March 22, 2012
Many remuneration agreements, be they project fees or retainers, are based on the head hour resources required to undertake the task multiplied by an overhead and profit factor.
But one of the key issues is setting a realistic scope of work and then guessing, predicting or even better, accurately calculating the human resources required.
We developed this methodology and refined the process to create the TrinityP3 Scope Monitor and Scope Calculator. This has been picked by TBWA and developed specifically for their clients in a model they call the Scope Manager.
Setting the baseline
The most effective model for developing resources against a quantified scope of work is setting the previous year as the baseline. The number of projects for that year and the number and type of head hours and associated costs are a known quantity. Accepting that the head hours are correct, this becomes the baseline from which the following years’ scope of work is compared.
Setting the scope of work
Predicting the advertising activity for some advertisers is easy and part of their normal budget planning. But for other advertisers it is much more difficult, with the need to react to the market place or difficult trading conditions making predictions for the coming year largely inaccurate.
If you cannot accurately set the scope of work then you may be locked into a retainer that is too high or too low. Either way it becomes expensive with you paying too much or not paying enough to maintain the relationship with the agency.
Adjusting the head hours
Some advertisers have opted for a system of an adjustable retainer based on the number of projects being undertaken. This method requires the scope of work undertaken to be reviewed either monthly, quarterly or half yearly based on the level of activity to ensure the number of hours does not exceed the amount agreed under the original contract and to adjust the payment accordingly.
The problem with this method is that it relies on the agency keeping accurate and detailed time sheets in the style of law and accounting firms who account for every 15 minutes. This can lead to unwanted disputes over the efficiency and effectiveness of the agency.
Using the industry benchmark
Using the industry benchmarks we have collected over the past 12 years, TrinityP3 has developed a model that can predict the human resources required year on year across account management, strategy, creative, electronic, digital and print production.
Based on creative outputs, such as television, digital, print and radio commercials it allows advertisers and agencies to not only calculate the resources required against the volume and complexity of the scope of work mix, but to measure the impact of changes in the scope of work on the agency resources.
How do you define your scope of work? And more importantly how do use this to calculate the agency resources required?