Quotes from Michael Farmer

Balkanization is a feature of the ad agency industry, but it is not a universal phenomenon across all service industries. Somehow, management consulting firms (again!) expanded their technical capabilities and specialties under one brand name. They added specialist consultants, to be sure, but at the same time, they expect their senior partners to become adept at understanding a growing number of disciplines.

Digital technology did not really lend itself to a simple division of labor between creative (generating the ideas) and production (executing the ideas). In an increasing number of cases, creativity was all in the execution, especially in YouTube, Facebook and Twitter. Balkanization

Loose management practices dominate agency cultures, just as they did during the high-profit past. Client heads are not held accountable for depressed fee levels, unmanaged workloads or insufficient resources for client work. Office heads are not held accountable for the varied performance of their client heads.

Jules Verne's protagonist Phileas Fogg burned his ship's furniture for fuel to reach Liverpool on his way around the world in 80 days. There is no Liverpool within reach for today's big ad agencies.

Ironically, the increase in numbers of the strategic planners had the effect of releasing the client service people from any previous responsibilities they had for brand strategic thinking – leaving them free simply to coordinate with their clients and give them all the service they needed. One

Recession, advertising slow-downs, media spin-offs, procurement department investigations, client globalization initiatives, fee-based remuneration schemes and holding company ownership added significant complexity to ad agency operations by 1990. The simplicity of the Golden Age and the Creative Revolution was long gone, whether recognized or not.

It was never mentioned at the time, but the widespread pursuit of shareholder value initiatives put marketing in the back seat among other strategic priorities. There were easier ways of growing the top- and bottom-lines than by gambling on marketing. Marketing was uncertain and difficult in the recession-prone, post-Golden-Age decades.

The cozy relationship between chief executives and advertising agencies had unravelled, as other strategic advisers like investment bankers and strategic management consultants jumped to the head of the queue. The

Holding companies did not kill all the fun, to be sure, but their involvement was like that of a sober spouse at a cocktail party, reminding you of tomorrow's hangover if you indulge too much.

The obsession with quarterly earnings came about because personal compensation was increasingly tied to what happened to the share price. Improving market capitalization became the number one job for senior executives. Success would lead to personal wealth. Sadly

Agencies missed the significance of "shareholder value" and the change in priorities that it represented to their clients. They assumed, perhaps, that creativity and big ideas were eternal verities – that they were what clients needed under any circumstances. Shareholder value was just another management trend, buzzword of the month – nothing to worry about. The

Shareholder value became, from the 1990s onwards, a driver of management consulting success and, somewhat sadly, of advertising agency marginalization.

The real agency problem resides in the C-suite of ad agencies, and it is to the C-suite that we must turn to find leadership for the required changes. This won't happen unless agency CEOs finally admit that poor pricing is the fundamental problem that must be solved. Agency CEOs have the responsibility to solve the price problem. It's time to get started.

Procurement sets fees based on a negotiated agreement about agency headcounts and costs, and (separately) marketing generates workloads for the agencies. Agencies, who measure client health through profitability measures alone, have no rigorous way to factor in client workloads. TABLE

Poor leadership" is a major cause of job dissatisfaction and low morale. More than half of those with low morale rated the leadership at their company as "inadequate."34

Ad agencies continue to believe that improved creativity is the answer for agency and client problems.

What has my readers scratching their heads, though, is why advertisers, whose cumulative actions have painted ad agencies into a corner, marginalizing their agencies as partners, do not see any relationship between their poor brand performance and the commoditization of agency services and fees.

This is an industry that no longer reflects strategically how to create value in the face of disruptive change.

Agencies need to initiate the creation of marketing and strategic performance partnerships that see themselves and their clients as co-equal partners, each with specific responsibilities and roles, each of them committed to finding successful, results-generating marketing paths for the advertisers' brands.

Accountability for agency operations is fragmented. Each office in a network is a separate profit center. Each department in an office self-defines its missions. Creative heads focus on creativity; finance directors focus on headcounts, overhead and budgeted/ actual costs and profits; client heads manage the service that they provide to their 'disorganized' clients and keep them coming back for more. (Despite this there seem to be very few happy clients.) Managing

The auditing of time sheet hours is a time wasting process that can be eliminated if contracts focus on paying agencies for deliverables rather than for man-hours.