Why Most Agencies Suck


written by Justin on October 9, 2012

Over the years of work that I’ve done in design and technology, I’ve come to a sad, but clear, realization: most agencies suck. Advertising agencies, design agencies, web/interactive agencies, whatever. Most suck.

Now, don’t get me wrong – many of them are very successful. They employ a bunch of folks, and those people are talented and genuinely great at their jobs. No doubt about it. However, the agency model doesn’t usually produce world-changing work. Yes, occasionally it happens, but usually not.

So, why? If we have buildings of talented folks, working on tons of projects for high-profile clients, why aren’t most making remarkable things?

Agencies suffer from at least two faults that prevent them from cranking out awesome work, and in my experience in working with an untold number of them, these two issues are remarkably consistent across most agencies.

Problem 1: They Can’t Say No

Most people know that saying no is a critical component of living a balanced and successful personal or professional life. The problem is, most agencies don’t know this. This creates big problems: the client drives the project, from engagement to solution, with the agency merely acting as a production house, instead of as a professional partner.

As an agency, your job is to be a partner with your client, lending expertise about what they should and shouldn’t do, and as a professional, your job is to control the process. Your client can’t do what they’ve hired you to do – you’re the expert, act like one. If they request bizarre functionality, say no. If they request unreasonable deadlines or deliverables, say no.

The point is not to be unreasonable or uncompromising – far from it. As the expert, you should take your side seriously, and giving in to functionality you don’t think belongs or a process you think will deliver subpar results harms both of you. Saying no, respectfully, retains your professional integrity, and ensures the client gets a solution that is the absolute best.

Bonus point: sometimes, this means a client goes somewhere else. That’s OK. You haven’t gotten to where you are because of a sales problem – you’ll have another walk into the office next week, and with that new client may come the opportunity to do truly exceptional work. Let the bad ones go!

Problem 2: Trying to Outrun the Negative Cash Flow

Agencies are service companies, and with true service companies often comes a business model problem: negative cash flow. Negative cash flow simply means you’re spending more than you’re taking in during a particular time period. In most agencies, this is caused by a typical billing structure: 50% deposit, 50% on completion (or some variant, but most follow a similar model).

Negative cash flow is a powerful motivating force. Watching the accounts receivables dribble in during a month causes anxiety, and that anxiety causes management to get antsy for the final deliverable. After all, the final deliverable means the second part of the project fee, which smooths out the earlier dip in cash flow caused by the period of working at a deficit. (Yes, I know the accounting of agencies is quite complex, and there are lots of ways to smooth out this cash flow. However, the fact is – most agencies work on a fundamentally negative cash business model based on commonly accepted billing practices, and that causes these problems).

Where this becomes an issue is with bandwidth, culture and quality. When the negative cash flow squeeze is on (and it’s always on to some extent), it accelerates projects. No longer does an agency have the luxury to say no to a ridiculous deadline or increased scope (see above point), they need to keep things moving to close the cash flow loop – and too often, it results in crappy work. Things get rushed, employees get burned out, and quality suffers – all because of the pressure from the business model, and the unwillingness to say no to the client. And it starts all over again next month.

I wish it was different, but years and years of experience have showed me it isn’t.

So, what’s the answer? First – agencies need to develop more backbone and respect themselves as professionals. Set the terms of your deals, establish a process and stick to it, and say no to unreasonable clients. Secondly, solve the business model problems: productize offerings, work on retainers, change billing structures to be more cash flow positive in nature, or develop other methods for releasing the pressure of the final check.

For me, the most unfortunate part of this situation is the talent and good work going to waste. There are seriously talented people working in agencies, working with seriously important and public brands. These people should be creating some of the best work in the world, and unfortunately, it doesn’t happen nearly as often as it should, too often due to a lack of professional discipline on the part of the agency.

Let’s find better ways to work. Let’s find more beneficial arrangements that establish clients and agencies as peers, working collaboratively (not as mere vendors) to create awesome work.


Leave a comment

  • Anonymous

     

    Agencies can’t say “No” when they have a project-to-project
    mindset. Every project, every engagement is critical, because (unconsciously)
    “this could be our last one!” A client with a request is money in the bank. Who
    can resist that simple – and immediate – transaction?  It takes the discipline (and a cash reserve)
    of a long-term view to look past the immediate transaction.

    It takes an advanced client to want a partner, not just a vendor. Most clients just
    want a job done — a project to be completed, an item to be checked off a list. A
    “project” is manageable and measurable – a beginning and end, and (hopefully)
    a known price tag. Retainers are scary for these clients; they see a never
    ending cash-bleed. The knowledge that partners provides comes as an expense. Employee knowledge is an asset.

    The thing that makes me nuts about the “project” mentality
    is how badly projects unravel once the engagement is complete and the product,
    service or whatever it turned over to the client. We spend no time educating
    our clients on the huge job they have in front of them maintain whatever it is
    we’ve built for them.

    “Partner” is too often interpreted as code for consultant: a person who get hired and never seems to leave because the organization is too
    dumb, scared, insecure or wrapped up in CYA to believe and act on
    in what it knows. A smart client knows what s/he doesn’t know and has figured
    out when and where it makes the most sense to get that knowledge from an outsider, rather than bringing it in-house.  Most clients don’t have the time, the skill,
    or the inclination to do that math.

  • Anthony Sakovich

    Having spent about a billion years in advertising and marketing, I can say you are pretty much spot on with your points.  Of course, I’ve found that the best solution is to only take the smartest clients.  I only want clients for my agency that want us to do great work, and they know we can do it because we’ve only taken on the work that was predestined to be great.   It’s like a positive feedback loop. We tell them what will happen, and if the timeframe is too tight because they planned poorly, we tell them that, too.

    The trick is to keep the agency as lean as possible — ALL THE TIME.  Live on the 50%, and then the second half is just a bonus. Because I’ll tell you this, we’ve had more than a few clients who only PAID the deposit and then couldn’t come up with the money to pay the balance. I think that, more than anything, taught me to run the company based on the deposits and not the balance due.

    My hourly rate has almost quadrupled based on that philosophy.  The quality of the work, more than anything else, has led to that increase. Now, when I only rely on “half”, I’m relying on twice as much as I was before.  I’ve grown the agency to where it would never have been had I spent the money before I had it.

    Great article.  Thanks for your insights!