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First Wall Street, Then Big Law

- 4 years ago

When Will Companies Demand These Efficiencies from their Communications Partners?

Overview

During the Great Recession of 2006-2011 companies of all sizes were forced to examine their expenditures and find greater efficiencies in order to compensate for declining sales.  This resulted in the review of relationships that had been in place for decades.  Relationships that kept the large firms; which serviced these companies fat and profitable for all of these years.

Multinational corporations, and companies of every size for that matter, began with a review of the imploding banking/financial service industry, and subsequently moved into the law services sector.  Many realized that, unlike manufacturing and production, the efficiencies of a multinational service provider are more difficult to quantify, and the efficiencies of mass production are much more difficult to scale.  

This post encourages companies of all sizes to continue these reviews, and focus on other service providers, especially those providing one of the most important services to your company- your providers of communications services including advertising, marketing, and creative services. 

Financial Services

Multinational companies examined their decades-old financial relationships.  These companies had longstanding relationships with household names such as Goldman Sachs, Merrill Lynch, Morgan Stanley, etc.

As they examined their relationship, they realized that many of the most talented and driven associates in these firms had already transitioned from these old wire houses to an independent model which allowed them to provide their clients with:

  •  Objective advice
  • Lower costs due to drastically reduced overhead
  • Efficiencies in time and money

All with resources as robust, or in many cases, more robust than they had at their old firms.

They did not have the burden of decades of accumulated overhead, nor the unique overhead exemplified by the excesses of this industry.  Excesses wonderfully chronicled by Matt Taibbi in his article in Rolling Stone magazine:

There’s John Thain, the chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multi-billion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain’s sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden-parachute payments as his bank was self-destructing.

Big Law

Big law is but another unflappable industry with many relationships between large clients and their firms dating back decades.  Law is an industry so stable and flush with cash and cockiness that many of these law firms consider taking you on as a client dependent on your pedigree. Noam Scheiberdid a brilliant job this past summer in New Republic magazine quantifying these excesses:

The old joke is that times are tough when Cravath [a prototypical Big Law firm] picks up the phone after two rings rather than three…

By the early 2000s, even Mother Mayer [another one of the Big Law firms] was anxious about this changing landscape.To make things worse, clients were beginning to question the expenses firms long used to pad their bottom lines—everything from 25 cents a page for photocopying to $250 an hour for a first-year associate with no legal skills to speak of.

“You can’t pay a guy writing briefs seven hundred, eight hundred, nine hundred thousand, a million dollars,” says a former partner, describing what the rainmakers dubbed “bracket creep.” In 2007, the firm’s management committee stripped more than 10 percent of these brief-writers of their equity stake… only weeks before Mayer Brown held its annual partners meeting in London.

The partners who made the trip were unsettled by its poshness. Mayer Brown had rented out the Grosvenor House hotel, one of the most expensive in London, and booked top billers into cavernous suites overlooking Hyde Park. One evening, the firm chartered boats to take partners down the Thames for dinner at the Royal Observatory in Greenwich. When they arrived, they were escorted down a canvas carpet by guides carrying torches and dressed like beefeaters. The speaker for the evening was the future British foreign secretary, William Hague.

 

Back at the hotel, the conference featured presentations by senior partners, including Maher, who took the stage amid strobe lights and booming rock music. “It was like one of Apple’s product launches,” recalls one partner.

These excesses are but a few examples of the ‘overhead’ that legitimate producers, and the their clients, must assume.   And the question continues to loom as to whether corporate America will continue to subsidize this ‘overhead’, or follow the smart money, and many of the top producers that have deserted these dinosaurs, and seek greater efficiencies in time and money with midsized firms truly focused on driving their client’s businesses.

Conglomerate Communications

So why haven’t the relationships between sprawling communications companies and the multinational clients they serve received the same scrutiny?  Especially given the recent merger between the two largest communications conglomerates in the world- Publicis and Omnicom as highlighted recently by Forbes Magazine:

Combined, these holding companies are colossal: $23 billion in revenues, $35 billion in market capitalization, some 250 subsidiaries, with over 130,000 employees. But while much of these businesses can be accounted for in numeric terms and spreadsheet models, the role of culture, leadership and creativity is much harder to quantify. They also happen to be the most important aspect and asset of these merging companies.

But there is something lacking in the discussion of this proposed merger, which is a key feature of these communication industries: creative talent. 

In fact, another take on the Omnicom-Publicis announcement, appearing in the satirical paper, The Onion (no less), addressed creative talent at the two holding companies directly. Its headline read, bitingly: “Merger of advertising giants brings together largest collection of people with no discernible skills.”

Success in communications is derived from the inherent talent of those both leading and engaged in the process.  In todays connected world, as do the aforementioned financial firms, mid-sized agencies possess access to all of the resources once solely the domain of these conglomerates, including primary and secondary research, media buying analysis, consumer and industry trends and insights.   And these midsized agencies are lead by the very talent clients are seeking- individuals driven, creative, and talented enough to know they can provide a better solution to their clients.  These midsized agencies have numerous intangible and tangible benefits for clients seeking the most effective and efficient communications partners:

Intangible Benefits:  Independent agencies are lead by creative thought leaders and their hand selected teams.  These teams are directly involved in the their clients projects and bring to them the talent, insight, and results, which ultimately lead to increased revenues and market share.  The insight and hard work Ogilvy, Bernback, and (more recently) Bogusky brought their clients when they were involved in the day-to-day operations of their agency. 

Independent agencies recommendations are not driven by shareholder returns, and the teams involved in these projects are still lead by the namesakes hanging on the shingle outside of the agency.

Tangible Benefits:  As with many of the financial services and law firms outlined previously, these communications conglomerates carry overhead that has been accumulating for decades.  The prototypical Old Agency features multi-floor offices on Madison Avenue, a bloated middle management, and innumerable young, disempowered, and ill-compensated lower level team members which will ultimately handle most of the projects for these agencies clients. 

Conclusion

Examine your current agency relationship.  Is the relationship in place because it has been there for years or for decades?  Is it in place because the agency was the safe choice and ‘no one ever got fired for hiring IBM’?  Is it driven by outside forces such as consolidation mandated by management?  Or was the agency selected given its true understanding of your business and brand’s needs?  Is it an agency partner that understands your company’s needs and will work alongside your team to achieve your short and long-term objectives?

As you consider your next communications firm remember why you chose to be in the in this field in the first place, remember the passion and love you have for this wonderful discipline  …the way you feel when you see a shopper reach for your product …a company agree to stock your products …or the bump in market share that drives that wonderful clink of cocktails between you and your team. 

Question, pursue, and fight for our amazing discipline!  A discipline that encompasses the left brain… the right brain… art and science… psychographics and influences… all of those things that still keep you thinking late into the night.  Take the time to question the status quo, and find an agency that is as passionately committed to your company’s success as you are, one that will fight in the trenches with you and have your back through thick and thin. 

 

GE Heredia
Managing Partner

Trimention Creative Communications

 

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