“You will be shocked (or not!) at what sort of agencies are indulging in undercutting today,” says Joseph George, Group Chairman & CEO, India Regional President, South & Southeast Asia, MullenLowe Lintas Group, as he gets candid about critical challenges faced by the communication industry today. George feels that agencies that have been unable to structurally respond to and ready themselves to the dynamics of new market realities are today resorting to reducing prices.
“It not just affects an agency’s ability then to pay for good talent and other crucial investments, but also then, brings down the market value of “ideas" from an industry perspective,” he further explains.
In his distinctive straightforward manner, George says that these tactics are “lazy and irresponsible, and that such practices are guaranteed to put you (agencies resorting to such tactics) on a slippery slope to hell.”
Edited excerpts from a straight–shooting chat with George on his approach to undercutting, why rewarding the wrong people is worse than not rewarding your employees, putting a premium on “niceness” before signing clients and more:
Is under-cutting the new reality of the communications industry? How do you deal with it as an industry leader, wherein majority of the agencies are going that way to retain or procure clients?
Yes, unfortunately this has been true for a while now. And you will be shocked (or not!) at what sort of agencies are indulging in it. Most agencies have not structurally responded in time to brace for the new realities. And responding to them by just reducing prices is lazy, irresponsible and
guaranteed to put you on a slippery slope to hell. It not just affects an agency’s ability then to pay for good talent and other crucial investments, but also then, brings down the market value of “Ideas" from an industry perspective.
But like it has always been the case, pricing is what you deserve and not what you are entitled to. And so, you can hold on to your pricing or indeed even extract a premium if you are able to consistently provide creative solutions that work in the market place. And that’s what we single-mindedly focus on. Every day.
Clients also need to play their part. Many of them at the cost of putting their own brands at risk, call for pitches only because their incumbent agencies refuse to re-negotiate remuneration. Given this, under cutting is something these clients are actively playing agencies; with full conviction but arguably with much myopia too. This malaise is unfortunately linked to a large extent to reducing tenures of marketing personnel in their jobs. This directly impacts their motivation or even their desire to think long term on the brand.
If you had to choose between retaining a prestigious client and significantly reducing monies, what is the choice you make, what are the factors you base it on, given global network pressures?
It is not a simple decision. But my guiding principle is that any client, current or new should not be margin dilutive. And if it is, then we should be absolutely sure that they are clients for whom we can clearly create value. And also that our people should get to learn something new and have fun working on. In short if there is no Fortune, there should at least be Fame and Fun for both client and agency!
How do you retain and motivate talent in a scenario wherein agencies are constantly struggling with clients over fees?
I personally believe there are 5 Cs that are moot to retaining and motivating talent in an agency. These are what I have come to believe in, purely by personal experience. And which is why I am sure they vary from leader to leader. First is the Creative product. Consistently putting out great work is the best way to retain and acquire talent. Being associated with, and having the chance to contribute to an agency that does great work consistently is the best HR strategy! Secondly, Communication. It is important that the leadership of the agency is in constant communication with the rest of the agency. When the rest of the agency is in the ‘know’ of what the leadership is up to and why, they begin to see themselves as enablers and stake holders. Thirdly, Character. The behaviour of the leadership exhibited on every aspect every day has a disproportionate role in influencing talents' love and respect for the agency. Fourthly, Clients. Fair, decent, professional and respectful clients makes agency talent stay with you happier and longer. Try and put a premium on “niceness” before you sign on clients. And if clients are disrespectful and abusive, walk out. Talent will see that you have their back. And their self-respect. And lastly, Compensation. It is not how much, but to whom. Employees need to believe that meritocracy prevails and that the right people are getting promoted or rewarded. What is worse than not rewarding employees is rewarding the wrong people!
Today as an industry leader what is it that you would like tell agencies as well as clients, given that each agency talks about an integrated offering, being a partner to the client and not a vendor and is still grappling with ground issues like remuneration?
Remuneration is a real issue. But instead of feeling wronged or victimised about this, one needs to understand the reasons why many agencies are grappling with remuneration. I would attribute this to primarily three reasons though I am sure there are many more. Firstly, Clients have over time rightly or wrongly arrived at what they feel is fair value for an agency’s inputs. Secondly, most clients across sectors are genuinely under pressure on both top-line and bottomline and are looking to cut costs across the board and lastly, there are a lot more partners who the clients are working with today, and therefore there is lesser available to pay to agencies. Fortunately, the way to address the first two reasons is completely in the hands of agencies by ensuring that clients receive and acknowledge the agency's inputs that consistently work in the market and the third reason by credibly re-structuring and re-purposing themselves to get back to being full service agencies. And within that, Digital, Content and PR (is) to be mainlined ASAP.
Agencies also need to take a hard and long look within and interrogate honestly and bravely the relevance of their structures in the context of today’s business realities. While I am sure different agencies have different ways to respond, I am not sure that you could go terribly wrong if you choose to cut on costs rather than cut on your pricing. You need to keep evaluating (unfortunately, more frequently that one would like to), the prioritising of your skill sets, your service offerings, your expenses and your investments.
What is the impact of Balki’s exit on you, and MullenLowe Lintas Group?
Like both Balki and me have said earlier, Balki’s exit was planned quite a while back and the first step towards this process was when he relinquished the Group Chief Creative Officer role two years back and chose to just be the Group Chairman since then. So everyone within the Group and indeed our clients were in a sense, transitioning in that period.
And it is thanks to this planned out transition that we have today fantastic leadership teams in place to build on the momentum that we have gained over the past 4 to 5 years as well as to chart out a new future for the MullenLowe Lintas Group.
I am absolutely convinced that the current Managing Committee is the most competent, skilled and driven leadership team in the entire industry.
Of course I miss Balki at office; we have been colleagues for more than 20 years! But we more than make up for that by meeting up as often as (we did) when he was working in the agency!