Funding Your Internal Agency: A Virtual Roundtable Recap

I recently had the opportunity to lead a Virtual Roundtable discussion that weighed the pros and cons of an internal agency that is funded versus one that operates with a chargeback model. I've already written about some of the numerous benefits of creating an internal agency so, this time, I wanted to dive into the specifics around funding. During the roundtable, both CMO mentors and Future CMO Club members came together for an engaging conversation in order to answer the question:

What are the next steps once you’ve already received the green light to bring your creative in-house and managed the logistics of doing so?

First thing’s first, it’s of the utmost importance to have political strength and a voice in your C-Suite. You’ll need their respect and trust in order to build an environment for creatives to thrive in, get budgets approved and be a conduit for open communication. Trust me, great communication is key to making sure that the reasons and objectives for having in-house creative are both explicitly stated and aligned with the overarching company goals. Plus, your leadership team will be the ones to help you enforce these.

Finally, there is the question of how this will all be funded year after year.

The Funded Model

The funded model is pretty straightforward: Your creative team will receive a set budget based on what the brand is expecting to work with, deliverables around the brand goals are established and a timeframe is decided upon. This allows the company to know exactly what finances have been allocated toward creative and get a clear picture of the value the agency is providing the company.

However, this also means that finite resources need to be tightly monitored to avoid scope creep. I’ve seen some companies struggle with setting boundaries for what their creative team will and will not be working on. But without doing this, you run the risk of multiple requests coming from all angles and an overworked and undervalued creative team – the ‘free ice cream truck’ idea, as one member pointed out.

To combat this problem, it comes back to the communication aspect that I had mentioned. Objectives need to be defined and agreed upon, with contingency plans thought out in advance. For example, what will your company do about surge needs? Will there be co-funding for these, will your creative team outsource to freelancers, or will the request simply be denied?

When you aren’t spending money as you go, it really forces companies and teams to go down the path of due diligence. This is an opportunity to be more intentional about what you are doing and how you are doing it, giving careful consideration to how your agency’s time will be spent on initiatives that move the brand forward. Gone are the days of just throwing things at the wall and seeing what sticks. People and audiences are overwhelmed with content as it is, and this method is only throwing away company dollars.

Finally, I recommend having your creative agency internally pitch and sell their campaigns at the end of each 6-month funding period to revisit campaigns and budgets and re-establish the value your creative team is bringing to the company.

The Chargeback Model

With the chargeback model, money is an expense versus a capital investment. It’s a shifted mindset and approach for accomplishing the same end goal but allows for a smaller operating budget and more scalability.

I find it to be a bit more difficult to push back on projects in this model because, even if a particular initiative doesn’t drive value for the brand, departments will say, “but we are paying for it, so do it.” And that’s how you end up with videos of company dinner parties. While there will inevitably be a little less control of the type of work coming to your agency here, it’s up to CMOs and the Board to make sure that the organization understands that the agency is more than a group of people that simply do admin work better.

Whether funded or chargeback, the most important aspect of a successful agency is to show the value of your in-house agency. For chargeback specifically, that means being diligent with your rate card, building a mission, defining services and providing cost avoidance where you can.

At the end of the day, marketers need to become a partner to the rest of the company instead of simply recreating the agency model in your own organization and department. Details need to be discussed before the creative team puts the first pen to paper, not as problems come up, because open communication, clear objectives and stellar output happen when the walls are dropped and goals are aligned at all levels.

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