News Analysis: Concern about overservicing grows

PR agencies continue to 'overservice' clients' business by more than one day each week - and cite this as a major threat to profits, according to PRCA research. Ian Hall reports from the trade body's annual conference.

Delegates at last week's PRCA conference in London could be forgiven if they felt a sense of deja vu. As in previous years, agency bosses were told that overservicing was hitting their profits.

This assertion, made as part of the unveiling of the PRCA's fifth Benchmarking Survey, indicates that agencies are charging clients too little.

Worryingly, there are few signs of a quick resolution to the problem.

Cited by the PRCA as one of the top three threats to agencies' profits (the other two being salary inflation and recruitment/staff churn costs), over-servicing is not a new phenomenon: agencies' current rate of overservicing is 22 per cent as a proportion of total net income, identical to five years ago. Put another way, more than one day out of five worked on a client's business is not paid for.

Inescapable problem

A modicum of overservicing appears largely inevitable. Indeed, former Porter Novelli European CEO Neil Backwith argued that 'intelligent' overservicing could be defined as 'client investment' (giving free time to selected clients in order to retain or grow business with them).

Fleishman-Hillard Europe regional chief operating officer Guillaume Herbette - describing overserviced time as a 'write-off' - told delegates that if they found themselves over-servicing by more than ten per cent, they 'should be able to invoice'.

But he later inadvertently illustrated the problem of getting clients to pay what agencies see as full reimbursement for their labours, saying: 'It's getting more and more difficult to be paid on time by clients.'

Regular quality dialogue between clients and their agencies should reduce overservicing, advised RAC director of corporate comms Neil Lovell: 'If someone (from an agency) comes in and says "I've done this many hours extra work (and I want paying)", this shouldn't be happening. You should know about these issues along the way.'

He added: 'The most important thing is to not provide clients with shocks, such as presenting them with random bills for expenses with no explanation.'

Maybe the problem lies partly in overeager staff, ingrained in Britain's long-hours culture, unquestioningly working overtime?

Rachel Bell, founder of consumer agency Shine Communications, said: 'Inevitably the problem stems from the way the budget is written rather than the poor account executive.' She added: 'People think that if they say "no" (to extra work), the client won't work with the agency again.'

Overservicing aside, the prevailing mood of the conference, and the Benchmarking Survey itself, was of optimism returning to the industry.

Fifty-two per cent of the 82 CEOs and managing directors polled believed the outlook for the year ahead would improve (40 per cent said it would stay the same; two per cent thought it would worsen). More than a third expected fee income growth of more than 20 per cent this year.

Lexis PR chief executive Hugh Birley, co-presenting the data, pointed out that 'staff churn is continuing to rise as the market lifts'. Many delegates also flagged up recruitment problems at mid-management level (account directors and associate directors) that were hindering agencies' growth, alongside the bad reputation of the industry itself.

Staff retention

In more positive news, Birley pointed out that there has been a fall (from 24 per cent to 19 per cent) in those quitting agency life for a 'complete career change' (the most popular reason for quitting is to join another agency - 31 per cent, up from 30 per cent last year).

The data also offered positive signals for more experienced PROs who are freelancing or unemployed - 77 per cent of agencies are 'likely' to recruit senior staff this year (up from 63 per cent in 2004).

Also on staffing issues, there has been a surge in agencies introducing lifestyle-related perks in a bid to retain staff. For example, 24 per cent of firms are using company laptops to enable flexible working (up from four per cent last year).

And the industry is clearly doing its bit to aid Britain's binge-drinking culture, with 26 per cent of agencies introducing 'free drinks sessions' (against 11 per cent in 2004).

In further evidence of a long-noted trend, the number of firms offering performance-related pricing to clients has increased (36 per cent, up from 27 per cent in 2004).

Overall, delegates' mood was upbeat - most agencies are faring better now than they were in the early part of the decade. Carrot managing director Richard Houghton, who co-presented the data with Birley, concluded: 'The worst-case scenario for the industry this year is slow growth; the best-case scenario is steady growth.'

The PRCA is hosting a webchat via www.prca.org.uk on the issue of overservicing on 26 May. A panel will include Camelot publicity manager Dan Humphreys, Threepipe Communications co-founder Jim Hawker and Kaizo chief executive Crispin Manners.

QUOTES OF THE DAY

- 'By the age of 32, most people have had nine jobs. The challenge is to hold on to people, not find them - although that is an issue.' Chime PR chairman Kevin Murray on the industry's recruitment problems.

- 'My staff in our offices on mainland Europe work similar hours to those here in the UK. This is a bit of a red herring.' Trimedia International CEO Michael Murphy in response to a question on whether potential changes to the Working Time Directive could mean fewer hours for UK PROs.

- 'It is clients who should do the measurement (of campaigns), so as to free up the intellectual capital of agencies. Agencies should not be spending time looking at clip-books.' Novartis head of global pharma comms Bob Pearson.

- 'There is a lack of creativity in US PR agencies. Companies are terrified of doing anything that might make them stand out in case it doesn't work. So they resort to surveys - "let's find America's oldest cheeseburger" - that they have done for 200 other clients. There is more willingness to offend in the UK - I love that.' Holmes Report president and CEO Paul Holmes.

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