Agencies are declining new business amid talent crisis – here’s what clients should do
The talent crisis has reached the point where agencies are being more selective about what they pitch for. Christine Downton, associate partner, The Observatory International, explains.
Agency recruitment has been in flux since the beginning of the pandemic
Earlier this summer we warned that the battle for agency talent would become intense. That prediction is now a reality.
Even agencies are admitting it, with Havas London chief exec Xavier Rees recently arguing that the business needs to look beyond its traditional recruiting grounds to find the talent it needs.
And it is not just agency talent that has been an issue – demand for photographic studios and post-production facilities has become intense. Warc’s Global Marketing Index has seen activity growth at 64.2% during July and August. In the UK ad spend is forecast to grow by 18.2% in 2021 (Advertising Association/Warc Expenditure Report) – the largest annual growth on record.
These resourcing pressures are having an impact across the marketing ecosystem, but the impact on pitch activity has become particularly acute.
Agency management are having to carefully coordinate their resources to ensure they continue to service existing clients, onboard recent new business wins and carefully evaluate the capacity they have for pitches.
Agency capacity has been pressurized from two directions – the increase in marketing activity in the second half of 2021, coupled with reduced staff numbers.
To balance the books during 2020 agencies were forced to cut staff numbers – in the last half of that year Omnicom and IPG cut headcount by 10% (10,000 jobs in total), while WPP has cut 5,000 positions and Dentsu 6,000. Some agency staff reviewed whether agency culture was right for them, especially when faced with new opportunities, including arguably greater stability in client teams building their own in-house capabilities.
So when it comes to pitching, agencies have been forced to be very selective about which opportunities they go for.
In recent pitch activity we’ve seen even the largest global holding companies having to decline new business opportunities where they are operating at, or near, full capacity. It’s unusual to have agencies pull out of pitches once they have committed to the process, but we are seeing that happen more frequently, even when the potential fee opportunity is quite substantial and the brand high profile. Anecdotal evidence indicates that some major brands have paid up to six-figure sums to encourage agencies to participate in substantial pitches.
Our regular discussions with heads of new business indicate that they are being asked to participate at an extremely high volume of pitches. That trend is likely to continue through to the end of this year, and into early 2022.
So what are the implications for clients considering undertaking a pitch?
Having a clear understanding of the current agency landscape is critical – know which agencies are busy with client and new business activity, and which ones have lost critical personnel in strategy and creative in particular.
Understanding the types of agencies able to fulfill a specific brief – the ‘usual suspects’ are not always the most appropriate. Look beyond the big name, big reputation agencies to seek out a broad range of potential partners with a wide longlist to capture many of the talented agencies that can fly under the radar in normal times.
Having a really engaging RFI and then Brief is essential to inspire and motive the agencies and ensure the right agencies want to take part and stay in the process.
Organizing a well-managed pitch process so the agencies’ time is spent effectively and efficiently. It’s important that the agencies have sufficient time to react and respond through a pitch process.
Being realistic on timings – especially as time is running out to complete a full pitch process this year. It will prove counterproductive to add more pressure by having short timelines.
Finally, being realistic on costs and negotiations. This is no time to squeeze the lemon for small savings.
With the improving business outlook, agencies are having to re-recruit and adjust ways of working in addition to reviewing their property commitments and future requirements. This, combined with rising inflation, will mean that there are likely to be some significant upward shifts in agency costs.
The next few months will be challenging for brands that want to accelerate out of the pandemic with refocused plans and revised strategies.
Finding the right agency partners to help them deliver at pace will be critical because without the right talent on their business, the results are likely to be sub-optimal.