SUITS: As clients and consulting firms hire MBAs, the advertising industry reevaluates its recruiting policies



By Greg Farrell





B-SCHOOL BROWNOUT





Last November, Shelly Lazarus slipped out of a worldwide management meeting of Ogilvy & Mather and dashed 60 blocks north to make an unusual new-business pitch. Nearly breathless, she arrived in the middle of a presentation by colleagues from O&M’s holding company parent, the WPP Group.





She took the floor before the assembled audience, and filled the room with the story of her remarkable rise from secretary to chairman and chief executive officer of Ogilvy & Mather. Although Lazarus promoted O&M in her speech, her ulterior motive was to sell the advertising industry to this difficult group of 80 students at the Columbia Business School, her alma mater.





Following the presentation, some 40 students applied for WPP’s MBA entry-level program. Of those, five were invited back for a day and a half of interviews and, of those five, two were ultimately hired. The presentation was a success. But this was one pitch where WPP did not face any competition from another agency: It was the only advertising firm to schedule a formal recruitment session at Columbia.





How ironic that the ad business has, with near total unanimity, abandoned a class of people it recently viewed as its salvation. Account managers in their 30s can remember a time less than two decades ago when clients accelerated their hiring of MBAs as brand managers. In the reactive mode that characterizes the business, many ad agencies followed suit, recruiting MBAs to match up against their new generation of clients.





“When I arrived in 1980,” recalls Eric Keshin, director of account management at McCann-Erickson, New York, “I was the only one hired without an MBA.”





The massive infusion of MBAs into advertising in the 1980s did little to stave off the industry’s loss of primacy. If anything, the swelling population of MBAs on the client side, combined with an increase of like-minded B-school types on the agency side, probably helped eradicate some of the sense that ad agencies possessed a magic that was unfathomable to most corporate marketers.





This new army of highly educated and expensive recruits left some advertising executives unimpressed. “We would recruit at Wharton and Harvard and Columbia [business schools],” says Mort Lowenstein, former executive vice president, worldwide group director on AT&T at Young & Rubicam who retired in 1991. “We paid them twice the salary of the Dartmouth grads, but they didn’t seem to perform any better, and they’d leave sooner, while the regular college people were hanging in there. Ed Ney [former chairman of Y&R] used to complain that many [MBAs] came here for a year and then left.”





That skeptical attitude, combined with the consolidation and shrinkage of the business between 1987 and 1992, contributed to the end of the era of the MBA in advertising. In recent years, major ad agencies have gone back to the tried and true: recruitment of the next generation of talent directly from college.





The reasons for this shift are both economic and competitive. Amy Hohulin, vice president, director of recruiting for client services at Leo Burnett, says agencies in general offer salaries that are lower than an MBA can command from the client side. Further, she says, management consulting groups have become far more aggressive about recruiting MBAs. Hohulin and other agency recruiters observe that the consulting firms can entice B-school graduates not only by offering better salaries and overall packages, but also by allowing MBAs to defer by several years the big decision of what career to pursue.





An informal survey of major agencies shows that Burnett and WPP are currently the only firms that regularly recruit at the MBA level. Hohulin says that until five years ago, Burnett’s incoming classes were half MBAs and half college grads. Today, the MBA portion has shrunk to about one quarter of the whole. (Burnett recruits 25 to 30 people at the entry level for client service each year.)





“We’re not ready to walk away from MBAs,” Hohulin says. “They have some terrific work experience, and the MBA gives them some perspective. It’s nice to have some people who have worked elsewhere.” Still, Burnett can’t outbid other potential employers for most MBAs. “You have to want to come to Burnett,” she says, noting the “salary sacrifice” of choosing an agency career can be offset by other long-term inducements at the privately held firm.





Burnett, at least, has kept in touch with the MBA segment by visiting business schools such as Northwestern’s Kellogg, the University of Chicago and Michigan each year. But what alarmed Brian Brooks, group director of human resources at WPP, was that his company had no regular recruitment program at the graduate level. Martin Sorrell, WPP’s founder, is a Harvard Business School alum who cut his teeth in the ad business as chief financial officer for the Saatchis during their 1980s acquisition spree.





“A few years ago, Martin Sorrell and I sat down to talk about the fact that we weren’t competing in the market [for MBAs],” remembers Brooks. “We thought about the range of reasons why the industry isn’t competitive for those kinds of people. We are proud of the diverse range of people in our organization. But if that diversity doesn’t include MBAs, we’re not covering all of our bases.”





To address the problem, Brooks and Sorrell devised a program that would help WPP clear some of the financial and competitive hurdles that ad agencies face in attracting MBA talent. The package they devised offers the following: Any MBAs who join WPP have to commit to stay with the organization for at least three years. In return, WPP guarantees it will rotate the grads annually from one company to another, from J. Walter Thompson, say, to Hill and Knowlton, or to any of a number of other communications subsidiaries. Further, WPP allows the MBAs the opportunity to work overseas, depending on their interests and career goals. Finally, the parent company kicks in a salary supplement designed to increase the MBA’s agency salary to the level he or she could make on the client side.





So far, Brooks says, the program has been a success. In addition to Columbia Business School, other stops on the WPP road tour include Harvard, Kellogg and the London Business School. Last year, the program netted four hires; the company brought on the same number of MBAs in 1997.





“Now that’s only eight people out of 22,000,” Brooks concedes, “but after five years, that will be 20 MBAs. And 20 people can make a big difference.”





“In the competition for marketing talent between clients and agencies, the salary structure used to be a toss-up,” says Garth Hallberg, a professor of integrated marketing at Columbia Business School and a veteran of J. Walter Thompson and Ogilvy & Mather Direct. “Today, the salary structures are no longer a toss-up.”





According to information provided by business-school recruitment offices and feedback to agency recruiters, major clients, depending on their needs and the quality of the candidates, are offering MBAs positions as brand managers with starting salaries ranging from $60,000 to $80,000. At the uppermost end, most ad agencies are only able to offer about $50,000 to $55,000 to the same candidate (who probably has racked up tuition debt of some $50,000). The strong push by management consulting firms into the recruitment scene has skewed the pitch further. The starting salaries offered by those firms can range from $75,000 to $110,000, depending on signing bonuses and tuition reimbursement packages. The consulting firms offer the added attraction of letting their hires work at top levels for a variety of clients for the first two years, allowing MBAs another 24 months to play the field.





“What you’ve got is a couple of trends,” says Sam Hill, who moved from consulting firm Booz Allen & Hamilton to become vice chairman of business development and planning at D’Arcy Masius Benton & Bowles just two months ago. “With the downsizing of America, the consulting field has just exploded. It has sucked up everybody with a pulse in business school. Now the talent pool is much thinner, and ad agencies have gotten priced out of the market. It’s a dangerous spiral for agencies. It’s a talent time bomb.”





“Management consulting firms are looking to fill the void that agencies created,” says Hallberg. “They’re dealing with the ceo level, rather than needing to go down to the division level. The big story is that the agency business is not a forward-looking business; it has become reactive. The question is whether the agencies can react fast enough when change hits. I’m surprised at the few number of [students] considering an agency career. Like most young people, they tend to think the future is already here.”





Industry powerhouses like McCann-Erickson and Grey Advertising don’t do any formal recruiting at the MBA level, focusing instead on undergraduates. Last year, McCann inaugurated a program of visiting some 15 universities to troll for talent, mostly Ivy League schools as well as colleges like Georgetown, Duke, Northwestern, Williams and Syracuse.





“It’s not that we’re not going after MBAs, but that we’re not going just after MBAs,” says Donna Borseso, senior vice president, director of human resources worldwide for McCann-Erickson. Borseso says formal recruitment of MBAs at McCann stopped five to seven years ago. Formal college recruitment was stepped up at the request of Eric Keshin, director of account management, and Jim Heekin, president of McCann-Erickson North America.





“What I’m trying to do in account management is to create a fountain,” Keshin says. “We’ve redefined account management. They are idea people. We’ve got to have people who are multidimensional originators of ideas and protectors of ideas. Rather than only hire to fulfill a need, we bring in six to seven people every year.





“The realities of the MBA, or the realities of salaries at the assistant AE level, don’t get us the cream of the crop at the MBA level,” he adds. “We believe the most realistic place is the college-graduate level. You get enthusiasm and an opportunity to mold people. We’re looking for the most enthusiastic people who want to be here.”





Advertising can appear archaic to today’s business-school grad, contends Andrew Campbell of CKS Partners, which did some recruiting at Columbia and other business schools this past year. “Ad agencies tend to give away a lot of stuff in order to get the media,” he says.





To Lee Daley, managing director/director of strategic planning at Amster Yard, the creative and strategic offshoot of McCann-Erickson, the question of where one recruits the next generation of talent is fundamentally important to the industry. “Do ad agencies want MBAs?” he asks. “Maybe agencies don’t need that kind. There’s a crisis in terms of the next generation of management. Agencies have not invested in training their people. You have to establish a balance between people with a conceptual nature, the raw material to come up with abstract concepts and ideas, and those people who understand how to work the business side. I would always go for the raw material and energy that produces great creative thinking, and train them to be a great business person.





“The problem is, the advertising industry hasn’t recruited advertising people. What you’ve got is service folk. Everybody [at Amster Yard] is a creative partner. That creativity cannot be confined to the creative department. It’s got to be part of what we offer. It’s why small agencies are going to win. An agency should be like a boiling cauldron of oil, not a reservoir. An agency’s core role is to challenge. By its nature, creativity is disruptive. But this is an industry that’s locked into, and historically defined by, the media-based commission.”





At Wells Rich Greene, recruitment of new talent is in the eye of the beholder. “We’re not looking for people with particular backgrounds,” says Paula Forman, president of the agency, “but for people with a particular way of thinking-people who think ‘otherwise.’ You do have to recruit against a vision. Those of us in a senior position are able to identify a Wells type almost immediately. A fundamental energy for ideas is what we’re looking for. Skills can be taught across all disciplines.”





Forman’s own history proves the point of how important it is to have people of diverse backgrounds in an advertising agency. With a Ph.D. in sociology, she entered advertising through an agency market-research department. Some of WRG’s best new recruits, she says, include a lawyer, a comedy writer and someone from the television industry.





What of the MBA students-how attractive is a career in advertising to them? Kristen Smith, who used to work in the media department of J. Walter Thompson and just finished her first year at Columbia Business School, is not returning to Madison Avenue. The economics of the ad business are not favorable. “Consulting is big money,” she observes. “I just don’t want to be on the service side of a service industry.





Consultants are always going on to new clients. You just don’t have that newness in advertising.”





“[Advertising] is low-paying,” says Dae Mellencamp, who just earned her MBA from Columbia and is searching for a marketing-related job. “That’s why they’re not looking for people with MBAs. The value placed on the MBA degree is small in the advertising world.”





“Being a Harvard Business School graduate has been very helpful,” says Fran Kelly, executive vice president of Arnold Communications, Boston. Kelly worked at Y&R in the early 1980s during “the height of the MBA craze,” he says. He went to work for another Harvard MBA, Ed Eskandarian, at HBM/Creamer. He then moved to Providence, R.I., for five years to run Leonard Monahan Lubars & Kelly, before Eskandarian brought him to Arnold. After his years at Harvard, he and his wife wrote the book, What They Really Teach You at Harvard Business School.





“There’s no doubt that [the MBA] has opened doors,” Kelly says. “It’s helped me have a different perspective. Still, if you’re not a good advertising guy, going to Harvard Business School won’t help you be successful. If being a great ad guy is in your blood, though, a Harvard MBA can only make you better.”





As far as Mort Lowenstein, the former Y&R executive, is concerned, the low value accorded to the MBA degree is fully deserved. He likes to tell the anecdote of a woman from Kobs & Draft who was applying for a job on the AT&T account with Y&R years ago. This woman passed with flying colors all the early rounds of interviewing and was sent up to the vice-president level for more interviews. Before she interviewed with Lowenstein, the final word on the AT&T account, the recruit met with a senior vice president, a bright, Oxford-trained MBA who worked for Lowenstein.





Following their interview, Lowenstein asked the MBA what she thought of the potential hire. “She’s good with clients,” he recalls being told, “but I’m concerned that she doesn’t have enough marketing skills.” Lowenstein then asked the Oxford MBA what her last great marketing breakthrough had been, a query that flustered her. The woman admitted she had not come up with any lately, but she knew of a thousand. He pressed further. He wanted her to recite just one from that thousand. She couldn’t do it, Lowenstein says, because genuine marketing breakthroughs-the kind that change consumer behavior-are rare. The most recent marketing breakthrough he knew, Lowenstein told the MBA, was American Airlines’ creation of a frequent-flyer program.





The moral of the story: The Kobs & Draft woman-who was good with clients but “lacked marketing skills”-got hired and is still with Y&R these many years later while the Oxford-trained MBA is long gone.








A longtime editor and writer at Adweek, Greg Farrell is working toward his MBA at the Columbia Business School.





“The Class of ’96: A Compensation Survey








…..Occupation…..%…..Salary Range…..Median





…..Management consulting…..18.5…..$55,000-196,000…..$111,000





…..Corporate finance/investment banking…..15.2…..62,000-164,000…..90,000





…..Investment management research…..13.9…..30,000-245,000…..87,000





…..Brand/product manager…..7.0…..50,000-104,000…..74,000





…..Institutional sales (financial services)…..5.2…..60,000-137,500…..95,000





…..Mergers and acquisitions…..4.8…..65,000-222,000…..90,000





…..Strategic planning (consulting)…..4.1…..50,000-132,000…..85,000





…..Business development (finance)…..3.9…..68,000-120,000…..80,000





…..Trading…..3.3…..55,000-122,000…..87,500





…..Advertising…..*…..*…..97,000











Source: Columbia Business School. Columbia’s May ’96 graduating class of 600 students found employment in 32 occupational categories. *Indicates less than 1 percent.











Copyright ASM Communications, Inc. (1997) ALL RIGHTS RESERVED





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