To In-House or Not to In-House: Inside the Mind of an Agency Search Consultant

So, why the sudden shift from outsourcing to bringing work in-house?  To get an insider's perspective, I asked leading agency search consultant and President of AAR Partners, Lisa Colantuono (pictured above), to explain what she is seeing and hearing about the advantages and disadvantages of bringing work in-house.

Erynn LaFlamme:  What benefits do in-house agencies have that external agencies lack?

Lisa Colantuono:  This really depends on who you are asking.  If you're asking the employees themselves, they might say better work hours and less of a grind or the fact that there are potentially fewer approval processes.  If you're asking an executive, they'd probably tell you it's more cost-effective and there is a 100% focus on the brand.

LaFlamme:  With cost-effectiveness being said to be the primary benefit of moving agency services in-house, are brands actually saving much after calculating the cost of people, equipment and training?

Colantuono:  The truth is, a typical brand corporation doesn't have the infrastructure to truly run an in-house agency.  There are multiple and increasing layers needed to properly communicate cross-channel accounting for complexities among content, production, digital and more.  Plus, what will the brand do if advertising goes dark for a period of time?  While an external agency has the ability to halt fees, an in-house agency has continued costs.  In addition, agencies have the ability to get best-in-class expertise by taking percentages of time from the best people for the brand's needs.  Agencies also get efficiencies on resources and tools since they're purchasing needed services in bulk and/or consistently.

LaFlamme:  A major positive for brands bringing work in-house is that they eliminate the learning curve and have an abundance of institutional knowledge.  Is this a benefit for every brand that wishes to build an in-house agency?

Colantuono:  Unfortunately, no.  Unless the internal advertising team consists of people who have worked at the company for a number of years, there will still be a learning curve.  I understand wanting to have 100% focus on the brand, but I also think being too close to the brand has the ability to hinder creativity.  Some of the best ideas come from "out of the box" thinking, but one needs to be outside of the box to benefit from it

LaFlamme:  What does an agency bring to the table that in-house agencies seem to struggle with?

Colantuono:  Agencies have the ability to cross-reference experiences from other brands, categories and especially consumer behaviors and purchase journeys; they can then apply those learned experiences to add value to their other clients.  When you work in-house and are solely focused on the brand at hand, you don't get the chance to see what other brands are doing and you don't have anyone else's insights either.

Talent is also a tough one for in-house agencies.  I've never seen an agency creative run to the client side of the business.  Why?  Because they would be bored out of their minds.  They want to keep their creative juices flowing by having their hands deep in a diverse portfolio of work.

LaFlamme:  In your opinion, why are so many marketers bringing their work in-house?

Colantuono:  Transparency issues have caused marketers to pull accounts in-house. Every agency has an ethical responsibility for having an "open book" policy that clearly explains operations and finances, and this has been abused in the past.

LaFlamme:  How are marketers supposed to forgive these transparency issues?

Colantuono:  Well, to be honest, most agencies are not unethical, so I don't think marketers should be looking at every agency with a crooked eye. Instead of throwing the idea of an agency out the window, I think marketers just need to hold agencies more accountable.  I suggest they establish simple financial relationships with transparent principles and a set of guidelines backed by a third-party monitoring service.  This will easily exemplify that an agency is being ethical and transparent, and marketers can still benefit from the external and diverse expertise agencies bring to the table.

LaFlamme:  There is somewhat of an "us vs. them" stigma going on against in-house versus external agencies.  Why do you think this is?

Colantuono:  There have always been in-house agencies and always will be … in fact, it is a better set up for some brands.  But no man is an island and instead of thinking of "us vs. them," I think agencies should embrace the shift and not fight it.  They can offer consulting services or project work to help fill the void for in-house agencies.  With that said, it may even be more rewarding and lucrative for agencies. 

LaFlamme:  According to Forrester Research,64% of corporate Americahas in-house agencies.  What are agencies doing to compete with this increasing number and where is their opportunity to stay relevant?

Colantuono:  As mentioned, agencies should embrace project work.  In fact, agencies should reach out to marketers with in-house agencies offering their production services or ideation services to help them.  An agency never knows if a marketer is having a tough time with its in-house agency, which could turn into something more if they reach out at the right time.  I recently heard a story in which the marketer called in a consultant to help fix its in-house agency ecosystem, which wasn't being run effectively or efficiently whatsoever!

LaFlamme:  As a search consultant, has the rise of in-house changed the way you do business at all?

Colantuono:  I've done more project-oriented reviews in the past year and I believe that will be more common for a while.  I've also seen this rise of the in-house agencies as a cyclical pattern over the past two decades.  In time, you will see the shift from in-house to external again.

If you are a marketer, there will be pros and cons of outsourcing versus bringing work in-house.  When making a decision, keep Lisa's thoughts in mind, as she has been closely working with both brands and agencies for over 18 years.  Who knows, maybe you could get the best of both worlds and decide to do both!

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