When A Freelancer Is The Most Expensive Agency Cost

Posted by Ray Kieser, Agency Practice Director on February 2, 2016

When a freelancer is the most expensive agency cost

One of the greatest challenges faced by creative agencies today is resource planning and management – particularly when it comes to staffing. Client projects are consistently changing and agencies are facing an increasing demand to be more agile, more flexible and more available. Unfortunately, this is easier said than done, especially when the primary way agencies provide flexibility – freelance support – is becoming more competitive and more expensive by the day. As a result, agencies that don’t have a strong grip on what personnel resources are needed, can get stuck paying exorbitant fees for freelancers on a day-to-day basis, or worse yet, risk disappointing clients and losing revenue due to an inability to adequately staff projects.

A recent report by ClickZ and Deltek noted that the two biggest challenges faced by creative agencies with regards to resource management and planning were finding and retaining qualified staff (13%) and staffing for an always-on environment (10%). When you consider that creative talent is core to an agency’s success, and recruitment and retention costs the advertising and marketing industry around £184 million each year it makes sense as to why this is such a focal point.

One of the key ways that creative agencies manage staffing pressures across the board is to rely on freelancers. The study goes on to identify the top three reasons for freelancer use – accessing specialist skills (34%), more flexible availability (20%) and fulfilling short-term projects (18%). However, more often than not, freelancers are brought in as the first point of call, rather than based on an evaluation of existing agency resources. As a result, an agency may end up watching their profit walk out the door in a freelancers pocket because overuse has eaten into margins – particularly if it is unplanned.  

To make matters worse, the study found that use of freelancers is not necessarily reducing the pressure on internal staff, meaning that agencies are essentially just adding to the headcount. A significant part of this can be attributed to the administrative costs associated with using freelancers with more than 30 percent of respondents reporting that they spent more time on admin tasks than they did on the creative elements of their role – not what you want to hear from a creative agency!

However, it is not all doom and gloom – at a recent British Interactive Media Association (BIMA) breakfast a select group of creative directors and operational heads discussed the use of freelancers and what they were doing to try and halt soaring costs. For some it was a matter of recruiting freelancers on longer contracts (three months compared with two weeks) in order to try and integrate them into the agency and tempt them to stay. Whereas, others were looking to reinforce and promote the agency culture in order to stand out in the market and position themselves as the agency to work for.

Another topic that all of the attendees agreed had a significant impact on their businesses was the use of resource management tools. Solutions that allow agencies to better understand capacity levels, track work in progress and assign resources proactively to enable a more granular understanding of where the gaps are imperative to managing resources, capacity and ensure projects are delivered on time and in budget. In another recent study by Deltek, in partnership with SoDA, 39 percent of the respondents stated that resource management, planning & scheduled was a key contributor to profit growth in 2015, following new client acquisition.   

So while it may seem like an industry in trouble that is certainly not the case. Agencies have spent a lot of time optimising non-staff operating costs and now the focus needs to be on optimising direct staff recoverability. By being smarter about the way they plan and manage projects, and getting resource management tools to do the hard work, agencies can ensure profit stays with the company, (not with the freelancer!) and staff are able to focus on what they do best – creative work for clients.

To continue the conversation you can leave a comment on this blog or head over to Twitter and have your say using #AgencyProfitDrain