Ad Age recently published the results of discussions it conducted among agency executives, freelancers and staffing companies with regard to the growth in agency utilization of freelance talent. If you’re an advertiser their findings may serve as a wake-up call for you.
First and foremost, we understand the fast-paced nature of the advertising marketplace and the important role that variable labor plays in helping agencies meet short-term labor demands. That is not the issue. What is of concern is the growing reliance on independent contractors versus permanent staffers by ad agency executives. Ad Age coined the term “permalancers” to reflect this trend of engaging freelancers for extended periods of time, in excess of 100 days.
Why the concern? Consider Ad Age’s primary conclusion on their investigation into this practice, that agencies “are not attracting and managing freelancers appropriately.” This perspective is supported by an executive of Redscout Ventures a division of MDC who was quoted in the Ad Age article stating that; “our current system of sourcing freelancers is incredibly inefficient.” Sourcing and managing of freelance talent aside, there are numerous risks and costs to an advertiser that are often not transparent. For example, do advertisers even know which agency representatives serving on their account are permanent staffers or freelancers? Is there an established procedure that defines how the advertiser is being billed for freelance time (i.e. pass through cost or incorporated into agency fee/ direct labor cost calculations)? What is the impact on agency time-of-staff investment tied to the learning curve associated with rotating in freelance help? Does this practice impact the quality of the work or the level of re-dos?
At Advertising Audit & Risk Management we conduct both contract compliance audits and agency fee reconciliations which consistently highlight the financial impact and risks confronting advertisers regarding the lack of controls and limited transparency around an agency’s use of freelance talent. Audit findings have identified risks ranging from intellectual property ownership to violations of the non-compete clause to inadequate time tracking of freelance talent. Unbridled, an agency’s use of freelance talent shifts the legal and financial risks associated with the advertising industry’s lack of sufficient controls in this area from the agency to the advertiser.
There are mechanisms which an advertiser can implement to mitigate this risk without affecting their agency partners’ ability to tap into variable talent pools to supplement the account team if and when needed. Advertisers interested in learning more about how to assess the prevalence of the use of freelance talent by their agencies and what can be done to introduce the requisite protections can contact Don Parsons, Principal at AARM for a complimentary consultation at; firstname.lastname@example.org. For more on this issue, read the article; “Freelancers’ Stock Rises on Madison Avenue” in Ad Age.