Why Cost Centers Should be Extinct

In this day and age, can any company afford to have a department or division that doesn’t contribute to the top- or bottom-line? The concept of a cost center makes no sense. “Let’s develop a department where we incur costs and have no ties whatsoever to improve the overall financial performance of the organization. We will have no financial measures that help the overall company improve.”

So here’s where you say, “But not all departments can be tied directly to the financial performance of the overall organization!” Wanna bet?

IT departments may have developed some great new technology tools to manage information in the company. Couldn’t that be commercialized and sold?

Call center representatives, who talk to customers ALL DAY LONG, could be trained on all of your company’s offerings and help identify new customer needs that can be filled with those products and services.

Repair people and technicians can be trained to provide better solutions to customers when they are in the field. Procurement departments can negotiate better relationships with key suppliers. Finance departments can find more cost effective ways to report on financial information.

And any department can contribute new ideas to help with customer acquisition and retention, or revenue growth, or increasing profitability.

I think you get the point. Creating cost centers is an out-dated idea that needs to become extinct. Are you one of the people giving it CPR to keep it alive?

Winning Less Than 50% of RFPs? Here’s why…

Most of the organizations I talk with and work with have a RFP win rate of no more than 30%. That means that for every three RFPs they respond to, they only win one of them. Sounds familiar? And we all know how much effort goes into the submission of a RFP response.

Here are three reasons why your RFP win rates are so low:

  1. You respond to too many RFPs. You have no way of identifying a good opportunity vs. a bad one, so you respond to everything. I recently worked with a client to reverse this problem and the results were immediate – higher win rate, higher revenues. All because they focused on those opportunities they had the best chance of winning and that afforded the largest growth opportunities.
  2. Too many people touch the RFP response. If you mapped out all the people that contributed to the submission of a RFP response, I bet it would look like a spider’s web. There’s no way all of those people are adding value and enhancing the response. I helped a client look at their RFP response process and helped them realize that, on average, 25 people touched a RFP response. I also helped them realize less than half of those were adding any value. Submission effort went down and win rate went up after implementing some changes around this.
  3. You don’t know what the customer really needs. Many organizations read the RFP document and respond to what is asked for. Don’t let the potential customer define your solution. You are the expert. You have done this before. Ask a lot of questions. Set up a meeting to find out their objectives. This can be extremely effective when done before the RFP ever comes out. I have helped a few clients be more proactive in this area and not only did they win more RFPs, but those RFPs were bigger than originally planned because my clients engaged in a discussion with the customer around THEIR objectives. Thus, they were able to offer better solutions than what the customer had originally envisioned.

Increasing your RFP win rate requires a different mindset and approach to what you have done before. In my first meeting with one client I told them that if they wanted to win more RFPs, they had to respond to fewer of them. I thought the executive was going to kick me out of the office. 12 months later, they had doubled their win rate and grown revenue by more than 10%. That is the reason why this is so important!

Site By: The Chad Barr Group