3 Economics of Staffing

It doesn’t take a mound of research to consider that happy employees enable happy customers.

The easiest way to digest that is to consider the flipside… what disgruntled employees might do to a company’s external relationships. Indeed, employees and clients go hand-in-hand even if they don’t work with each other directly, one-to-one, on a daily basis.

Sharon Toerek is the founder of Legal + Creative, a law firm that helps marketing agencies protect their business relationships and well-being. And she interviewed CEO Chris Kneeland of Cult Collective on this very topic. 

Cult is a marketing agency in Canada that contracts with specialized staffers to directly align with the needs of specific clients. Key points from that discussion are paraphrased and cited here, covering three economic staffing considerations to keep top of mind¹.

1) Some projects start and finish within 36 days.

It can take weeks to hire and onboard a new staffer in a full-time position, Kneeland says. Yet some special projects that require extra staffing might pop up suddenly… starting and finishing within 36 days. Wrapped up and done before the help even shows up. If the agency can’t wait for the cavalry to arrive, that would leave money on the table.

For example, maybe it’s a PR Strategy firm. Yet at times, that leads to video production, too. A semi-annual video event, for example. The video project can be done in a month. Then, half a year later, it requires another month, and so on. It directly relates to the agency’s overall position, but it’s not a primary focus that requires a videographer to be kept on staff year-round.

But if there’s no video pro at hand, it’s a pain point. An outsourced solution or partnership can indirectly support the firm’s strategic niche, only if periodically. Taken off the shelf and put back on as needed.

Now, instead of video, think how long it might take to find senior-level software engineers in today’s high-demand market. They have to be recruited, hired, and up to speed on a firm’s tech stack. And they have to be compensated, probably $100,000+ per year. Collectively, that effort is not a slam dunk. It could be months.

Outsourcing could whittle down that 36-day orientation window. Front-end, back-end, whatever specialist is needed… on the project within days instead of weeks.

2) Success and size don’t correlate.

The more employees an agency has, the more employees it needs to run around and worry about the care and nurturing of those people. Instead of the care and nurturing of clients.

However, talent truly is the product the agency offers. The core talent is the heart of its positioning. To gauge the level of that talent capability, “How many seats do you have?” is not an uncommon question for an agency owner to hear.

Of course, “How many” has nothing to do with it. Clients hire an agency for the market intelligence, research, and strategy that its leadership brings to the party. Not for its quantity of designers. For that, specialists are brought in as needed to specifically fulfill those needs as they evolve. Custom-tailored support staffing takes the distracting commoditized tasks of production out of the agency owner’s hair.

Ad Age magazine reports that 40 percent of brands are going to fire their agencies in the next 6 months (by mid-2023) due to a lack of strategy and leadership².

Plus, it’s egotistical to think that even if agencies did put full-timers in all those seats, the very best of that talent would even be recruitable or consider working for them in the first place. Yet it’s the agency’s job to bring the client the best of the best.

Or, let’s say the agency does strike it rich by finding 100 of the very best support staff on board. Kneeland says that line-up is subject to 30 percent attrition per year.

Hiring and rehiring. Onboarding and re-onboarding.
A topsy-turvy culture. A distraction versus a resource.

Whereas, outsourcing is a different story.

For example, web developers zero in on development, so the best of the best are attracted to that…  working with a razor-focused web-development company. One might specialize in this platform or that platform, front-end or back-end, or UX/UI versus databases and admin. Through that outsource, an  agency can get the services of the absolute best Ruby on Rails back-end developer (typically a $150,000 full-time position³) for a fraction of the cost. Only needed for a short term. A specific portion of a project. That skill set is in stark contrast to a full-time junior-level talent that matches the full-time budget available.

3) Coddling versus contracting.

Once full-time talent is found, what does it take to keep that talent happy and on board? Work location flexibility and work schedule flexibility are two leading programs for retaining employees.

Those two approaches are already baked into the outsource relationship. There’s no need to worry about having the onsite/offsite debate in-house. No worrying about animosity when some full-timers have to work onsite while the cubicle of the full-timer next to them is empty because that person gets to work from home. No one wants staff members grumbling to clients about injustice.

Other motivators to retain staff are pricey options, including pay raises, bonuses, reward programs, time off, and other extra benefits.

However, partnership relationships come with a variable, transparent pass-along cost. Agreed-to SOWs and guaranteed pricing. No “extras” required.

Very friendly to client needs, agency needs, and to adjusted gross income.

In the case of off-shore web-dev support, there may even be additional advantages. When full-timers are typically on vacation at home, they might be hard at work overseas… or otherwise seemingly around the clock. Delegate something when walking out the door at day’s end, and it could be done the next morning when the agency owner arrives back at work.

Timely, Customized, Profitable

The 1-2-3 of staffing economics can be summed up as timely, customized, and profitable. No extended recruitment and onboarding timeframes… leadership does what it does best while support is tailored to specific client needs… and AGI-friendly solutions make margins look all the better.

Client and Contractor Agreements:
Agency Protection System⁵

For client and staffing support, check out the Agency Protection System available from Sharon Toerek, the founder of Legal + Creative, a law firm that helps agencies protect their business relationships, intellectual property, and financial well-being.

Her toolkit includes templated service agreements for contractors, plus client-service contracts, and other essential guidelines and forms specifically for agencies.