A Hidden Cost of Low Win Rates

Now that the economy has been recovered for several years now, there is plenty of work in almost every market in our industry. Firms are winning work and hiring at all levels. Even if your firm has low win rates, you still may be able to meet financial goals and keep growing. A week doesn’t go by when I don’t see a social media post of a firm hiring a project manager, engineer, or architect.

Possible Overlooked Metric – Win Rate

In this strong economy, some of our firm’s metrics may not get the attention that they deserve, especially when they may indicate a negative trend. In my experience, we haven’t scrutinized certain metrics when revenue growth and backlog or meeting or exceeding goals.

One such metric I want to talk about today is your firm’s hit rate. This can also be called a firm’s win rate. Basically, it’s the percentage of proposals or pursuits you are winning divided by the total number of pursuits. For a more detailed explanation of how to calculate this for your firm click here.

When you are meeting your revenue goals, you might think that your win rate doesn’t matter. You are winning enough. You are meeting goals.

That could be true. You are meeting the financial metrics and goals your firm needs. However, there is one major hidden cost that is hurting your firm and team members.

Lack of Qualifying Pursuits

With a strong economy, there are lots of projects and opportunities. These may come from existing clients and markets. New opportunities may also come from expanding into new geographies and industries.

Your firm may have a formal Go/No Go (or qualifying) process or may have a more informal discussion to determine if a new client or project is a good fit. In my experience, this sometimes gets muddy when economic times are bad and good. In the last economic downturn, it seemed we pursued every new project because there just so few projects. Ironically, I also experienced a similar lack of discipline when times are good too. This is mostly due to wanting to move into new markets or expand geographically.

In either situation, when your firm does not consistently qualify new pursuits it is costing your firm more than time and expenses to chase those projects and respond to RFPs.

Effects to Your Team

Your firm may be able to afford the expense to win only three out of every ten pursuits. However, it may be costing your firm in other ways.

Not winning work consistently is taking a toll on your team. This includes both marketing and technical staff.

A Tale of Pursuing Too Much

Let’s look at an example that could take place at any architectural or engineering firm.

Joe is the CEO of a consulting architecture/engineering firm. He has a dedicated marketing team to produce proposals but also relies on his firm’s project managers to provide technical content for each proposal. These same project managers are also responsible for producing the work, managing the design, and keeping clients happy. Each project manager has a utilization goal, so often the work needed to produce proposals gets completed either before or after normal work hours.

Tina is one of the firm’s best project managers. Both the clients and internal team members enjoy working with her, even though she has been with the firm for only a year. She has hit the ground running and involved in nearly every healthcare proposal effort on top of managing several projects.

So, when she submitted her resignation to Joe, he was shocked. When asked why she was leaving she told Joe the following:

I have really enjoyed working at the firm. The team is great. The projects are challenging. I don’t even mind working nights and weekends. I am happy to put in the effort, but I feel that the time is wasted. In the last 20 proposals, we have only won two projects. I felt like I spent more time on proposals than we will bill on the projects we did win.

Joe realized at that moment, that winning only 10% of the proposals his firm pursued, was not only costing him money but was the reason he was losing key personnel.

He had to find a way to better identify opportunities worth pursuing. If he didn’t, he would struggle to retain and attract top talent.

A Lesson for Your Firm        

While this example above is completely fictional, I do know that top talent leaves firms. Sometimes the folks leaving give an honest answer as to why they are leaving and sometimes they don’t. Sometimes the person leaving cannot pinpoint the reason like Tina above, but he/she may feel that they are “spinning their wheels” or “not effective” or “not getting enough traction” or feel that he/she is not contributing enough for why they were hired.

If your team members don’t leave, having low hit rates or not properly qualifying pursuits can also lead to low morale, dilute your resources, and force you to miss out on more meaningful projects.

The good news is that this can be turned around. By narrowing your focus and properly qualifying all opportunities, your firm can eliminate the pursuits you cannot win and focus on the ones you can.

Take our example from above. If Joe’s firm still only won two projects but pursued half as many, the firm’s win rate would go from only 10% to 50%! Not only does this look good on paper, but Tina and the marketing staff would have not had to spend the time on the other 10 proposals. That time could have been spent on the 10 proposals they decided to pursue, client relationship building, and other marketing activities to help position Joe’s firm as the leading provider.

A New HR Strategy

In this good economy, finding good people—project managers, technical staff, and marketing professionals—is hard. Firms are focusing on ways to retain and attract top talent. Maybe looking at your hit rate and focusing on how you can increase it should be another strategy in these efforts.

Everyone wants to not only feel like their efforts are contributing and not wasting their time, but they want to work with a winning firm!

Your Turn

Review your firm’s hit rate by project manager. Discuss the results with your principals or HR director immediately if someone sticks out with an exceptionally low hit rate. Don’t do this to point out the person, but rather as a serious discussion to make sure they are not thinking of leaving the firm. Help that person or their office/market better qualify their opportunities to improve their win rates.