Do you find yourself or your team spending hundreds of hours evaluating deals that seem to go nowhere?
Or…
Are involved in deal review meetings where decisions are made differently every time and everyone leaves scratching their heads?
Too often I have seen organizations and teams pay a heavy price because of this. And the ROI of all the hard work is difficult to see at the end of the year.
Here is a four-step framework to move from a reactive to a proactive approach with your deal governance.
Step 1: Set the criteria
Work with the P&L owner and the senior team to list the strategic criteria for inorganic growth – e.g. capabilities that customers are asking for, high growth segments to enter, new business models, new customer segments – whatever they may be for your organization.
Invite inputs from a range of stakeholders.
Invest ample time at this stage – it will pay dividends later.
Step 2: Prioritize the criteria
Rank and prioritize the strategic criteria. Get inputs from the functional sponsors.
Identify the must-have and nice-to-have criteria.
Pre-decide what makes a deal fall towards the “high” vs. “low” side of the scale, against each of the criteria.
Memorialize this in a deal prioritization criteria matrix.
Share it back with the team, explain it, and make it easily accessible.
Step 3: Honor the criteria
When evaluating a new opportunity, always bring it back to the prioritization matrix.
Get independent feedback offline, using the deal prioritization matrix, so that one persuasive member doesn’t sway decision-making in the meeting.
Have the stakeholders rate the deal consistently (and independently) using the scale you’ve established. Encourage any qualitative commentary.
Calculate the score offline, and use that score and rationale to anchor the discussion with the senior team. Share the commentary.
The goal is independent, bias-free, deep thinking before the meeting.
Step 4: Evolve the criteria
Encourage dissent during the discussion.
Regardless of the go / no-go decision, make sure everyone understands why the decision was made.
If the decision didn’t follow the ranking score, understand why.
Reflect as a team and note if the criteria itself might need to be updated.
Collect this feedback diligently, across every deal.
Every quarter / semi-annually, revisit the prioritization matrix and tweak it.
Over time, your organization will get better and more effective at making inorganic investment decisions.
Less wasted effort, more alignment.