Execs Spar on Compensation

NEW YORK Agency and client executives agreed compensation parameters must be clearly defined, but they offered starkly different perspectives on how to negotiate and manage such deals during a session here at Wednesday’s Association of National Advertisers Forum.

Draft FCB CEO Howard Draft, for example, advocated an “open book” approach in such negotiations, with agencies providing salary, overhead and rent costs, if asked, in order to arrive at a fair compensation formula.

Asked later by an attendee why an agency would share salary information, Draft said, “I feel very comfortable letting their accounting firm see it.”

Anomaly co-founder Carl Johnson suggested that clients be less concerned about how much time agencies spend on their business and focus instead on ways to reward the quality of ideas. In fact, one of the shop’s basic principles is that it does not track its hours.

“How can I make money using time sheets? By having more people take longer” to solve a client problem, Johnson said. Instead, clients should encourage agencies to work faster and embrace the concept of value-based compensation, providing bonuses for ideas that exceed expectations, he said Johnson.

Mcgarrybowen chief strategic officer Stewart Owen also called for pay-for-performance mechanisms in agency contracts. And while the New York shop is “comfortable” with timesheets, Owen noted, “you reward inefficiency” when the “only lever that remains for an agency is, ‘I need more people. I need more time.'”

WellPoint vice president of advertising Michael Howe stressed that when an agency exceeds expectations, client bonuses should be paid to staffers directly responsible for the business. However, he cautioned that it’s not always clear exactly who deserves credit for the concepts an agency develops, particularly when staffers work in groups. Besides, he added, “[That’s] beginning to dabble in the agency business, which is what you shouldn’t do.”

On the broad topic of integrated marketing communications, Draft, Kraft Foods’ Jane Hilk and Goldman Sachs’ David May agreed that clients must take a strong hand in managing the campaign development process, particularly when multiple agencies are involved.

“You’ve got to have a client-led model,” said Draft. “You can’t assume agencies are going to work together. They’re not.”

So how do you get them to collaborate?

“You expect it. And you articulate it,” said Hilk, vice president of integrated marketing and growth channels at Kraft, who demands credibility, chemistry and commitment from her shops. “You tell them that’s what it means to be one of our partners.”

The ANA Forum was held at the Grand Hyatt Hotel.