What leaders usually conclude
The natural first read is that the pricing itself was wrong — too aggressive on hours, too optimistic on complexity. Pricing discipline is a genuine lever, and firms should absolutely scrutinise it. But this framing treats the problem as a calculation error, when the more durable issue is about who was in the room making the calculation.
What the evidence suggests
Paul Rogers and Marcia Blenko’s research at Bain, based on a survey of executives at more than 350 global companies, found that only about 15% of respondents believed their organisation had decision-making that helped it outperform competitors. Their work also identifies where decision-making typically stalls: at boundaries between the people who hold the relevant knowledge and the people who hold the formal authority to decide. In a partner-led firm, pricing authority commonly sits with rainmaking partners, while the knowledge of what an engagement actually takes to deliver sits with the people doing the delivery — and those are frequently not the same individuals. The knowledge required to price accurately sits with people who are structurally excluded from the pricing conversation.
This is not a lapse in judgement by any one partner. It follows from how partnership governance typically allocates authority — around relationship ownership and seniority rather than around who holds the most current, granular knowledge of delivery cost. Steven Kerr’s research on reward systems adds a further layer: partners are usually rewarded for winning work, not for pricing it accurately, so the incentive structure reinforces exactly the separation that produces the margin problem.
Donald Sull, Rebecca Homkes and Charles Sull’s broader research on strategy execution frames this as a specific case of a general pattern: cross-unit coordination, not the quality of any individual’s judgement, is what breaks down most often in growing organisations. Pricing and delivery function, in a partner-led firm, as two units that need each other’s information to work well — delivery needs pricing to reflect real effort, and pricing needs delivery’s current view of what a matter actually takes — and yet the two rarely have a structured channel for that information to flow between them before a proposal is signed. The 9% figure from their research, describing how few managers feel they can reliably count on colleagues in other parts of the organisation, captures exactly this gap: pricing partners are, in effect, a different “unit” from the delivery team, even inside a single small partnership, and the coordination between them is no more automatic than it would be between two departments in a much larger company.
Competing explanations
A firm might attribute this to a specific partner’s optimism or a one-off scoping mistake, and individual variation certainly exists. But when the pattern recurs across different partners and different engagements, the more useful explanation is structural: the people who know what work costs are consistently not the people deciding what to charge for it, and no amount of individual carefulness fully compensates for that separation.
The governance dimension deepens further at the point of internal dispute resolution. When a delivery team raises concerns about a poorly scoped engagement after signature, the conversation typically runs through the same partnership structure that approved the original pricing — meaning the people being asked to acknowledge a pricing error are often the same people, or close colleagues of the people, who made it. This is not a matter of bad faith; it is simply what happens when authority for pricing, delivery oversight, and internal dispute resolution all sit inside the same small, relationship-based group. A partner-led firm rarely has an independent party positioned to say, without professional cost to the relationship, that a specific proposal was underpriced.
The consequences of this separation tend to surface unevenly across a firm’s client portfolio. Engagements priced by partners with direct, current delivery experience in the relevant area are far less exposed to the gap than engagements priced by partners further from day-to-day delivery, even within the same firm. This unevenness can make the problem harder to see at a firm-wide level, since some engagements will look perfectly healthy while others quietly absorb the cost of a pricing process that was, in those specific cases, disconnected from the knowledge it needed.
Where this shows up
This perspective is written with professional services firms in mind. It sits within the Professional and Knowledge-Based grouping, and the questions it raises recur in other sectors too.
Questions worth considering
- Who actually knows what a piece of work takes to deliver, and are they present when it is priced?
- Is pricing accuracy something the firm rewards, or only winning the engagement in the first place?
- How would this firm know if the gap between pricing authority and delivery knowledge was widening as it grows?
- If the most recent underpriced engagement had to be re-priced from scratch today, who in the firm would the pricing partner need to consult that they did not consult the first time?
Your team is facing similar challenges?
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