The Agency Business: Planning can help agencies avoid overservicing accounts

Overservicing clients is a common problem for many PR agencies. But by working out agreements and tracking hours against a retainer, firms can put an end to the practice.

Overservicing clients is a common problem for many PR agencies. But by working out agreements and tracking hours against a retainer, firms can put an end to the practice.

Fleishman-Hillard's recent legal problems in Los Angeles, in which it is accused of overbilling, shone a light on a potential problem when it comes to agency-client relations.

But there is a flip side to overbilling: overservicing.

Aaron Kwittken, president/COO of Euro RSCG Magnet, says it's "one of the hardest things for any agency to manage."

Agencies will often give away free services because they "and the people who work at agencies are so client-service oriented," Kwittken says.

Noting that lawyers don't worry about overservicing clients - because they bill for everything - Lou Capozzi, chairman and CEO of MS&L, says, "The PR agency business is built on a model that assumes some level of investment, time, and effort on behalf of your clients. It doesn't presume 100% billability for everybody in the firm."

A typical AE works 2,200 hours a year, according to the Council of PR Firms' Benchmarking Survey. Of that, 1,748 is spent on client work, but only 87% of that, or 1,520 hours, is billed.

Richard Edelman, president and CEO of Edelman, feels that PR being a relatively newer profession plays into this.

Kwittken says that overservicing can be "the canary in the mine shaft that something is wrong with the account." If you're "constantly overservicing" on an AOR account, he says, "I can almost guarantee that that relationship isn't going to last forever."

Edelman says it's understandable to overservice at the start of a relationship, when there's a learning curve.

So how do you wean clients off of overservicing?

The first step is to recognize the problem has two versions: putting free hours into the kind of work already agreed on and including services outside that agreement. The first might be viewed as "pure" overservicing, the second as "scope creep."

Kwittken says the solution involves two steps. One is to have, before the engagement begins, a clearly defined scope - even down to how many drafts of a press release will be written.

He offers as an example a client for whom Magnet is the AOR for product PR, earnings announcements, and similar work. If special situations arise, such as a merger or crisis, that would be outside the scope of the retainer and would be done on an hourly basis.

Capozzi agrees that defining ahead of time "the objectives and a work plan that's going to achieve the objectives" is crucial to making sure an account doesn't get out of hand. "If you can't agree on that, then you can't work for the client," he says.

Edelman also concurs: "Periodically we misestimate, and then we eat it. Fool me twice, it's my fault the second time."

Focusing on the work's scope can also develop a better PR plan, Kwittken believes. "Making sure the scope is right from the beginning and eliminating overservice forces both the client and the agency to focus on activities that will generate the greatest amount of yield," he says.

The second step in avoiding overservicing is to use minimum monthly retainers and to track hours against them. If the hours spent exceed or fall short of the retainer, that is reconciled at the end of the month or quarter. "It really benefits both the firm and the client - you're encouraging transparency in that relationship," Kwittken says.

Charging hours against a retainer requires good time-management software so agency and client always know how the hours spent stack up against the budget.

Kwittken says, in his experience, overservicing happens more on "consumer-facing" accounts using junior people who are not as trained in how to manage their hours on a project.

"A lot is just having the conviction to say no to clients sometimes," he adds.

There are instances when an agency will want to "invest" in clients - especially big clients or small ones they really believe in - with gratis extras, Kwittken says. But even there it should be agreed on ahead of time. He calls it "planned overservice."

Capozzi - who says he doesn't like the word "overservice" and invokes "invest," as Kwittken does with certain clients - agrees that firms should invest in those clients that offer the most interesting and rewarding professional opportunities, that the staff likes working on, and that make a profit. "When you hear the word 'overservice' as a complaint in the agency business, it's doing too much work for clients that do not fulfill one of those criteria," he says.

But he agrees the "investment" must be done strategically and be managed.

Benefits of 'investing' in clients

Lou Capozzi, chairman and CEO of MS&L, gives an example of why an agency would want to work extra hours on an account:

  • "We're building a business in China. One of our key global clients is General Motors. We're systemically investing in [that] relationship. We've decided to provide staff services at a level higher than the client's budgets allow for. It's a perfect example of strategically managed investment in a client relationship. We feel the relationship with GM globally is so important to our firm, the opportunity in China is so dramatic for the future, the nature of the work is so rewarding, that we're prepared to invest in the development of that relationship."

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