Accountabilities within an agency office are very fragmented. Office heads feel accountable for new business. Finance directors are seen as accountable (and blameworthy) for low fees and high overheads. Creative directors are accountable for creative quality. Client heads "own" income, billable resources and SOW workloads, but they are held accountable for none of these things. Client Head performance is rarely reviewed by their bosses. Client Heads "own" the agency's economics (apart from overhead), but no one examines the decisions they make and the outcome that the office has to live with as a result of their invisible decisions.
Client Heads can agree to additional work without fees. This puts a stress on an agency's tight capacity. If the additional work is done with no additional resources, then there is an adverse effect on agency quality. If additional resources are found for the work, then there is an adverse effect on agency profitability. The lack of accountability extends well beyond workload issues. The only real accountability that the Client Head feels is "don't lose the client."
This fragmented scheme of accountability has led to a decline in agency office performance. Finance directors have to apply year-end fixes to the problems caused by this over-delegation, usually by downsizing the office to generate required profit margins. The downsizings leave the agency with fewer people to handle the growing strategic and creative workloads that Client Heads agree to with their clients.
There is probably no other business in the world that over-delegates and under-inspects in this way.
Of course, in the "good old days" of media commissions, income was so high relative to workloads that inspection of Client Head custodianship would have been a waste of time. Then, anything was affordable and possible.
But with over twenty years of workload growth and retainer decline, conditions have changed, and the over-delegation of agency custodianship to Client Heads is not only foolish but financially irresponsible.
Somehow, agency offices manage to generate profit margins for their parent agency and the holding company, but the quality of these profits has been in decline for a long time, built as they are on slimmed-down office organizations that handle larger and more complex workloads.
Income, workloads and resources are out of balance in the typical agency office. Income is under pressure as retainers are reduced by Procurement. Workloads grow because Marketing experiments with digital and social media, and Client Heads never say 'no.' Resources are stretched as increasing quantities of strategic and creative work are done by fewer and fewer agency people.
Agency CEOs, Regional Heads and Office Heads need to face up to the deteriorating economics of the agency -- and begin a robust process of Client Head reviews. "How much work are we doing for your client? Is it the right work? Will it generate improved brand performance? How much are we being paid for the work? Will it cover the required resources so we can do a quality job? What kinds of actions will you take to bring income, workloads and resources into balance? How much progress can we make? By when?"
Every profit center in the business world engages in management dialogues of this nature. It's time for agencies to do the same. Our SOW metrics provide the measures by which each Client Head's performance can be reviewed and discussed in an adult manner.