In-house Creative Services
vs. Total Outsourcing
By Lynn Brandli, Manager, Creative Services, Russell Investment
Group
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| Lynn Brandli |
How can a corporation justify maintaining an in-house creative
services department in today’s tough economy? Or conversely,
can a brand-conscious corporation even consider abandoning its internal
creative department in a competitive environment? Two sides of the
coin and two perspectives to consider as part of a recent reality
check.
My company’s executive leadership is looking at every function
to determine if it is a “core competency” or “non-core.”
Since I work for a very successful financial services provider,
creative services could easily be put in the “non-core”
bucket. The company manufactures multi-manager investment products,
so departments like money manager research and mutual funds operations
are “core,” but crafting the corporate story and image
are considered “non-core.” Is this how successful corporations
really think?
To aid me in this discovery process and analyze the efficiency
of maintaining an in-house design department, I hired an outside
consultant. Here is some of what we found.
Design as “Non-core”
I manage an internal creative services department that enables
the company to market its suite of products to the world. The company
needed my department to be successful… or did it? Could my
entire department be outsourced to a variety of external design
providers? My right brain said no way, but my left brain wanted
the true facts. These are the functions my Creative Services department
provides:
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Art Direction |
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Digital Media |
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Print Buying |
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Brand Management |
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Copywriting |
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Digital Asset Management |
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Web Design |
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Graphic Design |
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Production |
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Video Production |
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Project Management |
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Vendor Management |
These functions are performed by a staff of 21, producing an average
of 800 jobs per year. There are some intrinsic benefits to keeping
this function in-house. I could argue that we can turn around projects
faster than outsourcing. We currently outsource some design projects
and it usually takes an outside design agency more time to understand
our financial products, market and culture. However, these services
are readily available from external agencies. What would it cost
to outsource all these functions?
Cost Analysis
This is the crux of what bottom-line oriented companies want to
know. Are they getting a good value for their investment (ROI).
If you manage a large in-house creative services or marketing department,
then this is already a large part of your job. We outsource when
we can’t meet the deadline with internal resources. But the
types of projects we choose to outsource and with whom we partner
come into consideration. We base these decisions to outsource on
three criteria: design quality, time, and money. Because we partner
with excellent outside design agencies, design quality and time
are usually not issues, whereas cost always comes under scrutiny.
To measure internal vs. external design costs we asked our current
design providers to give us hourly rates for functions and bid on
samples of work. Our internal design cost is already calculated
using a financial model in which our clients are billed for our
time through transfer costs against revenue centers. Our internal
billable rate to our clients runs approximately $60/hour. We bill
one flat rate for all functions.
The other consideration in the cost analysis was how many project
managers would need to be retained to manage a total outsourcing
of design for 800 projects annually. These projects do not manage
themselves, and with a large amount of brand management to be retained
internally, the need to keep managers was apparent.
The graph below shows the cost comparison by function.
(This chart is for illustration purposes,
actual data is similar but proprietary and cannot be disclosed.)
The cost analysis results showed that current internal department
costs were 40% below market. So we demonstrated that for sake of
ROI we are an efficient resource for the company, even though we
are “non-core.” We pencil-out to be a good value for
the company, but what about the quality of design? If you work with
outside agencies you get “fresher” designs, more cutting
edge solutions, outside of the box thinking—or at least that
is what some of our internal clients thought. So let’s address
the next hurdle—the quality of in-house design.
Quality of Design
Can you really cultivate great in-house talent that can compare
to outside agencies? Design is subjective, right? Can business-minded
people really be good judges of design? This concept can be debated
indefinitely, but the reality is that anyone and everyone is a critic.
For this reason, you’d better have really strong in-house
design talent if you are going to maintain an internal agency that
can compete with the quality level of outside firms.
Our consultant interviewed our internal business clients to find
out what they thought about our quality of design. Under the cloak
of guaranteed confidentiality we discovered that it was not the
quality or level of design that was offered, rather, it was inconsistency
of design that was frustrating to our internal clients. To address
this requires exercising greater discipline over in-house design.
The best designers will excel in an environment that provides creative
tension. The lesser designers will not survive—not necessarily
a bad thing. Designers with the attitude that corporate design is
easier and less challenging are misinformed. There is a great responsibility
to learn the business, protect the brand, and deliver fresh top
quality design, while operating in a typical corporate environment.
Hybrid Model
After the cost analysis, client interviews, and benchmarking our
own internal department against other in-house agencies, we successfully
demonstrated our value to senior executives. We will continue to
maintain an internal design group with full functionality, including
client service and project management expertise. Through this analysis
we also developed new best practices for workflow, design disciplines,
brand management for design vendors, and client service models.
This exercise is probably not new to design managers in corporate
environments. My department survived this internal audit because
of the quality of analysis we put into this project. I highly recommend
that if you are faced with a similar situation, you hire an outside
consultant, one that is both familiar with your specific industry
and the design process. While it is not a pleasant experience, it
is worthwhile to do your own analysis of your in-house creative
department. You will learn a lot about the perceptions of your department
and the value you contribute to your company, and it will even force
you to use both sides of your brain!
For more information about the information
covered in this article, contact LBrandli@russell.com. Lynn would
like to acknowledge the contribution of her consultant, Jeanie Wilson
of Ulicny Communications.
This article appeared in the August 2003 eBulletin.
Feedback on DMI Viewpoints and article proposals
are always welcome! Please email jtobin@dmi.org.
All articles reflect the opinion of the author and not the Design
Management Institute.
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