One of the key benefits of establishing good governance is the role it plays in enabling you to win “good” or profitable business that you can successfully deliver. When there are fewer opportunities available – like we’re seeing in the current economic climate – it becomes even more important that you have the structure in place to pick and win the right project.
Failure to do so can result in you taking on “bad business”, which could lead to both a loss-making project and, critically, reputational damage if you have taken on work that you are unable to deliver.
The risk that bad business presents is increased exponentially when you’re looking to grow your firm quickly. In your drive to take on more business to grow top line revenue, it’s vital that you focus on winning the right business. As we’ve sadly seen many times over the years, it’s rarely a lack of opportunities that puts a growing consulting firm out of business. It’s when they take on the wrong project that they can’t deliver that causes them to go bust.
The next step in your growth journey
For founding teams this seems obvious and is relatively easy to manage when it’s just yourself and your fellow founding partners doing the selling. But what do you do as you grow and have to delegate these responsibilities to other members of the team?
This is where effective governance comes in. Creating an effective business development governance process will ensure that everyone is clear on what a good deal looks like and what needs to be reviewed by yourself or your fellow partners before someone in your firm commits you to delivering it.
Establishing your own business development governance framework
To help you think about how this could look for your consulting firm, here’s an example that we’ve seen work effectively for firms that we’ve worked with.
How this works in practice will vary from business to business. Without that context it can seem a little abstract but once there are clear and specific business-relevant criteria in place it becomes an efficient system.
Essentially, an effective new business governance process will accurately weigh up three key aspects of a deal – revenue, margin and risk. The higher the risk, and lower the margin, the higher up your business the decision-making will need to go. The process will ensure the appropriate people are involved at the right moment.
The framework below is one way of looking at it. Deals with high revenues and/or high risks will generally need a the most senior sign off, whereas approval of deals with medium to low risks can be delegated to more junior managers, provided there are good-enough margins in the deal
For example, at a global leading consultancy, a committee brings together leaders from across the business – industry, service line, finance and legal, to oversee the biggest and riskiest deals. It looks at how each part of the business will be impacted and what the pitfalls could be, with the Chief Risk Officer acting as an independent chair.
Your firm may not be the of that size, but establishing a group with a similar remit will give you full oversight of make or break business decisions before they are made. Alongside a structure that allows smaller decision to be made quickly it will enable your firm to move quickly with its eyes fully open.
We talked about this in more detail in our recent webinar which also looks at how to implement good governance and what these processes might look like in your business.
It’s not easy delegating this kind of responsibility, especially if you’re the founder of a business used to having full control. If you’re struggling with developing your own effective sales governance processes please feel free to get in touch. We’d be more than happy to explain how you can put these structures in place and help your company win more and better business.