.  The electrician is great at installing big grey boxes, running conduit and wire and getting the power to the right places.  The engineer is great at designing the entire electrical layout, providing guidance to electrical contractors on installation of equipment, modifications to wiring, drawing and often provides the final setup parameters of programmable equipment, such as circuit breakers and relays.

 

Business people love to use the 80/20 rule for just about everything, there is likely little basis for this other than a reasonable guess.  Because those numbers have been used and made up, I will introduce my rule, 90/10.  Without highly skilled and experienced technicians like us an electrician can typically complete 90% of the job, we are that final 10% that gives confidence to the electrician that everything is ready to be energized.  The 90/10 rule can also be applied to Engineers.  They can do all the preliminary work, generate drawings and supply the information to the field personnel, electricians, but we are the final 10%.  We provide detailed technical feedback to the Engineer on equipment specifics and things that are different in the “real world” that occur during installation.

 

But you may say, the Engineer is degreed, possibly a Professional Engineer (PE) and the electrician may be licensed  and experienced in the National Electrical Code and knows everything electrical.  This is the perfect combination.  Here are some of the realities. 

 

The Engineer is educated in many things electrical, they learn in a classroom how equipment operates, the function of all devices and how they work together.   Many engineers never actually get to the field to see the equipment.  In my many years in the field rarely do you find an under 30 engineer that can identify all the electrical components in a large electrical room.  They may have designed the electrical room, created all the drawings but they couldn’t point out the actual devices. You would think this changes with age, but it does only slightly.  Engineers elevate to supervisory positions as they get older which causes them to become more removed from the things they were taught.

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The electrician is educated in the installation, operation and maintenance of electrical equipment.  In some cases they are in a union that provides years of apprenticeship which educates them in these areas along with the contents of the National Electrical Code.  Parallel to the electrical apprentice education they are working on job sites learning how the things they are taught are implemented.  Interestingly, the electrician is not taught the design, construction and internal operation of typical electrical equipment.  In their defense, it would be difficult, there are numerous manufacturers for all the components they must install.  Lots of what is learned is from someone who told them how it works, who in turn learned it from someone else.  On rare occasions the electrician gets to equipment factories to see how things are really constructed.

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This very general overview is not to denigrate Electricians or Engineers, but to point out there is a technical gap in knowledge between the two.  The highly skilled technician is a liaison.  He can explain the technical details from the engineer to the electrician and the actual installation troubles of the electrician to the engineer.

 

What makes the highly skilled technician they way they are?  It is a combination of things, but usually it includes military experience, Navy Nuclear or Army Prime Power.   These two military disciplines are some of the brightest, technically capable and trained personnel in the military.  The electrical training in these two areas is rare to find in the civilian world. They know how to be part of a team, understand and respect authority, and have safety built into their daily lives.  Skilled technicians likely have one or more certifications, either for testing equipment or performing certain functions such as Energy Management, Infrared Inspections or Power Quality Surveys.  Highly skilled technicians likely have worked for an electrical manufacturer, or even more than one.  There is no other way to learn how equipment is manufactured and designed, then to work for the manufacturer, talk with the engineers and visit the factories and finally, to fix engineering and manufacturing mistakes in the field.

 

I am going to provide a few examples of interactions I have had very recently. In each case we provided value, but the customer focused on price

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Price Versus Value Case 1

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We recently had one large manufacturer that got in a bit over its head with a project that they didn’t have the skill set or manpower to complete.  They recently told us that we were expensive.  The work we did for them included us performing a specific function, that they did not have the skill set, alongside one of their engineers who had their own individual function.  To complete this work, they also had to hire electricians to open equipment.  On almost all jobs we found ourselves assisting the engineer in identifying specific equipment and distribution through the building, they just didn’t have the field experience.  Their knowledge was specific to one manufacturer, and sometimes limited in that.  During the same project, the engineers found out we had to work in the evenings, this prevented some of the engineers from working because they weren’t use to working at night or their spouses prevented them from working at those hours.  Yes, the latter is a factual statement, and is common.  We stepped in and provided support for the engineer, doing their work, during the evening hours, which caused our costs to go up.  On this job we were the lowest paid component, the engineer got more revenue and the electrician go their union rate.  To be told we were expensive clearly doesn’t consider the value we provided by assisting the engineer during the daytime and doing the engineers work during the evening.

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Price Versus Value Case 2

 

Another large manufacturer recently asked us for a quote for work on a Holiday weekend, traveling on a Sunday and working at midnight on the Holiday.  I heard through the grapevine that our price was ridiculous.  Interestingly, five years ago we provided the same service, for the same price.  So, holding the line on a price after five years is ridiculous?

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Price Versus Value Case 3

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A large data center company had us perform a metering installation throughout one of their facilities that included working days, evenings and minimizing any electrical outage.  Knowing how the equipment is constructed, and exactly how to install the equipment, this was very straight forward for us.  Because of the technical details of this project it was a bit outside the electrical contractor’s comfort zone and the company did not have the engineering expertise to oversea or perform the installation. 

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During the quotation process the company was getting ready to award us the job.  They came to us and asked for a 10% reduction on the price quoted.  I declined.  I later found out that our price was 25% lower than the next bidder, but the company still wanted more.   It took a week or so for the company to come back to us and said they would give us the job for the original amount quoted.  I mentioned that I didn’t want to do the job because the method used to get us to reduce our price is indicative of how that company conducts business, and it would cost us in the end.  Fortunately for the customer they had an employee that I had a long relationship with, and he stepped forward to ensure me the job would run smoothly and we would get paid in a timely manner.  We ended up doing that job but haven’t done one since.

 

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People believe that contracting to a large corporation is a free flow of money.  The truth is that the large corporation typically doesn’t see the finer details of the work, they just see a number, the price.  Large corporations have “margins”, and you would by surprised what some of them are.  All the little details of the work, supporting the electricians, taking over for the engineers, that value is not perceived by those doing the accounting, and likely not properly communicated through channels.

 

The choice we have available is to value what we provide, stand fast, and risk losing business or to lower prices till the customer is satisfied. The question is how low is low enough.  Business is faced with adjustments every day. how you handle those adjustments determines success. Larger companies have a larger pile of money to hide their mistakes, smaller leaner companies don’t have that luxury.

 

When I first got out of the Army, I worked for a few months with a defense contractor.  I was a smart, ambitious know it all type, and I worked with a 65 year old gentleman who saw my potential but said, “Dave, It takes 30 years to get 30 years’ experience” The older I got, the better I understood the value in that statement.  With age and expertise in your field, there comes a confidence in what you do.  When I started out I would have done just about anything, today, I have a better sense of my value.