In a landscape where CMOs are dealing with reverberations from the pandemic, a looming global recession and widespread geopolitical upheaval, it would be all too easy to let agency performance evaluations slide. However, according to the World Federation of Advertisers (WFA), the practice is holding steady.

Research from the global organization conducted in partnership with procurement business Decideware revealed 56% of agencies are being assessed regularly by clients, compared to 54% in 2020.

For Denis Budniewski, Verizon’s director of agency strategy and production transformation, the process is now much more than a nice to have.

“Do it—so many clients don’t evaluate their agencies,” he said. “As clients, we owe that to our partners, and it needs to come from the top. It’s mission critical your CMO is engaged in the process.”

However, the data has also uncovered the need for a reset in how this is done, showing the biggest gripes from both sides in the process.

Gleaning responses from 49 multinational clients with a combined marketing budget of $96 billion and 33 agencies, the WFA found that a lack of objective or measurable KPIs from agencies was the main concern among clients.

The KPI conundrum

44% said a lack of ability to measure the impact of their agency relationship was their biggest concern during an evaluation. On the agency side, 24% of people agreed. However, the top worry agencies bemoaned was poor alignment on the client side, with 53% stating conflicting client needs and siloed structures were holding the process back.

So many clients don’t evaluate their agencies. We owe that to our partners.”

Denis Budniewski, director of agency strategy and production transformation, Verizon

Respondents told WFA that while some services (like media and digital buying) lend themselves to objective, measurable KPIs, others didn’t. In a data-driven industry, marketers said they were starting to identify the gaps in how they measure the success of their agency relationships. For agencies, this blind spot can lead to unfair remuneration if pay is linked to performance.

Mirroring a similar study in 2020, less than half of agencies believed their compensation should be linked to the results of their evaluation as a result.

In short: the current mix of KPIs is causing dissatisfaction among clients and agencies alike.

However, it’s not all doom and gloom, with the study identifying that both parties agreed client satisfaction was the top KPI to consider. Strategic thinking, collaboration and effectiveness also featured among the top five metrics for both parties.

John Kearon, founder and executive president at market research and effectiveness business System1, argued the number one KPI should be an agency’s contribution to client profit and ROI.

This, he advised, should be crossed referenced with “the degree to which they did or did not take [their partner’s] advice, together with their advertising effectiveness performance once ads are in the market.”

An honest conversation

For agencies, evaluations can often feel like a one-way conversation. Almost 30% said they never got an opportunity to provide regular feedback, while a further 25% said they did but in an “unstructured way.”

Laura Forcetti, director of global marketing sourcing services at WFA, said this, combined with agency’s discontentment about the way clients teams are set up internally, reflected a need for advertisers to work harder to become “the client of choice” by actively nurturing agency relationships.

“Clients must get their houses in order and performance reviews provide agencies with an opportunity to help them on that journey,” she said.

Though agencies and brands are on the wrong footing elsewhere, the research found that suppliers are increasingly comfortable giving honest feedback to clients when it comes to performance evaluation.

68% of agencies are now, most of the time, comfortable telling clients what needs changing at their end, compared to just 45% in 2020.

There’s also an increased satisfaction with how clients respond, with just 13% of agencies saying clients often refuse to adapt based on feedback versus 38% two years ago.