Subsidizing agency pricing by overworking employees

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Chip Griffin: Hello and welcome to the Agency Leadership Podcast. I’m Chip Griffin.

And I’m Gini Dietrich.

And today we’re going to talk about how you’re overworking your employees, or maybe you’re not, but most of you are. So we’d like to have a conversation about it right after this.

So I want to start with a confession. Oh good. I haven’t always been the nicest boss. I haven’t always been the most understanding.

Gini Dietrich: You don’t need to confess that. We know that.

Chip Griffin: Wow. Wow. I mean, I try to, I try to be, I don’t know, magnanimous or I don’t know, something out of the gate. And what do I do? I get the baseball bat right, upside the head.

I mean, you can’t expect any less. I suppose, but I would like to think that I’ve grown over the years and I don’t just mean my waistline. I mean, in my leadership skills, my management skills. So those are things we’re going to talk about today because I’ve had a lot of conversations with folks about things like pricing.

And I’ve had a lot of conversations with folks about how stressed employees are feeling. I’ve had conversations with agency owners who want to figure out how to get more productivity from their employees. And by that, they usually just mean I want them to do more. and you know, to me, these are all interlinked.

And I think part of the fundamental problem is that if an agency doesn’t get its pricing right, it can’t get its staffing right either. Because you’re forced to subsidize your clients. By overworking your employees,

Gini Dietrich: So what that means is that, and I I’ve had this experience working for an agency where you’re required to bill 40 hours a week, and then you have your other work on top of it.

So you have to do your time sheets and you have to do your expense reports and you have to do. Client reports that you don’t necessarily bill for it, you know, all the administrative stuff. And then if you’ve got new business responsibilities, like dealing with proposals or going to new business meetings, so that that’s on top of it as well, you’re working 80, 90, a hundred hours a week for your 40 billable hours.

And the, the old agency that I worked at skated by because. They said, well, you’re, you’re only required to build 40 hours a week, but that wasn’t your whole job. and I think that that’s a trap that many agency owners fall into myself, included in the beginning, because I thought that’s how you did things.

when you really are trying to figure out, you know, how do we get all of the work done? And I think you’re right in that most of us don’t price correctly in the beginning. And so then we end up over servicing to get the work done because we didn’t charge enough in at the beginning.

Chip Griffin: Right. And look, I mean, you know, part of my challenge was I got my start in politics.

And so, you know, working on Capitol Hill, I worked six days a week. Right. And I didn’t, I mean, that’s what everybody did. And so when I then transferred into the private sector, I thought, Oh, That’s what everybody does, right? And so I was, I, I, I approached creating my first business with that mindset that everybody has to be, you know, that committed, that obsessed, or that crazy to be putting in not just 60, but I mean, 80 or 90 hour work weeks.

And I thought I was being generous by saying, Oh, you know, look, 60 hours is plenty. I, and, and it just, it never occurred to me for years, really. That that was wrong, counterproductive, and just not a good idea, right?

Gini Dietrich: Yeah, it’s, it’s, it’s a 40 hour work week for a reason that has, that, that is a lesson that I personally have never learned.

I don’t think I’ve ever worked a 40 hour work week ever, but I also have learned, that you can’t expect that of employees. And I had a really, Really good business slash leadership coach many years ago, Randy Hall, who said to me, listen, you can work however you want. If you want to work 80 hours a week, you want to work a hundred hours a week, do it.

That’s fine. But you can’t expect that your employees are going to do it. And I said, I don’t expect that they are going to do it. And he said to me, But your actions are different than your words. You say that you don’t expect it, but they see how you work. And you’re sending emails in the middle of the night, and you’re sending emails over the weekend, and you’re asking questions, you know, over the weekend.

So they, they don’t know that it’s okay for them to wait until Monday to respond to you, which is, which was totally fine with me. I wasn’t expecting the answer. And he said to me, What I want you to do is two things. And this was when we still had an office. I want you to pack up at 5 o’clock and leave the office.

If you go home and work, that’s entirely up to you, but leave the office at five o’clock every day, because that will tell people that they can leave the office at five o’clock. Assume, you know, assuming their work is done and everything. The other thing is learn how to hold your emails and you couldn’t schedule emails at this point.

Now I just scheduled them, learn to hold them in bulk and then send drip them out over a Monday and a Tuesday. So that they’re not coming in all over the weekend or all in the evening, which is what I was doing. And what that did is my actions matched my words and told people that, yeah, you don’t, you don’t have to work like your crazy boss.

You don’t have to, because they, what they saw was that I wasn’t working. I was working, but they saw that I wasn’t.

Chip Griffin: Right. And, and I mean, those are, that’s all good advice. I, I have to be honest. I’m not a huge fan of scheduling emails. Oh, I do. You know, I, I’ve experimented with it, but I’m always, my concern is always that, that some new piece of information is going to come in between when I schedule it and when it goes, I’m going to forget to go back and update it.

Right? Because to me, I feel like I then look stupid. And so, you know, I don’t know. It just, it’s, it’s, it’s my, I don’t, I don’t do much scheduling of social media posts, for similar reasons because then everybody could see, right? So, you share something out and then it turns out that what you shared was either proven incorrect, it was fraudulent, it was posted by someone who, you know, now has their own scandal because these days everybody’s got a social media scandal.

So, I, I’ve become. Much more reticent about scheduling things in the future and prefer doing them in real time. But you’re, I mean, but you’re right. You, you still have to figure out how you’re going to do it because you can say one thing, but your actions do speak louder. and, and so you need to make sure that you’re consistently reinforcing the message with your team, you know, that their expectation is not that you’re the same crazy person that you are.

And like you, I mean, I, I can’t remember working a 40 hour week. I wouldn’t want to, because I do what I love to do. And so To me, that line between work and non work is very blurry, and that’s fine, and that’s one of the reasons why we become entrepreneurs and owners and that kind of stuff, but our employees are not that.

We’ve talked repeatedly about how they will never be as invested as you are because they are not invested. Right. Literally. Literally. And, and so you need to, to make sure that they’re not. Overworking themselves, because if they do, they’re not creating the best work that they can for you, because if they’re not, if their heart’s not in 60 hours, they’re not even going to give you 40 good hours.

You know, they might give you a 30, because they’ll just, you know, resent the, you know, the, all that extra time. They’ll become fatigued. They won’t be making the right decision. So you’ve really, if you want the best from them, you need to keep them within the zone that they’re comfortable with.

Gini Dietrich: I would also add that there are going to be times.

And it’s depending on the work that you do, but in the work that we do, there are times where you are working nights and weekends. It’s just the nature of the beast. It’s a crisis. There’s an event, you’re at a trade show, whatever happens to be, you have to do that. And one of the things that I’ve had to be really cognizant of is allowing sort of flex time so that if we’re at a conference, you know, Friday through Monday, We come back on Tuesday, then the team gets to decide, you know, they get a three day weekend or they get to take us an extra day off during the week, whatever happens to be, I’ve had to be really cognizant of giving them that flex time off because of the nature of the beast.

So I don’t think we’re saying here, at least from my perspective, I don’t think that we’re saying here that. It’s not ever going to happen that they just work 830 to five and, you know, everything’s fine and dandy. That’s just not the case. I mean, I remember working on Thanksgiving a couple of, a few years ago when Mr.

Food passed away because you can’t control that it’s a holiday. When somebody passes away. So, you know, there are going to be situations where you’re working quote unquote extra, but think about how you can provide the flex time to be able to make up for that.

Chip Griffin: Right. And you need to be honest with people when you’re hiring that, that those times are going to exist.

The thing is that, you know, A crisis is not never ending, and so if you’re always in crisis mode, and that’s how you’re justifying, you know, regular 60 hour weeks, then you need to take a look at things. I mean, it’s just like the pandemic. The pandemic is no longer a crisis. The pandemic is a fact of life at this point.

And so it was a crisis last March, and you could treat it as such. But at this point, you know, You need to have made the adjustments. Your clients need to have made the adjustments. So that’s, you know, it is no longer a crisis. Same thing with anything else that you’re doing. If you’re always in that mode, that means that there’s something else that’s broken and you need to figure out what that is and address that first.

Gini Dietrich: Right. And I, I think your point at the very beginning, which was, you have to really think about how you are saying to a client, okay, if this is what you want, this is how much it costs. And I think that’s really hard for, there goes the answer. I think that’s really hard for agency owners to do in general.

It’s price and price correctly and price accurately. there’s so many things, you know, that you don’t know when you’re going into a new relationship. Is it going to cost this or is it going to cost this or what about this? And so when you think about, and we’ve talked about this before, but one of the things I like to do is have those packages up front for So a two day strategy session, which we don’t do anymore.

It’s, it’s broken up over zoom sessions, but you know, things that you can do to get yourself into the business, make, you know, make the appropriate amount of money, but then bring your team in to help you understand the real work that needs to be done and how much time it’s actually going to take and then just be honest about it.

And if they have a problem with it, like this is just how much it costs.

Chip Griffin: Right. And so many agency problems come down to poor pricing and it’s, you know, if you look at, you know, Owners who are unhappy. Owners who aren’t making what they want to make. Owners who are having a difficult time selling.

Employees who are frustrated at their workloads. All of these things come back to not getting the pricing right. Absolutely. So, if you spend no time on anything else in your agency, focus on that because so many things will improve. It’s not going to solve every problem that you have, but it will certainly help relieve the pressure in a lot of areas and gives you more room.

To make smart decisions and not have to make the panicky ones that you’re making because you’re not charging the right amount

Gini Dietrich: Yeah, and I think that’s a really good point. I think that especially as you’re starting out or you’re growing you’re building into something You’re it’s human nature to say.

Oh, we’ll do it for that price Because we want the business and we want the client. And I’ve had the experience in the last year, where I’ve just been like, that’s how much it costs. And if you don’t want to pay for it, then that’s fine. We have other stuff to do and we can do marketing for our own agency.

If we don’t have the client work, we have plenty of work to do. So that’s what it costs. And it’s really freeing. Really freeing, to be able to say, take it or leave it.

Chip Griffin: Right, right.

Gini Dietrich: Do you want the Porsche or do you want the Ford? That’s how much it costs.

Chip Griffin: Right. And you talk about what it costs, but what you’re really saying is what you’re charging the client.

Right. And the fundamental problem is that too few agency owners actually know what it costs to deliver those services. And you have to look at it, and particularly small agencies, which obviously is the bread and butter of the listenership of this show, they need to understand the importance of it. You know, figuring out those costs correctly, because if you, you know, if you are doing the work yourself, you need to figure out what it would cost to pay someone else to do it, right?

So in a small agency, the owners often doing a lot of client service work, and they find it very difficult to get to the point where they can hire or or subcontract because they didn’t get the price right originally because they priced it as well. Look, I can do an extra five hours of work. No problem.

So that’s that’s all profit, which is one of my my least favorite things. When an owner tells me that the work they’re doing is all profit. It’s not it’s not and if you’re if you’re pricing with that mindset You never give yourself the room to scale and grow You need to price it as if you’re paying someone else to do it And if you do that if you say okay, if I had to subcontract this work, it would cost me 100 an hour And so then you know, okay Well if a contractor is going to cost you that much you need to be charging at least twice that In order to give yourself the breathing room so that you can scale when needed You And, and you need to think about it that way, because that’s how you will give yourself the freedom and flexibility that you thought you were going to get when you became their own boss.

Gini Dietrich: That’s such great advice to just, if you, if you had to hire somebody else to do the work, I know you’re welcome. If you had to hire somebody else to do the work, how much would it cost you and then double it?

Chip Griffin: I mean, that’s, and it’s, it is not a, that is not a perfect system, but it’s better than what most listeners are probably doing right now.

Yeah. And it’s anytime you can take what it’s going to cost to get the work done. If you’re not doing it and double it, you will at least keep yourself out of big trouble. Yes, you can certainly find ways to to get even beyond that and generate more profits, but that will keep you out of trouble Which is the first thing that you have to do because that’s that’s what allows you to have a real business If you’re not thinking about what it costs to pay someone to do the work for you You’re really just a glorified freelancer, even if you’ve got employees Right.

So you say, well, I’m not, I’m not a freelancer. I’ve got three employees. We are, if you’re doing it based on everything that you do personally is all profit. So think about that and price appropriately. Price not for what Sally can do if she’s working 60 hours a week. Price what Sally can do if she’s working 40 hours a week, and that’s not billing 40 hours because you cannot, as you said, ever, ever bill 100 percent of your time.

So if you’re working 40 hours, you cannot bill 40 hours. And the other thing that I hate are utilization rates. I mean, I just go absolutely berserk over utilization rates because I think it’s one of the most phony metrics out there. And when you start using utilization rates and you say, okay, you know, Johnny, you need to be 85 percent billable.

Yeah. Well, okay. What’s Johnny going to do? He’s going to fudge his timesheets, or he’s going to cut corners, or he’s going to, you know, skip meeting. He’s going to, he’s going to engage in bad behavior when you tell people that they have a utilization rate that they have to meet. And it goes the same when you say, well, I don’t tell Johnny what his number is.

I tell his manager. Well, no, that still doesn’t work because now the manager’s incentivized to do it. So the problem with anytime you use any of these. Metrics are numbers. You know, we hear things like, you know, agency should have 150, 000 revenue per full time equivalent. Well, so what are you going to do?

You’re going to manage to that. Well, you know, I’m only at 400, 000. I can’t afford having three employees because the metric has to be 150. That’s insane. Look at the whole set of facts in front of you. And what’s right in a rule of thumb or what some expert like us tells you. I mean, we had that expert rant on, I think, on the last episode, so yeah.

You know be really really careful about listening to these things and managing them because all these numbers if you manage just to the numbers You’re gonna have a business that you hate Absolutely.

Gini Dietrich: Yeah, and I think you’re right on the utilization rates and I’m laughing because that’s how I started my business and If you were an AAP, you were 95 percent utilized.

And if you were a VP, you were 65 percent utilized. And that’s, that’s how I managed the business. As it turns out, that doesn’t work because you’re exactly right. People fudge their time sheets. They get burned out. There’s, it’s just, it’s too much. And I got burned out tracking it. It was terrible.

Chip Griffin: Right.

Here’s the other dirty secret on utilization. If someone’s utilization number isn’t right, whose fault is it usually? Is it the employee’s fault? Of course not. Not usually. 99 percent of the time, it’s, it’s not, it’s not the employee. It’s not their middle manager. It’s senior leadership. You haven’t staffed appropriately.

You haven’t priced appropriately. You haven’t scoped appropriately. You’ve done something wrong. And that’s why you’re not at those rates. It has nothing to do with the people doing the everyday work.

Gini Dietrich: Yeah. And I think, I mean, going back to what we started with at the beginning, which is if your employees are overworked, it’s because you have not priced correctly

Chip Griffin: and it will come back and bite you because you’re, you’re not, it inhibits your ability.

To grow it inhibits your ability to retain talent and who wants to be out there having to hire replacements all the time We talked about client churn. Oh, we hate client churn So, how do we solve client churn by just driving it over to the employees will overwork the employees and let them quit Well, how is that any better?

You want to have clients who stay and you want to have employees who stay the way you do that is you scope and price appropriately

Gini Dietrich: And I would say the other, the one other mistake that you make that, and I certainly have made this mistake is, okay, fine. I’ll, I’ll take up the slack then. But then you burn out.

You might be able to do that for a little while.

Chip Griffin: Right. Yeah. And look, I mean, again, there’s a time and a place for you to step in and help. And as an owner, you can’t be reluctant to that. I mean, I have seen some owners just say, well, that’s. You know, those days are behind me. I don’t have to do that kind of work anymore.

And this was, this was particularly prevalent in the old days where we had to make photocopies or send faxes. And, and I saw, you know, owners or other, you know, senior people say, well, I don’t make my own photocopies. Of course you do. Of course you do. I mean, in all of my businesses back when we actually used to have telephones that rang, I mean, you know, and then I actually answered.

I mean, pretty little secret. You want you ever call me on this thing? I’m never answering. I don’t I don’t answer the phone. I think there’s only like three people in the world that I ever actually have a phone conversation even scheduled with because I hate the phone just in case anyone’s surprised by that one.

and so, you know, you have to, when I had those phones, I was always just as willing to answer the phone and I told everybody on the team, I don’t care what your role is, that phone’s ringing and nobody else is picking it up. I don’t care whether it’s not my job. Right. Answer it. Answer the phone.

Right. Answer the phone. Right. You know, and so there is a time and place for you to step in as the owner and help out. In a crisis or because you’re short staffed, you know, because someone had an unexpected personal thing they had to deal with, or you’ve got two clients with a crisis at the same time, whatever, but, but you can’t say, I’ll take this whole project on because I can just work harder.

And so I’m not going to price it as if I have to farm it out, right? I mean, you’re much better off farming that project out. If you really want to take that business. Farming out from day one, then you don’t have to deal with the question I get all the time is how do I get the work off my plate onto someone else’s?

Answer, really hard. Better, don’t put it on your plate to begin with.

Gini Dietrich: It shouldn’t be on your plate to begin with.

Chip Griffin: Right? I mean, it’s just, it’s so much easier.

Gini Dietrich: Yes, for sure.

Chip Griffin: It’s like if you go to a nice restaurant, and I’ve got my dish, and you’ve got your dish, and you turned out you wanted mine, I gotta sit there and scrape it off.

It’s gonna be messy and ugly and cold. You don’t want that. Order the right plate from the beginning.

Gini Dietrich: That’s an analogy.

Chip Griffin: Yes, I like analogies. Surely, surely you know that by now.

Gini Dietrich: That, that is one.

Chip Griffin: That is one. Yeah. You don’t, you don’t think it’s a good one, but that’s fine. I don’t care. The good news for you, Gini, and the good news for listeners is we’ve come to the end of this episode.

Oh, thank the Lord, and Because while you may be making your

Gini Dietrich: employees do my 30 seconds left because I have 7 minutes and now 28 seconds before the second grade play is finished. And my time has ended with not being interrupted.

Chip Griffin: I, I thought you were going to finish the sentence there. Your time has ended.

And I, I was gonna say, well, I definitely want to get off the air before that happens because not, not like, I mean, that would probably get me really good YouTube ratings, but I’d be very sad.

Gini Dietrich: So we won’t be terrible YouTube ratings.

Chip Griffin: Hot. No, that would get a lot of views. I guarantee all YouTube would probably take it down.

So in any event on that chipper cheerful note, we will indeed draw this episode to a close, we will spend no more of your time. Don’t spend more of your employees time. I’m Chip Griffin

and I’m Gini Dietrich.

And it depends.

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