Welcome to the November edition of TrinityP3’s e-news
It sounds like a disease. And it is. Full time equivalents are the procurement approach to measuring agency resources. And it leads advertisers and their agencies to spend hours poring over spreadsheets and timesheets, trying to make sense of why the retainer is insufficient or why the project cannot be delivered for the fee.
But the fact is the process is misleading, deceptive and open to misinterpretation and abuse. Usually abuse of the agency staff, who are encouraged to work unpaid overtime while the agency claims this extra work is costing the agency a fortune and needs to be paid for by the client.
Of course, there is a better way. Leave the FTE and the overhead and profit making to the agency Finance Director and embrace value-based pricing to pay your agency for the work they deliver and not just the hours it takes.
Why FTEs are not full time under the retainer
So, when is a full time equivalent resource in your agency retainer, not a full time resource? It seems like a redundant question. Of course, a full time retained resource is full time. But if that is the case, why are there advertisers who have full time retained resources who are unavailable to take a call? Or even worse, why are there advertisers paying additional hours for someone who is full time on their account?
In fact, the issue is not as clear-cut as this. Because agencies are more likely to have resources partly on your account, or allocating a percentage of their time on your account, or – even – having several people with the same or similar job titles making up the full time equivalent on your account. It gets confusing very quickly – and that’s the point. The more confusing it is, the more likely you are to end up paying for something you have either already paid for or don’t need to pay for. Find out how here
Calculate your agency fees for free
The TrinityP3 resource calculators let you turn hourly rates into salaries and salaries into hourly rates and more.
The average cost of an FTE depends on the task at hand
Average cost per FTE is a very common procurement measure for assessing agency costs. It is basically the equivalent number of full time staff divided into the total cost of retaining those staff. The fundamental flaw of this approach is it provides no measure of quality and takes no consideration of the mix of expertise.
The average cost per FTE would be great if you were hiring a homogeneous workforce – if such a thing exists. But once you get beyond the effective cost per person measure, there is a need to consider more insightful measures of cost against quality – which effectively is value.
In fact, the use of average cost per FTE is encouraging agencies potentially to under-resource your business with more junior staff, with titles that are not necessarily reflective of their experience and capabilities. Read why this is a problem here
Benchmark your agency fees around the world
Find out how your agency fees compare to market in more than 20 markets.
20% of an FTE is unpaid overtime the client is paying for
Sitting through another agency presentation of Excel spreadsheets full of agency hours, explaining why they are spending too much time on the account. Adding up the over numbers to justify why the client needs to top up the retainer by so many hundreds and thousands and millions of dollars. The marketing and procurement team is increasingly frustrated as they ask questions about what the agency did with all this time. And the agency explaining it was meetings and admin and briefs and stuff.
Underpinning this approach, there is an incredibly misleading and deceptive practice – it could be that the agency is trying to recoup a bonus of up to 20% on their retainer. Or at the very least the client is losing 20% of the time they are buying for any given person. It all has to do with billable time. And you can read about it here
Most in Demand for this Month
The TrinityP3 team helped our clients on the following projects last month:
Creating a organisation-wide creative briefing and evaluation approach for a global sports marketer
Managing a creative agency tender process for a financial services advertiser
Assessing marketing strategy, structure and capability for a major online retailer
Identifying, articulating and assessing long-term media and data requirements for a national utility marketer
Managing multiple tender, agency assessment and benchgmarking processes across the business portfolio of a major Australian advertiser