When I ask people this question, I sometimes get a startled response. What??? How often should I measure my operational efficiency, what should I measure and how do I do it?
Large agencies have a broad dashboard of operational metrics that they are tracking most of the time. Most small-medium sized agencies track their gross earnings, profitability and people utilisation which is a solid approach in a world where first focus is on finding the work, doing the work and delivering the work.
This approach will help keep you going through busy times, but there comes a time when you need to take a deep-dive into what isn’t working and where profit is being lost. Rather than continually pulling your belt in, an Operational Efficiency audit can help identify areas where you can unearth wasted use of time and lost potential earnings, and identify where to invest in order to achieve greater profit.
What datapoints should agencies track?
Operational efficiency can be defined as a measure of output from different units of input. In an agency this may be:
- Employee efficiency employee productivity and the revenue per person, usually measured through utilisation analysis which is the number of hours per week they have spent on billables, or their cost per annum in proportion to the income/profit they generated or worked on. There are buts and caveats to both of these methods, and it is less straight-forward to measure than some of the other areas. Time sheets are invariably inaccurate, missing job or stage numbers, and not reflective of the hundreds of little 1 minute tasks that fill people’s day.
- Process efficiency: how smooth-running are the repeatable processes? All agencies tend to work to a similar workflow (see “Spotting inefficiencies in your creative workflow”) but are the tools robust, easy to implement and is everyone aligned on the workflow? Is it time to do an audit on this to see where bumps can be ironed out?
- Acquisition or conversion efficiency: a lot of time, money and opportunity can be lost in a poor pitch process or efficient turn-around of estimates and proposals. How smooth running is your pitch process? How quickly are proposals despatched to clients? What is the average lead-time to conversion, and the amount of effort required to convert it?
- Marketing efficiency: how much time and budget is invested into marketing, and what is it returning? The components of marketing must include the time & cost of updating your website, your case studies, blogs and thought leadership, networking, event attendance, cold calling, inbound responses, lead qualification, calls, coffees and all other meetings.
- Client efficiency: this is a new one that I’ve chosen to add in to what is otherwise a standard and recognised list. Up to you if you agree or not, but not all clients behave equally. Some clients are very savvy when it comes to working with their creative agencies, they know how to raise purchase orders in a timely fashion, brief work out, to evaluate design, give feedback and manage their stakeholders, amongst other ways of working that use people’s time (and therefore budget) in an efficient manner. Who are your most efficient clients, and how can you coach your inefficient clients?
- Technology & technical efficiency: does the kit work? It is a false economy to invest in people but not in the tools they have to use. Are machines continually crashing? Do the batteries in laptops have a 5-minute life before you have to hunt for plug sockets and re-organise a meeting, diving under tables and holding the meeting up in order for the presenter to be able to present? Not only is this time-wasting, but it looks so unprofessional and leaves clients questioning the agency’s capability and financial soundness.
Creating a benchmark
Following a first operational audit, set a benchmark on the best numbers you have. Wherever a top performing pattern can be spotted, isolate that as a target so your different teams know what they are aiming for, and empower them to do their own audits to find out what they can change in order to improve on their numbers.
Manage it through a dashboard
Each month, run the numbers and have a working session with the relevant team to celebrate positive uplifts, to examine what positively changed and how it can be leveraged to accelerate that improvement, and explore what hasn’t improved in order to work out a new tactic. Some problem areas may require senior level decisions or intervention, others may require some time or budget investment.
Most importantly, by creating a dashboard and tracking the numbers, you will start to see improvements. It’s easier to spot problems earlier, to allocate resources more effectively, for people to work together more harmoniously and create a positive and productive culture.