If anyone in adland ever wonders why they are held in such low regard by the population, this is why, says Dominic Mills.
Every now and then you see an ad that you know will cause trouble, and give the industry a bad name. No, it’s not one that is untrue, or that has been or will be banned, or is for e-cigs or some other anti-social product.
No, this is a beautiful ad, a joy to watch. The problem is that it’s just utterly – in an existential, rather than a literal way – dishonest. It’s vacuous and soulless too, but those are the least of its problems.
I do wish the agency behind it – adam&eveddb – had had the courage to say to the client – in this case Scottish and Southern Energy (SSE) – “look, Mr Big Cheese, your reputation is absolute shit. The last thing you should be doing is spending millions on a giant piece of corporate chest-beating.”
But sadly it didn’t. Watch the ad, below, then throw up.
About 60 seconds in, some woman with a Lorraine Kelly-type accent (i.e. trying to be warm and sincere) tells us: “Energy fills our lives with wonderful things.”
Then a pause…and the dreaded phrase that gives signals of impending corporate wank… “That’s why we’re proud to provide power to over five million UK homes and businesses.”
(I increasingly find the phrase “We’re proud to blah blah blah” an alarm bell, signalling incoming self-gratification. Trouble is I can’t dodge it fast enough).
Bollocks! This from the company that has been under fire for profiteering and earlier this year was subject to Ofgem’s largest-ever fine – £10.5m – for ‘extensive misselling‘. Even a half-wit can see that SSE needs to get its house in order before it should even think about spending a pound on advertising.
Scroll down a little on the YouTube page and you will see that all comments have been disabled. Already! The ad’s only been out a week.
If anyone in adland ever wonders why they are held in such low regard by the population, this is why.
Don’t leave accountants in charge of HR
There have been a couple of interesting pieces recently, including by the incisive Brian Jacobs, about unhappy agency folk. You can also read about a survey in the US here.
There’s no doubt there is a problem and many people are voting with their feet. According to the IPA, average staff turnover at member agencies is about 30%, which as I understand it is significantly higher than other professional service industries.
Now this is a serious problem for an industry that depends on people. Unhappy staff – or the wrong staff – aren’t going to produce the great work that differentiates one agency from another, or indeed allows clients to justify using agencies rather than, say, all the other people clamouring for their business.
Last week, as part of an IPA focus on Talent, I saw a fascinating and quite scary presentation about the true cost of staff turnover on an agency business.
It was by the redoubtable Sydney Hunsdale, who was chief operating officer at Razorfish for four years, and then chief financial officer of VivaKi until last year. With a background like that, she knows whereof she speaks.
Her point was brutally simple: that staff churn is the single largest financial drain on an agency.
The problem is that the true cost doesn’t show up in an agency’s financials. Indeed, it can work the opposite way. Managements can use high staff turnover as a means to reduce average salary costs by the simple expedient of replacing every leaver with someone cheaper, and no doubt congratulates itself on this fact.
Doh! Yet I bet there’s been more than one management team that’s treated itself to a slap up Christmas lunch on the basis that, in the jargon of accountancy speak and based on a review of year-end accounts, they’ve managed ‘cost out of the business.’
Yet as Hunsdale shows, this is insane. The real costs are hidden. They include: time taken to recruit a replacement; hiring temps to cover the gap; admin costs; lost productivity; lower relevant productivity in adjacent teams; impact on staff relations; and impact on client relations (not to mention one of your assets might have become one of your rivals’). And all the time your HR people are managing the recruitment process, they’re not managing the training programmes that might retain staff longer.
According to her calculations, it can take between five and seven months to get a new hire up to full working speed.
Add all this up and, as Hunsdale says, you have some eye-watering numbers. To replace an entry-level hired can cost between 30-50% of their annual salary; for a mid-level staffer up to 150%; and between 200-400% for a senior staffer or specialist.
The problem is that no-one adds this up; indeed, these figures just don’t appear on any balance sheet, which is what happens when HR is treated as a cost item, not an investment, and therefore falls prey to the accountants.
But, as Hunsdale says, “agencies with higher retention rates consistently outperform their rivals.”
To show how bad it can be, Hunsdale told of one agency that needed to increase its headcount by 11% to meet an ambitious growth plan. By year-end, after accounting for staff churn, it found that 43% of its workforce was new.
Now don’t get me wrong. I know how difficult it is for managers caught in the middle between the need to retain staff (which may involve paying them more money) and the need to meet head-office imposed targets on pay levels.
When salary is an agency’s biggest single cost – specialist accountants say the salary bill should not exceed 55% of an agency’s income – staff costs obviously need to be monitored. But there comes a point, as my dad used to say, where “penny-wise becomes pound-foolish”.
In the independent sector, or in a fast-growing area such as automated trading (where HQ staff don’t have a clue what’s going on anyway), managers probably have more wiggle-room to pay higher salaries to retain staff.
But it doesn’t work that way in the big agency groups, and as they hoover up more and more independents, so it’s only going in one direction.
I know of one global network owned by one of the big holding companies where all – and I mean all – salary requests go through one person in New York. Naturally, requests just pile up for months, middle managers who want flexibility with pay grind their teeth in frustration, and staff leave – followed shortly after by the middle managers themselves.
Is there an answer? Well, it’s not easy, and as recruitment becomes more competitive – against other agencies and industries – it’ll be harder.
Next week, I’ll look at some of the areas the industry is exploring courtesy of the IPA’s talent initiative.
(Full disclosure 1) : I work for the IPA from time to time, and attended last week’s events as their guest. Full disclosure 2): I used to be an SSE customer, but I took my business away a year ago.
