The anonymous executive quoted in last week’s “Confessions of a marketer: Agency overbilling is spurring the move in-house” raised a number of interesting points and issues. While I don’t know the exact circumstances of the relationship between that company and its agency, I do have plenty of experience with that kind of mindset.
For a number of years while I was at a PR/marketing agency I was responsible for both setting and then justifying the budget we presented to clients. In one particular case, we consistently went over the hours allocated in our budget but were contractually constrained from billing more than a set retainer each month. So, with that in mind, I’d like to offer my perspective on some of the comments made.
Agency plans for 1,000 hours, actually spends 2,000
It’s incredibly common for agencies to go over the number of hours it estimates it will need on a monthly basis.
The question I’d like answered is whether or not client expectations have changed and grown from what was laid out in the contract. On many occasions, the over-servicing results from the fact that more and more responsibilities are laid on the agency and rationalized so they fall under the existing scope of work.
It’s the equivalent of building out additional rooms on your house and then acting offended when your heating bill goes up.
Agency isn’t communicating overages
Well that’s a communication problem and the executive is justified in their irritation. A responsible agency account manager should be reviewing the team’s hours regularly, especially if there’s a history of going over, and sharing that with the client contact. It’s something I did regularly given how things were going.
On the flip side, it’s completely reasonable for a client point person to be requesting such check-ins. I’m curious as to what sort of regular communications systems are in place.
Agency isn’t charging for or justifying the extra hours
I’ve had this conversation. Many times.
Because we could only bill the retainer, not the actual, we were eating all those additional hours of work, giving them 160 hours when they only paid for 100. It was in our best interest to be more efficient, but a constant barrage of requests couldn’t really be turned away.
Here it’s on the agency account manager to provide the justification for those additional cycles being spun. If they’re going 50% over the estimate, why? Is it because they’re fielding X% of additional requests. Are they being pulled into X number of additional meetings with the client because of project creep? Is some task simply taking longer than the contract anticipated?
The people I’ve worked with want to be as efficient and accurate as possible. Agencies – at least the good ones – are like cabs: They make more money if they can fit five client projects into a day than they can by unnecessarily padding the hours on one client. Overbilling is not the ideal.
Agency’s lack of transparency is frustrating
Again, though, this comes back to communication. What information is the client not being given that would adequately justify the hours spent and billed?
As an account manager, I spent a good chunk of (unbillable) hours running reports on how my team was spending its time and where they may be areas we can make changes. I put all that together on a monthly basis for the client, explaining in detail what they were working on, what meetings they were taking part in, what requests they were responding to and more, all with the blessing of agency management.
If the client wanted to have a conversation based on that staff report, they could. Otherwise it would *definitely* be a topic of discussion for the next big picture check in meeting, which happened every six months. There were certain things we couldn’t share, but if the client wanted to know what we were spend their – or our – money on, we could and would give them a pretty clear picture.
Agency won’t drop the client for saying no to more hours
I can 100% say this isn’t true. Yes, we dealt with the over-servicing for a while but eventually it became untenable and we chose to walk away at the end of one contract period. It wasn’t an easy decision, but it was a necessary one for a number of reasons.
Also: *Are* you willing to hire internally to compensate for whatever skillsets you’d be losing by ditching your agency? I’m not just talking about today, though, how about tomorrow? Agencies are able to more quickly adapt to changes in technology and best practices because companies are more prone to institutional lethargy while agencies differentiate themselves in the marketplace in large part by the cutting edge abilities of their staffs.
This final point from the executive brings together all the previous points.
We were regularly going over the allotted hours, but were also communicating as regularly and transparently as possibly, offering justifications for those overages that specified where, when and how each staff member was spending their time.
That meant when it came time to set the next year’s budget I *was* asking for an increase, usually offering a series of options that outlined not only the dollar figure but also what services would be provided for each option. Any requested increases at that point simply formalized the conversations we’d already been having. Because there was a history of data being provided, no one could claim the request came out of the blue.
There was still pushback, even though in many cases we were simply asking the client to start paying for the level of service being provided currently. When we pointed out it was our side losing money on over-servicing so it was in our best interests to scale back, the client was concerned about doing so as they didn’t want to take anything out of the current program.
Again, a lot of the problems identified by the anonymous executive are legitimate, but they also mainly stem from all sides of the relationship seemingly being unwilling to communicate. A little more openness from both parties would go a long way.
Chris Thilk is a freelance writer and content strategist who lives in the Chicago suburbs.