Why digital agencies should measure their performances?

Agency life is a lifestyle. If you don’t like it, you can’t be part of an agency. That is love, emotions and the things you probably saw on social media tagged with #agencylife. 🙂 But, at the end of the month; you should make payments to your employees, pay the bills and have some profit if you want your company or digital agency to grow.

As a co-founder of Kontra and an IT product company (project stopped in 2015.), I will talk about my experiences over the last six years. I’m surrounded with people from creative, IT – tech, PR, performance and other types of agencies daily.  My conclusion? All of us have the same problem. We sell our time, and we should reimburse most of it (depends on a lot of variables and company goals, founders, etc.).

First, you should measure the hours within your company. 

Is it necessary for agencies to measure their performances?

When we talk about web development, IT agencies such as our development department are in a bit simpler situation because you can easily measure client’s requests (features, extra design hours, maintenance, etc…). The situation with digital marketing agencies or departments that provide services such as digital marketing project management (account managers), social media marketing, Facebook ads, Google ads, SEO, Google analytics and consulting, on the other hand, is a bit more complicated.

What gets measured gets managed. ~ Peter Drucker

Firstly, you should measure your employees (resources) if you want to see where your time “goes”. We are selling our time. It is our “currency”. If you’re not aware of what you’re spending your time on, your business and the company will suffer. When I’m talking about employees’ measurement, I don’t mean freak controlling by it. It is about the agreement between you, your employees and finally, it depends on the company culture. Employees in your company will understand why they should measure the time spent on billable and non-billable projects. At Kontra, we talk about that almost every day.

Furthermore, when the measurement is part of your company’s DNA, you should measure your client’s requests accordingly.

Digital marketing example

I have been working with one client on two sides of digital marketing: Social Media Marketing and Content Marketing (creating blog posts). As a digital marketer, you probably know that, if you want to be successful, you need other elements of digital marketing as well. We had a situation where the client had a problem with the bounce rate (90%+) because they have an old website without Call to Actions, with lousy design – user flow, etc. During ten months, we advised them on following the non-billable parts of digital marketing. (Remember, we’ve been paid only for social media marketing and creating blog posts): UX/UI consulting, how to create an e-book consulting, CTA deployment on an existing website, creating a digital marketing strategy for the following year, constantly educating their employees because they aren’t digital marketers (they were without basic knowledge).

Do you know what was the result of my measurement?

• In average, for this client, I’ve spent 15 extra hours/per month ten months = 150 non-paid hours
• On the digital marketing strategy, I’ve spent 150 of unpaid hours on this project with my team.

Sometimes it seems to be a “little help”, but when you summarize your hours on a monthly/yearly basis, it is so much more than you can imagine!

You should also measure non-billable projects in your company because all your employees have their time-cost. For example, when your employees write content for your corporate blog, it is great to know how much time you’ve spent. Let’s see an example of the calculation:

• They’ve spent ten hours per month for content marketing
• That’s 120 hours per year
• The cost of this is 4800$ (40$ per hour)
• The revenue from your content marketing strategy is 10000$ (you collect 300 leads and convert one into a customer).

Great, for the following year you know what type of marketing works for your agency, so now you know you will invest more time (money) in this segment.

Web App development example

We decided to start an IT project (web application) with specifications we haven’t even see. This is always risky (deadlines, the budget, time, etc.) but it’s the only way if you want to learn something new and upgrade your team!

It was full-custom project from scratch. I would like to focus on the main aspects of this project.

1. We were developing functionalities we never did before. We learned that we needed extra 120hrs for this and that we could automatize some processes and cut our time for at least 60hrs!
2. During the project, the client decided to import “just one thing” that we didn’t agree upon in the project specification – scope. We allowed this request without adding extra hours, and timeline corrections. What happened? We lost about 40hrs (non-billable), and our deadline was under risk. What did we learn after that? If a client wants new feature/functionality/design improvement or something else during the project, he must approve change requests (extra billable hours and deadlines correction). Don’t forget; this is the only way to protect your business and your employees from unwanted stress. 

What was the result of my measurement?

• I’ve spent 40 extra hours.
• We couldn’t charge extra hours because it was our failure, not the clients.
• The other project’s timeline was compromised
• We lost five men/days this year irretrievably.
• My team was stressed.

Is it hard to “force” employees to measure their time?

Force? Wrong.

I believe that force can’t impact positive changes. These are a few steps you should do within your digital agency if you want those numbers. I will start with those HR “porn words”, but in our case, these worked.

1. You should incorporate this into your company DNA and culture. It is crucial to explain to everyone why is it important for the company and what impact it has on profitability.
   1. How? We incorporated this in our company – policy rules.
2. Authorities (CEO, managers, etc.) should follow these rules. There shouldn’t be any exceptions for anyone. They are an example which people should follow.
3. You should not expect that people will do that activity by themselves.
   1. How? Just create a recurring task in your PM tool.
4. One person should be responsible for this activity as a stakeholder. He should remind team members if they forget, analyze data and create reports.
   1. How? Define who’s in charge.
5. Be transparent and communicate numbers/reports towards your team.
   1. How? Prepare reports from your PM monthly. This part depends on your company culture and procedures.

How to measure?

For project management, we use ActiveCollab which has excellent functionalities such as time measurement and time/expenses reports. This tool allows us to measure each task or we can add extra activity and its time. Maybe you are using other tools; you can even do it with Excel spreadsheet. It doesn’t matter which one you use, but it is vital that you have this data.

In the following image, you can see how it looks like in ActiveCollab!

What do we measure? We try to measure everything we can:

• Sales activity
• Client Consulting
• Content writing
• Meetings with clients and internal meetings
• Preparation time for a meeting
• Facebook Ads campaign creating
• Newsletter creating
• Digital Marketing strategy creating
• Social application creation

etc…

For this blog post, I will measure the time I need to write, proofread and insert multimedia materials. Measurement isn’t about the tool you use; it is about decisions and willingness to integrate these into your company’s DNA.

“The price of light is less than the cost of darkness.” – Arthur C. Nielsen

You can’t measure everything, but those things you can, will help you in decision-making and finally, it is about your agency’s profitability. Sometimes you will realize that some of your projects aren’t profitable, or you should increase your prices or decrease activities on some projects.

It’s not easy to always remember to measure your tasks, and you can’t do it “from now”! It takes time, and it’s a process, but you can do it with your employees from month to month. Analyse, check your reports and draw the conclusions based on data your gather.

Editor’s Note: This post was originally published on February 6th, 2017. and has been completely revamped and updated for accuracy and comprehensiveness.