How your agency is ripping you off

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Retainer and hours
However, if you are on a retainer, you become a dumping ground for agency personnel. Why? The dreaded time sheet. Each week or two -- or in the case of some creatives, months -- each and every person in the agency has to account for their time, what projects they have spent it on, and on which client accounts. But no one, and I mean no one, at agencies is accurate with these "guesstimates." Unless you are working in an environment where you punch out and punch in on every project, our brains are just not geared for accurately figuring out how much time we spent on something two weeks ago.

What happens is that people at the agency fill out the first round of their time sheet and realize that it only accounts for half of their hours. If everyone at the agency was honest and just stopped right there then clients would not be getting ripped off, but that doesn't happen. When you work at an agency, every hour you work must be "billable." The retainer-based account becomes a dumping ground for things like: "Thinking about creative for brand," "Spoke to client about media strategy," "Worked on new way to do graphics for brand," "Thought about new commercial/banner/website idea."

Rarely do they say: "Went out drinking with a bunch of co-workers at lunch for three hours and did absolutely nothing but blow off some steam because we are all stressed from the hours we are putting in and our brains are fried and we needed it so the time we do spend on the account is useful." Nope, you end up with five people billing three hours for a "creative meeting."

Then the agency comes back at the end of the quarter with a request to increase your retainer due to the number of hours being worked on your account. It is a never-ending cycle: The more you increase the retainer, the more hours get dumped there.

Ignore the repeated requests for increases in the retainer based on the hours an agency is showing you until they prove that more than 35 percent of the extra hours have been spent over the retainer. That's about the amount of waste I estimate is inherent in most agency systems. At that point, you are getting value. Instead, you could establish a procedure where work gets accounted for daily by those employees, what projects they are working on, how they are moving your brand forward, etc. Work not billed to that day cannot be accounted for later. I cannot stress this enough. This is one of the only ways to ensure your account is not a dumping ground. It also provides a reality check within the agency of how much time is actually spent on client work, and it will keep your retainer in check. Unfortunately, there is no way for you to actually check on that without access to the agency's time reporting system directly. And that, my friend, is not something you are likely to ever get access to.

That brings me to the next way agencies are ripping you off.

 

Comments

Max Hopkinson
Max Hopkinson December 23, 2011 at 2:43 PM

A superb article. It really is.

I work client side and have only done a very brief stint in an agency (3 months when I was 21), so won't claim to have a full perspective of both sides of the fence.

A fundamental issue for me is that both agencies and clients often have different objectives. Taking my scenario, the objective for my business is to sell as many kitchens as possible. My agency's objective is to sell as many profitable hours as possible.

So, a big question for me is how can I align these 2 objectives, so that ultimately both my business and agency are profitable when I sell a lot of kitchens.

I have been lucky that my scenario blends itself well to a performance related payment model and I now only pay my agency when I receive a kitchen "lead”. I have also introduced a model whereby I split any agreed media investment which has not been spent with my agency (as long as targets have been hit), encouraging them to spend my money as efficiently as possible.

I don't think I have cracked it all, but I do feel much more comfortable with my model than others in my position.

Another important thing for me has been to let my agency have a free reign to try stuff, and yes, make mistakes sometimes. If this wasn't the case, I doubt they would have signed up to my performance model because layers of management and inefficient control would waste too many hours.

One last point, it is tough for people to understand how agencies work if they have never been in an agency environment. I am masters qualified and wouldn't consider myself to be ‘brain dead', but often find it tough to get the most out of agencies. The principles in this article certainly add value for me and I look fwd to putting them into practise.

Cheers Sean.

Chip Haskell
Chip Haskell December 15, 2011 at 10:37 PM

Again, Sean, had you wanted your article to say "sometimes without malicious intent" or "let's all examine some of the practices we may be unconscious of" you would have written that in your article. But you didn't. And now you're backpeddling in an increasingly pathetic and sad way – telling us all "what your article really meant.”

If there are any of Sean's clients who want to do business with an agency that most definitely does not rip off clients -- consciously OR unconsciously -- please feel free to contact me.

Sean X
Sean X December 15, 2011 at 8:08 PM

Chip,

Sometimes, without malicious intent, employees try to fill in a timesheet three weeks late and reconstruct what they have done. It is highly improbable they they are accurate in those circumstances, and the research I have done while auditing shows that about 10%-35% inaccuracies occur.

I am sorry that you feel that I cast dispersions on an entire industry and that the title offended you; however your subsequent responses were not directed at the issues I raised in the article, nor did you refute any of them. You instead engaged in a personal attack as to my character, which I find repugnant. That instead of arguing the merits of your defense you chose to personally attack. I would suggest looking at the reasons for that style of response. It is not very flattering.

My intent is to shed light onto an issue, however unpopular it is. To possibly provoke people into action to change it. And I offered suggestions as to how they could change it for the better. Change it in a way that I have seen agencies thank clients for.

Maybe you will realize over time when you have been in the agency business a much longer time, that taking a look at some of the practices we may be unconscious of, or have not put attention on, helps our entire industry survive, move forward and thrive.

Chip Haskell
Chip Haskell December 15, 2011 at 6:30 PM

First you had 11 friends who were working in 11 different agencies that were -- according to you -- "ripping off their clients". (Your article. Your words.) Now you have 30 more friends who have called you to thank you for pointing out a seemingly ubiquitous injustice that they themselves are obviously aware of? Well, that makes THEM guilty to some degree as well, doesn't it?

Sean, now I understand why you'd make such malicious sweeping accusations about the advertising industry: Everyone you know apparently works at places that are "ripping off their clients". No wonder you have such a jaded view of this industry.

Now Sean, as much as I'd love to continue pointing out flaws in your logic and your approach to this topic in general, I have actual work to do -- and according to you, everyone else has timesheets to falsify.

Sean X
Sean X December 15, 2011 at 5:52 PM

Chip,

It seems as if you are still frustrated. It would be interesting if I was a client to be on meetings with you. Clients do need people like you who are passionate about their work.

It is possible that there is some underlying basis for your anger. I would just ask you to be in inquiry with it.

It also sounds like you work at an agency, from your opinion, where not a single employee has ever filled out a time sheet I accurately. Congratulations.

Beyond my sources I have had over 30 people contact me directly thanking me. You seem to continue to miss the main point of the article is that it's the structure of the business not the intention of the agencies. I.e. the ways clients are being ripped off is endemic to the structure of the way they bill.

Some agencies have different structures. Most tend to go with an hourly rate.

I neither apologize for the article nor what was written, nor it's title. That it is my assertion, that due to agencies structures in the way they bill, that the majority are inaccurate in their time reporting that supposedly justifies their costs. That is NOT to say that the value of that agency is not worth that work, it is to indicate that "hours" are a poor proxy for value and effectiveness.

It seems that you are holding to some dogmatic belief that, from what I have seen, is not supported by the evidence. I would hope that, as has been indicated to me by several people, that they are going to take a look at their structure and they way they bill to ensure it is more integrous.

Chip Haskell
Chip Haskell December 15, 2011 at 2:42 PM

a) No Sean. I'm not angy at all. What I AM, is nonplussed with your attempt to condemn an entire industry because 11 of your friends (your sources) say they work at 11 different dishonest agencies where they're screwing their clients over.

b) You consider yourself a principled journalist? Even the writers at TMZ are laughing.

c) I love the fact that your newest defense is "I don't write the title of my articles.” That implies that even YOU agree that the title is deceitful. But you fall back on the excuse that it was done to get people to read your article. Well, now you're just digging your hole deeper.

Face it Sean. I caught you. I caught you using seedy journalistic tactics to promote an article that was written only to provoke.

Had your intention been to say "SOME agencies may be ripping you off” or "us ad guys need to start treating our ideas as something of value, and not a commodity represented by an hourly rate” then you should have written that. But you didn't. And now you're backpeddling – telling us all "what your article really meant.”

Everyone makes mistakes Sean. I, more than most. And to prove that I harbor no grudge here, I'm going to give you a really great idea for free…

If the purpose of your articles is – as you say – to be provocative and scandalous, do this: Check your OWN moral compass and then write an article that reveals who these 11 dishonest agencies are.

Sean X
Sean X December 15, 2011 at 12:16 AM

Thanks for your response. I hear that the article upset you in many ways and you are angry. Is that accurate?

My article was neither misleading, nor deceitful. It was, at its core shedding light on some of the issues we need to fix as an industry.

I do not admit, nor did I state, writing the article without a basis or foundation. That would not be principled journalism. I have 11 independent sources currently working in agencies with a combined tenure of 108 years in the industry.

I do admit that my style is not having firmly held beliefs in my writing. That in no way indicates it not being factually accurate.

Yes, I could have stated "sometimes some agencies do this" however, my experience, and those of my sources indicate that it is rampant. I also rarely choose the titles of my articles. What you are holding to is some firmly held belief that most agencies have 100% accurate time reporting. I find that suspect as all of my sources who represent the major agency holding companies, as well as several mid and smaller agencies, have indicated the problem of time reporting is wildly inaccurate to the tune of between 15-35% and a systemic blight on our industry which paints us as hourly employees. That is what I listed in the article as a problem issue. Most I have spoken to, and all of my sources, would like to see a system where we are employed for value, not time.

Something is eating at you, something that was triggered, and in those cases I suggest looking inward not outward as to what is at the core of it. You ask who I am?

As to who I am, I have audited several agencies reporting practices of the years. I have a slew of creative awards from OneShow pencils, and Addy's to Cannes Lions and everything in-between. I have also worked client-side running marketing globally for companies with $80 Million budgets, and have purchased over a billion dollars of media in my 20 year career.

It seems that you got bent out of shape but the article title. I am going to assume you are a creative director, if only for the vehemence which you hold your belief system, and your creative prose. As such, I know you realize the purpose of a title. To get someone to read the copy.

I do not say that to be insulting, but as a way that you can have the opportunity to re-read it with open eyes. I was not indicating through the article "intention" of deceit but however a system problem.

Maybe you can use it as a way to look at some of the processes at your agency and ask "Do we do this?" "How can we structure the way we bill clients for value?" Maybe everything at your agency runs perfectly, maybe not. But the key is to always be willing to look inward to check our moral compass and make sure that the ways we are conducting our business accurately value what we offer.

Chip Haskell
Chip Haskell December 14, 2011 at 11:25 PM

Let's set a few things straight, Sean:

1) According to you, I could have only written my response if YOUR article "held some truth”? Well, by that logic, if I'd written an article insinuating that you rob banks for a living and you responded "vehemently” saying otherwise, there "must have been some truth” to my words. Seriously? That bullshit might work on your kids, but I don't think it's gonna fly anywhere else.

2) Your key defense of your sensationally-titled article is that I needed to have read two other articles you'd written prior to this to understand THIS article? What? Sorry, but how many articles prior to THOSE articles would I have had to have read to understand THEM? (If this is making you dizzy, join the club.)

3) You flat out admit that you wrote this article without any real basis or foundation: "My writing has little to do with firmly held convictions or beliefs, but writing in a way that… stirs debate.” Well Sean, it's certainly your right to provoke people in any matter you like, but I'll say this: If you're going to attack my industry and my fellow colleagues, you goddman right I'm gonna retaliate. Who the hell are you to cast such aspersions, anyway? I'm sure you fancy yourself as a modern-day muckraker, but this article stunk from beginning to end of nothing more than good old-fashioned yellow journalism.

4) I'll be the first to admit that you're right about how SOME agencies are ripping off their clients. But the key word here is SOME. Not MOST. And certainly not ALL. But your article doesn't say that. In fact, your headline implies that if you do business with an agency, you are MOST CERTAINLY being ripped off – thereby condemning ALL agencies.

The simple fact is this, Sean: You wrote a deliberately misleading and deceitful article about the advertising industry. And that makes you just as dishonest as all those imaginary people in this business who you're pointing your finger at.

Otmara Diaz-Cooper
Otmara Diaz-Cooper December 14, 2011 at 10:31 PM

Hallelujah. All of us marketers should stop pricing ourselves like a commodity and recognize that we knowledge firms, not day laborers.

Sean X
Sean X December 14, 2011 at 10:16 PM

Thanks for the comment Chip. Usually the issues that trigger someone so vehemently have some truth for them, especially when they start to sling personal insults. It is a standard psychological defense mechanism. However, it was exactly the reaction I am seeking. For only when we are confronted with the reality of what we do not want to face do we have an opportunity to change it.

Obviously the article affected you in some way. I suggest you read the two articles I wrote on "5 Reasons to Hate Google"

http://www.imediaconnection.com/content/28827.asp
http://www.imediaconnection.com/content/28839.asp

Of particular relevance is the conclusion at the end....
"Before you go agreeing with me on any of my points, let me explain why I write the way I do. You might have read my columns before but not understood my apparent outrage. So I'll let you in on a little secret: It's a trick. My writing has little to do with firmly held convictions or beliefs, but much to do about writing in a way that arrests, causes momentary outrage or exhilaration, and thus stirs debate. By planting a flag on one side, I give readers something to push against. I take positional stances on issues for that reason. So I can be your fodder, or proxy, for ideas. So you can rebel or support its ideation. For only in that dynamic tension do we all move forward as an industry."

Although I did use that persnickety word "ideation" again.

My point in the article that seems lost on you is that the model is broken. To Otmara's point in the comment below yours we should be charging based on value of the work, not on the hours, which is what most agencies do. I am sure that your agency provides exceptional value to your clients, but if you are justifying it based on hours it does your agency a disservice.

If an agency charges a fee for a project, rather than justifying it through hours, or the agency charges a retainer that is not based on hours but on a set of services then it behooves the agency, and it's personnel to work efficiently, and hence be more profitable.

If an agency however bills and structures their agency based on billable hours then it is the most inefficient employees who inadvertently benefit the agency, and thus work degrades over time. Hence the difficulty in this model retaining clients.

Most clients look at agency services as, well, a commodity. When an agency charges a flat-rate per hour to that client what it does is say "All of our employees are interchangeable. They are just cogs we plug into your account." Hence my advice in the article that you pick your team.

We need to start to get into the business of charging for the value of the work, and take a financial stake in it, rather than pricing ourselves as a commodity.

Chip Haskell
Chip Haskell December 14, 2011 at 9:37 PM

I read this article yesterday. The more I think about it, the more I think it's a load of crap for (at least) two reasons.

1. You're insinuating that everyone in advertising is a crook. For example, a more appropriate, less sensationalized title for your article might have been "IS your advertising agency ripping you off?” I happen to work for an ad agency that takes a lot of pride in going above and beyond client expectations; where we take pride in giving our clients more than they paid for. That's OUR business model. And we've been around for 25 years.

2. You're insinuating that clients are braindead. I'm sure some are, but the fact remains that any client can – for any reason at any time – go somewhere else. And I don't know anyone who would sit idly by and be ripped off by an agency who overcharges or pulls the "bait-and-switch” with their pitch/real teams. Our clients certainly wouldn't.

I could go on and on, but instead, I'll just wrap this up by saying that it's people like you, Sean – making overblown, sweeping, and unflattering generalizations about advertising agencies – that are the real blight on this industry. But I've come to expect that from the kind of seedy, slimy, unctuous hacks who would try to pass of "ideation” as a real word.

Otmara Diaz-Cooper
Otmara Diaz-Cooper December 14, 2011 at 5:40 PM

Totally agree on your identification of problems. The solution? not so much. There is another way. Get paid for results you produce, not the hours you work.

Tim Letscher
Tim Letscher December 14, 2011 at 4:04 PM

Favorite quote: "My favorite people to include in the retainer are a strategist and production duo." In an interactive world, being able to prototype and actively walk through an idea is so much more powerful than static layouts that look like print ads. However, I think the creative team, at least at our agency, needs to be on an account for more than your proposed 1 week each month.

Keith Pieper
Keith Pieper December 10, 2011 at 6:59 PM

Fantastic article. Having worked both sides myself, you have hit the nail on the head in identifying agency challenges. Your solutions are interesting and certainly worth a shot, though unless an advertiser has enough buying klout, it might be tough to get a large agency to bend.

Kat Gordon
Kat Gordon December 9, 2011 at 8:51 PM

Bravo, Sean. And the #1 way your agency is ripping you off: not having a female creative director to service your business. Women influence the majority of consumer decisions, yet only 3% of advertising is created (or green-lighted) by women. A male client would no sooner buy a $100 gift for his wife's birthday without weighing in with a sister, friend or female salesperson, yet he entrusts a $100 million account -- meant to motivate a female consumer -- to a team of guys.

Ford Kanzler
Ford Kanzler December 9, 2011 at 7:01 PM

With plenty of years in the PR agency biz as well as a client using agencies, I can confirm you've nailed it for people without that background. Determining who's on and not on the team, without agency management around, is extremely wise advice. Being a slow responding client is also a place where money and opportunities are often lost in the lightning fast PR business.
A practice that also helps is a twice-yearly agency report card to help uncover things that are working well and not. I've used this with agencies that I've managed to good affect and helped nip developing problems before the account was lost.

jeffrey dobkin
jeffrey dobkin December 9, 2011 at 3:52 PM

Wow, Sean…
It's not often I copy a whole column and paste it on my site and claim I wrote it, but this article is just awesome enough to do it. Go on, check it out: http://www.danielleadams.com">Danielle Adams Publishing.
OK, so I was kidding about that part. But this article is still awesome. I've spent my life in small business advertising and marketing, and haven't really gotten to know large agency practices and budgets of 20 million. But I have seen some of these same practices in smaller venues: Top level people pitching accounts only to turn them over to the recent grad with little or no experience and limited knowledge of how to make a customer call or come in. I've also seen the luck of the draw - top creative talent working on the least needed creative campaigns.

I've never heard anyone speak about - and better yet, write about it.