• by May 25, 2005

The agency world is in a tumult right now. While the effectiveness of advertising is being questioned, so too is the advertising agency itself. In the same way that a troubled company would employ an investment specialist to sell off its assets to the highest bidder, the media has likewise been unbundled from the mother ship. Clients are less than pleased. In fact, the client-agency relationship is at a precarious low point, with an ever-shrinking average engagement length - not surprisingly on a parallel path with the 18-month tenure of the average chief marketing officer.

The agency selection process is being led by bean counters, and the elusive big idea that clients covet has been commoditized and arguably reduced to a negligible value - an upfront giveaway that is the standard price of doing business.

Who's to blame? And, more pointedly, how can the problem be fixed? I point the finger at both sides. Of course it's the client.

Clients are siloed, conservative, and risk-averse. They don't give agencies enough time to establish and prove themselves, they expect them to play nice with a bunch of buffoons from other companies, they demand perfect accountability and "more for less," and they want big ideas for free - or at least at bargain-basement prices. Marketers: Please consider the preceding as your checklist for the inevitability of a buyer's market. But that doesn't make the situation right, nor does it make it solely your burden of guilt. Much of what is wrong with the relationship between client and agency right now is the product of an inherited legacy, as well as the shared responsibility of the agencies that have played a significant part in setting themselves up for the free fall they are currently experiencing.

The buck stops and starts on the client side. And it is the client that ultimately needs to take responsibility for overcoming the inertia, procrastination, and denial that are plaguing an entire livelihood. Of course it's the agency. The agency world has changed dramatically since the 1980s. Agencies today are no longer run by immaculately dressed client-service professionals, nor are they led by visionary creative directors. In reality, chief financial officers call the shots, and while this may not be that different from other major industries, there is one important distinction when it comes to the field of branded communications: Agencies live and die by their ability to generate innovative ideas for their clients. The process of providing solutions to business and marketing problems may be grounded in strategy, but it's creativity that ultimately attracts clients to invest their marketing dollars with an external partner.

When creativity is allowed to flourish, innovative ideas flow fast and furiously; when creativity is stifled, mediocrity and status quo are the order of the day.

Built into the margins of yesteryear were the value and rewards associated with prolific ideas and superior creative thinking. However, as margins were squeezed, creativity was starved. If you don't believe me, just look at the quality of current work out there to judge for yourself. Creativity and finance are like oil and water.

The only solution that has been brought to the table to address the very real problems of dormant new business, negligible margins, and a general risk-averse climate has been to cut costs. This short-term fix has meant salary freezes, cuts, and, of course, endless layoffs which have resulted in understaffed businesses with unmotivated employees who are more concerned with their job security than creating the next big idea.

At some point, agencies have to fight for what they're worth - or at least prove that they're worth the fight. To get back on the path, agencies must:

• Partner to win.
• Repair the pitch process.
• Stop the idea harvesting.
• Consider compensation and accountability: A return on Investment for a return on Investment.
• Invest in talent as if there were no tomorrow.
• Practice true integration.
• Embrace a new definition of creativity.

Partnering to win is predicated on a position in which both agency and marketer (and for that matter, publisher), share a degree of the collective risk and reward. The online world has come to accept - willingly or otherwise - the reality of performance-based advertising. Participants in the high-stakes game of communications - that is, buyers and sellers - must prostrate (but not prostitute), themselves before the god of accountability.

The value proposition suggests that a base payment for services rendered should be made to cover salaries, plus a reasonable degree of overhead. There-after, publishers and/or agencies would be compensated on a tiered system, corresponding to levels of performance. The more the cash register rings, the greater the revenue. Thus, the greater the remuneration promised, the greater the motivation and desire to succeed.

Employees should be compensated based on a scale that rewards performance, with comparable levels of performance earning similar pay. I don't know about you, but I'm pretty sure that most agencies' employees would accept a straight 10 percent cut in salary in exchange for the promise of a 20 or 25 percent bonus based on superior performance.

This fantasy scenario does have a flip side: the consequences of lackluster performance. Poor performance would be penalized by the opportunity cost of lost revenue. In my opinion, this is a far more pragmatic way to stave off an even worse situation in which an account is lost and layoffs accrue as a direct result.

It's time to banish the glib and meaningless contention that ideas can come from anywhere and anyone, (as long as it is the creative department). Great ideas that are sold, regardless of who generated them, should be rewarded to a degree that corresponds with their value.

No one argues that this is an easy philosophy to implement - but it is the right one. There are certainly some challenges involved in the process - for example, reaching mutual acceptance of performance standards and metrics. That's a job for an objective third party (read: consultant). Granting access to data and key measurement benchmarks is also a negotiation point. But the results of implementing a performance-based system will speak for themselves.

Excerpted from the upcoming book "Life After the 30-Second Spot: Energize Your Brand with a Bold Mix of Alternatives to Traditional Advertising" by Joseph Jaffe to be published by John Wiley & Sons, Inc. on June 10. Copyright © 2005 by Joseph Jaffe, jaffe LLC.