Account turnover in the past decade has remained steady at about 15 percent, meaning one in six clients replaces an agency each year. Like divorce, PR breakups have become an
accepted fact of life, with the same far-reaching and long-lasting effects on all parties. The fired agency takes a blow to its bottom line, its prestige and the stability of its
workforce. With forecasted revenues lost, employee turnover, empty offices, abandoned investments and damaged reputation soon follow.
Meanwhile, the new agency has to absorb significant costs for pitching the account, hiring and transferring staff quickly, and establishing administrative systems adapted to
the new client. Existing clients, however, experience the most disruption as the replacement agency focuses on winning and launching its newest account.
It's not surprising then that client turnover has factored heavily in the industry's 32 percent employee turnover rate during the past several years, and that it is responsible
for the PR industry's significantly lower profit margins compared to more stable professional consulting services like law, management and accounting.
Considering the various costs involved in dumping an agency, the biggest loser is the client. The client pays a premium for start-up during the first year of assimilation, just
as you would for bringing a new employee fully on board. In addition, count on executive distraction, reduced productivity, lost institutional memory and disrupted media
relationships.
Often overlooked are less obvious negative effects including the fact that trusted members of the former account team suddenly appear at other agencies that serve the client's
competition. If consequences are so bad for clients, what can they do to avoid the many unnecessary agency breakups? Here are some suggestions.
- Make the correct choice the first time. Invest time conducting a solid agency search, particularly in getting references from other clients. You want an agency that's good
at client service, not at pitching new business. (Request a Guide to Hiring a PR Firm by calling 877/PRFIRMS). - Set clear objectives. Most bad unions begin with euphoria, erode with disenchantment, and end in recrimination. Throughout, both parties remain ignorant of each other's
expectations. By clearly stating your business objectives and asking the agency to propose how it will demonstrate and measure success in meeting those objectives, you will air
respective expectations and create a dialogue about goal calibration. Calibrate those expectations. - Measure what matters. Good objectives are measurable. Invest in ways to measure results and progress, and you'll have performance accountability and insights for making mid-
course corrections. Some PR firms offer measurement services; or you could turn to PR-savvy research firms like Delahaye Medialink, Burrelle's Insight Farm, Carma, Roper Starch,
Harris Interactive, or Walker International for excellent media relations and reputation management measurement protocols. - Review religiously. Ask your agency to provide a scorecard for account reviews; revise it to meet your own needs. It should evaluate the quality of work and counsel, the
effectiveness of knowledge transfer, management issues like meeting deadlines, creativity and strategic input, availability of agency resources, financial status and the latest
measurement report. Use it quarterly. - Refresh and revitalize. At least once a year, take your staff and your agency off site. Spend a day or two brainstorming new creative ideas and stimulating fresh strategic
thinking. To build a sense of teamwork, pair up staff members and agency reps to report on special topics. Just as agencies need to demonstrate creativity, clients need to provide
intellectual stimulation. - Beware of infidelity. Other agencies will woo you with provocative promises and intriguing ideas. Don't be seduced. If a brilliant idea turns you on, give your current agency
a chance to make it happen. Agencies that sense a client's roving eye are less likely to commit their best people to that account and are more likely to respond to temptations to
bid on the competition's business. - Give a second chance. When all else fails and you are about to fire your agency, take a deep breath. Consider the cost and disruption to your company. Call the agency CEO and
tell him/her that they deserve to be fired, outline the reasons and cite previous warnings at review meetings. Give the CEO one week to provide you with a plan that outlines what
the agency will do to correct the problem within 100 days. If you like the plan and the CEO's proposed changes, immediately schedule an account review for the 100th day. Chances
are very good that you will have averted the pain of switching firms, re-invigorated your account team and restored the lost spark and success of your public relations program.
Stay Together/Save Costs
Estimated client costs for agency turnover, based on an account of $250,000:
- Old agency lame duck costs (working at half efficiency during the 60-day notice period), $20,000
- Client staff time to conduct search for new agency (100 hours), $12,000
- Lost productivity as client staff covers for new agency for 6 months, $30,000
- Portion of agency retainer for orientation and introduction during first four months, $40,000
- PR Director's time spent re-building support of colleagues, $10,000
- Opportunity cost before media contacts are re-established, $10,000
Total: $122,000
Jack Bergen knows firsthand the causes and remedies for account tensions. He served as CEO of GCI Group, president of Hill and Knowlton and SVP, corporate relations, for
Westinghouse and CBS. Currently he is president of the Council of Public Relations Firms. Reach him at 877/PRFIRMS (877/773-4767) or [email protected].