Digital and design agencies face second year of talent exodus in 2012.

First published by Left Foot Forward on 3 January 2012.

A sense of gloom hangs over small business owners as they make their turkey sandwiches this week.  With the Euro crisis dragging on, the Chancellor’s latest credit easing initiatives still to be felt, and official unemployment figures at 2.64 million, the highest since 1994, many will be reaching for another glass of sherry just to drown out the recent memory of their struggles in 2011 and the forecasts they’ve read for 2012.

Economists at global banking giant Standard Chartered say the UK economy is likely to be in recession going into 2012, eventually recovering in the second half of the year. It feels like the tough times for small businesses have already lasted years, but with public sector clients experiencing cuts that will accelerate from next April, and Standard Chartered forecasting 1.5 per cent growth in 2013, the belt tightening is here to stay.

Many are simply adapting to the new economic reality. I’ve been surveying people working in digital and design agencies about the economic outlook for three years now, and it is striking the way that the longest UK recession in history has changed the culture of an industry based on pitching for business, piece meal contracts and unpaid interns.

Agency leaders are facing a second year of talent exodus. In the next twelve months 58% of respondents are intending to change employer. 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.

Recruiter Karina Beasley of Gabriele Skelton says: “high staff turn-over means extra costs. Finding and recruiting new staff, then inducting them and getting them up to speed to take over accounts all adds to costs and eats into margins. In the current jobs market, agencies that advertise are being swamped with applications meaning that short-listing takes far longer than it used to and candidates rarely get feedback and often do not even have their applications acknowledged.

Too many are relying on freelancers and unpaid interns. 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?

Stef Brown, MD of On Pointe Marketing, says: “clients are increasingly nervous that the ‘A’ team pitched, but an unstable ‘B’ team are delivering. And feeling like you aren’t on the ‘A’ team is demotivating, giving employees another reason to consider leaving. Not only this, but producing creative work for free during pitches means agencies are giving away their most valuable commodity: their intellectual property. I can’t think of any other professional services business where this is tolerated, or even considered an option.”

Not only do respondents say clients are expecting more work in pitches for free (71%) but that 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.” One designer said there is “too much competition. Little opportunity.”

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. 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.

The good news is agency leaders are still wearing their rose-tinted glasses, perceiving their company’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 point of view. Staff perceive 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.

Agencies appear to be running on empty, with staff engagement at an all-time low. Lets hope that the entrepreneurial spirit possessed by so many small business leaders can be reinvigorated at the heart of the agency, so that we may yet find a way to stop the exodus and find a path to growth.

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Design Industry Voices survey 2012 sees fluid workforce trends continuing.

The headlines

1. More staff than ever intend to change job within a year (59%). Agencies are employing fewer permanent staff, more freelancers and more interns.

2. The widest perceived delivery gap is for ‘has a management team that demonstrates strong leadership skills’ (-53.1%). Owners have a rosier view of agency performance than their staff.
(The delivery gap is the difference between the perceived importance compared to perception of how well an agency currently performs in relation to an agency attribute.)

3. More staff than ever write their personal thoughts about work on social networking sites (34.6%).

4. Clients expect more work for less money to make up for budget cuts. Agencies are expected to do more work for free to win pitches and the pitch process is taking longer. Clients want ‘safer’ work.

5. Only 9% of respondents say clients demand accessible designs and fewer than half (45.7%) agree that they understand how to design in a way that improves accessibility for people with disabilities.

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A crisis of leadership in digital and design agencies.

There is an ever increasing instability within agency workforces. There are fewer permanent staff, more freelancers and interns. A record number of people are intending to change job within a year (59%). This year almost half of respondents (49%) have been with their agency less than two years, so it appears that unhappy employees are following through on their intention to change job.

A substantial change in those responsible for the day-to-day client relationships and client satisfaction may have an impact on the agency’s ability to service and farm existing clients, as well as to seize new business opportunities as the market begins to pick up. The resulting churn means agencies are spending precious budgets on recruitment fees and investment in getting people up to speed on their way of working and building staff knowledge of the agency’s clients.

This makes clients nervous that the ‘A’ team pitched but an unstable or more junior ‘B’ team are delivering. And feeling like you aren’t on the ‘A’ team is demotivating, giving employees another reason to consider leaving.

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 social media to talk about their professional experiences (34.6%, up from 18.8% in 2009).

Respondents perceive a crisis of leadership. For the first time the perceived delivery gap is widest for ‘has a management team that demonstrates strong leadership skills’ (-53.1%). Part of the issue is that owners have a rosier view of agency performance than their staff. Staff complain of inappropriate staffing levels, a lack of strong sense of teamwork throughout the organisation, their ideas and opinions not being valued, and they are not being rewarded for going the extra mile.

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Failing the blue pound.

10 million disabled people live in the UK with a combined annual spending power in excess of £80 billion – the Blue Pound. Nearly three-quarters (73%) are heads of households and 48% are principal shoppers.*

Business opportunities are being lost to secure the Blue Pound because clients and agencies are failing to understand and address their needs, resulting in a ‘walk away pound’.

A survey of the opinions and shopping habits of disabled customers by Business Disability Forum and Disability Rights UK people found that 83% of disabled people had ‘walked away’ from making a purchase, unable or unwilling to do so – ‘the Walk Away Pound’. What emerged was a picture of informed consumers who will reward good customer service and punish providers who don’t make any effort to meet their needs. Amongst the cited factors that discouraged disabled consumers from spending were poorly designed products, inaccessible premises, and poor or inappropriate communications including inaccessible websites and printed information.

Only 9% of respondents agree that clients ask for all designs to be accessible to people with disabilities. Fewer than a quarter (21.9%) agree that clients ask for website designs to be accessible to people with disabilities. Fewer than half (45.7%) agree that they understand how to design in a way that improves accessibility for people with disabilities.

The European Commission proposes that all public sector organisations will be required to ensure that disabled users of their websites have the same access to certain content and services as other internet users by the end of 2015.** This offers market opportunity for designers who understand accessibility.

Sources:
* Business Disability Forum website. Business Disability Forum and the Royal Association for Disability and Rehabilitation (now Disability Rights UK) Survey 2006.
** www.theregister.co.uk/2012/12/05/web_access/

Sorting the wheat from the chaff.

Clients expect more work for less money to make up for budget cuts. Agencies are expected to do more work for free to win pitches and the pitch process is taking longer. This is having an impact on the quality of work and client servicing. More work is being produced for less budget, by a changing workforce that is less experienced in the agency’s specific approach and less knowledgeable about the clients.

“I wish that the design industry would get together regarding the issue of free pitching. The amount of work that is expected is shocking. It can put small firms out of the running and out of business”, explained one strategist.

A designer agency-owner added: “We are a profession and like any profession we should have a strong professional body to support the industry, lobby on behalf of the industry. The design agency world is guilty of continually under valuing itself and as such clients, including the public sector, are asking for more and more but for less and less fee. It’s a tough industry that in my view needs a strong professional body to stand up for the SMEs in particular. To my mind no such body currently exists.”

Clients asking for ‘safer’ work will do nothing to enhance an agency’s reputation as being at the forefront of innovation (or their own), and safer solutions may not achieve the client’s business objectives.

“This recession is sorting the wheat from the chaff. Which is a good thing. We’re still suffering the client backlash from over-selling to them pre-recession”, noted an account manager.

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