Digital Agencies’ challenge to find talent in 2022

Agencies in the US are under intense competition when it comes to finding and acquiring talent. They are competing against each other, and against enterprises such as retailers, e-commerce companies, and giants like Google and Facebook. At the same time, they face a stagnant labor market in which they are increasingly forced to spend more for talent.  

This situation has led to understaffing, which sometimes means leaving business opportunities on the table. Also, without enough pricing power, some agencies may see their margins eroded. Finally, the owner’s and leadership team’s work-life balance may be affected due to insufficient resources to deliver services on schedule.

Understanding the problem

Like all markets, labor is controlled by supply and demand. In the US Digital Marketing Labor Market, demand accelerated as a result of the pandemic. As budgets quickened the transition to online, and many companies increased investments in digital channels, demand for digital marketers exploded. This demand is not only driven by agencies, but also by other types of companies engaged in some degree of digital marketing activities in-house.

At the same time, the supply of skilled digital marketers is not growing. The causes are complex, but likely include factors such as demographics, the increase in value of investment portfolios, and high demand from other sectors of the economy.

Agencies also face an increase in the demand for their services. Yet, when it comes to execution, they are seeing increased turnover, longer times to cover vacancies, and higher wage costs. In some cases, agencies have been able to raise prices, so payroll growth has not eroded their margins. This is not always the case, however, leading to challenges in hiring and retaining talented people.

Independent of rising costs and diminishing profitability, this situation sometimes translates to client unrest, which can hurt an agency in the long-term. 

Might want to check going beyond remote work.

How are agencies competing for talent?

Beyond raising compensation and offering benefits like unlimited vacation, there are few options for increasing competitiveness in the labor market. Most agencies have embraced remote work, hiring nationwide, and work flexibility. While some agencies have been innovative in developing their branding as employers, most face financial strains caused by this challenge.

What alternatives to increasing wages and costs do agencies have?

Nearshoring. As digital marketing often requires real-time interactions, working with marketers from other continents is impractical. On the other hand, working with Latin American marketers, or nearshoring, is an option worth consideration. 

Working with Latin American marketers, especially the top talent, can help agencies meet staffing requirements, while reducing turnover and hiring costs, ultimately increasing profitability. By learning how to do it right, and/or finding the right partners, nearshoring represents an amazing opportunity for digital agencies.  

Developing talent in-house. Some agencies have successfully developed internal training or internship programs to train new hires. This is an alternative to hiring more experienced yet costly talent. This option poses the risk of another agency coming in and poaching this talent.

Developing nearshored talent. This is a combination of the first two options. It consists of implementing an in-house development program, but hiring less experienced digital marketers from Latin America, while simultaneously hiring highly skilled digital marketers from the region. The highly skilled marketers can provide immediate operational benefits to the agency, while helping to coach and develop the less experienced ones.

The benefits of this model are that turnover risks are lower since few US companies are nearshoring, and working for the US normally is more economically attractive for digital marketers, reducing pressure from the local labor market. Also, it is possible to tap into the most talented new bachelor grads, MBA students, and digital marketers with experience, and leverage cost advantages of the economic differences between labor markets.

While the challenge is significant, it is critical to solve, and there are viable options to do so.