The Cause of Bad Proposals?
Imagine you are the CEO reporting to your Board of Directors at next quarter’s Board Meeting and you present the following:
“During the past three months Vague and Foggy, Inc. invested in four lots of lottery tickets at $10,000 each. We bought 10,000 tickets for a total of $40,000 and thought we had a very good chance of winning more than $3M. However, to date we have only won $3.00 on one ticket. Therefore, next quarter we plan to invest in six lots to improve our chances of winning.”
If you made this report you would not be surprised if the Board immediately required your resignation for cause.
While this imaginary example is ridiculous, the same scenario frequently occurs in companies that pursue Government contracts – only substituting proposals for new contracts lottery tickets.
Of course, there are some important differences between playing the lottery and submitting proposals. For instance, while many CEOs are unable to accurately track the costs of business development and proposal creation & production, we can be sure they would exactly know the cost of lottery tickets. But submitting a bad proposal and expecting to win is about as logical as buying lottery tickets.
So what creates a bad proposal?
In my opinion it is the fogginess about the cost of winning new contracts that drives businesses to utilize self-defeating business development practices that produce bad proposals. If a CEO had accurate information on the actual cost for investing in business development and proposal creation & production, it is reasonable to assume that a competent CEO would also demand systems and procedures to assess the return on the investment – the ROI – of business development.
If my opinion is on the right track, we must look for the reasons leading to the “cost fog” of business development. In my years of offering consulting and running businesses, I have observed the following
The cost of Overhead and G&A are accounted for in a firm’s billing rate. If these costs go up, the audited price to your clients and customers goes up. Obviously, there is a competitive incentive to keep these costs low.
There are a wide variety of approaches used to keep the costs of business development and proposals from increasing Overhead and G&A, such as:
Personnel on Overhead and G&A not itemizing time spent on business development and proposals on their time sheets
Requiring salaried Overhead and G&A personnel to work unpaid with unrecorded overtime on business development and proposals
Requiring direct salaried personnel to maintain normal rates of billability and then work unpaid overtime on business development and proposals – called “Green Time” in some firms
Minimizing staff augmentation and consultants for business development and proposals, as these costs must be accounted for in Overhead and/or G&A.
But the end result is that the actual cost of winning new contracts is foggy at best.
There is ample evidence that valid measurement of performance often changes the level of performance. A client once proudly showed me the graphs and data for the quality of their products. It clearly showed that product quality very significantly improved after they put the quality metric in place.
The question in this blog is simple – will the performance of business development improve if it is accurately measured. The starting point of a business development performance metric is cost compared to revenue growth. The cost fog I have observed denies the CEO with valid information and as a result there is a far too many bad proposals.
My bottom line:
If a CEO has accurate information on the costs of each step in the business development process, that CEO will also require clear performance metrics that assess the ROI of business development. And, it is very likely that an effective business development metric will result in more winning proposals.
Your thoughts and comments are welcomed.