Productivity is an enormously important metric in evaluating just how good your marcomms business is, because it’s a measure of how highly the marketplace regards your firm.
Productivity is simply the marketplace voting with its wallet, which is why you should pay attention to it. The higher the number, the more strategic and important an adviser you are considered by clients to be.
And in a world where clients are taking services in house more and more, and competitors are getting better and better (and new types of competitors are emerging all the time), you need to stay strategic and important, in order to stay ahead. And if you are thinking of selling your business at some point, then you should know that productivity has a major impact on the multiple you are likely to receive, as it is a measure of quality.
To get the productivity number for your business, divide the year’s gross profit by the number of FTE people you employ. That includes freelancers, secretaries – everyone.
According to the latest MKS survey (December 2021), the top performing business generated £271,851 productivity. Their clients think so highly of them, they are willing to pay almost £272K for every single person employed. That’s impressive.
So how does your firm measure up?
- Productivity >£200K means your business genuinely is top class;
- >£150K means your firm is doing really well;
- <£100K means your firm is offering generic services (and thus liable to price pressure from all the generic competitors out there);
- <£80K means you have a problem, no matter what your PR says to the contrary.
That’s why this is such an important metric:
- The number of awards you have is nice, but doesn’t reflect what the market thinks of you;
- The number of years you have been in business doesn’t tell you what the market thinks of you;
- Your own PR – we are market leaders, etc, etc – certainly is not an accurate reflection of what the market thinks;
- The number of eminent, experienced, well known people you employ doesn’t tell you what the market thinks of you;
- The number and prestige of your clients looks good, but says little about how important you are to each;
- Your profit margin says something about how you run the business, but little about the value you bring to clients.
So, how to boost productivity?
To be frank, for some it will be close to impossible.
- If you are serving a region that is under-performing economically, it will be hard to sell differentiated, expert services, because your clients can’t or won’t pay the fees.
- If you are serving a sector that doesn’t value communications and you are effectively outsourcing operations, not brains, it will be a real, hard, uphill struggle.
- If you are a brand new, tiny business, you will lack the necessary credibility (unless you are a high-profile exit from a firm with an outstanding reputation) to sell high-value services to the C-Suite.
So, assuming you are not in one of these categories, how to make the changes? It’s not something you can do in one fell swoop, but depending on the lifecycle of clients in your sector and the frequency with which opportunities appear, you should be able to make significant improvements in under a year.
High productivity means you are providing expert, high value-added services. So step one is to understand what valuable services your client wants and that they will be willing to pay for.
There are various ways to work this out. You might already know, because you are close to them and know them well. You could simply ask them what services they want that you are not providing (I used to ring all major clients, when I was a CEO, to ask them if (a) they were happy with our work (b) were we doing everything we could be. The answers give you an indication of gaps in your offer). You could watch what other advisers were doing, and listen to client complaints, in case they stopped doing something the clients still wanted (this is how Valin Pollen started Investor Relations – observing the brokers moving out of the IR space and leaving an unfilled client need).
You might find out at the scoping stage of a relationship, if the placemat uncovers something. You could observe competitors, to see what they were selling that you were not. You could ask intermediaries. You could brainstorm amongst your team. You could look at startups selling something different (especially in digital, where the pace of innovation is very exciting), to see if you could learn from them. You could look at your clients’ competitors, to see if they were doing something you could turn into a service.
These new services form part of your firm’s IP. But you can also look at your existing operational practices and see if you can improve them (using a similar process to that described above), to raise the quality and value of existing activities. Regester Larkin did this very effectively with their M&A work, for example.
One defining feature of experts is that they know more than non-experts. So you could increase your chances of creating high-value services by continually improving your understanding of the techniques and principles that could have a bearing on client work (think yourself sufficiently expert already? Then what are Cialdini’s Principles of Persuasion, including the new one? If you don’t know the answer, then I respectfully suggest you are less expert than you imagine). I find the output of McKinsey, Bain et al offer thoughts that, with some imagination, might have application in our spheres of activity. McKinsey’s work on the present day customer buying journey, for example, might give you insights of value in the B2C arena.
Basically, you have to turn your knowledge of the client and sector, combined with your natural curiosity, into a determined effort to spot promising ideas, then try them out, before refining them and rolling them out commercially.
You need to upskill your staff, so that they can handle clients in the C-Suite the new services will expose you to. In that hackneyed – but accurate term – they need to become Trusted Advisers, which is some way beyond the client handling skills needed for less valuable work.
Lastly, make sure that your operation is as efficient as possible, as waste won’t help you. That means having an effective marketing and BD process that focuses on the type of high-value clients you seek (and if you are really expert, you should be winning >75% of all pitches). You should understand what the most and least profitable services / operations are that you offer, so you know where to invest in the future. And – that old chestnut – you need to make sure your staff utilisation is at an acceptable level.
As always there’s much to do and time is short, so good luck and get cracking.