04.20.2018

Ad Agency Bean Counter Buying Bean Bag Chairs

By BoomAgers

Are ad agency bean counters really buying bean bag chairs?

Perhaps you noticed a recent article in the NY Times describing the challenges that ad agencies face in recruiting and retaining young talent. Apparently the solution is simple – you just ply them with liberal amounts of craft brew, live entertainment, and of course, “table tennis”. This new talent strategy would seem to be built on the premise that happy hours are the means to employee happiness with some cozy bean bag chairs thrown in for good measure.

There’s no doubt that traditional ad agencies are under some real pressure to reinvent themselves. For years now, the revenue once derived from traditional advertising has declined and transitioned to new agency specialists. What’s more, this financial predicament has been compounded by on-going client pressure to reduce agency overhead and fees. This dynamic is well chronicled in Michael Farmer’s aptly named book, Madison Avenue Manslaughter, an insider’s view to declining ad agencies. Alas, the bean counters are working harder than ever, but paradoxically, there are fewer and fewer beans left to count.

So why the focus on young talent? A popular answer is that today’s young talent is digitally savvy, but the real answer is that they’re a less expensive way to get the work done. Which raises another question. At a time when their work needs to work better than it ever has, why are ad agencies relying on less experienced talent? They don’t have a choice. Advertising is and always will be a human capital business. When your parent company squeezes you for more profit in a low growth market, reducing your talent cost is the only strategy remaining. Sadly, it’s become an exercise of managing fewer, cheaper employees.

At a time when they should be totally reinventing themselves, it would seem that ad agencies are rearranging their bean bag chairs instead. The agencies that are prospering today are what I refer to as “concept” agencies. They are highly specialized agencies that have been purpose-built to serve an emerging, unmet need in the marketing mix, and just as importantly, they operate in a way that recognizes the realities of the current business context. They succeed for the most basic of reasons – because they deliver outcomes that add tangible value to clients’ businesses. They do this by hiring the best talent possible (age not being an issue) and creating an agile and collaborative environment that is conducive to creative success. When done well, everyone gets more than what they paid for.

So back to where we started. If I’m an ad agency client reading the New York Times article, I’m probably wondering what I’m paying for. Young talent, no doubt smart but surely lacking the valuable experience needed to solve today’s complex challenges? Operating costs that include employee down time and play time instead of essential skill training? Or worst of all, am I paying for the services of an agency that doesn’t understand the severity of its predicament? The message here is pretty simple: success in the future will belong to those agencies that are focused on the clients’ beans. These clients aren’t asking for young happy hipsters. They’re asking for great ideas delivered at a better value, and value does not mean price alone. In the end, the happy hour that matters most is the 60 minute phone call from an effusive client. The one where they reward you with more business because you actually get what they need.

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