Tuesday, April 17, 2012

Promoting From Within Saves A Company A Lot Of Money

Not to bite the hand that feeds me, but I just came across an article which I’d like to share with my readers.  For years I have advocated on behalf of employees in that too many companies force their own people to look for jobs when all their employees really need is a small raise, a promotion or, perhaps, a simple pat on the head.

While the article is very dry and academic – please check the link – but the bottom line is that, on average, it costs 18% more in salary to hire an employee on the outside.  Of course that does not account for down time, recruiter costs and the severe cost in terms of lower morale when an employee leaves.  

While clients can squeeze their agencies to cut overhead – which is often none of their business – agencies ought to take a good look at their own turnover, which carries an amazingly high cost.  Many of those costs are often hidden and do not show up on a balance sheet. One of the great points made by the study in this article is that it often takes two years for productivity to catch up. That is a long time.  Now we all know that advertising has high turn-over.  Could it be that agencies are so used to the volume of employees leaving that they don’t realize that they could be saving money by actually keeping the people they hire?

I see all too many people who haven’t had a raise in three and four years.  I see people who cannot get rotated on to another business because agencies have forgone their rotation policies.  I see too many people who work fourteen and sixteen hour days.  At every agency where there is a wage freeze, everyone knows that all most employees have to do is to get another job and they will probably get a counter-offer with a raise.  Most of those candidates end up leaving anyway, as they should.

It doesn’t take a lot to reward people for good work and loyalty.  Sometimes, sending an employee and his or her spouse or significant other out for a nice dinner works as well as a bonus. Advertising should inherently be a rewarding and fun business, not drudgery.  

One thing which perplexes me is that in this day and age of wage freezes, when an employee leaves, a new employee can come in at a higher salary than the person who left.  That makes absolutely no sense.  If ad agencies want to make themselves more profitable, one way to do it is to lower turnover.  


  1. Paul, I am in the media industry and I agree with you 100% having seen this practice first hand. Everyone knows to get a "raise" is to jump ship and get hired by another agency. It's a vicious never-ending cycle.

    1. Anne: It is unfortunate that ad agencies force people to leave for money. It is the worst reason to change jobs.


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