Ogilvy boss: Performance bonuses should not risk all profit
James Greet and David Fox at SAGE Sydney yesterday
The CEO of Ogilvy Australia David Fox has told a forum that both agencies and their clients need to be careful how they structure performance bonuses to ensure fair remuneration and reasonable servicing and profit for each party.
Speaking at yesterday’s Secrets of Agency Excellence forum in Sydney, Fox told a panel discussion that remuneration and fair structuring on performance bonuses was one of the big challenges for the advertising industry.
“It is the ongoing problem,” said Fox. “I’ve seen this situation in some remuneration models where the agency is unhappy with it and the client is unhappy. No one is happy but no one can fix it.
“So what’s changing? Well nothing except that margins are going down. From my point of view that’s the biggest issue.
“If someone can crack that one… maybe with an app. That would be great,” he quipped.
Fox told the forum, at the Amora Jamison hotel, that clients need to be clearer about what goals needed to met for the agency to earn the boness and also not structure it so that the entire agency was putting its whole profit on the line.
“It is about defining what you need to influence to get that result,” he said.
“Sometimes it is positioned as a bonus and I call it a margin. You have to be very careful about how that conversation goes.”
“A lot of our clients are very open to (incentives), after all it not a crime to make money. In fact they want their agencies to be successful.
“Performance is an ongoing discussion but the remuneration issue just doesn’t seem to end.”
Also on the panel was Ikon Communications CEO James Greet who was making one of his first public appearance since taking the reins of Ikon in mid 2013.
Greet, whose agency recently retained its foundation client Commonwealth Bank following a competitive pitch, told the forum that successful agencies needed to be structured more around client problems not ad campaigns where the agency profits.
“There has been a fundamental shift in the agency landscape,” said Greet. “You go back ten years and the solution to most marketing problems was advertising – and advertising led the whole process – but I think the world has change massively and it is not about just an advertising solution.
“It is about having a clear sense of purpose and that provides relevance and that has reframed the world of media. It is about helping join the dots to make you own relevant, exciting experience that brands can genuinely play a role in.”
The Ikon boss said that too many agencies still believed paid for advertising was always the solution.
“Unfortunately even though the language has changed and the doing has changed, most agencies who govern the majority of client spend are still running to the old metrics. They are still starting with paid advertising as the answer.
“It’s now about understanding who your core customer is and building relevance from the inside out. How do you work owned and earned assets first.
“The problem is the commercial model advertising agencies and media agencies still work in works against that. I think that’s where if you’re running an agency understanding how you bring value that is the first thing you need to do.”
Greet told the forum, that despite some recent account losses, he was focused on differentiating his proposition in market.
“Today’s world is about removing complexity from what is becoming an increasingly complex world, which is media in the broader sense. It is about how do you help clients join that up and connect that to the broader customer experience journey,” he said.
“That is something (Ikon) is very free to do because we’ve never done agency deals with media or technology partners. It is really about framing Ikon as the iconoclast – finding a way that we could challenge the lazy status quo of the agency world.”
Challenged on how the market had responded to that proposition he said: “I don’t think it is hard (to sell) at all. I think it about having a point of view and then there is about being able to deliver it.
“I think a lot of people have been very good at talking the talk but less so at doing the work.
“It hasn’t been that hard and what I think is interesting certainly from the media agency space – if you look at the businesses that have been successful it is the local homegrown largely independent businesses that have been smashing it in terms of being the first agencies on the list, they are smashing the big multinationals.”
Nic Christensen
And how many pieces of new business has Mr Greet won with this approach?
Isn’t it convenient for him to bash the multinationals that he has worked for for most of his career, once he is no longer with them.
Play fair James, there’s room for big, medium and small players in this market – no need to disrespect your competition, especially colleagues and friends you were once working alongside.
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That David Fox fellow is one great man
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any client asking an agency for an ad campaign instead of working with them to solve their business problems is an idiot.
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James Greets idea of “massive change” in remuneration is not just to race to the bottom of fee proposals, but to actually jump head first until he hits the bottom and breaks the spine of the agency!!! What absolute garbage that fee models have progressed where an agency does not get paid for the bulk of their workload….
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So, man leaves big media agency, says big media agency model was always broken.
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What if the problem is the advertising? Who is the idiot then?
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Sounds promising James.
I’m sure there will be a lot of excited media owners out there if Ikon is going to move away from the “Cash Savings” promise they have made to lure new in new business.
For Ikon to take a step away from making the media do it for less than last year just to keep the business with no upside will be refreshing.
Time will tell I guess…
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