Monitoring client profitability and resource
allocation on a regular basis helps BBH maintain
above-average profit margins despite a difficult
business climate.
Overview
Advertising is becoming an increasingly crowded market place. The
emergence of digital communications channels like mobile, online
and gaming has introduced a wealth of new players. And in the face
of such competition, traditional agencies have had to become much
more focused on the impact of resourcing, costs and levels of
service on their profit margins.
The challenge for BBH
Bartle Bogle Hegarty (BBH) is a leading advertising and
communications agency, with operations in the UK, the US,
Singapore, Tokyo, Shanghai and Sao Paolo and clients including
Unilever, Diageo, British Airways, Vodafone, Barclays Bank, Audi
and Levi Strauss.
Despite being responsible for some of the most memorable
campaigns of the last 20 years and having a bedrock of blue chip
clients, BBH faced a challenge as it sought to reposition itself as a
provider of services within the digital space –it lacked any
established fee models upon which to structure its creative
proposals.
Exacerbating the situation was the increasing prominence of client
procurement teams in the agency selection process and their
practice of benchmarking agency fees across the industry in an
attempt to get better value for money.
BBH recognised that having access to accurate time and historical
resource data was essential to the construction of these new models
and would be a crucial part of the agency’snegotiation armoury.
Not only that, BBH knew that without the ability to look in detail at
the efficiency of its own resources and scrutinise client profitability
on a project-by-project basis, it would not reliably be able to
maintain, and ultimately improve, its profit margin.
BBH’s previous system
Until the mid ‘90s, BBH was using a manual timesheet system. In
what was a very labour intensive process, data from the timesheets
was inputted into the agency’s accounting system before being rekeyed
into MS Excel spreadsheets for analysis.
David Spencer, BBH’s finance director says, “For a business model
dependent upon time-based fees, it was vital that we could have
access to information as quickly and simply as possible.”
BBH’s manual system was nowhere near dynamic enough to be able
to provide real-time data analysis. Unfortunately neither was any
other off-the-shelf solution at the time.
“We had no choice but to spec our own system,” says Spencer.
BBH approached a software vendor with knowledge of agency
requirements and asked them to build a system. The end result
however was unreliable and inflexible, largely due to the vendor’s
choice of technology.
What the exercise did prove however was that BBH’s original
business design was sound.
The solution
BBH needed a solution that could be deployed on Macs as well as
PCs and that would cope with the overseas expansion of their
business.
It emerged that Tempora already fitted most of BBH’s requirements
and could also be customised quickly to suit the company’s needs.
It has since become one of the key systems used by the agency on
an ongoing basis.
Checking the health of a project – at a glance
BBH makes extensive use of Tempora’s time and time cost reports.
“The time reports help us when allocating resources because we can
see at a glance how much time is needed to man our various types
of projects,” Says Spencer.
BBH obtains net revenue figures from its finance system and sets
these against time costs in Tempora to provide client profit/loss
figures. In this way the agency can see easily if it is over-servicing
clients.
Time and time cost data can also be exported from Tempora for
further analysis in Excel.
Transparency on both sides
Tempora allows BBH to demonstrate to clients that they are in
control of costs. This transparency in turn helps to reassure clients
that they are not being over-charged.
“As the agency has grown we’ve found that we can delegate more
financial responsibility to project teams. The reports we produce in
Tempora we pass directly to those teams so they can see for
themselves how much time they’re spending on each job,” says
Spencer.
Providing better visibility is a feature that runs through all
Tempora’s products. The Tempora holiday and sickness module
used by BBH for example, not only makes it easier for employees to
request leave, but gives managers a better view of exactly who’s
out of the office at any one time before approving that leave. BBH
finds this a useful resourcing tool at project level.
Simple timekeeping
From a timesheet entry perspective, Tempora is simple to use and
requires little prior training. BBH wanted a system where users
could get in, report time against the right client and get out again –
as quickly as possible.
“Creative businesses are often reluctant to complete timesheets on
a timely basis and we were no different,” says Spencer.
There’s very little manual inputting in Tempora which also helps to
reduce errors.
The benefits of web delivery
Spencer says more recent enhancements to the product have seen
its functionality advance exponentially.
“Because Tempora is web-based,” he says, “we get the benefit of
those enhancements almost instantly, without having to wait for
upgrades to be manually installed on users’ workstations. It makes
Tempora a very flexible tool.”
The same process applies to adding new users. Where agencies
need to add additional resources to a project, they can be given
access at the touch of button, no matter where they are based or
whether they’re working from a PC or a Mac.
Results
According to Spencer, the real-time client profitability data
produced by Tempora has been vital to BBH’s fee-based business
model. The agency has been able to achieve operating margins well
above industry averages.
“One of the main reasons we have been successful in maintaining
above-average profit margins [see fig 1] has been our ability to
monitor client profitability and resource allocation on a regular
basis,” he says.
“What’s more, we’ve achieved this despite a difficult business
climate for advertising agencies over the last few years.”
| Fig 1 |
| Operating Margin |
BBH |
15.7% |
17.6% |
18.0% |
19.3% |
19.9% |
|
Industry Average |
7.0% |
7.0% |
13.0% |
10.7% |
10.9% |
|
|
Extracted from the Willott Kingston Smith annual survey of marketing services companies.
|
From a user acceptance perspective, Tempora appears to have been
adopted well and the number of repeat timesheet-offenders is low,
in comparison to other agencies.
Spencer attributes this, in part, to having a system that is both PC and
Mac-compatible.
|