The 4A’s Attempts to Thaw the Cold War Between Consultants and Ad Agencies
Bell Atlantic Corp. continues to make waves: More than a month after the Bedford Group sent questionnaires to clients of ad agencies participating in the telecommunications company’s $200 million media consolidation, some contenders are still fuming at the outside consultants conducting the search. They’re miffed that the Atlanta consultants sent out the forms without giving agencies advance notice. They’re incensed about the intrusion into their clients’ time with a request for written answers. Adding further insult was the “can’t win” phrasing of some of the questions, such as What is the worst thing about this firm’s media buying operations?
This latest controversy underscores the uneasy relationship that continues to exist between consultants and agencies six months after the American Association of Advertising Agencies drafted guidelines intended to govern conduct during new- business reviews. The suggestions offer basic rules of engagement for what has become a scattershot cottage industry of independent individuals and firms operating by their own standards. Of more immediate impact, the rules acknowledge the growing influence and power of the outsiders. Finding common ground is a matter of no small significance: 60-70 percent of the reviews larger agencies participate in are now handled by consultants, according to the 4A’s.
“Now there are so many consultants, it’s not beyond the realm that somebody’s going to find a niche as a consultant to advertisers about consultants,” says Charlie Decker, senior vice president, management services for the 4A’s.
If the 4A’s guidelines are a recognition of the crucial role consultants are increasingly playing in the ad industry, it’s far from clear what, if any, impact they will actually have in the real world. While you might expect consultants to criticize the 4A’s attempt to advise consultants about how to run their businesses, you’ll be surprised to hear why.
“I took umbrage when I first saw them. The guidelines are so weak, so namby-pamby,” says Bob Lundin of Jones-Lundin Associates, Chicago. “We certainly support them, but do they go far enough?” In a private response sent to the 4A’s new-business committee, which created the guidelines over the course of four months of meetings, Lundin compared the proposed rules to “the American flag, Mother and Apple Pie.” In other words, more symbolic than substantive.
Like all voluntary guidelines, the new rules are as toothless as a baby chick. The rules depend upon the goodwill and conscience of the same individuals and institutions they are meant to cajole into line– without any means of enforcement. “Our hope is that all participants in the agency review process will voluntarily choose to refer to the guidelines because of their inherent value and benefit to all,” 4A president O. Burtch Drake said in a statement unveiling the guidelines.
That’s not surprising, given the process by which the guidelines were developed. While ad agency veterans are often vociferous when cornered privately on the subject of abuses perpetrated by outside consultants, the guidelines are the product of the 4A’s. Clearly, no one involved was willing to antagonize individual consultants with specific grievances for fear of shutting themselves out of any future dealings.
“These guidelines are quite specifically meant to be general. The intent was not to single out any one consultant,” says Bruce Meyers, BBDO executive vice president, director of strategy, business development, a committee member. “Among the big consultants as well as the Mom and Pops, there are some with sterling reputations and some with considerably less than that.”
The final guidelines address general issues of agency concern related to the protection of data confidentiality and potential conflict of interests among consultants. The 4A’s proposed that data supplied by agencies should be confined strictly to what is relevant to a specific search. The 4A’s also suggest that confidentiality be guaranteed: Consultants working for advertisers should not solicit business from agencies and shops should show restraint in responding to blind questionnaires. In one major review last year, recalls Decker, in which agencies “coughed up their guts” in answering an anonymous questionnaire from a Midwest marketer, the client is alleged to have been an agency competitor trolling for proprietary material about rivals.
What’s interesting about the guidelines, however, are the topics that didn’t make it into the association’s directive. For instance, committee members discussed divisive issues such as whether spec creative demands should be met or whether agencies should register with “double revenue” stream consultants who charge fees to marketers and to agencies alike. But the final version avoided these topics.
“Things like the double-revenue question became complicated,” says one committee member. “The AAR (Advertising Agency Register) is supported by every agency and is perceived to be fair. But then there are other consultants who are thought to be biased in their review processes because of this.”
Participants are careful to note that the new guidelines are the first step in an ongoing process. “I think the guidelines went about as far as they could go the first time around and the discussion continues,” says another committee member. “The fact that you got a group of competitors to open up and talk to each other and then issue guidelines is a positive first step.” The 4A’s has scheduled a series of “round-table discussions” with consultants to thrash out some of the touchier issues.
In fact, what may be needed is to get all review participants–consultants, clients and agencies–to face up to each of their responsibilities. That breakdown isn’t addressed in the guidelines.
“It’s in the best interests of clients to check out consultants, to see how effective they’ve been in the outcome of their searches and the length of the resulting agency relationship,” says Lorraine Rojek, president of The Rojek Marketing Group, in Cleveland.
Review competitors also have to honestly evaluate their new-business goals. “Agencies have to understand their true level of competitiveness,” Rojek adds. “If they’re just casting their net very broadly at anything that comes along, then they’re operating inefficiently.”
Despite agency grumblings over Bedford Group’s direct dealings with agency references, the consultant–in fairness–wasn’t guilty of anything more than conducting ordinary due diligence among the shops vying for a lucrative chunk of business. “It’s a normal, typical way of doing business,” admits one Bell Atlantic review hopeful. “People supply references all the time.” Ad agencies should not be surprised when those references are contacted; they’re supplied, after all, as a way to verify an agency’s credentials.
Ultimately, a shop’s savvy should drive a client’s decision. “At the end of the day, it’s really the strategy, the content, that should decide the outcome of the review,” says Jane Bedford, president of the Bedford Group, a veteran of both agency and client-side jobs before establishing her own company. She has conducted new-business reviews for companies including Bush Brothers, makers of baked beans, and Krispy Kreme Doughnuts.
On the other hand, agencies have every right to know who the prospective client is, the amount of revenue associated with the business, the selection criteria and who the client decision makers are, argues Rojek. Unlike many consultants, she does not take anonymous clients.
In the past, agencies have sometimes feared retribution from consultants if they questioned the relevance of required financial disclosures. The new guidelines provide a standard by which agencies can judge the appropriateness of outside consultants’ demands for proprietary information.
“The guidelines give agencies more flexibility in setting the terms about what’s right in asking for information related to a pitch and what’s not right,” says Ron Fierman, executive vice president and chief financial officer, Warwick Baker O’Neill, who sits on the committee. “Since we’ve put the guidelines out there for everyone, agencies aren’t as likely to face individual retribution.”
“We live and die off new business,” emphasizes another committee peer. “That’s why it has to be the 4A’s that puts out these guidelines and not individual agencies, which might look like they’re badmouthing consultants.”
Some consultants, however, complain that agency executives have adhered to the guidelines so strenuously that they have made their job difficult. “Some agencies saw them and began to interpret the rules as telling them not to provide any financial disclosure,” says Arthur Anderson, of Morgan Anderson, New York. “In setting agency fees, we have to have some transparencies.”
Such compensation negotiations used to be easier. Twenty-five years ago, the relationship between agencies and their clients was more straightforward. Clients paid one fee; agencies got 15 percent of billings. In addition to more complex compensation arrangements, today there are too many other variables, such as unbundled services and multinational marketing strategies that require global or other specialized agencies. Clients, already grappling with fewer inside resources thanks to downsizing measures over the past decade, often need a consultant’s help to make sense of the myriad choices available in the marketing communications industry.
In today’s financially driven, volatile world of agency-client relationships, it’s a rare shop that is willing to risk losing tens of millions of dollars of new business by alienating those who serve as the gatekeepers to marketers’ coffers. As long as consultants don’t get too outrageous in their requests for financial data, they will still hold most of the cards. “You may not like consultants, but you better learn how to do business with them,” says one agency head, especially if you want to keep your agency active in new business.
In an ideal world, there’d be no need for the 4A’s guidelines. “A lot of problems would be solved if agencies simply resolved not to work with people with ethics that are not above board,” observes Lundin. “If someone would simply stand up and say ‘These are tactics we do not approve of’ that would take care of a lot of existing problems with consultants.”
There’s one catch: That act of courage would require ad executives to learn to tell clients one of the most dreaded words in the business: “No.”
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