Senior agency leaders, honest question:

If we didn’t have to hand over so much revenue to our holding companies, would there be fewer layoffs?

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No, there would be more. Holding companies offer a safety net when an agency is doing bad and frankly can get way more credit during tough times. They also have more liquidity to get through times like this. As publicly traded companies, they will obviously have to think about shareholders as well. However, mass layoffs rarely instill confidence to shareholders. Some smaller/independent agencies will go under completely or lose their best talent during this time, it is safer to work under a large banner right now.

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Agreed.

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For all the demands they place on us, even  stringent ones, the truth is many agencies wouldn’t be able to survive without them. Small shops have a lot of advantages but deep pockets usually isn’t one of them. Simply ask anyone who worked at an independent who lost a key account and the tough discussions that followed knowing they would have to employ drastic cost cutting measures to remain viable.

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I’ve always been curious about this. So even at a successful, large holding company agency, paying the holding company 20% is worth it?

Candidly, as the AOR engagements dry up , the answer you are looking for becomes moot. There are very few agencies that have stable, robust AORs accounts that cover all their overhead costs. The few that do probably don’t have the other elements people are looking for like award winning work and sexy brands or they are hyper specialized. The holding company allows the left pocket to feed the right and keeps some of those hot agencies who are doing good work afloat because in my experience the hot work usually doesn’t satisfy desired margins.

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