Overservicing: 5 steps to dealing with the elephant in the room.

Overservicing: the elephant in the room
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Overservicing shortchanges your clients and your agency.

As I flick through some industry reports the relationship between overservicing and profitability comes sharply into focus.

Agency profitability relies on the control of three things: the amount you pay your team, your rate card(s) and the percentage of time spent on billable activity. Set these at the industry standard and you should make a reasonable profit. Why then do many agencies struggle?

Overservicing.

Falling into a vicious cycle of overserving is all too easy. Offering services for free in a pitch. Giving in to the ‘people pleaser’ gene that leads you to commit to tasks beyond the scope of a project. Allowing senior staff to work on tasks that more junior folk could do. We’ve all done it. But while our intentions are good, there is a downside.

When you work beyond a project’s scope you devalue your services. Clients question the value of your time when you give it away for free. You also have to find a way to absorb all those extra hours. Work longer days? Sacrifice new business activities? Take time from other [paying] clients? None are good business practice.

The reality is that overservicing brings in no extra money. It leaves your team overworked, stress out and frustrated that their efforts aren’t resulting in a bigger pay packet and a healthier bottom line.

There is a way out. Here’s my 5-step plan for success:

  1. Manage expectations: scope work accurately. Client-agency relationships can go sour when it’s not clear what is in/out of an agreed budget. Detail exactly what a client will get for their money and make sure it’s accurate. Get it wrong and you’ll jeopadise the success of your agency. Don’t guess or repeat what’s been done before. Analyse past projects, use question guides when taking briefs and subscribe to a real-time benchmarking tool. The latter does it all for you in minutes.
  2. Encourage transparency: track client goals v actual. Things change, that’s life. What you need to do is make sure that both you and your client always know where you are against agreed goals. It’s far easier to deal with client requests when project progress is transparent. For example: when a client asks for something beyond scope you simply say, “Yes, we’re happy to do that but let’s see what we need to move around to make that happen.” After that, one of three things happen: the client changes their mind, you jointly agree to lose something, or you get more money to add it in. Boom!
  3. Build knowledge: train & support your team. Managing budgets is a science not an art. Teach your team leads’ how to scope work accurately and track budgets against deliverables weekly. It develops your talent and reduces bottlenecks, particularly in agencies where cost estimating and monitoring is carried only by a limited few.
  4. Analyse: track actual time spent. Tracking time internally enables you to assess team capacity and your ability to take on new clients/work. Analysing activity lets you establish the actual time it takes to complete a project and the efficiency of your team. It reveals scope creep, time-wasting activities and bottlenecks so it puts you on the front foot in client discussions. It also ensures you make the most from the resources you have.
  5. Break the vicious cycle: deal with overservicing. If you find that you are habitually overservicing despite doing the above, there are a few things you can do.
  • Analyse past projects: are some project types, clients or deliverables causing you to go out of scope? Consider whether to continue servicing these.
  • Change the scope: learn from past mistakes and adjust the scope of future projects. Be transparent with the client about changes.
  • Benchmark: analyse past projects and use industry benchmarks to mitigate project unknowns. Use insights to challenge your team and stand your ground in client negotiations.
  • Educate your clients: if you do decide to ‘invest’ and go beyond the agreed scope, make sure your client knows. Showcase the number of hours and the value of that time on your invoice or monthly report. This is called ‘planned’ overservicing.

So, there it is. Five steps. You can do it! My final bit of advice for making this happen is to invest in some clever tools that will help. The ROI is there in spades.