06 September 2009

Dirty money, filthy lucre; a designer's confession

A long, long time ago, I worked for a fancy schmancy kitchen design studio. We worked the very high end of the market and with the help of a whole lot of smoke and mirrors, we had a reputation as the high class joint where somebody with money to burn could go to get a kitchen or a bath straight out of a magazine. In fact, a lot of our stuff ended up in magazines. We had a reputation for being an ethical, service-oriented firm peopled with designers who were completely committed to their clients' needs, wants and whims.

I worked there for two years and in those two years I worked on a couple of interesting projects, but most of it was just overpriced exercises in more is more. It was pretty soul-deadening. My big project though, was a home that was under construction for the entire two years that I was at the fancy schmancy studio. It was a grand home; a complete, period-perfect reproduction of a plantation house. We were contracted to design all of the cabinetry and casework in the entire house. It was a tremendous opportunity to learn how to design such things as coffered ceilings and wainscoted walls. It took a year-and-a-half to complete the designs.

Finally, when we priced out all of the cabinetry and casework the first time, the numbers came back at 1.3 million dollars. And no, million is not a typo. Eventually, we edited down the designs in the project and got it to a more palatable but still galling $400,000. A couple of hours before my boss and I were to present that revised proposal to the architects, he and I met to review the numbers one last time. When I was digging through the internal, itemized price sheets I came across an $85,000 charge that didn't have any kind of history or back up. The $85,000 had been folded into the total and since the client never saw the itemized back ups, no one would really know that it was in there. I asked what that charge was and he informed me that it was to pay for the builder's kitchen renovation.

I wanted to vomit. I am not a naif, I know that payola and kick backs go on all the time in my industry. But I'd never seen so naked a grab in my life. What ever respect I had for my boss or the contractor went out the window at that very moment. I swallowed my revulsion and made it through the meeting. I went along with it and said nothing. I was a junior designer on the project and I told myself that it wasn't my place to make waves about the graft I'd stumbled across. I left the firm a couple of weeks after that, and I never got to see the completed house. It didn't matter by then. In my mind the whole thing was tainted and I had a hard enough time looking at the plans, seeing the real thing would have done me in. Many years later, that situation still bothers me.

The payola, the graft, I stumbled across that afternoon wasn't an isolated case. I don't mean just at that studio either. "Paid referrals" are a common practice throughout the industry and I react to them now the way I did then. I'm repulsed. I think the practice is sleazy and unethical. I don't pay for referrals and I won't accept money for one. Take the money you would pay me and charge your customer less. What a concept!

I'm hooked into a network of tradespeople and suppliers I know and trust. When I refer my clients to my tile setter, or my electrician, or my lighting supplier, I want them to know that I am referring to the best person I know for the job at hand. I want them to know that they will be taken care of. Their job will be completed as promised and they will be charged a fair, though not necessarily a low, price. I want them to know too that the fair price they're paying doesn't include a kick back to me.

I was reminded of that whole situation this week when I got a phone call from an interior designer I'd never met. She had two clients who wanted to renovate a kitchen but that a kitchen plan was beyond her skill set. As we talked about the job she was proposing, she told me that her clients wanted something nice, but they were pretty price-sensitive. She then told me that she was willing to waive her usual 10% referral fee and "only" wanted me to tack $1000 onto the job total for her. Only. This was a sentence or two after she described them as price-sensitive.

I told her that I'd love to talk to her clients but that I wasn't going to give her a dime. There was a stoney silence on the other end of the line. "Really?" she asked in a near whisper. "Why is that?"

"Because it's sleazy," I said. "It's unethical and it makes projects cost more than they should. If you're any good at what you do, you should be able to make a living from the fees and commissions you earn. Payola is dirty money, it's a used car salesman move. I'm not a used car salesman. Are you?"

"Ummm," she nearly whispered, "maybe we're not a good match."

It was the smartest thing she said during the three minutes she was in my life.


  1. good for you! referral fees are a sleazy practice, and gives all of us in the design profession a bad name. i'm always happy to pass on names of people i work with because they are *good* and i want to see them keep working!

  2. Thanks Christian, I was worried when I posted this today. I thought I might have kicked a hornet's nest and that the wrath of the ASID would rain down upon me for exposing a dirty secret.

    I am thrilled to know that other designers out there share my ethics. We should start our own directory!

  3. I just cannot imagine how people like that woman and her ilk sleep at night. I had no idea that happens. The nerve! $1000?! Hopefully she's spending the afternoon thinking about your words.

  4. I doubt she thought about it a whole lot. She just called the next person on her list and probably found a willing taker with little difficulty. A grand's nothing, it's usually expressed as a percentage. As in "Give me ten per cent and I'll bring you this job." It's a disgusting practice that pretty widespread from what I can tell.

  5. I'm with you all the way on this, Paul. When vendors or contractors tell me they'll give me kickbacks (whether they call them that in so many terms or not), I tell 'em no thanks, that any discounts they give me will get passed on to my clients, and if they really want to thank me, they can do so by referring me a new, good client. We would both benefit from that, and it would be completely on the up and up all the way around.

    One once had the nerve to offer me a major discount if I paid him in cash as opposed to by check or by any other means.

    Actually, ASID would back you all the way on your response to that designer, as I think that kickbacks are against their code of ethics. They do specifically require that all forms of compensation be disclosed to clients, and as far as I'm concerned, that's only appropriate, whether you belong to an organization that requires it or not. It's the right thing to do. If you're accepting kickbacks and referral fees, though, how in he** do you keep track of them to be sure you disclose them all? It's easier, to my way of thinking, to just not go there at all, and treat everyone and every vendor the same. If Vendor A gives me a 20% discount, that means there's that much more money in the client's budget for something else when I pass that on.

    Interestingly enough, the vendors I've told I won't accept kickbacks from and that I'd pass all discounts on to the client from have responded really positively. I think it really builds respect - at least among the reputable ones. A lot of them haven't even thought of the potential issues it could raise between the designer and the client.

    And don't even think of trying to actually *charge* me a referral fee if you refer someone to me. That's completely sleazy to the nth degree.


  6. Hurray for ethical designers! I'm glad to hear I'm not alone in my refusal to take payola and I pass along my courtesy discounts too. I don't understand the motives behind tying up money on useless and shortsighted, not to mention unethical, expenses.

    I'm glad to hear that it's in ASID's code of ethics. It's in the NKBA's too but NARI is oddly silent about it.

  7. This type of backscratching goes on in many different industries. It has always bothered me. Here in Lancaster, PA contractors that I know and love can not be bothered to come to your home and provide so much as a quote. It is appalling. They might as well say, "Write us a check for $50,000 and we'll see what we can do." Where is that 50K going?

    It is nice to hear your designer's outrage, Paul. Bless you for your honesty. It would be nice to pick up an extra couple of grand here and there if it wasn't so darn skeezy!

  8. I can imagine that in a small market that things would be more insular and closed. Sure, it'd be nice to pick up a couple grand but you know, some money's too expensive.

  9. Nate:

    Good for you! Ethics and business can, and should, coexist!

  10. Amen, brother. Although, that's sort of the argument for DIY? You could, theoretically, avoid this sort of thing.

  11. Hey! welocme to Kitchen and Residential Design and welcome to the blogosphere. In my experience, most people aren't interested in DIY, despite the popularity of DIY programming on TV. Although it is a way to avoid paypack schemes. A better idea is for homeowners to be aware that it goes on and to ask the pros they hire if they engage in the practice. It's no guarantee that they're get an honest answer, but asking an uncomfortable question can be a great way to evaluate someone's ethical sense.

  12. Hi. This whole commission/referral thing makes me really uncomfortable. I am a very skilled designer, who has learnt a lot of the contractor work by doing it myself: installing toilets and faucets, connecting sinks, laying down tiles, wallpaper, painting, sanding, finishing furniture. I bring value to clients and to contractors who know that this "pretty face" actually knows what she is talking about. But I only charge $75 per hour, not even charging my travel time nor adding an overhead fee. Hard to make a decent living this way. When I see how much money other designers who never get dirty make, I just feel it is totally unfair, just looking at the houses of some famous designers...
    I found the clients are always reluctant paying the design fee, but do not mind getting an overpriced plumbing quote at $125 per hour. Although I always say to my contractors: you guys can do without me, but without you making my design come to life, I am NOTHING. So maybe it is fair after all.
    ASID may be against the concept (I am not a member), but it would be interesting to have ASID conduct a study to know what is the % of their members who actually do not get kickbacks/commission/referral fees. What is your bet?

  13. My bet is that it's around 90% despite the fact that their Ethics Statement claims it's against their rules. The practice makes me sick frankly and I can't stand it. Just yesterday a lighting store offered to pay me to start shopping with my clients there. Ugh.

    ASID would never make results to such a poll public you know...

  14. Now I know why I could renovate my kitchen for $6,000 when contractors all quoted me $18,000-$40,000!! Sure, it took me 2 months to complete a complete gut and these guys said they could do it in 2 weeks (which I don't believe. I believe you can tear a kitchen APART in a day, then leave it like that for 60, all the while holding the homeowner hostage for more money) but still not worth 3-6X my costs.

    I don't mind paying for a job well done, but when that job contains kick-backs to the subs, the brother-in-law, the referral fees, and on and on... get out of my house.. and take that mangy mutt with you.

  15. Well that may not be the complete answer, but I'm sure it's part of it. By the way, a kitchen renovation can be completed in a month if the stars align and there's a solid plan in place ahead of time.


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