Overservicing – The Ad industry’s open “dirty secret”

All agencies are guilty of overservicing clients. I say it’s an open dirty secret because we know it happens, but few do anything about it. It’s become so ingrained in agency culture that it’s almost ignored as a problem. However, agencies worry about its symptoms: high staff turnover and depressed client profitability.

In this article, we talk about the history of overservicing clients, the problem it causes, what it actually is and what we can do about it. Finally, we talk about client communication and how we can use the solutions to help us build true client partnerships.

The History

Back in the ‘Mad Men’ days of the advertising industry, overwork was almost considered a badge of honor. I recall back in the ’90s, many of my colleagues & friends semi-bragging about how they worked until the early hours working on a client pitch or delivery. Agencies encouraged and rewarded this, so staff did it to get ahead. Anyone who did not was labeled as “Nine to Fiver” and this was not a compliment.

The Reality

While times have changed, long hours, which invariably lead to overservicing clients, are still commonplace in pretty much every agency. In fact, I would wager that the problem is a lot worse than agencies are willing to admit. In order to track it, you need the staff to honestly and accurately register the time that they are working for the agency.

Let’s be honest. How many times have you seen staff in the agency working long hours every week? Yet they only register 40 hours on their timesheets.

I get it. It’s tempting to turn a blind eye to it because agencies pay a set salary to the staff, so they get paid the same whether they work 35 – 40 hours a week or 60 – 70. It would also be very difficult to actually charge all the “real” hours being to clients. The market is very competitive, and clients demand more for less.

The Problem with overservicing clients (if we ignore it)

The problem is your team members are stressed. They’re spending so much time doing work that is outside the scope of the project for one client that they can barely keep up with the client work the client pays your agency. Capacity levels are never correct, so everyone is overworked. And because of the loss of profits, you have to skimp on pay increases.

All this means that the agency suffers because staff churn is high. This leads to situations like the one that I saw on FishBowl recently: A creative director asking for advice on how to deal with team members who were not pulling their weight, but he couldn’t fire them because it would be very difficult to replace them.

What is overservicing?

At the risk of seeming patronizing, it is worth defining the issue. Overserving clients, simply put is doing more work than was agreed or planned. If captured at all, it leads to an excess of unbilled time which erodes client and project profitability. It’s counterproductive because you might want to delight the client by over-delivering. However, your CFO will be on your back for unprofitable work. At the same time, your client is probably not even aware that you are doing it. So will end up frustrated if you start to try and reign it back.

One of the most common reasons for overservicing is scope creep… The famous, “can you please just do 1 more revision”. Or: “can you just add this one little thing”. Or worse of all: “can you do me the favor of……”

So, what can you do about it?

Firstly, we need to be able to measure it. I’ve read a bunch of articles while researching this topic and I noticed that none addressed this key point. Your agency staff needs to be honest about how many hours they work, EVEN if they know that these hours can’t be charged to the client. You can’t fix a problem you can’t see.

That leads to the next point, which is that your agency should do timesheets. I know that this is a challenge for some agencies, and they argue that it’s not their culture, etc. However, it’s impossible to really know how profitable your clients are unless you track time.

Your time tracking system needs to be part of your project management (preferably your business management system) so that the time reporting flows into the project management and client profitability. You can see how much your staff is overworking and for which clients. All clients will not be equal here and this information shows you which clients to focus on (see later.)

In conjunction with systems, the agency should look at its processes and procedures. I know that this is not a ‘sexy’ subject for agency folk. But it’s necessary if you want your agency to be profitable.

What does that mean?

Contracts and Service Level Agreements (SLA’s) should be written to be more watertight.
A proper change process should be established and written into proposals.
The scope should include regular project reviews with the client which must be adhered to.
Project & Client reporting needs to be shared with the agency management team AND with clients
Project Closure reports and “lessons learned” need to be recorded to improve future work
There should be a process for working on pitches and the pitches themselves should be more disciplined. For example, avoid scenarios where the client asks for a few extras at the end of the negotiation.

Retrain your agency’s staff to think more commercially. It will be a challenge as is any change but it needs to be done. This should cover things like:

Staff will need to be encouraged to enter time accurately.
Managers and leaders should challenge staff for entering a 40-hour timesheet when they have seen them in the office for 10 to 12 hours per day for the week
Staff needs to learn how to be stricter when a client asks for stuff that is out of scope.
Staff needs to recognize and transmit the value of the service they provide
Project Managers need to learn to estimate more accurately by reviewing the lessons learned in similar projects. Again, having good systems in place will facilitate this.
Link bonuses and incentives to the reduction of overservicing. But do this carefully to ensure people log all their hours.

As I said above, this is change so there may well be resistance. But you must remind yourself that you are a professional service. That’s why the consultancy firms are buying agencies after all!

It’s all about the clients

Let’s be honest, implementing all the above will not be the silver bullet that will eliminate overservicing. However, it will do 2 things that will give you an advantage:

1) Give you information

How much you are overservicing
Which clients you are overservicing the most
The ‘real’ rate you are charging clients

You can use this information to negotiate with the client. We talk about being partners to our clients. To be true partners the relationship needs to be built on mutual trust and respect. What better way to develop trust with your clients than be transparent about the effort that your agency is exerting to service them?

Now that you know which clients are being overserviced the most (and the least profitable) they can be prioritized. Open the communication channels, renegotiate contracts and this will start to manage the level of work.

I know it will be a challenge to renegotiate overwork with a legacy client. It’s likely that he had no idea that you were overservicing them. Therefore, the client is used to getting free services. However, ultimately, an unprofitable client is not good for your agency. If you can’t make them profitable then you should walk away.

I appreciate that this is very difficult for an agency. I recently listened to a podcast by Andy Brown (in English) in which he talked about an agency he worked with. The agency was unhappy with a legacy client which was unprofitable. This client represented 25% of the business so the agency felt frustrated. They felt there was little that they could do. Sounds familiar?

One day the client ‘sacked’ the agency. Initially, they thought this was a disaster but quickly realized that they were better off. It allowed them to refocus staff on new biz and profitable client work.

2) Standard Processes and Procedures

That in themselves will make the agency more efficient. At the same time, it reduces the hours wasted in “reinventing the wheel” every time a new pitch comes in. Implement and communicate these to new clients so that at least they will be easier to manage.

Summary

There is a lot to take in this post but. If nothing, I hope that it has given you some ideas on how to identify and minimize (eliminate will be impossible) overservicing clients. The market is competitive but overservicing kills your agency’s profitability, leaves staff overworked, frustrated, and feeling undervalued which is untenable in the long run.