The Salad Days are Over – Part II.

“They were my salad days, when I was green in judgment” 

Cleopatra (from Shakespeare’s Antony and Cleopatra)

In Part I of this article, we introduced the idea that many digital agencies benefitted from the growth-friendly economic environment of the previous decade, but because revenues and profits were dependably growing, they never felt the need to optimize their business performance – a time we referred to as the salad days – “a youthful joyous time of innocence and inexperience.1” Now that we are facing economic headwinds, we argued that agencies need to focus on developing their operational savvy and provided 5 Building for Scale tenets that  focused on financial / operations best practices that will provide a platform to deliver more efficiently.

In this Part II, we discuss 5 Building for Culture tenets that change the way business is conducted in order to provide organizational durability.

Building for Culture

When we hear about Agency Culture we typically  associate it with how the company treats its employees, its ESG position(s) or whether the organization is “innovative” or “data-driven”. We might more accurately call our thoughts here Agency DNA because we mean the intrinsic habits and traits that infuse everything the company does in order to maximize its capabilities and longevity. Agency DNA is solely for internal consumption.

1. Focus on the Doable (i.e., the Good Enough).

Agencies tend to get “caught in the weeds” when performance is negatively impacted. In the current economic environment, many, if not most, business leaders will be challenged as they don’t have a historical reference point to call upon. Understanding what’s necessary, recognizing change and its implications and ultimately implementing plans to address specific scenarios is critical to weathering uncertainty and change.

As much as this seems obvious, the reality is significantly different. Agencies, by their wonderful nature, tend to over-engineer or go for grandiose solutions so that by the time they’re implemented the negative implications have arrived – now the agency is facing even more difficult decisions. As the adage goes, “the enemy of good is great ” and a decent improvement in production is far more useful than an even better one in development.  Being mindful of the capabilities and backgrounds of the leadership team, coupled with having quality business insights should provide adequate context for “doing the doable”.

Finally, as veterans of several business turnarounds and countless performance improvement initiatives, we can’t stress enough that the path to improvement and organizational sustainability is through the rapid implementation of continuous improvements rather than moonshot type overhauls.


2. Know your Future (with Forecasts).

Let’s start with the fact that the term “forecast” in many agencies is nothing more than an approximate guess at the future state of the business. However, as we enter a riskier economic environment, it’s critical to know what the near future holds so that mitigating actions can be taken in time to avoid an otherwise adverse outcome.

What was once acceptable as a loose method of approximation within a sales funnel, now becomes a critical path to the health and long-term viability of the agency. The lead that has been sitting in the proposal stage for 3 months probably isn’t going to close and candidly, shouldn’t even be in the forecast. In the past, that lead might have still converted, but as budgets become tighter and dynamics change, probability weighting should also change. In the new reality we’re facing, it would be irresponsible to assume that sales will close, and a pipeline will fill just because they have in the past.

Good forecasts provide a window into the future state of the business and give  management the necessary  time to make needed adjustments. If sales are looking weak, hiring can be slowed or sales efforts increased so that the forecasted margin impact is mitigated. While revenues were steadily increasing, business foresight was not critical, but an unforeseen drop in revenue levels could be catastrophic for companies that are slow to realize their world has changed.

For reference, leading up to the .com crash one of us (Paul) was the Controller for a $120M agency group and saw that the boom was coming to an end with the slowdown in the pace and value at which the pipeline filled. Having significant visibility into the forecast didn’t save the agency from the evaporation of the market, but it certainly bought time to make adjustments they would not have otherwise made and, in the end, had a positive impact on decisions and associated timing.  (That was the end of Paul’s salad days).  

3. Be Resilient.

It’s always a difficult subject to broach, but it’s time to prepare for the necessary operational tightening that ensures continued success for the agency and the shareholders as a collective. Tightening must balance the competing audience demands and ensure that a cohesive, effective and profitable organization emerges from whatever difficult period we may face. 

Operational resilience has to be the goal when entering a period of uncertainty and acting proactively is critical vs. being forced to react to losses. Cost reductions such as reducing overhead expenses, eliminating the “nice to haves,” and team efficiency are all critical considerations, but the lasting value is in building longevity by focusing on automation, market differentiation and offerings.

The concept of “make change before change makes you” is a necessity and is valued in the long-term, while frequently painful in the short term.  Resilience is critical to ensure the value that’s been built is ultimately retained through more difficult economic times.

4. Change the Mechanics of Building and Managing a Bench

For the last 3 – 5 years, and especially the last 2 years, a significant limiter on growth has been the scarcity of talent. The pace of new business acquisition has, as a whole, outpaced the rate of onboarding new colleagues, while in parallel creating significant issues related to alignment of salaries to billable rates. The conundrum of clients and their respective Sourcing colleagues placing increasing pressure on rate reductions has further compressed margins, especially within inefficient agencies that aren’t managing to a detailed operating plan.   

The strategy for building and managing a bench in a post-COVID world is quite different, as most agencies have experienced, yet the model hasn’t necessarily evolved or matured for many. For those that have determined that a remote workforce is feasible, the flexibility of not being tied to a high-cost geography or the lack of access to talent in a highly competitive market has provided a competitive advantage. The concept of fractional talent (global in footprint with varying cost structures) requires a change in philosophy in the functions of Recruiting, HR, Operations, Finance and Project / Program Management. Flexibility in the structure of a bench through fractional capacity, based on our experience at Bravery Group, is critical to weathering the “unknowns” of the current and future economic scenario.

Finally, when we say “Manage a Bench” we mean the ability to foresee bench time over the next few weeks and to actively do something about it. Bench time is a perishable good and if it is only known in hindsight it is a wasted opportunity to sell time onto another project or to assign some internal IP or other work. This has not been much of an issue over the last few years as bench time has been fairly limited, but if it starts increasing, companies must have a plan to counteract it.


5. Build a “Yes and…” Culture

“Soft” cultures create significant challenges. As much as leaders want to be seen as part of the team and aspire to be liked, running a business is difficult and the fiduciary responsibility has to be the highest priority. Building a performance culture that understands the critical aspect of running an effective and efficient business is key to navigating uncertainty. It’s this culture that affords the business the ability to scenario plan and to get in front of issues vs. reacting to circumstances.

The construct of “Yes and” is highly desirable in a leadership team when everyone needs to be “on board” and operating under the same thesis. Having leaders that remove their personal biases and adhere to a common objective while focusing on the positive nature of the “and” facilitates insightful solutions and guides decision making by removing the inertia of leaders that refuse to accept the need for change.

As much as this may seem obvious, the willingness of leaders to listen to feedback, interpret market signals and to plan for future scenarios for many is a lost art. The realities of economic downturns inevitably requires collaborative problem solving and a willingness to look beyond the known, especially if the practical experience of agency leaders is based on building and managing only through the “Salad Days.”  

The Salad Days are Over (For Many an Unsuspecting Agency)

For agencies that are entering into this new economic reality, it’s time to seek counsel. Whether it’s from your Board, external advisors, or leaders that have served in senior roles during previous times of uncertainty, performance optimizing advice is needed more today than at any time in the last several years. Relying on your own intuition or attempting to educate yourself through frantic late night Google searches that date back to the last significant market downturn will leave you with insights that are most likely irrelevant to your particular circumstances..

Those that do adapt to the higher levels of risk and uncertainty will have a distinct advantage throughout and into the post-slowdown environment and will ultimately have built a business that’s highly valued not only by colleagues and clients, but also as a future acquisition by strategic Buy-Side parties that recognize the maturity and resilience of an agency that maintained their revenue and margin levels.

Those that don’t adapt are going to struggle to retain the clients, reputation and income streams they are currently enjoying.

1) Read more about “Salad Days” on Merriam-Webster
2) Read more about “Salad Days” on Wikipedia

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