Agency Profitability Hinges on Operational Clarity and Talent Alignment

This conversation with Melanie Chandruang, founder of WeConsult, offers a crucial, behind-the-scenes look at the operational bedrock of creative agencies. Beyond the surface-level pursuit of growth, Chandruang meticulously unpacks how fundamental operational health--specifically the alignment of services with personnel, rigorous financial oversight, and standardized workflows--directly impacts profitability and reduces the pervasive chaos that plagues many agencies. The non-obvious implication is that true readiness for advanced tools like AI isn't about adopting technology first, but about building a robust, documented operational foundation. This insight is vital for agency owners and leaders who are either struggling with inefficiency or looking to strategically leverage new technologies. By understanding these deeper systemic connections, they can gain a significant advantage in navigating the evolving agency landscape, moving beyond reactive problem-solving to proactive, sustainable growth.

The Perilous Pursuit of "Right People, Right Seats"

The persistent challenge in agencies, as highlighted by Melanie Chandruang, isn't just about filling roles, but about ensuring those roles are perfectly matched to the agency's evolving service offerings. This isn't a simple HR problem; it's a strategic operational imperative. When an agency pivots or expands its services--a common occurrence in the fast-paced creative sector--the existing structure can quickly become misaligned. A designer might suddenly be expected to manage social media strategy, or a content writer might be tasked with SEO optimization, simply because there's a gap.

"I think that's first and foremost, number one issue that a lot of agencies have is, do we have the right people and the right skill set to own and have accountability over the responsibilities that are needed to deliver excellent services for our clients?"

This misalignment creates a ripple effect. Team members can become disengaged, feeling unqualified or overwhelmed. Client work, consequently, can suffer. Chandruang’s approach involves meticulously mapping services to responsibilities, often using frameworks like RACI (Responsible, Accountable, Consulted, Informed). This structured analysis reveals not just who is doing what, but whether the right skills are in place for the agency's current and future service portfolio. The consequence of neglecting this is a slow erosion of expertise and efficiency, masked by the busy-ness of day-to-day operations. For an agency owner, failing to address this foundational mismatch means potentially investing in growth that is built on shaky ground, leading to higher error rates, client dissatisfaction, and ultimately, reduced profitability.

Financial Ratios: The Unseen Engine of Operational Health

Many agency owners, Chandruang observes, focus on the top-line revenue, assuming that more sales automatically equate to a healthy business. However, she emphasizes that digging into financial ratios is where the true operational story unfolds. These metrics act as a diagnostic tool, revealing inefficiencies that are otherwise invisible. For instance, a salary-to-revenue ratio exceeding 50-60% can signal an overstaffed or inefficient team structure. Similarly, operating expenses eating up more than 25% of revenue leaves little room for profit.

"The number one is like, what is the net profitability of that agency and looking there. There's some other ratios that I then dig into that I feel like a lot of agencies don't, because they're just looking at their finances and saying, 'Are we making money? Great. Are we not? Okay, we need to sell some more.'"

The danger here is that operational chaos--poor project management, scope creep, inefficient resource allocation--directly translates into these unfavorable financial ratios. When projects run over budget because of poor planning or execution, that cost is absorbed, impacting profitability. When account managers are stretched too thin, their utilization rates drop, and their capacity for strategic growth is diminished. By monitoring metrics like salary-to-revenue and operating expenses to revenue, agency leaders can identify the downstream financial consequences of operational breakdowns. This data-driven approach allows for proactive adjustments, preventing minor inefficiencies from snowballing into significant profit erosion. It’s about understanding that financial health is not an outcome of good operations, but a direct reflection of it.

The AM/PM Divide: A Strategic Choice, Not Just Structure

The debate over combining Account Manager (AM) and Project Manager (PM) roles versus splitting them is a classic tension in agency operations. Chandruang’s perspective has evolved: while a combined role might seem more cost-effective initially, it often creates an unsustainable burden on individuals and leads to conflicting priorities. An AM's success is often tied to client satisfaction and growth, requiring a focus on relationships and strategic opportunities. A PM's success, conversely, is measured by project delivery, budget adherence, and timelines.

"If I can advocate for the two roles to be split, I will do it. If it financially makes sense for that agency, then I will recommend that they have someone that is a separate account manager and someone that is a separate project manager, just because again, they are looking at two different metrics of success."

Building an agency around "unicorns"--individuals who can excel at both--is not a sustainable strategy. The consequence of forcing individuals into this hybrid role is often burnout and a dilution of focus. An AM might neglect strategic client development to ensure a project stays on track, or a PM might push for aggressive timelines that compromise client relationships. Chandruang advises that if an agency's revenue and project volume can support it, splitting these roles creates clearer accountabilities and allows each function to specialize, leading to better client outcomes and more efficient project execution. This isn't just about headcount; it's about recognizing that distinct skill sets and focus areas are required for different facets of client engagement and delivery. The delayed payoff here is a more resilient, scalable, and effective agency structure, but it requires the upfront investment and strategic foresight to separate roles when financially viable.

Priming for AI: The Unseen Work of Standardization

The conversation around AI in agencies often focuses on the tools themselves. However, Chandruang pivots the focus to the essential prerequisite: operational readiness. An agency cannot effectively leverage AI for critical thinking or decision-making if its internal processes are chaotic and undocumented. The "AI-first" agency isn't built on adopting the latest software, but on a foundation of standardized workflows, clear documentation, and accessible knowledge bases.

"AI is only as good as the information going in. And if you don't have anything standardized, you're making the AI's job way harder than it needs to be in order to be able to clean up that data and to really make it useful for it to interpret."

The immediate benefit of standardization--creating process documents, templates, and a central knowledge repository--is improved internal efficiency and easier onboarding. The hidden, long-term consequence, however, is that this groundwork unlocks the true potential of AI and automation. Without it, AI tools might only automate existing inefficiencies or require significant manual data cleaning. Agencies that invest in this foundational standardization, even when it feels like mundane, unglamorous work, are positioning themselves for a future where technology can genuinely augment their capabilities, rather than just automating chaos. This creates a competitive advantage by allowing them to scale more effectively and deliver higher value with fewer resources, a stark contrast to agencies still bogged down in manual, undocumented processes.

Key Action Items

• Immediate Action (Next 30 Days):

  • Service-Responsibility Audit: List all agency services and the specific responsibilities required for each. Map these to current roles using a RACI framework. Identify any gaps in skill sets or accountability.
  • Financial Ratio Review: Calculate current Salary-to-Revenue (target 50-60%) and Operating Expenses-to-Revenue (target <25%) ratios. Analyze deviations and identify the operational drivers.
  • Knowledge Base Audit: Assess current documentation for core processes and services. Identify critical knowledge residing only in individuals' heads.

• Short-Term Investment (Next 3-6 Months):

  • Develop Core Process Documentation: Begin documenting key workflows and responsibilities identified in the audit. Prioritize areas with the most significant operational friction or risk.
  • Implement Utilization Tracking (if not already): Ensure accurate time tracking is in place to measure billable vs. non-billable hours, especially for AM/PM roles (target 55-65% utilization for AMs).
  • Define AM/PM Role Clarity: If roles are combined, clearly delineate responsibilities and success metrics for AM and PM functions, even within a single individual, to highlight the inherent conflict and potential for separation.

• Long-Term Investment (6-18 Months):

  • Strategic Service Design Review: Based on market shifts and AI impact, critically evaluate current service offerings. Identify areas where human expertise provides unique value that automation cannot replicate.
  • Pilot AI/Automation Tools (Post-Standardization): Once core processes are documented and standardized, pilot AI tools for specific, well-defined tasks to assess their effectiveness and identify further optimization opportunities.
  • Develop Career Paths: For roles like AM/PM, establish clear career progression frameworks to ensure long-term employee satisfaction and retention, addressing the "what's next?" question.
  • Consider Role Separation: If financial metrics and workload support it, begin planning for the separation of AM and PM roles to improve specialization and efficiency. This requires careful financial modeling and pipeline forecasting.