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Sunday, March 16, 2014

Ad Agency Organizational Drift

These days sociologists increasingly talk of “organizational drift” in American business. Much of it clusters around what goes on in Wall Street particularly in the world of investment banking. Some blame the repeal of the Glass-Steagall Act signed by Bill Clinton. When investment banks could become traders in a wide variety of financial instruments as well as advisors to their large corporate clients, things began to change. Big institutions that were always 100% client focused, shifted. The balance between their trading profits and their client advisory business became blurred and the trading business often took the upper hand in corporate emphasis.

Coupled with that, the sociologists also talk frequently of the need for “dissonance” in an organization meaning healthy internal conflict. People fight behind closed doors about a particular issue but, once they come to agreement, create a united front in front of clients or the public. Dissonance was thought to be a great help in dealing with rapid change and uncertainty in the market and helped to avoid “group think” in any company. Minority opinions were always heard.

The more that I talk and write to people, it is obvious that many ad agencies, particularly the small and mid-sized that this blog focuses on, are struggling with the exact same problems as the big Wall Street investment houses. The money involved does not have as many zeroes at the end as is typical on Wall Street, but the overall problem, that some have labeled “organizational drift” is very real.

Now, cynics may say that these problems have always existed and I agree that they have to a certain degree. However, consider a few issues. Those of us with a bit of gray hair remember hearing about or actually working at ad shops whose mantra was--”We service our clients, we service our clients, we service our clients.” How often do you hear that today and is it really ever true anymore?

As the noose has tightened around mid-sized shops in recent years, I have received a number of reports about a shift from client focus to an emphasis on short term agency profit.

A few examples:

More than once, I have reported on young media staffers getting pressured or ordered to put a large complement of over the air TV into media plans forcing a huge allocation of the total budget to TV production. Less expensive digital options abound and even good old low cost production radio was available and made sense. The agency chief or creative director wanted some first rate TV done that year so the client(s) needs be damned.
For years, many of us have said that they avoided their CEO at year end as the scramble for revenue required one to empty one's  pockets to proceed to the other side of the agency. We all laughed about this and many experienced it, but lately I have been hearing of tactics that are just plain wrong. One old acquaintance wrote this to me: “for years, you have been telling me and demonstrating that most new products fail. Recently, I have seen it firsthand. Well, my boss told me that we needed to move the rollout for a brand we handle into 4th quarter last year. I argued that distribution was not strong yet and we needed to wait several months. He countered that our new work was so good that it would force distribution. I looked him right in the eye and he did not blink. He is a smart guy and knows better than make a ridiculous recommendation to advertise to empty shelves. The client wisely did not bite and the product died a quick death recently. My boss recently rationalized his trying to move billing to improve 2013 agency financial performance by saying that most products fail anyway, so what’s the difference. It makes me sick.”

Separately, the idea of dissonance is fading at many mid-sized shops. “We don’t hash things out anymore. The Boss or Czar as we call him behind his back gives orders and we follow. Ten years ago, I was a confident marketing pro who gave his opinion freely. I was a team player but I was never afraid to speak up. Now, I am approaching 50 and am facing high school fees for my kids. I have become a yes man. Given the sweeping changes as we move into more digital, I know my boss is not getting things right. I never speak up as I did at other jobs. The culture here is for short term profits only.”

The above comment was from someone whom I have known for 25 years. He says that other than some creative work, there is no discussion left at his shop on policy or client retention issues.

Am I overreacting? Maybe. When I look at it objectively, it seems that organizational drift seems to have (sadly) caught on at many mid-sized shops. What will push the pendulum back toward a client orientation? It is difficult to see a way out in the short term as shops with less than 100 employees are more challenged than ever financially.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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