Why won’t agencies sign contracts?
After weeks of negotiations followed by a handshake or email agreement between partners, we are finding lately that some agencies do not want to put pen to paper to formalise the client relationship.
In the last few years Enth Degree has assisted in the appointment of numerous agencies, across all disciplines, to partner with and service our clients’ marketing needs.
One thing that has become more common over the last 12 months, is that a number of agencies are becoming increasingly wary of signing Service Level Agreements (SLAs), that contain not only commercial terms but process and intellectual property based clauses.
So after the champagne corks have long popped on a successful pitch, why is this the case?
When compiled correctly SLAs provide both client and agency with the necessary protections to ensure a mutually beneficial partnership.
It is important for both parties to be aware of their rights and obligations in a legal sense, and also have an understanding of who-gets-what if there is a “break up.”
By not having an executed SLA, agencies are in the advantageous position of being able to freely pursue any client they wish, even if this is a conflict to their non-contracted customer. From the agency’s point of view, why would they want to be tied by an exclusivity clause?
Further, the absence of an SLA means that commercial terms (i.e. retainer, commission, head hours etc.) can be easily amended at a later date following the agency’s “appointment” (this, despite what was agreed during SLA and fee development). It is far easier to get a fee increase across the line if the agency doesn’t need to deal with the red tape associated with a SLA, for which responsibility would ordinarily lie with the client’s Procurement department.
Our experience is that the agency will only push for commercial terms to be confirmed in the SLA, if they believe they are getting a deal that under a more competitive scenario would not be sustainable.
Also, agencies are often in the position to capitalise on tight client side timings. It is quite common for the agency to commence work (and get paid) long before a draft SLA is even tabled. With money coming in the door there is no real incentive for execution of the SLA, and in light of the points above it seems the agency is in the envious position of getting the milk without having to take the cow as well.
So, what can a client do to avoid these problems and get their agency to sign that elusive SLA?
- Provide the SLA early and give the agency the opportunity to raise any issues long before final submissions.
- Withhold full agency payment until the SLA is executed, and make this stance known. We guarantee that this will speed up the agency’s legal review process.
- Accept that SLAs are not just the Procurement department’s problem, and get involved in their drafting and negotiation.
Clients need to ensure that they have a well written SLA that contains necessary clauses to provide all relevant protections for client and agency. As in life, most agency relationships don’t last forever and the role of a good SLA is to help work out who-gets-what, when, and for how much in the event that a parting of ways occurs.