I was conducting a two-day proposal and presentation workshop for one of my favorite clients. A large group of project managers and seller-doers was around the table and we were having a pretty intense discussion about the go/no go decision-making process and abysmal hit rates, when the CEO posed a truly radical idea:
“What if each of you were accountable for your own hit rate?”
There was a whole lot of silence in the room.
We all know what hit rate is – the percentage of proposals submitted that actually turn into paying projects. Industry-wide, it’s been stuck somewhere between 25 and 30 percent forever. Most firms have some sort of go/no go decision-making process, some more formal than others. But I’ve yet to see any system that isn’t regularly gamed to allow the project manager or business unit leader to do what they’d already made up their minds to do regardless.
Standard industry practice is to throw proposals against the wall until something sticks. Statistically, less than a third of them do.
But what if each person was accountable for their own hit rate? What if part of your annual evaluation looked at the amount of time and money you wasted chasing those proverbial wild geese? What if the project manager who went after 10 projects and won three got less than half the bonus of the one who went after just five but won four?
On reflection, it might just be a stroke of genius. The average cost of a competitive proposal today varies wildly, but it would be safe and conservative to say it averages around $10,000. If the hit rate is 25%, you can easily calculate the break-even point of the winning projects in order to cover the cost of the losers:
$10,000 ÷ 25% = $40,000
A project manager who doubles their hit rate to 50% saves the firm $20k and could put forth a reasonable claim for a piece of those savings.
There is a lot of conventional wisdom floating around this industry. Another one of my favorite candidates for the We-Might-Be-Wrong-About-This award is the notion of chargeable time. We set quotas, constantly measure and work hard to maximize billable time. But what suffers as a result?
You and I are both smart engineers. We’re both given a task and 100 hours in which to complete it. I spend 97 hours, get the job done well and please the client. Then I spend three hours tidying up and getting ready for the next project. I get a pat on the back and a bonus for being 97% chargeable.
But you’re much smarter and more efficient and produce a finished job and a happy client in just 70 hours. Then you spend 30 hours on some proactive business development. Boss says, “We’d really like to see you get those billable hours higher please.” No problem. Next time you’re going to take 95 hours to get the same job done and the boss will be off your back.
I hear a lot of talk among firms looking for ‘best practices’ to emulate. But let’s not confuse conventional practices for best practices. There is a lot of conventional wisdom that’s a little too conventional for my taste and a little revolution would be good for us all.