Wailing and Gnashing of Teeth at the 4As Meeting in Austin, Texas. It’s All Good.

March 9, 2011 § Leave a comment

I am very sorry to be missing the wailing and gnashing of teeth that is reportedly going on at the 4As meeting in Austin, Texas right now. According to Ad Age, senior agency panelists lashed out – seemingly at each other, but probably just in frustration – at, well, just about everything:  complexity, communications, clients, compensation, change and even creative. Lots of “Cs”on the list, but maybe all because of one “B”, which would be “Big.”

Howard Draft, Executive Chairman of very big agency, Draft/fcb, was quoted by Ad Age saying:

“You can’t be great with 10,500 people on a regular basis…Size does matter on controlling the product you put out, if I’m looking to make money.”

Part of that may have to do with the fact that with 10,500 people an ad agency will struggle to bond with and nurture its talent. This was the point of a separate discussion, a presentation by Andrew Benett, Global CEO of another very big agency, Havas’ Arnold Worldwide. According to Ad Age, his “bleak” report on employee retention revealed that 30% of an ad agency’s employee population would turn over in 12 months, with nearly all agency employees (96%) indicating they felt confident about finding a another job thanks to an improving economy (and, we might surmise, because there are always so many job openings resulting from so much turnover).

If he were starting over today, Mr. Draft reportedly said, his ad agency would never have in excess of 50 people and it would charge clients $1 million a month. In which case, the incidence of great creative work issued by the agency on behalf of a client would presumably go up from the rather sad levels that Draft and fellow panelists, Claudia Batten, Peter McGuinness and Duff Stewart, estimated at less than 50%.

All of this echoes a story last fall, also in Ad Age, about the exodus of creative talent from ad agency land. Matthew Creamer wrote:

“Since the beginning of the year, a veritable Cannes jury worth of senior creative talent has shrugged off the leashes of big agency networks for their own start-ups or for creative pursuits outside the ad industry.

“Longtime agency watchers will say this kind of churn has always been part of agency life, but to dismiss the trend as part of some cycle is ignoring some key questions that agencies need to answer. After all, the pressure on these companies’ business model is intense. While the economic gloom might be lifting, for most it still lingers and, besides that, agencies are getting hit from all sides: Cost-cutting, conservative clients; procurement officers; more competition from small and midsize shops; newfangled concepts such as crowdsourcing agencies; and a business model still very reliant on the production of ads, not ideas.”

In reaction to Matthew Creamer’s piece, I told a short story in this space:

I can remember sitting around a pool in suburban Connecticut in the late 80s chatting with a fellow I’d known since I was a boy. I’d grown-up to work in advertising. He’d grown up to work in investment banking.

Dancer Fitzgerald Sample (DFS) had been sold recently to Saatchi & Saatchi, which came after a merger or two with other agencies, Backer and Spielvogel and Compton. Or something like that; I forget the order. I had worked at DFS, but moved on. My friend was explaining:

“You see,” he said, “The people at these companies – these ad agencies – that have built them through the 50s and 60s and 70s, they want to retire, and they own more stock in the companies than the companies can afford to pay them. They have to sell.” And the holding companies, of course, will have to keep buying.”

For me (I wrote at the time) that conversation by the pool all those years ago has satisfactorily explained everything about the ad agency business since, including now, because it made it inevitable that the cycle would re-boot and the green shoots of numerous new agencies would begin to appear when big got too big, as big always does.

So, cheer up Austin. Really, the wailing and gnashing are the birthing sounds of a new ad agency era – a smaller one.

Which is maybe why your conference is aptly titled “Transformation 2011.”

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