Agency Compensation - Variables that Impact Pricing

It's tough to make predictions - especially about the future.
                                                                    - Yogi Berra

How much will it cost to build an x for us? Where x stands for Website, Microsite, Facebook Page, Mobile App (or even a House, a Bridge, an Aircraft Carrier). Tough question, right? The answer is, "It depends". What kind of x do you want?

Unfortunately, this question is asked by clients of their agencies every day. Given the recession hangover, fortunately it is still being asked. I find that a little education helps either avoid this overly, simplistic question or more productively, it helps point to a method for finding an answer. The approach pretty much has to do with helping your client (as well as your team) understand the variables that impact pricing.

While on the topic, in the spirit of precision, I like to define terms. In general, the price of services and/or deliverables is made of two components: fees (pretty much labor) and costs (usually pass-throughs, such as travel, licenses, equipment, etc.).

Below is a list of some of the variables impact the price of a project. As I hope you can see this list will generate some pretty interesting discussions that, if handled, properly will result in a level of professional empathy that should elevate all involved

• objectives’ clarity / validity
• strategy integrity / clarity
• project duration
• time of year   -   for info on an ugly confluence of factors, see Use It or Lose It
• program complexity
• state / quality of assets, briefing, brand and style guides
• 3rd party involvement (e.g. other agencies, technology vendors, email / sweeps vendors, client-internal parties [legal, IT, etc], client-external partners [other marketers])
• scale & volume (planned scale decreases pricing)
• review / approval process – including: cycle duration, feedback quality / consolidation, and number of stakeholders (e.g. marketing, legal, compliance, branding, etc.)
• specification quality / stability
• production value
• costs (e.g. photos, video, locations, research, technology, travel needs, etc.)

The old Triple Constraint is also a valuable concept to help frame an agency compensation discussion with clients and your team.

There's a wide range of things on the agency side that also impact pricing, such as available staff, their skills, their rates, etc. Is it fair to charge a client an Art Director's rate to do a Production Artist's tasks? Same answer, "It depends".


Let us know your thoughts or if you have some other major variables that drive pricing.

Achieving Balance - Rigor and Flexibility

If nothing else, being a PM in an agency environment is about achieving balance. I'm just going to skim the surface of this topic in this posting. There are a myriad of competing forces to reconcile along the development continuum in order to find the win/win including:

Reliability & Innovation
Options & Recommendations
Breadth & Depth
Effectiveness & Efficiency
Client Goals & Agency Goals
Collaboration & Autonomy
IM & Email (or picking up the damn phone!)
Revenue & Profit
Branding & Response
Engagement & Accessibility
And the PM classic: Quality, Speed & Price

On the PM side, whether we're talking about employing a service delivery process, using tools & templates or just how one manages communication and relationships, it often comes down to balancing rigor and flexibility.

PM is a robust and mature disciple with a successful history in a number of complex industries. However, an agency environment, is not a construction site, a military base nor a software engineering firm. Many of the PM tactics, tools and tenets that drive success in those environments will choke the life out of an agency. Applied with the right sensibility and professional judgment the methodologies promoted by PMI, Prince2 and the like can absolutely enhance PM and overall agency performance. However, without the appropriate judgment to achieve balance between the rigor supplied by those approaches and the flexibility that must exist in an agency, a clash or a lose/lose is inevitable. Similarly the lack of predictability that comes along with iterative approaches, like Agile is sometimes too nerve-racking for clients or agency stakeholders to bear.

A PM who can effectively depart from a plan to the mutual satisfaction of all is far more valuable than one who can create a 700-line project plan and hold a team hostage with it.

Bend so you don't break.
Bend but don't bend over.

Kill the Post-Mortem

It's a commonly held best-practice to perform a Post-Mortem session following a project - especially one that doesn't go very well. I strongly support this practice and, along with teams I've worked with, have benefited considerably from them over the years.

One common risk with these, shall we say, charged events is that they become finger-pointing exercises (or chair-throwing if things really get out of hand). The typical objective is to generate actionable insights that improve the chance of success going forward. Obviously a certain amount of look-back is critical to the process but this should be done with an eye towards the future. To those ends, I've found the following to be helpful:

PRE-SESSION

• Do some info gathering w/a broad range of stakeholders.
  
• Identify areas to Sustain and areas to Improve. Including items to sustain helps keep a positive focus and is, of course, instructive.
  
• Capture the initial observations on a grid (see sample below) that lists project phases down the left and disciplines involved across the top (note the presence of the client) - you can even divide each cell into Sustain / Improve subcells.
  
• Use this info to help formulate your sense of what really happened and where you'd like to take the meeting.
  
• Don't shy away from your instincts and ideas about what happened and definitely have a strong notion of what positive outcomes will be for the meeting.
  
• Preview the grid and your ideas with a small number of key stakeholders and enlist their support around driving towards (not precisely at) your vision of positive outcomes.
  

SESSION

• Choose a person to facilitate the session. Common sense is your guide here: ideally someone who can work dispassionately and has the strength and intelligence to deal with, shall we say, "passion".
  
• Be clear about session objectives, desired outcomes, ground rules and keep a parking lot for issues that are not directly relevant or too deep for the scope of the meeting - you are not going to solve deeply rooted agency issues in this meeting.
  
• Distribute the grid and share your thoughts on its value and how you want it used (fill it in further, just a guide, etc).
  
• Allow for some venting, but keep the session moving.
  
• Many process or change management initiatives jump too quickly to detailed solutions - a shared vision of the way things should be is a prerequisite for changing the way things are.
  
• Recap findings and next steps.
  

POST SESSION

• Share outcomes w/broader team
  
• Publicly call out strong contributors
  
• Implement and educate about any changes to the organizations processes, tools and documentation (or FINALLY commit to creating them)
  
• Refer to the session as related issues (or the same damn ones) come up on other projects
  

KILL THE POST-MORTEM

Improvement is cyclical and iterative. The best way to avoid the tragedies that drive the need to conduct painful post-mortems, is to start out correctly in the first place (see: post on Project Initiation). Good Pre-Natal activities and health are the best way to avoid the slaughter that necessitates the Post-Mortem.

The Best Predictor of Project Outcome - Project Initiation

I have developed and deployed numerous tools, techniques and templates that assist in completing high-quality projects on-time, on-budget and on-spec. However, the best aides in the world are of little use, without a framework or a way of thinking that guides their use.

The central idea of the framework that I advocate is that up-stream investments pay down-stream dividends. If you don't start right, it's difficult to finish that way. Simple idea, yes, but in the common rush to complete and succeed in an agency, groups of highly intelligent professionals (i.e. the team) frequently devolve into a 3-ring circus. "Ready, Fire, Aim" is a prevalent and unfortunate reality of day-to-day agency life.
Up-stream activities, such as information gathering, synthesis and dissemination are the preventive medicine that keeps agencies healthy.

COURSE-SETTING to avoid COURSE-CORRECTING!

Now, one doesn't want to get carried away. This orientation should not be misconstrued as a recommendation that the end-state should, or even can be, known at the outset of a complex engagement. In fact, the very value that project managers bring to the table - thoughtfulness about process, planning and up-stream focus, can choke the life out of the place if applied rigidly. There is value to be lifted and applied from both waterfall (stringent) and agile (flexible) methodologies.

Perhaps a bit overstated in terms of the uselessness placed on plans, this quote frames the issue well:

In preparing for battle, I have always found that plans are useless, but planning is indispensable.

- Dwight D. Eisenhower

Ike realized that the very act of planning and the frame of mind that it creates, lays the groundwork for intelligently dealing with challenges.

Do yourself and your teams a favor and apply effort up front. The finest minds in an agency are a valuable resource to be used wisely. Time spent in the early phases of a project is a far more effective than time spent scrambling to find and apply resources hours before a deadline.

Document Management - Where is the latest version of xyz?

Not being able to find the soft copy (the latest version!) of a printed document is pretty high on the list of things at an agency that drive me nuts.

INSERT FILENAME & PATH!

To combat the effects of short, mid and long-term memory loss - effectively saving myself from myself, I have become reliant on inserting a field that dynamically generates the filename and path in the footer of all of my Microsoft Office documents. Combined with a proper file-naming convention, a "bread-crumb" path to the exact server or local hard-drive location of a document printed on the bottom of your document is invaluable. As far as I know, this doesn't work in PowerPoint, but as a bonus, it works like a charm in Microsoft Project.

I'm not going to go into detail on how to do this. It's easy enough to find out on the Microsoft site. As an example, you can find the instructions for Microsoft Word, in the Quick Reference Card on the Microsoft site.

If you've ever had the joy of updating a document from an older version, while a deadline or your boss is looming, you will agree that taking the time to include this in your and your team's SOP is worth the effort. The job you save may be your own.