Media Agency Bosses Tackle Turnover, Transparency

Six leaders talk shop at the 4A's conference

In 40 minutes, they covered a lot of ground.

Six leaders in the media agency world gathered on stage today at the 4A's Transformation conference in New Orleans to discuss everything from trading desks and talent turnover to General Motors' massive consolidation of its global media business at Carat and Dentsu's acquisition of Carat parent Aegis Group.

Calera Capital's David Verklin—himself a former media agency CEO—steered the spirited conversation, which included Irwin Gotlieb, global CEO of WPP Group's GroupM; Nigel Morris, CEO of the Americas, Europe, the Middle East and Africa of Aegis Media; Matt Seiler, global CEO of Interpublic Group's Mediabrands; Jack Klues, former CEO of Publicis Groupe's VivaKi; Alan Cohen, U.S. CEO of Omnicom Group's OMD; and Bill Koenigsberg, CEO of Horizon Media.

Koenigsberg broached the talent turnover issue, which he described as a broader industry problem that stemmed from low entry-level salaries and exceedingly long hours for younger employees.

"The turnover rate—of one to two years in the industry—[is] abysmal. Thirty to forty percent of the people leave the industry" in that span, Koenisberg said. "There's so much pressure in terms of delivery. You're talking about kids working 28 hours a day.

"We need to bring more diversity into the industry," Koenigsberg added. "We need to figure out how to right-size in terms of paying more for these entry-level people. We should be competing for the best minds in the industry. People who come out of Harvard or the Ivy League schools—we want them to come into our industry."

This isn't just a marketing problem either, Gotlieb said.

"We've traditionally, all of us, recruited from communications schools. And if you think about it, kids going to study communications maybe study journalism," Gotlieb said. And yet, media agencies today need a much deeper and varied skillset.

"We need a combination of people to do ideation, to do creative work from that standpoint, and do that heavy-lifting and the [numbers] crunching because we have encouraged new technology," Gotlieb added. "And I don't think any one of us has done a good job of that. The industry, as a whole, has done a terrible job."

That said, Cohen suggested that turnover in the younger ranks is a fact of life. "We hire so many people out of college [that] you're not really expecting that those people are going to stay," Cohen explained.

Verklin used the topic of holding company trading desks to raise a broader question about transparency between agencies and marketers. In short, he asked Gotlieb, how can trading desks be fair to clients?

"We have to be transparent with a client on what our business model is," Gotlieb replied. "Then we have to execute that way. Having said that, it doesn't say in Genesis that everything that we do has to be on a fully disclosed basis to the client."

Furthermore, agencies are making big investments in technology and "those investments don't lend themselves to recruitment through overhead charges of 200 or 300 percent—clients won't accept that," said Gotlieb. "We have to compete with parties who are venture-funded or private equity-funded where profitability isn't an issue.

"We have to be able to run an organization that can develop technology, build data structures, exploit it to the benefit of our clients," Gotlieb added. "And there are times—and for many clients it is absolutely acceptable—to be transparent and yet have a business model that is different from a straight commission or a straight fee."

Mediabrands' Seiler pushed back, however, and noted that Gotlieb used air quotes when talking about transparency.

"It's either transparent or it's not. It's not sort of transparent," Seiler said. "We are totally transparent. We don't arbitrage at all. Don't believe in it. There are clients, not necessarily, not specifically of the people up here, who say, 'We just don't understand how it can be that our agency thinks that our money is their money.'"

Klues, for his part, echoed Gotlieb's concern about how to fund agency investments.

"We need to identify—transparently, no air quotes—other models of remuneration if we are to continue to serve our clients as well as possible," Klues said. "Right now, guys, we are in a dangerously risky downward spiral with this [full-time equivalent] cost field. You know, God bless procurement people. I'm not debating their need. I think we all would just like some balance in those approaches."

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