Originally featured by CMO.com on 25 January 2017.

 

The most destructive things for the relationship between client and agency are unfulfilled expectations and unarticulated assumptions.

So while the closing stage of the pitch process is clearly all about sorting out the commercial side, it’s also about making sure that as many ambiguities as possible are removed, and that everyone knows exactly what’s going on.

The basic principle of any payment structure is straightforward—you’re paying your agency for an amount of time, multiplied by the rate for the team needed to do the work. But hidden in that are a whole load of questions that need to be addressed. What’s the scope of the work? What’s out of scope, and how will you handle out-of-scope requests? What’s the make-up of the team required, and is it the same throughout the duration of the contract? Will you need specialist skills and, if so, when?

In the old days, when advertising technologies were stable and clients only worked with a few agencies, these questions were easy to answer. Sometimes they still are. But if you’re looking for innovation, or introducing new channels and technologies, or working with a big roster, it can get much harder.

There’s also the issue of the assumptions your team—and even you—might be making. If you’re replacing an incumbent agency, people may assume the previous ways of working will continue. Or they may think they’ll work with the newcomer in the same way as they do with the rest of your roster. Unless you set out how the new relationship is going to work and then communicate that to your staff, you run the risk of confusion and resentment at best, and wasted time and money at worst.

Agreeing, rather than assuming, what is and is not in scope is vital at this stage. And it’s not just the big stuff. For example, what’s the policy on attendance at meetings: will it be based on set roles, or will the agency decide on who should attend and charge accordingly? What about travelling time and costs? What about ad hoc requests from your team, for example for information, competitive analysis, or to have a deck produced for a presentation?

You Don’t Know What You Don’t Know
With all this in mind, at AAR we increasingly recommend agreeing a fee for the first three months, rather than for the full year. Then you can agree the annual fee later, when you and your agency have a better understanding of both the scope of work and each other’s ways of working.

If you’re going to adopt this more fluid approach, it’s important to remember you need great processes in place to support it. Make sure you have monitoring points agreed, and stay in constant touch with the agency. It’s also vital to stick to the three-month review, and not just let things run because everything seems fine.

Too Much, Too Soon
It was no surprise that, in our 2016 AAR Senior Client and Agency Leaders Research, almost two-thirds of the people we asked—clients and agencies—felt it was useless to set Service Level Agreements (SLAs) at the start of the relationship, because “the realities and pressure points are unknown.”

We feel that too, so, instead, we recommend starting with an SLA framework. This should consist of everything you need to define service levels and an initial acceptable range for each service level. For example, how many rounds of amendments will you accept for different types of creative work?

Once this has been agreed with the agency, you should monitor the entire framework, and, when you see how things are working, you can begin to revise both the service levels you require and the processes you need to deliver those levels.

Who, What, When?
Another question that you need to address now is what work needs to be done when, by whom, and how you’re going to pay for it. The traditional approach is to pay the same fee every month, which has the benefit of simplicity. However, it risks overspends in the early part of the contract when the focus is on strategy and planning, and, therefore, senior staff need to be more involved. That, in turn, sends the wrong message about efficiency and wastes time for both you and the agency.

Much better is to commit to a phased approach that reflects how the relationship is actually going to work. This also has the advantage of making it easy to explain to everyone why specific people are involved at a particular time. So when the senior agency staff move off your work, you can show your team and stakeholders that this was part of the plan, not because they’ve lost interest in you. And the same is true of people with other specialist skills.

Full-Time Equivalents
A good way of thinking about phasing is to look at the Full Time Equivalents (FTEs) for the agency team. For example, a team of 10 people at 20% FTE might look big, but it’s actually only the equivalent of two people. A team of five at 50% FTE is 2.5 people, with much more focus. Thinking this way can help you decide what you need right now, and what the right shape of the resourcing is in future.

For example, it’s worth bearing in mind how many points of contact you’re going to need. If there are going to be a number of different teams briefing in, a small team might be swamped. But if you want the agency knowledge focused around a few core projects, the bigger team might be too diffuse.

Keep Talking
Whatever you agree, it’s vital you make sure it’s communicated to your teams quickly and clearly, so that they know what to ask for in the full knowledge of what’s within the scope of work.

Communication with the agency is equally important. Obviously, there will always be niggles and minor misunderstandings—you’ll never nail down every aspect of the working relationship right at the start. And as things move on, plans, people, and scope can all change. Maintaining a fluid approach is good, as it allows you to respond more quickly to new opportunities and changing circumstances. But it’s important to actively manage the relationship, rather than just being swept along by it.

We also recommend a health check after six months to address any issues that have arisen, and to bring to the surface anything that might be bubbling under, unspoken but causing disappointment and resentment.

Every new client/agency relationship starts with both sides wanting it to succeed. Clients want transformational ideas, great work, and game-changing results, and agencies want to deliver them. The key for both sides is communication.

About The Author

Kerry Glazer

CEO

Kerry’s communications industry career spans 27 years and she is one of the industry’s most prominent figures. 

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