What is going on with the American workforce?
Currently, about a third of the American workforce identify as freelancers, contractors, or “solo-preneurs”. And by 2020, it is predicted that that between 40% (Here’s Why The Freelancer Economy Is On The Rise, Fast Company) and 50% (Five Reasons Half of You Will be Freelancers in 2020, Forbes) of the workforce will be freelance. That’s less than 5 years away.
What is this doing to interactive agencies? We work harder, try and learn from our mistakes, respond to RFPs and RFQs and ITNs, pitching our minds out. The competition is stiffer, and while we each think we’re “special,” are we really that different from one another? Can one be swapped out for another? How many of our agencies will be missed (and who will even care) when we’re gone?
For those in the creative industries (like design, branding, interactive, and marketing), the freelance life of flexibility, freedom, and responsibility are waiting to be grasped, should you choose. Which means clients will have an increasing number of considerations and options, should they choose. And agencies, dealing with a changing workforce and client desires, will need to adapt, should they choose.
“Should they choose.” There is no right way, wrong way, or single way forward. The way forward is choice. So what choices will employees, agencies, and clients need to make?
The Choice of the Workforce
The idea of waking up and having someone else figure out what you’ll be working on can be attractive to many. You show up, do the work, get paid, go home. At least that’s the myth of job security. It no longer exists, if it ever did. Losing accounts and the business direction of an agency can create a situation where even the best employee shows up for work to a position that no longer exists. As stated in an AdAge article, “Today, when an agency loses an account or a client cuts its budget, even the best and longest-tenured employees are fearful that they will be laid off (and often are).” (Eight Ways to Lower Agency Employee Turnover, Advertising Age). As an employee, the only person looking out for your best interests is you. As a previous agency owner, I’m not saying this to be harsh or heartless. It’s a reality of business, even for business owners who truly care about their employees, and I think most do. I do. Business owners are looking out for the best interests of the company and their own personal investment; they’re the ones on the line financially and contractually. And sometimes their decisions lead to having to let employees go. Nothing personal, though it’s always personal.
In this type of work environment, is the choice of going freelance any less secure than a full time job? Uncertainty is scary. It involves risk. It involves responsibility. It can induce panic attacks. But which is scarier: uncertainty or the certainty that others are making choices that can have an effect on your life? At some point, either by choice or by circumstance, uncertainty will find you. From personal experience as both employer and employee, any time someone else has made decisions that will affect my future are the scariest.
“30% of employees expect to stay at an agency for less than one year, 37% expect to stay between 1-5 years, and 35% expect to stay longer than 5 years.”
– Andrew Benett, Global CEO of Arnold Worldwide, from Transforming Talent Management
If job security is non-existent, and maybe because it doesn’t exist, job mobility is very much an issue for employees and employers. A survey conducted by the American Association of Advertising Agencies in 2012 estimated that about one third of agency professionals plan to leave their agency each year. Look at many agency workers’ LinkedIn profiles and it’s like clockwork. People move on to other jobs, either as lateral moves to work on different projects in different work environments, or sometimes they move to take a step up to the next role and pay scale if it isn’t available at their current employer. Great employees no longer need to stay working at a place they don’t want to be. As an employer, this means always having to be prepared that someone is going to leave, no matter how great the company culture and pay is. And if the pay and culture aren’t great, they have to be even more prepared for these departures.
“Increasing numbers of professionals are finding that they don’t actually want to work for the same company month after month, year after year.”
– Stephane Kasriel from Why The Future Of Work Will Look A Lot Like Hollywood, Fast Company
Talented individuals benefit from this opportunity: the freedom to work where they want, on what they want, when they want. In order to embrace opportunity, great employees also need to embrace responsibility. Being your own boss requires dedication, initiative, and being responsible for your own future. There are plenty of talented individuals who don’t want this responsibility, and working for an agency might make more sense. But as stated before, there are risks that go along with this as well.
These are uncertain times. The people who will thrive are those that embrace this flux and uncertainty. At the root of this uncertainty – even the cause in some aspects – is a workforce who is increasingly feeling enabled. Talented individuals will embrace uncertainty because they feel enabled to chart their own course and determine their own future.
How does Maslow’s hierarchy of needs compare to these uncertainty embracers? With little job security, the idea of “a safe job” is gone except the safety individuals create for themselves. Belonging no longer exists on an corporate organizational level because individuals are an organization of one (beyond the support of friends, family, and professional organizations). But then there’s an interesting shift… esteem grows the more enabled someone becomes. They feel valuable and provide value. And then these people reach self-actualization, where they achieve their full potential – where they are the creators of destinies.
According to Maslow’s hierarchy, we only move to the higher levels once there is the base of the lower levels. Is this true? There is a perception that for freelancers, safety (or security) is removed because they never know what the next project will be. (Is this really any less “safe” than the myth of job security?) Belonging to a larger organization is removed. Or maybe safety and belonging happens through other channels… the safety of knowing that as an individual, you’re making the decisions and putting in the effort. Belonging takes on a new meaning, building a support network of both personal and professional connections. Is the traditional Maslow pyramid just not how freelancers are wired from a hierarchical needs perspective? Maybe it’s more like a Space Needle than a pyramid… the base (physiological), begins to taper as it goes up through Safety and Belonging, but enlarges at the rotating restaurant of Esteem, ending in the point of Self-Actualization.
Or maybe freelancers still want and need safety and belonging just like everyone else does, but they just go without? Or is there a new agency model that supports the Space Needle of needs?
The Choice for Clients
Clients hire agencies to assist in accomplishing their business and marketing goals. But clients can often have very little insight on who is doing the work or how it is actually getting done, only that there are deliverables that meet (and hopefully exceed, though that’s an entirely separate post) their expectations.
But if employees are leaving agencies, either to work at other agencies or to go freelance, it means the staff that clients are hiring could (and probably will) change over the next 2-4 years. As a client, maybe you’ve experienced this… your agency contacts changing now and again. It means the employees who created the work that built the agency’s reputation may not work there anymore. And if the people who created the work and reputation that you’re hiring an agency for are leaving or have left, who will you be working with?
Clients hire agencies to access great talent but there’s the rub: they no longer have reliable access to great talent through agencies because great talent is going freelance or leaving to go elsewhere. Unless the client hires the talented freelancers directly (and freelancers don’t always have a path to contact and work with these clients directly) or the agency hires the freelancers (which they often do, but as a client you’re not involved in this aspect of agency operations), clients have little control over the people they’ll be working with at an agency. Even after going through an agency selection process, it doesn’t mean the client will be working with the most talented people at the agency. Kyle Racki in his Medium post “What Clients Really Want From Your Agency” calls this “the bait and switch.”
“It’s when the CEO or a senior member comes in, does the pitch, then hands you off to the junior team members who actually work on your project. I have learned to stipulate in the contract that the client must have access to the senior creative/executive as promised in the proposal.”
– Giles Crouch, from Kyle Racki’s What Clients Really Want From Your Agency
Then in many situations, especially at smaller agencies, once an agency wins the business they’ll bring in freelancers to handle the additional workload. (I’m familiar with plenty of agencies who bring on freelancers to support their workloads – we did it at Substance for a number of positions. If you’re a client, you are almost certainly working with freelancers right now and don’t even know it! But, to the case above about the most talented staff going freelance, maybe this is to your benefit…)
Clients are going to struggle in hiring agencies when the end results aren’t up to their expectations because, unbeknownst to them, the staff working on their project are not the talent they thought they were hiring. Even when hiring a larger agency, clients will only be working with a smaller team within that agency’s structure, or even freelancers brought in to take on additional work – back to the idea of “the bait and switch” where the client doesn’t know what team they’re going to get.
The Choice for Agencies
Before you start saying that all the stuff above doesn’t apply to your agency (though you probably already are), of course this isn’t the case at every agency. At least not today. There are plenty of agencies that employ plenty of very talented people. I know many talented people that work at talented agencies. But for how long? How long will these employees believe they have job security? How long will employers be able to retain this talent? There’s an argument that benefits like health insurance and 401k plans that employers offer, along with aspects like “great company culture,” will keep people wanting to work at agencies. And I agree with the sentiment of this argument. I like having health insurance, contributing to a 401k and my eventual retirement (and is retirement even something we should expect to do in the future? Does a generation younger than me even think about the concept of “retirement”?), and being part of a group. It’s great to have others around to validate ideas, to help troubleshoot and problem-solve, to play ping pong and drink beer and go on lunch and happy hour excursions.
But agencies are going to begin, or continue, to lose their best talent. It’s already happening. Company culture will sustain some, but the culture that is attractive to some will become a cult of personality to others, and those who no longer want to participate in the business as usual will seek opportunities and control of their personal destiny.
Add to this the decisions agency owners must make about the costs associated with onboarding, equipment, training, insurance, infrastructure, and real estate. Then there are employee benefits that need to be determined and managed like working remotely and time off, both things that have been traditional “freelancer” benefits that agencies are offering to keep employees.
It’s a challenging time to be an agency owner. The choice is how to adapt due to changing employment opportunities and client needs.
At the Core…
Everyone and everything is in flux. Uncertainty will rule. And people will ignore it until it affects them.
For all my prognostication, I don’t think agencies are going to disappear entirely. Based on people’s needs, I think things are going to change, especially with the full-time and freelance workforce.
Imagine agencies as molecules (and keep in mind I was terrible at chemistry in high school). Some molecules are bigger than others. Some huge molecules swallow up smaller, independent molecules. A bunch of mid-size molecules float all over the place. These molecules are made up of leadership teams, senior staff, and employees. As the workforce shifts from full time to freelance, freelancers will continue to split off of the molecules like rogue atoms.
Some of these liberated atoms will float around on their own, sometimes joining up with a larger agency molecule based on that agency’s needs, sometimes joining up in a direct-to-client molecular relationship (not represented in the diagram). And some of these atoms/freelancers will join with each other to create smaller, denser molecular “cores”, or “core agencies.”
Inherent in its name, core agencies are built around a strong nucleus. (Yes, I realize I’m mixing molecular structures and atomic structures. Just go with it here.) From time to time, as clients and projects require it, the core agency can pull in additional freelance atoms, temporarily creating a larger, higher capacity, multi-skilled molecule that would, to an outsider, appear to function like a “traditional agency.” As my friend Shaun Tinney commented to me, “it’s almost all about appearances. Big agencies have their reputation even though they struggle to keep their talent, while freelancers have some of the best talent but no reputation with clients.” The fact that a core agency and traditional agency can look similar isn’t a bad thing; they are both capable of the same type of work. But core agencies are built on a different business model and have different opportunities than traditional agencies.
- consistent leadership (the nucleus) to create brand recognition
- flexible workforce to handle different types of projects
- ability to easily adjust/change the direction of the business
- lower overhead
The core agency isn’t that different in concept from the way independent movies are currently made. In these instances, the producers raise the money to fund a project and form a production company to make the film (from “Why The Future Of Work Will Look A Lot Like Hollywood”). In this example, the nucleus of the core agency are the “producers,” with the funding coming through projects and relationships with clients.
How is the core agency different from the current agency model, except people aren’t full time employees? That’s exactly the point. Each of these atoms can do other things as well. They can go join another molecule for a bit. The nucleus can focus on its core abilities without bringing in additional freelancers (or have to let employees go). The core, if financially able, can even take time away from work. (Check out Stefan Sagmeister’s TED Talk on “The Power of Time Off” for ideas on this.)
The core agency is also built upon the premise of location independence. Companies are embracing the concept of a distributed workforce in order to hire the best talent. Matt Mullenweg (founder and CEO of Automattic, the creators of WordPress) says of working remotely, “the smartest people in the world are going to want to work this way.” If the smartest people desire the freedom and flexibility to work remotely, the core agency extends this concept to the freedom and flexibility of what they’re working on and who they’re working with.
“There are companies that are finding new ways to work that allow people to set their own hours, have more flexibility, live wherever they want in the world. And they’re going to attract the best people in the world.”
– Matt Mullenweg
Why Should Clients Work with Core Agencies Over Traditional Agencies?
As stated previously, clients hire agencies because they think the agency can accomplish their goals. Having worked at larger and smaller agencies, I’ve seen that there is nothing a larger agency can do that a core agency couldn’t. I’ve seen a team of five accomplish what was assumed to be a team of ten. I’ve seen a team of three strategize, outline, and design huge web projects for significant publishing brands. The only time team size matters is when there’s a preconceived notion that team size is important and equals quality and ability. It doesn’t. Having the right people on the team matters. Having the best people on the team matters. A larger team simply means more people. Not necessarily better. Not necessarily smarter. Just more. True, the larger the team, the larger the odds that some of them will be awesome. But there’s the opposite as well… the larger the team, the larger the odds that some will not be awesome.
Clients want the best people to work on their projects. At larger agencies, they have little idea or control over who they’ll be working with specifically – it could be the team that pitched the work, the project could be handed off to another team, the agency might hire freelancers to work on the project, or any combination of all these. At core agencies, the core are the people that clients will be primarily interacting with. But core agencies will need to earn trust, and this will only be earned through successful engagements and references. There needs to be transparency on the resources they are working with. But to answer the question above with a question, why should clients trust traditional agencies when the future shows there’s so much not to trust?
So what is the super compelling reason that clients should hire core agencies over traditional agencies? I don’t think they necessarily have to hire a core agency. At this point, there are services that traditional agencies offer that core agencies don’t, one of the primary ones being scale. But clients are going to need options as more of the larger agencies close, as clients get tired of a constantly changing agency team that fails to meet their needs. And as more agencies fail, more talent will enter the talent pool, which will in turn strengthen the talent that core agencies can bring to the table.
Now, more than ever, there’s more than one way to “do a project.” Clients will find better solutions in core agencies as core agencies embrace the concepts of transparency, nimbleness, and the recognition as being an extension of the client marketing/web/publishing team. With core agencies, in the same way that the nucleus can bring in additional freelance atoms, the client molecule can pull in nuclei to be a part of their own team.
Seeing the Forest for the Trees
These ideas aren’t unique to me – economists, journalists, and agency naysayers have been forecasting this for weeks. Months. Years. Now I’m seeing it happen firsthand. Just last week I came across RSL+Crew… I love their positioning statement: We assemble the most talent-dense crew imaginable for each project. You get the best people, and just when you need them.
It’s an exciting and scary time! It’s seeing the big picture created from the details… seeing the forest for the trees. We can choose to do things the way we’ve always done them, or we can choose to do them differently. My future is choosing to do them differently.