The third stage of the Life Cycle of Agencies framework is Grow Mode. This is the second major inflection point in your agency’s growth.
Things feel easy once you’ve cleared the hierarchy of financial needs…until they don’t.
At this stage, your core leadership team is too far removed from key delivery decisions, and the business feels tension and strain. Things break. It feels like the wheels are starting to fall off. Employees leave. Clients churn.
Your agency has become too large and complicated for this team to make all of the decisions, and it’s time to start empowering your next layer of leadership. These deputies are critical to carrying out the vision and processes of the agency that you’d once managed on your own.
Success now hinges on your ability to empower, incentivize, and hold accountable this next level of leadership.
We get it; it’s hard to let some of it go. It’s important for agency owners to stop wearing so many different hats and start allocating responsibilities to a senior-led team. You were once a founder and small leadership team - “a family of employees” - but you’ve outgrown this stage and need a team of people with a focus on systems and processes.
Your first order of business is to determine how to divide and conquer the organization. How can you organize your agency into smaller chunks so that these new deputies can individually run them?
We recommend organizing into either departments or client portfolios. - Departments are best for agencies with separate and discrete service areas like development, design, SEO, etc. Portfolios of clients, on the other hand, work best for more integrated or homogenous service delivery, like typical branding agencies. One is not better than the other - you’ll need to make the judgment as to what is best for your business.
Once you’ve carved off slices of the business and anointed their respective leaders, you’ve got to set expectations. Each leader should have accountability for their own piece of the P&L (e.g. department net income or portfolio gross margin), and you as the owner need to empower them to manage that P&L. The leaders must understand the levers available to them to either grow revenue and/or manage costs, and you must permit them to use those levers.
But the secret sauce to make this really work is the feedback loop. Failed attempts at divisional reporting boil down to the same thing - a lack of accountability. Agencies create divisions, select leaders, develop reporting, distribute the reports regularly, and then….nothing. Business as usual. Exceptional divisional performance is not discussed or rewarded, and poor performance is not addressed, supported, or triaged. The exercise becomes window dressing - nothing more than “playing business.”
And that’s because these efforts too often lack the feedback loop. A feedback loop is a regular means of reviewing the expectations with the leaders, determining whether we are on or off track, and using the established incentives to reward exceptional performance and support poor performance.
Our favorite version of the feedback loop is the Monthly Business Review (“MBR”). These are meetings where agency partners meet with their deputies to review their divisional reporting. The goal is to create an environment where leaders feel accountable to their expectations, but more importantly, can share what is working and support one another to improve what is not. Each meeting ends with a specific action plan, and begins with a review of the prior month’s action plan.
Entering Grow Mode can feel disorienting - for an agency used to winning, it’s uncomfortable to experience loss. But it’s a natural evolution of your growth. The answer lies in delegation. Once you’re able to successfully elevate and empower the next level of deputies to run your organization, you’ll be well on your way to Scale Mode. And we’re here to help at every step of the way.
For more, check out our podcast: Creative Outcomes.