4 red flags that indicate your agency model needs urgent fixing

Jack Skeels: AKA, The Fixer. 

No, it’s not Tom Cruise’s next Hollywood action-thriller starring Cameron Diaz. But it’s still pretty sexy (by adland standards, anyway).

Skeels and his team have been quietly swooping into agencies around the world and making them over under adland’s radar. 

For a fee -- which can go as high as $3,000 a head -- AgencyAgile promises to resculpt the shop model by shifting internal culture to restore productivity. He credits his company with helping more than 100 agencies evolve.

But as the daily/weekly/monthly/yearly churn grips agency life harder than it ever has before, it can be challenging to know when to call the first responders for resuscitation. 

"One of the first things we do is make sure that the agency’s leadership is actually measuring things that matter," said Skeels. 

"It is hard to run a business without good metrics, and some of the more common metrics, like cash flow, sales revenue and profits, only tell part of the story; in a rush to create results, they create an organization that struggles and often see-saws from big wins to big disappointments. Growth can hurt your agency if you’re not watching the right indicators."  

Here are Skeels’ four red flags that tell a better story of what’s really been going on while everyone’s had their head in the dollar dollar bills.

1. Your management team is seriously over-maximized 

Manager to Team Ratio, the ratio between how many people who have at least part-time managerial roles (account, project management, discipline leads, etc) and the people who are solely focused on delivery of the work for the client. 

This managerial group can grow quickly, and most companies don’t realize that the more managing you do, the harder it is to get things done. Over-managing is very common in agencies as they grow. 

If your manager to team ratio is worse than 1:4 then you’re in the danger zone – you can still be profitable, because you may be billing the client for some of the managing, but you have a very costly and lethargic organization… it will be hard to get things done, or everything will feel like it is started late and on fire.

2. Unaddressed issues = shrinking project profit

Leakage, the difference between sold-as and delivered-as costs.  We sold the project at 400 hours ($60k at $150/hr) but we delivered it in 560 hours, a leakage of 40 percent.  

This sort of difference will not put you out of business -- you will still be making some profit at $107/hr ($60k/560hrs) -- but the leakage signals many potential unaddressed problems in project intake, account management and delivery management. If your leakage is less than 10 percent, then you’re dialed in.

3. You don’t know how unhappy your customers really are

Client Satisfaction, as measured by Net Promoter Score (NPS). Our industry has dismally low scores, the average is usually around 15 or so. If you’re not measuring, then you’re flying blind with no idea of what your clients really think… it may be different than what your account people say, for example. If you’re doing well, you have a 40NPS or higher with a 50 percent response rate.

4. Money doesn’t buy happiness: Toxicity can spread through your team like a virus, even by those highly paid

Team Satisfaction, as measured by the employee version of NPS (called eNPS) or some other good tool, and with scoring only the people who deliver the work. This is probably one of the best metrics you should be watching, especially along with Client Satisfaction. 

You can boost your client NPS scores by giving them everything they want at all costs. But the costs will show up in the wear and tear on your teams. It is not uncommon to see decent NPS scores with horrible eNPS scores. 

Don’t confuse your attrition numbers with eNPS -- well-paid people can be miserable and make others miserable for a long time before they quit and go elsewhere.

Simon Francis, CEO at Flock Associates, says the trends are striking when his consultancy appraises agencies. 

He stressed that the shops willing to dramatically shift their model are winning over dinosaur companies which have the challenge of slowing U-turning an antiquated juggernaut. 

Francis told Campaign US: "We run lots of agency appraisals, it’s fascinating to see the commonalities in results. Across agency types and geographies we see common patterns; very often the same faults. And, because we see so many agencies pitch we see a lot of the best new agency models, and ways of working. 

"The gap between the traditional and poor scoring agencies and the modern and winning agencies is widening."

(This article first appeared in www.campaignlive.com)