Navigation

The ad industry's broken business model is breaking talent

January 28 2019

"There needs to be a collective effort to come up with stuff and start getting more excited because, my God, this is depressing as shit. We’ll just talk ourselves out of an industry, we will."

These brutally honest words on the state of the advertising industry were part of a wide-ranging and thought-provoking report into how the top 1% of talent at ad agencies really feel. The research lifts the lid on the challenges of leading agencies in the face of seemingly constant cost-cutting and restructuring programmes.

According to the study, carried out anonymously by business design and talent consultancy The Blueprint, agencies are responding to disruption through cost-cutting rather than business transformation – a state of play that in effect means, instead of working smarter, everyone is working longer.

Simon Wylie, chairman of The Blueprint, said: "The predominant theme and central cause of the issues we identified through the interviews and survey is the current agency business model, [in] a market which is oversupplied with undifferentiated capability, and the perpetuation of charging our talent effectively by the hour.

"The solution is to adapt this legacy model and move to outcome- or output-based value pricing, which will allow talent to be utilised fully according to value. It is very likely that this will happen gradually and only via new leadership."

Creativity is being managed out

The report argues that the business case for creativity has been forgotten by management. According to one interviewee: "The thinking and talent that get rewarded are the people that are status quo and make the leader look good. Not the people challenging convention and coming up with bold ideas. That’s a fundamental challenge in the industry."

Many participants felt that creativity is no longer valued. Rather than rewarding innovators, conformists are rising to the top. As one explained: "Advertising isn’t full of people with big personalities and big opinions any more. We’re not hiring enough people with an original point of view."

The action gap

Interviewees also expressed frustration with the pace of change within the industry. One agency executive told the researchers: "The industry is stuck in a vicious cycle where everyone talks about change but no-one is prepared to actually change."

The study suggests that, rather than focusing on business transformation, agencies are chasing short-term targets. Constant cost-cutting for margin management means that people are working longer hours with fewer resources.

The myth of meritocracy

There was a frustration among every interviewee that advertising isn’t a genuine meritocracy. While diversity has been a key talking point for some time, there remains an action gap. The report particularly underlines the ticking time bomb of ageism in the industry.

"All that incredible wisdom’s gone," one executive noted. "We’re failing ourselves by seeing people who are older as being expensive and not valuable. We’re not keeping great people."

Another lamented: "We wouldn’t put David Hockney on the shelf because he’s in his eighties, nor Martin Scorsese nor Steven Spielberg. There is a reverence to wisdom and experience. There is an incredible shallow learning in this industry [that] youth is the answer to everything. Which is ridiculous – you know you don’t die when you’re 30."

A cultural challenge

While culture is often top of the thought-leadership agenda, the report suggests that this isn’t translating into employee experience. As one participant noted: "There’s a big difference between office perks and office culture. A lot of agencies tend to cover up the culture with perks: 'I know things are tough but, hey, look, we have a football table.'"

The study highlights the importance of having a viable talent strategy, hiring on potential and treating people as individuals as key to addressing this challenge.

Incentivising disloyalty

The research also reveals that agencies are not doing a great job of rewarding their top-performing talent. "I’ve known so many people go freelance because they weren’t getting the right levels of compensation and flexibility," one interviewee said.

Engaging with a broader pool of talent was also seen as a challenge. As one participant observed: "If your agency improves the way it treats returning mothers, then it actually ends up being a win for the agency. It makes it easier to recruit and retain top talent. There is a return on investment. But a lot of people don’t see it that way yet."

A race to the bottom

The report identifies time as being key to the industry’s current woes; notably, how a business model where agencies charge by the hour is upholding an antiquated and inefficient long-hours culture. As one respondent said: "There’s the mismanagement of time. Because we sell time, we often take too much time too do things."

Another noted: "The talent and energy we have in our agency is extraordinary. But we’ve got a business model where everyone’s working 15, 16 hours a day and at weekends. We’ve got the business model wrong – we give away so much of what is valuable. That’s my number one frustration – the waste of talent and energy."

The impact of this business model on mental wellbeing was also highlighted. As one participant noted: "We shouldn’t have these levels of stress when its such an amazing, creative, awesome energy industry in itself. What I get to do every day, compared to my friends, is amazing, We should all be so much happier in our work. But instead we’re not; we’re all carrying quite a lot of pressure."

Key stats from the research

Do you feel your agency understands your personal motivations?

24% answered 5/10

How well do you feel your agency understands industry change?

19% answered 5.8/10

How well set up do you feel your agency is to adapt to industry change?

19% answered 5/10

Do you feel your agency leadership has a coherent vision for the future?

19% answered 4.4/10

How well do you feel your agency position is clearly articulated?

19% answered 5/10

How confident do you feel your agency is differentiated in the market?

22% answered 5.2/10

Do you feel your agency has a clearly defined talent strategy?

19% answered 3.7/10

How confident do you feel that your agency understands innovation?

16% answered 5/10

How well do you feel your agency embraces diversity?

14% answered 6/10

https://www.campaignlive.co.uk/article/ad-industrys-broken-business-model-breaking-talent/1523740