There’s a better way: the virtual agency

I recently announced that I am changing IDP’s business model from full-time employees to independent contractors and converting to a virtual agency. Drawing inspiration from such innovative firms as Host Universal of London and jo&co of Salt Lake City, I am abandoning the traditionally slow and paperwork-heavy approach to the “ad agency” business and adopting a more client-focused approach to solving marketing problems.

It was the most difficult decision I’ve ever made. It affected the lives of our employees, their families and their friends. The staff that left that stormy afternoon was the best I’d ever had. My decision was not related to performance or quality — it was about passion. Running a company and managing people exhausted my passion, frustrated my employees and interfered with my ability to be the best at what I do. Struggling with employee turnover for the past two years, I had been looking for a way to build a dynamic organization, generate a more consistent profit margin and create an environment conducive to creative collaboration and freedom.

I drew from the experience of ad agency employees and principals throughout the world who love the “advertising” business but don’t like the “ad agency” business. We work hard and we love what we do, but it’s annoying when we spend more time pushing paper around than working on clients’ projects. In the beginning, a client called with a change to her Web site and I would do it during the phone call. Now, an account executive fills out a job requisition, submits it to traffic, which assigns it to a developer… it had gotten ridiculous. There simply had to be a better way.

In a shrinking world of outsourcing, powerful personal technology and the Internet, the traditional ad agency or design firm business model has begun to outgrow its usefulness. Rent, office furnishings, computer networks, phone systems, management and administration, client acquisition and other expenses lead to excess overhead that doesn’t improve the quality of the work we do. Business hours, employee assignments, hourly billings and traffic systems lead to inflexible parameters for each project. Agency principals and managers, buried in administrative responsibilities, assign important tasks to junior-level employees. Time spent tracking billable hours (designed to controls costs and increase efficiency) took away from time that could (or should) be spent on client projects.

Our employees were just as frustrated. The business was either too creative, or too administrative. We had either too much work to do, or not enough work to do. They needed time to pay attention to the details of a project or to find a solution for a problem, but budgets and other assignments got in the way. These employees were hard-working and creative but that hard work and creativity wasn’t exclusively available from 8:30 a.m. to 5:30 p.m. Monday through Friday. We tried flexible scheduling arrangements, but it created challenges that were difficult to overcome.

The virtual agency model allows everyone on the team to work against a deliverable and a deadline not on billable hours, business hours, unnecessary paper work and overbearing supervisors. I create a team on the fly, assigning the best candidate to each role for each project, every time. They earn an agreed-upon fee for an agreed-upon deliverable without daily schedules, performance reviews, and time cards. If the work isn’t up to standard, there’s no meeting to discuss expectations and develop a plan for improvement; we just call someone else. If the work is excellent, they get more work to do and more control of what projects they take. In addition, the virtual agency can quickly grow and shrink according to the needs of the clients with much less financial pressure than the traditional business model.

Under the new business model, each independent contractor (or freelancer) takes only the projects that he or she is best-suited to perform and at the same time gains the benefits of being self-employed. We still have two employees that handle the coordination, billing and other administration tasks. My clients, who prefer to talk directly with me and get my input and feedback, are happy to hear that they’ll once again have the opportunity to sit down with me at a strategic meeting and talk personally about a campaign, a Web site or a design project.

I’m optimistic about the future. I believe this model will prove successful for us, for our clients and for our independent contractors. It will improve the relationships we have, the work we do, the experience our clients have with us, the collaboration of our teams and the satisfaction we all get from a job well done.