Sustainability, compensation and culture: 4As looks into the 2022 crystal ball

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The 4As annual outlook report predicts the big trends that will shape an industry in flux.

Agencies are masters at keeping up with change.

But in 2022 they’ll be faced with more pressure than ever to adapt to a variety of forces reshaping the landscape, according to the 4As 2022 Outlook Report, released Tuesday.

In addition to attracting and retaining talent amid “The Great Resignation,” agencies must embrace the fact that a full return to normal may not be in the cards, given ongoing surges of COVID-19, and start rebuilding culture and connection in a hybrid workplace.

This could be the year agencies and clients finally evolve their compensation frameworks and embrace what Marla Kaplowitz, CEO of the 4As, calls “value-based compensation.”

Agencies will also have to tackle big-picture business challenges, such as sustainability and online privacy regulation, as they head into 2022.

The big takeaway? “Let’s not assume everything has to continue the way it’s been,” Kaplowitz said. “There are always opportunities to make things better.”

Sustainability gets real

This year, US agencies are in for a reckoning on sustainability. There will be pressure to get internal environmental policies in order while also helping clients craft sustainability communications that avoid greenwashing.

To support that work, the 4As is launching a sustainability taskforce, with members from holding companies and independents, to identify regulatory changes in the U.S. and educate the industry on the issue. Kaplowitz predicts that sustainability disclosures will become a common feature in client reviews this year.

The 4As is also launching AdGreen, an initiative from the U.K. Ad Association to reduce the environmental impacts of production, in the U.S. in 2022.

But the issue of sustainability can easily get tricky for agencies, especially those that support big businesses operating in fossil fuels. Look no further than PR firm Edelman, which was recently attacked by celebrities and activists for working with fossil fuel clients.

“It's easy to point fingers, but when you get into the logistics, the important thing is to educate and expand the understanding of what this means and what can be done,” Kaplowitz said.

The 4As hasn’t yet committed to a broad industry initiative like Ad Net Zero in the U.K., opting to focus specifically on what the U.S. agency community wants to engage in.

“I don't want pledges,” Kaplowitz said. “I want action.”

Agencies and marketers address legacy pain points

Is 2022 also the year agencies and clients finally address pain points around pitching and compensation models?

The 4As is working with the Association of National Advertisers (ANA) to reconsider and modernize both the pitching process by identifying pain points and simplifying the agency search process. One idea, for instance, is to create a database of information about 4As members so agencies don’t have to fill out repetitive RFIs for every new pitch.

“There is a recognition that the process is broken,” Kaplowitz said.

As for compensation, the 4As and the ANA are also working together to evaluate value-based compensation models in an effort to end the antiquated FTE model, which many agencies have already moved away from, Kaplowitz said.

Value-based models will look different for each client but will measure things like outcomes and performance vs. how many hours staffers log on an account.

“People work at different speeds, levels of productivity and output,” Kaplowitz said. “Let's think about the value the agency is producing and assign a monetary value to that.”

The challenge, of course, will be to get client procurement teams on board, which are focused on showing year-over-year savings with agency relationships.

Privacy becomes a patchwork

As states continue to create their own online privacy laws, the landscape could get complex for agencies very quickly.

The 4As and the ANA have been lobbying for a federal privacy law for years, but a state-led approach seems more likely as Congress focuses on other issues. Colorado and Virginia launched their own proposals in the last year.

Working hand in hand with the ANA and the IAB, the 4As wants to ensure state privacy laws don’t deviate significantly from each other to minimize complexities for agencies and businesses, Kaplowitz said.

“If there is consistency, it will be easier for not just companies but also consumers to understand what they're doing,” she said.

Office culture goes hybrid

Agencies used to be all about foosball tables and beers on tap. And for the past two years, agency leaders have been rallying to get people back together in person to create the “magic” they claim can only happen in a room.

But after both the Delta and Omicron variants of COVID shocked the country and delayed big office return plans yet again, the 4As advises agencies to lean into flexibility.

“The future of work is very much with us,” Kaplowitz said. “When do you recognize this is the new reality and how do you evolve the way you work and your culture?”

On the culture front, agencies must rediscover what they stand for and figure out how to maintain it without the physical four walls of an office. Many have given up their office spaces altogether, while others are reimagining spaces to be more collaborative.

The talent crunch continues

Agencies are dealing with a talent crisis that will extend into 2022.

The 4As is working with its members on retention strategies with a big focus on training. For instance, the trade body encourages agencies to embrace learning and development strategies such as micro-learning plans with workshops and open discussions.

DE&I needs to continue to be a holistic business focus in 2022, and leaning into sustainability and purpose can help agencies attract younger talent.

The 4As is also helping its members map out the talent journey to create more retention opportunities. And it’s encouraging agencies to formalize their remote work policies for good to minimize uncertainty, while looking outside the industry for fresh talent.

“We have to stop playing musical chairs and moving people from one agency to another,” Kaplowitz said. “There are a lot of creative businesses out there.”

As the talent crunch continues and cost of living increases, agencies are already being hit with massive salary inflation. This will cause them to price services and drive operations differently, while also pushing them to embrace automation for rote agency tasks.

“It will be challenging to compete if people continue to throw money at the problem,” Kaplowitz said. “If pricing keeps ratcheting up, where is that money going to be found? What are you cutting back on?”

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