When in-housing goes wrong

In-housing is hot. So hot that it’s likely to encourage marketing organisations to action plans that haven’t always been fully thought through. Not for nothing does the marketing business have a reputation for chasing the shiniest of shiny objects.

Conferences are being organised and case studies are being prepared, but in-housing is not a decision to be taken lightly. While there are good reasons to take some work in-house, there are also circumstances when it can go horribly wrong (or, at the very least, be very expensive).

Part of the problem is that the phrase "in-housing" covers a broad church of options. It can range from putting resources in place to manage image-cropping and content management for websites through to full production capability, data science and management. Each of these options requires a different level of commitment and internal expertise. In-housing is often also extended to include embedded agencies within companies.

Our experience of working with companies around the world that have opted to bring some work in-house is that there are five key risks that many fail to take into account.

1. This is a cost-saving measure

Actually, no, in-housing is likely to be a long-term increase in the fixed cost base of the company. This means that it can be more difficult to flex resource and therefore cost up and down in times of economic/business fluctuation. If you are likely to want to tailor your resource level year by year depending on business performance, you need to ensure that the in-house investment only covers the essentials that will always be needed.

2. This will make us cutting-edge

The truth is that if your marketing strategy needs you to be cutting-edge, innovative and/or highly creative, external agencies are likely to offer the best solution. In-house agencies don’t generally attract the best talent—particularly when it comes to strategists and creatives. This type of talent needs the stimulus and buzz of working with different clients and categories to develop their thinking and do their best work. Pepsi’s 2017 Kendall Jenner spot, created in-house, was pulled after criticism that it appropriated the Black Lives Matter movement for commercial gain.

3. There’s no agreement on scope

If business units and teams are not clear on the scope and processes of the in-house team, or if expectations about what the in-house agency can do are not understood, there will be issues. We have seen clients who are far more demanding on in-house teams than they would be with their agency partners, where issues have occurred. The result of this lack of clarity is high turnover for the in-house team. The bottom line is that if a company treats external agency partners as suppliers rather than partners, they are very likely to treat their in-house agencies even worse.

4. There’s no oversight or management

If there is no single point of robust oversight and full-time management of the in-house resource, it will gradually become overloaded. With no limits on what work can be pushed in-house, other business units and other functional areas start to use it, leading to overstretch and a decrease in the quality of service. Without clear management, the business model for the in-house agency can also become complicated, charging time and costs to some functional areas but not to others. Management for an in-house agency is just as important as leadership for an external agency. It cannot be an add-on to someone’s existing role—it needs focus.

5. It’s designed to put pressure on external partners

Don’t try to use an in-house agency as a lever to drive down costs with your existing external agency partners. Creating value is important, but value is not the same as cost and most brands will continue to need external resource for their specialist skills and expertise, which come with an appropriate cost. The in-house agency should simply be part of a well-run roster rather than a source of tension and friction that undermines the partnership relationship with the external agencies.

The rise of digital has encouraged many brands to consider who does what part of their marketing. The need for content as part of a digital transformation process has created a demand for in-house resource, for example.

While many companies will end up doing some work that might have been considered agency territory a few years ago, decisions about what comes in-house still need to be taken carefully.

As with any agency relationship, rules, lines of responsibility and clarity around ways of working are essential for success.

Christine Downton is a senior consultant at The Observatory International