Finding the solution to shrinking margins and rising costs: The operations director
Getting internal operations right has never been so critical to the success of an agency. The world is changing at record speed. New technology and channels have revolutionised everything. This brings both challenges and great opportunities for agencies, along with a strong requirement to redefine and reinvent their processes, people and systems.
At The Industry Club, we’re hearing from agencies big and small about increasing workloads and decreasing margins. These sentiments were mirrored at a recent conference hosted by the IPA, where advertising leaders, practitioners and finance professionals gathered to revisit agency pricing, margins and ways to more effectively value and price their services – all while trying to hold on to existing business and win more of it. No easy feat.
“I think the challenge here is to re-manage the agency,” said Michael Farmer, founder and CEO of Farmer & Company LLC, a strategy consulting firm for ad agencies, to the IPA crowd. “Everything you do should be tied back to an effort to improve brand growth and profitability. What [clients] really want and need are results.”
In Farmer’s book, Madison Avenue Manslaughter: an inside view of fee-cutting clients, profit-hungry owners and declining ad agencies, he explains that fees are agreed by CEOs and financial directors with no corresponding internal data to substantiate the fees or understanding of what resources and efforts are required to make the work at a decent margin. He explores how this disconnect inevitably impacts the overall health of an agency.
To survive and thrive, agencies need to stop delegating operations; they need the right resources in place for the right work at the right price – and they need to have a firm handle on it. This is where operations directors come in. We recently held a networking forum for operations directors from London’s agencies to discuss these challenges at length.
Role of the operations director
“Operations plays a vital part in any agency and an ops director now sits at the top table,” said Aidan Moran, operations director with Proximity. “I work very closely with the CEO, the executive creative director and, crucially, the chief financial officer. It’s about executing internal strategy, and to execute that strategy you need to be at the table when that strategy is developed and pushed through. That’s what ops directors are all about these days.”
Essentially, the operations director adds another pillar to the management of a client’s business. This pivotal role works alongside the management team in driving forward the business, actively promoting integration, effectiveness and growth, driving additional revenue opportunities and commonly being the production face of the agency to the client.
While the creative product and marketing efficacy are still key factors in a successful client/agency relationship, in today’s market, business is not won on those factors alone. Clients are demanding agile, lean working practices, streamlined departments and smart technology solutions. That’s why a key focus of the role is creating and maintaining efficient processes and work flow systems to enable a creative, agile and collaborative work environment. While strategy and creative manage the idea, and client services manages the client, it’s the operations director who manages the agency.
“It’s so important to have someone constantly looking at the business, not just the finances, clients, creative output or the many skilled departments within an agency – you need someone who has a bird’s eye view of the whole picture and understands the mechanics of the business so we can respond to client and creative needs,” said Nicky Russell, a previous Industry Club candidate and current operations director at Anomaly. “You have to constantly look ahead to ensure we’re building a model that protects and encourages progressive thinking alongside solutions that are bespoke, flexible, scalable and respond quickly to client needs.”
Managing operations at Red Brick Road
Andrew Godley, managing director at Red Brick Road, has seen first-hand the difference an operations director can make. Doubling in size in a relatively short period of time, Red Brick Road’s participation in The Industry Club’s Ops Clinic quickly revealed the need for an operations director to keep pace with the growth of their business.
“For us, it was driven by an ambition to grow 20% year on year. We recognised that things that go well when you’re 40 people don’t work as well when you get to 70 people. We didn’t want to be process driven, but we knew we needed more structure. We needed someone to come in and help us both with process and with looking after the agency’s interests.”
After hiring Industry Club candidate and operations director, Maxene Edgehill, Andrew has discovered that it’s invaluable to have someone on the team who is viewed differently by clients. He observes that an operations director can be objective, take away emotion and approach client needs from an unbiased perspective.
“We’ve spent a lot of time on the account management side of things. We do everything the client asks us to do in the best possible way. Sometimes this means you end up saying yes to a lot of things, and delivering in a shorter and shorter time frame,” said Godley. “With Max on board, we are now talking about things much further out. We are very clear what is going on much earlier, which means we are not burdening teams on different briefs. Max makes sure we identify integration opportunities and scope projects thoroughly up front. This means that the rest of the process clicks.”
The ROI of an operations director
We know that that average client/agency contract tenure has dropped in the last decade from seven years to two and a half years. Today, clients are promiscuous, and they want it all. Planners and creatives can’t give them everything they need anymore, which makes operations directors more important than ever.
That said, while the right operations director can be the solution to this predicament, they do come at a price. In an ideal world, an operations director would be billed out as an intrinsic part of the delivery team. However, even if an agency takes on this role as an overhead, the return on investment for this senior position can be well worth it.
“Max’s presence has already shown real improvements in key client relationships, allowing us to see what the next couple of years will look like. The big thing for me is we have less creative reworks, the briefs are the right briefs, and they are clearer. Max helps us to manage time more efficiently across the board. We are now much clearer on where we should spend our time and deliberate about excess time,” said Godley. “You can hire the best creatives, very clever planners, but this is a role that is very visible very quickly. If you get it right, it can really sharpen the culture in positive ways.”
It’s clear that agencies need to get their house in order. With the right operations director on board, an agency is well on its way. According to Godley, you’ll know you’ve found the right one if they possess a mix of diplomacy and assertiveness, take ownership and accountability, and truly understand the needs of clients and how best to meet them.
“Today, we have an opportunity to think differently, behave differently and explore areas where traditionally we haven’t been before. Market needs are evolving quicker than ever and you need an agency that’s always five steps ahead in its thinking, planning and delivery,” said Nicky Russell. “If an agency is an orchestra, head of operations is the conductor.”