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The role of an agency managing director

Who’s this post for?

This post is relevant for those responsible for the management of the agency, such as a Managing Director or CEO. If your agency is smaller (less than 20 staff), this role will likely have more hands-on responsibilities, including those of Ops/Project Managers.

Why did I write this post?

I co founded NOVOS back in 2019 and every year since it seemed like mine and my business partners roles have changed. Partly adapting to the new needs of the business but mainly it was due to us discovering what we were good at and what we enjoyed as individuals.

At the start of 2023 I found myself in a new role. The role was the Managing Director of the agency I co founded.

After nearly 3 years of role switching and tweaking we settled on roles we were happy with and that we know we’re good at and enjoyed (he took the Growth Director role for the record, focusing on inbound & marketing).

Across the company we have a large amount of job descriptions, progression and development documents and job responsibilities documentation. So shifting to this role I start to define what the role actually is on a day to day basis.

Initially, this role involves defining the company’s strategy and vision (which we already have), outlining the yearly plan, and executing it. This approach and structure led to the creation of the Directors Framework.

However, it always felt like the MD role needed clearer definition in terms of day-to-day responsibilities to avoid stepping on the toes of other directors.

It was at this point I attended a conference and got a free 15 minute call with Mark Probert who dropped a few golden nuggets in such a short space of time.

He defined the responsibilities of an MD in three critical factors: net profit, customer satisfaction, and employee satisfaction.

That was it. Super simple and I loved it.

So with this broad structure in place I got on with the job in hand and started to group day to day tasks, priorities and responsibilities under these 3 buckets and this is what i’ve come to:

1. Net Profit

Of the 3 factors referenced above, net profit is by far the most crucial factor. Without profit there’s no real business. An MD needs to ensure that the company is financially healthy, and it is making a profit. A profit led agency should be roughly aiming for 20% net profit margin, a scaling agency would be closer to sub 15%.

So what are the factors you can influence to move the needle for net profit?

Resourcing

The MD needs to ensure that the sales team brings in new business in line with hiring and capacity. This requires alignment across departments through defined processes and a way of working. As an example, your SEO team could have lots of capacity, your Paid team could be full up for 3 months yet your sales team is actively perusing paid leads.

Hiring the right people

Defining the culture and what a good employee looks like. During the early stages of the business I was on nearly all interviews, overtime i’ve stepped back as the team knows what good looks like. Occasionally if we get a new manager or head of department i’ll step back into their hiring process so they can see how I interview and challenge individuals.

Cost management

At the beginning of the year, I make a 12-month forecast. Every month, there is a budget for all costs, some fixed (like rent), some tied to activity (like recruitment fees), and some tied to department plans (like marketing). The MD and finance or operations lead define these budgets, and each month, they work together to ensure the agency is operating within them. If not, they figure out why and take action or re-forecast for the next 3 months.

Efficiency

An MD should collaborate with the operations department to optimize project managers’ use of delivery teams, minimizing over or under servicing. Document and address inefficiencies throughout the business. Identify the root cause of consistent over servicing for a specific project type, whether it is related to team training, processes, or pricing.

Pricing

Pricing is crucial. Review your pricing yearly compared to industry standards or competitors to avoid losing money or overcharging. Involve operations and project managers in defining bill rates and review this annually with client costs. Know your margins per team role, comparing their cost to billable rates. For example, mid-senior hires may be more efficient and profitable than junior staff.

Forecasting

Forecasting encapsulates most of the above points for an MD. Forecasting helps predict future trends and plan accordingly. Even if it’s not 100% accurate it shows you have a destination and are thinking ahead. Through data analysis and predictions, MDs can make informed decisions about resource allocation, hiring, and budgeting, ensuring the company’s long-term financial health and profitability.

Planning business projects that hit the bottom line

Based on the information referenced above, you will have outlined a list of issues and opportunities per department to improve your agency. You are responsible for identifying trends that span across departments and addressing them. These are issues and opportunities that affect the entire company, requiring your attention and leadership.

2. Customer Satisfaction

Keeping customers satisfied is essential for any company’s success. It’s way easier to retain a client than it is to acquire a client.

This point is still relevant even if you don’t work with retainers, if your clients are unhappy they won’t return for future projects or refer you to their network.

An MD must ensure that the company is delivering on its promises and providing value to its customers.

Aligning delivery with sales

From my experience this is number 1 area where the MD is needed. In it’s most basic form this process is where the clients expectations are set, agreed upon, communicated and then executed.

Your sales team doesn’t see the delivery of your work and your delivery team doesn’t see the full sales process. The only person who crosses both of these departments is the MD. If you are going to action 1 thing on this list, i’d recommend it to be this.

How? standardise the output of your delivery teams in laser tight statement of works. Copy the exact ‘definitions’ the delivery teams use in their teams into your SOWs and just change the wording to be more formal. Do not commit to guarantees in contracts.

Ensuring customers get what they are sold

Following on from the above, once you have a standard way of delivering. This is the bare minimum of output you should be delivering per month. The delivery team needs to set up trackers so you and the senior leadership team can see Birdseye view of progress of delivery across all clients. This is how you ensure your company is delivering on time and inline with the statement of work (SOW).

Providing value adds

Once the minimums are covered from the above 2 points you are going to want to start going above and beyond, especially with larger clients. If you follow the steps above the expectations have been met, what you do now is going above expectations.

Certain individuals will excel at value adds more than others, it’s important you get processes in place that these value adds are prioritised each week and those that aren’t good at them have a checklist of previous value adds that have done well for other clients. It’s an agency operations in a nutshell, see what works document and systemise and roll out across multiple clients.

Tracking customer happiness

Initially, we used NPS scores and surveys every quarter, which we made a part of client contracts. However, this frequency wasn’t sufficient to track trends and address issues promptly. As a result, we introduced monthly scores to gather data more frequently and integrate feedback in monthly reports. This way we can stay ahead of client needs and adapt our service based on their needs.

Building relationships

Building relationships with key clients is important, but have you considered the value of your network in solving your clients’ issues? Connecting clients who have the same role can also help them build relationships and solve similar problems. To track our client relationships, we created an internal score across all 50+ clients.

Relationships are an intangible thing for an agency which is hard to scale, yet they are so important. To combat this we created an internal relationship score to track our client relationships across all 50+ of our clients. I’ll share more about this in the future (I love it!)

3. Employee Satisfaction

Employee satisfaction is crucial for the success of any company, especially for service-based companies. I once worked at an agency where the founder didn’t prioritize employee satisfaction, resulting in high staff turnover. Don’t let your hard work in the previous sections crumble by neglecting this important aspect. An MD must ensure that the company’s employees are happy and motivated. A satisfied employee is more likely to be productive and contribute to the company’s success. Bare in mind you won’t get all this section right, every employee is different and can manage different workloads / react to situations differently

Here are aspects of an agency that an MD should focus on to influence employee satisfaction:

Workload management

Invest in efficient tools for productivity and workflow management. Establish a standard operating procedure for your agency and integrate it with resource management. Utilize tools that enable time tracking for tasks to ensure that both you and your staff understand how long to allocate per client. For instance, keyword research for NOVOS should be limited based on the client retainer rather than being an endless task which it easily can be without restraints put in place.

Providing benefits and perks

These are additional benefits on top of the base salary. This is largely dependent on your culture and the type of business you want to be. One of the biggest i’ve done in the past is unlimited holiday, my wife’s company does a 4 day working week. If done successfully and for the right reasons these big perks can become a big USP for your company for staff acquisition and retention.

Building trust & empowerment

Avoid micro-management by clearly stating expectations in job descriptions and communication with staff. Trust is crucial for scaling delivery. As an MD, you need to trust that your line reports are holding their reports accountable. Trust is a two-way street, and if it is broken, give direct feedback and outline steps to regain trust.

Rewarding employees

Naturally salary increases come to mind here. These are the minimum requirements for rewarding staff members for hitting progression and development milestones. We’ve done pay reviews bi-annually in the past – whatever you chose make sure to make it structured and stick to it.

On top of salaries, there are other ways to reward staff. A few examples are:

  • peer to peer recognition

  • bonus’ for completing marketing efforts eg writing a blog inline with strategy

  • upsells and cross sell bonus’

  • rewarding with additional responsibility (with intention for financial rewards in the future)

  • leading internal committees eg AI, Innovation, People, Culture committees

  • Providing a sense of purpose and value

This relates to your business’ mission and strategy – why it exists. For example, NOVOS chooses to focus on eCommerce despite the potential for more profit from fintech or gambling clients. We also say the agency is a vehicle for client and staff growth. At The Living House, the goal is to make interior design accessible to all. These missions should be embraced by your staff as they are the WHY behind all business and commercial activities.

Maintaining work-life balance (lead by example).

Avoid messaging outside of work hours. Use slack or email schedules if necessary. Encourage staff to communicate if they work late and establish a culture of working within regular hours. Allow flexibility for special circumstances such as clients in different time zones or website projects with strict deadlines. Give staff time off to balance out any extra hours worked. Encourage senior leadership to update slack status throughout the day to promote a work-life balance eg at the gym, dog walk etc.

Providing opportunities for growth

Each role should have a clear plan for progression and development. Progression means moving up the hierarchy, while development focuses on skill gaps and individual growth. It’s important to establish this framework early on, especially for small teams with less than 10 people. This way, adding new roles and adapting the framework as you grow becomes easier. Don’t forget to allocate a portion of your profits to staff training. As an MD you need to make sure each line of management is aware of the framework and has training on how to communicate this with staff eg not leading them on to get a promotion for a management role that isn’t part of the business’ plans this year.

In conclusion, the role of a Managing Director in driving business success is crucial and goes way beyond just setting the strategy and vision. By simplifying the role into 3 buckets: net profit, customer satisfaction, and employee satisfaction, an MD can help a company achieve its goals and succeed in the long run. It’s important to remember that the role of an MD is constantly evolving, and it’s essential to adapt to the changing needs of the business. By following the guidelines outlined in this post and staying focused on the three critical factors, you can focus on what’s important and delegate what doesn’t fall into the buckets.