Back in October last year, Strategy reported more clients in-housing than any time in last decade. Driven by the lure of perceived nimbleness and cost savings, the trend toward in-housing seems to have reached fever pitch with marketers either going all-in or creating hybrid working relationships between their teams and incumbents.

So is it working?  And at what point should marketers be calling a timeout on in-housing and asking whether their quest for ‘cheaper, faster’ isn’t creating a host of new problems in its wake?

I’d like to suggest the time is absolutely now and marketers should be giving themselves a really good shake to wake themselves out of the delusional stupor that in-housing has created.  Because as promising as in-housing efficiencies may have seemed when they were initiated, not all in-housing solutions are created equal and some marketers could be in for some unpleasant surprises if they’re not prepared.

“But wait!  Look how much money we’re saving…” we hear you cry.  Well, OK let’s do some basic math here:

Let’s say you’ve insourced five agency resources at $100,000 each, instead of the million dollars – adding in overhead and profit – you’d be paying for those same five resources at your agency. Pretty good, right? 

Well, let’s not forget your own overhead and what happens when those resources get bored working on the same business day-in, day-out with no room for advancement and decided to quit.  You replace them, with more drones doing the same thing until they get bored and you start again.  Your job as head of marketing has quietly shifted from what you’re really good at – focusing on your business and managing your brand – to what you never wanted to do in the first place, building and managing your internal agency, tripping over endless process minefields, production conundrums, training needs, mentorship demands and likely as not, a more junior team than you had at your agency.

So, back to the math. This means we now add in (conservatively) half of your salary to sort all that out and (if you have the autonomy to add headcount) resources to manage the resources you’ve brought in-house. Chances are none of the above want to work in a (I’m talking pre-pandemic here) bank tower / industrial park with people who don’t understand what they do, and you’re now having to look for separate office space to keep them happy.

On the same day this whole thing reaches its inevitable, nightmarish crescendo of ‘what the hell have I done…’ your CEO sends you a note asking, “hey what’s the ROI on our marketing efforts this year because our sales are down?” or (worse, but unfortunately more likely), “why is our competitor’s advertising so much better than ours…?”   

Even if it’s not quite that bad yet, the point is, running an in-house agency takes work and will ultimately be judged on its ability to help drive your business, not just save money based on what you’re paying your agency today. Next year your external agency costs will have been forgotten and you’ll be the one on the hook for a cost centre that looks more like an expensive, leaky bucket.

So whether you’re contemplating an in-housing solution or managing one today,  I believe marketers should be watching for three red flags that are likely indicators an in-house agency solution is – or shortly will be – asking for trouble:

Lack of vision

Marketers must be able to articulate a clear vision for their in-house agency in order to align internal resources and stakeholders to their purpose.  That vision must include clearly defined rules of engagement to avoid chaos from inter-departmental asks and expectation.  If you’re left with an in-house agency that’s essentially churning out product or feature advertising dressed it up as brand leadership – trouble will undoubtedly follow as results fail to materialize.

Talent drain

Finding ways to attract – and retain – the best talent is pivotal to the success of your in-house efforts – regardless of whether you’re developing social content, managing a programmatic media enterprise, or have ambitions for larger brand advertising projects.  If you don’t have a strategy to retain your resources by constantly giving them an opportunity to draw on fresh initiatives that will  keep them engaged, you’ll have a revolving door of talent that will never match what you can find at an agency.  

Management overload

Marketers must accept that managing in-house agency resources is anything but ‘set it and forget it’.  Building fully-loaded P&Ls, honing workflows, managing technical capabilities and grooming talent can be hugely time consuming but are the foundation on which an agency has to stand.

Where marketers have chosen hybrid models, there must be clear demarcation points between in-house and external agency responsibilities. Without them, neither will be able to focus or be held accountable for their work and corresponding results.

Where creative resources are involved, teams must find ways to have their work critiqued and honed objectively and not be allowed to ‘mark their own homework’.  Enabling creative resources to become their own clients with no checkpoints is otherwise one of the surest ways for brands to lose their way.

The bottom line with in-house agencies is, think carefully before you start or know when to draw the line if it’s not a fit with your organization. Conceptually they may look good and the lure of immediate savings can be irresistible, but the reality is they take a huge amount of work to run successfully, talent is often difficult to find and even harder to retain, and by the time results are in, the CMO is – or shortly will be – out.

An edited version of this article first appeared in Strategy on February 9, 2021.

It occurred to me as we were writing a client proposal recently, that our usual approach to creating robust methodologies is to define the ideal final outcome first, and then work backwards. That way we’ve always got something to work towards, ensuring ideas and concepts ladder-up to the ideal end-state.

So it occurs to me this week to take the same approach and share the ideal end-state in an agency pitch process, by providing five key hallmarks that are helpful to aim for when conducting an agency pitch. Of course this will vary depending on what business you’re in, the reasons for your search and perhaps the questions you ask during your process, but here are five that can really set your process apart:

You learned as much about yourself and your own organization as you did about the agencies you reviewed

Because agency relationships are dependent on the clients they serve, they’re as much about chemistry and fit with your own organization as they are about the agencies themselves. If you’ve asked the right questions and really taken time to look at the pros and cons of each agency, while stacking them up against your incumbent agency’s performance, you should glean some really good insight into your own organization and you work as a team.

Your eyes were opened to what the market really has to offer

Our business is moving so quickly and agency models evolving so rapidly, that unless you’re in the unique position of having gone through an agency search in the last six months or so, an agency pitch is going to be an eye opener. In my view, every pitch should have a seamless connection between brand and digital offerings, and how the market has evolved to meet that connection continues to be a fascinating area of our business.

Feedback was consistent

If a pitch has gone well, your feedback should be reasonably consistent across all stakeholders. In addition to your internal stakeholders, consider those agencies that were rejected along the way. Where possible, we like to take time to give feedback to agencies not selected personally. If we’ve done our job well, the most common thing we hear after giving feedback is, “that’s a fair comment…”. It underscores the evaluation process was thoughtful and accurate, and reinforces decisions that were made along the way.

Your team is and was aligned

Sounds easy, but we’ve seen emotions get seriously high when evaluating agency pitches. The best way to get that alignment is to take extra time to ensure stakeholders were listened to, issues were addressed and your evaluation criteria clearly defined before you went to market for an agency. Not taking time to really define the kind of agency you’re looking for or indeed your real evaluation criteria, are primary issues preventing team alignment.

Your process was fair

No matter what kind of agency you’re looking for or whatever the circumstances, you need to ensure your agency search process is fair and transparent. Making sure agencies understand both the process they’re following, together with the evaluation criteria by which they’ll be judged are key factors in ensuring fairness and transparency. Choosing an empowered search team and holding them to the highest standards of governance during the process will also give you confidence your process was beyond reproach.

These are just some of the hallmarks to aspire to as you prepare for an agency search process. If you’re in doubt or the process seems overly complex, employ the services of a professional agency search consultant to help you and your team set yourselves up for success.