Brands are missing a big opportunity to strengthen relationships with agency partners and deliver smarter communications, according to a new study from the World Federation of Advertisers (WFA). At issue: Performance evaluations.
Poor processes, few face-to-face meetings (pandemic aside), a lack of focus on how clients can improve and a focus on ‘cost-only’ KPIs mean that many agency performance evaluations are less effective than they should be, the study concludes.
The study was conducted in partnership with agency management software specialist Decideware. It surveyed 60 senior global agency leaders about the ways clients evaluate agency performance. Respondents included both network and independent agencies representing clients with estimated ad spend of $69 billion.
The study follows a 2019 report which found that advertisers need a better approach to agency management if they want more productive and longer-lasting relationships. Both surveys highlighted the power of performance evaluations as a tool to improve relationships and performance. According to the latest report, the best evaluations provide clear and honest feedback--from both sides-- so agencies can deliver better outcomes and clients can improve too.
The most recent study found that agencies want more face-to-face and open discussions with clients about what can be done better once evaluations have occurred. While 31% of clients say they conduct face-to-face discussions around the results of evaluations, the reality, per the survey is that 7% of agencies get a phone call, 5% hear by email, 14% discover the results via an evaluation tool and 2% say they get no feedback at all.
Many agencies are also not comfortable providing honest feedback with 43% citing this as the biggest barrier to effective evaluation. Thirty-eight percent add that they do not believe clients will change as a result of feedback and 34% say there is little leadership engagement with the process.
Agencies also get fewer opportunities to provide feedback. So while seven out of 10 advertisers provide feedback on their agencies at least once a year, just four out of 10 agencies get the same chance. Twenty-nine percent of respondents said the majority of their clients didn’t ask them for feedback at all.
Agencies also want clients to think more carefully about the KPIs they use, rather than rely only on cost-focused KPIs (mentioned by more than 30 respondents). Often clients focus on KPIs which the agency has no control over such as customer loyalty or share price.
Many argued that new KPIs should be explored such as proactivity and speed, efficiency and contribution to business strategy.
The report found that many agencies also perform their own self-evaluations of performance but often the results are not shared with clients.
While agencies say they want recognition for positive work the survey found most agencies don’t want a compensation model that ties most of their remuneration to performance. Seventy-one percent of respondents think it should be below 15% of total remuneration and a quarter of respondents suggested it should be less than 5%.
“Agencies want the performance evaluation process to be deliberate and genuine starting from agreed upon goals through to action plans and tracking progress against the plans,” the report concludes. “They want to be able to have a relationship with their clients where they are evaluated fairly and objectively and want to be able to provide honest feedback.”
Recommendations include “active engagement,” by senior leaders at both clients and agencies in the evaluation process, which should be understandable and consistent. Also, evaluations should not be used for “punitive purposes,” and should include KPIs that are “motivating for agencies and adapted to [client] business goals.
The full report is available to WFA members only.