Over the last two years, thinkPARALLAX has transitioned into a full service agency from a design studio, and through this metamorphosis, we have encountered various challenges and opportunities to figure out the best way to operate a fast-growing business. And our perspective has been: Happy Employees, Successful Business. It has been relatively smooth sailing, but we decided to reach out to an outsider’s perspective and hire a business consultant to provide oversight on day-to-day work, as well as long-term planning.
After a great deal of searching, we found an industry veteran who served for many years as CFO at Burson Marsteller – one of the largest PR firms in the world. He knows the business inside and out and provides guidance on all levels.
During his first trip out here in October of last year, he did a few workshops with our team, as well as evaluated our business workings. In both the workshop and big picture planning session, we talked about billing and utilization rates. For those unfamiliar, utilization rates are basically the amount of time that an employee is working and is billable for client work. Together, we did the math about maintaining a high billable rate and keeping the business profitable. If you are in the agency world or if you’ve heard about it, often times agencies put an extreme amount of pressure on individuals to maintain a high billable rate – they can be singled out within their teams if they’re not meeting goals, and even terminated because they are not producing enough billable work. We want to avoid this at all costs and the negative stress that results from it.
Guusje, my partner from the Netherlands and a firm believer in equality, stressed the importance of only working 40 hours while our consultant reiterated a high billable rate, which for all intents and purposes, equaled a 50+ hour work week. There wasn’t a consensus at the end, only that we don’t believe you need to work overtime to keep an agency profitable.
It’s been 8 months since that initial meeting and we’ve been working monthly with our consultant and keeping a close eye on billing and our utilization rates. What was the conclusion? We’ve been able to maintain 75-80% rates while keeping our employees at their 40 hours and not singling anyone out if they fall below their targets. How did we do this and how can we continue the balance?
- Try to be as transparent with clients as possible. We’ve completely changed the entire process from proposal to invoicing, where we share with clients the projected hours we will spend as well as updates throughout the process. It’s taken away all the mystery, as well as provided clients better insight into how long things will take. The proposal hours are then used to make our project schedules.
- Clear expectations with clients. From the project onset through the duration, we define clear responsibilities for each team and how much work will be involved.
- Set a schedule. Tight or drawn out, it will allow both the client externally to see where and how we will spend our time, as well as plan and organize our monthly, weekly and daily workloads.
- Production scheduling. Our Project Managers meet daily and weekly to talk about projects, re-evaluate and reassign depending on workload.
- Don’t be shy about hiring outside help. We’ve kept a pretty good team of contractors close by if workloads increase. Yes, they potentially bill more and the company earns less but it keeps the stress down and often brings in a new perspective into the office and on projects.
- Group billable rate. We’ve assigned a goal for each employee, but collectively set team goals of what we are working towards. Yes, mathematically it won’t work out if a higher billable employee does more or less time, but on the whole we are working as a team, and if the team hits a certain number, the business is profitable.
- Keep everyone updated, always. For all employees, managers, clients, and even the clients’ accounts payable teams, we are completely transparent and on top of it. They know what to expect, when to expect it and what it will take.
It’s a different way of thinking about it. Working as a team will not only promote group accountability, but it will also allow the team to work through stressors together. Transparency is the future of business and we decided to practice what we preach. Also, if we can do the right thing and still earn a profit, why wouldn’t everyone do it?