There are significant skills shortages in the direct marketing industry. Over the past few years the lure of other careers, such as management consultancy and new media, coupled with a generation of graduates who value quality of life over material success, has created a shortage of applicants for full-time positions and led to the rapid expansion of the freelance sector.
Agency bosses feel that the balance of power has shifted from employer to employee resulting in a fall in productivity and a rise in staff costs.
Yet many believe that the emergence of a large pool of freelance talent is no bad thing for the industry. Jim Surguy, managing director of Results Business Consulting, which works for a number of direct marketing agencies, is quick to point out the benefits: “Lower fixed costs and greater variable costs should be the aim of management. Freelancers provide much greater flexibility in overhead structure.”
Surguy points out how Sir Martin Sorrell of WPP has been a strong proponent of lowering fixed payroll costs to cope with sudden and unexpected fluctuations in income levels.
This is of particular advantage to smaller agencies. Russell Abbott, managing director of agency WDPA, acknowledges the benefits of freelancers: “There are always peaks and troughs in the business and so it’s good to have that flexibility.” But, as Abbott points out, the benefits are not merely financial: “If you take on additional staff because you have won extra business and then, for some reason, have to fire someone, there can be tremendous morale problems. But people will always understand if a freelancer leaves and so it is much easier to handle,” he says.
In the past, there were concerns about the calibre of freelancers – but this has changed. As Matthew Hooper, managing director of Interfocus, says: “Six years ago, if you said you were a freelancer people assumed you were between jobs or unable to get one. Nowadays there are some very good people around – and people recognise this.”
But even if standards have risen, most employers are still concerned at what they perceive as freelancers’ lack of commitment to the client and the agency. Hooper comments: “With freelancers there is very little allegiance to the company’s culture or vision. As the proportion of freelancers you employ increases you risk diluting your position in the market. The biggest danger is to companies that don’t have a very distinctive identity to begin with. Agencies really have to concentrate on differentiating themselves from competitors if they are to cope with an influx of freelance staff.”
For this reason, many believe that freelancers can never be successfully employed beyond account manager level.
Dave May, managing director of new agency, Blue, is one of the sceptics. “An account director needs to manage a team and it is hard to develop and motivate the people under you when you’re a freelancer. Would you really give development of your most prized asset – your junior staff – to people who don’t believe in your product and brand enough to make a full-time commitment?”
Abbott agrees: “We try to avoid employing freelancers at account director level. Occasionally, we might book someone for short-term holiday cover. But it’s not ideal because they need to be able to direct the account strategically as well as understand the client’s business and brands.”
Pros and cons
Adam Wylie, managing director of Tequila Payne Stracey, is one of the few enthusiasts for freelancers. “I’m not sure why there are concerns,” he says. “If a freelance account director has specialist knowledge that will keep the client in the agency then I don’t have a problem with it. The breadth of skills that are required nowadays are so diverse that you have to consider what the freelancer brings to your business that you don’t already have.
“There are two or three phases that an account might go through during its life and each generally needs very different people to direct it.”
However, Wylie acknowledges that clients still often need to be sold on the idea. Resistance to freelancers has probably been bolstered by Coca- Cola’s recent alleged refusal to allow its agencies to deploy freelancers on its account. Wylie thinks that this sort of attitude is unfair: “Do clients really think that well-run agencies run their businesses with a raft of people sitting around waiting for their business? Most clients face the same staffing issues and use plenty of freelancers themselves. The reality is that, in the short-term, you are unlikely to have any option but to staff up with freelancers when you win a new account.”
The biggest issues for clients tend to be confidentiality and continuity: “If there is a stream of freelancers on the account, clients will, quite rightly, become very disillusioned,” says Abbott. “Clients need account teams which are dedicated, understand the business and have a history. True, freelancers may not always be as committed as full-time staff but if you treat them right and involve them as much as possible they can breathe life and energy into an account,” he adds.
The danger for agencies is that, if clients become convinced of the merits of freelancers, they may go straight to this pool themselves in an effort to cut costs.
“The barriers to entry in this business are low,” says Hooper, “but clients shouldn’t be fooled into thinking that freelancers are cheaper.
“It costs about &£6,000 a year to sit someone in your office and you may well find that you have bought less commitment and less service than you would have enjoyed had you gone direct to an agency.”
The solution, agency chiefs believe, is to persuade more freelancers back into full-time employment. As Wylie points out, the distinction between freelancers and permanent staff is rapidly being eroded through new legislation which requires employers to give freelancers the same benefits as comparable payroll staff. Additionally, freelancers’ lifestyle demands and lack of career ambition is affecting the attitudes of permanent employees: working hours are reported to be getting shorter and turnover is rising as employees increasingly reorder their priorities in favour of play over work.
One solution is to make the working environment more attractive. “Retaining and developing staff is an area that has not been addressed until recently,” says Surguy. Dave May acknowledges that, in a small agency, it’s harder to give staff clear career paths because the shape of the agency turns on each successive account win. But he insists that a small company has a head-start when it comes to creating an environment in which people want to work. “Most large agencies are the same – warehouses full of people,” he says. He also points out that small agencies can offer equity to valued employees.
Abbott thinks that small companies are more stretching for ambitious people: “You can offer participation on different levels so that they are actively involved in determining how the agency is going to operate.”
WDPA, based in Surrey, has found this increasingly important to senior staff who get frustrated by the hierarchy and specialisation of roles in larger agencies.
However, Hooper thinks that the current employment market will ultimately favour larger agencies. “Equity has become the BMW of this decade but 100 per cent of nothing is still nothing and people will realise that having equity isn’t going to make you millions.”
Yet most agency chiefs believe that freelancing is here to stay. The problem is ensuring that client servicing and operating margins are not compromised by the emergence of new patterns of work.
Wylie speaks for all in the industry when he concludes, “we have to be masters of our own destiny”.