The rise of the in-house agency (IHA) has been one of the most notable shifts in the marketing landscape over the past decade. Motivated by a desire for speed, control, and most importantly, cost savings, brands are increasingly developing internal teams to manage everything from production and content creation to strategy and media planning.
The main reason for this move is usually financial: “Our internal team’s salaries are cheaper than external agency fees, therefore we save money.”
And while the P&L statement might seem initially promising, this argument hides a crucial vulnerability: a low hourly cost doesn’t always mean high productivity or better value.
In fact, concentrating only on the lower internal wage bill can mislead marketing and procurement leaders about what truly counts as success. If an in-house team is inefficient, lacks the right expertise, or takes twice as long to deliver as a high-performing external agency, that ‘cheap’ internal hour turns into an ‘expensive’ waste of budget and time. The IHA then operates under the false impression of savings, risking the entire purpose of its existence.
At TrinityP3, we believe the true measure of any agency’s worth, whether internal or external, is its ability to produce high-quality work efficiently. For in-house agencies, the challenge isn’t just to be cheaper, but to be clearly more productive in delivering similar or high-quality outputs.
Leveraging our two decades of proprietary data from benchmarking thousands of external agency engagements, we have crafted a methodology that enables IHAs to go beyond simple cost comparison and objectively demonstrate their productivity, resource efficiency, and ultimately, their value. This is how we implement the principles of Value Benchmarking internally.
The In-House Paradox: When Cheap Hours Become Expensive Deliverables
The core of the IHA business case is avoiding the usual commercial margins, overheads, and utilisation targets included in external agency rate cards. For example, an internal creative or strategist earning a salary of $120,000 might be costed at an effective hourly rate of $60, whereas an external agency might bill at $132. The immediate takeaway is significant savings.
However, this comparison is fundamentally flawed because it overlooks the real efficiency of the resources.
The TrinityP3 Insight: An external agency rate demonstrates a proven, systematic ability to deliver a specific output within a commercially viable timeframe. Your internal hour is not benchmarked against the expected level of productivity.
This is the IHA Paradox:
- Low Input Cost: The IHA’s internal hourly rate is cheaper.
- Unknown Efficiency: The IHA’s productivity (hours required per output) remains unverified.
- Potential High Output Cost: If the IHA takes considerably longer, the total cost per deliverable could surpass the external market price, even with a lower hourly rate.
To genuinely justify the IHA, you need to demonstrate that your lower hourly cost is matched by equal or better productivity. This is where our structured benchmarking of resource mix and outputs becomes essential.
1: Benchmarking the IHA’s Productivity
To achieve genuine productivity, we draw on two key principles from our Value Benchmarking framework that specifically tackle the most common IHA vulnerabilities: resource mix and time efficiency.
Metric 1: The Optimal Seniority Mix (Addressing Quality and Efficiency)
A key finding in external agency benchmarking (Flaw 4 in traditional models) is the “Blended Rate Trap”—the misconception that the cheapest average team is the best team.
This is especially relevant for IHAs, which often rely on a flatter, middle-heavy resource structure. Why? Because senior staff are costly, and junior staff need constant supervision, making the middle level appear like the safest, most cost-effective option.
The IHA Challenge: A team lacking senior strategic input or expert oversight often spends excessive time and effort fixing basic errors or managing strategic complexity inefficiently. They might produce a large volume of work, but the quality and the time it takes to complete it both suffer.
The TrinityP3 Solution: Benchmarking the Optimal Resource Mix.
We benchmark the IHA’s proposed resource structure against the optimal seniority mix required to deliver high-performing work in specific domains (e.g., brand strategy, digital development, campaign launch).
- We recommend the ‘ideal’ balance: Using proprietary data, we determine the appropriate ratio of Directors, Senior Managers, Managers, and Specialists for a specific workload profile.
- We analyse the IHA structure: We then compare the IHA’s current mix to this benchmark.
- The insight: If the IHA has a low proportion of senior experts, it may be necessary to invest more in higher-cost senior resources to reduce overall time (boosting efficiency) and enhance quality (adding value). We demonstrate that increasing the average internal cost can surprisingly lower the cost per output.
Metric 2: Benchmarking the Total Resource Requirement (Addressing Time)
The primary sign of low IHA productivity is the lengthy time needed to finish a task. This relates to the “Hourly Rate Fallacy” (Flaw 1), where the emphasis is on the input rate rather than the hours used.
The IHA Challenge: Internal teams often lack the pressure and process rigor of external agencies. Without clear utilisation targets, external financial accountability, or standardised workflows, projects can drift, causing “scope creep” that is not financially tracked but is reflected in wasted internal time.
The TrinityP3 Solution: Benchmarking Time-to-Delivery.
We determine the standard, suitable number of resource hours a high-performing external agency needs to complete a like-for-like deliverable. This is based on thousands of data points across global markets.
- We define the scope: Identify a tangible output (e.g., a standard social media campaign package, a quarter’s performance report, a strategic brief).
- We set the benchmark time by establishing the expected, efficient hours (for example, 80 hours) for that output, taking into account the complexity and quality level.
- We monitor the IHA time: The IHA records the actual hours spent on the same deliverable.
- The insight: If the IHA takes 120 hours to complete the 80-hour benchmark task, the productivity gap becomes immediately apparent. The IHA is producing only 67% of the expected output. This sets a clear, objective target for process improvement and training.
2: Proving Value: The Gold Standard of Output-Based Benchmarking
The ultimate measure of IHA’s value is the Cost Per Deliverable. This metric cuts through all the fuss about salaries and hourly rates, focusing on what the marketing team and the CEO truly care about: how much the final product costs.
This is the principle of our Flaw 5 correction—shifting from input costs to value outcomes.
Calculating the True Cost Per Deliverable
By combining our analysis of the IHA’s optimal resource mix and its actual time-to-deliverable, we can develop a fully costed, objective benchmark.
Example Scenario: Benchmarking a Content Strategy Document
- External Market Benchmark (The Target): Based on our data, a high-quality, comprehensive Content Strategy Document requires an optimal mix of 50 hours of senior or director level work and 30 hours of manager level work, resulting in a market-validated total commercial price of $15,000.
- Internal IHA Calculation (The Reality):
- The IHA employs a leaner team: 30 hours of senior time, 90 hours of manager time (due to limited senior oversight). Total time: 120 hours.
- The IHA’s internal cost for those 120 hours (including true internal overheads like software, space, and benefits) is calculated at $12,500.
At first glance, $12,500 appears more affordable than $15,000—saving you $2,500.
The Value Benchmarking Conclusion
While the IHA is more cost-effective, the required effort (120 hours versus 80 hours) is 50% higher than the industry benchmark. This highlights a productivity shortfall. If the IHA scaled this inefficiency across 50 deliverables annually, the total internal time wasted would amount to a substantial, unrecovered cost for the business.
By establishing this clear, output-based metric, the IHA secures the data necessary to:
- Justify Investment: If the IHA can reach the 80-hour target while keeping costs lower internally (e.g., $10,000), they can demonstrate they are offering a $15,000 market value for two-thirds of the price—a real, measurable saving.
- Identify Bottlenecks: The data indicates a resource problem. The IHA requires more senior input to cut total hours, supporting the business case for a costly, high-impact hire.
3: Transforming the IHA from Cost Center to Value Creator
The data from Value Benchmarking is more than just a shield against budget cuts; it is a vital tool for strategic transformation. An IHA that demonstrates its productivity is no longer merely a cost centre; it becomes a proactive, data-driven value creator.
- Future-Proofing the Business Case: Instead of yearly justifying their existence based on lower salaries, the IHA can display a dashboard indicating that their Cost Per Deliverable consistently remains below the external market benchmark, demonstrating they are a high-efficiency asset.
- Optimising Resource Allocation: The benchmark data enables IHA leadership to make objective decisions about where to invest. If the creative production team exceeds the benchmark but the strategy team underperforms, the data clearly supports reallocating budget and training to the strategy function.
- Enhancing Collaboration with External Partners: When the IHA needs to partner with an external specialist, the benchmark data offers an objective baseline for negotiation. Knowing the fair price for a specific output allows the IHA to negotiate with external agencies from a position of informed strength, ensuring they never overpay for outsourced support.
- Building Internal Confidence: Perhaps most importantly, objective benchmarking replaces internal speculation with measurable facts. This boosts confidence, strengthens accountability, and encourages a culture of ongoing improvement within the IHA team, turning them into proud defenders of marketing efficiency.
Winning the Value Argument
The discussion about in-house agencies should shift from “How much cheaper are they?” to “How much better and faster are they?”
If your in-house agency is the future of your marketing delivery, it must meet a standard of productivity and value that is objective, robust, and externally validated. TrinityP3’s Value Benchmarking offers the means to apply the rigour of external agency standards to your internal teams. It is essential for demonstrating that your IHA is not merely a cost-effective alternative but a high-performing, cost-efficient engine that drives marketing success.
Don’t let the illusion of low cost hide a productivity issue. Provide your in-house team with the objective data it needs to demonstrate its value and secure its future.
Ready to objectively measure your in-house agency’s efficiency and transform your cost centre into a proven value creator?
Contact us today for a comprehensive Value Benchmarking assessment.
