Successful agencies today put clients in the center of their ecosystem. This has bred a variety of agency business models designed to deliver the results clients demand, while running a profitable agency business.

The following outlines the types of agency work models in practice today; both shared and specific legal issues that each model faces; and the critical legal tools your agency needs to manage within your selected model.

The Evolution of Modern Agency Models

The “Traditional” Work Model…..Evolving

We’re all familiar with the most dominant work model for today’s agencies – the “traditional” model. In the traditional model an agency’s talent pool is employed by the agency. It conducts business in common physical workspaces, and the agency owns, dictates and administers systems, processes, hardware, software and more.

But as agencies look for ways to become more nimble, control costs, and focus on their core competencies while finding flexible ways of scaling up and down as needed, we see an evolution into alternate models:

Outsourced or Contract Staffing Model

The agency uses a model that engages freelancer and contract resources to augment regular staff, or, in some cases, the talent base is entirely freelance or contract-based. Engagement of talent and resources is driven by the agency’s current work log or specific expertise needs.

Virtual Agencies

While this model may be traditional in some senses including employing staff and utilizing common systems and processes, this model has very little to no common physical infrastructure or spaces. Team members work remotely and are more frequently likely to operate with BYOD (bring your own device) policy.

Teaming or Strategic Alliance Relationships

The model combines two complementary (or potentially competing) agencies, where one agency is positioned as the lead with clients. Unless one agency white-labels the services or products of another, each agency/firm maintains its own identity with the client. Each agency maintains its defined role and the size of the role determines compensation of each.

Collective Models

In this arrangement, relationships are independent and contractual. One agency serves as the primary client interface, with a group of agencies or pros with different disciplines working under a collective brand.

Shared Legal Concerns for all Models

Some legal issues are common to agencies no matter what type of business model you employ. Those include –

• Intellectual Property (ownership to the work): In both completed and conceptual work, WHO owns what, and when?
• Portfolio Display Rights: A sub-issue of IP rights, this includes unfair competition issues and a focus on who gets credited with the work.
• Unfair Competition: This involves restrictive covenants for employees, contractors, and clients to provide clarity around who owns a relationship.
• Data Privacy and Information Protection: This includes and emphasis on personal device use or BYOD.
• Liability and Indemnification: This includes, but is not limited to, bad performance, negligence or knowing acts, legal clearances and approvals, and third-party claims
• Insurance: Who carries the policies, what kinds of coverage and what limits.

There may also be some business-model specific legal questions that arise from using a particular alternate model.

Additional Implications for Contracted Talent and/or Virtual Agencies

One issue revolves around the independence and autonomy of talent. For outsourced talent, autonomy is the (IRS) rule; for remote workers, reporting and monitoring are issues. Also related is the proper tracking and reporting of time for remote workers.

There are further concerns regarding the ownership and security of information and data, information confidentiality, and assigning responsibility for client interaction.

Personal device use for agency and client business comes with a host of risks, such as the integrity/legitimacy of software tools, use of legal software, monitoring employee devices remotely and more.

And, who has he legal authority of talent to bind the agency to an obligation: can the contractor bind the agency, when and why?

Specific Considerations for Teaming/Strategic Alliance and Collective Models

In these models, clarity around authority, or who’s in charge and who’s responsible, reign supreme. For example, the ownership of the client contract/client relationships; who’s first in line in responsibility, who is primary client interface and who’s signing the master service agreement (MSA)?

In teaming relationships, get clarity regarding the legal structure – are these subcontracts or joint ventures? Ensure that all contracts align and that there is consistency between parties to address the responsibility for deliverables, IP ownership and transfer, and liability.

In a collective, trademark and branding use rights come into focus, including who has rights to use the client-facing agency brand, and/or white-labeling and cross-licensing of brand uses.

Finally, the compensation model needs to be clearly defined. This includes any potential commission to the collective for referring business to a collective member agency, administrative compensation to any participating agencies and the division of revenue among participating firms

Setting the Agency Business Model Up for Success

For all models, contracts, policies, and agreements will secure the mechanics of the model so its people can keep the focus on doing good work for the client. These legal tools include:

• Nondisclosure Agreements
• Independent Contractor Agreements for Freelancers
• Strategic Alliance Agreements between Agencies
• Collective Model Participation Agreements
• Client Service Agreements: Reflective of Strategic Alliance or Collective Model relationships (with “waterfall” provisions for consistency throughout)
• Data Protection Policies
• BYOD and other Remote Work policies

As I’ve discussed on our blog before, growth and innovation don’t come without a new set of risks.

What agency model does your firm employ, and what other opportunities have you considered?