Employee Retention: A Key Metric for Digital Agencies

There are thousands of digital marketing agencies out there, and countless more that provide digital marketing services as part of a larger overall offering. We’re not exactly suffering from a shortage of digital agencies in the world. In some ways, this is great news for digital marketers — lots of agencies means a vibrant job market. Unfortunately, as I talk to marketers in our industry, especially those who are just a year or two into their careers, one thing becomes clear: a lot of these agencies really suck to work at.

A cursory search on Glassdoor reveals a litany of complaints from current and former employees of digital agencies across the US. Common themes include too many clients, not enough time to get results, bad management, no on-the-job training, high turnover — the list goes on. If you’ve spent much time working in a digital agency in your career, chances are at least some of this sounds familiar.

Not only are these agencies creating negative experiences (and high turnover) for their employees, they’re also churning out terrible work. I can’t tell you how many times I’ve taken on a new client and found that their previous agency was using outdated techniques (like focusing on keyword density or PageRank sculpting); engaging in shady practices like using PBNs for link building; or — the worst and, also, the most common — charging a high monthly fee for “services” that boiled down to a canned, auto-generated report on meaningless metrics (like total page views and nothing else), with no further analysis or action items in mind.

As we’ve built UpBuild, we’ve tried to commit ourselves to not only delivering the best possible work and highest value to our clients, but also to being the best possible employer. Here’s a little secret I’ll share with you: it is because we focus on being a good employer that we are able to deliver the highest value to our clients.

Employee Retention: The Most Important Business Metric You’re Ignoring

Taking a look at Conductor’s Inbound Marketing Job + Salary Guide for 2019, we can see that people with the title “SEO Specialist” or “Content Specialist” tend to stay in those jobs for about 2 years; the same is true for SEO Strategists or Content Strategists (this bears out with what I’ve seen in my own career — a lot of people I know tend to wind up in a new role every 18 months to 2 years, and I was the same way before I came to UpBuild). Average salary data for SEO and content marketing roles tends to be pretty all over the place, because someone’s experience level will come into play as much as, if not more than, their title when it comes to starting salary. 

Why does this matter? Because digging into salary data gives us a big clue as to why digital marketers might be spending 2 years or less in a given role. According to PayScale, for an SEO Specialist with 0 years of experience (i.e. entry-level) living in Los Angeles, the median salary is $37K.

Two years later, the median salary for that same SEO Specialist living in LA jumps up to $53K:

I’m personally a big proponent of growing your own SEOs. Hiring smart people right out of college and training them in SEO seems like a winning strategy: the agency gets to hire people without worrying that they have any bad SEO habits, and the employees get to learn valuable skills on the job, all while only costing the company an entry-level salary. In practice, however, this often means that SEO agencies end up hiring smart people right out of college, teaching them valuable skills on the job, and then seeing those smart, well-trained people churn out to go work somewhere else as soon as they’ve leveled up their skill sets.

What’s an agency to do? Most companies probably aren’t prepared (or willing) to give 43% raises at the 2-year mark. How can you keep your best people in their roles, when they could easily be making more money somewhere else?

Fortunately, compensation usually isn’t the reason people leave their jobs; a lot of people would rather stay in a job they enjoy than go through the stress and uncertainty of job hunting, even if that means they’re not constantly maxing out their earning potential (and those who do make maximizing earning potential a top priority are probably going to job-hop regardless of what their employers do, so we can’t worry about them).

A 2017 Work Institute report on retention found that only 9% of survey respondents listed compensation and benefits as their top reason for leaving a job; it came in 4th on the overall list of reasons. The top 3 reasons for leaving a job, as listed by survey respondents, were:

  • Career development (22%)
  • Work-life balance (12%)
  • Management behavior (11%)

In a nutshell, this means that if you provide your employees with clear advancement opportunities, don’t pile more on their plates than they can handle, and make sure managers aren’t being jerks to their direct reports, you can retain employees even in markets where you can’t pay them at the top end of the salary range for their roles.

Have You Tried Not Working People into the Ground?

Let’s say you have an SEO Specialist with 10 clients. Doesn’t seem like too many to handle, right? If she’s working 40 hours per week, that’s about 160 hours per month, or 16 hours per client per month. You can do a lot with 16 hours a month!

Unfortunately, this only works out to 16 hours per client per month if your SEO Specialist never goes to any internal meetings. Or checks her email. Or uses the bathroom.

You are never going to get your employees to 100% billable time, and a good employer wouldn’t want to. You’re especially never going to get your employees to 100% billable time if you also expect them to attend trainings, participate in a weekly team meeting, or have regular one-on-one meetings with you, their manager — which you probably do. I find that a decent rule of thumb is to expect that someone will spend 30 minutes of unbillable time for every 60 minutes of billable time. That’s ⅓ of their work time spent on unbillable activities.

So our SEO Specialist with 10 clients really has room for about 107 billable hours a month. This makes for 10.7 hours per client per month. Now, let’s assume she does a monthly report for each of her clients; let’s assume these reports take her about 2 hours each. Let’s also assume that she’s meeting regularly with her clients — a bi-weekly 30-minute call with each client every month sounds about right. Presto! Your SEO Specialist is down to less than 8 hours per client per month.

This already puts your SEO Specialist in a tough spot; depending on the client, it can be difficult to achieve substantive SEO results with 8 hours of work per month. But what about when someone leaves your organization? Your agency might not be able to hire a replacement right away, so clients get distributed around to the rest of the organization while you’re down a head.

Now your SEO Specialist has 12 clients, which boils down to about 9 hours per client per month; with meetings and reports, she’s only able to spend about 6 hours on each of her clients every month. When work starts piling up like this, the only way for her to survive is to under-serve some of her clients (maybe only give them a report and no other work that month, or dash off a deliverable in 1 hour and call it 5) and hope they won’t notice.

This is not news. This is just math.

This all-too-common scenario is a big part of why employees churn out of digital agencies; they get burned out, and it sucks to feel like you never get the opportunity to do good work for your clients. It’s also why agencies end up cranking out shoddy SEO work — with only 6 hours a month for each client, it’s a lot harder to customize reporting to a client’s needs or provide any useful analysis for them, let alone do some of the time-intensive technical deep dives that good SEO often requires.

Are Your Metrics Making You a Bad Employer?

As a business owner, you’re focused on improving a core set of metrics that are key to the health of the business. This might be things like:

  • Total revenue
  • Profitability
  • Lead volume and quality
  • New sales
  • Etc.

You can’t afford not to focus on these core success metrics, but they can sometimes mask problems in the bigger picture. Salaries are usually one of a digital agency’s biggest expenditures, so optimizing for profitability often means maximizing the number of client hours per employee and clients per person. This can make those bottom-line numbers look great, but has some unfortunate side effects: less attention per client, which can create client churn, and overworked employees, which leads to employee turnover.

Employee turnover has a lot of explicit, easily-tracked costs associated with it, which a careful examination of your balance sheets will make evident. This includes HR expenses, such as time spent on offboarding, interviews, hiring, and paperwork; it also includes direct and indirect team costs such as new materials and equipment, time spent interviewing and training new hires, the extra work when the team is down a person (as discussed above), and lower work quality from an overextended team.

All of this time and money spent already adds up, but high employee turnover also comes with a set of hidden costs. These are harder to quantify and track, but they’re definitely a problem:

  • Performance differences: A new team member won’t be able to immediately produce work at the quality of a seasoned employee. This affects the overall quality of your services.
  • Lost business: There will come a point where your clients start to say “I’ve been your client for 3 years and have had 4 different people work on my account,” and bounce.
  • Lost institutional knowledge: When most of the people on your team have been there for 2 years or less, it’s difficult to build a deep understanding of your agency’s processes — or of your clients.
  • Lower productivity & morale: As employee churn rate increases, the rest of the team is constantly carrying more than their fair share of the client load. It can start to feel like they’ll never get back to a manageable workload, which only further increases churn.
  • Damaged reputation: Digital marketing is a small world. If the above factors start to damage your agency’s reputation as a provider of quality services, it can be hard to come back from that blow.

Relationship-Focused Metrics for a Relationship-Focused Business

Successful agency work is about relationships: not only establishing collaborative, trusting relationships with clients, but also building a team whose strong relationships with each other result in innovation, cooperation, and knowledge sharing. To succeed, an agency needs to invest in both sides of the client/employee relationship. In addition to the core business metrics listed above, a relationship-focused business should be looking at things like:

  • Lifetime customer value
  • Recurring revenue and run rate
  • Client retention
  • Employee retention

Focusing on employee retention helps you get a flywheel going. Longer employee tenure means higher team-wide expertise — your rock stars aren’t jumping ship at the first opportunity — and stronger client relationships, because your client stakeholders have been working with the same person the whole time. This in turn allows your agency to deliver more value to your clients; since you’ve got such an experienced, specialized team, you can charge a higher billable rate and be confident your clients will still see an ROI on that investment. This grows your recurring revenue, which allows you to pay your employees more, which leads to longer employee tenure — and so on.

Happy Team, Happy Clients

At UpBuild, we assign a hard cap of 4 clients per person. At 107 or so billable hours per month, that’s an average of 27 hours per client per month for our Senior Marketing Strategists. You can do a lot of SEO in 27 hours per month, and even more when more than one person works on a client’s account, which is usually the case here.

How can you make this work for your agency?

  • Close bigger deals. Stop relying on a whole bunch of small deals to hit your revenue goals; instead, focus on clients who have the time and budget to work with you to build something great.
  • Know how small you can go. Make sure your sales team is clear on how small a client/budget you can work with and still keep that attention/client metric nice and high. Or, like Zato Marketing does, have a separate service line for smaller budgets that allows you to help them out without breaking your team to do so.
  • Hire proactively. Don’t wait until your team is carrying an entire person’s worth of extra work to start the process. Stay keyed in to your sales pipeline and invest in forecasting so you can understand when you’re likely to need another person, and start the hiring process early enough that you already have that person in place when you need them. This has the added bonus of not immediately burdening a new employee with a full client load before they’re even fully in the door.
  • Ditch the account management layer. When you give your services team enough time to really build relationships with clients, you can rely less on account managers to filter messages through to those clients. It turns out clients actually love this! One of UpBuild’s top selling points is “You will be talking directly to the person who’s doing the work,” and our prospects are usually delighted to hear that.
  • Don’t pay salespeople on commission. If you’re going to be turning down deals that are too small or not the right fit, it’s not really fair to pay your sales/business development team on commission. Instead of having a full-time salesperson, try reducing someone’s client load and having them do business development part of the time. Bonus: you have someone who does the work selling the work, which reduces the risk that you’ll end up selling a deal you can’t actually fulfill or otherwise setting unrealistic expectations during the sales process.
  • Be very clear about what you do and don’t do. Cultivate an expertise and resist the temptation to be all things to all people. Don’t be that agency that hires one social media person and immediately starts selling social media packages to every single one of their clients.
  • Partner strategically. Knowing what you don’t do opens you up to a lot of opportunities for strategic partnership. Why hire that one poor overloaded social media person when you can find a kick-ass social media agency and join forces? You can even get some passive revenue going with a referral program — chances are, your partners will be happy to return the favor.
  • Resist the whale. If one client is going to make up a significant portion of your revenue, you’ll be totally screwed when they leave (and you will lose every client). Understand what that percentage of revenue is for your business, and make sure all your forecasting sheets light up red if a single client hits that threshold.
  • Have your team’s back. Be crystal clear internally about what client behaviors you won’t tolerate, and have a well-defined system for firing problem clients. Employee retention is, in this case, way more important than client retention.
  • Forget the foosball table. I mean, sure, have one if you want — but invest in giving people benefits that actually make their lives better, like 401(k)s, parental leave, generous PTO, and great health insurance. Nobody’s going to stay working for you just because of that foosball table.
  • Have clear paths to advancement. Don’t want people to leave after 2 years? Make paths to advancement clear and check in with your team regularly about professional development. When you do promote people, base their new salary on market comps for the same role, not on a percentage of their existing salary.
  • Automate your processes. Don’t waste your clients’ money spending hours every month on reports. Spend time building them customized, automated dashboards, so they can see their metrics whenever they want.
  • Implement feedback mechanisms. Use a tool like TINYPulse to get company feedback on a regular basis. Even if everything’s going well and the team is happy, regular feedback will help you spot problems early and address them before they become widespread.

Why Do We Even Care if Our Competitors Suck?

Why am I even telling you this? Wouldn’t it be better for UpBuild if most agencies kept burning through employees and clients at an alarming rate? Well, yes and no. As I’m fond of saying, if I hire a plumber to fix my shower and she doesn’t actually fix my shower, I don’t immediately jump to the conclusion that plumbing is a scam and doesn’t work. Unfortunately, businesses make that sort of assumption about SEO all the time. Bad, ineffective agency SEO gives us all a bad rap, and makes it that much harder for agencies like UpBuild to establish trust with clients who’ve been burned in the past.

Beyond that, though, I really believe in Betterment for our industry. I hope that agency owners will move away from the as-many-clients-per-person-as-possible model if for no other reason than that it sucks to work for a company that places so little value on one’s time. I’ve been really fortunate in my career to (mostly) work at places that took a little more care with their employees’ time, but I talk to so many SEOs a few years into their careers who are discouraged, burned out, and jaded about our whole industry. We owe it to ourselves to produce better work and be better custodians of the next generation of SEOs’ careers.

Alaina O’Connor

Senior Marketing Strategist

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