How do agency hierarchies work?

If you want your agency to succeed, you need to set your operations up for success. This includes everything from process to hierarchy, which determine project success, client satisfaction, workplace culture, and more.

If your agency’s hierarchy is well-thought-out and regularly assessed, your processes will run smoothly, and communication will be fantastic. And if they’re not? Well, you can wave goodbye to your agency’s growth goals.

Whether you’re scaling your agency or it’s time for an organizational restructure, it’s never too early or too late to review your hierarchy. So, what are your options?

What is an agency hierarchy?

Your agency’s hierarchy defines how you organize the individuals that make up your business, sorting them into departments and setting out the chain of command within each team.

Are hierarchies bad?

We’ve all heard horror stories about hierarchies. Colloquially referred to as a pecking order, the term ‘hierarchy’ calls to mind egotistical managers and authoritarian leaders who ignore their staff's views and personal lives. In any environment where there is a defined hierarchy, there is the potential for people to abuse their authority. 

However, this is only true if your agency doesn’t have the suitable structures to prevent this. Hierarchies are not evil but necessary for business success, as they lean into our human desire for order and security. In agency land, they define who is accountable when things go wrong and provide structure for people management, developmental support, and the process for escalations.

Building a people-first work environment that focuses on accountability, trust, and transparency prevents your agency’s hierarchy from breeding distrust and territorialism. To do this, you need to find the right hierarchical structure for your agency.

What types of hierarchies are there?

At the top level, there are two types of hierarchies. Mechanistic hierarchies depend on formal relationships between team members, with power centralized at the top. Most agency organizational charts use this structure, with one leader at the top and neatly organized teams with clear lines of authority beneath.

At the other end of the spectrum, we find organic hierarchies. A marker of an organic hierarchy is the opportunity for collaboration among teams. It is much easier to share information when your business isn’t arranged around rigidly structured teams. In an organic hierarchy’s org chart, you’re more likely to see overlapping lines of authority representing this system's greater flexibility.

What works best for your agency will depend on your existing ways of working and the services you offer your clients, but both have their merits and cons. To find the right option for you, let’s look at the three hierarchical structures most commonly used by agencies.

The traditional model

You’ll have seen countless marketing agency org charts that represent the traditional model. This is the default hierarchy used in most corporate businesses and is often the best option for large agencies that require a higher degree of structure. It centralizes authority and makes lines of report extremely clear to minimize confusion and miscommunication.

The traditional model breaks an agency into clear divisions based on the teams that make up the business, such as Client Services, Production, and HR. Within each division, there are clear lines of authority, with the C-suite at the top and the department heads branching off them. The department heads oversee numerous members of staff that solely work within their department, with team managers branching off from there, and so on. Department heads can include Directors, Heads of and Managers.

Pros of the traditional model:

• Clear lines of authority and reporting
• Clear career paths and responsibilities
• Accountability for decisions made and actions taken
• Greater opportunities for employees to specialize in one area
• Improved supervision and team loyalty

Cons of the traditional model:

• Greater risk of siloed working, which can kill productivity
• Less flexibility and autonomy can block innovation
• A poor fit for agencies that require teams to cross-collaborate to provide clients with multiple services that use the expertise of several departments
• Rigid chains of command can slow down decision making
• Top-down management can reduce opportunities for junior employees to connect with upper management

What types of agency is the traditional model best suited for? Due to its siloed approach to working, the traditional model will work best for specialized agencies, such as PR agencies and B2B marketing agencies, and larger organizations that need a greater degree of organizational structure and that have inflexible processes.

The matrix model

The matrix model introduces the element of flexibility missing from the traditional model. While departments are still clearly defined, they are cross-divisional. The term ‘matrix’ refers to the idea that this agency structure blends multiple models, with team members reporting to two people, not one: a project manager and a head of department. 

Moving away from siloed ways of working, the matrix model embraces collaboration, with teams sharing resources and staff. This makes it easier for project managers to make sure they’ve got the tools and expertise they need to get their projects over the line.

While this may seem slightly confusing, at least compared to the traditional model, this model has many benefits. As in a traditional marketing hierarchy, employees report to a department manager, allowing them to support their professional development and well-being. The main difference is that they also report to a project manager; this allows project managers to pull resources from multiple parts of the agency — from marketing to production — without all semblance of structure being lost. 

There are three types of matrix models to be aware of, which depend on how much authority the project manager is afforded versus the department manager:

• Weak matrix: the project manager has limited authority, with timelines and budgets left to the department head to manage
• Strong matrix: the project manager retains decision-making power, giving them ownership of their projects. While the department manager still has an input, they aren’t responsible for decision-making
• Balanced matrix: the project and department managers share authority, helping keep communication open and progress moving forward

Pros of the matrix model:

• Best suited to agencies that offer a wide variety of services to their clients, requiring members from different teams to collaborate to execute a project
• Reduction of silo mentality, which keeps information flowing freely and communication open
• Resource is used more efficiently
• Projects are prioritized with clear objectives, timelines, and budgets
• Clients can access a greater range of services
• Strong project teams

Cons of the matrix model:

• Reporting lines can become complicated, especially if the project and department managers aren’t aligned
• Power struggles between the project manager and department manager can occur
• Employees need additional support to help them juggle competing priorities
• The complexity can slow down response times and delay projects

What types of agency is the matrix model best suited for? Because of its flexible nature, the matrix model can be used by any agency that embraces agile ways of working. However, it’s perhaps best suited to agencies that provide clients with more than one service and require greater interdepartmental collaboration, such as in-house agencies and multi-service agencies.

The pod system

In the pod system, an agency is organized into — you guessed it — ‘pods.’ Each pod represents a small team made up of individuals with complementary skills. The idea is that the team works together on specific projects and client accounts, honing their expertise and specialisms. What job functions make up each pod will depend on your agency's services but typically include a client or project management lead, a creative lead, and a strategy lead. All pods are overseen by a senior member of the agency, such as the client services director or COO.

The focus of the pod system is to provide clients with dedicated support, which reduces approval times and increases accountability without employees relying too heavily on senior staff members.

Pros of the pod system:

• Streamlines operations
• Allows better servicing for clients, putting them at the center of the pod
• Supports team members developing in their specialist areas 
• Greater collaboration among team members
• Greater accountability
• Processes can be tailored for each pod and its clients

Cons of the pod system:

• Scaling can be challenging
• If a resource needs to be drawn from other areas of the business to support on a project, this can be difficult to organize
• Gaps need to be filled when a member of a pod has paid time off
  

What types of agency is the pod system best suited for? The pod system is perhaps the easiest to implement in small agencies with clearly-defined roles, responsibilities, and client accounts. It is also appropriate for use in a creative agency that would benefit from more clearly structured teams which are dedicated to individual client accounts, such as advertising agencies and digital marketing agencies.

Get the most out of your agency’s hierarchy with Forecast

Structure and transparency are key to your agency’s success, whether you opt for a mechanistic or organic structure. With Forecast, an intelligent work management platform, you can manage your projects, resources, and inter-team communication from a single AI-powered platform. Find out more about how Forecast can help your teams manage resources, budgets, and timelines effectively, no matter your hierarchy structure.