Does Your Ad Agency Operate as a Contractor or a Consultant?

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As published in the Fall 2019 edition of Stretto magazine

At the age of 23, on my first day of a new project, I attended  a meeting that had been scheduled with our new client. I had just completed a 12-month engagement with another company in a similar industry. After formal introductions, the Vice President looked past our partner, a senior manager, and my manager to ask me, “In your previous role, what did you see them do that you think we ought to be doing as well? What did you learn there that you can apply here?” 

Candidly, I was shocked. Why not ask the partner or senior manager, both of whom were much more experienced?  I wasn’t ready. I didn’t have an opinion, and it showed in both my response and the Vice President’s body language thereafter.

The partner gave me feedback immediately after the meeting that I’ll never forget: 

“You always have to have an opinion, be informed, be thinking about, and provide a valuable perspective on our client’s business. He wasn’t asking you what you know. He was asking you what you think. He hires contractors for what they know and consultants for how they think. The two are priced very differently.”

He was right, and it was a great lesson.

I spent a large portion of my 20s as a consultant with Accenture, racking up frequent flyer miles, eating in hotels, and developing bags under my eyes. The training was exceptional, however, and I wouldn’t trade the experience for anything. We were hired by companies all over the world to solve problems. For the most part, our clients hired us because they knew they didn’t know everything and wanted our help.

Now I’m in the second half of my career. After earning an MBA and spending a decade in marketing at Walmart and Coca-Cola, I recently celebrated my first anniversary in the ad agency business.

So far, I love it. I love the pace, the work we do, the people I work with, and the client roster we have. It’s exciting, and it doesn’t feel like work. Perfect.

However, while the consulting business is very similar to the ad business (similar business models, value propositions, etc.), I am struck as well by how far apart they seem. Both sell the same thing, the creation of value, so how did these two industries grow so far apart?

I firmly believe the answer rests in what has become a fractured model between clients and their agencies. Agencies act as contractors while getting paid consultant rates, and clients hire consultants only to treat them like contractors. This dichotomy no doubt exists in the traditional consulting world as well, but I see it to be far more pervasive in the ad business.

When Are Agencies Acting as Contractors While Being Paid as Consultants?

In this scenario, I primarily see two ways companies pay consultant rates only to get contractor results. 1) They don’t place an emphasis on understanding their client’s business or place a priority on the business over the advertising. They believe the end result is advertising and marketing, not using advertising and marketing to drive business. 2) Agencies perform the ‘bait and switch’ model, bringing their best talent for the pitch to help win the business, but they slowly migrate those people off the client’s account over time. The superstars who impressed the prospect during the pitch are now working on their next pitch.

The following are some indicators that your company may have a contractor relationship with your agency:

• The metrics and KPIs your agency reports are vanity metrics rather than business metrics (“clicks” or “likes” versus revenue or profit).
• In terms of digital marketing, the KPIs your agency drives aren’t deep in the funnel. (Think cost per landing page versus cost per locator conversion or buy-now conversion.)
• You never see any KPI reports.
• The agency doesn’t ask questions about your business or try to attribute their efforts to your business results.
• When you ask the agency for input about how to solve a business problem, they either don’t give you a good answer, or they try to sell you something that neither solves your problem nor impacts your business.
• The depth of experience of the team you’re working with consists of technical experts rather than individuals who also have some business knowledge. Ideally you want both depth and breadth in your agency partner. A team of wholistic thinkers, backed by specialty experts, is extremely powerful.
• The team working on your business behind the scenes is not the same group who pitched the work, received the accreditation, or did the client work that initially impressed you.

When Are Companies Using Ad Agencies as a Contractors?

Let’s re-examine the consultants-used-as-contractors example. Clients hire top agencies that truly are capable of performing and acting as consultants (i.e., they’re capable of solving business problems through marketing and advertising) but are never utilized to their fullest potential. They’re put in a box, with a partition separating them from what is actually happening in the client’s business. The client feels as if they have to manage the agency rather than reap the benefit of partnering with them. No matter the industry, when you work with great talent, the delta between partnering with them and managing them is the value that you are leaving on the table.

Indicators your company may be using agency consultants as contractors include:

• You’re too busy to meet with or talk to your agency.
• You don’t let the agency know what is happening in your business, the professional struggles you have, or the problems you’re facing.
• You feel as if you have to manage the agency rather than partner with them.
• You’ve siloed the agency into a particular swim lane and assume they have no perspective to offer on the rest of your business.
• You don’t share your business plan with the agency.
• You’re reluctant to listen to new ideas they bring, because you assume they’re trying to sell you something. This might be true, but you may miss a good idea that could drive your business.
• When you say “no” to ideas they suggest, you don’t explain why. This does not allow the agency to course-correct.
• You’re not transparent about the budget you have. This behavior demonstrates managing, not partnering. Your agency is there to help maximize the dollars you have to drive your business. Period. Having a complete picture helps them do this. Honestly, if you don’t trust them enough to share your real budget, then you probably shouldn’t be partnering with them anyway.
• Every conversation you have is about price rather than outcome. This is indicative of a transactional relationship, not a transformational relationship. The price an agency charges should be secondary to the value they create. (In other words, if they create enough value beyond their cost, it shouldn’t be a problem.)
• You’re telling them what to do instead of sharing the problem you are trying to solve.

Tips to help change course with your agency either way:

• During the pitch, ask to only have people who will be working on your account. Ask for a list of the people who would work on your account should they win the business. Ask for their backgrounds and the depth of their experience. 
• Have a formal annual planning process. Write a brief about what is important to your business, what your key growth drivers are, your strategies, and the KPIs you really want to focus on. (This needs to be more than “We want to grow revenue, profit, and market share; we also want tot put the consumer first.” You have to go deeper. Vanilla goals and direction will return vanilla results.)
• Stop telling your agency what to do, and ask what they think. If you are repeatedly unimpressed, it’s probably time to move on.
• Be transparent. Give the agency regular updates, not only on what is happening in your business, but also on your current struggles. They are there to help you problem-solve. You might be surprised by their ideas and insight.
• If you have multiple agencies working in multiple swim lanes, they probably don’t believe they only belong in one swim lane. Ask them questions around what they think beyond their current swim lane. You will quickly identify contractors versus consultants.
• Focus on ROI and your business results with your agency, not just their cost. Repeated conversations around cost change the focus to all the reasons you shouldn’t do it versus what needs to happen to make it work for your business. This kind of focus drastically changes the way your agency thinks about their ideas.

All the recommendations above cost you NOTHING. A little bit of transparency and partnership can have a material impact on the work you get from your agency. Either partner or part ways. It makes no sense to be somewhere in the middle. If your agency is more focused on themselves, vanity metrics, and their deliverables instead of the big picture of driving your business, they are serving as contractors, which means it’s probably time for you to move on. There are hundreds of agencies out there who can help you transform your business. Once you decide to work together, the way you relate to them (managing or partnering) will have a direct impact on what they produce and, ultimately, the ROI you achieve.

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