4A’s Marla Kaplowitz on 3 ways agencies can navigate the uncertain economy

Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure.”

This year, many organizations have in one way or another contemplated how to prepare their business for broader economic changes, including downturns. According to Digiday+ Research, 53% of agencies think a recession will occur in the next six months, and 66% think one will occur in the next year. The American Association of Advertising Agencies president and CEO Marla Kaplowitz has been preaching preparedness with constituent agencies, media and otherwise — from how to retain talent to honing their financial acumen.

Call it what you will — economic uncertainty, economic downtown — or as Kaplowitz refers to it, the “R” word. With a potential recession still on the table, the 4A’s leader spoke with Digiday about her best advice in talent, business development and finance for agencies in the current economy.

This is an important time to actually be investing in talent.
Marla Kaplowitz, president and CEO, American Association of Advertising Agencies

In terms of the business growth and financial knowledge, Kaplowitz argued that agencies should keep investing in business development as well as tools such as automation, even in a slowdown. On the financial side, there is also a lot that agencies can sharpen during this time — from diversifying client rosters to having a screening model for pitches.

“If we go back to that 2008, 2009 recession, resilient agencies … did all of these things,” she said. “They really focused on how to protect their talent, protect their clients, but also look at what was new and next and make sure they invested in the appropriate way.”

This interview has been edited for space and clarity. 

What challenges are agencies facing on the talent side?

As it relates to talent, we know that when there is an economic downturn, agencies can start pulling back on discretionary expenses, like training and development. We are really encouraging agencies not to do that, that this is an important time to actually be investing in talent — especially now, given what has happened in the past couple of years: the shift to hybrid work, the intensity of the past couple of years, as well as the fact that there’s been a lot more pressure because there was a talent shortage.

Now is the time to really make sure that you are not only investing in talent, but investing in people who have been promoted into managerial roles and need that training. People are looking for companies that are going to offer them career pathing opportunities that are going to invest in them not just in the short term, but the long term. And that’s actually why we’ve really changed a number of [4A’s] learning and development offerings. For example, we launched something called team leadership certification for managers that has been very popular, because people don’t have time to train.

So how can agencies improve talent retention and recruitment?

You have to make sure that you are investing in them, whether that’s their salary, but also making sure you have strong benefits for the employees and making sure that it’s not only fair, but competitive. Many agencies are doing pay equity analyses to ensure that they have the right approach. We see a lot of members augmenting their parental leave policies, for example, and making sure that they’re providing new offerings for their employees. Making sure that leaders know that by investing in their talent, they’re going to actually reap the rewards of that through greater retention and loyalty. And that’s going to be incredibly helpful, especially if we are going through a really challenging time and … the forecast is still a bit uncertain right now.

What can agencies do on business development to prepare for a downturn?

I know that seems very obvious, but sometimes [agencies] just need to be reminded that they need to maintain a diversified client roster. We tell them to think of it like an investment portfolio. … You don’t want to be saturated in any way. We also remind agencies that as they are looking at new business opportunities — and we know that’s the lifeblood of any agency — they really need to vet those opportunities carefully and make sure that they [are] looking at the category that the particular brand does and making sure that they have each category experience within the agency, or they have a very unique perspective or building idea for that brand. They know that they have the right kind of relationship also with the key decision maker as they accept that.

Automation is so important right now, as well as sustainability.
Marla Kaplowitz

We also believe that agencies that don’t have a screening model already should absolutely develop one, because they may be dealing with a situation where they have scarce resources. They’re not going to have the ability to potentially get involved with as many pitches as they typically would have in the past. Automation is so important right now, as well as sustainability. We think it’s important to remind agencies that there are automation tactics that they can use to not only help them with potential talent gaps, help them increase accuracy, but it also allows the ability to free up time for people to focus on other areas that can add greater strategic value to that business growth and development.

How about an agency’s financial operations?

Agency operations is an area that tends to be under-appreciated and ignored. While it may seem obvious, it’s so important to remind agencies of the opportunities they have to eliminate discretionary expenses and focus on those related to how you’re going to keep your clients happy — client retention, client satisfaction, employee retention and motivation. And then be very laser focused on business development. We remind agencies to avoid any sort of long-term financial commitments, to keep a close eye on their business, their accounts receivable, their cash flow.

One of the more challenging aspects when we hit economic uncertainty is that marketers and brands get a bit brazen about asking for extended payment terms. It’s really unfortunate, and you see costs going up for everybody when someone is trying to push that — and smaller agencies really can’t handle it. It’s not a good way to do business if you want to truly have a partnership and be in it together. Agencies should reconsider the amount of new business pitches they have, and we also want to make sure that they are bringing current clients unsolicited new business building ideas. We think that’s an opportunity from a consulting standpoint, to address areas where they may be struggling.

What keeps you up at night?

What worries me is when marketers and brands don’t value agencies the way that they should, and treat them like a partner versus a vendor. And that’s when payment terms come up. That’s just not how you should be treating them if you want them to really be partnering with you. I very strongly believe in the power of creativity and the power of an external perspective with a breadth of understanding that has incredible talent. There’s a very unique type of people in agencies. It’s not for everyone. It’s very fast paced. I love having… people that are very entrepreneurial, creative and love to figure it out. So I really want to make sure that agencies get the respect that they deserve.

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