Rose tinted challenges in the digital and design industry.

First published by Design Week on 3 January 2012.

UK digital and design agencies are facing a second year of talent exodus. Last year 56% of respondents to our Design Industry Voices survey were intending to leave their agency. These were not idle threats; in our 2011 survey 35% had been in their job less than a year. In the next twelve months 58% are intending to change employer. It is time for the industry to take this seriously.

The impact of churn

Churn has far reaching consequences that SMEs can ill afford in this uncertain economy. It impacts on reputation, profitability, quality of work, client and talent retention and acquisition.

Recruitment demands senior management time, fees, and further investment to train new employees on the agency’s approach and knowledge of its clients’ businesses. Over half (58%) of respondents told us their agency is employing less permanent staff, 43% that they are using more unpaid interns and 55% that they are using more freelancers. Is it any wonder that 32% say that the quality of work has declined?

Clients get nervous when the ‘A’ team pitches but an unstable ‘B’ team delivers. And feeling that you aren’t on the ‘A’ team is demotivating, giving employees another reason to consider leaving.

This uncertainty can encourage clients to put their account out to pitch again. Add to this that respondents say clients are expecting more work in pitches for free (71%) and once you’ve won the account more work for less money (85%). One agency owner told us “Yes, budgets are killing us, everyone wants something for nothing and without good reason and if you don’t agree they all go elsewhere.” There is “too much competition. Little opportunity” said one designer.

The movement of people between agencies can make or break reputation through word of mouth. This is increasingly true as a growing number of respondents are using the social web to talk about their professional experiences (30.4% in 2011, up from 19% in 2009).

Clients asking for safer work (54% of respondents) will do nothing to enhance an agency’s (or the client’s own) reputation as being at the forefront of innovation.
An account manager explained “There are a lot of clients demanding that something is just done the way they want despite expert opinion to the contrary… It seems lost that the clients are in fact employing experts for the skills they have and subjective feelings on the value of the work can dominate the management of project and dilute the end result.”

Safer solutions may not achieve the client’s business objectives. One design director pointed out: “It’s increasingly being dumbed down and made more obvious and commercial as the clients are frightened to try anything new. They tend to patronize the audience and don’t assume that the consumer can pick up on edgy subtleties.

A rose-tinted challenge

Agency leaders are wearing rose-tinted glasses. Owners are consistently more likely to rate their agency’s performance higher than their employees. This may be helpful if they are to successfully lead their agency through the economic downturn and back to prosperity, but they should be aware that their employees do not share their perceptions of agency performance.

Respondents rate ‘has management team that demonstrates strong leadership skills’ as the agency attribute with the second highest delivery gap: -53% in 2011, and -48% in 2010. (The delivery gap is the difference between the perceived importance of an agency attribute and the perception of how well the respondent’s agency actually performs against that attribute.)

Perceived agency performance is getting worse: there is too much poor leadership, that doesn’t value ideas and opinions, and fails to reward people for going the extra mile when there are excessively high workloads relative to staffing levels. Fewer staff than ever expect their agency to be a brand that is compatible with their own values.

Agencies appear to be running on empty, with staff engagement at an all time low.
What are digital and design agency leaders going to do about this?

A return to middle management

Elizabeth is an agency entrepreneur. An account director, she steers her agency and client team, always delivering innovative, creative, business results focused work. She is a middle manager: no responsibility for running the agency, total responsibility for her client’s satisfaction. Elizabeth is tenacious, she invests budgets as if the money were her own, worries about billability and profitability of the agency, is confident advising business leaders, and is a natural ‘farmer’ and business developer. A wordsmith, she always pushes studio to innovate creatively and knows when to nurture and when to begin again. Elizabeth knows the value of ideas and she doesn’t like giving them away for free.

If we can put that entrepreneurial spirit possessed by so many agency leaders and managers at the heart of the business we may yet find a way to stop the exodus.

It is time for a return to middle management. Middle managers have daily contact with clients, lead the agency team, manage the budgets and produce work that can make an agency’s reputation. They are the future leaders.

With middle management as the agency’s driving force, it’s easer to focus on profitability and engagement.

Teach managers how to increase billability and usage rates, reduce investment from overspend on pitches and projects. Improve their negotiation skills. Stop over-delivering in ways that the client doesn’t notice and instead make one-off investments in additional work that is groundbreaking, setting a new tone.

Give managers responsibility for the resourcing budget on their project so that they can staff up appropriately and allocate manageable workloads. Stop promising to clients more than your people can deliver during a normal working day for the budget. Take a percentage of the project profitability and allocate it to managers to use as a team bonus for outstanding work and for seeing the project through, helping increase quality and reduce churn.

When I see Elizabeth, or any of the other great senior manager or director level account managers, designers and strategists at work, it makes me wonder why we have executive teams. How are they helping if they are failing to lead, don’t listen to ideas and opinions, fail to reward people for going the extra mile, or ensure that workloads are acceptable? Here’s one way to save money – a slimmed down executive team and an empowered middle management.

Whatever you think of my ideas, this is an industry wide problem and it is time for fresh thinking and action.

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