Building the ideal agency: wrestling with the tough decisions

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Chip Griffin: Hello, and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.

Gini Dietrich: And I’m Gini Dietrich.

Chip Griffin: And Gini, we’re going back to a place that we’ve used for inspiration before. And no, I’m not talking about Reddit this time. Oh, I’m, I’m sorry. Dear listeners, this is not one of our Reddit episodes.

Gini Dietrich: I, I’m always scared of the Reddit episodes.

Chip Griffin: The Reddit episodes are always, they’re interesting. We’ll leave it at that.

Gini Dietrich: Yeah. I saw one the other day that I was like, oh boy, okay. In the real world…

Chip Griffin: Sometimes I just, I read those posts in the, in the agency subreddit, and I just, I wonder if, if they’re actual, real people posting about real stuff, because some of it just seems so insane that it just couldn’t be real.

Gini Dietrich: Yes. And some of it is very junior level entitled frustrations who don’t understand how a business operates. And so some of it you’re just like, Ugh. Okay.

Chip Griffin: Yep. But I mean, we were all once those people sort of a little bit

Gini Dietrich: Fair, true.

Chip Griffin: At one point in time.

Gini Dietrich: Yes. So absolutely.

Chip Griffin: But that is not what this episode is.

We are going to use another source of inspiration for us that we’ve used in the past, and that is David C. Baker. And, in this case, he had a post in his newsletter recently about what he would do if he was starting his own agency today. And it’s a lengthy article that walks through all of the different choices, that he would make strategically and tactically for the business.

And there’s a lot of good food for thought in there. It’s, mm-hmm. It’s probably gonna inspire a few additional episodes, down the road as we dig deeper into some of the specific topics there. But, one of the things that I did on LinkedIn was I broke out into four buckets, my perspective on it, and broke it into things that I agree with, things that I agreed to disagree with.

It depends because, hey, that’s our motto here, so why not?

It does depend. Yes. Yep.

And then of course, food for thought. So, there are far too many points for us to cover in a reasonably length podcast episode. So. I figured why not be controversial? Let’s deal with the disagrees that I had on my list and, use that as our jumping off point.

And we’ll of course include a link to the article in the show notes that you can go read the full article as well as additional context around what we’re gonna talk about today because there is a lot to, to explore here.

Gini Dietrich: And I think the buckets that you, you broke it into are really good. And for the most part I agree with how you’ve compartmentalized them all.

But there are some interesting ones on the agree to disagree bucket. So let’s, let’s do that. Let’s start there.

Chip Griffin: Alright. Do you have, do you have one that you would like to start with or do you want me to just start calling ones out?

Gini Dietrich: Let’s see. Yeah, there’s, well, yes I do. That we require one month annual sabbatical to eliminate single points of failure.

Sounds lovely. I would also like a one month sabbatical every year.

Chip Griffin: It’s as, as I understood the article, and it is possible, I misunderstood the intent in the article, but as I understood it, he was suggesting that every year, every employee.

Gini Dietrich: Everyone. Yes.

Chip Griffin: Had to take a full one month sabbatical.

Gini Dietrich: Yes. That’s how I read it as well.

Chip Griffin: That is, I mean, it’s a nice idea. I think it is highly impractical for most organizations. And look, I think the, stated intent here is truly a good one, which is to avoid those single points of failure, over reliance on any individual team member. Yeah. ’cause this is a giant problem for agencies, honestly, of most sizes until you get to be giant.

But it is something that, that you need to be conscious of. I don’t know that you need a full one month sabbatical for every employee every year in order to get there.

Gini Dietrich: Yeah, and I mean, truth be told, like if you’re designing in the agency of the future and you’re starting from scratch today, I don’t know how you do that.

I mean, to your point, even in a large organization, I don’t know that how, you do that because it costs a lot of money. Not just resources and time, but it costs money to have people out. And so, you know, if you’re a, you’re an agency of three people or you’re an agency of 50 people, or you’re an agency of hundreds of people, it still costs money.

And so requiring that I think is a bit too much. And also, I will say that as somebody who has an extraordinary flexible and generous paid time off plan. There are people who take advantage of those things and you have to adjust to that, unfortunately. And I just don’t think it’s realistic. I don’t think it’s something that you could actually do.

I don’t think it’s something you could enforce. I think it would be extraordinarily stressful for the person and for their team, even though it might be nice in writing. I don’t think it’s, realistic in practice.

Chip Griffin: Well, I, think you, I mean, you, have a number of logistical issues that come into play here in addition to everything else.

And particularly because one of the other, tenants in there that I, disagreed with was, that you would require all employees to take four one week vacations. Over the course of the year. So now you’ve, essentially got all employees out for two out of 12 months.

Gini Dietrich: Two outta 12 months.

Yes.

Chip Griffin: And, that is logistically challenging because how do you do this and make sure that you don’t have too much overlap because inevitably there are certain times where people are going to prefer to do this. I mean, absolutely. If you want to take a one month sabbatical, most people are probably gonna want to do that over the summer months.

Yes. When perhaps, you know, family members have access to vacation or those sorts of things.

Gini Dietrich: Yep.

Chip Griffin: Or they may want it end of year around the holidays and those kinds of things. So you, have collisions between people wanting the same time. If, they, can’t get what they want now, they may be frustrated that I gotta, you know, I have to take off a month in February.

What good is that gonna do me? I mean, it’s cold, it’s snowy outside. My family can’t take the time off. My significant other won’t go. Like,

Gini Dietrich: yeah,

Chip Griffin: so what am I just gonna sit around in my house all day for the month. so I think there are some logistical challenges. So I guess what I, this is one of those ones where I’d say the ideal is nice.

I’m not sure that it is practical to implement in the vast majority of firms. I would encourage instead that owners look and try to identify single points of failure and make sure that you have backups. Yes, yes. And frankly, those are important, whether you have someone taking a month off or a week off. And my view is that every employee should have a backup who can at least do the, minimum required for that role while they’re out.

Particularly if they’re out suddenly, right? Because being able to plan for it. You’ve got a sabbatical, it’s on the calendar, six months ahead of time. You can get some stuff done early, you can push off some deadlines. There’s a lot of things you can do, but really to deal with single points of failure, you need to be able to handle those unexpected absences, right?

Someone has a family emergency, someone has a health issue.

Gini Dietrich: Yep.

Chip Griffin: Someone gets an opportunity to go on a game show, I don’t know, whatever it is, that takes them away suddenly. Those are the kinds of things that you wanna make sure you’ve, handled, with single points of failure. So. Nice idea. I just, I, don’t think it’s practical for most firms.

Gini Dietrich: Yeah. And the other thing I’ll say on the single point of failure piece is one of the things that I experience as an agency owner quite often is that my certain members of my team will take time off, but they can’t… They can’t allow themselves to take time off. So they’re constantly checking in and they’re constantly asking for updates and they’re constantly, and so one of the things I do with them is.

You know, ensure A, that you have some backup, and B, that when you’re asking for updates or you’re constantly slacking or texting or calling, that we don’t, we don’t give you a response. And, it makes people angry. But what I’m trying to do is A, give you the time off because you deserve it and, I want you to come back refreshed and ready to work.

And B, well, I’ll say C. Actually there’s three, three things, B there, nothing’s going to burn down while one person is out because we have backup and we do have places where there is not a single point of entry. And lastly, it’s really demeaning to your team, like it’s demeaning. And even me as the owner sometimes I’m like, well, don’t you trust me to fall to take care of your clients while you’re gone?

Like, come on, seriously. Right. That’s how it makes you feel. So I would say that it’s important from a single point of entry perspective as well to ensure that on the opposite side, that the team feels comfortable taking time off, that they don’t feel angst about taking the time off, that they can take the time off, and that the team behind them is, feels empowered and ready and trusted to do the work.

Chip Griffin: Spot on. Alright, well there’s, there’s a lot on this list. So let’s move on to, to something different. How about we talk about open book finances, because this is, one that, I, will say that I disagree with an asterisk. So I, what he’s advocating in his piece is open book finances, including public disclosure of finances on the agency’s website.

Gini Dietrich: Nope.

Chip Griffin: So, and in general, I am not a fan of full open book either internal or external.

Gini Dietrich: Nope.

Chip Griffin: However, I do believe that most agency owners would be better off being more transparent than they currently are with their teams. That doesn’t mean being complete open book, but it does mean at a minimum, sharing with them more specifically the trends that are going on with the agency.

You know, Even if you take actual numbers out, I like to show charts that show the directionality of revenue, the directionality of expenses. You know, so that you can kind of see those mapped up against each other so that as an employee, you start to understand more about the fundamentals of the business.

Gini Dietrich: Yep.

Chip Griffin: And it starts to make you less surprised when you’re seeing growth and less surprised when you’re seeing, you know, a narrowing of the gap, say, between revenue and expenses. So therefore, profit is shrinking. I, think that there does need to be more communication about that with, as I always say, education.

You can never provide numbers, whether that’s percentages or charts or actual numbers to your team without helping them to understand the economics of the business. Because otherwise you’re just giving them numbers that they will interpret however they want. But I do think the smarter you make your team about these things, the better they can help to manage project budgets, the better and more realistic they can be about compensation and bonuses.

All of these things, information helps, but not in my view all the way to full open books, either internal and certainly not external. No, definitely not. I don’t see enough upside doing it external.

Gini Dietrich: Definitely. I, can’t imagine doing it externally because all that does is open up the, an invitation for your clients to say, well, you don’t really need to be that profitable, so let’s, take some, let’s take a percentage off like the No, no, no, no, no.

And I also think, if I read it correct, his article correctly, he was advocating for open book on everyone’s salaries too. And no, I mean, we do salary bands, but you, do not know exactly how much every person makes. That’s not, that does not contribute to any sort of morale building inside a culture.

Absolutely not.

Chip Griffin: Yeah. I mean, the only thing I will say to that is that, I, agree with you. However, the reality is that most people have a pretty good idea of what everybody else in the business except the owner is making anyway. And perhaps other select senior level people depending on, how your organization is structured.

But pretty much all the juniors know what all every other junior makes. They all talk.

Gini Dietrich: Well, and that’s why we have salary bands ’cause everybody pretty much makes the same

Chip Griffin: right

Gini Dietrich: amount. Right? Like they all make the same, but I’m still not publishing it.

Chip Griffin: Exactly. And salary bands, you know, protect you. On that.

And so, I mean, you could make the, case as long as you have tight salary bans.

Gini Dietrich: Yep.

Chip Griffin: Disclosure actually isn’t a problem. But you know, I don’t, I think as long as you have salary bands, you don’t need that. Obviously a lot of states are in here in the US are now requiring more disclosure around salary bands and that kind of stuff.

So, you know, we’re headed there as an industry one way or the other. but I do think that salary bands are probably sufficient and, we don’t need to share actual salaries with team members.

Gini Dietrich: Yeah, I totally agree with that.

Chip Griffin: You know, that said, I will say that all of your employees think you make far more than you do.

We’ve talked about this before, so there may actually be an upside for, most owners to share what their actual take home is because

Gini Dietrich: that like 10 people actually make more than I do.

Chip Griffin: Yeah. Yeah. I mean, I know a lot of agencies where the owner is making less than team members.

Gini Dietrich: Yes.

Chip Griffin: Which is wild to me, but.

Gini Dietrich: There’s also the upside on that though, if, you’re profitable and you make enough money at the end of the year, you get, you get that. But yes, from a salary perspective.

Chip Griffin: Right, right. Alright, how about, 360s? My, one of my pet peeves. I consider it performance theater. I think most KPIs and OKRs and all these things, I think it’s all performance theater.

I think it has very little to do with what actual performance outcomes you get from your team. But, 360s, you know, they’ve been popular for a couple of decades now. I don’t understand them. You know, I’ve been in organizations that, have done them. I will confess that, that, you know, at various points in time, my own businesses have experimented with them, and most of the feedback that you get from them is borderline worthless.

Because most of it falls into the category of nobody wants to say anything really bad about anything else, it’s, you know, at worst it’s lukewarm. But then of course, you always get the random ones who just, they have an ax to grind

Gini Dietrich: Yep.

Chip Griffin: And they’re gonna use the 360 Yep. As their way to grind an ax against a colleague. Yep. Or, or another department.

Yep. Or whatever.

Gini Dietrich: Yep.

Chip Griffin: And I, I’ve yet to see any, that actually helps to provide good feedback from the employees to the owner themselves. That’s just, I mean, you can tell people it’s anonymous. You can use an outside advisor to organize it, but people are not gonna put in writing. Even if they think it’s anonymous, any perspective about the owner, it just, it doesn’t happen in, the real world.

Gini Dietrich: Yeah. I agree with you. The only time I’ve, and it this happened to me, the only time I’ve seen it be effective is I, early in my agency life, business life, I hired somebody externally to do interviews. It was all anonymous, it was all verbal, nothing was recorded, and people were absolutely brutal.

And the way he presented it to me made me so defensive that I couldn’t take even the kernels of feedback that I needed to hear. And there was some in there, but it was so brutal. And he, the way, and he presented it, I, in retrospect, I think he embellished some of it to make me, I, to make it like more jarring and alarming. Because he thought that that would make me wake up and pay attention.

And in fact, it had the opposite effect. It was not, not good at all. And then I didn’t feel good about the people I had hired. Because it was, it was brutal. So I agree that, they’re not great. I subscribe to the give feedback, ongoing feedback. And so I don’t do annual reviews, I don’t do 360 reviews.

You get feedback consistently. And when we’re in a meeting and I see something that you did really great or I see something that could use some work, I tell you that immediately. When I’m trying, when I want to coach you on something, I do that immediately and I ask my team to do the same with their team.

So there’s, we have the ongoing feedback and then the annual review, quote unquote, is, Hey. We met our goals, we did really, really well. Here’s a raise, or you know what? This year was shitty and it sucked. You did your part in trying to make it better. I’m gonna give you a cost of living raise or whatever it happens to be, right?

But it’s not a, here’s all the shitty things that your clients say, and here’s all the shitty things that your colleagues say and more about, I, you already know that you’re doing a great job in these areas. You already know that these are areas that need to be worked on, and we just continue to move forward.

Chip Griffin: Yeah, I mean, I’ll say from, an owner trying to get, you know, feedback and perspective from the team there. You know, you, I wouldn’t do it through a, you know, a normal 360 review process, but you know, what, you’ve described part of it, I think the, whoever you hired got it right in having, you know, very anonymous conversations with team members.

And I think that bringing an outside advisor who has those kinds of conversations, nothing in writing, it’s just it, you know, it’s dialogue back and forth. I do those for my clients from time to time. I’ll be honest, I, you know, I would say it’s maybe 50/50 whether I feel like I’m truly getting candid feedback.

Gini Dietrich: Sure.

Chip Griffin: from the team members, because usually I don’t have any prior relationship with them, so they don’t know whether they truly can trust me or not. But you know, it’s, I mean, even 50% in most cases is enough to start, you know, pulling some common threads. But the whole, the way you use that information as an outside advisor, the way you present that.

Matters a lot. And so you need to really understand how is it gonna land best with the owner that has hired you. And is that by being blunt, is that by sort of internalizing the knowledge and sometimes I’ll just use it in my ongoing conversations to try to steer things. Yes. To address some of that feedback.

Sure. Without even explicitly saying, well,

Gini Dietrich: yes,

Chip Griffin: you know, the whole team said you’re very bad at X, Y, and Z.

Gini Dietrich: Brutal.

Chip Griffin: But instead, try to find other ways Yes. To, achieve the same outcome, because then the team starts to feel like it was useful to talk with me, and the owner then starts to feel good about the way the team starts to pull together and all that kind of stuff.

But it, is, delicate and, I would say that, you know, the, typical 360 process where it tends to be, you know, written survey feedback form type things, I, just, I think that’s, it’s very difficult to see that working in most cases and in my own experience, it has rarely worked out, the way people would like it to.

Gini Dietrich: Yeah, totally agree.

Chip Griffin: All right. let’s see. We have time probably for at least one more, or maybe just one more here from the list. I don’t know if there’s something that, that jumps out at you that you would like to have, covered.

Gini Dietrich: Let me look, let me look. Uh, maybe we can mush board of advisors and direct access to CEO together.

Chip Griffin: Sure. Although they’re, well no, because the direct access to CEO is the CEO of the client.

Gini Dietrich: Oh, oh, got it, got it, got it.

Chip Griffin: So they, they are, they are separate issues. Got it. But I, mean, I think either, either board of advisors, the other one I would throw out there is a possible one is the, tying all, employee comp to have an incentive component.

Oh, yeah. I, think either one of those would be good. So I’ll let you pick between board of advisors or employee comp.

Gini Dietrich: Employee comp.

Chip Griffin: So, this is, this is one of my pet peeves. And I’m sure that David doesn’t know this, and, if he did that…

Gini Dietrich: Ha! He wrote it just because he knew it was your pet peeve.

Chip Griffin: But, but his argument was that every employee should have at least some of their compensation effectively at risk as part of a, an incentive compensation plan. And I hate this idea. I hate formulaic, incentive-based compensation for virtually all employees. And I’ll be controversial here, it doesn’t really apply to most agencies, but I don’t think it should apply to most sales reps either. Because I think that when you have incentive compensation, whether that is commissions or for hitting profit targets or you know, other things, the problem that you run into is people tend to the extent that they pay attention to it at all.

Right? So. You’ve got a couple of risks here. One is that you’re paying people for things they don’t even care about. Right? Right. You know, I mean, I’ve had sales reps they were gonna sell or not sell, and it had nothing to do with the commission they were getting.

Gini Dietrich: Fair.

Chip Griffin: Now that’s rare. Most sales reps are incented by their commission and, so they will try harder to get it, but what are they doing?

They’re, focused on the thing that gets them the commission, which is the actual signature on the contract and the revenue. It doesn’t mean that it’s good revenue. It doesn’t mean that it’s profitable. It doesn’t mean that it’s a good client. It doesn’t mean you can get results for them. It doesn’t mean any of those things.

And you’re now creating tension because if you have more than one sales rep, nobody wants to help each other because then they gotta split the commission. And so, but this goes beyond, you know, sales and other ways of doing incentive compensation. You still have, it’s very difficult to craft a plan.

Gini Dietrich: Yeah.

Chip Griffin: That doesn’t have unintended consequences. Yeah. And particularly when you’re outside of the sales realm, my experience is that most employees are not truly motivated to hit specific targets for their incentive comp. They’re either gonna do a good job or they’re not. And it has nothing to do with you saying if you hit this target, you’ll get a little bit extra.

But to the extent that it is, it does have those unintended consequences because now they’re fixated on, I mean, let’s say it’s client retention. So now what if, if you’ve got a client retention target and if you have a client retention over 85%, you get a bonus. Sounds great. Right? Because we’re, retaining clients. Except that what are we doing to retain those clients?

Right? Oftentimes that means we’re going to go way down the, rabbit hole of scope creep. Yep. And, we’re just gonna be giving them all sorts of freebies to keep them around. And so those are the things we need to think about. And it’s, why in general, I’m opposed to all forms of incentive comp.

Gini Dietrich: Yeah, I agree with you. I mean, one of the things that we do do is we say you can earn up to a certain percentage of your salary in bonus. It’s the end of year bonus. And here are the, gates, like revenue, profitability, all the things. But most of it is not reliant on the individual. Most of it’s reliant on the company as a whole.

And so we all have to work together to achieve those goals. And then they sort of know like, okay, well this, this is where we are, so I’m gonna make 90% of that percentage or whatever it happens to be. So they are they are clear about those kinds of things and they tend, because of that, they tend to ask…

They tend to be more engaged and ask more strategic questions about work, and they’re more thoughtful about it. But to your point, we don’t reward scope creep. We don’t reward, you know, keeping a client longer than we should. Those kinds of things. Those, like, we take those pieces out. So we, do it based on, we don’t do it commission or incentive based, but we do do it based on a certain percentage of your salary if we meet certain objectives as an organization.

Chip Griffin: I mean, that’s better, but I’ll be honest, I still don’t like it.

Gini Dietrich: Yeah. It works for us. It’s highly motivating for us.

Chip Griffin: And that’s, the thing. I mean, the, as we say at the end of every, episode, it depends. So even these things where

Gini Dietrich: mm-hmm.

Chip Griffin: You know, we may disagree, you know, where David has different ideas than we do, that doesn’t mean that, that none of them can work in your agency.

Right. and I think that it’s, that’s a point that, that he made in a LinkedIn conversation that, that we had, recently as well. You know, some of these may be good ideas, some of them may be bad ideas. Some of them may be good ideas, but you know, wrong place, wrong time or wrong agency, wrong time. And, some of these ideas are good at different stages of the lifecycle of even your own agency.

So something that works when you have two employees may not work when you have 20 or 200. Right. And so, you know, I just, I, love articles like this though, because it gives you that food for thought. It makes you think, it makes you, you know, to test your assumptions. You know that I’m a huge, advocate of curiosity generally.

And so, you know, making you think about things is helpful. And so hopefully we’ve made you think just as David made us think. And, so we, appreciate that and, we hope that we’ve given you those insights here that may help you think through decisions for your own agency. And of course, you know, check out the full article for many, many more ideas beyond what we were able to cover today.

Gini Dietrich: Yeah, absolutely. It was a really good, really good article.

Chip Griffin: Absolutely. So thank you all for joining us. That will conclude this episode of the Agency Leadership Podcast. I’m Chip Griffin.

Gini Dietrich: I’m Gini Dietrich,

Chip Griffin: and it depends.