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Nov. 4, 2019

New study shows relationships actually matter

Joe Broschak

When seasoned professionals leave ad agency jobs, it’s not uncommon that they sometimes take clients with them. After all, the client has a vested interest in following the manager—they tend to have a depth of understanding about the client’s business and culture.

However, new research out of the Eller College of Management at the University of Arizona now shows that when clients leave agencies managers often go after them.

“We found the account managers are often highly valued at a former client’s new firm,” says Joe Broschak, University of Arizona associate professor of management and organizations and Eller Executive Education faculty. “This is especially true when the new firm has a higher reputation than the account manager’s existing firm, and if more than one client has migrated between the firms.”

The study, conducted on a sample of New York City advertising agencies, recorded more than 8,000 manager exits, 5.7 percent of which subsequently migrated to another agency in the study. More than 56 percent of the agencies in the sample lost a manager to another agency, while 54 percent received a manager from another agency. Additionally, 75 percent of the agencies received client ties from one of the other agencies in the sample, a phenomenon the authors termed “client tie circulation.” Client tie circulation is when clients form new relationships in the wake of an old one dissolving.

“We found that most managers who moved were actually long-tenured middle- or lower-tier staff,” says Broschak. “These were the type of managers who worked on a regular basis with the client, who knew how to talk to them, which was a benefit to the client.”

Interestingly, top executives who migrated to other ad agencies were less likely to draw new clients with them or vice versa—likely because they are less involved in the day-to-day operation of client relationships.

Broschak and his co-authors (Emily S. Block of the University of Alberta, Sharon Koppman of the University of California, Irvine and Idris Adjerid of Virginia Tech University) concluded that ad agencies interested in acquiring clients may be just as well off spending resources on poaching longer-tenured, boundary-spanning, lower-level managers from other agencies as spending resources on recruiting clients. For keeping clients, agencies should focus on retention strategies to keep their own lower-level managers.

“In other words, lower-level managerial staff appear to be the key to avoiding the loss of clients to other agencies,” Brochak says. “This stands in contrast to previously held beliefs that recruiting and retaining higher-level managers is what enables a firm to attract and keep clients.”

The study is based on a sample of advertising agencies headquartered in the greater New York City area. Broschak and his co-authors examined data between 1986 and 1998 from The Standard Directory of Advertising Agencies, which lists agencies that had at least one national or multi-state account spending $200,000 or more on media every year. They utilized a sample of 261 agencies with minimum gross billings of $3.5 million for which the names of managers and clients were available, and that appeared in the directory for a minimum of three consecutive years.

The study is forthcoming in Journal of Management Studies under the title “Will We Ever Meet Again? The Relationship between Inter-Firm Managerial Migration and the Circulation of Client Ties.”