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Top CMOs and agency CEOs work through some of the most common issues.

 

When organising a dinner on remuneration, I was a little concerned about the RSVPs. Everyone turned up, so maybe it was unfair to think this is a dull topic. Either that or I’m more generous with buying wine than I thought. Whatever the reason, they arrived armed with their experience and outlook on this trickiest of industry subject matters.

And by ‘they’ I mean Reuben Arnold (Starbucks), Julian Douglas (VCCP), Paul Alexander (Barclaycard), Jamie Elliott (The Gate), Pete Markey (TSB), Neil Simpson (The Corner), Paul Davies (Microsoft), Claire Hynes (Mr President) and Janet Markwick (Y&R).

Remuneration currently seems to be a flawed process. Whilst everyone operates in their own way, the shared verdict is that right now it’s not working. It could be better and people (both brand and agency side) aren’t happy.

We organised this evening, not to find a solution, but to prompt real thought and active debate about remuneration. To hit on exactly what we need to think about so that improvement becomes a reality.

 

What Kind of Success Do We Want

‘We currently allow a lot of inefficiency to prevail.’

Nobody disagreed with Y&R’s Janet Markwick. Where remuneration is concerned, exactly how brand and agency work together on these matters should be a well-oiled machine.

Instead, it has become a secondary issue. Rather than settle the order of things early on, we race towards the results. Achieving great work is what drives us, sure, but no one wants to do that by sacrificing the relationship.

Markwick continued: ‘There’s a lot to be gained by really coming together early and understanding how do we want to work together; how do we want to achieve success?’

We all want success – on that, we’re agreed – but how we want to achieve it is (by contrast) something we fail to reach a consensus on.

‘Clients often want to start work straight away before we’ve defined anything,’ Markwick continued. ‘And particularly how we’re going to work with each other.’

She called on us to focus more on how we bring great work to fruition, and not simply focus on what we want each other to do.

We all agreed that a key part of how brand and agency can be more constructive is down to transparency – outlining the process ahead of time to avoid any nasty surprises later on.

Barclaycard’s Paul Alexander said ‘transparency is a given’ when it comes to how we improve our dealings on remuneration. ‘There’s still a huge lack of transparency – both ways. Upfront transparency is a critical starting point.’

Included in that transparency is how we value one another. Whatever conversations are to come about remuneration, it’s critical to outline value – both our own and others’ – from the start.

Jamie Elliott from The Gate said how ‘[agencies] are poor generally at negotiating because we’re poor at defining what our value is. We have to do that from an industry point of view – communicate what our value is.’

Janet Markwick shared Jamie’s opinion that agencies need to upskill their negotiation skills.

If brands have procurement, whose role is to drive costs down, then who do agencies have on their side? Agencies need an equivalent to be able to negotiate the deal by articulating their value.

Procurement skills are relatively new to the marketing and creative industry, so this imbalance is no surprise. But perhaps it’s worth agencies’ time investing in people who are able to negotiate and champion their value.

 

The Curious Case of Procurement

There was real disagreement over how harmonious the involvement of procurement teams made the early stages of a brand agency relationship.

Whilst some of the agency heads at the table bemoaned their experiences with procurement, it was something clients equally had their own troubles with.

Starbucks’ Reuben Arnold understands that because he will be the one to actively manage the relationship with agencies, he tries to involve procurement only at specific points in the process. That way, the primary relationship agencies experience is marketing instead.

Paul Davies from Microsoft concurred that as a marketer he was not always in agreement with procurement and had tough conversations with them too.

There’s the risk of them being too closely associated with the function of a relationship – the numbers, the spreadsheets – and not the sexy bit: the creative. For Neil Simpson, he sought to combat this idea, encouraging them to come into The Corner’s offices and get more of a sense of the people who work there.

‘We had a procurement person spend two weeks in the agency and it worked out really well. They said to us, “What you do is very difficult.” The hours that people work they were blown away by. And the fact that they really liked everybody. Those were the three headlines. That relationship made it much easier later on.’

This harks back to the transparency Barclaycard’s Paul Alexander deemed so critical. By showing the bigger picture; the level of investment that goes on, it can be easier to express (and therefore value) the level of work performed.

 

Skin in the Game

Quantifying creative input is always a tricky one. Is the quality or validity of an idea really measured in hours alone? Or even by subsequent sales?

Skin in the game is one of the ways to navigate this. By offering agencies a part of the growing business, they are tied to a bigger, longer-lasting brand journey. They are not just granted the opportunity to work with the brand, but a chance to invest in it.

‘The big story is skin in the game,’ said Neil Simpson from The Corner, ‘but I have yet to encounter a client who’s said, “Yeah have some equity.” Having run my own business I think how protective I am over my own equity and I understand fully how protective they are over theirs.’

Claire Hynes from Mr President says equity can bring a level of complexity to things. One that ‘outweighs the benefits.’

‘I don’t think it focuses you any harder on the objectives or gets the client to a better place. I can see that the reason we’re all still doing it the old way is because the old way is simple.’

Julian Douglas from VCCP said how aligning to the bonus of the brand was a route he’d enjoyed results with. ‘We’re going for the same thing. Even if we can’t split up who did what on it, we’ve all got the same North Star and that definitely helps.’

This is another example of how brand and agency both sitting down together and detailing how they want to achieve success brings clarity to the relationship. It doesn’t have to be a definite choice between inflexible options – transparency can help both parties mould their own joint solution.

 

Our Best Behaviour

How brands and agencies treat one another is something that reverberates through every part of a relationship. But how we behave (whether brand to agency, or even agency to agency) and how it potentially impacts on the landscape is something we must consider.

Janet Markwick talked about how in the midst of a pitch she suffered from another agency undercutting the fee they sought from the brand. There are a fair few things in an agency’s armoury to win work – it comes as no surprise that this is one of them. However, it’s more that this is a precedent being set by the brand, with Janet recalling how agencies were played off against one another.

For agency-facing people it presents a conundrum. To look out for your agency and to secure the work. Or to resist, ultimately miss out on the opportunity, but know that what you’re doing is for the welfare of the industry.

‘I refuse to negotiate during the pitch process until we know we’ve won it,’ said Janet.

When you look at what the agency would ultimately be missing out on, it seems far less palatable anyway. A reduced fee, and circumstances that presumably favour the brand more than anyone else.

Janet’s stance is one which can lose work but is it necessary if a change in behaviour is ever to be reached? With price negotiation another huge drain on manpower, it becomes an unwelcome addition to proceedings and one we, like Janet, believe should be resisted.

‘If there were a code of behaviours around this, that would be absolutely great,’ said Neil Simpson from The Corner.

Neil’s comments demonstrate the point that it’s not always the client you’re battling. There are undoubtedly unspoken rules in the industry. Perhaps it’s time these were spoken more often. With the assurance between parties (via a code of behaviours) that there’ll be no lowballing, the best deal and not the cheapest wins out.

For brands, it might seem a good move to use agencies’ competitiveness and willingness to win the account to further improve the deal you’re getting. Not so, says Reuben Arnold.

‘If you’re in a situation where you’re playing three agencies off against each other, all that really says is that you’re looking for the cheapest deal. You’re not massively bothered by the quality of work.’

It might seem naïve to suggest that values such as decency, honesty, transparency, are essential when it comes to remuneration. Yet these were the very things that came up again and again throughout the dinner.

If these values alone seem too twee to make business sense, then consider the longer-term investment in talent. If you pay for better people, you get better work. Agencies who value their creative and strategic output invest in people’s training. They look to grow their capabilities and return value back to brands. So why aren’t brands wise to this – why don’t they see the reasoning behind the price tag.

The subject of remuneration is not a new one. Yet tackling the subject in its entirety was always going to end in frustration. By looking at it piece by piece, we can find a way to gradually correct our handling of the matter. It’s what we talk about when we talk about remuneration that we need to concentrate on.

It’s important that we don’t ditch the subject of remuneration. Keeping a dialogue going can increase awareness of the subject and help tackle its problems.

In our industry, certain practices have a knack of staying broken. Whether from an absence of people asking the right questions, or the lack of a better alternative. The risk is that they grow too stubborn to fix.

Our role as someone who sits in-between both agencies and brands means we occupy a unique forum with both parties. And we make it our business to actively scrutinise topics when it can lead to improvement in the marketing world.

When it comes to remuneration, we don’t pretend to have all the answers, but for now we know where to begin if we want to (have to) improve.

 

In brief:

  • Establish a clear process of expectations between brand and agency at the start of any conversation
  • Identify a common objective for both parties and make sure agencies are rewarded against it
  • Encourage the topic of value. It’s often swept aside but is the common thread throughout the whole process
  • Bring procurement closer to agencies and educate them on agency value
  • Remember that cheap does not translate to good
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