The recent rumbling in LA wasn't another earthquake, but rather seismic tremors along the fault line between client and agency perceptions about agency performance and value. What started as a lantern and pitchfork rebellion by city officials in Los Angeles over hourly rates and questionable billing practices ended with Fleishman-Hillard's $3.6 million engagement with the city going down in flames, and finally with the mayor canceling all city contracts with PR agencies.Meanwhile, an agency insider who runs a practice group at a big firm told me recently that he's relieved to see that creativity and chemistry, and not price, are winning new business pitches these days. He might be right, but the events in Los Angeles are a stunning reminder that price and performance are still losing business for agencies. This leads us to the question for which no one in the PR business seems to have a decent answer: Why should an organization increase its spending with a PR firm, whether in the form of higher billing rates or bigger budgets? Business leaders are interested in investing capital in activities and assets for which the risk and return characteristics can be objectively measured, analyzed, and predicted with some degree of certainty based on data and facts. If intangibles like chemistry and creativity are positioned as the deciding factors in an agency's success, then PR looks more like a leap of faith than a good investment. By adopting three new ideas, agencies (and clients) can elevate the conversation beyond intangibles, billing rates, and quarter-hour increments to shore up the fault line and increase the likelihood of reinvestment in the PR process. The first is intelligent processes. Agency time-keeping systems track hours and not value. Value is tracked in offline reports that rarely sync to the time record. Yet the time record forms the basis for what the client gets billed, thus setting up a paradox that represents significant business risk for both parties. Because agency processes are unmapped, undermeasured, and underanalyzed, any unit of time the agency bills can be regarded as waste, when it might have been a critical part of the whole - there's just no visible process or data to support the case. The rigorous analysis of performance data from an intelligent process creates a dividend for agencies in the form of trends and norms that describe and validate the process by which client value is created. Aligning around intelligent processes also allows agencies to manage their capacity to create value, not just their capacity to bill hours. The second is productivity. Every organization served by a PR firm has worked relentlessly to boost productivity and lower its cost to serve customers. Agencies need to start measuring what gets created for the billable hour, not just the hour itself. CEOs value suppliers that are ruthless about increasing the speed at which they deliver solutions in support of business objectives, thus creating a premium for shorter cycle time and reduced risk. The third idea is performance management. The evaluation of agency performance must toughen up and get serious. Every year at budget time the agency trots out its "scorecard" so the client can "measure" the agency's performance. Instead of focusing on how efficiently and effectively the agency produced client-valued output as measured by time and money, the scorecard will likely include whoppers such as: "On a scale of one to five, how would you rate the firm's passion for your business?" Now there's a hard-hitting metric the CEO will respect. For clients, PR program management around intelligent processes and consistent measurement of agencies using performance data validates the fact that some program activities take longer, cost more, and yield significantly less than others. Data and benchmarks can describe this fact objectively and put to rest nagging questions like, "Why are we spending all this money on PR, and what are we getting in return?" Once the process, cycle rates, and intervals to value can be objectively described and evaluated using data and analytics, you might find the CEO more receptive to the notion of increasing investment in PR. Why? Because the data will show that the PR activities the CEO cares about are highly complex, expensive to execute, and will demand his/her resolve to stay the course despite any short-term setbacks. Describing the risk and return characteristics of PR objectively will change its profile from a leap of faith to a process worthy of continued and even increased investment.
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