What Predicts Your Firm's Success?

By Tim Williams

By Tim Williams

Most of these financial reports are merely a summary of lagging indicators; they are like looking in the rear view mirror. They give you an understanding only of what has happened, but very little understanding of what is likely to happen in the months and years to come. 

What’s your canary in the coal mine?

In the coals mines of the 19th century, a dead canary signaled the presence of dangerous gases that could lead to a deadly explosion in the mine. For the coal miner, this was a critical “leading indicator”.

Agencies can look at important leading indicators to help them look ahead to their future success. Unfortunately, hardly any of these indicators show up on a balance sheet. Here’s a partial list of some of the key leading indicators of agency success:

  • We have integrated digital into the fabric of the agency.
  • We are capable of providing our clients with real-time campaign management.
  • We provide our clients with the discipline of analytics to help maximize marketing success.
  • We are well prepared for the trend away from mass communication to one-to-one communication.
  • We have expanded the role of the media function to include all relevant communications channels.
  • We have an organizational structure that minimizes silos and maximizes integration.
  • We have a talent management system that utilizes both internal and external resources.
  • We engage in inventive and unorthodox forms of promotion for our own brand.
  • We are not dependent on timesheets to assess the value we create for our clients.
  • We are willing to experiment with pricing and compensation arrangements in order to continually learn how to capture more value for what we do.
  • We are actively attempting to own or license more of our intellectual property.
  • We are developing new revenue centers that transcend the traditional “work for hire” model of professional service firms.

Measuring what matters

A performance measure can only confirm the past, while a predictive indicator can help you peer into the future. Most of the metrics agency executives use have zero predictive capability (unless your theory is the future will be an extrapolation of the past, a perilous assumption is today’s fast-changing world). In order to develop meaningful indicators of success, engage your management team in a meaningful discuss about the agency’s chief value drivers––the precursors of income and profits. The correct leading indicators will predict the lagging indicators. And that is the key to agency success.