How to Avoid Over-Servicing Clients in a 24/7 World

Have you ever worked on the weekend? Or fought your way through a long email at 8 p.m. on a Tuesday?

Have you done additional work for a client, even though you knew you couldn’t bill for it?

Odds are you’ve overserviced before. And you’ll probably do it again.

A Bit of Overservicing History

At some point — no one can say for certain when — in the history of sales, someone had a brilliant idea. What if, instead of just telling people about a product or service, you demonstrate it? In the era of the door-to-door canvasser, this turned into giving out little “freebies.” A vacuum cleaner salesperson might clean a portion of your floor to build trust in his wares; an Avon rep might give out free samples or even do your makeup for you.

Fast forward to today, and you’ll find digital agencies, consultants, and PR firms doing their own version of this dance: working for free.

What Happens When You Over-Service?

Performing free, out-of-scope work that should otherwise be billed, has a number of negative consequences:

1. Limiting your employee’s ability to work on other (billable) projects
2. Creating impossible client expectations that cannot be met over time
3. Reducing employee utilization and profit margins

Remember, when your employees are over-servicing clients, they are working for free — but you are still paying their salary.

How to Avoid Over-Servicing: Steps You Can Take Now

The good news is that there are a number of tried and true ways you can help your team reduce over-servicing. Some are simple, some take a little bit of work, but all of them result in a major increase in profitability.

Measure Employee Utilization

Employee utilization is one of those concepts that sounds more confusing than it actually is. Simply put, employee utilization is the measurement of how effective your employees are at billing for the time. If someone works 20 hours and bills 10, then they have an employee utilization rate of 50%. This, of course, begs the question: What should my utilization rate be? For employees who are not in management or developing new business, their utilization rate should be 90%.

By measuring employee utilization, you can see which employees are delivering billingable hours and at what frequency. Low employee utilization rates could mean a 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 — overservicing!

Set Boundaries with Your Clients

This is easier said than done. Especially during the first few months of a new client engagement, where you are often doing anything and everything to deliver exceptional results. But setting client boundaries early on allows you to push back against impossible demands or requests for out-of-scope work.

Before the project kicks off, review the deliverables, budget, and timeline with your client. And as work progresses, use your weekly check-ins to share progress, costs (if necessary) and hours worked with your client. A simple timesheet report should help you explain your efforts.

Educate Your Team

Employee turnover at digital agencies and PR firms is notoriously high.

Telling your account execs they need to increase billable hours or be at 90% utilization will only get you so far. Your team needs to know why these practices are important. By explaining the negative impact of over-servicing, you can help connect the dots between the work they do and the financial wellbeing of the organization. If your company has profit-sharing, offers performance-based bonuses, and/or a strong culture of camaraderie, your explanation will be much more effective.

Review Non-Billable Hours

What comes to mind when you think of over-servicing? Late-night rush jobs? Extra phone calls on the weekend? Helping out teammates but not recording the hours?

If any of those sound familiar, you’re on the right path. But this is another hidden side to over-servicing: Non-billable time. If employees are spending too many hours on work for which you are not able to bill, then their ability to take on new billable hours quickly becomes impaired. This is not to say that all non-billable work is bad. In fact, it’s quite the opposite. Non-billable hours are necessary for any high-performing agency to improve operations and build the right kind of culture.

Run a report on non-billable hours by task (or job, depending on the naming conventions you use in your timesheet system), and see which employees are spending more than 20% of their time on non-billable work. Then, remove any admins, salespeople, marketers, etc., and see what you come up with. If there is anyone on this list who is not supposed to be spending the bulk of their time managing people (as opposed to billing), you’ve got an issue.

So, how do you change an employee from predominantly non-billable to billable hours? That’s an issue we’ll tackle in another post.