I had a planning lunch today for my September 17 presentation at the APMP roundtable event, when a fellow proposal consultant self-admittedly got on a favorite soap box. His pet subject was criticizing the whole notion of win rates as a metric for proposal professionals success.
He said win rates are all fake or suspect, and they do not reflect a real picture. People who claim their win rates are really high are distorting the truth. People whose win rates may be low but who write great technical proposals that lose on price should count those as a win, and not a loss, to be fair to their ability as a proposal manager.
I said, wait a minute. A loss is a loss is a loss. I think there is another issue here at play a fundamental lack of understanding of how win rates are calculated. Many proposal people are highly opinionated about win rates, but surprisingly few know enough about this metric to have a meaningful discussion devoid of emotion. Many executives and business developers also should be careful when they see a proposal professional claim a high rate or present a seemingly low rate. Instead of getting really excited or discouraged, they need to first understand whats behind the number.
One mistake that people commonly make with a win rate is to derive it simply by counting the number of proposals won versus a number of proposals lost. This is the metric that causes the most anger for proposal professionals, as those numbers never look that good. This is by far the most unfair, and frankly, the most meaningless way of calculating a win rate. A loss of a proposal thats $10 million does not cancel out a win thats $1 billion.
The way a win rate should be calculated is by looking at the amount of dollars won versus the amount of dollars lost. This is how the proposal folks and consultancies that claim high win rates get to such high numbers. These are also the results that proposal professionals who do not understand the way the rate should be calculated file in the another marketing lie category.
Needless to say, the only way a proposal professional or a firm can ever make a claim of a win rate is by keeping an accurate tally of all the pursuits worked, and record whether this was a win or a loss, the amount of the booking including option years, and the resulting win rate percent.
Now, there are three cautionary points that I would like to make. The first one is that there is still room to play with the rate, and when someone advertises their impressive rate, you need to ask them how they derived it.
The biggest mistake that people make with the rate in government proposals is by counting the multiple award indefinite delivery/indefinite quantity (ID/IQ) or Government Wide Acquisition Contracts (GWAC). Those are just a license to hunt, so the sizeable dollar ceilings cannot be added into the total amount won. Since these can be very challenging wins as well, they should be counted — only separately. For example, my win rate is 94% for the regular contracts, but it is 99% for contracts when counting ID/IQs and GWACs.
The second cautionary point is that people have to be consistent with what proposals they count. You should always ask how they derived their win rate. For example, do they count only the proposals where they felt they had control over the outcome? Do they count all the pursuits in which they have ever taken part, no matter what role they played? Do they only count the pursuits they managed, but omit the ones where they were a contributor? Or do they apply a specific set of criteria, such as the threshold of involvement? This could be based on the minimum percentage they are involved in the pursuit in order to count, based on the number of hours versus the length of the pursuit.
Whatever is the method, you need to know what it is to understand what the win rate number really means, and whether it was derived consistently. If the proposal professional cannot answer the question quickly and succinctly on how they derived the rate, then you cannot trust that they did not cherry pick whichever win they liked to count, and whichever loss they liked to discount, in order to make the numbers look more impressive.
The third, and the most important cautionary point, is not to be distracted by the glitter and the smoke and mirrors of what a win rate represents. Of course, this may be the best known and the most visually impressive way of judging someones abilities, other than them adding up all the millions and billions they won. Win rate, however, when calculated properly, is just one of the dozens of metrics and criteria that should be applied to measure someones professional competence and predict the level of success they could bring to your business.