Boring But Important

Operational management of ad agency offices is one of those boring but important details that is increasing needed today. If all offices are managed well, then the total agency is managed well.  If not....then the agency is weakened from within. Unfortunately, operational management practices receive little or no attention from top management. All that matters is office profit margins. There is no training of Office Heads or reviews of their operational performance. There is no agency concept of what defines excellent operational management practices. It's time to change attitudes and elevate operational management practices to the important position they deserve.

Each agency office is a portfolio of 10 or more profit centers -- each client is a profit center, headed by a Client Head (or Account Head, as it is sometimes called). The Office Head is the line executive to whom the Client Heads report, at least in theory. Client Heads manage Scopes of Work, fees and resources, at least in theory.

Good operational management of clients means ensuring that SOW workloads, fees and resources are "aligned." Aligned clients have a healthy balance of fees, workloads and resources. "Misaligned" clients have inadequate fees and stretched resources relative to workloads. Misaligned clients are capable of generating acceptable profit margins, especially if resources are stretched thin, but this is not a healthy way to generate profit margins. It is the way profit margins are often generated today.

The evidence of poor operational management practices is clear: no agency offices measure or monitor workloads on a uniform basis by client. They measure fees and resources to calculate margins, but they ignore the measurement of workloads. Furthermore, Client Heads are not really reviewed by Office Heads; it is assumed that Client Heads "know what they need to do," and they are left to their own devices while Office Heads beat the bushes for new clients.

There is considerable evidence, office-by-office and client-by-client that Scopes of Work are growing faster than fee income. There are obvious reasons for this -- Marketing and Procurement have different motivations. Marketing experiments on an ad hoc basis with digital and social executions, while Procurement routinely cuts fees. Agencies have to staff their growing workloads with stretched resources. This is not a sustainable practice. Because agencies do not document or track SOWs on a uniform basis, agencies are not in a good position to understand their situation, client-by-client or office-by-office, or to negotiate client fees on the basis of workloads rather than on guesstimates of agency resources.

Sound operational practices begin with agency-wide operational policies. One policy to begin with is a Scope of Work Management Policy, which goes something like this: First, every Client Head will forecast annual Scopes of Work in a uniform format, in a Scope of Work tracking system that calculates and verifies whether or not clients are "aligned" or "misaligned" relative to workloads, fees and resources. Second, Client Heads of misaligned clients will be responsible for developing corrective action plans. Third, Client Heads will be reviewed by Office Heads for the conduct of their clients. Progress in achieving corrective action plans will be monitored.

This approach is standard business practice in every major company in the world. Line executives review their direct reports. Tighter operational management is a new requirement for agency Office Heads. Agency Chief Executives should take this on board as a matter of some urgency and establish operational management policies for their offices.