If I may take the liberty of paraphrasing my esteemed friend Madhukar (read Madhukar Sabnavis' blog here), agencies must be remunerated better. I agree and endorse his position wholeheartedly.
However, I cannot but agree with Sumit (read Sumit Roy's comment here) in that the whole problem really stems from the legacy of the commission model of remuneration, which the industry is reluctant to abandon.. And like Sumit, Darren, Madhukar and everyone else, I too yearn for a payment system that rewards effort fairly. Hence, I’d like to add my shoulder to the wheel here too.
However, I also feel that a number of Madhukar’s arguments, while passionate and zealous, do have a few loopholes. And while my current role as a client will certainly appear to prejudice my ideas on the subject, I hope readers will conclude that I present a balanced perspective.
Let’s deal with and get Picasso out of the way first. Yes, it is undoubtedly true that Picasso spent a lifetime learning how to scratch out the perfect doodle, and it is arguably worth what any auctioneer is able to hammer up for him.
However, Pablo must first invest in a stock called Picasso, which delivers poor to no returns for the better part of his life, until a time comes when art aficionados deign to value his work as worthy of a king’s ransom etc. In fact, in most cases, it is the estates and investors of such artists who profit, and many wannabe Picassos die in abject penury. Ad agencies do not deliver their labour of love on such stringent terms. They do far better than bread and water, regardless frequently of whether their output may be deemed artistic at all.
Madhukar also suggests royalty as a structure for fees for the agency. Truth be told, any agency that is still working on the commission structure is actually being paid royalty. Honestly, after the first `10cr of media spend, what additional contribution to the creative effort can the agency claim to have made that justifies a percentage of the next `90cr of media spending behind the same creative output? If this is not royalty, what is?
But to debate royalty a little more, much like Picasso, the author of a creative unit of work, like a book, for example, labours alone in the proverbial attic, with no recompense, and thus takes much of the risk of his enterprise, until he completes it and persuades a publisher to partake in the risk by printing copies. Again, typically agencies take no such risks that can warrant a share in rewards of the entrepreneurial kind. I am aware that Sumit Roy has been peddling such a model via his firm Univads for some time now, but clearly it’s a long way from becoming the mainstream model.
Furthermore, agencies that demand royalties skate on some really thin ice, because then the creative employee within the agency who can be directly credited with the “idea” would be well within her rights to demand royalties from her employer in turn. While I am not privy to how creative folks currently get paid, I’d be surprised if royalties come into it.
The same is true for celebrities being paid for their endorsements. They have invested of themselves until they get to the point that brands feel they can gain by associations with them. That is what they get paid for. And before agencies cry foul about the star getting paid a helluva lot more for just turning up than they do for making it up, I’d like to invite the agency folks to make bold and eschew the celebrity as a crutch for their ideas. Again, while there will be clients who demand to see known faces in their ads, there are too many agencies lobbying for the same as well. What gives?
The real problem lies much deeper. In the genesis of the industry’s raison d’etre. A discipline that was born to serve as publisher’s agents and has managed to claim compensation based on that archaic paradigm long after it (supposedly) switched sides to work for the advertiser surely has some serious introspection to do. The idea of commissions immediately sets up a relationship contruct that is by definition in conflict. Clients want to spend as little as possible, agencies earn more when clients spend more. Go figure.
For those who argue at this juncture that commissions are gone, fees are in, I urge you to look into the eyes of both clients as well as agency CEOs when compensation is being discussed. You will quite likely see them rapidly back calculate what the equivalent commission percentage would be.
And while Madhukar correctly dismisses agencies’ ability to do what consulting firms do for a living, may I submit that it is possible to think of their calling as a kind of art as well? After all, beauty is in the eye of the beholder, and if the buyers of consulting decks feel they got their money’s worth from a few pretty slides, who are we to argue?
In fact, I have submitted elsewhere earlier that this is exactly the problem. Agencies gave away logo designs, marketing strategy and thinking for free, wanting a cut of the media spend. Meanwhile logo designers & consultants came in, charged crores for a few weeks work and waltzed off into the horizon.
The problem is, an entity called “agency” will always carry some of the taint that is associated with commissions. Who likes brokers of any kind? They provide a service, true, but our gut warns us not to trust them, right?
So I ask, how does it come about that an industry that peddles “differentiation” as its core deliverable is stuck in commodity hell when it comes to the positioning of its own members?
It's time for this industry to take some of its own medicine, and “reposition” itself. Fair, even rewarding compensation will surely follow.
The views expressed in this article are the personal views of the author. He may be reached at email@example.com. His day job is to help market another commodity category, namely financial services.