Okay, perhaps not yours Marc, but when you recently stated that you would like three quarters of your agencies to be creative, it made me reflect on the literally hundreds of agency remuneration deals we have benchmarked, negotiated and managed over the past 18 years and the fact that in every case the agency resources required were directly related to the requirements and expectations of the marketers.
Not just the marketers currently in the marketing department, but also the generations of marketers that have added to the huge amount of complexity within marketing and their marketing departments. Because as you acknowledge, part of the problem Marc is that marketers often expect agencies to mirror or partner with the marketing teams, but it is worse than that.
In the increasingly complex and complicated world of corporate marketing, the number of agency resources required has been increasing for the past three decades and the number of account management people, or project managers as you refer to them, has been multiplying for some very specific reasons.
Interestingly the marketing department causes all of these reasons and the marketing department can directly manage all of them. But they do not. Let me explain.
The creative to account management ratio
In our work with advertisers and marketers on their agency remuneration, one of the important factors we consider is the creative FTE (Full Time Equivalents) to Account Management FTE ratio (C/AM).
Why? Because this provides an indication of the complexity or demands of the client on the agency. Let me explain.
As Michael Farmer discovered in his early projects on scope of work measurement with Ogilvy & Mather in the 1990s, the number of creative personnel to account management personnel was 1.5. (Michael has reported that that this has since dropped to 1 to 1 under client pressure for efficiencies and lower costs).
What this means is that if the creative work required takes one creative person full time to deliver that work then it would typically require 1.5 account management people to manage, administer and co-ordinate the other client, agency and supplier functions to complete the task.
A low C/AM means that there is less administration, management and co-ordination, so more of what Marc Pritchard says he wants. A high C/AM means more administration, management and co-ordination to the creative time spent.
We similarly use this as a measure of complexity and demand. We did call this a measure of account maintenance but some advertisers where offended by being labelled ‘High Maintenance’ so changed it to complexity. But findings go beyond an industry average and start to look at the C/AM by category of advertiser and by individual advertiser to determine a measure of efficiency.
You see, Marc Pritchard is right in saying that a higher level of account management to creative is a sign that the relationship is overly complex and therefore highly demanding of the agency from an administrative and management perspective.
What we found was there is a significant range in the C/AM from 1 to 1, as reported by Michael Farmer, right up to the highest ratio so far of 1 to 7.2. We have excluded relationships, which have had no creative requirements but included relationships where the bulk of the creative work was adaptations of the global creative in regional and local markets.
Measuring retained resources to actual resources used
One of the important issues to consider when measuring the C/AM is that you need to often look beyond the number of agency resources in the retainer and try to establish the actual resources used by the agency to deliver the scope of work. Increasingly we find that the actual agency resources required could be more than 40 or 50% of the resources actually retained.
But it is incredibly difficult for agencies to charge for these as often the resources are highly fragmented with up to 20 or 30 individuals contributing to a handful of FTEs. That is because while the advertiser may retain say 3 people or FTEs in creative, this could be delivered by many more individuals contributing fractions of their time to make up the 3 FTEs.
Revealing this to the client would indicate a lack of cohesion and consistency of work in the creative department and raise unwanted questions of the agency.
The other reason we look beyond the C/AM is because we also study the other ratios between strategy, account management, various production functions and creative too. Each of these provides an insight into the functioning efficacy of the client / agency relationship and the current remuneration model.
The factors influencing the creative to account management resources
There are many factors we have identified over the past two decades that impact the Creative / Account Management ratio. Here are the most significant ones:
Yes, size does matter, but not always. Just being a big advertiser with a big budget does not always mean you will have a high C/AM. The size of the budget is not the issue, it is the way you spend it. Big budgets for big advertisers usually come with big marketing departments and complex, multilayered structures (see structure below).
But also big advertising budgets can be spent with low C/AM if the activity is targeted, focused and efficient. Rather than spreading the budget around over a multitude of communication channels, if the spend is focused into a smaller number of activities then this can lead to a lower C/AM.
Perhaps Marc is on to this because we have read in the trade press that his company has made major cuts in their spend, but was this to create simplicity and focus? While creative people love big brands and big budgets, you cannot expect them to manage the associated complexity.
This is complexity in all its forms and expressions from strategy, to brand structure and team structure. A prime example is that a Branded House will typically have a lower C/AM than a House of Brands. This is because the focus is on building a single house brand that the products sit under rather than fragmenting investment across a multitude of brands.
Likewise, increasingly in a global market you have a multitude of layers from local market to regional to global teams and the more teams involved the more co-ordination, administration and management required by the agency. (More on this in Structure below).
There is also complexity in marketing strategy and therefore implementation, with increased channels and markets leading to greater complexity for the agency to manage, co-ordinate and administrate. For Marc this is a particular issue as a House of Brands like P&G has a huge collection of brands.
But not all of these brands are supported by advertising and marketing. A common strategy for extending life and increasing relevance for many of these brands has been to create a range of brand variants and brand extensions, which naturally increases complexity.
Beyond the strategic complexity there is also the implementation complexity. As consumer communications channels have increased in the digital age and traditional media channels have fragmented, there are more channels than ever before. Unfortunately while a great strategy would allow you to focus on the most important channels, the emergent nature of these channels has seen many marketers try to embrace all of them, leading to greater complexity in their go-to-market implementation.
This complexity invariably falls on the agency to administer and co-ordinate. Creative people are great at creating, but when it comes to co-ordination and administration then account management is required. Taking this away means it has to be managed elsewhere. Are the brand managers meant to take this on? And if so why has it not happened up to now?
One of the key roles of account management is stakeholder management. Therefore one of the biggest impacts on the number of account management personnel required to manage the account is the number of stakeholders. The greater the number of stakeholders, the greater the account management resources required for managing them.
The problem is two fold; the first being the traditional hierarchical structures found in many marketing departments, the second is the lack of autonomy within these structures requiring more junior staff to refer decisions up the chain. This can be from brand manager, to senior brand manager to category manager, to marketing manager to marketing director and to CMO.
These traditional hierarchical structures with multiple points of responsibility for approval are exacerbated when it comes to complexity with regional and global functions accommodated in the hierarchy. We worked on a global brand client who had 12 different points of approval for all advertising work, spread across three different markets and more importantly 16 time zones.
To decrease the agency dependence on having a similar sized account management team to manage this process would be to either make the decision making more focused and autonomous or to simply remove all of the people from the process that cannot say yes and approve the work.
But this is often the most senior person in the marketing team who simply becomes the bottle neck in the process and negates the authority of everyone who reports to them. In an Agile Marketing department the move is to greater team autonomy, but in most traditional structures it continues to bottleneck at the top.
It is interesting working across different advertiser categories. At one end we have telecommunications companies and online retailers who expect their agencies to turn around work in 3 – 5 days. While most consumer goods advertisers still have a process that allows up to six months or more from brief to campaign launch.
Of course the outputs of each are very different, but have you heard the phrase “the work expands to fill the time allocated”?
The process itself takes into consideration the planned complexity of the marketing process. This includes research and testing and more along the way to support the decision making process. It is also a linear or waterfall process, meaning that the next step cannot proceed until the previous step is completed and approved.
Meanwhile other advertisers are embracing an agile process that requires a shared, network process and supporting structure.
Agencies and specifically their account management teams have managed to integrate themselves into these long and protracted go-to-marketing processes defined by their clients. The creative teams are bought in to the process at specific points as required, just as strategy and production specialists join the process when appropriate and required.
So if Marc want less project manager and account management resources and more creative, then does this again mean that either; the processes the CPG marketers have used for years are becoming more agile, less linear and less protracted, or is it again that the function of managing, co-ordinating and administering will be managed by the brand managers within the marketing department. And again if this is the case why has it not been done this way previously?
Since the demise of the media commission and its replacement with hourly rates and retainers, the most common remuneration model (or perhaps more appropriately for Marc the compensation model) actually encourages having more people working on the business.
After all the agency gets paid effectively for the number of full time resources effectively retained by the retainer. The more people on the retainer the more the agency gets paid.
Now this is quite simple to see that as the rest of marketing and advertising has become more complex this leads to an increased requirement for more people from the agency. First there is a requirement for an increased number of subject matter experts (SMEs) and then an increased number of account management people to manage, co-ordinate and administrate the increased number of SMEs working on the client’s account.
Yes, some of these SMEs required were creative people, but they did not always have creative titles. There were Social Content Creator, Digital Technology Programmer, Content Marketing Specialist and more. It is interesting that over time we observed two things happen; first the higher fees they often commanded initially dropped back to the level of the traditional equivalents, and second many of their titles also became more traditional such as Senior Content Copywriter, Social Copywriter and Web Copywriter etc.
My fear is that even if Marc achieves his aim of three creative people to every one account management person, those people will still be paid by the hour / day / week. Which begs the question; why not just hire them, as without the account management team they will be cheaper as a package? Perhaps a better way would be to stop buying the agency package by the hour and start paying firstly by the output and then paying on a value basis?
How marketers can reduce the creative to account management ratio
It amazes me when marketers wish that agencies would just change to give them what the marketer wants. The fact is that many agencies are making changes in the way they work only to find out that marketers often do not want what they are offering. But as I have said, the power to drive change resides with the marketers simply because of the Golden Rule.
“While the industry loves to talk about client / agency relationships as a partnership, it is in fact actually a symbiotic one”
If Marc Pritchard or any other CMO wants more creative people working directly with their marketing teams and less account management people, then this can happen, but you need to be prepared for the changes it will require within the marketing team.
You see while the industry loves to talk about client / agency relationships as a partnership, it is in fact actually a symbiotic one – like how the crocodiles let Egyptian plover birds pick leeches off their gums. If the plovers do what is expected of them then the crocodile and the plover benefit. But if the plover gets ideas on how to be different they could simply end up crocodile dinner.
Sure marketing has evolved faster than the crocodile, but if you want the agency to change then you need to sit down with the agency and discuss and map out the implications of that change, because in most cases the agency is simply providing what you asked them for and doing it the only way they know you want.
Lets go back to where we started. If Marc Pritchard really wants three quarters of his agency resources to be creative and reduce the account management, strategy and production people to 25% then he needs to consider more than just the mirroring of the agency structure to the marketing structure.
He needs to consider the size and complexity of his organisation and the way it engages with the agencies. He needs to look at the complexity created within his organisation, including the portfolio management, strategy and implementation plans. He needs to look at the often complex, multilayered and resource intensive structures. And he needs to review the often protracted and laborious process to go-to-market and streamline approvals and provide more autonomous decision-making.
For the last decade we have been working with major advertisers on just that; getting their house in order internally and externally before exploring what could be. While I am sure Marc Pritchard has enough people offering him help, perhaps we can help you future proof your marketing?
Let us know.
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