Adventures In Recruiting: The Wrong Way And Right Way To Start A Business

Over the years I have been approached countless times to put creative people together, usually a writer and an art director, with an account person to start a business; usually its an ad agency but occasionally a consultancy.  Inevitably, the creative people have been working or freelancing together and have developed a relationship with a company whereby they can poach the account to fund a their business.   Or, occasionally, they have enough freelance business to be able to turn it into a real business. I generally turn the opportunity down.  Here is why.

I originally wrote about this last October 10th, but I thought it deserved a fuller explanation

Usually, one or both of the creatives are fully employed and earning a paycheck from a company or ad agency, their freelance income is on top of their regular paycheck.  The freelance income becomes significant which drives the decision to leave their current employment and start an ad agency.  They approach me to find them a partner to do this.  In the meanwhile, they continue to earn money from their current employer.  In most cases they are willing to call the new person a president and offer him or her a percentage of the business sometimes equal, sometimes not. In addition, they want the new person to devote full time to the new business effort; all this normally without pay.

Unfortunately, in most cases, the new business person/president is expected to resign from their current job (or to be out of work in the first place) to spend full time developing new business for the creative team, which is currently employed or, if not, earning significant freelance income.  While the creatives share their freelance income they are unwilling to share it with the person who will become their partner because of work done on their behalf. 

Essentially the account person is expected to work for nothing.  

While this may sound insane, it is the usual process.  

Predictably, the new partner will only be paid out of the revenues generated by new business that she/he brings in.  And since the creative people often consider themselves to be the product, the account person sometimes is offered less than a full third of new business.  

Even if I am offered remuneration (rarely my full fee), I turn this kind of assignment down because, with very few exceptions, these arrangements rarely succeed; starting partners have to be respected, valued and compensated equally.  I generally tell the potential partners that they have to incorporate and set up a business with all the necessary legal paperwork, including partnership agreements.  

More often than not, they balk at the formality.  In one case that I remember, they told the account person that he was far too nervy and had too much chutzpah to ask for a contract; this is not a good start.

The irony is that in almost every case I can think of, creative people always need a partner to both administer and manage the business as well as to run the entire new business program.  This person is almost always the first person hired once the business starts.

Over many years when I explained what is wrong with this premise, almost everyone who has put it forth to me has said the same thing:  "If this person is good and really believes in themselves, they will bring in business quickly and then end up making a lot of money."  This is truly specious logic.  Anyone who has ever worked for an ad agency and pitched new business, knows how difficult it is to win an account. And it is ten times more difficult for a start-up, especially one with no history, even if there is one anchor account. In other words, they are asking the account person to give up his or her job and paycheck in order to create a business for people who are already working, getting income and have nothing to lose if their pitching is unsuccessful.

I can think of only several instances where the writer and art director (actually, in one case it was a writer and a producer) actually got the logic of the issue and agreed to split whatever they earned freelance because they understood that the new person would be working on their behalf.

If the creative people have freelance income, they should be willing to share it with an account person (or other title) so that they are all invested equally.  This provides everyone involved with incentive and insures mutual commitment.   

Mutual commitment is essential to a respectful and equal relationship.  There is no other way.

What Happened To Account Management?

If clients want to get their money’s worth from their ad agencies, they should demand more from their account managers.  Unfortunately, over the past twenty-five years, account management has been emasculated.

Going back to the Mad Men days and before, account people had a very specific function that helped lead to great creative and media work.  Account executives (the term is used in its broadest sense for this post) worked closely with their clients and were marketing partners.  They did sales and marketing analysis, they went out on sales calls both at the retail level and corporately. As a result, they often knew more about the business than their actual clients.  All of this was to strengthen the relationship and build credibility so that the agency could sell its creative work.   

However, there was always an undercurrent of distrust between weak brand people and strong account people.  The concern was that giving away too much proprietary information might, somehow, hurt the client.  Many companies refused to share data feeling that it was not the agency’s business.  Many others did the minimum they had to in order to integrate their account people into their marketing and advertising.  Over many years, this situation spread and, gradually, marketing was mostly removed from the agency function.

Ad agencies established account planning, taking away the strategic function from their account people.  If one goes back to the beginnings of planning, that was not the intention.  The original planners were there to strengthen the communications function and to be the voice of the consumer, gaining insights into the market which, truthfully, many account people did not or could not do.  They were to be partners with both account and creative people.  But account people were often given the cold shoulder by planners who tended to relate better to the creative people, thereby weakening thie account function even further.

Fees, which became prevalent in the nineteen nineties, cut away agency profits.  This resulted in clients demanding that they be serviced only by senior people; unfortunately, this further limited the account function, since account directors and group directors were relegated to doing the administrative work that account executives had previously done.  Because so much of what junior account people did was handle billing and traffic, those functions were also removed from account people and given to lower paid project managers (or some other title).  

Media, while important, was always relegated to the bottom of the heap.  For instance, media was mostly the last to speak in creative presentations.  And, half a century ago, as media choices started to grow with the advent of cable, media buying services were developed.  Gradually, they gained a toehold in the business and became profitable.  The holding companies then separated media from their traditional agencies.  Over the last two decades media has become fractionated – spot, network, cable, digital, social, and many other aspects – which have complicated the media landscape in every aspect.  Media people always said that media was its own profession and in the mid-nineteen nineties, they got their way.  But, that took one other major function from account people.  Unfortunately, today, most account people have little or nothing to do with media planning, buying or analysis.  Media agencies have their own account people to handle clients and to deal with their traditional and digital agencies.  Even the media agencies owned by the holding companies have their own account people to deal with their traditional agencies.

All these changes served to weaken a very necessary function – working with clients to develop business and marketing and advertising strategy.  Today, we are starting to see that a lot of this work is being handed off to consultants, and as that happens, agency fees will get cut even more.  And account people may become superfluous.

It has become a vicious circle.

I fully believe that as account people have been removed from the creative and marketing process, the work coming out of agencies has become weakened.  Why?  Because account people were once fully involved with the creative process and were the source of information, insight and knowledge; that kind of insight helped creative people to do better, more effective work.  Today, since this function has been divided among dozens of people, many of whom work for outside companies.  It is very hard for an ad agency to have full control and oversight over the vision for its brands. And every brand needs a vision.

This is the vision that the pioneers of the business – Ogilvy, Reeves, Chiat, and many others – had that enabled their businesses to grow and thrive. The holding companies are just too big and complicated.

Five Easy Ways For Every Company To Keep Its Best Employees and Lower Turnover

These are  simple and inexpensive ways to help improve employee retention.  When employees stay, profitability increases.

1     1)    Communication is the key

Every employee must feel important.  Management must communicate; in person is better, but emails are important.  These communications must come on a timely basis and from the CEO, but especially if there is a crisis or some other event which might start rumors.  Pre-formatted company newsletters are no substitute for a single subject email.  When there is an issue, it must be addressed specifically and immediately.

In ad agencies, when the trade press reports and account in review, particularly a large one, management must immediately deal with the issue.  Best to have a meeting and say that there is no plan but that you will get back to employees as soon as one is in place.  Then follow-up is critical and necessary.  Employees feel better when they are spoken to.

Communication doesn’t have to be from an issue or problem.  At an ad agency, showing the new work on a monthly basis builds pride and excitement.

2     2)    Give raises and promotions when they are due

Every employee, no matter their level of seniority, looks forward to their salary increases.  They should never be put off.  Every employee knows that wage freezes are merely an excuse.  They also know that they are meaningless.  As someone once told me, “All any valued employee has to do is threaten to interview and their pay increase will miraculously appear.” 

Most people don’t leave companies solely over raises, but they will leave over an overdue promotion.  Failure to get a new account is not an excuse.

Spot bonuses are a great management tool to let valuable employees know that they are valued. If raises cannot be given, a small spot bonus will keep employees motivated and loyal.

Unfortunately, ad agencies which have not gotten new business in a while, use that failure as an excuse not to give raises or promotions. Every employee understands the issue, but when it happens multiple times during a short period of time (one year or eighteen months), forgiveness turns to anger.  There is no reason that rotations or new assignments cannot be given; it requires more work on the part of HR and management, but it will keep good employees motivated and loyal.

3     3)    Making employees feel valued is essential

Make sure that valued employees know that they are valued.  Telling someone they are important, doing a good job and have a bright future mean a lot.  Asking a junior into a very senior meeting makes those people feel like they are on top of the world.

A dinner with a spouse or a short weekend away does wonders for morale. 

Feeling important and wanted can lower turnover at very little cost.

4     4)    Giving an employee extra responsibilities goes a long way

As a young account supervisor I was asked on to the agency’s new business committee.  I met with the chairman, CEO, creative director and many others.  Imagine how valued I felt.  Think about this or similar perks for valued employees.  Showing recognition by giving added responsibilities is a sure way to keep valued employees

5     5)    Recognition Is essential

When someone does something important, the whole agency should be told.  Creating pride goes a long way towards building loyalty. Giving recognition for a good job goes a long way – it is why some companies have awards – but giving an occasional award does not go far enough.  I remember once being secretly chosen to go to the agency’s condo in St. Croix for a week.  I felt like a king and it cost the agency cost nothing. I had to pay airfare for my family. 

Establishing special training really helps.  Sending employees for career counseling, presentation skills and other non-traditional training is inexpensive and smart.  I know one agency that sends its mid-level and senior employees for investment training and seminars.  How smart is that?

Believe it or not, all agencies used to announce new hires to the entire company; there was generally a memo and a accompanied by a photo.  Somehow this important recognition has been forgotten.  How nice it used to be to walk down the hall during the first week and have someone recognize and welcome you.

Training Programs Need To Be Reinstated Properly

During the forties, fifties and well into the sixties ad agencies had real training programs which involved both the agency and its clients. Those training programs were for every department. The best of those programs lasted six months or longer, where new recruits spent weeks in each of the major departments – account management, creative, research, media and production. They learned what each department contributed and how they functioned; people in those training programs were given real responsibility and tasks.  Account managers also spent time on the road with their clients – I spent six weeks going out with Lehn & Fink route drivers, (Lysol, Beacon Wax, Stridex Pads and other well-known brands), checking and loading inventory, setting up end-isle displays, installing shelf-talkers and basically learning what is today called shopper marketing.

Over the years, these training programs kept being reduced.  By the 1980’s, they were diminished to the point where they had become a series of lectures, mostly about the various departments of the agency. The lectures were generally given by agency executives who, for the most part, might have been interesting but were not teachers (running a department does not mean being a good teacher).  Since then, almost all ad agencies have ended their training programs claiming they did not lower turnover nor do much to foster the loyalty of employees.

The problem, I believe, was not the concept, but the execution. The truth is that if 50 employees started these abbreviated programs and in two years only ten remained at the agency, the program is/was for those ten; however, however agencies didn’t see it that way.  For most, it was merely a time consuming expense  with little benefit.  Agencies never examined that if so many people left the agency, the company needed to examine itself in order to determine why turnover was so high, which probably had little or nothing to do with the training.  

However, I would like to deal with the training programs themselves.

As the training programs evolved they developed into two categories.  In the first, senior agency executives gave lectures on their departments and functions, occasionally accompanied by case histories.  In the second, some lectures were given about the different functions and then the trainees were split into groups consisting of people from each of the agency’s departments and were given a case history or problem to solve together.  Those results were presented by the teams to a panel of agency executives.  The winning team got some sort of prize and/or recognition.  

Neither was particularly effective and actually taught very little about advertising.  People who went through these programs tell me that in retrospect they were boring and had no relationship to the day-to-day problems of the business.  And therein lies the problem.

There is a story told to me by a copywriter which is illustrative of the problems resulting from the lack of training.  The agency was the old Jordan, McGrath, Case and Taylor.  A client asked the agency to create a coupon ad for a reformulated product.  The agency presented an ad which essentially said, “25 cents off…” The account supervisor, who had been in the business about ten years, presented the ad and sold it, but a day later came back and said the client wanted to add that the product had a great reformulated taste (I wonder if she knew that in the first place?).  So the copywriter wrote, “25ȼ off great new taste.”  This, too, was approved.  But then the AS came back and told the writer that the client wanted to add something about its new packaging.  This time the writer said no, the message had become too muddled and they could not do 25ȼ off new taste in a new package.  The account supervisor and the writer got in a big hassle because the writer explained that this simple coupon ad now had too many elements to be effective.

The ensuing argument was one of those small things that got out of hand and ended up in Jim Jordan’s office.  Jim looked at the supervisor and said, “You’ve been in the business long enough to know that an effective ad should only contain a single communication or message.”  The supervisor’s response was stunning – “I never heard that, how should I know it?” 

And therein lies the issues with training programs or lack of them.

As training programs evolved they did nothing to contribute to the creative product or to good advertising.  Agency employees really learned nothing about advertising and what makes it good and effective. (I remember being in the print production department and being taught how to view and evaluate retouching.)

These programs should have taught advertising that matched the agency’s philosophy and should have been be taught by professionals, not a creative director whose mind is on too many other issues (and who sent a substitute most of the time).  And while bringing in professionals – perhaps from local colleges and universities – is expensive, the results could be significant.

If juniors knew more about their business and how it really operates, clients would be far more accepting of their contributions and require less time of seniors.  This, in turn, would increase agency profitability and, in turn, pay for the investment in real training.  And, of course, juniors have this amazing habit of becoming more senior.