It was my favourite quote of last week, and regular readers will know how much I would like to see the infamous fee system (resource packages/FTEs) bite the dust – if only we can come up with something fairer and better. The fee system not only encourages inefficiency. It also has nothing to do with either deliverables or outcomes. It is purely an input measure, and encourages agencies to use bigger teams, at higher percentage utilisation, for longer periods – for no intrinsic benefit.

Intellectual heroes like Tim Williams of Ignition Group out of Salt Lake City (www.ignitiongroup.com) have been beavering away for years now, looking for new solutions, alongside innovative clients, agencies, and indeed consultants like ourselves.

But the quotation in the headline did not come from adland. It was from Lord Neuberger, the Master of the Rolls (Britain’s second most senior judge), and he was talking about solicitors. He said, ‘Businesses that base their charges simply on costs do not deserve to succeed, or even survive……Rather than treating time as the commodity which is being sold, we should be adopting an approach where skill and experience are the commodities which are sold’. And of course he is right – in the generality, and about any industry, like ad agencies, which was misguided enough to ape the solicitor’s business model.

Remuneration is back in the headlines – but for different reasons. The 7th May edition of Advertising Age has a disturbing article by Jack Neff on “nonworking media spending”, variously known as non-productive marketing spending. It is apparently a scourge which mighty advertisers like Unilever and PepsiCo are committed to reduce in favour of “working media”. The wasteful stuff is creative development and content creation. Working media spending is the money spent to run that content.

“Experts” have calculated that the target maximum for so-called nonworking media should be around 15%. To show how scientifically this figure has been arrived at, Mr Neff was told that it related to the old 15% commission level!

So the very companies that have been trumpeting the need for top level strategic and creative input from their agencies are now allegedly trying to reduce creative and content costs and devote the saving to media and other delivery mechanisms. At the zenith of the space era, this would have meant NASA spending more on rockets and less on the satellites and space stations they were propelling outside the earth’s atmosphere. Misguided lunacy, in other words.

The splendidly named Jordan Bitterman, SVP Social Media Platforms at Digitas, says that so far from reducing nonworking media to 15%, ambitious companies in the digital arena should be looking at raising it to 50%, because earned media, followed by owned media consistently drives purchasing well ahead of paid media.

In a related development, several heavy-hitting companies (Miller Coors, Sprint, Bank of America and GM) have recently moved to a dedicated holding company model. Why? Was it for greater strategic advantage and creative firepower? I think not. Industry commentators are convinced it has been to drive even tougher remuneration deals. I bet they are right.

To return to the top of this piece, the wretched fee system has a lot to answer for. As long as charging for inputs is the default setting, the agency world is super-vulnerable. Lord Neuberger is even more on the ball than he imagined.

There’s an article in the new issue of Ad Age (5th December) “Tightened policies on conflicts box in agencies, clients”.

I was surprised, frankly, to hear that the situation in the US has become tighter. My experience in the UK and internationally has been the opposite. I think that the old paranoia about conflict (on both sides) has significantly reduced. There are a number of factors at work to explain this:

1. There are certain sectors – pharmaceuticals, travel, music, financial services – where lack of current market experience is a positive disadvantage. It was a real shock to learn that it was Marriott’s sensitivity about pitching agencies that gave rise to the story
2. Far more assignments are now effectively projects, or short term. It makes little sense for either clients or agencies to become too precious if the job on offer is not a long term alignment
3. Most of the big FMCG players have become enlightened enough not to worry too much about potential conflicts unless they are in the same product class or close sector
4. Senior marketers now seem to be to be more open about their strategies in this digital age. Once you start engaging consumers in dialogue, it is hard to be secretive about the end game
5. Media agencies – largely because there are far fewer major players – have always managed conflict. Essentially their situation is not too different from that of the magic circle lawyers and leading auditing firms.
6. If it’s cool for media agencies to erect Chinese walls, why wouldn’t it work on the creative side of the equation? The big groups run a multi-agency strategy to allow them to cover a wider spread of clients, and I see absolutely no sign of client challenge to that. Groups are allowed to handle competitors, provided they keep them in different – albeit sister – shops
7. Most important of all, the increasingly short-lived span of client/agency relationships makes it impractical for agencies to be too self-denying in the area of conflict. Nor can I see any reason why clients – who are the moving force behind account shifts – would expect any greater degree of siloing than has been the industry practice over the last two decades

Perhaps the US market really is going in a different direction. Or maybe Ad Age has just got it wrong.