NEWS ANALYSIS: Time is money - don't undercharge

Profitable agencies value themselves and their time, but many PROs still put in the hours without getting correct returns. A PRCA-hosted seminar highlighted this problem of over-servicing. Suzy Bashford reports.

If you hired a decorator to come and paint your living room for an agreed fee, you wouldn’t dream of asking him when he arrived to also mow the lawn and put the washing on. But this type of over-servicing on client accounts is ubiquitous in the PR industry, with PRCA statistics revealing that agencies are working a five-day week but only being paid for four.

PRCA managing director Patrick Barrow describes over-servicing as ‘the blight of the PR industry in which every other issue has its roots’. He adds that the high percentage of over-servicing occurring in PR is testament to ‘the lack of confidence our industry has in itself’.

The PRCA is so concerned about the detrimental effect this is having on profits that it and technology firm TimeAct Solutions hosted a seminar last week to advise agencies on how to stamp it out.

Trevor Morris, visiting professor, University of Westminster, and former CEO of the Chime group’s public relations division, believes that many of the problems associated with over-servicing stem from poor contracts.

‘You don’t send your client to speak to the media without training, just as you should never go into a contract negotiation with a client without training in negotiation skills,’ he says.

However, as all speakers at this event acknowledged, PROs are not typically comfortable with confrontation and feel embarrassed asking for more money, even when it is unquestionably justified. For this reason, ­Morris suggests that PR practitioners attend these potentially awkward meetings accompanied by their financial director, or even an externally hired procurement specialist. This way they can make the conversation less personal and preserve the day-to-day client/agency relationship.

As for which subjects a contract ­negotiation should cover, Morris feels the following are prerequisites: precisely what work is and is not included in the contract; who can commission work, to avoid multiple client commissioning contributing to the over-servicing problem; plus a clause that allows the agency to invoice for over-servicing.

Once the contract has been agreed, over-servicing should not be an issue that then falls off an agency’s radar. ‘Make it an agenda subject for each monthly board meeting and, if over-servicing is occurring, inform the client about it on a regular basis, not suddenly at the end of the year,’ admits Morris.

Fellow speaker Neil Backwith, former UK CEO of Porter Novelli and author of Managing Professional Communications Agencies, suggests using graphs to show clients the gap ­between hours paid for and actual hours worked on a monthly basis.

‘By doing this, you make it partly their problem and force them to share the issue,’ he says. ‘You can then give the client two choices: either find more budget or take out some elements of the work to ensure the agency comes in on budget.’

Delegate Jennie Flower (pictured, center right), financial director of EHPR, found this tip particularly helpful, saying: ‘Our teams ­always want to do a fantastic job and have a tendency to over-deliver. At least with a graph like this, we can start the conversation about over-servicing a bit sooner and work to get the lines a bit closer together, rather than leaving the conversation until budget time.’

Backwith believes PR agencies need to change their whole attitude in order to improve profits. In his experience, many PR agencies work by the ethos that if they deliver great work, the profits will follow. ‘That’s absolute rubbish!’ he says. ‘If you do great work you’ll lose a fortune unless you control the time.’

Controlling the time comes down to two much-dreaded words: time sheets. Speaker Jim Horsley, managing di­rector at What Next Consulting, argues that time management doesn’t currently work ‘because people are scared of it’. To get past this, he suggests cultural change has to occur, which can only be brought about if all employees – from executives to directors – become more commercially savvy.

‘Account managers and executives must be involved in this subject,’ says Horsley. ‘They have pressure from all sides: clients are asking for everything for nothing, and bosses are saying ‘don’t give our services away for free’. Everyone needs commercial training to make them understand that if the agency is more profitable they will have better careers. They must recognise that they have a role to play in the business world and stop underselling.’

While most agencies lapped up this advice, two clients were more sceptical. If their agency confronted them with a graph showing the difference between actual hours worked and paid-for hours, their first reaction would be to question whether over-servicing was merely a symptom of inefficiency.

Agencies need to justify that they are using their time wisely before they broach over-servicing with clients, says speaker Peter Smith, who co-founded Lightning PR and now runs TimeAct Solutions. ‘PR is very labour intensive and it doesn’t use technology efficiently,’ he says. Naturally, he argues that by using software such as his own, which integrates different PR tasks, agencies can save time that can then be devoted to chargeable work.

The seminar highlighted the fact that the biggest factor driving over-servicing is that agencies worry about losing clients if they appear to be too pushy when it comes to billing. According to Morris this worry is completely ill-founded, and if an agency stands up for its worth, its value will actually be elevated in the client’s eyes. As he puts it: ‘Confident consultancies make money. But if you massively over-service a client, they won’t respect you in the morning.’

 

This week's video podcast features Trevor Morris of the University of Westminster talking more about over-servicing in the PR industry. GET INVOLVED

 

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