17 October 2010

Autumnal re-runs: Dirty money, filthy lucre; a designer's confession

The following post appeared originally on 6 September 2009. Here we are more than a year later and the payola situation out there seems more chronic than ever. I still won't dirty my hands with it and that it goes on as often as it does sticks in my craw like few other things.

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. Thanks Chookie. Having ethics and then putting them into practice by acting morally never wins popularity contests but I don't know how people sleep otherwise.

  2. or you could say: the client can opt to pay you the $1000; it's their money. Its hiding the fee that seems sleazy to me. by finding you, she actually was doing work. and maybe the value is negotiable - is a phone call worth $1000?

    otoh, I refer people all the time. cannot imagine what cajones it takes to then ask for a fee for doing so little... Plus good deeds tend to cycle back, good karma. but that's my way of doing business, apparently it's not hers.

  3. I have a slightly different response. When asked to put in money for an allied professional, I simply say "I don't do that because it's too messy" and let them figure out in what way I am referring, not wanting to take the time to explain/validate my reasoning, etc. It works really well, especially when said casually. And, man, do I refer big jobs to a variety of professionals. Whatever.

  4. I laugh every time I see that photo of Schlomi. Great post.

  5. Thanks for speaking up about this. I've seen this kind of crud all over the building and home furnishing industry. And let's not even get started on real estate. However, as long as the barriers to entry in these jobs are low, and it's easy to avoid getting caught, this stuff will continue.

  6. Cindy: I don't have a problem with referral fees when they're earned and disclosed fully. It's the sneaky stuff that I can't stand.

    Susan: I like your subtlety, but the woman in situation two was beyond any kind of subtlety. I am a referral machine and I view it as part of my job to get the best people I can find lined up for my clients. All I ever ask is that my clients be treated superbly. I can usually root out the kickback nonsense from the people I refer to, but when something comes across my desk from an unknown person and it's such a bald cash grab I feel compelled to call a spade a spade.

    Melody: Thanks!

    Scone: But the barriers aren't low in the design world. It's expensive to get started and there's a lot of money at stake. People who engage in this stuff are putting up with an enormous risk and I don't think they're quite aware just how big.

  7. As a general contractor, I run into this all the time from interior designers. Never from architects or other contractors. I have made many, many referrals of architects, designers, and tradesmen through the years and have never asked for a "piece of the action" but iti seems that the vast majority of the interior designers expect this for every referral they make. I have always thought this was sleazy.

  8. No to play pile on, but I hear it from Interior Designers primarily too. IDs and general contractors from time to time.

  9. I am glad you wrote about this from a vendor perspective. When I first started in the design business over a decade ago, they way we made money was on a referral basis; 10%-40% depending on the vendor. The customer was charged a small fee up front but the bulk of the income was straight referrals. It was so convoluted and messy and I really felt uncomfortable doing this. What was even harder was trying to explain to a client how we made money. I found myself in many flustered situations because client would inevitable try to bargain that %. Finally four years ago I went to a billing system that was flat fee. It may sound like lot upfront for a client but that was all they paid. No dodging conversations behind them and they could also use vendors that they felt comfortable with as opposed to me feeling slighted when they didn't use one of my vendors. It was a relief! I think more interior designers are now going this route. Hopefully "cost plus" will be a thing of the past.

  10. Thanks for weighing in, let's hope the days of cost plus accounting are on their way out.

  11. So happy to hear that there are other professionals who feel this way about paying for or being paid for referrals! Hearing about this practice has always bothered us - where is their integrity?

  12. I think that most of us operate this way, the ones who don't operate like us get away with it because no one ever calls them on it. I do. So far as I'm concerned, somebody taking or paying kickbacks makes me look bad and I don't like being made to look bad.


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