Getting the most from in-house, insource and outsource creative

Tuesday February 10, 2009

All businesses depend on standout creative work, even ones that aren't in the "creativity" business. But producing good creative often seems to involve a choice between uninspiring outsourcing experiences and inefficient in-house headcounts. Many are looking for a "third way," but the answer may instead lie right down the middle — in a carefully managed "insourcing" arrangement that combines the right kind of internal structure with smart use of outside resources.

There are advantages and concerns with all models. In exploring this challenge, I reached beyond my own experience to read several case studies. I Googled, e-mailed, discussed, and observed the way non-creative companies get creative done. What I've come up with is a short compilation of pros and cons, value propositions, leadership insights and best practice recommendations.

Generally speaking, there have been two historical reasons for using in-house agency functions like creative.

1. To save money. The simple, traditional in-house view: value = cost

2. To better control an organization's image… and to save money The insource perspective: value = cost + brand + expertise + familiarity

The point is that no matter what your approach, cost-saving is always part of the equation. The question is what other factors you value. Successful insourcing requires far more expertise and responsibility, while the only purpose of a traditional in-house group is to spend less. A recent Unisys survey suggests cost is now less important compared to increased effectiveness, improved quality and overall business value. That doesn't mean costs are not important to business — but it suggests that a broader focus is the order of the day.

This creates an opportunity for in-house creative groups. Why? Because most have yet to embrace their full potential. Too many of them function simply as a cheap alternative to external creative resources. This type of organization struggles to matter in a company where creative isn't the core product. They survive by doing work that’s good enough, not by raising the bar. They generally have little access to executives. And they find themselves squeezed, because they continue to increase salaries and overhead with attractive benefits while competing with external firms that have freedom to adjust headcount. You can never win on price alone — not even in-house — so why try? You'll always be seen as a vendor. Someone will always come in cheaper. The answer? Be better.

I grew up in ad agencies. At one point I left agency life to join a respected in-house creative group. My agency creative director at the time said, "Are you crazy? They don’t make creative for a living." His implication was clear. If companies make money from your work, you’re valued. If not, you're overhead. He was right, too.

Creative services groups functioning like internal catchall vendors have three vulnerabilities:

They usually don’t create needle-moving work. These groups are asked to do everything from a single slide to time-consuming books, and "no" isn’t in their vocabulary. So they aren’t known for any particular expertise.

They struggle to attract and retain good talent. It’s a deadly cocktail: one part "not having challenging work to keep superior talent engaged," one part "dealing with clandestine internal political issues." In a fog like that, talented people struggle to see their relevance.

Their only success measure is cost-to-completion. Obviously, measuring cost-to-completion is easy. Measuring superior work quality with ROI requires more work, deeper integration with other internal stakeholders and (above all) the willingness to admit the group could be better. Because of the short-order mentality that governs their work, most in-house groups aren't privy to the ultimate results. Showing cost savings is easy, but in the end, good cost-to-completion numbers just substantiate the theory that "good = cheap."

Well-respected companies like Target and Apple build their cultures around innovation, and it shows in everything they do. Simple ROI metrics are put in place to measure the programs; creative leaders are part of important company decisions; and creative staffers are kept clear of company politics. This provides a clear mission — the ultimate goal for creative thinkers. It also creates a definitive scale for areas of improvement.

The new alternative: brand owners

A new type of in-house creative department owns the creative function while making smart decisions about where work is actually done. Key accomplishments that would be too costly (and too hard to control) externally stay inside the walls. Mind-numbing production is outsourced to vendors that must remain competitive.

According to PR Web, "insourcing" — the delegation of jobs to internal, specialized, stand-alone entities — is gaining popularity to control critical productions or competencies. Insourcing demonstrates value by embedding creative thinkers in the company's business. All internal organizations are expected to be cost effective, but progressive companies now see creative and design thinking in terms of overall value.

Insourced employees create value because they:

Have a personal commitment to the greater purpose of the organization
Earn the trust and confidence of executive decision-makers
Understand key business drivers
Know the culture and can facilitate faster decision-making
Aid in speed to market

Business publications are tripping over each other to declare creative thinking a viable business tool and brand differentiator. The perfect insource creative group will thrive if management challenges and treats it as a valued consultant. But the elephant-sized caveat cannot be ignored: The right talent has to be in place. For a creative group to be most valuable, each employee must know and live the company’s mission, brand, goals, structure and culture. Leadership is key, and sometimes those perfect traits are difficult to find in an archetypal "creative."

The perfect internal creative leader:

Fosters a safe creative environment.

In-house groups have been saddled with a bum rap of not pushing themselves, and rightfully so. They often create environments that feature little boat-rocking and plenty of kowtowing to internal politics. Their lives can sometimes seem to revolve around keeping a VP happy. Laziness can easily set in. Animation pioneer Pixar employs 3 principles for fostering a creative environment⁴:

Everyone must have the freedom to communicate with anyone.
It must be safe for everyone to offer ideas.
Stay close to innovations happening in the academic community.

Knows when to take risks.

If you aren’t at least a little scared, the creative team isn’t doing its job.3 Risk is absolutely necessary for innovation. Management’s job is not to prevent risk, but to build the capability to recover when failures occur. In order to maintain original work, you have to accept uncertainty, even when it’s uncomfortable.³

Has a sense of urgency

The perfect leader always sees an opportunity to prove worth. This often requires jumping on a problem with little lead time or protocol. This trait fulfills two goals: It puts the group front and center in solving company issues, and it portrays the group as proactive in caring about the company. The perfect leader should never say, "That’s not my department." They know how to execute projects efficiently, on time and cost-effectively.

Is a spotlight-shunning consigliere.

This is a toughie. By nature, superstars love the spotlight. But to succeed, they must let their executives be the stars. Every executive wants to know they have a valued creative thinker at their disposal who cares about them and the company. Sure, Steve Jobs at Apple is a great celebrity CEO. But without the help of his Design SVP Jonathan Ive, would we still perceive him and the company as innovators?

Has high standards and a strong moral compass

Keeping the company's reputation is the mission every day. Is it coincidental that some of the most widely respected brands also have widely respected insourced creative teams? The making of a great brand, product, reputation and set of values is no accident. Companies like Target, Apple, Nike, Disney and Herman Miller control everything they do.

Is a tireless evangelist.

A lot of senior in-house leaders come from an age of doing, not leading. They grew up as designers and still lean on tactical execution for problem solving. In contrast, the contemporary group leader is a generalist with broad-based knowledge and command of process, procedure and time management. This person elicits the most creative thinking from employees to fulfill the company’s mission and objectives. These leaders don’t get bogged down in nuts-and-bolts production that keeps them from focusing on creating strategy. By outsourcing certain creative and production functions, they free themselves to concentrate on marketing direction and product development. Outsourcing non-core competencies can also provide better results and lower overhead costs.¹

When a creative leader works to remain an expert in the company's products, services and the primary audience, he or she can be a better steward of the business and its reputation in the market. The leader will also inspire an environment of continuous creativity.

To ensure a creative environment is maintained, animation giant Pixar has incorporated a "dailies" process. This is a group meeting held daily to give and get feedback in a positive way. Once people get over the embarrassment of showing their work in progress, they become more creative. People learn from and inspire each other. Additionally, employing this method helps garner a checks-and-balances approach along the way to keep each project on target.

Pixar also integrates different departments to allow relationships to flourish. With that comes a better understanding of the company’s products. Pixar prides itself on getting talented people to work effectively with one another. This takes trust and respect. Managers play a critical role in making this happen.

During times of economic downturn, like now, the value proposition of internal groups will be under extra scrutiny. Both in-house and insource shops offer value to businesses, and both have challenges demonstrating that value. They’re challenged to be creatively great and business-smart at the same time.

Case study² of XYZ Investment Group

Following is a short case study. Although the name is made up, the data and information is real.

Problem: Determine whether or not the in-house creative services at an investment group were high-quality, cost effective and results-oriented

Method: A cost analysis method was performed to determine if internal costs were leveraged by ROI

Results: This cost analysis showed that current internal department costs were 40 percent below market. For the sake of ROI, the internal creative team proved an efficient resource for the company. However, interviews showed some internal clients weren’t impressed with design quality. They believed that working with outside agencies provided "fresher" designs, more cutting-edge solutions and outside-the-box thinking.

Cost analysis chart

graphic - in-house versus outsource

Is that result pre-ordained? Can you really cultivate great in-house talent that compares to outside agencies? Can business-minded people really be good judges of design? It's certainly debatable, and there are plenty of critics in a company. Having strong talent helps.

XYZ's consultants found the problem wasn't the quality of design that was frustrating to internal clients; rather, it was inconsistency. Greater discipline over in-house design was needed. The best designers will excel in an environment that provides creative tension. The lesser designers will not survive — not necessarily a bad thing.

Following the cost analysis, client interviews and benchmarking against other in-house agencies, XYZ's creative group demonstrated its real value to senior executives and continues to maintain an internal design group with full functionality, including client service and project management expertise. Through this analysis they also developed new best practices for workflow, design disciplines, brand management for design vendors and client service models.

Introducing outsource into the mix

Even the most efficient internal creative groups need external support. Smart internal groups leverage agency resources to get the best work and the best relationships. The rule of thumb is to narrow the number of external suppliers based on talent and capabilities. Each agency has a core competence. Sure, there needs to be overlap for scalability, but each internal need (whether function, brand or department) should match the talents and skills of the agency.³

Some useful guidelines for outsourcing include:

Use the same supplier for similar projects, so they can deliver consistent work. You want to work with companies that know your product and your mission — this helps guarantee a better execution.
Using fewer suppliers will cut down on the overall costs and learning curves that arise when new teams work on new projects. This also eliminates the need to provide detailed background work for every project.
Fewer vendors equal stronger working relationships.
Output should be outsourced, not owned. This will free the internal team from time-consuming materials.
Only work with good agencies that push themselves to do good work. They must always be reliable and have a deep understanding of your company’s industry.

Conclusion

In-house creative groups can save money, but those cost savings are meaningless if they come at the expense of quality or responsiveness. Focus on providing great work that shows industry knowledge along with great customer service. Lastly, look for external agencies that attract good, talented professionals with complementary skills. Partner with them and consistently employ efficient processes. Do this and your organization will enjoy the best of both worlds: agency-quality work at in-house prices.⁵

References:

How to Accomplish In-house Marketing Goals by Outsourcing. Credit Union Times. February 2005.
Brandli, Lynn. Viewpoints: In-house Creative Services vs. Total Outsourcing. DMI e-bulletin. August 2003.
Zyman, Sergio. The End of Marketing as We Know It. November 2000.
Catmull, Ed. How Pixar Fosters Collective Creativity. The Harvard Review. September 2008.
Grant, Matthew. High Quality, Low Cost: 3 Keys to Successful Creative Services Management. Aquent Talent Blog. September 2007.
Longenecker, Clinton O., Mead II, William K. Marketing as a Management Style — Improving Internal Customer Service. Business Horizons. July-August 1995.