By Tim Williams
What exactly constitutes success in context of a professional services business like an advertising agency? Should success be defined exclusively in financial terms? Is it more about reputation and recognition?
This topic actually produces some heated debates in the hallways of agencies across the globe. Creatives insist that being recognized for brilliant work is by far the most important metric of success. Account types counter that while awards are good and desirable, they don’t pay the bills. Both arguments are right, of course, but determining a winner requires viewing the question through a different lens.
Peering at the road ahead vs. looking in the rear view mirror
The problem with judging the health of an enterprise using financial measurements is that money metrics are lagging indicators of success. Lagging indicators are historical; they measure things that have already happened. Studying lagging indicators is like looking in the rear view mirror.
In professional services firms, most of the things that get discussed in monthly management meetings are lagging indicators – not just income and expenses, but the various ways this information gets sliced and diced by the accounting department (including the notorious billable time report).
Are lagging indicators important? Of course they are. Good managers need to be intimately familiar with their income statements and balance sheets. But these metrics only paint part of the picture. And instead of being a roadmap that helps indicate where you should go next, they mostly just show where you’ve been.
More important are the leading indicators of an organization’s success. Instead of reporting on the success of a business, leading indicators help predict success. Leading indicators represent the activities that if done well, actually produce the revenues and profits.
The predictive power of leading indicators can be quite remarkable. In the automotive business, what would you guess is the most potent predictor of sales? For most auto makers, its test drives (followed closely by website visits). Economists employed by large corporations know that as certain key leading indicators move up – like new housing starts – sales of certain consumer goods are sure to follow.
But what are the factors that predict the success of an enterprise like an advertising agency? Ignition has studied this question for well over a decade, and has developed a suite of key leading indicators, organized in six key areas. While some leading indicators can be quantitative in nature, most are qualitative, and can be measured via scores assigned by key stakeholders in the organization.
Following are some examples:
STRATEGIC DIRECTION AND POSITIONING
Examples of Key Leading Indicators
1. We have identified what we do well – our strengths and core competencies.
2. We have a clearly-defined business focus that helps make us intensely appealing to a select group of prospects.
3. We are focused on what we do best and have business partners for the rest.
4. The agency has a set of core values that guides business dealings with clients, employees, and business partners.
5. Agency employees are inspired by a sense of purpose that goes beyond just making money.
6. Etc.
SERVICES AND STRUCTURE
Examples of Key Leading Indicators
1. We help our clients identify and prioritize marketing initiatives that have the greatest potential.
2. We have an organizational structure that minimizes silos and reflects the realities of the multi-channel marketplace.
3. We employ innovative methods for understanding our clients’ customers.
4. We regularly develop and deliver proactive thinking and ideas.
5. We show marketing leadership in growing current client business.
6. We have a system for measuring our clients’ success and showing accountability for results
7. Etc.
STAFF MANAGEMENT AND TALENT DEVELOPMENT
Examples of Key Leading Indicators
1. We have clearly defined the roles and responsibilities of every associate.
2. We recognize and reward exceptional performance.
3. Our managers and supervisors provide regular feedback and coaching.
4. We communicate news and information regularly and keep the staff well informed.
5. We have an effective system for identifying and qualifying the best talent.
6. We thoroughly orient and indoctrinate all new associates.
7. Etc.
SELF-PROMOTION AND BUSINESS DEVELOPMENT
Examples of Key Leading Indicators
1. We have a creative brief for our own brand.
2. We have a consistently-executed brand identify.
3. Our new business program focuses on points of relevant differentiation.
4. We have well-defined criteria for prospective clients.
5. We have an effective content marketing program for our own brand.
6. Our website is an effective virtual representation of our firm.
7. Etc.
SYSTEMS AND PROCESSES
Examples of Key Leading Indicators
1. We proactively manage workload based on capacity rather than arbitrary client demands.
2. We view project management as a discipline in its own right and separate it from the traditional client service role.
3. We have made pricing a core competency in the agency by teaching it to all client-facing associates.
4. We separate ideation from execution and charge separately and differently for each.
5. We routinely review and resign unprofitable, undesirable clients.
6. We are actively exploring and developing new revenue centers that transcend the traditional “work for hire” model.
7. Etc.
STAGING AND RESOURCES
Examples of Key Leading Indicators
1. We create positive first impressions at all major points of contact with the agency brand (reception, voice mail, e-mail, etc.).
2. We have a well-designed work environment that balances collaboration with privacy.
3. We have an effective digital asset management system that is understood and used by all associates.
4. We provide associates with the necessary tools and equipment they need to do their best work.
5. We have leveraged technology to not only help make us more effective, but to help create a competitive point of difference.
6. Etc.
Get your firm in the habit of identifying and measuring key leading indicators in addition to the usual lagging measures of financial success. By paying attention to the territory ahead rather than just the road behind, you can significantly alter the course of events in your firm. Don’t just measure your success; help predict it.