Let’s take it as a given that talent — this means people, remember — is the biggest driver of creativity and effective marketing within agencies. It stands to reason that agencies need to hire the best talent if they expect to create the best work. But for companies that are all about creativity, they are remarkably uncreative about building new models to treat their talent better. (Here is a point of view on that.)

Before we talk about how to fix the problem, let’s get into more detail about how we got here. Why are agencies unable to hire and retain the best talent?

There are three overlapping forces: First, the traditional agency model is repulsive to talent, prioritizing cost-cutting and efficiency over creativity. Second, even if agencies wanted to hire back their lost flock, there is a looming global talent shortage that will affect “knowledge-intensive” jobs like those in marketing. And lastly, freelance or small agency life seems to be better suited to these folks anyway.

This is a steep hill for any agency still employing a traditional model.

Let’s get into it:

Clients are exploiting the current model through longer payment terms and increased project work rather than long-term relationships (Digiday). Startup and challenger agencies try to attract those clients by agreeing to absurd terms and undercutting on fees. Not to mention rise of the internal client agencies. Not to mention the incursion from publishers and platforms.

So it’s understandable that agencies find it hard to manage their bottom line. But rather than innovating on the model, they cut costs. They commoditize their own offering and box people in, all for the sake of efficiency.

The result is an environment that is actively inhospitable to talent of any sort. The work becomes about being efficient rather than about being creative. (Ironic, right?) Their talent is stifled. The best primary evidence of this is a report from Blueprint in 2019. Its first-person interviews with top talent about agency life are damning:

If you’re good at something, that’s what you’re supposed to be doing, cogs in a wheel. It’s hard, for people that work for me and a lot of people, to think out of the box. On one hand, it’s contradictory because people are told “we want you to be innovative and think about big ideas” and yet the system and the structure’s not really conducive to doing that. It’s easier if you don’t fight the system and you just do what is expected of you versus trying to do things out of the box or profit lanes or going into someone else’s P&L. It’s not really an easy transition to make.

And this one:

Because of the pressure on money, and shorttermism, the conversation becomes more about money than creative work. So there’s a dilution of the work. What frustrates me is there seems to be a lack of belief in the power of creativity as one of the core tenets for growth.

Perhaps needless to say, the pressure on the model is getting worse. Some 52,000 agency jobs in the United States will be lost through 2021 because of the current recession. Hiring has dropped to historic lows and CMOs are pessimistic about when or even whether the jobs will return. What’s more, Forrester reports that advances in technology like AI and automation will decrease the average number of employees at any given shop, to the tune of 11% of the agency work force lost by 2023.

In the aftermath, what sort of talent is going to be left at traditional agencies? We can safely assume that the conformists, the ones easily put in boxes, and the ones who prize efficiency will make up a sizable proportion of those left standing.

Here’s a hypothetical scenario: In another year or two, realizing they’re in a downward spiral, agency management teams will wake up. “This is crap!” they will exclaim. “Let’s hire back some of those mavericks and misfits!”

Even if this happy thought does occur to them, they are increasingly unlikely to be able to act on it.

Within the next decade, there will be a global shortage of talent. This is especially true for so-called “knowledge-intensive” jobs like most of those in marketing. A report by Korn Ferry, a global leader in staffing and recruiting, predicts that by 2030, “demand for skilled workers will outstrip supply, resulting in a global talent shortage of more than 85.2 million people” (The Global Talent Crunch).

This means that those of us who are responsible for hiring people to work at our agencies will have a harder time of it. It will be harder to find people of talent. Those who have the right skills — not something to take for granted, as current skill sets aren’t necessarily going to match jobs that are available in the future — will be in higher demand. Their stronger negotiating positions enable them to command higher salaries.

The higher salaries would, in turn, put even more pressure on the fee-based agency structure. And the downward spiral continues.

Even before the pandemic began, a sizable portion of the talent base saw the appeal of working for themselves. More than a third of the American workforce—some 50-odd million people—is already freelance by choice, an increase of ten million people over five years ago. When this survey by Upwork (quoted in Fast Company) was fielded in 2019, a full 40% of millennials planned to abandon their job to freelance in the next five years.

It’s no wonder. Silicon Valley has touted the benefits of gig work for years, and still hires them as a huge percentage of their work force. But the traditional agency model has a hard time making a profit when freelancers are in it. Freelance fees are higher than the cost for a full-time employee with equivalent experience. Already-thin margins just can’t be whittled down any further.

Not everyone fleeing the traditional agency model will freelance or start their own shop, of course. A former big-agency colleague just told me about a new job at one of the big tech companies, for example. But the trend is very much moving in that direction. There is so much energy there right now.

It’s clear that the talent problem in marketing is massive and not getting better. But amidst the darkness, there are glimmers of hope for the future. In the next post, we’ll take a look at interesting and inspiring business models that are challenging the traditional agency model by treating their talent better.

Until then… Send your colleagues some love, will you? They need it.