Aquarius Advertising

FINDING THE BALANCE

The Aquarius Advertising Agency is a middle-sized firm that offered two basic professional services to its clients: 1) customized plans for the content of an advertising campaign, e.g., slogans, layouts, and 2) complete plans for media such as radio, TV, newspapers, billboards, magazines, etc. Additional services include aid in marketing and distribution of products, and marketing research to test advertising effectiveness.

Its activities are organized in a traditional manner. The formal organization is show in Figure 1. Each of the functions includes similar activities, and each client account is coordinated by an account executive who acts as a liaison between the client and the various specialists on the professional staff of the Operations and Marketing divisions. The number of direct communications and contacts among clients, Aquarius specialists, and Aquarius account executives is indicated in Figure 2. The sociometric data were gathered by a consultant who conducted a study of the patterns of formal and informal communication. Each intersecting cell of Aquarius personnel and the clients contains an index of the direct contacts between them.

Although an account executive is designated to be the liaison between the client and specialists within the agency, communications frequently occur directly between clients and specialists, and so bypass the account executive. These direct contacts involve a wide range of interactions such as meetings, telephone calls, emails etc. A large number of direct communications occur between agency specialists and their counterparts in the client organization. For example, an art specialists working as one member of a team on a particular client account are often contacted directly by the client's in-house art specialist, and agency research personnel have direct communication with research people of the client firm. Also, some of the unstructured contacts often lead to more formal meetings with clients in which the agency make presentations, interpret and defend agency policy, and commit the agency to certain courses of action.

Both a hierarchical and professional system operates within the departments of the Operations and Marketing divisions. Each department is organized hierarchically with a director, assistant director, and several levels of authority. Professional communication is widespread. It primarily concerns sharing knowledge and techniques, technical evaluation of work, and development of professional interests. Management in each professional department is exercised mainly through promotions and supervision of work done by subordinates. Many account executives feel the need for more control and one commented:

"Creativity and art. That's all I hear around here. It is hard as hell to effectively manage six or seven hot shots who claim they have to do their own thing. Each of them tries to sell his or her idea to the client and most of the time I don't know what has happened until a week later. If I were a despot I would make all of them check with me to get approval first. I'm sooo frustrated."

The need for reorganization is made more acute by the changes in the environment. Within a short period of time, there has been a rapid turnover in the major accounts handled by the agency. It is typical for advertising agencies to gain or lose clients quickly, often with no advance warning as consumer behavior and lifestyle changes emerge or product innovations occur.

An agency reorganization of its current functional structure is one of the solutions proposed by top management to increase flexibility in this subtle and unpredictable environment. This reorganization is aimed at reducing the agency's response time to environmental changes, increasing cooperation and communications among specialists of different types and increasing responsiveness to clients.

This memo in response to your request for an evaluation of the Aquarius Agency. This memo covers the background of the Aquarius Advertising Agency, including the contextual situation and the current structure and problems, and provides some recommendations and options available to the agency. I recommend that the agency change their organizational structure to a matrix structure.

BACKGROUND
Current Situation
Aquarius, being in the advertising industry, is in an unstable environment. People's likes and dislikes change rapidly, therefore providing for a dynamic, changing environment. The company is of moderate size and management's goals are adaptation to external events. The current technology can be analyzed as non-routine (high variety, low analyzability) using Perrow's model or Reciprocal (daily interaction, lots of communications, and mutual adjustment) using Thompson's interdependence model.

Current Structure and Problems
Currently, Aquarius is using more of a functional structure. Its structure has been kept in a traditional manner with an account executive attempting a liaison role. Activities are grouped together according to Accounts, Operations, and Marketing. This structure does not fit the environment, goals, or technology of Aquarius. Although it may allow economies of scale, it is too slow in responding to changes in an uncertain environment. The Liaison role is not effective since many specialists bypass the account executives. Currently there is poor horizontal coordination among departments, although they do seem to be interdependent. This type of structure also results in lower innovation; something an ad agency definitely does not want.

OPTIONS AND RECOMMENDATION
Aquarius's structure does not fit its contextual variables. My recommendation is to change the structure to one of two types: Product or Matrix. A product structure divided up among TV, Radio, and Newspaper would be better suited for the uncertain environment, allowing for faster changes to be made. The goals of effectiveness, adaptation, and client satisfaction could be met. It would also allow better coordination across functions. To its detriment, however, this type of structure eliminates economies of scale, leads to poor coordination across product lines and reduces technical specialization.

The other alternative would be to use a matrix structure with the account executives as horizontal matrix bosses and the functional managers as vertical matrix bosses. This type of structure fits with the firms environment and technology. Regardless of which structure is used the company must implement the change following these guidelines:

1. The change should be made quickly and visibly. 2. Employees should be involved in the change. 3. Employees should be informed that top management supports the change. 4. The company should use education, cooption, and persuasion to get employee support for the change. 5. Employee concerns should be addressed.

I believe a matrix structure implemented following these guidelines will help the organization achieve its goals. Please contact me if you have any questions.