June 18, 2020 Jonathan McElhatton

FIVE TRAITS OF (VERY) SUCCESSFUL AGENCIES

Your leaders are talking to your clients

As agencies scale, it’s normal to delegate client-facing responsibilities to middle management. But it’s never OK to step back fully. Agency leaders have a responsibility to be present across sales and delivery, leading teams, building confidence with key clients and identifying growth opportunities…and not just for quarterly meetings or the odd pitch. It’s a sad state when agency leadership spend more time at their desks than out at the coalface, and clients notice it!

What can you do about this?

Take a look across your leadership team, challenge all of your key leaders to increase their client-facing activity by twenty per cent. There’s always a way to redirect one day per week to something more valuable, and you’ll make people more efficient during their other four days too. Don’t take no for an answer.

Your people are busy

Busy means different things to different people. Everyone can say “I’m busy”, but busy should really mean one of two things. Busy on billable work, in other words, doing work that a client is paying for. Or busy on sales activity, directly progressing opportunities through the sales pipeline. Of course, there are many other day-to-day activities that keep us busy, like people management, reporting and internal projects, but there should be clear priority placed on the above two activities…the two activities that have direct impact on your top line. If your staff don’t understand this, you can help them by making the connection between revenue and pay, profitability and pay rises.

What can you do about this?

First, take a look at the ratio of billable to non-billable roles across your business. A target of 75:25 is good. Anything significantly different to this may mean you have headcount and/or efficiency issues. Second, consider introducing a utilisation target for your practitioner or studio teams. Your staff should feel a responsibility for their own busy-ness, and you’ll soon see improved individual performance and engagement as a result. Third, share a reminder with your staff that people management is an expectation of more senior people that can be absorbed efficiently across the week, not something which should have its own dedicated time ‘pot’. Finally, you can look to improve your sales triage process, as it is typical for sales teams to spend time chasing the wrong opportunities, something that could be quickly improved through more effective triaging.

Reward the right things

Do your Sales and Delivery departments get on? I bet they don’t. Why? Probably because you’re incentivising contradictory behaviours. Rewarding Sales teams on sales figures is very common, but it isn’t doing you any favours. You’re driving your Sales team to convert at any cost (they’ll say they don’t, of course), and typically at the expense of profitability, which (not so) coincidentally you measure your Delivery teams on…see where I’m going with this? You need your Sales and Delivery people working together towards mutual goals. If they are not currently, don’t blame them, look at how you’re incentivising their behaviours…

What can you do about this?

Consider adapting your remuneration structure, particularly bonuses and/or commission, to reward both your Sales and Delivery teams on revenue and profitability, and your practitioner or studio teams on utilisation. This will create a one-team effort to ensure work is sold correctly, money actually arrives in the bank, and profit isn’t being sacrificed unwittingly. You should also ensure you’re rewarding on targets actually being hit, not paying commission on every sale. And don’t forget to set a stretch target, which will motivate your team to go above and beyond.

Culture evolves

Culture is dynamic. Like the culture of any nation or region, people leave and new people arrive, and so the culture of the entity evolves over time. A business is no different. Agencies must embrace the cultural evolution that comes with the departure of old talent, the arrival of new talent, and wider market change. Agencies that do not, preferring to protect the status quo than to evolve, will be left behind. And what does this look like? The same old folk stay year after year, doing the same things in the same ways, while new talent arrive and quickly leave in frustration. Not convinced? Take a look at Glassdoor. Does it really paint the picture you want it to?

What can you do about this?

First, mix it up. Introduce new talent into your leadership and management teams. There’s no good reason why a new person must report to an existing member of your leadership. Businesses that do not do this are the ones that fear change. Second, empower your new talent to operate without constraint. Don’t cage the animal you just hired. Permit them space to influence and operate across organisational boundaries. Finally, keep an open mind about moving on some of your old talent. We all hit a ceiling at some point, whether it’s lack of progression opportunity, challenge or transferable skills. Make peace with the idea that your colleague of ten years won’t be around anymore and focus on the opportunity it offers both them and you to move on and learn something new.

Profit is king

Growth is important, but if your agency doesn’t focus on profit, you’re failing not only your shareholders but, crucially, your staff. Lots of agencies have challenges keeping their costs under control, especially people costs. Common issues include having too many people overall, too many unbillable people, inefficient people, the wrong mix of staff and short-term contractors, and uncontrolled bonus and/or commission structures. Other things that typically contribute to low profit include under-selling/discounting by Sales teams, over-delivery by Delivery and practitioner or studio teams, staff churn and generous spending on ‘nice-to-haves’ such Personal Assistants, Front-of-House staff, expenses and partying. Without a healthy profit margin, you are unable to invest. Your top talent will not be rewarded with progression, bonuses or training, and they will leave, and your business will not be able to invest in research and development, innovation or other progressive steps. Change this picture now!

What can you do about this?

First, set yourself a net profit target. If you’re unsure where to start, choose a healthy twenty per cent and work down from there. Second, really challenge yourself on all the nice-to-have expenses and tighten your belt. Third, get some control across the sales-delivery cycle, ensuring your Sales teams are selling responsibly and your Project Managers are in control of scope, budget and timelines. Fourth, review your remuneration structure, introduce salary bandings and get control of the variable elements. Finally, conduct an assessment across your unbillable headcount and challenge the value delivered by each person. Redundancy is always a last resort but shouldn’t be avoided at the cost of profit margin.

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