Monday, May 3, 2010

Feeding The Beast

As part of my post on Organic Growth, I provided a systems model that offered a different way to look at growing and building one’s PR business. In this post, I’d like to support that model with a common scenario you may be familiar with.

Consider a typical, successful PR agency start-up. The principals sign their first few clients and treat them like gold. They are often directly engaged in each client’s business and everyone is happy. Word spreads about the new firm that helps attract more clients – even larger clients. The more business that comes in the door, the larger the agency becomes. Getting addicted to winning and growing becomes an understandable outcome. (Of course the addiction is not confined to start-ups, but I digress.)

Eventually the forces of the marketplace take hold, and this relatively new firm will go through a period where their rapid growth begins to wind down. There are no longer as many prospects in the new business pipeline anymore. The response? Redouble new business efforts of course. Principals respond this way because they are wired to believe that:

The greater the new business effort, the more new clients, the more the agency grows.

So principals become obsessed with adding new clients, and because of this, employees learn all too quickly that success in business development is the fastest and easiest way to achieve stardom and claim a more senior leadership role in this growing firm. Unfortunately, with the attention of the principals focused on the next new prospect, the emphasis on existing relationships becomes compromised just enough to result in some client losses. Remember, these clients signed on because they were being treated like gold – silver or bronze may not cut it for most of them for very long.

Now do agencies typically respond to these client losses by examining what may have happened and what they can learn? Not usually. The firm collectively brushes it off by convincing themselves that it’s the client’s loss." “Look at how much new business we’re winning? We know we’re good, so it has to be them.”

Now the agency finds itself in the position where winning new business isn’t just about growing, it’s about maintaining and surviving. Principals quickly become familiar with the concept of “net” growth, or new business growth minus client losses. So now the bar has been raised even higher, and it means the pressure to win more new business just increased. Time to double-down on the agency’s new business effort. You have probably already surmised that this agency is going to struggle, and it will do so for a while unless something changes.

So What’s An Agency To Do?

  1. Think about your firm as a whole system not as a linear growth equation

  2. Make your current clients your top priority

  3. Celebrate organic growth with as much exuberance as a new client win

  4. Recognize and promote your great practitioners, not just your strong business development people

  5. Create a client service culture supported by a sustained initiative that‘s at least as robust as your business development program.

By seeing your agency as a complete system, you can avoid becoming addicted to business development at the expense of serving your client. Feeding the beast is not unlike feeding ourselves – if you do so in excess and without proper exercise, it might make you grow but not typically in the way you want.

1 comment:

  1. Leo,

    This summer I worked for a startup company that was facing a similar dilemma. This company's growth was astronomical in the first couple of years. I noticed that the company was unable to keep up the pace on the account management/ client relations side of the business. Clients became excessively agitated with certain aspects of the company. As the company continues to grow, executives will need to place more focus on maintaing relationships with current clients. This will not only keep revenue flowing into the company but it will create brand advocates--an essential key to any successful business. As you mentioned above, celebrating organic growth is something that this company would need to adapt in order to develop a client service culture within the startup.





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