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A senior executive at a major advertising agency was recently quoted in The Wall Street Journal: "Judging an ad's effectiveness by sales numbers is too simplistic."

This is an all too common bit of rhetoric in an industry that has become amazingly adept at inventing elaborate excuses for failure. What has happened to the advertising business is no different than what occurred at big corporations in the last two decades: Success bred complacency and allowed people in leadership roles to become "disconnected" from the two groups they need the most-their own employees and their clients' businesses. For agency leadership, this error was compounded by staying linked only to the most senior level of their clients, who were themselves becoming disconnected from their employees and their consumers.

This "disconnect" created many problems, but central to them all is that neither agency employees nor clients trust agency leadership any longer. The lack of trust creates a cultural cancer inside the agency that inhibits creativity, threatens relationships and stifles risk-taking.

Some issues and actions for agency leaders to consider:

1. Leadership has failed to acknowledge that sustained hard times in the industry have made people anxious and apprehensive. When an agency culture is afraid of change, it will not change. When leadership so much as whispers "restructuring" or "evolving into the agency of the future," instead of being inspired, people react by thinking, "What's in it for me?" If the answer isn't clear, today's hardened professionals react in a protectionist, survivalist way.

2. People issues matter more than structural issues, because it is people who solve problems, not structure. So while most of the industry is scurrying for the next trendy structure-decentralized business units, account planning, service clusters-hardly anyone has a clue how to attract talented people to the industry. The industry has been trimmed down to the hardiest survivors, and that breed is not always the smartest or most creative.

3. Architecture, interior design and ergonomics impact an agency's culture in countless ways, and so it invariably affects an agency's creative product. An industry renowned for its creative flair and sense of style should be more aware of how to use its surroundings to stimulate creativity and foster communication. Instead, the bowels of many agencies have that backroom sweatshop feel.

Aesthetic issues aside, why can't top management resist the temptation to isolate themselves from their employees in a separate, more luxurious part of their office space? It's one thing not to care much about your surroundings, but a double standard sends this message: "We care about our environment, we just don't care about your environment." The workforce then concludes: "If they don't care about me, why should I care about my client?"

4. Politics and creativity are just plain incompatible. The creative force of an agency depends on top management to provide conditions suitable for nurturing their ideas. But in troubled times, with high stakes, it's easy for an agency to develop political agendas. It is also easy to rationalize politics as "creative tension." But creativity is delicate and requires people with special talents who will not do their best work unless there is a reasonable chance they will be appreciated and understood.

5. Learn your client's business. It takes time, effort, genuine interest and talent to get past the fundamentals and into a deeper understanding of a business and its customers. Clients always know when an agency is taking shortcuts or not being honest about how much they care. They just might not let on they know until it's too late.

Instead of coasting to a comfortable retirement, an agency's leadership should act to restore employee and client trust, get re-connected and give the industry a brighter future. The next generation of leadership thanks you in advance.

Mr. Pazzani, a former client and agency executive, is managing partner of Retail One Network, a marketing company in New York.

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