At best, ‘Finder’s fee’ is a discount; at worst a bribe. Either way, the work pays for it.
By Gokul Krishnamoorthy
Here’s a confession. I usually avoid getting into situations where a client wants guidance in engaging agencies – of any marketing communications kind. I was expected to be a neutral observer of the marcom industry in past assignments, and am expecting myself to be one as a neutral observer of brand campaigns now.
But when someone genuinely needed counsel recently, I couldn’t refuse. I had to go a little beyond the usual approach of giving suggestions and stepping back. After the first round of discussion, one of the agencies called to keep me posted. They also made me an offer which wasn’t entirely unusual. If selected, they would offer me a certain percentage of their annual retainer. It was unusual though, to hear it in the midst of the pitch process. Especially when one was acting as an advisor to the client, not as an agent for the agency.
I had heard them before. From agencies in one city wanting to get clients in another, from a new kid on the block trying to break into the big league, from anyone hungry for new business. There are a few notable exceptions, I am told. And that even some of them make exceptions in creative ways.
A ‘Finder’s fee’ isn’t new in agency circuits and it has grown to become the accepted norm. An old agency hand says it used to be done discreetly earlier, but is now accepted formally with the ‘Finder’ billing the agency for his/her services. And that service, is to find business.
So what’s wrong with an agency outsourcing its business development function? And will this ‘normal’ rise or fall with the Covid-19 crisis and attendant downturn?
The Problem With The ‘Norm’
To start with, it duplicates the job of the talent inside the agency. There ends the commonality. Many of the outsourced new business deals do not involve skills other than making the introduction. Some go further to helping the conversion happen – but not with strategic inputs. The agency’s culture and point of view are not reflected in the person making the first impression. And that person might be pitching more than one agency, which is worse.
It is not just the finder, but in some cases the client who engages the finder is also ‘incentivized’. Where is this coming from? And what can it lead to?
Look at some ‘norms’ that are still in place in media buying. The top rung of agencies and clients with robust practices may now be ring-fenced from certain practices, but there is a lot of money that flows into media (TV, print, OOH, radio, production, events, digital, the works) through other channels. A former media seller tells me of the target-based ‘incentives’ some agencies ‘earn’, with or without the knowledge of the clients whose money they spend. A media buyer adds that they will have to ensure that the bills are cleared on time, to have that carrot. In some cases, a representative at the client end is also ‘incentivised.’ I assumed these must be just the folks right at the top. I was mistaken.
Since we are on media, I am tempted to delve into media companies and ad sales intermediaries paying a bomb to fly client representatives to conferences, or other indulgences, in fancy locations. Call it entertainment or education; it has an uncanny similarity to ‘incentive.’
But let’s stay away from media or film or live event production costs. Each of those requires a thesis by itself. Suffices to establish that the culture of ‘incentives’ is not alien to marcom-land or client-land.
When the same product starts costing more, at some point one may start consuming less of it. Especially in a downturn.
Spiral Of Diminishing Returns
A former agency head was once asked by a senior client-side executive for a favour. It was perfectly legitimate. The client was setting up a small in-house team and wanted a visualizer. Since the agency head would know talent in the space, he was asked. A candidate he introduced was asked just one question: how much did he want? The candidate asked for Rs. 75,000 per month. He was told he would be paid Rs 1,00,000 per month. The excess needed to go to the person who hired him. This is not based on a true story. It is one.
But for now let us assume that the client is beyond corruption. When the finder takes home a cut, of say 10 per cent, that is money meant for the agency. So how will the agency offset this cost? By adding to the costs under other heads billed to the client, or by cutting costs incurred on the client. In either case, the client organization pays. In case the agency absorbs the cost, it suffers.
The advertising industry has never missed an opportunity to point out diminishing margins (other marcom industries don’t get to talk much). They also point out how they are unable to pay for good talent now, especially at the entry level. Could making less and ‘incentivising’ more help on that front? I doubt it.
A few ‘Mad Men’ I have had the privilege of meeting still speak about the era of leisurely lunches with clients. Of mutual respect. Of an equal relationship. That form of entertaining clients is quite different from paying them – or an intermediary – a commission to get their business.
We could look at this ‘incentive’ in two ways. At best it is a discount, at worst a bribe. Either way, the work ends up paying for it. Even if there is no undue influence, it is the client organization that is affected and must hence start investing in understanding its ecosystem of partners rather than rely on quick-fixes and fixers. Leaving it to the seller of wares to incentivize intermediaries is not the way to source the best talent there is.
They say there are many positives to come out of the current pandemic. Will it lead to lesser engagement of ‘finders’ or more? I fear that things may get worse before they get better.
(The author is an independent content consultant, Founding Editor of StimulusMag.com and Founder of ClutterCutters.in. Feedback: email@example.com)