Analysis: Crippling cost of skills shortage

The Iris initiative was bullish, irreverent - and successful. There was a strong correlation between the applications and the agencies that were targeted, but Iris says the push also created a lot of word of mouth.

The agency's website had 100,000 hits over the course of the two-week campaign and as P&I was going to press, 100 people had fully completed the online application form, second interviews were under way and some posts had already been filled.

Yet if Iris's staff problems look as though they're being allayed, many other agencies are facing people and skills shortages that are putting significant strain on businesses, and potentially compromising client campaigns. A random straw poll of below-the-line shops, ranging from independents to those owned by media groups, revealed that four out of five was on the hunt for staff; the first three agencies called had 38 vacancies alone.

DEMAND OUTSTRIPPING SUPPLY

"It's definitely an employees' market at the moment - demand is outstripping supply and recruitment is an ongoing challenge for us as a business," says Trish Weener, managing director at Intelligent Marketing. "It's the senior account positions we struggle to fill - senior account manager upwards - rather than on creative. We've got eight positions vacant and we're lucky if we get one CV worth considering."

Weener, in line with many of her peers, places blame for the skills shortage at three doors: agencies, recruitment consultants and trade body the MCCA.

"My preference would be to grow our own people - the four account directors we've developed in-house are miles ahead of external recruits. And I accept that agencies have to take greater responsibility for training both on the job and investing in training courses. But it takes three or four years to go from a graduate recruit to a senior account manager, and we need senior people right now," she says.

The skills shortage certainly isn't a new phenomenon, as Clive Mishon, non-executive director of Kitcatt Nohr Alexander Shaw and marketing director of the ISP, points out. For him, agency life is simply less attractive than it used to be: "Twenty years ago, agency account directors were sitting opposite their clients having a nice lunch, with the keys to a sexy car, courtesy of the agency, in their pockets, and a fairly sizeable salary going into their bank accounts. Today, there's none of that. Working in an agency isn't glamorous anymore, and its not aspirational unless you work in a hot agency."

Certainly, agencies are having to peddle harder to make their margins, but the current demand for senior talent is being driven by buoyant client activity.

Over the summer, budget has been pushed away from advertising into marcoms, and general agency business practice is to win the work and then staff up to handle it.

"There are more projects kicking about," concurs Nick Rankin, managing director of Bd-Ntwk. "That's resulted in a scramble for staff, a consequence of which has been freelance rates going up, which has subsequently had an impact on staff salaries as people see freelancers earning more than them and asking for a pay rise. If an increase isn't forthcoming, then freelancing becomes an attractive option." But he says agencies have also seen senior people leave the sector altogether.

Rankin concedes that agencies are suffering from not having invested in graduates five or so years ago, and not having invested in their existing teams. But the resulting churn from lack of previous investment, he says, has given recruitment consultants a "certain power. You can see the opportunities for them here: there's the fee they get when you employ someone, and the fee they get every day you have a freelancer working with you."

Rankin echoes the feelings of many principals when he pinpoints the crux of the issue thus: "Recruitment consultants provide a service, but the cost of that service is crippling." And he believes this is where the MCCA should be pulling out the stops to help its members. "I accept that Ian Millner has a business to run, but he is an MCCA board member and I don't appreciate the tactic Iris used, especially when I'm looking to the MCCA to help me. And I do believe that the MCCA is best placed to do that, starting perhaps by negotiating a flat fee for members with a preferred list of recruitment consultants."

BEST PRACTICE

Scott Knox, MCCA managing director, admits the body has been approached by members. "We're investigating an incident where an agency asked a group of recruitment consultants into its offices, so the consultants could see what the agency was like and what its needs were, only to find the following day that one of the consultants was trying to headhunt the main part of its senior team."

Plans are being put into place to set up an MCCA HR group that will look at all areas of recruitment and training. "We need to get consensus across the board on the contents of a best-practice agreement, which we can get the MCCA's preferred list of recruitment consultants to work to, at a preferential rate, if that's what's best for members," says Knox.

But he also charges clients with part of the blame for the ongoing skills crisis: "If clients continue slashing agency margins, it will ultimately be to the long-term detriment of their brands - if agencies can't afford to keep ahead of the consumer, brands will suffer. So they should be asking their agencies: 'what's the ongoing development cost of your people to learn more that will develop my brand?' And that should be accounted for within client budgets." He believes the call to action with which the MCCA should lobby client bodies, including ISBA, is one which challenges clients to set aside budget to develop knowledge, both internally and within agencies, that benefits their brands.

All of which is very laudable for the future, but isn't helping agencies now.

For his part, Millner is unapologetic about his recruitment tactics: "Agencies are always headhunting people from other agencies, so at least this was an open way of doing that. And out of professional courtesy, I put the campaign to the MCCA board to get their views before it went on the streets. But fundamentally, it isn't the role of the MCCA to solve this problem."

Ultimately, he believes, agencies should take sole responsibility and be proactive in solving the people issue. "We all know there isn't enough talent in the industry, so what are other agencies doing about it? Iris invests time and money in working with universities to bring good talent into our sector, in the belief that really good talent is the number one enabler of growth and leads to really good clients, not the other way around. We don't win the work and then staff up, because clients don't buy that."

The agency, through its head of people Helen Wright, also includes a 360-degree review scheme for its staff, and last year put 40 per cent of its profits into bonuses as part of its retention policy.

If this cloud has a silver lining, it is that other agencies, too, are beginning to invest in graduate and retention schemes. Bd-Ntwk's Rankin aims to make his agency "an employer of choice" with a graduate programme and a retention scheme that includes a career development structure; Intelligent Marketing's Weener also has a graduate scheme and is considering revamping its benefits package.

Despite all this, for the present, it looks as if Iris and its rivals will have to carry on being cute when it comes to recruitment.