Top 5 Metrics Management Teams Should Watch Closely
by René Praestholm, Deltek
The concept of measuring performance and utilizing KPIs is nothing new to agency people. Most have a handful they track, but are they the right ones?
The more successful agencies often look beyond the end-of-project numbers to evaluate agency health across sales, estimating, and project management on a regular basis (and in real-time). While every agency is somewhat unique creatively, most share similar business practices and the frustrations that come with over servicing, poor estimating and inferior client management.
The metrics I’ve highlighted below represent five integral areas of agency business practices that, when monitored and stabilized, contribute to solid agency performance and more predictable results - while helping to avoid cash flow and resource surprises.
Is there enough new business in the pipeline to cover costs?
Make sure that you have a solid view into your new business pipeline and make sure that you have proper metrics to determine the health of your pipeline. Having the ability to compare pipeline vs. capacity is really important as you might not have the resources available when you win the pitch. This leads to extra work pressure on your team which is bad for employee morale. 85% of the survey respondents report this as a high priority KPI.
How is new business pipeline progressing?
Spending too much time on that one pitch? Maybe start tracking how much you invest in winning pitches. Often, I see too much time is invested in a customer that really isn’t that profitable. If your new business investment supersedes your projected profitability, then you need to consider backing out.
Monitor the health status on our on-going projects
Monitoring project heath is key to your profitability. If a project is off track it can cost you a lot of money. Often you find out too late if a project is not performing as expected, so make sure that you have proper tools in place that can foresee if a project is going in the wrong direction. This survey reveals that most are dedicated to measuring efficiency (96%), but only 20% are using an automated system. Consider the implications of a “stitched together” monitoring plan that can be inconsistent versus a complete operational system that ties activities, transactions, costs and resources together for complete reporting.
Consider your agency business model
There is no single answer to what model is the best, but having the different models in mind when you negotiate your next agreement is valuable. Considering variables like the amount of work, type of work, client budget and frequency of deliverables will help you determine which of these three models is most applicable for your situation:
Project by Project model: you sell projects one at a time with no upfront commitment from the client on a yearly budget.
Retainer model: you have a fixed yearly budget that is based on x amounts of projects, by project type and size.
Capabilities model: you sell a team of people with a specific skill set for an agreed time frame. This team is then at the client’s disposal throughout the period.
Getting estimates right
39% of survey participants say their projects often go over budget due to scope changes with 65% reporting an income loss of 10-25% when that happens. Over-servicing is hard to avoid if you haven’t got tools to drive a template structure. With a template structure in place, both the brief, estimate and time plan is accurate from the get-go, which ensures that the project framework is initiated correctly. Furthermore, as you accurately measure capacity and performance against these scopes you can refine them over time to include line items, new pricing and language that ensures they do not overpromise and/or under deliver.
About the Author: René started his career in 1999 as a project manager overseeing large and small business software installations with global advertising networks. He was the first employee at WorkBook (acquired by Deltek in 2017) and has worked on more than 250 implementations of the creative agency management system. With his profound knowledge and experience in the agency industry, René knows how a modern agency should be run. He is now working as the Global VP of Agency Solutions with Deltek out of the Copenhagen office.