The Branded Free Agent Hub

post # 53 — April 20, 2006 — a Managing, Strategy post

This question was submitted by email:

I own and run a PR consultancy with 24 professionals. In the 13 years I’ve been in business, I’ve lost 7 of my best people. They either open up their own shop or move on to a client. In order to retain the great people, I tried offering bonus compensation (7 yrs ago) and opening up the chances for sharing in the ownership (3 yrs ago). Despite a great culture within the firm, I still had departures.

Now I’m reflecting on the idea of a Branded Free Agent Hub, a place where the best senior Communications/PR talent is exclusively pooled together, but where the senior professionals work independently (and even from remote locations) for their own clients. It could be somewhat like a cost sharing model found in some law firms.

The professionals could work, live and nurture the relationships with their respective clients at free will like an entrepreneur. They could work as flexibly as they wish. The hub would provide all the benefits of a large professional service firm – stuff we already have in place like coaching, online project management tools, service offerings/packages, service innovation, a strong brand, administration, billing, reverse seminars with clients, sharing of knowledge with peers……you name it).

The professionals would bill 100 per cent of their time to their accounts. In return, the hub would keep a percentage of the revenues, say between 10 and 20 percent. The hub would fly under the flag of the brand I’ve built in the past 13 years.

So what’s in it for the client? I presented the model to four of my long time clients. The model is not really relevant to them. They say as long as they can keep the relationship with their consultant and as long as the hub secures the defined service level they’d buy in.

And what’s in it for the professional? I talked to some inside and outside peers. They think I’m crazy. They say I’ll lose business and above all, I’ll lose the professionals who may be savvy experts but not so good in relationships. They could be right. My math tells me that out of the 24 staff I’d have only 6 or 7 who would go for the ride. A ride that, I think, would be beneficial to the client as well as for the professional.

Is the Branded Free Agent Hub a professional service firm (PSF) model that’s built for the future?

Boy, this question raises a lot of profound issues. Let me give some quick conclusions, inviting other people to jump in.

First, I have heard other people propose models like this. In fact, over the years, I have been invited to join in on one or two. (I declined.) I have NOT heard from – or about – those people ever again, so I don’t think the model has had much success in general.

The single best example I know of where it has worked is with the EDGE group (which includes Patrick McKenna, my co-author on the book First Among Equals). They have an association of consultants who all advise law firms – each person is independent, but they work together to share knowledge, do joint research, publish a shared journal and do other activities.

I think it works because they all do related things and have many opportunities to work together and learn from each other. If, in your model, the senior professionals did very different things, I suspect the Free Agent Hub would be very unstable. Maybe Patrick or his colleagues would like to join in the conversation here on which of the activities work best for them.

Second, I doubt whether the hub will justify a “commission” of 10 to 20 percent. In many countries and in many professions there have been both informal networks of firms and ‘aggregators’ – companies who buy up smaller firms and try to add value by providing the network benefits you suggest. The trouble is that the benefits are really worth paying a lot for. Let me give you a quick comment on each one on your list:

Coaching – “I’m from headquarters and I’m here to help.” (No, not worth a lot – I can get input from my peers in the business community without paying a percentage off the top.)

Online Project Management Tools – Maybe this was scarce 10 or 15 years ago, but today there are so many vendors offering good software for a variety of things that it’s unlikely to be an ongoing benefit. Maybe as a one-time start-up I could use advice on these tools, but I’m not going to pay an ongoing premium to the hub / network / aggregator for their proprietary versions.

Service Offerings / Packages – Yes, by partnering with other individuals or firms, you may be able to offer a wider range of services, or a new offering that combines in one project a diversity of skills. As I argued in True Professionalism, the market recognizes an advantage in creating something new, but doesn’t consider a broader “menu” as much of an advantage if each of the dishes on the menu are available to them in the market anyway.

Service Innovation – It’s not clear to me that this is a guaranteed result of a hub of independent entrepreneurs. Yes, if they all agree to fund the same, focused research projects, then they can do more together than they can independently, but that requires true joint decisions and joint commitments, which not all hubs / networks / aggregators or firms achieve.

A Strong Brand – I’m a skeptic that a brand is what the individuals get from the hub. I think of it in reverse – if the individuals all live to a high standard, then the hub will have value in the brand (which, of course, is more than name recognition.) Exactly as your clients said, the brand value is in the achievement of consistently high standards. Fully-owned firms rarely achieve this, so I have my doubts about whether a loose band of individualists will.

Administration and Billing – The benefits here are real but very small. Not worth giving away freedom and autonomy to get this.

Reverse Seminars with Clients – If by banding together you can do more joint listening to and learning from the clients, then this could be a real benefit.

Sharing of Knowledge – Very beneficial if real and on-going.

My bottom line is this – I think all the topics I have just discussed need to be addressed whether you are an integrated firm OR a hub or network or aggregator. I don’t think structural form is the issue, but whether or not you have the processes in place to capture the “Let’s benefit by doing things jointly according to a common philosophy with mutual commitment.” If you have that, there is value in your association together. If you do not have that, then being a hub (or anything else) won’t solve your ‘departures’ problem.

The right response to turnover and mobility problems is not (just) pay schemes. Instead you (and everyone else) must address the question of why your firm exists – as a firm. What value does the organization add above and beyond the individual talents of the individuals?

I discussed these questions in How Firms Should Add Value, chapter 11 of True Professionalism and also raised them in my article Are Law Firms Manageable?

There’s a lot more to say on these issues, but let’s see what others in the blogosphere say first.