CEOs of ad agency offices are the critical agency leaders of today. They are the most senior agency executives who head actual profit centers. They either control or supervise all of the agencies' Account Heads -- those individuals who are responsible for client fee income, resources and Scopes of Work. What challenges do Office CEOs face?
Workloads grow. For at least the past decade, creative and strategic workloads have been growing much faster than agency fees or agency headcounts. We've measured this by gathering and analyzing agency Scopes of Work from around the world, year after year, in the conduct of our consulting and software business.
Why workloads grow. Workloads are grown by client Marketers, who are anxious about brand growth and are in a state of constant and sometimes frantic experimentation. Digital innovations allow Marketers to experiment while maintaining traditional advertising efforts.
Why fees grow slower. Separately, Procurement sets agency fees, using direct labor methods. Workloads are not measured or negotiated for fee-setting purposes. Scopes of Work are not documented or tracked. Retainers are cut because that is what Procurement does, especially when they assume (wrongly) that their agency suppliers are inefficient and "fat."
How agencies are involved. Agencies operate as service providers, whose instinct is to do whatever the client wants, particularly now that agencies are very insecure about their relationships. This leads to Account Heads agreeing to growing workloads that are not really aligned with fees.
Who is affected? What is the outcome? Agency staff is severely affected. Headcounts are held constant or are managed downwards in an effort to maintain margins, while at the same time workloads grow. The average creative has had to increase his / her annual output (on a like-for-like basis) by 50% in the past decade. In a typical agency office of 10 clients, 7 clients underpay, relative to their workloads, and are understaffed as a result.
Office deterioration is invisible. Agency workloads are invisible to senior agency executives. So is the stretching of agency resources. Workloads are not documented, negotiated with clients, tracked or reviewed. Account Heads are not held accountable for the growth of their workloads. The office is expected to cope -- period. The only key metric is margin – fees verses costs. Margin is an inadequate measure of what is going on.
Office heads need to face these problems squarely, and assume the leadership responsibilities that these problems require. Office CEOs need to create a policy that each Account Head will now be made accountable for their workloads, fees and resources.
The right place to begin is with 2015 Scopes of Work: Account Heads should be required to forecast their Scopes of Work for calendar 2015, even if much of this is a guess. These SOWs will be reviewed by the Office CEO, along with client-by-client staff plans and revenue forecasts. How aligned are workloads, resources and fees? Chances are the fees are inadequate, and so are the resources. What needs to be done about it? Account Heads need to begin to have thoughtful discussions with their clients about ways to rebalance these three key variables. Workloads can be cut through fewer briefs or less complex briefs. Rework rates can be tracked and reduced. Rebalancing need not require increased fees.
Throughout the year, Account Head progress in rebalancing workloads, resources and fees should be reviewed by Office CEOs. This means sitting across the table from Account Heads and asking difficult questions about what is being done.
Office CEOs no longer have the luxury of focusing only on new business development. They must become good general managers and strong leaders who motivate their Account Heads to have difficult conversations with their clients. The health of the agency depends on it.
Photo Credit: Jack Ziegler / The New Yorker Collection / The Cartoon Bank. With permission.