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Intellectual capital: In the line of fire?

By , agencyfaqs! | In | September 09, 2002
With margins under immense pressure, training programmes in agencies have taken a backseat. A look at the long-term implications of such cutbacks


Late one evening some two months ago, a client services director with a national-level agency was packing his bags for a junket to picturesque Kumarakom, Kerala, when he received a call from his immediate superior informing him that the trip had been called off - indefinitely.

The CSD doesn't rue the fact that he missed out on the rice-boats and the placid backwaters. What he does grudge is the missed opportunity to hone his professional skills. "This was the second training programme I was supposed to attend that has been cancelled this year," he sighs. "I joined this place in the hope that I would be exposed to new learnings, new ways of doing things, so that I could give better value. You can imagine my disappointment."

If you're still wondering why that particular training session - and the one before it - was scrapped, you're either not in advertising, or you're one of the lucky few to be spared the vagaries of the downturn.

It's got to do with agencies cutting costs, plain and simple. At a time when margins are under immense pressure, and big clients are spending less (and paying even lesser), agencies, in this scramble to meet the numbers, are doing everything to keep a lid on costs. A lot of this cost-cutting is justified, even desirable. But when it comes to investing in intellectual capital, many question the wisdom of cutting costs. After all, as everyone keeps reiterating, this is a 'people business'.

"I certainly think training has taken a backseat as the budget allocated for this is being cut," says Piyush Pandey, group president & national creative director, O&M. "This is worrying because we have a lot of talent coming into this industry from all over the place. When you have people from so many different backgrounds coming in, training becomes critical if you are to achieve professional standards." Rahul Kansal, deputy managing director, Leo Burnett India, agrees that on the whole, there has been a cutback, although he adds that Burnett has actually up-scaled its training budget this year. "When push comes to shove, I think agencies look at training as dispensable."

A tossup between the "urgent and the important" is how Rajiv Agarwal, country manager, rmg david, looks at it. "Not investing in intellectual capital has always been an industry problem," he says. "However, in times such as these, agencies are so busy fire fighting and trying to meet the quarterly targets, they hardly think of the long-term. We certainly aren't investing as much as we should."

For the agency, the implications of not investing in talent are far-reaching. Some are obvious, some not so. "Training basically serves two purposes," Kansal points out. "One is, naturally, skill enhancement. The second is that during the programme, it creates a bonding within the organization. It boosts employee morale, motivates people and helps create a goal in line with the agency thinking." Ergo, less training means a toll on employee satisfaction. "Our business depends entirely on intellectual capital, and it would be foolhardy to reduce investment or let it affect morale," insists Kurien Mathews, director, TBWAAnthem.

Unfortunately, it's not enough for agencies alone to realize the need for investments of this nature. Clients too have to realize this, and make allowances through better agency remuneration. "Clients must see the agency as an extension of their organizations and pay agencies better," says Kaushik Roy, executive director, Mudra Communications. "After all, better talent means better solutions." It can be argued as to why the client should subsidize somebody's training. "If clients don't pay well, ultimately, it's the brand that suffers," counters Roy.

Investing in intellectual capital doesn't necessarily mean training alone. It also means staffing beyond critical mass. Sounds totally obscene in today's advertising environment, but, in the words of a senior vice-president and creative director, "Keeping the organization lean is fine, but is anyone planning for a recovery or an increase in business? You'll need people and where do you get talent in short notice? So you are forced to poach from other agencies at an incredibly high price. And then you lose some business and you're stuck with this guy you've paid a bomb for. Better keep a couple of youngsters on board who can absorb work as and when it increases. And groom them."

All said, there is clear consensus that enough is not going into cultivating the talent that the industry has at its disposal. Cost of investment is the issue, but Kansal points out that there are inexpensive ways of holding training programmes. "A fair amount can be achieved by having day-long sessions somewhere out of office, but not out of the country," he says. "You can have sessions at a fraction of the cost of a junket. All I am saying is, you don't need to cutback on the amount of training."

Margins might be slim, and perhaps the client doesn't help bear the cost. But that's not a good enough reason not to invest. As Mathews puts it, "Our business is going through a transition from a commission-based to a fee-based system. All transitions have their pain, and we have to endure this. The important thing is to realize that this is a transition, and not stop investing in talent, which is so fundamental to our business. Not investing in talent will be an aberration by the shortsighted." © 2002 agencyfaqs!

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