Why a scope of work is essential for managing agency value

This is the next in a series of one-minute videos that address one of the many complex challenges facing marketing, media and advertising today. The Golden Minute series is an attempt to prove Albert Einstein right when he said “The definition of genius is taking the complex and making it simple”.

But he also said “Everything should be made as simple as possible, but not simpler”. So we will leave it for you to judge. Please let us know here if there is a topic you would like us to cover in a Golden Minute.

The value of your agency retainer is not how many people you get, it’s in what they produce and ultimately in what this achieves. But to do that means you need to have an understanding of what they have produced, which is also known as a scope of work.

I find it fascinating when we work with our clients on either their agency fee agreement or their roster rationalisation and we need the data on what the agencies have produced and what it cost. This is historical information. We usually look at the past year or perhaps two. It is information that should be on hand.

Ask yourself, if your company CFO came to you and said “We know you spend X millions of dollars with Agency Y, can you tell me what we got for that money?” You see, what we have found is that the finance team will know within a cent how much you spent with each agency and each supplier (assuming of course you raised all of the relevant Purchase Orders (POs) and applied the appropriate purchase codes). But what they never have a record of is what was actually done.

I don’t mean what services the agency provides. That is simply a list of services, usually detailed in the appendix of the contract. What this is about is the scope of the work provided by the agency for their fee. Imagine if you went to a restaurant and ordered from the menu, drinks and more and when the bill comes it just says “Dinner” and the amount. Sure you had a great dinner and you know the cost but what did you actually get and did you pay for what you got?

So where do you find this scope of work? The agencies usually keep very good records of not only what they have done for each client, they also have the costs and the number of agency hours for each of these. (The truth is their time sheets are usually less reliable than their project and cost details)

Now while the agencies have this information they do not necessarily need to provide it to their client. It is important that agency contracts include provision for regular reports from the agency to monitor their productivity. But having the agency monitor the scope of work (which they do anyway) you are able to track the output of the relationship against the cost (more accurate than relying on agency time sheets alone).

This means you can see where the outputs of the agency are either increasing, decreasing or changing. With this information you are able to monitor the outputs of the agency and if and when the CFO comes calling inquiring as to what you received for your spend with the agency you will have a definitive and quantitative answer. More importantly you will be able to assess the value of you agency or agencies and not just the cost.

Golden Minute Script

Do you have a scope of work for your agency?

Do you know what your agency needs to produce?

How much they will produce?

And when?

It’s the only way to really assess agency value?

Those agency outputs can be tangible and intangible.

Intangible – like a comms strategy or a big idea

Or tangible – like a landing page, a video or a social media update

But some marketers don’t think a scope of work is important

They simply pay a retainer and then the agency simply does anything and everything the advertiser wants. To a point.

Or others worry that the scope of work may change.

It may go up. But then it could also go down.

And some don’t know what they want from their agency until they get it.

The fact is that unless you have a scope of work, no matter how scary that is, it is the only way to manage the agency value.

So if you have an agency you need a scope of work. And we know where you’ll find it.

Our Scope of Work Management service evaluates your current agency scope of work and recommends the best approach, calibrated to your needs. Read more here