Thursday, April 30, 2015

Why You Should Be Writing Fewer Proposals

The verdict is in: Writing fewer proposals typically increases both your win rate and your sales. That, at least, is the consensus of the many sales and proposal experts I "surveyed" via a Google search. That has also been my experience over the last 25 years working with a variety of engineering, environmental, and architectural firms.

But many firm principals aren't buying it. Not in practice, at least. They find it hard to "miss opportunities" by being more selective in the proposals they submit. Several have explained to me that while that maxim may work for most, it doesn't apply to their firm, office, or market sector. They fear dire consequences if they reduced the number of proposals.

Inevitably, these "volume sellers" have a low win rate. Their business development costs are often inordinately high, and their profits are usually lower. It's not uncommon for volume sellers to pursue a higher percentage of price-driven selections, which would seem to substantiate their conviction that more proposals equals more sales.

They may be right, but I doubt it. For one thing, that approach to developing new business inherently erodes the perceived value of their services. My take after watching business development trends for decades is that indiscriminate selling reinforces indiscriminate buying (e.g., selecting on the basis of low price). When you shortchange the sales process by simply responding to RFPs, you shortchange the opportunity to establish your value proposition.

Still not convinced? I offer the following additional reasons why you should be writing fewer proposals:

Proposals are costly, but the greatest cost is opportunity cost. Proposals constitute roughly half of the typical A/E firm's BD budget. But for many firms, the budget share is still higher. And as proposal costs increase, there is usually a corresponding drop in ROI (i.e., win rate). That's because the larger expenditure is rarely an investment in better proposals, but in more proposals.

It's fairly typical for volume sellers to spend about 70% of their proposal budget on writing losing proposals. But that's not the worst of it. The greater cost is that those hours could have been diverted to higher-value BD activities, such as positioning their firm for success in advance of the RFP. I remain convinced that the vast majority of awards go to the firms that invest substantially in the pre-RFP sales process. 

You need to invest more in your best proposal opportunities. What about the argument that most of the cost is borne by overhead staff who you have to pay for anyway? You still suffer opportunity costs because they could have spent more time on more promising proposal efforts (not to mention marketing, which is frequently neglected in A/E firms). Plus, if most of your proposal labor cost comes from marketing staff, I would question your commitment to producing winning proposals.

Having reviewed hundreds of proposals, I've observed that most fail in the area of technical content. Rarely do they reflect the firm's true expertise and insights. Why? Because the technical experts invested too little of their time in the proposal effort. Yes, I understand the demands on their time. Which is all the more reason why they shouldn't be wasting time on proposals that have little chance of success.

You shouldn't be using proposals to introduce (or reintroduce) your firm to the client. I advocate a "no know, no go" policy. In other words, if you weren't talking to the client before the RFP was released, you shouldn't be submitting a proposal. There are exceptions, of course, but I consider them rare. I addressed this issue in a previous post, but I'll recount two reasons that stand out: (1) if you don't know the client, you're usually going to lose to someone who does and (2) if you haven't been gathering insight into the client's issues, you're not going to be able to write a strong proposal. That means a mediocre first impression—another opportunity cost.

Bottom line, the volume strategy usually ends up diluting your value and wasting a substantial portion of your BD budget. Yes, it can be a step of faith to say no more often and trust that less is more. But you can take courage from the fact that the best firms have already taken that step.

Monday, April 27, 2015

Why Employees Leave

The economy continues to make a slow recovery. That's the good news. The bad news? Expect employee movement to pick up as well. Voluntary turnover dipped during the worst of the recession. But as business picks up, more employees will be leaving for greener pastures.

What can you do about it? Start by understanding the reasons why employees might leave your firm. There is a good deal of misunderstanding about the causes behind voluntary turnover. While most companies conduct exit interviews, they often fail to uncover the real reasons for an employee's departure.

The Saratoga Group has conducted thousands of independent exit interviews and has found significant differences between what employers and employees report as reasons why people choose to change jobs. For example, their interviews revealed that 89% of managers felt that employees left mostly for more money. But 88% of departing employees said they left for reasons other than money.

The Saratoga study identified seven main reasons why employees leave their job:

The job is not what they expected.
Expectations play a critical role in both the employee's decision to take a job and his decision to leave. When initial expectations are not met, the process of "disengagement" begins (see below). The problem often begins when the employer fails to establish realistic expectations during the recruiting and hiring process. Obviously, you want to do your best selling the job to a coveted candidate. But overselling or failing to disclose the less desirable aspects of the job can cost you later. A key aspect of the interview process should be confirming mutual expectations about what the job entails and the work environment.

The job is a bad fit for the employee.
Research by the Gallup Organization found that poor job fit is the top reason for employee disengagement—when interest and productivity drop. Disengagement usually precedes an employee's voluntary departure. (Remarkably, Gallup found that 75% of workers are not engaged on the job, costing the U.S. economy an estimated $250 to $350 billion a year in lost productivity!) Again, the problem begins in the recruiting and hiring process, but can also surface later when the firm fails to find the best fit for the employee's evolving skills and interests.

There is a lack of feedback and coaching. This is a common shortcoming, resulting in lower productivity, quality, professional growth, and job satisfaction—leading ultimately to higher turnover. Feedback and coaching obviously help employees develop their skills and performance. But it also communicates that the company cares about its employees and wants to invest in their future with the firm.

They see little opportunity for career growth.
This contributes to turnover among all employees, but especially among younger and "nonprofessional" staff. Younger employees often are looking to advance at a faster pace than their older colleagues did. Most firms I've worked with lack clear career paths, the very thing younger professionals want. We need to also reconsider the traditional time line for moving people into management roles. Other industries, for example, are promoting capable technical professionals to project management roles 3-4 years out of college.

Many nonprofessional workers in our industry feel trapped in their current jobs, with little perceived opportunity for advancement. The A/E firm culture often seems to undervalue the contributions and potential of those in administrative or technician level jobs. Yet many of these individuals not only add tremendous value to the team, but have substantial untapped potential to take on larger roles if given the chance.

They feel devalued and unrecognized. Compensation—both salaries and bonuses—play a role here, but as noted above, it's much less than commonly thought. A greater factor is a general sense among employees about whether they are properly appreciated and valued. This is more often demonstrated in non-monetary forms, such as listening to employee concerns, inviting their input on decisions, formally recognizing their successes, caring about them as people, entrusting them with appropriate freedom and authority, and giving them opportunities to grow and advance.

They feel overworked and stressed out.
There is growing interest among employees (especially younger workers) in maintaining a work-life balance. At the same time, Americans are working longer hours and on-the-job stress is increasing. Work-related insecurity associated with business downturns, mergers, and reorganizations certainly hasn't help this situation.

The problem clearly affects our profession. Long hours, pressure, and extensive travel all can contribute to employee turnover. Firms are attempting to respond with more flexible hours and policies, but many firms are still short-staffed emerging from the recession. Even apart from the economic downturn, many managers have long favored some degree of understaffing to maintain higher utilizations. Yet the net benefit is dubious if this increases turnover and its associated costs.

They are unhappy with their boss.
According to Gallup's workplace research, a poor relationship with the boss is the number one reason why employees leave. Gallup concluded, "People join good companies but leave bad bosses." In other words, there's little a company can do to create a great workplace if they have ineffective bosses—those who don't invest time in or show concern for their employees.

In my experience, too many firms in our business fail to give this matter appropriate emphasis. They ignore the problem of deficient bosses, especially if these individuals have strong technical credentials. If you're serious about reducing turnover, this is a good place to start. Establish specific expectations for those in supervisory roles, provide appropriate training and mentoring, and track performance by routinely getting feedback from those they supervise.

Do any of these reasons hit close to home at your firm? If so, there is clear justification for making investments in creating a more competitive workplace, and all the more as the economy continues to grow. For ideas, you might check out my previous post, "Seven Steps to a Winning Workplace."

Friday, April 17, 2015

Who's at the Top of Your Org Chart?

The late Bob Dunlap, founder and president of RETEC where I worked for a decade, often would show an organization chart with clients at the top, then project managers, then the rest of the organization, and him at the very bottom. He would proudly say, "My job is to serve those who serve our clients, because that's why we're in business."

It was Bob who fashioned our core values, the first of which was: "Our clients are the focus of everything we do." Unlike many companies, RETEC was serious about their values. They routinely came up in conversations about strategy, operational matters, business development efforts, and personnel decisions. That focus on clients was perhaps the most important factor in RETEC's success as one of the top performing environmental firms—before they were acquired by AECOM.

I've since been involved in several debates within different firms about organizational structure. These discussions are typically internally oriented, in contrast to Bob's vision of an externally-driven organization. Ego is a common visitor in these conversations, as managers vie for their favored spot on the org chart where the extent of their domain will be visually displayed. In general, people's perceptions of the org chart within the firm take precedent over any concern about clients and markets.

Interestingly, what results is often internal dysfunction. Every subdivision of the organization is a potential barrier to communication and collaboration. When client focus is subjugated to internal realms of control, functional silos inevitably develop. While A/E firms tout the breadth of their experience and expertise, the fact is that many of them struggle to make the full benefit of these assets available to clients because of organizational hurdles.

So here's a homework assignment for you: Sit down with your management team and do an honest assessment of how well your organizational structure serves your clients' interests. Does it facilitate the efficient delivery of your services? Does it expedite access to your best resources as client needs dictate? Does it promote cross-disciplinary collaboration? Does it help you focus efforts on your target markets?

If you find your org chart is a hindrance rather than a help to serving clients, perhaps it's time to restructure. You don't necessarily have to invert it like Bob did. But it wouldn't hurt to remind your management team in the process: "Our job is to serve those who serve our clients, because that's why we're in business."

Tuesday, April 14, 2015

The Art of Contractual Indemnity

I'm pleased to welcome Matthew Copus of Hall and Company and Ryan Kohler of CCM+S as guest posters this week. They write on a topic of interest to A/E firm leaders and business developers—how to avoid bad contract terms.

An unfavorable indemnity clause signed today can create a catastrophic risk at some point in the future. There is an alarming trend of both private- and public-sector owners including onerous indemnity clauses in their contracts, and the magnitude of the risk transfer associated with these terms is on the rise. Every individual who signs contracts for your firm should understand the risks involved in accepting these clauses.

The Impact of Obligations Assumed Through Contract

California may be the most troublesome state for indemnity and defense issues. In the 2010 case UDC v. CH2M Hill, a jury found that CH2M Hill bore no responsibility for any damages claimed by a homeowners association in their lawsuit against UDC the developer. But the court nevertheless ruled that CH2M Hill had to pay more than $500,000 for UDC's defense costs due to an unfavorable indemnity and defense provision in their contract—even though the jury agreed they had met the standard of care!

Given that other states often follow California's lead, this line of reasoning may start to spread east. Many states currently have rules that bar contracts between A/E firms and government agencies requiring indemnification or defense beyond the designer's negligence. But these same states may have a more lax requirement for contracts with private parties. Regardless of the state you work in, the fundamental principle to keep in mind is: If you sign a bad contract, bad things can happen to you!

If your firm becomes liable simply due to contract language on indemnity or defense—in other words, without any breach of the standard of care—your insurance company might deny coverage for that claim. The claim arguably arose out of a "contractual" liability, not a breach of the standard of care typically intended by professional liability policy terms. Most professional liability insurance policies for A/E firms specifically exclude claims arising from contractual liability. That's the last thing you want to hear when facing such a claim.

The Duty to Defend

If your firm accepts an indemnity clause with a duty to defend, you may be agreeing to pay for the other party's out-of-pocket defense costs. The terms of professional liability insurance typically do not include defending your client. You should also understand that in some states (including California) the duty to defend is part of the duty to indemnify. The contract doesn't need to even mention this obligation if there is an indemnity clause.

The default contract interpretation reads the duty to defend into the indemnity clause. Therefore it is not enough to simply strike the mention of duty to defend in the contract. If your contract has an indemnity clause, you need to have it state explicitly that there is no duty to defend.

What Should You Do When Negotiating Indemnity Provisions?

Consider the following strategies: 
  • If possible, eliminate the indemnity provision altogether. In the absence of an indemnity clause, you are still responsible for damages that you actually cause, which is fair.
  • Make the indemnity agreement reciprocal.
  • Tie an obligation to indemnify to a "finding" of negligence by a court or arbitrator. If the contract has two separate obligations or clauses (one to indemnify and one to defend), both obligations should be tied to a finding of negligence.
  • Make it clear in the language of the indemnity clause that there is no immediate duty to defend.
  • If the client won't agree to strike the duty to defend language, try to break the indemnity clause into two paragraphs: (1) one paragraph agreeing to indemnify the client only to the extent of your negligence, and specifically excluding your duty to defend; and (2) the other paragraph addressing non-professional services that may include the duty to defend (since it doesn't fall under your professional liability policy). This can be a delicate operation, so have your attorney and insurance carrier review the clause before proposing a change to the client.
  • Lastly, if dealing with a public agency that refuses to make a single change, check with the laws of your jurisdiction. Some states have softened the impact of unfair indemnity provisions by making the onerous clauses void and unenforceable. So you can at least argue that the provision is void should a claim and demand for indemnity arise.
The best advice regarding contractual terms remains constant: Don't sign contracts that unfairly shift disproportionate responsibility for problems beyond your control. Do your best to serve the client and provide quality work, but don't assume responsibility for the negligence of local public agencies, developers, and third parties.

Nothing contained in this post should be considered legal advice. Consult with an attorney before acting on any legal matters that might be addressed here or in any article.

Contact the authors: Matthew Copus, Hall and Company, (360) 598-5016; Ryan Kohler, Esq., CCM+S, (626) 243-1100 

Wednesday, April 1, 2015

How to Make Your SOQs More Client Focused

I've written in this space before about the importance of making the client the central character in your proposal narrative. This can be quite challenging since most RFPs encourage you to do the opposite, to feature your firm rather than the client. But clients notice when you turn the attention to their needs and aspirations (while still being fully responsive to the RFP requirements).

I think client focus has been the single most important differentiator in my compiling a 75% win rate over the last 25 years.

Typically the most client-focused section of your proposal relates to the project approach. This section should include a description of the project's background, objectives, approach, and expected outcomes. Don't simply provide a scope of work; demonstrate that you have a deep understanding of the project from the client's perspective and how best to deliver it successfully.

But what if there's no specific project involved? A common scenario is a client solicitation (RFQ) to provide a statement of qualifications for an indefinite delivery contract. There may be many and varied projects and consulting assignments packaged within this contract. You may have little idea what specific projects you might be working on. So much for the project-centered approach to writing a client-focused submittal.

Don't give up yet! There are still ways to feature the client in an SOQ. Here are some for your consideration:

Connect with the client's broader needs and goals. There is no difference between an RFQ and an RFP in this respect—they are both driven by the client's needs. Differing needs motivate the client to package several projects under a single contract rather than individual contracts. Different expectations influence the client's assessment of the A/E firm's performance under an IDC compared to a single-project contract. Assuming you have uncovered these critical success factors, be sure to address them in your SOQ. In particular, consistently point out how your project experience, project team, and other qualifications are directly relevant to the client's needs.

Always include a compelling executive summary. This enables you to distill the essence of your SOQ with a particular focus on the client. The basic message of your executive summary is this: "You said you had these needs and wanted these outcomes; here's how our qualifications are a perfect fit for you." Don't hesitate to include an executive summary because the RFQ didn't ask for one. In my experience, this section of your submittal will almost always be read, often be read first, and commonly will be a factor in your selection.

Describe how you will optimize the working relationship. While you can't describe your approach to a specific project, you can describe your approach to your relationship with the client. This is a critical success factor that is commonly overlooked in A/E firm SOQs and proposals. To avoid the usual marketing hype, you'll need to outline a formal process for defining and meeting the client's service expectations. Besides the real advantages of having such a process, you'll also benefit from likely being the only firm to address this in your SOQ.

Describe how you will deliver quality, on-time projects. Sometimes the RFQ will ask you to include a description of your QA/QC process, and possibly other routine activities such as budgeting and scheduling. If not, you should briefly outline your project delivery process. The emphasis should not be on internal procedures as much on how you ensure the client receives what they want. Of course, this advice is hard to follow if you've never really defined your project delivery process.

Use personal language. If you use third person exclusively, as is common in our business, your SOQ will come across as impersonal. If you only use first person (we, us, our), it helps reinforce the impression that it's all about you. Adding a generous helping of second person (you, your) puts the spotlight on the client where it belongs. Don't discount the power of pronouns. Several studies going back to the 1960s have concluded that you is the most persuasive word in the English language.

Make your SOQ skimmable and easy to navigate. I can't think of a much more boring reading assignment than reviewing a stack of A/E firm SOQs—can you? Help the client reviewers out by making your submittal user friendly. This is the differentiator that no one talks about. Any important messages in your SOQ should be provided at the skim level; don't make the client read for it. That means making ample use of boldface headings, bullets, graphics, and captioned photos.