Wheel of Fortune

by Chris Daniels

Rejecting the old Mad Men agency model, digital firm Teehan+Lax decided to reinvent the wheel, getting rid of everyone who stands between the client and creative people, and simplifying billing. So far the gamble is paying off.

Jon Lax and Geoff Teehan never had a grand scheme to reinvent the agency model. When the two started to work for themselves, in 2002, they picked up a few clients from their former employer—interactive agency Modem Media, which had retreated from the Canadian market in response to the dotcom bust. Lax had been creative director there and Teehan was an associate creative director. “We felt that we would just work those existing relationships until they died,” says Teehan. “So we thought maybe they’d be good for six months, maybe 18 months, and then we’d go out and get real jobs.”

Seven years later, the duo still doesn’t have real jobs. Those former Modem Media clients are long gone, but through word of mouth their agency, Teehan+Lax, has built a small but impressive roster of clients that includes Air Miles, Bell Canada, Canada Newswire and Torstar. And last summer the Toronto agency beat out several rivals to handle the digital work for Virgin Mobile—which helped ease the pain of losing its largest (and longest-standing) client, Telus, earlier that year. (The telco consolidated its interactive business with its traditional ad agency, Taxi.)

Teehan+Lax is poised to grow again. To accommodate staff hires, the agency will move from its current 5,000-sq.-ft space into an 8,300-sq.-ft LEED-certified, brick-and-beam office in Toronto’s Liberty Village district. The agency now numbers 30 staff, but the founders could easily see themselves eventually growing by another dozen or so. “I think 45, 50 people—that’s about where we’re going to hit the limits of what our model will take,” says Teehan.

That model is one that has challenged the conventional agency setup. Teehan+Lax, for starters, has no account managers. “I hated this idea that creative people can’t be put in front of clients. Why not? Who is best able to speak to the work: the account manager who just saw it an hour before the client meeting or the person who spent the past week living and breathing it?” Lax, who started his digital media career at Shift Magazine, in 1994, says. “Let’s face it: The agency model was developed in the 1950s and ’60s. Watch [the television program] Mad Men—it’s the same [as it is today]. When the interactive industry started in 1994, they just borrowed the closest business model, which was advertising. No one ever stopped and asked, ‘Is this right?’”

By eliminating account managers, Teehan+Lax promises clients faster turnaround and more strategic creative. With the exception of the receptionist, everyone on staff has a creative background. (“Everyone’s billable,” says Teehan.) In fact, the agency has just two layers of hierarchy: associates and higher-billing partners. “We try to hire more senior people who we can put in front of clients so the roles and responsibilities that a typical account manager would be responsible for get spread out amongst the team,” says Teehan.

Clients love the model, including newcomer Virgin Mobile, which will unveil a new Website designed by Teehan+Lax that aims to be as transparent with customers as possible, as well as to engage them through more social media. “When you get to work directly with the people doing the thinking, they share their thinking with you. It is more of a discussion because the account manager isn’t taking your comments back to the team and having a big group meeting to understand what we’re thinking,” explains Valerie Jones, Web marketing and chief online officer for Virgin Mobile, who has worked with about a dozen agencies in the past. “Teehan+Lax is [faster to market], and they get much closer to understanding our strategy and needs.”

With just two employee layers, the model has also simplified the agency’s pricing. While Teehan plans to tweak its billing model this year, clients are currently charged two rates: $150 per hour for associates and $300 for partners. “Having seen the billing structures of past agencies, there were seven to eight different cost layers for a creative person, from the junior designer up to the chief creative officer,” says Teehan. “So we just said, ‘No, there’s two rates.’ Sometimes the client will get more value and maybe sometimes they’ll get less, depending on the job, but we feel it evens out in the end.”

“As an industry, we’ve set the bar way too low for how we price work,” adds Lax. “What work is worth has nothing to do with how long it takes. We misalign our incentives with cost-plus pricing. We’re going to talk about value pricing in 2010. We need to recognize the value we bring and align our pricing to reflect that value.”

In other words, don’t expect Teehan+Lax to stop reinventing the wheel. “I don’t like the idea that you do something just because that’s how you did it before,” says Lax. “That doesn’t mean reinventing the wheel every time, but it does mean that you commit to always improving.”

Chris Daniels is a Markham, Ont.-based writer. You can reach him at chris@chrisdaniels.ca.

Comments

ZH

August 07, 2010 12:31 PM