The agency allergy to measuring work has a long history, but we only have to go back to the early 1960s to find a grand figure who not only wrote about it but may have influenced several generations of agency executives.
The grand historical figure is none other than Bill Bernbach.
Bill Bernbach (1911-1982), the renowned founder of Doyle Dane Bernbach (DDB), has a special place in industry history for his creative innovations on behalf of Volkswagen, Avis and Alka-Seltzer -- ads that were the backbone of the Creative Revolution.
He is also remembered for his quotations, which surely helped to establish the culture of creativity that continues to dominate agencies today:
Properly practiced creativity must result in greater sales more economically achieved. Properly practiced creativity can lift your claims out of the swamp of sameness and make them accepted, believed, persuasive, urgent.
Nobody counts the number of ads you run; they just remember the impression you make.
The 1950s and 1960s world of Bill Bernbach no longer exists, but the Creative Revolution still shapes agency thinking even though creative advertising is no longer the novelty it was 50 to 60 years ago. TV advertising is just as likely to be skipped as ignored by today’s ad-weary consumers. Agency prices are only 25% of what they were during The Golden Age; doing unlimited work is no longer economically feasible.
The fact that nobody counts the number of ads that an agency completes is regrettable. One can’t really blame Bill Bernbach for this -- what he meant was obvious and relevant for the Creative Revolution time period. However, the advertising industry has since moved on, and the fact that ads are not counted or measured is now a major strategic problem.
Advertiser vs. Ad Agency Management Cultures
The enemy is “workload growing faster than income.” The advertisers’ teams are well-organized and relentless. Among other things, marketing and procurement executives get together at ANA conferences and share “best practices.” These best practices focus (in part) on cost-reduction subjects, including how to reduce agency fees, what kind of benchmarks to use, whether or not to establish internal ad agencies, whether or not to take production responsibilities away from agencies, and many others.
The discussions certainly have the effect of stiffening the backbones of marketing and procurement executives, making them stronger and tougher when they think about negotiating with their ad agency partners. Furthermore, these executives work and operate in cost-conscious, performance-focused corporate cultures where accountability is a fact of life, and reviews of performance are routine. A certain amount of tough-mindedness flourishes in corporate settings.
This does not mean that advertisers are well-organized and disciplined in their day-to-day dealings with agencies. On the contrary: advertiser briefing and ad approval processes are often very poor, and SOW planning processes are almost non-existent. Months can pass before contracts are signed, and out-of-scope deliverables pop out of nowhere, like dandelions on an uncut lawn.
This kind of disorganization should not fool agencies into thinking that advertiser cultures are disorganized and undisciplined. To the contrary, there’s a lot of corporate backbone throughout the marketing and procurement organizations. Client disorganization, such as it is, allows clients to get something for nothing. There’s more method to madness in their disorganization.
Agencies’ organizations and cultures could not be more different from their clients’.
Accountability for agency operations is fragmented. Each office in a network is a separate profit center. Each department in an office self-defines its missions. Creative heads focus on creativity; finance directors focus on headcounts, overhead and budgeted/actual costs and profits; client heads manage the service that they provide to their ‘disorganized’ clients and keep them coming back for more. (Despite this there seem to be very few happy clients.)
Managing service levels means a number of things: obtaining internal or freelance resources when workloads require additional capacity; rescheduling deliverables; handling rework; agreeing to new client SOW priorities, including new or repositioned work -- but client heads do not really manage SOWs in a proactive way. They do not, as a rule, hold the line on scope creep. They respond. They mobilize their teams to deliver whatever they have to deliver. For many client heads, this is the essence of their job: appeasing their demanding, disorganized, and grumpy clients. The miracle is that they achieve this in the face of resource constraints. The downside of the miracle is that their success is killing their own agencies.
Their “bosses” -- the agency, regional and office CEOs -- leave them alone, for the most part. They do not review their performance. They do not discuss SOWs. For the most part, their bosses are out in the marketplace, drumming up new business, seeking new clients as a way to shore up growth and deliver promised revenue and profits to the holding company.
Who is responsible for an agency’s operational response to growing workloads and declining fees? In today’s agency culture, it’s everyone … and no one. The agency management culture is fragmented and divided. Everyone does his/her own thing. An integrated counter-attack is hard to organize, and in practice, it simply does not happen. At the end of the year, the finance director has the ultimate responsibility to deliver the agency’s profit margin, and this is often done through cost reductions -- a blunt instrument, indeed, but the laissez-faire culture does not allow for much fine-tuning during the year.
The agency management culture is a barrier to change.
It is virtually unchanged from the management culture of more than 50 years ago, reinforced by the Creative Revolution, when the agencies were rich and the creative departments accepted no masters. Agencies could operate as businesses without much active management as long as they could keep their commission-paying clients and add a few new ones every year.
Agencies retain a perverse but understandable pride in the unmanaged culture that is associated with “being creative.”
As Kevin Roberts, CEO of Saatchi & Saatchi described it to me in 2014:
We don’t believe that anyone can run a first-rate creative shop with organizational diagrams and spreadsheets. That kind of Bain-and-McKinsey stuff would kill our creative capability. A creative agency needs to operate more like an ant colony, where every ant knows its job and has the freedom to do it. As long as we hire and inspire the right people, to do the right thing, to build our clients’ business and market shares, our agency should grow and our creativity should flourish. If we take another approach, like a typical command-and-control company, we’ll end up in the dustbin of mediocrity. I still believe in hiring Mad Men rather than Math Men.
Although agencies have seen considerable changes in their operating environments -- the rise of holding companies, the change from commissions to fees, the empowerment of procurement, the globalization of client relationships, the development of new digital and social media and the fragmentation of their client relationships -- they have been constant in their commitment to self-organizing management cultures that celebrate creative departments and allow other individuals to define their own rules and priorities.
How does self-organizing actually work in the typical agency? We know what the creatives and production people do. What do the other “ants” do?
Client Heads and Client Service Teams
Collectively, client heads and client service executives are the custodians of 100% of agency income. They approve 100% of the agency’s strategic and creative workloads, and they use 100% of the billable capacity assigned to them.
Client heads have vague and unwritten job descriptions. This was not the case during the commission era, when a client head’s clear mission was to get the client to spend large amounts of money on commission-paid media. The change from commission-based remuneration to fee-based remuneration change was momentous for client heads -- they ceased to be media salesmen on behalf of the agency. Today, it is assumed that client heads understand their revised responsibilities, which can be described as “please your clients, hang on to client income, and do the best you can to deal with client demands and disorganization.”
This definition captures what has been a long, slow decline in agency responsibilities for client heads. Client heads and their client service colleagues were previously the activist and aggressive “owners” of their commission-paying clients during The Golden Age, fighting off all client attempts to cut media spend or bring in other agencies. Since then, client heads have lost a lot of their aggression, and since the change from commission-based to fee-based remuneration, no one has quite redefined what their new muscular roles ought to be.
Furthermore, client service responsibilities have become divided, especially after 1980, first through the widespread adoption of a British innovation, “account planning”. Agencies created “account planners,” who were tasked to do a better job of bringing consumer insights into advertising -- a role in which that client service people were deemed not to be sufficiently expert. Account planning (today called strategic planning) was brought to the U.S. by Jay Chiat in the 1980s and spread throughout the industry. Strategic planners number approximately 20 FTEs for every 100 client service FTEs. The strategic planning innovation reduced the responsibilities of client service executives and put strategic planners at center stage with respect to advertising development.
More recently, client service responsibilities have been divided again through the creation of agency project managers, who are believed to do a better job “project-managing client work through the agency.” Project managers were a recent (post-2000) response to the chaotic and costly way that client work was being shepherded through agencies’ creative and production departments. This type of coordination used to be solely the responsibility of client service people, and it gave them bully rights over the creative and production departments -- account managers were the guys and gals who pushed the work through these overworked departments.
No more, at least at this writing. Agencies hope that project managers and project management systems will bring some order to the flow of workload through the agency (the jury is out on this issue, as best I can tell -- project managers have even less accountability than client service people).
Client heads and their client service teams, then, have been downsized and downgraded over the past decades -- responding to changes in remuneration and to perceptions that their generalist skills were not quite good enough to deal with advertising research and project management.
In the 2014 era of big data, the perception that client service people are not quite up to the analytical task is a new theme. At the March 2014 4A’s conference in Los Angeles, advertisers and agencies sparred over agency access to clients’ brand data. Clients expressed concerns that agencies “could not be trusted” with this sensitive data. Others expressed concerns that agencies were insufficiently analytical. “It’s not the data itself that’s the advantage,” said a Google executive. “It’s the insights.” That only works if agencies have the skills to derive insights from data. “My challenge to agencies is to say, ‘Use my data to be proactive,’” said one CMO. “But I struggle and worry you don’t have the talent.”
What client heads and their client service teams are left with today is “servicing the client and responding to demands,” doing their best to manage client expectations and needs for creative and analytical work.
It is assumed that “doing their best” will generate profits, but client heads and their teams are under no “do or die” imperative to ensure that profits are 15% or greater. Each client head can make excuses for why targeted profits cannot be earned:
- The price was set by the holding company or the CEO. I can’t do anything about it.
- The contract is for 10%, not 15%. I can’t change the contract.
- The client will only pay for an agency team of 15 FTEs, and that’s it -- they won’t pay for the 20 we need.
- My job is to get the work done within these limits.
Clients are viewed as unmanageable constraints on agency performance, like spoiled children. Client heads are like nannies or babysitters who believe that the brats are beyond saving. It’s easier to give in than to fight. It’s also less risky. Who wants to lose a client over an argument? Who wants to lose a job?
Each client head has fully-delegated authority to manage his/her clients in any way that he/she sees fit. Each can approve out-of-scope work, whether or not it is paid for, and use agency resources, whether or not their costs are covered by client fees. They can plan SOWs or let their clients plan them for them. They can negotiate aggressively or simply give the client the service that the client wants. They can manage their resources tightly or loosely.
In the meantime, in background, strategic planners go about their job, helping to bridge the gap between clients and agency creatives on consumer research matters, while project managers help to schedule and push the workload through the various agency departments.
However client heads handle their client situations, they can be sure that what they do today will be relatively invisible to senior agency executives. The way that client heads go about their management job is not measured or reviewed. There are no metrics other than profit margin to differentiate between who is doing a good job and who is not. There are no standards for the client head. There is no defined “Agency Way” for managing clients. The job is left up to the individual initiatives of the client heads, who carry out their responsibilities without a rule book, set of standards or measures.
Client heads are responsive to clients and generally unresponsive to agency initiatives that interfere with their freedoms. Client heads are not interested in transparency. They do not want their actions exposed and visible. They simply want the freedom to act and service. If they do a good job keeping the client on board, they create job security for themselves.
This is the agency culture, developed and reinforced for more than 50 years. Client heads each “run” part of the agency, and the total agency is simply the sum of their actions, whether the actions are known or not and whether or not the actions are strategically good for the agency.
Client heads do not wish to make trade-offs or to say “no” to their clients in order to promote agency interests. To do so would represent a major change in attitude and a shift in the center of gravity away from client interests towards agency interests.
No one is telling them that this is what must happen.Excerpted with permission from the author from Madison Avenue Manslaughter: An Inside View of Fee-Cutting Clients, Profit-Hungry Owners and Declining Ad Agencies.
Originally published Jun 1, 2016 7:00:00 AM, updated February 01 2017
Topics:Agency Pricing Models