TOP

WHAT AGENCIES ARE DOING TO COPE

Innovative, independent agencies are embarking upon vastly different strategies to compete for and retain talent.

Work/Home Life Balance:

One firm (not in Silicon Valley) decided that what mattered was the balance between work and home life. After a careful analysis of the cost to replace a valued employee, the agency instituted a retention/benefits program. It included three months off with pay (at the end of four years of employment) along with an elaborate series of personal learning benefits and health fringes. Even in the first year of work there was a month of paid vacation and personal days (that could be used for illness or time off as needed.) The program was well crafted to reflect the values of the founder. The firm encourages a normal 40-hour work week and intervenes to fix a problem if an employee is regularly staying late.

Creating Wealth/Going Public:

Several firms are looking at the issue of taking themselves public -- in essence, becoming a startup. Key employees are being offered stock, which could soon be extremely valuable. It will be interesting to see how the market values an organization whose assets are people, not products. For an innovative, independent agency that has been effective branding/positioning itself as a "winner" there could be excellent upside potential. A stock purchase program could be instituted for all employees, while the most senior members of the agency achieve "key employee" status. It would be an excellent retention strategy especially if there were a relatively short (achievable) vesting program. I’m sure we’ll see this strategy implemented in the next few months.

Creating Wealth/Stock in Lieu of Full Fees:

Another approach is to take a stock position rather than a full fee from a client in a high growth mode. The stock could be priced at a pre-IPO level, or as a relatively new public company. A formula would be worked out to define the value of pre-IPO stock. One firm takes 20% of its fee this way. In order not to penalize agency staff (if they didn’t happen to work on the most lucrative account) profit from stock is pooled and an across the board average determines the pay-out.

Creating Wealth/A Venture Fund:

Establishing a venture fund from company profits and sharing the profits (assuming there are profits) is yet another program to generate wealth. Companies selected could be a mix of clients as well as recommendations from employees. This fits the model for longer-term gain with a high degree of risk and reward.

Creating Wealth/Partnerships:

Sharing the business with key employees by granting minor partnership status with stock purchased over several years encourages stability. Those shares of stock have vesting clauses that state, if the company were sold, the stock would immediately become fully vested. This arrangement would encourage stability in a time of uncertainty.

Creating Wealth/Salary Increases Directly Tied to Client Billing:

For the smaller agency -- this is an attractive incentive. It allows an ambitious professional to work within the security of an organization to grow the business and reap the benefits from increased client billing. One agency owner established base line performance goals and billings to justify a starting salary, then outlined specific financial rewards for increased client revenue, client retention (contract renewal) and new business acquisition. The formula was complex, paid immediately and mutually beneficial. If the newly hired manager were successful, earnings could increase by 20% within 6-months.