All agency/client relationships, regardless of the type of agency compensation and regardless of the types or level of agency services, are “Scope of Work” relationships. When you think about your service relationships with your clients, whether you provide traditional strategy and creative services or PR or digital services or promotion or direct response services, you need to have a systematic approach for planning and tracking scope of work.
Given the paramount importance of Scope of Work planning and tracking, the 4A’s is fortunate to be able to work with Michael Farmer, CEO of Farmer & Company LLC, www.farmerandco.com, a preeminent authority on Scope of Work considerations. Michael Farmer has dedicated 20 years to perfecting knowledge about the elements of scope planning. Farmer & Company has developed techniques for mapping the inter-relationship of scope complexity, rework dynamics and service level standards in a systemic methodology that helps agencies link Scope of Work plans to staffing plans and then in turn to levels of agency remuneration.
The 4A’s and Michael Farmer prepared this video in order to provide 4A's members with guidance on best practices and illustrative examples of how to design, structure, implement, assess and report critical agency work output information.
Scope of Work Planning and Activity Based Pricing
In this 4A's video, Michael shares his perspectives on the drivers that affect Scope of Work. He discusses his observations on the economic implications of scope components, scope creep and scope modifications. Farmer cautions the marketing service community that Scope of Work planning and tracking must become a core competency if the compensation for service model is to remain viable in the future. He discusses tools used by Farmer & Company and provides illustrative cost and fee examples.
The 4A’s advises members to:
- Develop the systems and skills that are needed to accurately plan and track scope of work;
- Inculcate an agency culture that subscribes to the discipline and nuances associated with Scope of Work budgets;
- Educate your clients on why Scope Planning and Tracking are important and let the client know why it’s essential for them to participate in the scope planning, prioritization and tracking process;
- Develop a framework for linking Scope of Work to a client staffing plan. This framework should be calibrated to reflect the client’s service requirements, work flow preferences, approval processes and compensation thresholds.
The Table of Contents for this video includes:
Introduction by Tom Finneran, EVP, 4A's
About the Speaker
I. Background & Situation Analysis
II. Scope of Work – Projects & Agency Resources
III. SOW’s Multiple Multiple Markets – Disciplines
IV. Activity-Based Compensation Strategy and Tactics
V. 4A's Compensation Tools & Principles
VI. Questions and Answers
VII. Thoughts on Value Pricing
There are numerous Scope of Work planning and tracking systems used in our industry. Scope systems can and do take on many different formats. The techniques that Michael Farmer describes are a thoughtful and comprehensive systemic approach to scope management.
It is not the intent of this video to suggest that your unique relationship with each of your clients should be standardized or framed into any form one-size-fits-all work process or economic arrangement. However, the association believes that it is essential for you to be able to plan and track Scope of Work because without a detailed, timely and evolving scope process your agency is apt to face unrelenting scope creep and eroding profitability.
Bonus Discussion: Farmer on Value Pricing
Michael Farmer’s has broad business acumen and a unique knowledge of both marketer and the agency business requirements. So we asked Michael to share his perspectives on the industry and discuss his views on the state of agency compensation.
In this supplemental “bonus section” of the video, Michael Farmer shares his perspectives on multipliers, agency value contribution and agency compensation. Michael’s industry assessment is fascinating. In this section of the video Michael provides both food for thought and suggestions for future agency business transformation.
Michael Farmer is CEO of Farmer & Company LLC., a strategy consulting firm for advertising agencies and marketers. Farmer & Company provides systems support and management discipline to help agencies deal with changes that have affected the industry in recent years.
The Farmer Resource Model, is a computer model that was developed to evaluate the relationship between Scope of Work and agency resources for different productivity levels. Farmer & Company has also developed ScopeTrack®, an application that can be use to track changes in Scope of Work and agency resources over time.
Michael worked as a consultant with The Boston Consulting Group and he served as a Director of Bain & Company in Boston and Europe. Michael established Farmer & Company in London in 1990, and began working with advertising agencies in 1992. He relocated Farmer & Company to New York in 2001.