How Could An In-House Department Be As Good As a Private Firm?

Nearly all of you, regardless of your positioning, are going to need to deal with the existence of in-house departments. Some of your best clients outsource everything to you and some of them don't. Either way, it's in your best interest to understand them.

Here's a cheater summary of what their lives are like, but with a twist. I'm going to evaluate in-house departments as if they were private firms on the outside (like most of you reading this). I'm doing this for two reasons:

1. It's a unique perspective that'll get you thinking outside the normal categories.
2. The most enlightened in-house departments actually want to emulate an external, private, entrepreneurial firm like yours. They want to earn respect like anybody else. They are generally doing really good work, trapped inside a system that's not ideal.

So pretend that an in-house department came to me (like they regularly do) and they wanted to function like one of the agencies that they normally partner with, instead. What would I say about their business, and what do those observations mean in real life? These are the things that shape their impact.

You Have a Client Concentration Problem

You have one client who doesn't just represent more than 25% of your billings, but they actually represent 100% of your billings. Yes, that overall relationship is made up of multiple departments, but their fate is tied together.

What does that mean? It means that you move, slowly, to an order-taker mode, doing things downstream. You're judged by how well you take directions and how quickly you perform.

You Have Too Many Clients, And Some Of Them Are Unqualified

Having 8-15 clients, no matter your firm's size, is ideal. Some firms thrive with up to 20 or so, but above that you're inevitably doing work for smaller clients than you should. In an in-house department, you have even more than that number. Even worse, the interfacing between you and the internal client is delegated down to assistants who are using borrowed power. They are proxies who need to keep checking back in with the decision maker.

It's inefficient and further reinforces your role as an order-taker.

You're Very Close To The Situation And Lack External Objectivity

You're inside the jar with them, and neither of you can read the label. Even if you could, developed cultures don't listen to people with whom they are already familiar. (It's the reverse in developing cultures.) If you have any employees who are filling a staff aug role, you know exactly what I mean. They blend in and become a part of the way things are done instead of how they could be done.

You can say the same thing to your kid, but they don't listen until another adult says the same thing to them. You can say all the right things from inside the company, but sometimes it takes an outsider to move the needle...even if nothing about the advice was different.

You Have No Way Of Measuring Exchanged Value

Your company thinks of you as a cost center and not a revenue center. Your salaries and facility usage and equipment and so on are budgeted every year. We kind of know what you do for a living, but we don't have any objective way to measure that value. Your clients aren't usually given a choice, and when they do use you, they aren't "charged" in any conventional sense for that choice. If you did a passable job and met the deadline, we're good.

The solution is a chargeback system, at least, which means budgeting for those internal expenses in advance. Better yet, do what the really enlightened companies do: give each department (the clients) the freedom to use the in-house department or an external firm. That injects a level of entrepreneurship into a corporate setting.

Thankfully, Though, You Don't Have a New Business Problem

Or do you. Yes, you know where your work is coming from: all the internal "clients" who don't have a choice about using you. But that's now what new business is for. It's not to land work—most any firm can do that—but rather to land a certain kind of work within a broader context of respect. Every in-house department should be trumpeting their value weekly by helping their clients and constantly shoveling unique, targeted insights that they can use in their work.

Not doing so is pretty much like taking your clients for granted, and that's what in-house departments do. They aren't getting fired and they can't whine about the non-invoices.

Having said all this, there are some remarkable in-house departments doing some remarkable work. But they are operating under some heavy constraints.