5 Fatal Flaws in Traditional Agency Org Structure
Posted on January 13, 2014
I have been working with multiple full-service and digital agencies over the past 15 months and it has been interesting to observe a common theme emerge. The traditional advertising agency business model that was established 50+ years ago and emphasized functional specialty (creative, production, media buying, etc.) is no longer working as well.
I believe that the traditional agency org structure has five (5) fatal flaws that result from a silo approach to workflows, P&L accountability and compensation systems:
- Paradigm – separate silos perpetuate a last click approach in an assisted-attribution world. That is, when individual functions are evaluated on their ability to generate results apart from an integrated ecosystem, they optimize for their role in the attribution path without consideration for the other functions.
- Learning – separate silos undermine learning between functional groups responsible for the delivering multiple touch points (like links in a chain). Here again, sharing insights across functional teams helps the recipient of the information but does not advance the interests of the functional team sharing the insight. When PPC analysts are compared against the email or social media teams for their effectiveness in generating sales leads (thereby determining which team receives funding), sharing insights to help another team becomes counter productive.
- Insight Accountability – silos often undermine data sharing whereby all functions in the assisted attribution path are held accountable. Instead, the responsibility for interpreting the data, extracting meaningful insights, and advising the client falls to the Account Service team. This creates a problem in that the Account Service team does not have ownership of the marketing tactics that drove the results, but the Account Service team has to report the results and be held accountable by the client.
- Collaboration – silos undermine cross-functional collaboration by rewarding individual performance instead of integrated outcome. As noted in #2 (Learning), collaborating between marketing functions is often deferred as the Account Service team is responsible for sharing insights between functional teams and suggesting opportunities for teams to work together toward a common outcome. A more effective approach is for cross-functional teams to collaborate and bring solutions to the Account Service team that they can report to the client as part of their ongoing optimization efforts.
- Client alignment – silos demonstrate a lack of understanding of the problems CMOs face. Most effective client marketing organizations may have functional specialists (email nurture, social community manager, etc.) but they structure for collaboration between these teams under a single “demand marketing” umbrella and are rated on their ability to deliver results, as opposed to effort. Because the client has not structured their organization as individual profit centers, they are aligned differently than their agency in many cases.
There are definitely a subset of full-service agencies that have taken steps to organize themselves into collaborative lead generation teams for better alignment with their clients’ needs, but many have not. Those struggling most are founded (and still managed) by advertising and creative leaders. They have perpetuated the ad model in full-service (integrated marketing) engagements.
My goal is to raise some practical client-side considerations that might provoke agency leaders reading this post to reflect upon their current business model and organizational plan and consider whether there is a better way forward.