How Can True Agency Collaboration Be Achieved? Via a Financial Incentive Program
As advertisers continually require new media expertise, with both traditional and ever-growing digital channels to connect with consumers, many have increased the number of agencies to manage their communications. But they have also grown more concerned that the agencies don't often work together harmoniously.
In short, collaboration didn't used to matter as much.
Agencies started the idea of creating a holistic platform for advertisers by telling their clients that all their services could be handled by various units within the agency, or holding company, and they devised some nice labels to convey integration. "Under one roof" is a nice selling proposition, but it really doesn't happen easily. Often, the groups are siloed and each responsible for its owned profit-and-loss statement, and media, PR, promotions, direct marketing and other disciplines don't actually talk to each other. Many are set up as profit centers.
Today, creating winning campaigns for advertisers often requires real collaboration. Yet rarely is there someone from the holding company, or a single agency, responsible for choreographing all multiple agency functions. And while there have been instances of streamlining efforts --case in point, the ambitious Commonwealth agency structure from General Motors, which was made up of two agencies from two rival holding firms-- many clients are again thinking gee maybe it's not about the holding company offerings, or a single agency. Maybe it's about "best of breed".
I believe this is why we've seen a spike in recent months of "project work" or "assignments" given out to shops rather than agency-of-record relationships.
Surely each holding company can't have best of breed in all cases. So, if advertisers seek media services from several different places who handles coordination and collaboration. Who leverages the assets? How does each agency profit motive fit in and the ego system (right I said ego system, not eco-system). Whose client is it anyway? Would one agency function screw it up for another? Do we all charge the same way? Who leads? Who benefits (or loses) the most from results? Can we really have true integration this way? How do we solve this problem?
There are many, many questions. But I think the answer lies in structuring the right financial incentive program so everyone not only has skin in the game but a relatively fair reward for performance. And it all gets tied to advertiser results.
Here's an outline for how we might think about it:
1. The advertiser sets a list of objectives and what is expected to fulfill each objective.
2. Specific functions are assigned to agencies and performance related metrics are created and measurements established at the outset.
3. An organization chart is developed for all functions and a process outlined.
4. A fee structure is set up to cover the salary costs and overhead for each agency profit center but the actual profit margin, which would be the same for all units on the business, would be based on each unit fulfilling its objectives.
5. If the objectives for an agency or unit are not fulfilled, the profit margin for that unit is reduced accordingly.
6. An incentive bonus for every agency is provided only when the advertiser's overall goal is fulfilled. In other words, a bonus reward is paid when the advertiser's total goal is met or exceeded as a result of the work from all units combined (say x% sales increase or x% awareness increase or share of market increase). That's the only bonus system. All agencies are brought together to hash out the individual advertiser's proposal, including goals and metrics, at the outset. All sign off and everything is reviewed twice a year.
In the final analysis, this might also be the time to create the position of "Chief Collaboration Officer" as a team leader on the account when a client employs multiple agencies. This could be done at a holding company level or at a "lead" agency or at the client. The responsibility for this individual (and job description) is designed not only to be a real contributor to the business but also, perhaps, the scorekeeper. It's not a surefire solution, but it's going to get you a lot closer to getting that harmony clients crave than we are today.