The 10 Most Common Business Mistakes14 years ago
Running a PR business is never easy and companies with sloppy management practices fall quickly by the wayside. Keith Hunt offers his thoughts on where marketing services agencies, and PR agencies in particular, frequently go wrong.
It’s not easy to manage a PR agency well. But you are much more likely to do so if you can avoid most, and ideally all, of the following pitfalls.
1. Giving things away
Time and again I’ve witnessed managements doing just this. You wouldn’t expect a lawyer or accountant to offer his/her time free of charge. One has to ask oneself why then the PR industry – eager to be considered a ‘profession’ on equal footing with accountants, lawyers and management consultants – persists in giving its time and expertise away for nothing.
If PR agencies continue to place such little value on their core offering, there’s no reason why clients should view it any differently. Undercharging and over servicing continue to be endemic in the industry. Poor time management and/or recording of over servicing are in many cases to blame; but often low productivity lies at the heart of the problem and needs to be addressed. This usually is because either too much time is spent on the urgent and not enough on the important, or because too much time is spent on non-billable activities.
2. Lack of positioning
Standing out from the crowd is not getting any easier. Each agency must therefore develop a clear and differentiated business proposition if it is to be noticed and prosper. Like the old adage about cobbler’s children wearing down-at-heel shoes, marketing services agencies all too often fail to get this right.
The first step is to appreciate that each agency is a brand. If management is serious about getting its positioning right, it should start by considering a brand audit. Marketing services companies are quick to advise their clients to do just this, but it’s surprising how few think about undergoing a similar process themselves.
A brand audit will reveal information on how your brand is perceived externally in the marketplace, among clients, ex-clients, prospects, journalists and industry bodies. It will also reveal other important facts such as which of your services clients value more than others as well as how creative they consider you to be.
Comparing these results with what you think your agency’s core competences are will often spring surprises. Benchmarking these results against where you think your competitors sit is also useful. Managements can then use the wealth of information provided to run internal workshops to define the agency brand (its essence and deliverables) and shape a vision and set of values. They should also decide which clients to target.
Don’t fall into the trap of trying to be all things to all people. Crucially, agencies should remember that whatever market positioning they decide on, it must be rooted in the reality of what the agency is. Never over-promise or try to be something you are obviously not – it simply won’t work.
3. Not looking after existing clients
As any agency manager knows, there’s a fine balance between driving new business and servicing existing clients. All too often, agencies pay scant attention to client retention and development, seduced instead by the excitement and energy of the pitch process. For these adrenaline-junkies, the day-to-day business of managing existing client work simply doesn’t provide the same thrill. Problems arise when agencies devote so much of their time and resources to pitching for new business that existing clients suffer.
Agencies ignore the needs of existing clients at their peril. Research carried out by Results shows that after an average of nine months, cracks are already showing in one in ten new client/agency relationships. And those in the industry agree that churn is not in anyone’s interest. When you learn that agencies in the UK alone are estimated to spend over £30 million a year on new business pitches, typically winning one in three it’s obvious why. This effort consumes a huge amount of the industry’s energies, much of it unproductively, for client and agency alike.
Confronted with the sums, both sides are increasingly aware of the importance of good relations. Agencies are making client retention a priority, while clients are genuinely endeavouring to understand how to get the best out of their agencies. Both sides are seeing the benefits of conducting regular client satisfaction and client needs surveys as an effective means of assessing the health of the relationship.
4. Not managing the new business drive properly
The Results’ belief is that the right mix for an agency’s growth is to gain two-thirds of its revenue from existing clients and the remainder from new accounts. The way in which agencies manage the new business drive is vital. Although new business requires a lot of “perspiration” and stamina, good processes are also crucial. Just relying on referrals, word of mouth and ad hoc opportunism is not enough. What is needed is accurate targeting, a written plan, allocating responsibilities and resources and actioning and policing the plan.
Too often PR agencies simply do not allocate sufficient resources to new business. Pity the poor account director working at full capacity servicing retained clients who is also under pressure to develop new business. As long as he/she simply doesn’t have anything like the time to do so, results can only be disappointing and will ultimately adversely affect morale within the agency.
Pitching and winning business is vital for the mental health of any agency and for its growth and development. Repeated success breeds confidence and a healthy ‘can do’ culture.
5. Not embracing accountability/evaluation sufficiently
Clients nowadays have an ever-increasing need for accountability from their agencies and strong commercial reasons for wanting to incentivise superior performance. They demand a demonstrable, competitive return from communication investments, not just from PR agencies but from all their marketing services.
Particularly in a recession, client marketers are increasingly under pressure from their boards to demonstrate return on investment. Failure to do so leads to budget cuts, which in turn impact on retained agencies.
Agencies are getting better at demonstrating value, but not quickly enough. Improving the tools used to measure the effectiveness of PR helps clients make better-informed decisions and justifies further investment in PR.
6. Lack of proactivity and creative initiatives.
It’s important to understand that when clients appoint an agency they are buying a combination of relationships, talent and processes, which will deliver consistent, long-term value. Within this overall recipe for success, creativity is rated extremely highly by clients. Research carried out by Results into why client/agency relationships break down has shown that a poor creative contribution (in the widest sense) is the overriding reason for clients changing agencies.
Once the relationship becomes established and the honeymoon period is over, it is vital to continue to listen to your client and demonstrate that your agency really understands his/her business imperatives. Continue to take the initiative by providing fresh thinking and ideas. Be proactive, continue to nurture the relationship (see the point above) and never, ever take things for granted. Remember that you are only ever one phone call away from losing that business!
7. Managing but not leading
Strong and consistent leadership is crucial, no more so than when times are tough. Agency managements need to have the skills and charisma to inspire and motivate staff.
There is a real distinction between being a manager and being a leader. One sets the vision, values and strategy. The other manages. Visionary leaders inspire their managers to pursue ambitious corporate goals. Indeed, outstanding leaders motivate people to high levels of achievement by transforming their own expectations of themselves.
Effective leaders define a vision and strategy, which needs to be shared, fully understood and bought into. Strategy is about how to manage future outcomes and effective leaders ensure that the agreed strategy is made to happen. This means empowering people and creative organisations are actually facilitated by empowering leadership.
Effective leadership also means:
a). building teamwork
b). generating trust
c). valuing the contribution of individuals
d). accepting that good ideas don’t mind who has them, and
e). ensuring constant client focus in the business
Such things, and others, help frame the culture and values of the agency the responsibility for which naturally falls to the leader, who in turn can help provide points of differentiation in an ever more competitive market.
So keep focused on the vision and the values in the business and lift your people’s eyes with your leadership qualities. Remember, coming out of the dark tunnel, it is the driver who sees the light first.
8. Paying lip service to staff management and motivation
All agencies should have a proper business plan, which will include wider business goals and key account development plans, as well as a human resources (HR) plan directly linked to it. It is in the area of HR management that agencies traditionally fail to invest. This is in direct contrast to many of their clients where the HR function is represented on the board and plays an important role in formulating corporate strategy.
If you want improved agency performance you must make the best use of people. This means that you have actively to plan and manage the development of staff at all levels, so that what they do, and how they are motivated, is directly linked to what the agency needs them to do.
There is no doubt that organisational performance depends heavily upon the ability to motivate people. Motivating people, is about more than just money – it is to do with recognising people’s achievements, giving them training and personal development opportunities and, through empowerment, influence over their work. This needs to be done within a framework that relates HR planning to the company’s business plan, so that the two mesh together.
9. Not seeing the bigger picture
Many agency managements become so engrossed in the day to day running of their business that they lose sight of the world at large. It’s important to be aware of what’s happening outside the agency and the PR industry as a whole (digital is not going to go away...need we say more!), as well as the way trends affect your clients’ industry or sector, or indeed changes in the way clients purchase marketing services.
10. Poor negotiating with the client and not looking after costs.
Increasingly clients’ procurement departments are deeply involved in negotiating terms of business. More worryingly they have a real say in which agency gets appointed. Generally they are expert negotiators (after all, this is what they are trained to do), and are more than a match for any account handler, or the average chief executive, if the truth be known.
Your agency’s internal management efficiency is also of real interest to clients when fees are being discussed, and this is another excellent reason (although you shouldn’t need to be told this) why your financial management should be rigorous. You should ask yourself whether your staff costs and expense budgets, for example are actively controlled; whether you minimise interest charges by ensuring good debtor payment; if you’re carrying costs internally which could be outsourced; whether you have systems to ensure minimum unbillables and no bad debts. By now you should be getting the message.
In some cases, your client might have a better grasp of what your agency’s internal management efficiency should be than agency personnel. Faced then with a client who has independently costed out the monthly retainer or project fee and expenses, many agencies are simply not bold enough or skilled enough to argue their case, and retreat feeling brow-beaten and bullied. A poor start to any relationship!
Involvement by procurement departments is not going to go away. The answer is for agencies to up their game. Clients go on negotiating training courses. Agencies can do themselves a favour and boost confidence in their own skills by doing likewise!
Keith Hunt is managing partner at Results International. Results advises the marketing communications industry, working with advertising, PR sales promotion, direct marketing, design, interactive, media buying, market research, telemarketing and others marketing services organisations. It provides a full range of business strategy, client and staff satisfaction, change management and corporate finance advice.mail the author
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