ITL #164 Eliminating fiefdoms: the one P+L model

3 years, 5 months ago

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Traditional PR agency structures may promote ‘bad behavior’ that restricts growth and denies clients the best people to work on their business. By Phil Carpenter.



You’re the GM of your firm’s San Francisco office. One afternoon, you get a call from the head of communications for a fast-growing local company that designs electric skateboards – think Tony Hawk meets Tesla. She explains to you that while the company has had some good coverage in the “tech geek” press, they’re looking for attention from a broader selection of consumer media and need to upgrade from their current firm to one with strong consumer experience and a nationwide presence.

 

You’re excited about the opportunity and reach out to the GM of your firm’s New York office to engage some of that team’s consumer talent. But that’s when you hit a wall.

 

In your agency, each office runs on its own P+L, which means that self-interest reigns supreme. The New York GM tells you that his team is in the midst of pursuing a beauty products company, an account about which they’re excited and that they’d staff entirely out of their own office. He doesn’t think his team would be particularly interested in promoting a skateboard and has little incentive to help you. And so, he doesn’t – and you’re left proposing a team to the client that doesn’t truly have the experience to do the job well.

 

If you work for a large agency, this probably sounds familiar to you, as most sizeable firms are structured this way. The argument in favor of such a structure is that it makes it easy to monitor the financial results of an office or practice group – and easy to make changes quickly if a group is not performing as desired.

 

Bad behavior

But as the example above illustrates, this is a structure that also promotes bad behavior. To keep revenue within their offices or practice areas, groups compete rather than collaborate.

 

And clients suffer, for rather than staffing business with the best talent their agencies have to offer, managers operating under this model often look to shoehorn “their people” into an account – whether or not the fit is right.

 

The big question, therefore, is “is there another way?”. At Allison+Partners, the agency for which I work, we’ve taken a decidedly different path. It’s not for everyone, but it has served us well – and for the benefit of agencies, team members and clients, we think it’s worth sharing.

 

Our approach has been simple. We use one P+L – for the entire agency worldwide. In many ways, this may seem like a small thing. But it’s not. It drives the behavior we want to see from our managers and is consistent with the culture we are building. On the other hand, this approach does require thinking on behalf of our senior team to make sure we’re evaluating our performance effectively.

 

Incentivizing cooperation

With a single P+L, managers have no incentive to compete with one another for business or resources – and every incentive to share. Collaboration becomes the standard, as we win together – not independently. Offices and practice groups pursue new business jointly. And when we win it, we share it.

 

Managers team up to staff business with people who are the best fit for the situation. If a client’s needs shift over time, we can change the team – and no one gets heartburn over “losing revenue.”

 

Not only does the single P+L model help us to run our business with a collaborative spirit, it also serves as a big differentiator when we are talking to prospective clients. Many client team members have worked in agencies themselves and are all too familiar with the problems that arise when agency fiefdoms flourish. And those who haven’t worked in an agency setting understand the “best talent” advantages that the single P+L structure brings.

 

Defining success

Sounds appealing, yes? It’s a simple and powerful model – but not without its complexities. When using this structure, the single biggest challenge we’ve faced is how to define success for an office or practice group.

 

One can’t simply look at numbers, as we’re not zeroing in on office or group level profitability. Instead, we look at top line revenue…and then we ask ourselves a series of questions. Has a manager brought in great clients? Great people? Is he keeping those clients and that talent? Is he helping others in the firm to do the same? And is he sharing?

 

These are qualitative measures – perhaps not the kind some big European holding company would be comfortable with. But they work for us, as we believe that rewarding managers based on such factors is driving behavior that helps us grow and makes us distinctive.

 

So if the model works, could an existing agency change course and adapt it? The answer is…maybe. A small to mid-sized firm (say one to three offices and/or practice groups) could definitely grow into this model or reinvent itself as a single P+L firm without too much pain from cultural shift or process changes. If you find yourself at this stage in your growth, then give the one P+L model careful thought.

 

One for the big boys?

But could a big, established firm make the change? Could an Edelman, a Fleishman, a Weber or an Oglivy ever recast itself this way? It’s doubtful. We know that some such firms, intrigued by the benefits that the single P+L structure offers, have considered the possibility of reinvention. But so far, all have found the idea too revolutionary. They’ve stuck with the status quo – to the detriment of both their people and their clients.

 

The single P+L is a deceptively simple idea. It doesn’t seem like a big deal – until you see what it can do. It drives team members to make the best choices on behalf of the agency – not just their office or group.

 

It brings team members together rather than forcing them apart. And it leads managers to optimize in favor of the client – the right choice given the business we’re in. If you’ve chosen a more traditional structure for your firm but are not yet too set in your ways, grab a few colleagues, gather around a white board, and ask yourselves, “what if ….?”


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The Author

Phil Carpenter

Phil Carpenter, Senior Partner, Chair – Western Region, Allison+Partners.

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