Stand up and be counted

Marcomms has long held a reputation for boozy lunches at The Ivy, the perception being that this is how agencies win and keep clients. While this was true to form in the 1980s and early 90s, the heyday of media darlings is drawing to a close under pressure from clients demanding tighter financial controls and account transparency. Such is the demand that some agencies, including media shop Zenith Optimedia, demonstrate their value to clients – it now uses the motto “The return on investment agency”.

Loudhouse report Accounting for Creativity questioned 100 finance directors within UK creative services agencies, and reveals that trustworthiness is a key issue within the creative service sector.

In the UK, alarmingly, only 42% of agencies surveyed believe clients perceive them to be trustworthy, compared to 67% who believe clients primarily consider them to be creative. UK agencies are renowned for innovation and creative flair, however the ad industry is often regarded as the poor relation to sectors such as retail and finance when it comes to managing processes. For years the industry has shielded its eyes to account management practices, but as clients increasingly look for more efficient agency management and greater transparency, the industry must stand up and be counted.

The traditional split between creatives and account handlers is a well-worn story and the survey highlights that creative teams are not always “100% behind” operational initiatives, which can seriously hamper costs at a company level.

The issue of over-servicing may never be fully eradicated but this, combined with bad financial habits, is heavily impacting on agency profitability. Currently, 68% of creative agencies over-service accounts and also undercharge clients, while a further 80% never charge for late payment of invoices. It is clear that the question of financial control is key as agencies feel the squeeze from clients, however the research reveals a worrying trend for agency finance directors as the attitude of creative staff towards financial processes is frequently unco-operative (41%), with a further 21% completely oblivious to the need for financial process.

Agencies need to focus more on the operational side of the business and become more efficient in accounting for resources such as time. Yet, despite an awareness of the need for transparency, many agencies struggle to implement this mindset within their business culture.

This reluctance stems from the sentiment that financial responsibility rests elsewhere. While creatives remain unconcerned by process, clients increasingly demand a transparent view of how their money is spent – and it is a lack of transparency that explains why many agencies do not consider themselves to be trustworthy.

Even though 56% of agencies believe their clients are demanding more visibility, only 20% could be described as demonstrating financial processes. This gives clients the impression that they have something to hide, and in the majority of agencies, where personal relationships can make or break contracts, the lack of trust on the client’s part should cause alarm. Trust is key to long-term relationships and the first step to engendering trust is being open and honest with clients.

Some agencies are, however, taking steps in the right direction and recognise that training is essential in combating the reluctance among creatives to be financially responsible; 80% of finance directors believe it is possible to instil a sense of financial responsibility within creative teams.

Efforts to be transparent are critical in earning and building a client’s trust, but the targets are only viable if agencies are prepared to invest in people, systems and methods that increase efficiency. On a positive note, it appears this message is getting through: 62% of agencies invest in methods such as time and resource management. So, while creativity is often viewed as the keystone in measuring client satisfaction, and financial process its unlikely bedfellow, the research indicates that the days when agencies are judged solely on creative excellence are numbered.

In fact, 66% of finance directors consider the most attractive agencies to be those where creativity and financial control co-exist: agencies must therefore redefine what it means to be successful.

Forward-thinking agencies will welcome the shift in focus as an opportunity to encourage creative staff to be more engaged in managing costs. Agency efficiency is increasingly important in a highly competitive environment where clients are under greater pressure to maximise the value they get from agency relationships. In order to stand out from the crowd, agencies need to understand that while creative brilliance is still sought after, clients are looking for it to be underpinned by robust management.

Hugh Stafford-Smith, managing director of Maconomy, contributed to this week’s Trends Insight