Fees Top of Mind at 4A’s Conference

SOUTHAMPTON, BERMUDA In his opening remarks at the 87th annual American Association of Advertising Agencies’ management conference here, president and CEO O. Burtch Drake outlined steps the organization is taking to address the complexity involved in determining client-agency fees and the conflict it creates in client-agency relationships.

Drake also said revenue was up for the trade association that represents the advertising industry for the first time since before Sept. 11, 2001. Drake and 4A’s chairman Ron Berger, beginning his second of a two-year term, sounded notes of optimism about the financial and idealistic states of the marketing communications industry.

While Drake focused on the issues and challenges, Berger emphasized the creative exuberance that characterizes the craft of advertising.

Drake said the organization’s revenue was up more than 8 percent to $14.2 million compared to fiscal year 2003, pointing out that the rise, reflected in agency dues, is indicative of a healthier industry overall.

He touched on the familiar challenges facing the industry such as a lack of diversity, new media advertising, the rise of branded entertainment and agency compensation.

That last issue touched a nerve among the estimated 380 advertising executives attending the conference. He outlined three initiatives the 4A’s is taking to address the issue. First, he said, it has formed a task force with the Association of National Advertisers to establish a framework of principles, best practices and definitions regarding compensation. Second, it is working with shops to develop benchmark data and metrics to determine costs. Third, the 4A’s will conduct seminars and studies on a value-based compensation program with economists, including author Ron Baker, who wrote The Firm of the Future.

Seizing on the compensation issue, Nina DiSesa, chairman of Interpublic Group’s McCann Erickson in New York, told Adweek that the 4A’s must lead the charge on the issue with clients.

“Right now, we’re selling time,” DiSesa said of the way agencies are paid. “But we really sell ideas. The whole idea of timesheets is archaic. What happens if you have an idea in the shower?

“There isn’t a single creative person in a single agency who doesn’t think they’re underpaid. We need to have the money to take care of talented people.”

She said that agencies should give a lump cost estimate for clients regarding what servicing their accounts would cost annually and then adjust for overages at the end of each year.

In a separate panel discussion, office leaders from WPP Group’s JWT and Omnicom Group shops BBDO, DDB and TBWA\Chiat\Day acknowledged that recruiting and retaining talent continues to be a challenge.

One reason, said Dana Anderson, CEO of DDB Chicago, is, “We have difficulty articulating what we think is the future of our own industry.”

Added JWT New York co-president Rosemarie Ryan, “It’s hard to attract talent becuase we’re not as proud of our industry as we should be.”

Another challenge cited by Anderson, BBDO New York president John Osborn and TBWA New York Group CEO Brett Gosper was fostering regular and constant collaboration among disciplines, particularly with media planning colleagues who work outside their agencies.

As Gosper put it, “One person cannot [run] an entire show given the complexity of the business now … it’s team management, a sense of empathy across disciplines.”