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Leadership Trials of the Agency CEO

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This post is by Michael Farmer, Chairman of TrinityP3 USA and author of Madison Avenue Manslaughter: an inside view of fee-cutting clients, profit-hungry owners and declining ad agencies, which won the Axiom Gold Business Book Award for the best marketing / advertising book of 2016.

We don’t get to pick the era we live in.  We’re human, though, and we dream about other times and other places.  Given a choice, today’s agency CEOs might dream about turning back the clock sixty years or so, when the world — and the ad agency within it — was much simpler and a lot more fun.

Television was new and growing in 1958.  There were only 40 million TV households (today’s number is 120 million) and the agency’s creative challenge was how to get better at TV and print — and grow even faster than the post-war economy.

Remuneration was a fixed percentage of media, and on a normalized ad-for-ad basis, it was at least five times as high as today.  Agencies were privately owned and based in New York City.  Ogilvy & Mather was only 10 years old, with only 200 employees.  If an agency won a client, it could expect to keep it for decades, if not forever, and agencies would be in the driver’s seat about media plans and Scopes of Work.

Small wonder, then, that the CEOs of this past era wrote books, drafted inspirational memos and promoted creativity to the highest standard. Compared to today’s CEOs, Ogilvy, Bernbach and Burnett had easy lives. Advertising was a red carpet ride to fame and fortune. Mediocrity was the enemy; inspired creativity was the god. Economic growth was strong.  The rest took care of itself.

Kevin Roberts, the former CEO of Saatchi & Saatchi, identified with this past, and he chided me in 2014 for my “modern” concern that industry changes were getting the better of agency executives.

“Farmer,” he said to me, “you’re an MBA management consultant, and you see the world through numbers. That’s what you do.  It’s understandable. You’re otherwise an ok guy. But this is a creative industry. It has entirely different needs. I don’t believe that anyone can run a first-rate creative shop with organisational diagrams and spreadsheets. That kind of Bain-and-McKinsey stuff would kill our creative capability.  A creative agency needs to operate more like an ant colony, where every ant knows its job and has the freedom to do it.”  Kevin went on to remind me that ant colonies did not have CEOs who managed the colony’s ants or activities.

Ant-colony management was Kevin’s forte, and he saw it as a required cultural continuum, stretching back to the successful days of David Ogilvy, Bill Bernbach and Leo Burnett. Success and freedom went together.

Agency CEOs of 2018 would not go as far as Kevin in proclaiming that ant-hill management is appropriate in a world where agencies are caught between fee-cutting clients and profit-hungry owners — and where clients call the shots and change their agencies every two or three years.

Today’s agency CEOs have more challenges than highly skilled executives can expect to master.  They must balance economic and aesthetic factors that compete with one another. The clients’ desire for lower costs and greater efficiencies conflict with client calls for higher creative quality. In the meantime, holding companies want and expect growing revenues and profit margins even though client fees and spend levels are declining.  How can these circles be squared?

There are organisational dilemmas, as well. The agency culture still celebrates the freedoms of an ant colony. Office heads do not measure and review the performance of client heads, for example.  Scopes of Work are invisible or non-existent. There is considerable organisational freedom for agency office heads, account people and creatives to “do the right thing” by their own standards, without the expectation that anyone will look over their shoulders and review their performance.

However, none of the conditions that permitted ant-hill freedoms exist today. There are neither surplus revenues, surplus resources nor surplus profits. Under these conditions, management theory states that “tight” rather than “loose” management approaches are appropriate.

How, though, does an agency CEO who has grown up in an ant-hill culture become, late in his or her career, a leader that tightens things up? The need for “tightness” is a global need.  Agencies are global federations of offices.  I’ve seen agency CEOs attempt to influence the operations of international offices like London and be told “that won’t work here, and we won’t be doing it.”  [The initiative in question involved documenting Scopes of Work in a uniform format.]  Office heads can veto CEO initiatives, and this doesn’t (yet) lead to a job termination.

Agency CEOs and their network of offices face the same kind of jurisdictional conflicts as the U.S. Federal government and the sovereign states. The agency culture, developed during the good old days, was a culture of states’ rights. CEOs now need to strengthen the center and override the ant-hill freedoms of the states if they hope to survive economically in the current environment.

Looked at from afar, what changed was the power balance between clients and agencies, with clients developing the upper hand. Since clients have the power of the purse-strings, the shift has been very consequential.

Today’s agency CEOs have to reverse this trend. It’s just one of the many challenges — creatively, economically and culturally — that make their job so difficult.

Cartoon credit: Charles Barsotti, The New Yorker, The Cartoon Bank. With permission

This post was first published at Media Village

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Michael Farmer is Chairman of TrinityP3 USA and author of Madison Avenue Manslaughter: an inside view of fee-cutting clients, profit-hungry owners and declining ad agencies, which won the Axiom Gold Business Book Award for the best marketing / advertising book of 2016. He currently serves as Adjunct Associate Professor of Branding and Integrated Communications at The City College of New York (CCNY) and is at work on a new book about the challenges facing Chief Marketing Officers.

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