30th September 2009
The key to successful decision making for any management team is relevant, accurate information delivered in a timely fashion. For marketing services businesses this management information typically relates to its people, and in particular how they utilise and recover their time.
Unlike a production line, which can be precisely monitored and managed, the process of measuring the effectiveness of your employees’ time should be considered more an art than a science. To ensure the quality of the data collected and create positive behavioural change, careful consideration needs to be given to both how information is collected and reported.
The most common tool used to track employees’ time is the timesheet, usually in electronic form. Although there may often be no choice in the software used, for legacy reasons or other overriding service requirements, there remain a number of practices that may be applied to enhance the quality of data collected. Each of the techniques below work to reinforce one universal principle – timesheets should reflect reality.
Granularity – despite technology providing the ability to subdivide time to the nth degree, the division of time into job codes, activities and units of time should be no more elaborate than entirely necessary to run the agency’s core processes. Excessive categorisation of time will usually lead to poorer and less timely recording and encourage the temptation to produce unnecessary reports.
Culture – a common and positive approach to timesheets will strengthen their reliability. To create this, agencies should use an induction process to train users on both what is required and to explain its importance to business success. Any charges of “Big Brother” should be countered with positive explanations as to the way in which the timesheet information will be used, e.g. to demonstrate client service thereby improving client fee negotiations and overall profitability. Senior management should be seen to lead by example and the whole system should be appropriately policed for compliance.
Regularity – the quicker the time is recorded following the event the more accurate it is likely to be. Daily, and at the very least weekly, completion also minimises the impact that unforeseen absence, such as sickness, has on an agency’s ability to report performance in a timely manner.
Having worked to ensure the accuracy of the timesheet data collected for the period, key performance indicators (KPI’s) need to be identified and clearly communicated to the management team so that informed decisions can be made. The two critical KPIs for monitoring the productivity of staff are:
Recovery – the fee paid by a client in a period as a percentage of the value of time provided by the agency.
Utilisation – the time an employee is engaged on fee earning activity in a period as a percentage of the total time recorded.
Each agency’s optimum level of recovery and utilisation will be different as it is specific to multiple factors such as industry sector, cost base and positioning. Equally, the profile of recovery may vary across differing services or client verticals, as too will utilisation across employee groups. The key for management, therefore, is to not only understand these metrics, but understand them in the context of its own business, and develop strategies to improve them.
Recovery, in its broadest sense, is a gauge of the quality of the relationship an agency has with its client. A client who is happy with the service they receive should pay its agency accordingly. Using recovery instead of profitability to monitor client performance is preferable – it focuses a Client Director on developing the relationship, not on the internal factors which drive profitability such as salaries and allocation of overheads. It is also a simple measure that is easy to understand and can be shared widely, both internally and with the client. Agencies which exceed their targeted recovery tend to reinforce the concept of a partnership between the parties, and introduce the concept of recovery at an early stage, such as at the point of contract negotiation.
Utilisation, by contrast, is an internal facing measure which helps management to understand the capacity in the business. As with any measure, utilisation should be looked at in context. For example, increasing utilisation with no corresponding increase in profitability will be a consequence of lower client recovery, which may indicate an issue with a key client relationship. This higher rate of utilisation may then result in less resource being available for new business, placing pressure on the pipeline of future business.
Agencies should be mindful of the limitations of timesheet data. By its nature it captures only what has happened, rather than why it has happened or what will happen going forward. Management need to be aware of its ability to add bias to the data – how it communicates, incentivises and acts upon timesheet analysis will have a bearing on how accurately people choose to record their time going forward.
When used appropriately, time analysis and the key ratios of recovery and utilisation are powerful tools with which management may drive agency performance, and thus profitability. Having the ability to provide transparent time metrics is critical to establishing balanced relationships between an agency and its clients.
If you want to discuss this white paper or the potential benefits of improved management reporting please contact David Ainsworth on +44 (0)20 7182 4704 or via e-mail at email@example.com.
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