Agencies, meet pot of boiling water - your new working environment

12 March 2024
Tim Kirby.

With budgets tighter than ever, many agencies are bending under the pressure. But Tim Kirby, founder of Galore, doesn’t think agencies have to accept this as a given - and argues that change needs to be on everyone’s agendas.

If you were to take a look at some of the billboards across Sydney and Melbourne at the moment, chances are you would see my dog in a fair few.

That’s not because my dog is a paid actor or employed as some clever production accounting trick to make us a few more dollars on the shoot. It’s the opposite - we were running a campaign for a client and didn’t have enough budget for a paid dog for a scene. Cue Basil, our lovable Cocker Spaniel.

Creativity in agencies doesn’t stop at the art and copy. So while ‘creative problem solving’ is an overused term, it aptly describes how creative thinking is needed when working out how to run a creative agency, and not just make the work. We’re all constantly thinking about any way we can make the impossible possible, no matter how big or small.

But no amount of free canine talent can fix the increasingly acute underlying challenge that our industry faces. Simply put, agencies today have to deliver significantly more in a market where inflationary pressures have caused costs to spiral, while budgets have not. ‘Cozzie livs’ is hitting hard on household budgets, but for agency leaders there’s no respite when we get to the office either.

And that’s without mentioning the breadth of talent and roles agencies now need to hire. The plethora of digital solutions, AI and any number of other technological changes require specialists we wouldn’t have found sitting at a desk in Surry Hills or Richmond just five years ago.

It has really come to a head over the last year or so. Like the frog sitting in a pot of rapidly boiling water, creative agency leaders are discovering that the ‘hot tub’ they bought for the office to lure talent back post-Covid is starting to get uncomfortably hot.

Of course, we need to continue to demonstrate the value that we deliver to businesses, and to fight for fair pricing off the back of it. But ultimately we need to first focus on what we can control, and if we can’t control the temperature of the water, maybe we need to change the pot?

Ultimately, I think this comes down to the ever-widening disconnect between the traditional agency structure and the nature of what many businesses need from creative partners. The agency business model is too rigid to be able to meet the more complex problems being posed by brands in need of flexible solutions. Agencies need to look harder at how they can build a business that allows brands to access what they need, when they need it, in a more affordable way.

Take the humble head hour rate card, the cornerstone of how most agencies make money. As procurement teams wring the rate card dry of margin, the response has generally been to squeeze margin back in by tactics like utilising staff to 100% of their time (and beyond), or putting cheaper resources onto the business.

While this undoubtedly helps agency margins, it does so at a cost to staff and a cost to client experience. So we need a more fundamental change: I say sack the rate card, and also sack the model that relies on it.

Now consider the cost estimate, which is pored over in great detail by clients at the start of every project. It works as a perfect invitation for a client to question how their budget is being spent, and I think it too often tells a story that agencies are an expensive way to spend money.

Agencies need to take this on the chin and work out how to demonstrate that more of the budget can be spent on what the client really wants. By starting with what the client really wants, and working backwards from there, it will inevitably lead us to question the legacy structures most agencies are built on.

I’m sure at this stage some of you are shouting at the screen that AI is going to come along and take out 90% of these production and people problems by eliminating a swathe of expensive jobs.

I clearly has a role to play - and we use it ourselves at Galore - but in the short to medium term, it’s not the silver bullet that many agencies at an existential crossroads can lean on. It will be a solution, but will also require agencies to hire people with new and different skills to marshall the tools. There’s still going to be a healthy cost base if you want to make good creative.

I think of this moment in time as an opportunity - a chance for agencies to change and evolve to their next true form. If business structures are acting as a handbrake, the only ones who can change that are the agencies themselves - and expectations around what they can do and how they work will only evolve once they take that leap.

There are already a few around, notably in the indie sector, which are blazing a trail in the right direction and creating really sustainable and future-facing models by embracing what a ‘creative’ agency should look like in the modern world.

So while it’s handy to know that my dog can behave on set if I need him, I’m putting less of my focus on creative ways of wriggling out of tight budget binds, and more on creating a business that changes the conversation entirely.

Let’s commit to rethinking our own agency structures and open up the conversation to brands to find a more progressive way forward - and maybe then we can all breathe a sigh of relief.

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