As we look into the case for smaller agencies, it all begins with the people. Even though all agencies tout a lot of services they provide, they are actually all selling one main thing: hours of a person's time. So the product is really people. The core asset of any agency is the caliber of people they employ and staff on your project. Though I think this is nothing new to anyone reading this, it does tend to slip from memory when the agency lavishes other credentials in their proposals. After all, where do the bios go in the proposal? At the back.
When looking for an agency, it's very much like hiring on an extension of your team. When interviewing for a position in the company, there is much more scrutiny. Why not in looking for the right agency? Or, rather, it tends to become more like buying a name brand product. Is a top brand product really that much better than the off-brand product? Perhaps that off-brand just needs a better marketing campaign to prove it's product is superior?
So let's look to see if it is a comparable product:
Companies are often a product of their leadership. In terms of thought leadership, organizational structure, and otherwise. This brings up the Peter Principle which holds that "in a hierarchy, members are promoted so long as they work competently. Sooner or later they are promoted to a position at which they are no longer competent, and there they remain. In time, every post tends to be occupied by an employee who is incompetent to carry out his duties...[so]...work is accomplished by those employees who have not yet reached their level of incompetence." (Dr. Laurence J. Peter and Raymond Hull).
Though humorous, it does hold validity. Especially in an agency with a steeped hierarchy. Translated, the partners who run the practice groups are beyond their level of competence, so the real work is done by the more junior staff. Though rational sounding, it does pose a problem. Ideas are promoted or squashed at the partner level in most cases. Thus, ideas are triaged at the level of incompetence. In other words, the senior level people in the agency are the filter that all ideas go through before you see them. And that filter may not be the one most current, or relevant to you or your business goals.
Another question you would ask in interviewing a candidate is their salary expectations. Is their salary commensurate with their experience? Now let's apply that to agency rates. Why does the same creative director bill out $150/hr at a small agency and nearly $350/hr at a larger one? Does s/he have better ideas at the larger agency? Probably not. Coke costs more than Vess mostly to bear the cost of marketing. Higher agency rates cover overhead. Though you'll hear that it covers training their people to be more effective (among other arguments), usually its something else. In some instances to the tune of $6000+/mo per "head" beyond the margin already calculated in the hourly rate. Oh, and I'd look further into that training claim...
These arguments only work if the smaller agency does not adopt the hierarchy model of the larger agencies. They are prone to this as well. However, most are flat in organizational structure, the principal (who's name is usually on the door) stays current, and the overhead is low.
Still more to come.... Motivation, Experience, Client Lists, Network Reach, and Brainstorms...
