Sadly Ad Agencies No Longer Invest In Training Talent

Recently, Digiday ran an article entitled, “Paltry pay at agencies leads to millennials moonlighting”.  It reported that 44% of those between 25 and 34 in advertising have second jobs.  That is astounding, but not surprising.

Entry level pay at ad agencies is comparatively quite low.  So low, in fact that ad agencies are no longer attracting the best and brightest talent from either graduate schools or from four-year colleges.  This is not news, so it is not a new problem; it has been going on – and getting worse – for many years. Low salaries paid to juniors almost preclude those except the most dedicated (that doesn’t mean the best) from going into or staying in the business.  

In addition to low salaries, ad agencies have simply stopped investing in junior talent and it isn’t just about salaries.  There are almost no training programs. There is very little advanced training of any kind.  But it goes further. At least one of the top five New York agencies actually has a policy against its junior account people (AAE’s and AE’s) attending television and print shoots, even those which take place locally.  So how are these young executives supposed to learn the essentials of the business?

This has all been brought about because agencies have accepted rather than fighting back against the fee system, as dictated by procurement. Ad agencies, particularly the network owned shops, are so determined to win business at any cost that they have cut their margins to the point that they can barely afford to service an account once they win it. Clients are insisting on being serviced by senior people only and agencies, to their detriment, have accepted that mandate.  As we all know, the problem now is that by short-staffing and under-training juniors, seniors are forced to do work which should be done by more junior members of the team, thus often limiting the people who should be thinking about strategy to spending too much time executing.  

Since clients underrate juniors, so do their agencies.

As evidence of all this, ad agency financial people have mandated that human resources not use  recruiters for junior jobs. They just don’t care about the quality of their new, junior employees. If their young people succeed, so much the better, but if they are not good or fail, they are totally replaceable.  There is a considerable body of evidence which indicates that talent placed by a trained outside recruiter (not the contract employees hired, mostly on a temp basis to fill jobs if they are in a crunch) is of higher quality and stays longer. The attitude of the financial people is that one young person is just like another, so it doesn’t matter if we get the best talent through networking.  In many cases this is also true for senior and management jobs. 

The result is that there is a talent crisis in the business. The best young employees have to figure out their own career paths and how to get the training they want and need.  This causes additional turnover which, for ad agencies, is expensive.

Turnover is at an all-time high. Really good juniors change jobs frequently in order to increase their salaries up to a livable level. And because agencies don’t invest in training, there is low allegiance; one of the things which training programs did was to foster a sense of commitment. Advertising, even when there were training programs, always had high turnover, but there were still many employees who remained for years.  Today, that is becoming rarer.

Financial departments do not count the cost of turnover (other than possible recruitment costs) which is a non-balance sheet item:  lower productivity, training and retraining, lost client relationships are difficult to measure.

Ad agencies need to take a tougher position with their clients when negotiating fees.  Investing in people should be the number one priority.

Ad Agencies Often Fire Their Best Employees

Not long ago, a director of human resources sent me a person she called a star.  I asked why she would be sending me such a high quality employee.  Her response was startling.  She said that this person’s account was leaving the agency and she was so good that she wanted to help her find new work quickly. The person she sent me was an account supervisor; she was at a large agency where there were actually many, many people at her level. Surely she was better than others with her same level and title. When I asked why a star would not be placed on another account, I was told that that kind of move required too much effort.  Ouch.

About two weeks ago the same thing happened with a much more senior person.  He had been with his agency, one of the top ten, for about twelve years.  He was promoted about every two years and was responsible for running several major accounts and had been rotated to run a new business pitch; the assumption was that if the agency won the account, he would be running it.  The agency won the account.  Several months after winning it, the agency was told by the client that they wanted the account moved to another city where the agency had an office. Unfortunately, this person's personal situation preclude his relocation.  Consequently, he was terminated (in fairness to the agency, he was given six months’ notice).  This is another case of "too much trouble"; surely there is an account where someone with his stellar credentials could have been moved on to.  Stars like this person should not have to worry about their jobs.

Part of the problem is the way accounts operate under the current fee system.  Before fees, rotations were common at every level, from juniors all the way to the most senior account, creative, media and strategic leaders.  Many agencies were proud of their rotation system and it was often brought up in initial client staffing meetings.  Rotations helped employee retention and were generally good for business.  Consequently, all an agency had to do was go to the client and tell them that it was time to rotate even their most senior account people (who were moved less often than the more junior employees.  Now, under fees, the client is actually in charge of his/her own business and can fight back:  “We are quite happy with so-and-so- and we are paying for him/her”.  Difficult under these circumstances to make changes. It means that agency management, including human resources, must commit to spending time and effort to make personnel changes happen. Consequently, it is easier and requires less time and administration to let the status be quo.  

As a result of this procedure, there are some very good people out of work in advertising.

The irony is that as recruiters, we still get assignments where the client company tells us that they would prefer candidates who are currently working.  In this day and age of the "rent and employee" attitude, this policy makes no sense.  That is why I always balk when we get a job assignment and the agency tells me that they don’t want someone out of work.  Often, an out of work person may be better than those who are working.  It is a great incongruity in the business now.

Adventures In Advertising: Don’t Bring The Client Home

This is an amusing story of what can happen with fees paid to an advertising agency.  It is a true story of a client who was paying a fair fee to an agency. But first a short background.

Back in the late eighties, Robert Jacoby, then chairman and CEO of Ted Bates put over $100 million in his pocket when the Saatchi’s bought his agency.  He was accused of being greedy and was highly criticized over the amount of money he earned.  It certainly helped to put the nails in the coffin of agencies earning commissions as many clients felt that their agencies were overpaid and switched to fees as a result.

This is a true story of another situation where a client ended up resenting the fees it paid to one of its ad agencies.  I have been asked to keep the identity of both the agency and the client private.  

An agency chairman/CEO was attending a focus group in a nearby suburb.  As it was told to me, he decided to go because the groups were taking place only about ten minutes from his home.  In attendance were several agency people as well as two client brand managers, a client R&D person and the two or three people in the corporate new products group.  Towards the end of the afternoon, the chairman thought it would be nice to invite the group back to his home for tea and coffee.

Bad idea.  

The chairman was independently wealthy and lived in a huge home right on the Long Island Sound. It was one of those homes that ends up featured in “Living Large” and selling for millions. One of the executives from the agency warned the chairman that this was the wrong group to see his home; they were mostly junior to mid-level executives.  His home was filled with antiques and incredible and expensive artwork.  The executive who asked him not to do this thought it inappropriate for the clients to see how the chairman lived.

The chairman would hear none of it.  He called his housekeeper and asked her to set up for ten or twelve guests.  What she put out was very elaborate.

When the clients went to the home they were overwhelmed by its opulence.  As I was told this story, none of the people from the client had ever been in a home like this (true of everyone there).

The next morning at about 8:30am, the head of account management at the agency got a call from the client marketing director (who had not been there).  The conversation was startling. It went something like this, “What did Peter [made up name] do last night?  Why would he have middle to junior level executives in his home?  They had no business seeing his riches and were actually overwhelmed.  As a result, two people have already come in to my office this morning to complain that we were paying too much in fees to the agency.  Before this visit they already thought it was too high [it was].  I have no choice but to cut the fee.”

The fee was cut by several thousand dollars a month.  For the chairman, it was a very expensive lunch.

There is a lesson here.  In a service business, where fees are paid, it is probably a good idea to keep what you own and have to yourself, no matter how modestly or elaborately you live.

Adventures In Advertising: Getting Fired At A Christmas Party

 Because it is that time of year, I thought I would post two Christmas party stories.  One was a couple of weeks ago and was about a terrible party.  This is the second, but has a much happier ending.

Years ago I worked at a great agency, McCaffrey & McCall.  Both Jim McCaffrey and David McCall were wonderful to work for and with..  I was a Senior Vice President and ran a couple of accounts. Jim had announced his retirement.  The big mystery was who David would hire as a partner and president.  Tradition was that the agency made big announcements as a surprise at the agency annual Christmas party. It then closed for the holidays.

McCaffrey & McCall was actually one of the very first agencies to close between Christmas and New Year’s.  The party was generally given a day or two before the holidays began; it was a big, festive party, always given at a popular restaurant/club.  There was a lot of drinking, followed by lunch and whatever announcements the agency was going to make (promotions and other big news) and the party ended sometime in the afternoon.  Drinks were continued at the bar. When it was over, everyone went home for the holidays.

Jim McCaffrey had announced his retirement some months before.  David McCall, in a not so surprising move, announced the new president at the luncheon.  And with that, he introduced, Bobby Statz as the next president of the agency.  Everyone laughed.  Bob was not an advertising executive, he was not even in advertising.  He was well known to most of the agency as a comedian.  Bobby did sales meetings and the like and had performed for my clients many times.  Bob, as I recall, had an act where he was always drunk (maybe an act, maybe not) and he would memorize names of executives and insult them or otherwise abuse them in his routines.  Bob was immensely funny. But he was certainly not a president – on this day he was unshaven and poorly dressed (he actually looked that way most of the time – and it was long ago, when everyone, particularly senior executives still got dressed up for work).

Of course everyone, even those who did not know him, got it immediately that it was a joke. He managed to insult most of the senior executives and he also made funny and outrageous promises for the coming year – as I recall, a four day work week, free transportation to and from work in limousines, all raises would be 15-20%, etc.  Everyone laughed and enjoyed the performance.

After his performance, the party broke up and many of us adjourned to the bar.  Bobby joined us.  And then, while we were standing there, a man who was a media estimator approached Bobby. (Do any of you remember media estimators? They existed in the days before computerization and were responsible for costing out client media and reconciling spot TV performance vs the estimates.  They kept track of discounts, make-goods, etc.) We’ll call the estimator Andrew. He was a man in his forties, wore a toupee and was one of those clerks whose face everyone knew, but no one really talked to because he kept to himself.  He came over to Bobby and introduced himself and congratulated him with a big handshake.  We thought he was doing a gotcha on Bobby.  Statz put his arm around him and said something like, “Ah, yes, Andrew, I’ve been wanting to talk to you.”  He then took Andrew over to a corner.  They apparently had a good conversation which lasted a few minutes, but we were too busy drinking and having fun to pay any attention.

Five minutes later, Bobby came back to the bar.  Someone asked him what he had said.  Bobby said, “Oh, I fired him.”  We all laughed and went on with the party.

On the first working day of the New Year, after a week off, I was in, as always, at about 8am.  I was generally the first one in.  But on that day, I heard a lot of unusual noise coming from a nearby interior office (this was long before open space. Everyone had an office, or at least shared an office with one other, at most).  I walked over to the office to see what was happening.  There was Andrew in his office putting things in boxes.

I asked him what was going on.  With a straight and serious face, he said, “I was fired.”  I asked him what he was talking about.  He said, “Mr. Statz fired me and told me to take the holidays off but to come in today to clean out my desk.” I gulped in shock and couldn’t believe that he actually thought it was true.  Suffice to say, I was horrified.  I explained that Bob Statz was a joke, and Andrew told me I was wrong.  I realized that this poor guy had spent the entire holiday thinking he had been let go. OMG, what to do? I told him to stay put and not do anything or go anywhere.

I wasn’t sure what to do, but as I was leaving Andrew’s office, I saw Don Goss, who was an EVP and the head of client services.  He was my boss. I flew into his office and told him what had happened.  He was at the bar with us all after the party.  Don couldn’t believe what had happened.  Well, he couldn't believe it until he poked his head into Andrew's office and saw him packing his things.  He told Andrew to stay put and he suggested to me that we go right up to David McCall’s office.  Like us, David was always in early.

David, at first, didn’t believe us because it was truly impossible.  We had to convince David that he had to do something. David was horrified; he was also the world’s nicest guy. The three of us went down to Andrew’s office.  On the way down, David confessed that he had no idea what to do. Neither did we.

David explained to Andrew that it was a total miscommunication and apologized. He immediately gave him a huge raise (I don't remember how much it was, but Don and I thought Andrew was now the highest paid media estimator in the city).  Then David did the most incredible thing.  David asked Andrew to call his wife.  David took the phone, apologized to her for having a miserable holiday and then invited her to have dinner with Andrew at the Four Seasons followed by theater, with a limousine to pick her up, take them to theater and then take them home, all as guests of the agency. He told her about the raise and then told her that everyone loved her husband (David barely knew who he was).  

It was an amazing on-the-spot recovery.

It is simply an awful story with a lovely ending and I think with his raise, Andrew became the highest paid media estimator in the business.

May your holidays be wonderful and filled with love.  And may you all get a great raise.

Adventures In Advertising: The Most Unhappy Office Holiday Party

Now that we are getting close to holiday party season. I thought I would tell two holiday party stories, both pretty weird.  This is the first of them.  It is the story of a holiday party no one wanted to go to and is 100% true. I hope all of you have a wonderful holiday season filled with love, friendship and happy parties, none like this one.

I have tried to stay to the facts with no exaggeration or creative license because it is amazing enough as it happened.  You can’t make this stuff up.

I joined the agency in the fall as a senior partner and I quickly learned that it was very dysfunctional – more than most.  This story is a good illustration of why.  By November, people were asking me if I could do anything to make the upcoming holiday party more spontaneous and fun.  People told me it was very dull, stiff, formatted and un-spontaneous.  The party was organized and run by the office manager, who was a lovely woman, but very anal – everything in the office, including this party, was scheduled and controlled.  (I wisely decided that since I had just joined the agency and it was my first party, I would not get involved.)

The biggest hint that this event would be laborious was the way the invitation was sent. It was a staff memo - formal and cold and very matter of fact.  The party was at a downtown, West Village restaurant that no one had ever heard of (before or since).  The agency was nice enough to pay for employees to get to the party, but only if they went in assigned groups.  The car pools had been set up by the office manager and only the designated employee could pay and be reimbursed.  The invitation stated that when we arrived at the venue, we should be sure to check in with a designated employee so that they would know that we were there (message: attendance is mandatory).  Nice way to create esprit de corps.

Sure enough, the week before the party, every employee was given a car pool assignment – there was no switching.  The first car was to leave at 5:15 for the long ride down to the venue.

Once there, each person was given chits for drinks (who ever heard of chits at a private party?). Of course, table seatings were assigned so that there was no spontaneity.  Senior management, including me, all sat together (heaven forbid that the senior executives should sit with and mix with other employees).  There was no music initially and nothing conducive to fun or a real party.  The smart people belted a couple of drinks down before dinner was served.

There were no speeches, no welcome, no thanks for a good year.  I was told by long term employees that this was usual.

It was the most dour and least festive group I ever saw. No one got dressed up because no one gave a damn.  Dinner was pre-set with a choice of meat or fish.  There were no options for other courses.  It took until about 6:25 for everyone to arrive.  Dinner was served promptly at 7.  Everyone got a glass of wine, but there were no refills.  The wine and food were actually good.

At 8:30pm the DJ arrived and set up.  He was allowed to start music at 9pm.  The music was actually good.  The DJ was allowed to dim the lights, but there was no disco ball or complicated lighting.  I actually did say something and the president of the agency told me that, “This is an ad agency, not a radio station.” Huh?  Shortly after the music started I looked around and the other senior executives were nowhere to be seen.  It was only about 9:30.

What a waste.  The worst part was that the management of the agency was so removed that they had no idea that there were any issues or that anything was wrong with the party.

I did not stay at the agency even a year, but I heard that the next year was even worse.  It was held at an expensive mid-town restaurant and there was no music at all.  Just a dull dinner. And I was told the food was terrible.

The irony of this is that one of the best holiday parties I ever attended was at a smallish agency where there was no formal party, but everyone brought food and drink; someone brought music tapes (remember them?) and we had lots of fun drinking and dancing.  It doesn’t have to be formal.

Have a terrific holiday season filled with fun and love!!!