Have you ever worked over the weekends? Or struggled your way through a lengthy email at 8 p.m. on a Tuesday?
Have you done extra work for a client, even though you understood you couldn’t charge for it?
Chances are you’ve overserviced before. And you’ll presumably do it again.
A Bit of Over Servicing History
At some point — no one can tell for certain when — in the history of sales, somebody had a profound idea. What if, rather than just telling people about a product or service, you show it? In the era of the door-to-door representative, this turned into giving out small “freebies.” A vacuum cleaner salesman might clean your floor to develop trust in his wares; an Avon rep might give free samples or even do your makeover for you.
Fast forward to today, and you will find digital companies, consultants, and PR firms creating their own version of this dance: servicing for free.
What Happens When You Over-Service?
Offering free, out-of-scope work that should differently be billed, has many adverse consequences:
- Limiting your worker’s expertise to work on other (billable) projects
- Building impossible client expectations that can’t be met over time
- Decreasing employee utilization and profit margins
Remember, when your workers are over-servicing customers, they are serving for free — but you are still giving their salary.
How to Avoid Over-Servicing: Steps You Can Take Now
The good news is that there are many examined and true ways you can support your team overcome over-servicing. Some are easy, some take a little bit of effort, but all of them end in a major boost in profitability.
Measure Employee Utilization
Employee utilization is one of those theories that seems more complicated than it actually is. Simply stated, employee utilization is the estimation of how productive your employees are at billing for the time. If somebody works 20 hours and bills 10, then they have an employee utilization rate of 50%.
This, of course, hits the question: What should my utilization rate be? For workers who are not in administration or developing new market, their utilization rate should be 90%.
By regulating employee utilization, you can see which workers are performing billable hours and at what rate. Low employee utilization rates could determine the number of things: there is not enough billable work to be done, non-billable hours are appropriate for this type of employee (i.e., your VP of Business Development), or hours are being spent on free work — over servicing!
Set Limits with Your Clients
This is simpler said than done. Particularly during the first few months of a new customer engagement, where you are usually doing anything and everything to achieve exceptional results. But setting customers boundaries early on enables you to push back against impossible demands for out-of-scope work.
Before the project kicks off, check the deliverables, budget, and timeline with your customer. And as work proceeds, use your weekly check-ins to discuss progress, costs (if necessary) and hours served with your client. A single timesheet report should help you justify your efforts.
Educate Your Team
Worker turnover at digital agencies and PR firms is particularly high.
Telling your account execs, they require to increase billable hours or be at 90% utilization will only get you so far. Your team needs to know why these methods are important. By describing the negative consequence of over-servicing, you will be able to help connect the dots between the work they do and the monetary well-being of the company. If your business has profit-sharing, offers performance-based rewards, and a strong culture of sociability, your explanation will be much more effective.
Review Non-Billable Hours
What comes to thought when you think of over-servicing? Late-night rush projects? Extra phone calls over the weekend? Helping out peers but not tracking the hours?
If any of those seem familiar, you’re on the correct path. But this is another side to over-servicing: Non-billable time. If workers are consuming too many hours on work for which you can not bill, then their capability of taking on new billable hours soon becomes disabled. This is not to say that all non-billable work is wrong.
In fact, it’s quite the contrary. Non-billable hours are needed for any high-performing agency to better operations and form the right kind of culture.
Get a report on non-billable hours by the job, and see which workers are spending more than 20% of their time on non-billable work. Then, eliminate any admins, salesmen, marketers, etc., and see what you come up with. If there’s anybody on this list who is not supposed to be consuming most of their time managing people (as opposed to billing), you have got an issue.