Commentary
We're Scaling Agencies the Wrong Way
- by John Trahar , Op-Ed Contributor, October 23, 2019
There’s lots of conversation about agency growth today – particularly alternatives to agency holding companies. But what’s missing is a critical notion on scale. Even a recent article dubbing several newer agency networks “the third way” simply described a different approach to organize big. Each of the network options were predicated on adding groups together to make bigger entities.
Bigger in a different way is still bigger. And bigger is bad for just about everything we’re expected to do as agencies. Bigger obstructs creativity,
speed, innovation, adaptability, and understanding. It creates distance, which creates more places to hide, more hand-offs to others, and more layers that ideas have to survive. And bigger reduces
accountability, resourcefulness, speed and opportunity per employee, which slowly corrodes the structure from the bottom up.
Advertising’s future depends on output and impact.
And agencies’ future depends on delivering more and more answers for smaller and smaller margins.
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We can’t get there by chasing big. We can by scaling the right kind of small.
Small creates more immediate, sustainable results by focusing a core team’s attention on the actual problems to be solved. Within a process that creates better and faster
understanding within the group, closer connection, easier collaboration, more efficient production, and more seamless integration.
Scaling small means setting up to do more well
rather than just more of the same. It means an experiential model that preserves what makes great work. Everything about the agency must orient toward how much great work we can produce, how fast and
how repeatedly.
We can’t buy this cohesion; we must build it.
That requires involving the entire small team upstream to downstream, from an overarching strategy
through production, evaluation and reaction. Give people with multiple talents the context and freedom to make more together. And make clients teammates, so there’s no lag, opacity or passing
the buck.
When we empower people more, they can do more, better work in less time. A lot more. And generate joy in doing it. That’s small at its best. Clients buy and grow
from a unified approach to solving business problems with storytelling.
Then we need to replicate the model, not add mass to it. We can do that when we focus on increasing our
footprint by location rather than square footage, with an eye towards being close to client opportunities.
That means more places, not more people in one place. It means multiple
independent, multi-talented and 95% autonomous teams indoctrinated in a process that values creative momentum over analysis paralysis and meaningful results over territorial roles.
It
means that some of those new locations will include being embedded within the brands themselves, in their office space as a more effectively objective in-house option. It means the whole creative
organization working as a widespread collective rather than as a rigidly structured, org chart hierarchy of branch offices. It means building teams in places where people can get a better quality of
life, which is increasing beyond the boundaries of the typical major metropolitan area.
By contrast, buying bodies in a market or specialty area – which the holding companies and
alternatives do – just begets more people doing the same things. Meanwhile, the small agencies that give up independence for scale lose the energy that made them special. They got to great
because they didn’t obscure the most important work with more people, departments, specialties, and management layers. But now they must spend their creative energy figuring out how to manage
ever more.
Scaling small also keeps the basis of client relationships on output and impact, not hours. That solves the inherent trap in the drive to bigness, along with the
common and misguided approach to limiting creative and production costs. When the budget is the budget, the directive and value proposition simplifies to how much we can make with it.
True power in advertising isn’t more people, it’s more impact. Advertising innovation will take a giant leap forward when unique models adopt unique scaling propositions. We’ll
meet the combined pressures of quality, speed and cost while answering the famous question that Chiat/Day co-founder Jay Chiat once asked: “How big can we get before we suck?”
Jay’s question resounds today. The answer is, not very big at all.
John, I'm not sure what exactly is being said here. Should the big agency holding companies fragment into many smaller shops while still trying to serve huge client marketing complexes on the grounds that this will generate better service--in creative, account handling and media work? Frankly, I doubt that that approach will work and I also doubt that the small shops could compete with the larger ones---where a number of agencies are available to handle clients and are able to use their expertise and clout in media for the advertiser's benefit.
When I started out in the agency business, we, at BBDO, were employing about nine persons per million dollars of billings and still making a nice profit under the 15% commission system. I saw with my own eyes how inefficient that system was and how most of these people had little to do most of the time. Later came the negotiated fee system which meant that clients paid less than 15% and this required the agencies to go the mega media route whereby each person handled much more than before in billings---in short, a far more efficient though not a perfect solution.I also saw how many clients, themselves were poorly organized and as they, too, became bigger and bigger, confusion and lack of coordination---which leads to poor direction for the agency----became rampant.
Fast forward to today. When a huge agency conglomerate gets a client, the account handling and creative duties are handled by the shop in the bundle that is best suited---which means small. As for the media planning and buying, this is usually assigned to the conglomerate's media folks-- who may handle many accounts. But the planning phase is done by people assigned specifically to each brand ---which also means small---while the buying is done by specialist groups who are experts in dealing with media sellers and work for many clients under the planners' direction. The same thing applies to creative---each creative at each agency in the bundle has specific client assignments---which means small. It doesn't matter if a creative works on three or four accounts over the course of a year, instead of twiddling his/her thumbs most of the time wiating for a single client to get organized. That's a recipie for ineficiency and would probably require advertisers to pay much higher fees than now.
In short, you ---the client --can't have it both ways. It's unfair to squeeze your agencies mercilessly on fees, yet insist on the kind of always available and waiting in the wings service by full time and exclusive to you creatives. What's needed is far better organizational structures and communication by clients to their agencies--who, in fairness, should learn how to adapt and be able to handle the resulting more sensible and meaningful direction as professionally as possible. Just my always humble opinion, of course.
What’s being said here, is that smaller existing models can scale up regionally and nationally if they have a plan for an end result that is smarter, faster and makes more sense for both client and agency than a giant conglomeration or the goal of filling a skyscraper with employees. Smaller organizations where all are involved in understanding the strategy, business goals, creative solutions, and produced work for a particular brand have greater accountability and faster reward for the work done.
As you say, gone are the days “nine persons per million dollars of billings and still making a nice profit” in a large agency ecosystem. A million dollars go much farther in a small agency ecosystem. And if you can spread that ecosystem while maintaining smaller core groups you can scale up while staying nimble. Clients certainly do want it both ways — nimble service + the comfort of scale. Here is a way to achieve both.
I do not propose that large systems break themselves up, as the above proposition does not work in reverse. I also don’t think your “small” portions of a larger entity is at all the same thing. Why pay a massive holding company millions of dollars to cover their understandably large overhead and then work with 5 people?
From a media perspective, you bring up an interesting question about clout. If clout equals combined spend, do those combined large spends absolutely need to go through a giant agency organization or could they go through a more nimble and efficient entity?
John, regarding media buying, it's very common for sellers to charge small brands and, especially, new buyers, higher rates than they can get in dealing with big agencies who handle lots of business. This is certainly the case with national TV and is one of the reasons why many corporations buy into the corporate upfront time buying systems---despite their lack of specifity in dealing with individual brand needs and other flaws.
As for the large "overhead charges" aspect, that's clearly negotiable and many contracts with agencies servicing a client's account handling and creative are very specific about how much will be allowed for this---if anything. Also, one of the major selling propositions of the big agency holding companies is that even if specific account handlers work on a brand at one of their shops as well as creatives, help from the rest of the organization---with its wide experience on many accounts and all sorts of research---is always available. Many clients buy into that as one of the major perks of the big holding companies. What matters in both account handling/ creative and media is the ability of the client to give meaningful and consistent direction and the client's willingness to pay close attention. In such cases, the agency almost always responds in kind---or it loses the account.