Budgeting...Billings...Profits and losses...Cost management...Cost savings...Resource and equipment justifications. These financial considerations play a critical role in a creative department's ability to thrive long-term. At the root of these financial practices and mandates for creative teams is the funding model that is used to establish and control the creative department's operating budget. There are many variations of funding that companies use to fuel their creative departments' operations, but for the purposes of this article, we'll focus on two broad categories:
- Creative groups who charge a fee to their internal clients in order to cover a portion or all of their department's budget (the chargeback model)
- Creative groups who are funded through a corporate-level allocation and who are often perceived by their internal clients as being "free"
Cella is in the business of helping our in-house creative department clients optimize their management structure and operations and we frequently find that the topic of funding models comes up with the majority of our consulting clients. Some questions we hear include: Which funding model is the right one for our team and company? How would our situation improve if we were to start charging our internal clients for creative services? Or if we stopped?
Often times, teams feel like the grass is greener on the other side and that they should switch completely from one model to another. However, data from our 2016 and 2017 In-house Creative Industry Report surveys, which include input from over 500 in-house creative teams across the U.S., tell a more nuanced story.
As you can see, each audience (those who charge vs. those who are funded through corporate) sees some significant benefit to their current funding model and each sees significant drawbacks. In some cases their benefits and drawbacks even sound similar to one another! Often times however, regardless of their funding model, a creative team's health can go the way of the DRAWBACKS if the challenges of either model are not addressed head-on. Chargeback-driven groups become worn down with the administrative burdens and vendor-like conversations with clients that they need to manage. Groups that are perceived as "free" struggle to manage client behaviors due to a lack of financial accountability and are often challenged when attempting to justify the need for additional funds and resources.
Either model can be difficult to manage and as a result it can be tempting to alter that model, but unless the timing is right and you have the attention and buy-in of all the right stakeholders within your company, you should assume that drastically changing your funding model isn't going to happen any time soon and not without a lot of focus, time and effort. Here are two universal tips for all creative teams, no matter what your approach is to charging internal clients:
- Regardless of your funding model, always run your team like a business. Understand what things cost, and how your team is performing from a financial perspective. Know your internal and external competitors and how your costs compare to them. This means your team MUST CAPTURE TIME and do so in a way that allows you to track hours with specificity as to team member, tasks and job types. (for more information read posts from our Metrics & Reporting blog category)
- Embrace the need to master communications and manage relationships with internal clients and key financial stakeholders such as Procurement and Finance. Issues concerning project and department-level funding and available (or unavailable) resources are topics often at the root of conflict between the creative team and internal clients or executives. Unhealthy relationships result from this conflict not because of the funding model's limitations, but more often because of the lack of solid, clear and straightforward client communication and relationship management.
If you are in the midst of a deeper analysis on this topic and your company is seriously evaluating alternative funding models for your creative department and perhaps other groups as well, Cella's team of subject matter experts in this space can help. Email me at firstname.lastname@example.org to discuss further.