Why the Agency Utilization Model is Flawed

Since starting [meta]marketer, I’ve been naturally having a lot of conversations with people about why I’ve chosen to work with freelancers instead of building what people inevitably call “a real agency.” Most people guess it’s to reduce overhead. That’s a good guess, but it isn’t the real reason.

The real reason is a nasty little model called utilization. It’s how most agencies are managed. In other words, they measure how many billable hours each staff member is able to clock relative to the number of non-billable hours. In theory, it’s a great way to drive profitability for the agency and ensure a lean operation.

The problem with this model is probably obvious: at some point in time, some work is going to be pushed to a resource who isn’t right for the task just because he or she is sitting idle and needs work to bill. And who is likely to suffer for this? The unsuspecting client.

Don’t get me wrong: I’m not knocking all agencies, or all staff at agencies. Most agencies, no doubt, have talented people on staff, and those folks can probably adapt and learn quickly. I’ve managed plenty of folks who fit that description, and I mean no disrespect to their skills.

But there’s a time and a place for on-the-job learning, and most clients simply don’t want to have to pay for it.

And they’re right to feel that way, sort of. Clearly, taken to its extreme, this approach means no one can ever again take on a job they don’t know backwards and forwards. I don’t think that makes sense, either. The agency management must strike a balance between billable hours and what’s fair to the client. I’ve taken on tasks in the past that I knew I wasn’t the most efficient resource for simply because no one else was available, and I would always discount the hours on that line item for the client to the amount it would have cost to have someone more skilled performing the task. That way, we’d all win: I’d brush up my skills while getting paid, but the client didn’t have to bear the full brunt of my training expense.

What I hope to avoid with [meta]marketer is having to settle for the nearly-right person on a project. I’ve been working hard to find the best people to work on each of the projects we’ve taken on. What we offer to our clients who demand it, then, is a team of professionals who know their stuff backwards and forwards.

In many cases, staffing a project this way will involve less overhead, and will end up costing the client less. In some cases, though, we may come in priced higher than other agencies. In some cases it depends on what experience tells us is the best way to execute the project.

But either way, we’re building the best team for the job, rather than billing for the team that has jobs.

If you think this approach makes sense and you’d like to discuss a project we can help you with, contact us today.

This entry was posted in management and tagged , , , , . Bookmark the permalink. Follow any comments here with the RSS feed for this post. Both comments and trackbacks are currently closed.