Does your firm write too many proposals? It's a common problem in our industry. Many technical professionals find it difficult to pass on virtually any opportunity where their firm is qualified to do the work, even in the face of long odds. In this economy, the temptation is even greater.
I call it the "proposal monster" because the lure of the latest RFP often wields more power in the office than the firm's strategic priorities. It diverts attention away from more important matters. It gobbles up valuable resources that could have been more productively spent on other business development activities.
Many firms spend the bulk of their business development time on writing proposals. Invariably these firms have low win rates. They would be wiser to (1) push more time upstream to the tasks of building relationships and positioning the firm in advance of the RFP and (2) invest more time on the proposals where they have a legitimate shot at winning.
So how can you tame the proposal monster? Let me illustrate my recommendations with the example of an engineering firm that largely succeeded at doing it. This 100-person firm hired me as their business development manager a few years ago on a part-time contract basis. They had struggled for some time, with little growth, poor profitability, and high business development costs (12% of net revenue) that produced mediocre results.
When I stepped into the role, they had submitted 136 competitive proposals over the previous 12 months and won 26% of them, well below the industry median of about 40%. I suggested setting a goal of cutting the number of submittals in half for the coming 12 months, while increasing their win rate to 45%. After the initial shock wore off, the management team agreed with my suggestion.
Over the following year, the firm submitted 80 proposals, short of our goal but a substantial improvement (there was one rogue office that refused to get with the program; they accounted for half of all submittals while winning only 13%!). The overall company win rate improved to 46% and sales increased by 31%. Profitability improved from -0.1% to 7.5%. Better still, the improvements continued into subsequent years.
Could your firm benefit from similar improvement? Let me recommend the following steps:
Shift the focus from chasing projects to building relationships. This is a critical first step. Most A/E firms take more of a transactional approach to business development than a relational one. Since writing a proposal is in the latter stages of the sales process, many are prone to shortcutting the preliminary relationship building in favor of seemingly starting closer to the finish line. This is particularly a problem for firms that pursue public sector work where there's little to no upfront investment required to receive an RFP.
To facilitate this shift in focus with the aforementioned firm, I started with our weekly BD conference calls. I noticed initially that the branch managers on the call spent most of their time talking about the proposals they were working on. It seemed a source of pride to report that there were multiple proposals underway in a given office. I asked that future calls include no discussion about proposals unless (1) they needed the help or advice of someone on the call or (2) they had learned the outcome of a specific proposal.
With this deliberate shift to talking more about sales than proposals, branch managers realized they needed something to talk about. I think that simply changing the content of our conversations helped encourage more sales activity. There were other steps we took to promote the shift, such as changing the metrics we tracked, but I think that redirecting our BD conversations played the biggest role.
Establish a "no know, no go" policy. If a firm decides to submit proposals only when they've been talking to the client in advance of the RFP, that one step alone will eliminate most wasted efforts and increase the win rate. I've never seen any data on this, but my estimate is that for most firms there's less than a 5% chance of winning if you submit a proposal without client contact prior to the RFP. Of course, every firm can recount an exception or two, and that's what entices many to keep trying despite the odds.
We established this policy in the example firm. Exceptions required executive approval, in this case meaning either the president or myself. As I mentioned earlier, there wasn't full compliance, but the policy made a huge difference. Besides reducing the number of long-shot submittals, it encouraged people to contact clients earlier in the process--if for no other reason, so that they wouldn't fall victim to the policy in the future.
Control behavior by limiting access to corporate BD resources. Perhaps your firm has attempted various policies like the one above, or a formal go/no go process, only to find it ignored by a significant number of key players. I don't advocate forced compliance with such policies. It's hard to tell seasoned professionals what sales opportunities they can or cannot pursue.
So what to do? Limit access to corporate marketing staff to only those proposals where the team adheres to your policies and follows the process. I mentioned the one rogue office in the example above. They didn't use any corporate support, except on rare occasion. When they did, they had to comply with what everyone else had agreed to. If someone in another office chose to pursue a proposal where they hadn't been talking to the client and didn't get approval, or where they didn't go through the established go/no go process, they did the proposal on their own. Thankfully, there were few such situations.
One of the mistakes that firms make that hampers their BD efforts is giving open access to corporate resources. Why should marketing staff be made available at the beck and call of their technical colleagues? This commonly is a disservice not only to marketing staff, but to the corporate interests. Business development costs are substantial, but opportunity costs are often even greater. Exercise restraint in how you allocate these precious resources.
Obviously this tactic is dependent on your organizational structure. If marketers report directly to technical managers who lack discipline in their proposal pursuits, you've got a problem. It might be worth tweaking the organization to gain better corporate control over marketing staff.
Give some proposals special priority. This should go without saying, but I've seen too many major proposal efforts shortchanged by poor resource allocation to avoid mentioning it. For several years, I served as the corporate proposal manager for a national firm. I worked on perhaps 10-12 proposals a year. In other words, I and the corporate resources assigned to me were only engaged on our highest priority submittals.
When your best proposals draw from the same resource pool as the ones you shouldn't even be pursuing, there's a good chance that you won't be giving your best efforts to your best opportunities. If you're not already, determine how to reserve your best assets for your really important proposals. Don't let them be overwhelmed by the proposal monster.
Have you ever considered how critical your communication skills are in delivering value to your clients? Think about it: Your work products are all forms of communication, whether provided as plans, reports, correspondence, presentations, or simply help and advice offered in conversation. Yet we would not identify communication as one of the core strengths of our profession, would we?
Let me suggest three straightforward keys to improving your communication. You could call these critical goals that you should try to achieve every time you communicate:
- Attention: How well your audience tunes into what you have to say
- Comprehension: How well your audience understands what you have to say
- Retention: How well your audience remembers what you had to say
Getting Attention
You cannot communicate until you have your audience's attention. Don't take that for granted. We live in a hyperactive, over-communicated world, where drawing attention to your message is harder than ever. But here are a few ideas for breaking through the din:
Explain at the outset why what you have to say is important or valuable to your audience. Audience attention is typically higher at the beginning of the communication process. That's when you must answer the question, "What's in it for me?" The best way is to connect with audience needs and interests. If they think you have an answer to their problem, you'll have their attention.
Establish your credibility. If you haven't gained the trust and confidence of your audience, they won't pay attention to what you have to say. There are several ways to gain credibility (reputation, referral, demonstrated competence, etc.), but usually the quickest way is to show genuine concern for your audience.
Present your message in bold, dynamic fashion. This is brash advice for many in our profession who favor a safe, conservative communication style. It doesn't mean you have to do anything outrageous; simply borrow the best communication techniques from the experts. Use design principles from mainstream books, newspapers, and magazines. Study how popular speakers and television news professionals draw attention to their messages. Take note of what messages get your attention and how they are presented. Then put these observations into practice.
Communicate the most important information first. This is a technique called the "inverted pyramid" that the news media have used for decades. Order your message content from "what I must say" to "what I should say" to "what I could say." Keep your key messages as the prominent feature of your communications.
Personally engage your audience. Draw them in by relating to them as individuals. Ask questions, invite participation, show interest. Use a personal, conversational tone. You need to meet your audience where they're at before they'll join you where you're going in your communication.
Enhancing Comprehension
Working in a technical field, it's easy to forget sometimes that others aren't familiar with much of the content that has become second nature to you. You should try to avoid letting technical terminology and concepts leave any of your audience feeling left out. It's also important to speak about issues, concerns, and experiences that are familiar and relevant to your audience. Some pointers:
Minimize the use of technical jargon. Some may think that using such terms demonstrates expertise, but in fact it takes more skill to describe complex technical concepts in everyday language. If you must use words that might be unfamiliar to your audience, be sure to define them first.
Test your messages with someone outside your area of expertise. Sometimes it isn't just the terms technical professionals use that impede comprehension, but the way we construct sentences and order information. Someone who's not familiar with your technical specialty is often best suited to point out confusing messages. Invite feedback from such an individual (or individuals) before taking your communication to your audience.
Address issues and concerns that are relevant to your audience. If you are a civil engineer, for example, you might be prone to focus predominantly on the civil engineering issues associated with a project or problem. Unfortunately, your audience's interests may center on something else--such as traffic disruption, visual impacts, noise, air quality, historic preservation, etc. To increase comprehension in that situation, you would need to make your engineering issues relevant to their non-engineering concerns.
Write in a concise, conversational manner. For some reason, technical professionals often struggle to communicate their specialties in a straightforward, understandable fashion. Their writing is frequently stilted and wordy. For best results, write generally as you would speak. Use short sentences and don't say more than is necessary.
Increasing Retention
Your audience cannot act on what they cannot remember, and studies point out that people typically remember only a fraction of what they read, hear, or see. So you should design your oral and written communications to increase the likelihood that the most important messages are remembered. Some ideas to increase retention:
Target a few key messages. Determine the three to five most important points to remember from your communication and feature these prominently in your document or presentation.
Illustrate your main points. Visual images are remembered more readily than what is merely written or spoken. Use graphs, figures, and photographs to illustrate your key messages.
Use stories. Stories are a powerful form of communication and are better remembered than mere information. Most technical professionals commonly use case histories, but these should be "humanized" (talk about the people involved and how they were impacted) for maximum effectiveness.
Always provide a concise summary. Whether writing or speaking, make sure to offer a summary of your key points. In a document, this should appear first--typically in the form of an executive summary. In a presentation, meeting, or conversation, your summary should occur at the end, joined with some discussion of or request for what you'd like your audience to do in response.
Your communications are vitally important. So let me urge you to commit these three keys to your memory: attention, comprehension, retention--then structure your messages specifically to achieve these crucial goals.
Most A/E firm principals give little formal attention to corporate culture. Maybe they don't understand its powerful influence on business performance. Perhaps it seems too complex or intangible, a matter outside their expertise. Or maybe they simply take it for granted, assuming that the firm's culture naturally mirrors their own values and perspectives.
Whatever the reasons, ignoring culture may hinder your firm's success. That's because culture strongly shapes how things get done within the firm. It often overwhelms attempts to change strategy, procedures, or organizational structures. It defines the company's real values, no matter what precepts are officially espoused. Culture largely determines the nature and quality of the work environment.
So what is your firm's culture like? Have you ever made a detailed assessment of it? Have you ever clarified what you wanted it to be? Does your culture align with the way you want to do business?
Admittedly, evaluating your culture can be complicated. One study, for example, identified 39 important cultural indicators. Various classification systems have been devised, and there's little commonality among many of them. But thankfully there are simpler and more practical cultural models out there that you can use in looking at your firm's culture.
I've adapted one such model from a white paper by Bruce Tharp, who based his model on the synthesis (by others) of several studies on organizational culture. This research concluded that corporate culture tends to be shaped along two dimensions, what I call:
- What drives you, which relates to focus, motivation, and priorities. In the matrix shown below, this is the horizontal axis between internal focus and external focus. Both are critical elements of a firm's culture, but the question is: What tends to take priority? Clients or projects? The practice or the business? Building your expertise or strengthening your market position?
- What steers you, which relates to structure, organization, and control. It's how you do the work. This is the vertical axis between the two poles of empowerment and control. Once again, you need aspects of both, but where does your firm place the emphasis in trying to maximize technical and business performance? Individual performers or teams? Decentralized or centralized authority? Loose or tight?
To assess your culture, start by plotting where on the matrix you think your firm best fits relative to each axis. I realize this can be difficult because different aspects of your operations will likely fall different places along the two axes. You may be "tight" with respect to quality control, for example, but "loose" regarding billing and collection practices. It may be helpful to break out different aspects of your firm and plot them separately, then chart your position based on the resulting cluster.
Remember that the discussion surrounding this exercise is more valuable than how you plot your position on the matrix. The matrix is a tool to support your analysis, not the ultimate outcome. I would also encourage you to engage people from different levels of the firm, and from different offices. They are likely to bring significantly different (and possibly more accurate) perspectives to this exercise than that of management alone.
With your position plotted, you will find yourself in one of four quadrants corresponding with four basic types of organizational culture. These are briefly described below:
Collegial culture. This culture is characteristic of perhaps most A/E firms, where there is a looser structure and the focus is on doing the work. Technical professionals tend to resist management control and prefer concentrating on their areas of expertise. Many collegial cultures offer an open and friendly place to work, where teamwork and consensus are valued. With seniority there is a substantial amount of freedom and discretion permitted. Leaders tend to be more mentors than managers, their stature within the firm often based more on technical qualifications than leadership skills.
Entrepreneurial culture. This culture is more common among younger, smaller firms that have a strong marketplace orientation combined with a flexible, dynamic structure. A passionate focus on building the business and responding to clients tends to resist organizational constraints. These firms often promote innovation and are willing to take risks. Individual initiative and creativity is encouraged. There is usually an emphasis on growth and carving out a competitive edge. Leaders in an entrepreneurial culture are also more likely to be like mentors than bosses, but their status in the firm is based more on their client skills and ability to bring in the work.
Hierarchical culture. As firms grow larger there is a tendency to exert management control through standardization and a well-defined structure for authority and decision making. The focus is more on internal operations and organization. There's a heavy emphasis on "making the numbers," but attempts to improve performance tend to stress internal functions rather than market-based strategies. Hierarchical cultures are usually characterized by ever-increasing rules and bureaucracy. Effective leaders in this culture excel at organizing, coordinating, and monitoring people and processes.
Competitive culture. Firms with this culture have similarities with the hierarchical model in their preference for organizational stability and control. But they maintain a strong focus on clients and the marketplace in which they compete. Competitive cultures stress performance improvement based on excelling at business development, client retention, and market positioning. These firms share the external focus of entrepreneurial firms, but approach it with more structure and process. They tend to favor a more transactional (as contrasted with a relational) approach to developing new business. Leaders in this kind of firm are similar to those in the hierarchical model, but stress competitiveness and differentiation.
So Why Does This Matter?
This topic is likely to seem tangential to many of my readers. Does it really matter if you understand what your firm's culture is like? What are the practical benefits of assessing your culture as I've outlined above? Let me attempt to make the business case for taking a closer look at your culture:
Strong corporate cultures deliver better business results. Harvard researchers John Kotter and John Heskett found that companies that had a well-defined culture built upon a foundation of shared values outperformed other companies by a large margin: Their revenue grew 4x faster, their rate of job creation was 7x higher, their stock price grew 12x faster, their profits were 7x greater.
Strong cultures are the product of deliberate design and effort. The research of Kotter and Heskett also bears this out. To have a culture that drives better business performance, you need to start by understanding what you currently have. What elements of your culture do you value and want to reinforce? How? What aspects of it need to be changed? For more on this topic, check out my earlier post, "Natural Selection vs. Intelligent Design."
Strong cultures are threatened by lack of operational alignment. Shared values and consistent practice form the foundation of strong cultures. When some company practices and policies conflict with the cultural norm, it weakens the culture. Lack of operational alignment is quite common, in large part because it's not recognized as such. Doing a cultural assessment is one way to bring this problem to light.
Strong cultures are threatened by growth and turnover. If you haven't articulated what your culture is, it's very difficult to pass it on to new employees. I've seen firms essentially lose their cultural identity through staff growth, turnover in key positions, and mergers and acquisitions. If you want to preserve the cultural strengths that define your firm, it's important to clarify what those are.
Effective change must be embedded in the firm's culture. Since culture innately defines how things are done in a firm, any attempt to change practices must be done in cultural context. Connecting change to culture was one of the critical steps that Kotter observed in his study of successful organizational change initiatives. This is difficult to do if you're not really sure what your current culture is, or how you might like to change it to achieve your firm's strategic goals.
So if you haven't already, let me urge you to take some time to explore your firm's culture. Is it really what you think? Look at the evidence. Remember, your true culture is expressed in behaviors and practices, for good or bad. If you examine it more closely, you might be surprised what you find--for good and bad.
I've long been a passionate advocate for the value of delivering exceptional client service. My research and experience lead me to believe that service excellence is the best differentiation strategy available to the average A/E firm. That's because most firms are so, well, average when it comes to serving their clients. A passion for service excellence is hardly common in our industry.
Perhaps there would be more commitment to raising client service levels if the bottom line benefits were more evident. I've often been asked whether an investment in better service pays off in higher profit and client loyalty. It's a fair question, but one that's not so easy to answer directly. No one has specifically studied this issue in our business, to my knowledge. But there is some evidence that I think is relevant.
For many years, the best client service data relating to professional services has been compiled by BTI Consulting Group. I became familiar with their work back when they primarily served the environmental services industry. My former employer hired them on several occasions. BTI has since shifted their focus to other professional service sectors, particularly the legal profession.
I'm convinced that their research findings for law firms are relevant to our industry. Most data related to professional services are worthy of our attention. Plus I've noticed similarities between BTI's numbers and those compiled through studies in other industries. There are similar trends in the data for law firms and for the environmental consulting firms that BTI previously studied. So let's look at the evidence that service excellence delivers bottom-line benefits:
Higher profits. BTI has developed several criteria for service excellence based on feedback they got from law firm clients. Those firms that excel at client service according to those criteria report 30% higher profits than other law firms. That's substantial!
Sound too good to be true? Try this assessment: List your clients from most to least profitable. Then grade the strength of the relationship you have with each client, using a five-point scale. Based on my experience, I suspect you'll find a strong correlation between the quality of the relationship (a byproduct of great service) and profitability.
BTI also found that firms that had established client service standards (which are rare in our business) improved profits by 10.7%.
Higher client retention. Client service leaders have a 35% higher client retention rate according to BTI. Of course, that has a huge impact on profitability. PSMJ reported that an increase of just 2% in your client retention rate has the same effect on profits as cutting your costs by 10%. A study by Bain and Company found that a 5% increase in customer retention improves profitability 25 to 95%.
Over the years I've asked seminar audiences what percentage of their lost clients could be attributed to service-related problems versus technical problems. Estimates have varied from 70 to 90%. Interesting, isn't it, how much more we invest in improving our technical capabilities than we do our client service capabilities.
Higher fees. BTI found that client service leaders charged 7% higher fees than the average law firm. Another study found that service leaders charge 9% more for their services. You can confirm this by adding average fee per client to the assessment I mentioned earlier. Better still, ask your clients to score your client service and compare the results with the fees you charge each.
Higher ROI on your marketing efforts. Here's an interesting finding by BTI: Simply designating a single individual to oversee the firm's client service performance increased the marketing return on investment by 35.4%. In other words, build accountability into your service organization and watch your business development results improve.
Why? I suspect it's the link between satisfied clients and new business opportunities. These come through referrals, a stronger brand (which is rooted in client experiences), and a corresponding service-centered approach to business development.
Higher growth. PSMJ reported the results of a study that found that firms with excellent client service grew twice as fast and picked up market share at least 6% per year, while those with poor client service lost 2% per year. Obviously, it's much easier to grow if you retain a higher proportion of your clients.
So how will you boost financial performance in 2011? Step up the business development effort? Cut or contain costs? Improve collections? Don't overlook perhaps your best opportunity to boost the bottom line: Delivering better client service. The financial impact may not be significant in the short term, but over the long haul the evidence suggests that delighting your clients can be a highly profitable strategy.
Does your firm write too many proposals? It's a common problem in our industry. Many technical professionals find it difficult to pass on virtually any opportunity where their firm is qualified to do the work, even in the face of long odds. In this economy, the temptation is even greater.
