Agency Journey Episode 18 (Y15M9)

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It’s much easier to publicly share and write about business when things are going very well. I almost thought about skipping this month (or perhaps never writing this series again) because frankly, it’s been a very tough period for me as an agency owner. The business has struggled in various ways, and there’s a measure of shame and disappointment in talking about how things haven’t been going well.

However, after much reflection, I’m convinced that my future self will be very regretful if I miss out on chronicling these difficult times. As an optimist, I know there’s a turnaround coming where things will improve and today’s problems will feel like a distant memory. Experiencing a true journey means experiencing both pain and pleasure, hardships and good times. I’d be doing myself a disservice if I couldn’t find the courage to keep this going. So, let’s go.

About Agency Journey: This is a monthly series detailing the happenings of my agency Barrel, founded in 2006. You can find previous episodes here.


Hard Realities and Tough Decisions

We had been hoping and hoping for enough new business wins to “turn the tide” and get our finances back on track. But even with some promising new wins in the first 2 months of 2022, we realized that there were some serious underlying issues with the business.

Looking deeper across all of our accounts, we surfaced two big factors negatively impacting our operations: delayed projects and over-serviced retainers.

Due to poor planning, scope management, overstaffing, and a variety of other reasons, we found ourselves underwater with a good number of projects. Projects that were supposed to finish up months ago were still lagging but without any changes to the budget. In the worst of cases, we still had a good amount of work left even though the client had finished paying for all of it already. Each project in trouble has its own combination of issues, but they all boiled down to a few common themes: bloated process, unclear expectations on scope, and lack of nuts and bolts project management where budget and schedule are concerned.

On the retainer side, an audit of accounts showed that we were, more often than not, over-servicing accounts. A client may pay for 100 hours of work per month but for various reasons, we were consistently going over by 20, 30, or even 100 hours every month without negotiating overage payments or asking the client to change their plans.

In both cases–project delays and over-servicing retainers–our team was kept extremely busy with work but not driving any profits, a leaky place to be as a business. What’s worse, in order to service new accounts, we’ve had to bring on freelancers at additional cost because our core team was too tied up with delayed or over-serviced work to take on the newer engagements. Further erosion of profits.

I’m not saying all projects and retainers suffered in these ways, but enough to seriously dent the business and to make us realize that we needed to make some drastic changes.

As we began the process of instituting systems and cleaning up problematic projects and retainers, we realized that we needed to make some really hard decisions to stabilize the business. Looking closely at our pipeline and running the numbers, we saw that at our current rate, we simply couldn’t support the team in its existing cost structure. It was time to make some cuts.

In over 15 years of running Barrel, we had never done layoffs. Even in times when layoffs would have been prudent, we did everything to resist it and luckily got through the tough times. However, this time, the numbers were larger and the burn was faster, so we needed to do something. After much deliberation and back-and-forth on exactly how deep to go with the cuts, we ended up with a 6-person layoff, or roughly 15% of the full-time headcount. Two of these are director-level team members, which means there’s some serious restructuring ahead and ramifications for how we staff and do the work.

Without going into too much details, the layoffs happened quickly on a Thursday afternoon and Friday morning. I’m grateful that every single person was incredibly professional and as understanding as they could be with the situation, but it also felt terrible and sad. To know that our failings as leaders led to such a disruption in their lives is incredibly disappointing.

The hard thing to stomach is that the better business decision would have been to make these cuts earlier. Perhaps months ago. But we were overly optimistic that an influx of new business would give us the boost we needed. In hindsight, we didn’t want to face the hard realities across our accounts that were leading to real losses each month. We shied away from the tough decisions until we absolutely had to make them. I’m most ashamed of this, that I failed as a leader to make the decisions at the appropriate time, no matter how hard. I hope this will be a lasting lesson for me: always face reality head on and don’t delay what I know deep down to be the right move.

Top of Mind

Heads Down Execution

Luckily for us, the solve for our problems isn’t rocket science. We actually have all the answers, it’s just a matter of having the discipline and will to get it done. We need to execute.

We’ve spent the past 6 weeks tightening up our systems to better monitor projects and retainers for financial performance, planning, client satisfaction, and work quality. We’re looking more closely at utilization and have taken steps to improve the accuracy of our resourcing. There’s a lot of good things happening all around with deep engagement from all levels of the team. But this is just to ensure that we’re looking at the right things.

Execution means that team-wide, everyone takes accountability for the success of every engagement day-in and day-out. More specifically, it means getting clear and specific on tasks, timing, and details, ensuring that we’re all moving towards a certain milestone and delivering at or beyond the quality expected by the client. Partners, team leads, and account leads need to model for the team and set the tone. No jump balls, no assumptions, and no pointing fingers. It starts with everyone being aligned on the goals of the project and what success looks like (e.g. bug-free website launch by X date, A, B, C tickets completed by end of month, etc.). And then it continues with each person asking the question: “What can I do today to ensure that this project will be successful?”

This is about culture, the things we as an organization hold as standards and the things we absolutely don’t tolerate. It’s about having high standards in communications, in being detail-oriented, in being thorough with our solutions, in consistently delivering beyond what is expected by our clients. It’s about having zero tolerance for finger-pointing, for making careless assumptions, or for passing up the chance to clarify uncertainties and vagueness. As leaders, we’ve got a lot of work to do here, to model these behaviors and to reinforce them.

The promising thing is that our team is great, and everyone is game to embrace a culture with such standards. This energizes me and gives me hope that we can find ourselves in a much better place just months from now. In the meantime, the onus is on me and our leadership team to show up every day, to face whatever difficulties head on, and to continue making tough decisions that will move the business in the right direction.

Shared with Partners

“Listening well to clients means more than informal, opportunistic information gathering during the process of pursuing new client prospects, or ‘keeping one’s eyes open’ during current client engagements. Neither can it be restricted to special market research efforts performed as part of a ‘once-every-three-years’ strategic planning activity. Rather, it requires an ongoing systematic attempt to track client preferences, desires, and requirements. The questions ‘What do our clients want, and how are their needs changing?’ must be continuously addressed through a structured program of information gathering, analysis, and action built into the daily operations of the firm.” (David H. Maister, Managing the Professional Service Firm)

I wrote about how our clients can get a lot out of systematically checking in with their customers. In this quote, the same could be said for our business and for us to have a systematic way of digging into how we can service them better. We recently passed around a spreadsheet to different departments and asked for most frequently asked questions on the part of clients and it confirmed an opportunity I knew to be true: how does the work that we do for them (e-commerce websites) impact their business and how can we continue to optimize so performance can improve? There are many opportunities to both educate and then to offer deeper services to address these questions for our clients.

“Changing your behavior in the face of changing information is always hard. But when people are doing well, they don’t want to change. They choose to ignore the discordant notes and the tunes you are hearing. They feel threatened by bad news and dread the uncertainty of change and the hard work it demands. This tendency makes them passive and rigid at the very moment they should be most active and flexible.” (Stephen A. Schwarzman, What It Takes)

While I would love to step into a time machine that takes me back 6 months to re-play and re-do some of the decisions and non-decisions that I made, I can only look ahead and embrace the changes that need to be made to spark different outcomes.

“Most people believe that the opposite of that is true. They believe that success makes you happy. It does not. It’s the other way around. Happiness makes you successful. It makes you more creative and energetic. It builds relationships faster. It’s a very efficient operating mode.” (Steve Chandler, The Joy of Selling)

Amid the challenging times, I’ve tried daily to keep things in perspective–so many things I’m grateful for and happy about including the time spent with family, the things I get to do for fun, the comforts and entertainment I enjoy daily. It’s hard to think this way when the business is struggling, but it’s worth trying because positivity will always be an energy-booster, and energy is what I need to get through some of these rough days.

“Mastery of creative tension transforms the way one views ‘failure.’ Failure is, simply, a shortfall, evidence of the gap between vision and current reality. Failure is an opportunity for learning—about inaccurate pictures of current reality, about strategies that didn’t work as expected, about the clarity of the vision. Failures are not about our unworthiness or powerlessness.” (Peter M. Senge, The Fifth Discipline)

This was a timely quote to share with my partners as we navigate the “gap between vision and current reality.” It’s a big one, but definitely an opportunity for learning.

“According to Seneca, ‘A man is as wretched as he has convinced himself that he is.’ He therefore recommends that we ‘do away with complaint about past sufferings and with all language like this: “None has ever been worse off than I. What sufferings, what evils have I endured!”‘ After all, what point is there in ‘being unhappy, just because once you were unhappy?'” (William B. Irvine, A Guide to the Good Life)

It’s all about having perspective and seeing that much of the suffering that happens is in our minds and avoidable.

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