Paragon Advertising is a large advertising agency employing several hundred people. Paragon provides its clients with two main services: planning for the contents of advertising campaigns (slogans, layouts, basic selling points) and planning for the media (radio, television, newspapers, magazines, billboards).
Paragon also helps clients with marketing and distribution, and with market research to test advertising effectiveness. The agency’s income is derived from a 15% rebate on charges made by the various media or from fees paid directly by clients, usually large corporations.
As Figure 1 shows, Paragon is divided into three parts: the creative branch, the marketing branch and the account-management branch.
The creative branch has four departments: copy, art, newspaper and magazine production, and TV and radio production. Copy staff write scripts for television and radio commercials and the written contents of print advertisements. Art staff design the layout of ads and provide needed illustrations. The two production departments finish the rough work provided by the copy and art departments and arrange for its appearance in the chosen media. For television and radio this includes filming, taping and distributing commercials. For newspapers and magazines it means reproducing the ads and supplying them to the scheduled media.
The marketing branch focuses on the selection, usage and evaluation of the media through which the advertising will be presented. Marketing has three departments: media, merchandising and research. Media staff study the various media to discover the least costly ways of reaching the greatest possible number of buyers. Media staff then purchase air time or space in publications. Merchandising staff help clients with the design of displays and packaging and in selecting the means of distribution. Research staff survey markets to eliminate potential problems and to assess the effectiveness of advertising.
In the account-management branch are executives for each account who act as the links between the clients and the agency, and as co-ordinators of specialists in the various departments in the creative and marketing branches.
Such are the formal structure and reporting arrangements. The staff at Paragon, however, have worked rather differently in their day-to-day activities. There have been serious difficulties in those working relationships, and the top-level managers at Paragon believe the difficulties are due to the organisational structure.
For example, the account executive is officially designated as the point through which all of Paragon’s contacts with clients are to be channelled. But, in practice, there has been substantial direct contact between Paragon staff members and their counterparts in the client organisations. Artists talk to artists, market researchers to market researchers and copywriters to advertising people.
Consequently, the account executives feel unable effectively to control Paragon-client relations. One complains:
“Control? How the hell can I keep track of five or six prima donnas? Each of them (agency professionals in different specialties) tries to play up their big idea to the client, and half the time I don’t know about it until a couple of hours later. If I were stronger, I would make the whole pack of them come to me first. Yes, before they did anything.”
Another difficulty has arisen from inconsistencies between account management’s definition of good work and the definition of good work in the creative and marketing departments. For example, a copywriter’s advertisement might please the client and yet be considered a sloppy piece of work by colleagues. Or, the result of a market-research survey might horrify a client and yet be a first-rate professional job. As one research supervisor said:
“The most discouraging part of this is that the account executives always want our findings to show positive results: You know that our advertising is the best and that it’s selling soap, that it’s better than last year’s. But a lot of our research either shows nothing really positive or sometimes shows that our advertising is worst. There’s a lot of pressure to fudge. I think my biggest job is to show people the truth, not to tell them what they want to hear.”
An account executive reflects the pragmatic point of view: “Remember, nobody cares how good our research is except us; the client and the agency only want results. We are in business to sell soap and not to do sophisticated research; that is, as far as they are concerned.”
Professional staff (artists, copywriters and market-research specialists) vary in the degree to which they value technical excellence in their work. One type of professional employee, the craftsperson, judges his or her work in terms of its excellence in the particular specialty. Craftspeople are especially disturbed by pressure from account executives or clients to do anything that might be in conflict with their professional standards.
Had these tensions between account management and the various creative branches been confined to minor squabbles in the agency, they would not have distressed top management as much as they do. But the conflict between groups in Paragon is interfering with its ability to provide efficient service to its clients. For this reason some clients have already taken their business elsewhere.
It should also be mentioned that there seems to be a general change in the conditions under which Paragon operates, a change that has made the agency’s internal difficulties even more serious. For many years business has been relatively stable. But a trend has now developed towards a more rapid turnover of accounts and more rapid changes in the needs of established accounts. This instability necessitates more speed and flexibility than the old structure is able to provide.
As a result of a loss of business and an awareness of the changing conditions, management has decided to re-organise the agency along lines it feels are better calculated to ensure client satisfaction. Figure 2 shows the new organisational chart.
Instead of drawing on specialist creative and marketing departments, each account executive will now head a mini agency. Members of the old departments will be organisationally and physically separated and dispersed into new client-centred units located in various parts of the agency’s building.
Will the account executive’s control over contacts between agency personnel and clients be improved? How will the re-organisation affect job satisfaction for the craftspeople? How will the re-organisation affect the agency’s performance for clients?
Proposed solution #1
Ron Tomlian is the manager of marketing and
communications for the Corporation of the City of Adelaide. Ron has extensive marketing experience in a range of sectors including industrial, consumer and business services, and has a particular interest in
corporate branding and reputations. He is an Associate Fellow of the Australian Institute of Management and was AIM’s chief executive in South Australia for the past two years.
The senior management of Paragon Advertising has the right motive for taking action to re-organise the company that is, to improve customer satisfaction but has succumbed to the lure of a simple structural “fix” to resolve an issue of considerable complexity. Restructuring, of itself, seldom improves customer service.
Just as importantly, the creation of mini agencies within the agency is likely to diminish Paragon’s competitive advantage of size and resources over the smaller niche agencies that will, as a result, undoubtedly capture a significant number of Paragon’s lost clients.
The central needs at Paragon are a sense of common purpose and an agreed methodology for achieving it. Each department seems to have a different perspective on the way to add value for the customer and is critical of the way that others in the organisation employ their expert resources.
Account executives see themselves as client representatives, but want total control over client contact, not recognising the value of client intimacy across the organisation. The creative group, inherently craft-oriented, are more concerned with their artistic integrity, and there is every indication that they believe the account executives are selling them out. And researchers are valuing “truth” above all else, without seeing that it is the way that their information is used to improve the client’s advertising that is important.
Paragon does not need external competition to steal its customers the internal competition for credibility is driving them away.
Winners and losers
The restructuring effectively signals that one group has won this internal struggle. It may give the impression of improved formal control over the process for the account executives, but that mere impression will have won at the expense of internal communication between experts an important differentiator for larger agencies.
It also imposes a requirement on the account executives for specialised personnel management. In my experience, many of them would be ill suited to it. Creating an environment that is conducive to creativity or professional integrity will undoubtedly be seen as merely a distraction when management is dealing with the pressure-cooker environment of account service. This latter requirement will, in the new structure, reduce rather than increase real control over the process for the account executives.
The new structure effectively replaces perceived competition, which has been allowed to exist because of a lack of common focus on the needs of the customer, with real competition between internal mini agencies.
People are assets
The craft-oriented experts, who are the lifeblood of the agency, will be disgruntled most by the restructuring. These people regard themselves as the modern-day artisans of advertising. More importantly, it is the expertise of such groups (the copywriters, artists, creative directors, researchers, media buyers) that clients are buying when engaging Paragon.
In an industry that “sells” the expertise of such creative workers, it is the job of management to develop and maintain an environment that gives full rein to the craftspeople’s skills and knowledge, and directs their energies to the benefit of the client.
Collaborative association with their peers is a prerequisite for such people; and, to a great extent, it is recognition by peers that drives them. Instead of fostering the right conditions for these groups, the restructuring isolates them and makes competitors of their peers.
It is not hard to see that the problem for these craftspeople will be short lived: they will simply leave.
It is unlikely that the new structure will be convincing to clients either. Organisations attracted to large advertising agencies expect access to a pool of expertise and the resources that such agencies can devote to their business. Usually there are star talents in an agency upon which its reputation is built. The new structure makes it clear that only certain accounts will have access to this talent.
The structure also takes little account of the wild fluctuations in individual client demand that have become so much a feature of the advertising industry recently. Unless Paragon can somehow provide for flexibility of resourcing in this new structure, it will find the trickle of client defectors growing into a flood.
A more in-depth analysis of the problems at Paragon to reveal the core of what is at stake is needed. An improved understanding of common purpose, and each person’s role in achieving it, is at the root of the solution. Such an understanding would have enabled management to retain an element of differentiation and improve the service that it offers to clients.
Proposed solution #2
Ross Moyle is the client services director at Young & Rubicam, one of the world’s largest communications groups. In his 25 years of advertising experience in Britain, Asia, Australia and New Zealand, he has managed advertising agencies and client-service departments and developed and implemented communications programs for many multinational and national product and services companies.
Although Paragon seems to offer the services typical of a conventional advertising agency, its organisational structure is hardly conducive to producing work that would meet the objectives of clients, staff and shareholders.
In fact, the structure suggests that Paragon never really understood how a typical agency should be set up. For example, marketing is not a core skill of advertising agencies.
Furthermore, the functions of media planning and buying, research and merchandising are not complementary.
Invariably media is a stand-alone department, and often its functions are undertaken by a separate company. Research, if an agency has such an in-house resource, will probably come under a strategic-planning umbrella, and merchandising is generally seen as a client responsibility.
Although agencies do design and produce point-of-sale material, a company’s merchandising strategy is usually a sales or trade-marketing task. No wonder the agency was starting to founder.
Still a step behind
The proposed restructuring is more akin to the shape a conventional agency would have had before the onset of the social and business changes wrought by globalism, new consumerism, and the IT revolution.
The new structure acknowledges that clients tend to look for a communication “champion” in their agency, and this is invariably an account-management role. This view in no way lessens the importance of the creative, media and planning specialists in the agency, as more often than not it is the creative product that attracts and holds clients.
None the less, the new structure does recognise that, to get the best performance from the agency, a team leader is required to work with the client in developing communications programs that support business objectives and to provide a focal point for co-ordinating the resources of the agency.
The mini modular agency
The idea of creating virtual mini agencies is nothing new. But Paragon needs to recognise that each of the departments needs to retain its structural integrity. For example, creative people like working with their peers; indeed, they work better thus, and the creative product is enhanced and refined by the working interactions that naturally occur.
Not all for the better
So, will the account executive’s control over contact between agency and clients be improved?
Probably. However, controlling contact is not the issue; in fact, contact by all departments is desirable. For example, no one sells creative work better than the person that created it.
What is important is to ensure that all staff understand what the agency expects of them. An agency “working process” and a formalised briefing system are imperative for the efficient and harmonious production of work.
Once there is a clear demarcation of job responsibilities and respect for each other’s roles, it is likely that the account executive will have greater control over the communication process and management of the agency resources, without encroaching on departmental territory.
With a designated team leader and clearly defined roles, job satisfaction will be greater and the agency’s performance on clients business will improve.
Having said this, a little bit of departmental friction and competition generally leads to a better standard of work.
Entering which millennium?
But will the proposed restructuring allow Paragon to meet the communications challenges of the new millennium? The answer has be be an emphatic “No!”
More then any other service industry, advertising is re-inventing itself, and the ways in which agencies are restructuring are manifold.
For example, integrated communications groups now exist that offer total solutions with a network of wholly owned or affiliated specialist companies. As do integrated agencies offering through-the-line solutions with in-house specialists formed into mini agencies. This approach is sometimes referred to as the “pod” system. Then there are agencies specialising in categories or media for example, health care, media independents and dot-com agencies.
And the way these new agencies are being remunerated is also changing. The standard commission system has all but disappeared as agencies relate the fees they charge to the scope of work, the resources they place against the business and results, with target and sales-related bonuses.
Although Paragon should be applauded for restructuring to overcome problems in service delivery, maybe it is also a good time for thinking about what kind of business the organisation is in. Maybe it is time Paragon re-invented itself so that it is truly meeting the needs of 21st-century clients and staff.