The perils of losing your unique identity with growth

We recently decided to change accounting firms. It was a very long agonizing decision because we’ve been with our current firm since the beginning of Peppercom’s life (almost 12 years). Quite simply, this firm produced quality work. That was never the issue. But, from a service standpoint, we were receiving less and less, while the costs were rising more and more. This firm out grew Peppercom and my perception is that we suffered by being caught in the middle of paying for many junior and administrative layers (that we didn’t need), while not receiving in the last year (or so) the partner level service that had always created a great working relationship for us. In the end, we went right back to our roots – hiring a small accounting firm that considers Peppercom an important client.

This phenomenon is by no means unique to the accounting industry. Every professional services firm wrestles with the issue of wanting to be successful by growing each year, yet still providing a high level of senior service and quality. I worry about this for Peppercom as well. 

Overall, many of the largest agencies within the PR agency industry have a dysfunctional staffing model for growth. It’s based on a pyramid structure where the most senior people (at the top) often spend very little time running across many accounts trying to provide some semblance of management, consultation and accountability. At the bottom of the pyramid are the most junior account people (many of them). These are the worker bees, who are often thrusted into the logistics, media and day-to-day management role of a client’s programs with very little experience. This model works well for them because it’s profitable and allows them to scale without having to hire a senior executive with every new account win. The problem is that it doesn’t serve the clients well because it rarely allows for the most senior experienced people to perform some of the most important account initiatives and that’s why account turnover in our industry is always so high from year to year.

I wish I could say that Peppercom has developed the silver bullet solution for this age old problem that pits business growth versus providing the highest level of client service. But, I can’t. What I do know is that because we always lead our client programs with business and communications strategy before ever implementing, it’s critical that our staffing model is focused on senior level client service. So, we tend to be more top heavy within our entire organization and therefore the focus has always been on senior client service. I can say with pride that this strategy was not created by chance…but was a long thought out foundation for our business. 

As we grow, I hope that Peppercom is never forced to adopt the pyramid structure to maintain a sound business because this does really scares me. Frankly, I’m starting to become a big advocate of trying to find a sustainable way to turn this pyramid on its head. Our industry needs to change the way clients are served and still be able to grow profitably. That’s priority number one in my book.
 

Comments

[Steve Zweig]

I agree that a flatter structure can work very well, Ed. In a very different industry--educational publishing--I found that having proportionately more senior editors and fewer junior ones resulted in better books being published, more innovation, and more flexibility in adapting to changing market environments.

The one thing it didn't support was simply cranking out the maximum number of products--for that, a massive team of junior editors works best. On the other hand, if you produce second-rate product, even if you produce alot of it, it will catch up to you. You'll get a one or two year bump from the flood of product, before the market catches on to your lack of quality and shifts its purchasing elsewhere.

Steve Zweig

[ed]

I agree that quality and service go hand in hand, Steve.

What is your staffing growth strategy as your company takes off?

[Steve Andrews]

I think it all starts with knowing the markets within your market. I believe there are both high-quality, high-service strata along with high-volume, low-service strata within almost every marketplace.

Knowing your market and, as important, knowing where you best fit that market is a key place to begin planning your delivery model, one or the other or a combination.

Clearly some businesses have found successful niches within the high-volume, low-service strata of the marketplace. Think Wal-Mart.

[ed]

No argument on that point, Steve.

I was mainly referring to professional services not a product oriented company. Most clients who hire a pr firm, consulting firm, etc., want senior counsel throughout their program.

In PR, every once in a while, the occasional prospect asks for just a lower level media person to implement a pretty basic initiative. But, that's an exception to the rule.

[Paul Marobella]

hey ed,
we at wirestone have been using a new model of client service that is pretty unique in our agency world. it is flat, it is a bit democratic and allows us to be agile. our 7 offices are networked and we truly work together as one - allowing us to be fluid with our resources. but as the old adage goes - how big do you get before you're bad. i heard stan richards say once - the day we are big enough for an hr department is the day we close our doors. food for thought.

hope you are well.

paul

brandsoapbox.typepad.com

[ed]

There definitely is something to be said about being a flat organization, Paul. My experience has always been that it sounds like utopia (or at least can work like that) up to the point when serious growth occurs.

But, it seems like your firm is really doing great. Congrats. I look forward to reading your blog as well.

[Steve Zweig]

In terms of growth, we'll take a page from the professional services industry, not traditional school publishing (our industry). We'll expand out laterally more than vertically, by adding senior editors who have ownership over and a financial stake in the performance of one or more product lines. I'll have them report directly to myself and/or my partner, rather than putting in a dedicated manager--an extra-level of heirarchy and cost over them.

I've found that as long as you hire the right, self-motivated, people, giving them the ability to profit directly from what they do is one of the most incentivizing things you can do. And while you always have to exercise management and oversight over everyone in your firm, a direct incentive structure is fairly self-correcting--do the wrong thing, you don't make as much money.

Of course, at certain points you do need to develop extra levels of management--no one can stay truly flat forever--but I intend to resist bulking up purely managerially as long as possible. In the past, I've built very efficient teams that were much flatter than my industry's convential wisdom allows for, and I intend to the same with my own company.

Steve