Is Your Agency a Practice or a Business?
By Mike Carlton
Vernon C. Kenny, MD
When I was a kid, Doc Kenny was our family physician.
His office was over a hardware store in our village. When I had an ear-ache or it was time for a vaccination, mom would send me off to see the doctor. I’d trudge up the stairs to his office with the five dollar bill she had given me to pay him for the visit.
Although he was a lone practitioner, Dr. Kenny took good care of me and my family. As well as many of the other members of the community.
More Than a Professional Relationship
Dr. Kenny was deeply committed to our small town. He was highly respected. And very approachable. Not just as a physician, but as a friend and neighbor, too.
For a while during their high school years my older sister dated Dr. Kenny’s son. I remember how cool it was when he showed up for her in his dad’s big yellow Buick convertible. Boy, would I have loved to have a car like that some day!
The day my father had a fatal heart attack, Dr. Kenny was at our house almost as fast as the rescue squad. When it was apparent that dad was gone, Dr. Kenny sat in the living room for hours consoling mom while they reminisced with each other about dad.
That sort of personal attention wasn’t unusual. It was just the way he treated all his patients and their families.
Dr. Kenny lived a good life. When it came time to retire, he personally called his patients and told them of his plans. He offered to not only turn over their records to whatever new physician they chose, but to individually brief that physician on his opinion and previous treatment.
That done, he quietly closed his office and moved to Florida.
A Different Paradigm
Today, my health care is in the hands of The Cleveland Clinic. Probably one of the most highly acclaimed medical systems in the world.
The Cleveland Clinic was founded by George W. Crile, MD. He and Dr. Kenny lived in the same era. But his vision was quite different.
Dr. Crile set out to create a world class medical facility. His mission was to provide patients (lots of them) with a scope and quality of health care services unheard of in his time. His focus was on building the enterprise.
His dream was realized. And it has succeeded him brilliantly.
Each year I go for my routine check-up. Everything is coolly clinical. Most of the people involved, with the exception of my primary care physician, I have never met before. And it seems like there is a different doctor and a couple of technicians for each part of my body. Most comprehensive. Highly organized. And very, very professional.
From a technical standpoint these folks clearly know what they are doing.
But, there is little bond with the team of physicians, nurses, technicians, etc. who are providing that care. I am just another of a myriad of faceless patients they deal with each day. And while each of them is undoubtedly extremely proficient at their particular specialty, there is scarce human connection.
It appears that physicians at The Cleveland Clinic are like interchangeable parts in a huge (36,000 employees) and very complex machine. Each is quite good. And each is quickly and easily replaceable.
Unquestionably, the technical quality of care they provide is superb. But at the same time, the human quality of their care is far less satisfying than what Dr. Kenny provided.
Which Model is Better?
Neither is better. Neither is worse. Each approach has its distinct advantages. And each has its just as distinct disadvantages. Each provides its patients with generally satisfactory results.
The differences are simple. Dr. Kenny had a practice. The Cleveland Clinic has a business. Dr. Kenny’s practice ended when he retired. The Cleveland Clinic will thrive long after any of its current physicians.
Each model exists because patients have different wants and needs. And because physicians have different wants and needs, too.
In this world of choices, it is as simple as that.
What Does this Have to Do With Advertising Agencies?
Agencies, like all professional service providers, are either a practice or a business. Or somewhere on the continuum between. Knowing where you are, and where you want to be can make things a whole lot easier. A whole lot more fun. And, a whole lot more rewarding.
That Leads to the Question
Is your advertising agency a practice? Or is it a business?
On the surface this may sound like a silly question. An initial response might be, “Of course we’re a business. We’re incorporated as such.”
Yet the legal trappings and outward appearances have little to do with providing an accurate answer to this question. Being crystal clear on the correct answer is far more important than it may initially seem.
Because your life satisfaction, both now and in the future, hinges on it.
First, let’s look at what we mean:
1. A practice is an enterprise in which the revenue stream is closely connected with the activities of its leader(s). That revenue stream will quickly dry up without those individuals.
2. A business is an enterprise that can continue to thrive without its current leader(s). Its revenue stream is, or quickly can be, independent of those individuals.
Why is This Important?
It is an unfortunate truth that many agency owners think that their agency is a business, when in fact it is a practice. This can lead to all kinds of problems. Not the least of which is the almost unconscious confusion it causes for agency staffers.
And for the owners, it can create serious disillusionment. Particularly when that leader is seeking to merge, sell or retire.
For the fundamental fact is that a business has enduring value in the marketplace. Most practices do not.
The Acid Test
Ask yourself what would happen to your agency’s revenue stream if you (and your contemporary partners) were suddenly no longer involved? Leadership would immediately pass to others. Others that may not have the knowledge, experience, relationships, skill and drive that you do.
An honest answer to this will quickly tell you if yours is a practice or a business. Or where it might be on the continuum.
Vive la Difference
Now wait. Don’t misunderstand. There is nothing wrong with being a practice. Nor is there anything wrong with being a business. They are just different. And require vastly different qualities and contributions from their leaders.
Typically, agencies start as practices. They are usually driven by one (or no more than a few) passionate entrepreneur(s). In time, all come to a fork in the road. Some evolve into businesses. Many do not. There are reasons for this. Understanding these reasons, and embracing a self-selected proactive plan makes success much easier, and life a lot less frustrating.
It starts by understanding which you are today. Which you would like to be. And what will be necessary from you as leader to achieve your desired outcomes. This insight should come from conscious, thoughtful introspection and decisions.
The Plusses and Minuses
Let’s look at both models more closely.
A practice can be a great way to live. Carlton Associates is a practice. It is exactly what I want. There is enormous freedom and independence in a practice. The leader can set the tone, the style, the size and the pace of the enterprise. The passions, the vision, the values, the goals are all easily controlled. A practice can do what the leader wants it to do. And not do what he doesn’t want it to do.
In a practice, the leader answers only to his own conscience.
In addition to all the psychic rewards, a practice can be as financially rewarding as a business. Or even more so. Thus, quality of life can be exceptional.
Think of Dr. Kenny. His focus was entirely on his patients and their families. He contributed to his profession and to society. Enjoyed professional and personal respect. Had a strong family. He lived well.
In many respects he had it all. Not a bad way to live a life.
But from a financial standpoint, his ability to generate wealth was directly connected to his work. When he retired, his practice had no residual value. No brand equity. There was little to sell that might fund his retirement.
Nor a booming enterprise that he could bask in the glory of. Or leave an ongoing brand legacy that history could attribute to him.
A business too can be a great way to live. There is enormous satisfaction in guiding an enterprise from birth through all of its growing pains to a point where it no longer needs its founder. There is a certain selflessness in this.
Dr. Crile’s entire professional life was focused on creating an outstanding health care system. His biography describes it as “a medical practice on an industrial scale.”
But grooming an organization for this kind of growth and self-sufficiency requires a different leadership mindset than a practice. There must be a continuing focus on the enterprise that surpasses focus on the craft.
The benefits of building a business are clear. Not only does it provide the psychic rewards of creating an enduring enterprise, it also can have significant residual financial rewards. The enterprise has value that will outlast its founder.
There can be great satisfaction in building a business. This combination of psychic and economic rewards can nourish and support a very good life.
The Role of Indispensability
Within an advertising agency the key differentiator between someone leading a practice and someone building a business is their indispensability.
A practitioner usually feels a sense of indispensability in the day-to-day craft activities of the firm. He is usually very highly skilled in the craft, and personally touches much of the work. He is good. And very personally involved. And the benefit of this personal involvement is valued by clients and staff alike.
But the flip side of this benefit is that others in the firm can tend to defer to his thoughts and personal leadership. They may hang back. And as a result often do not fully develop their own craft skills. They allow themselves to become subordinate to their indispensable leader. This usually isn’t a happy situation for anyone.
That sense of indispensability can make the leader a prisoner of his own practice. Making it difficult to grow past his personal span of control. And leading to higher than desirable staff turnover.
It is not unusual for a strong practitioner to say, “I can’t find good people so I have to do it myself.”
The builder of a business, on the other hand, usually follows a course of planned dispensability. First, she will set a clear and stable vision and values for the firm. As well as fostering the key elements of the culture.
With those components embedded, she consciously and continuously seeks to work herself out of a job. Constantly pushing and prodding others to step up to higher levels of self actualization, so that their craft, leadership and management skills can more fully blossom. She becomes more of a coach and mentor than a doer.
Her objective is clear. She wants to build the scope and scale of the enterprise. And knows that accomplishing that requires a strong, entrepreneurial tier of second level leadership. In fact, ongoing leadership development frequently becomes a mantra throughout the entire firm. And talent is attracted and remains largely because of the opportunity each individual has to grow professionally.
In her mindset, the work is not the end in itself. It is rather the means to the end. And that end is in the quality, reputation, growth and strength of the enterprise.
She is the orchestrator that makes that happen. But not necessarily the star performer.
This can all lead to an environment in which the quality of the work is excellent and the professionalism of the staff is superb. Yet the personal bond with clients and staff may be a less important factor.
What to Do If You’re Not Where You Want to Be
If your answer to the question tells you your agency is where you want it to be, great. Consider yourself very fortunate. Things are in sync. Your likelihood of psychic and financial reward is great. Life should be good.
However, if you are not where you want to be perhaps it’s time for some serious introspection.
For example, if in your heart you get greater satisfaction from practicing the craft than you do from building the enterprise, maybe its time to rethink the size and scope of your agency. Has it become a business, or is headed there, and yet you really yearn for the days when it was clearly a practice? Do you feel you are becoming a captive of your own organization?
Conversely, if yours is a practice and you would like it to become a business the actions you should be focusing on are clear. Building the enterprise so that you can eventually become redundant must take high priority. Sometimes at the expense of craft ego.
One thing is certain. You can’t be both simultaneously. Trying to do so, either consciously or subconsciously, is a sure path to frustration and disenchantment.
It is Up to You
One of the wonderful things about advertising agencies is the freedom their leaders have to shape the vision, values, scope, size and direction of their firm. It always troubles me to hear an agency leader say, “My work is not fun anymore.”
That is a terrible waste. Life should be enjoyable. And so should work. And if it isn’t, it should be changed. And in the agency world that is fairly easy to do.
Your agency should be in full alignment with your life interests.
There is nothing wrong with an agency that is a practice. And there is nothing wrong with an agency that is a business.
What is wrong is being one when you would really be a lot happier being the other.