Back in 2000, I left a traditional public relations agency
in Newport Beach to start my own public relations practice. Establishing my company in the spare bedroom
in my house, my goals were simply to make as much money as I did in my agency
position as a senior account executive and live the “consultant life” of
working a few hours a week and spending the rest of the time on the golf
course. Things went as planned until I
became inundated with new business and made the decision to try and grow a
public relations agency.
Long story short, throughout the majority of the life of my
business, the company has operated in a virtual network structure out of the
third floor of my house. During a
four-year period of growth, I actually hired full-time staff and moved into
office space. And then with difficult
economic challenges from 2008 through 2011, I had to lay off all of the
employees and revert back to the virtual structure.
There are a number of advantages to running a service
business like mine using a virtual network of professional resources. According to Daft (2007), “one of the major
strengths is that the organization, no matter how small, can be truly global,
drawing on resources worldwide to achieve the best quality and price and then
selling products or services worldwide just as easily through subcontractors” (p.
118). Utilizing my network of subcontractors, I’m able to provide a full array
of public relations and marketing services globally without having to incur the
costs related to leasing office space, and paying the salaries and benefits for
an internal staff. By utilizing
senior-level public relations and marketing consultants, I’m able to provide
clients with a high level of service at a very affordable price.
As Daft (2007) noted, there are some significant
disadvantages to this type of structure including a “decentralization of the
network structure and the increased time spend managing relationship and
resolving conflicts” (p.120). Utilizing
the virtual network structure requires a lot more communication and greatly
complicates the communication between outsourced entities. Because the work being performed is under the
Integrity Public Relations name, the work of the consultants can make or break
the client/agency relationship.
Given the volatility in the economy, I have found that for a
service business like mine that has to compete in the global market, a virtual
network structure is the simplest, fastest, and most effective structure to grow
an agency that needs to adapt to constantly-evolving needs of our clients.
Daft, R. (2007). Fundamentals of Organizational
Structure. Organization Theory
and Design (9th ed.), (pp. 88-125).
Mason, OH: South-Western Cengage Learning.
Hi Ken,
ReplyDeleteYour business sounds very interesting and I can imagine the amount of guts it takes to break away and start your own company. I definitely understand your move to using consultants for a more cost efficient business, but I also can see the negative impacts that can have on your business. Consultants work under the name of your company without having the loyalty of a permanent employee and we all know how one bad apple can ruin the bunch (or one bad experience can ruin a company). How do you go about finding your consultants? How do you ensure that they will uphold the standards you have created for your company?
My organization has a functional organization structure, but for public relations, it seems like the network organization that you have created is best (Nohria, 1991). As Nohria (1991) said, "The main advantage of the network structure over traditional structures is its adaptability. The fluidity and ease with which network structures can be adapted also means that the network structure has the advantage of being fast and responsive to environmental demands." In the world of public relations, I assume that your environment is consistently changing. By creating a network structure, you can adapt quickly and efficiently for your clients and get the job done.
Ken,
DeleteYour story is fascinating. I am assuming that you were with your company long enough to learn most of the ins and outs of the business, but when building your own company did you have to do a lot of research? Did you know what a virtual network structure was or did your company just sort of evolve into what it is now? It seems that the virtual network structure works great for you! I am just interesting in hearing more about how to came to this style of structure.
Hi Cathryn.
DeleteThanks for your reply. Yes, one of the biggest issues for me is finding good consultants that I can trust, particularly because I allow them to interface with my clients. Since they work under my company name, they're considered by the clients to be part of my company.
I try to find my consultants through referrals. Because I place so much trust in my consultants, I rely on references from trusted colleagues who have worked with the consultants.
In this economy, one which is consultant-rich due to the failure of so many companies over the past few years, the consultants are motivated by job stability and money. The consultants are under the understanding that I can cut them for any reason, and with my typical consultant making between $85 and $125 per hour, they don't want to lose my business. I have high standards for the work coming from my company and they either meet the standards or they find work elsewhere.
It's not a perfect business model by any means, but it works.
Hi Megan.
DeleteI only worked in an actual PR agency for about a year and a half before going out on my own. In my mind, I had no choice because of the terrible ethics that my employer displayed. I didn't have time to do much research. I just figured I knew how to do PR and I'd just let a few colleagues know that I was going to venture out on my own.
I had business coming in before I even left the agency. Since then, I've made a lot of mistakes, but I've learned from each of them. Luckily, my reputation was strong enough to bring us through a terrible economy while many of my competitors were going out of business.
My company has gone through a few phases. I started out as a consultant. Then when a lot of business came pouring in, I decided to build an agency. I began staffing up with interns and fresh graduates with PR majors. The idea behind this was that I would teach them MY way of doing business so that I wouldn't have to hire anyone that had bad habits from other agencies. However, I began to realize that with the heavy client load, I needed more senior-level people to service my clients. Senior-level people are very expensive to hire ($125k+) so I started working with other consultants that I knew and gave them hourly pay to support my clients as-needed. This way, I'd get senior-level talent and they'd ultimately cost me less because they could get the jobs done faster than junior staffers.
When the economy got really bad in about 2008, I had to let all of my full-time staff go and I went strictly to an outsourced virtual team. The virtual structure has worked out great because even though I'm a very small business running out of my home, I have consultants around the world that are building my brand as a global marketing agency.
Ken,
ReplyDeleteIt's great to hear about your virtual business. I can totally relate. When I started my law firm years ago, I first employed the use of a virtual office. It was a great way to save costs while the firm was getting started. I would work from home, mostly in the kitchen while my dog Oliver stared at me all day, and then meet clients in a rented office. Eventually, I moved to a physical office, which, of course, came with a steep price tag. I eventually got tired of high overheard and left to work at a law firm. Now, like you, I can consult out of my home. It's great to be back in a virtual environment with little to no overhead. But, I can't say my golf game's improved any.
I was curious to get your take on outsourcing. As you recall in Draft (2005), his discussion on how companies use this resource. You too mention it in your writeup with regard to subcontractors. How reliable do you find this resource. Aside from the obvious cost savings, do you feel their work is up to par as opposed to when you managed your own employees?
Hi Joshua,
DeleteI find outsourced talent to generally be very good. I only work with consultants that are referred to me by a trusted source so that I have a reasonable level of assurance that they meet my standards.
Since my business model was to hire my staff straight out of school, it took me a number of months to get my employees up to a point where they could work directly with the clients. Even then, it would take years to get them to a senior-level. By using good senior-level consultants, I'm able to bring in a turn-key solution that I can put on a client account and know that the client is receiving the same level of service that I would provide.
Ken, very interesting to hear about your firsthand experience with running a business with a virtual network structure. You note that this organizational form requires a lot more communication and that communication between outsourced entities can be particularly complex. What sorts of processes in place do you have to help you manage this challenge?
ReplyDeleteNohria (1995) notes that structure is fluid in network organizations, and that "the only organizational structure that has reality for people is an informal one" (p. 9). Do you find this to be the case in your company?
Hi Jessica.
DeleteThe communication with the outsourced entities is further complicated by the fact that they're in different time zones, and some are even in different countries. One of the groups that handles my Latin America client is located in London and speaks broken English. Trying to communication my goals and objectives across cultures is quite a challenge. There's no formal process in place. We do a lot of conference calls and share a lot of emails. I put my strategies and plans down in writing now so that they can be shared and digested over time by my various consultants.
There is definitely a more informal structure to my virtual organization because I'm dealing with people that are at the same professional level as I am, but simply specializing in different marketing segments. There is a healthy level of respect among all of us, but at the end of the day, they recognize that I'm the one that pays their invoices and provides them with work, so there is a sort of implied structure that we work within.
Ken, I was fascinated by the story of your business and how the virtual structure was the best structure for your business. It seems that you saw the advantages of such a structure and ran with them. I am curious to know how you dealt with the disadvantages of such a structure (the more complicated communication with outsourced entities, as you mentioned)? Did it require face-to-face time? Or more concentrated efforts at regularly scheduled electronic communication?
ReplyDeleteHi Peggy,
DeleteSince my consultants are literally located across the country and around the world, I haven't actually seen many of them face-to-face. We use Skype and email a lot. It has meant that I put more things in writing to share across my distributed network to ensure that my ideas and strategies are getting across. Also, working cross culturally brings its own challenges including language barriers, misinterpretations and work norms.