NEW YORK (AdAge.com) -- Rising tensions between agencies and marketing procurement have birthed a new role in the agency C-suite: the chief compensation officer.
Omnicom Group's TBWA/Chiat/Day has appointed Neal Grossman, a one-time certified public accountant who over 25 years at TBWA has served in various financial and strategy positions, as its first global chief compensation officer.
The role -- which is distinct from TBWA's chief financial officer -- means Mr. Grossman will be the one leading contract renegotiations with clients and procurement officers, and overseeing fee discussions during new-business pitches. He'll also be tasked with developing value-based compensation models that are mutually beneficial to the agency and its clients.
"With the advent of procurement officers taking incredibly strong roles in client-side negotiation, agencies have been slow to respond with trained and savvy financial oversight in response to procurement," said Laura Bartlett, chief financial officer at the 4A's and former global chief financial officer at DraftFCB. "I think it's an excellent response to the squeeze by clients and the intervention by the procurement side of the business."
Like Ms. Bartlett, industry experts who spoke to Advertising Age hailed the move as a long overdue step in the right direction. But they also highlighted potential pitfalls: For example, an agency "chief compensation officer" requires a unique skill set and would have to be trusted implicitly to make decisions.
'Obviously a problem'
TBWA Worldwide President-CEO Tom Carroll says his agency created the function because financial discussions between clients and agencies have deteriorated to a point where neither side is satisfied. "Twenty-five years ago there was less focus on the money when there were 15% commissions," said Mr. Carroll. "Today there's obviously a problem. ... We are trying to deal with it in a positive fashion and stop whining and focus some real professional attention on the issue."
Of course, the establishment of a dedicated person to carry out every fee negotiation and take every procurement officer's call isn't practical at smaller agencies. And just because such a role doesn't already exist doesn't mean agency execs aren't adept at negotiating with clients.
But experts point out very real problems with the burden falling on others within the agency. At some shops, top account executives have financial discussions with clients. That situation can pose a conflict of interest if the account person wants to protect the interests of his or her team, offering, for example, a deal that would keep the account (and his team) in place, but might not be optimal for the overall agency. Further, that individual doesn't have detailed finances of the agency to properly carry out the job.
While a chief financial officer might understand the agency's finances, he might not grasp the value of different roles within the agency, like producers or planners. And challenges presented by the current economy have meant CFOs often find themselves stretched for time.
"Negotiating with clients and marketing procurement resources takes a certain level of focus, and the role of the CFO in agencies -- particularly in the current economic environment -- is one that is very busy," Brad Dehart, practice leader for marketing-services procurement at ICG Commerce in King of Prussia, Pa. "They have a lot on their plate."
Mr. Dehart supports the idea of an agency chief compensation officer, but cautions that, for it to be taken seriously by procurers and marketers, "It's important for them to be empowered to make decisions in the negotiations instead of being viewed as an intermediary."
Lynne Seid, partner at recruiter Heidrick & Struggles, New York, said, "What I feel is perhaps still a work-in-progress with TBWA's idea is the scope of it is narrow and a little transactional-sounding as opposed to relationship-sounding. ... I feel it's a very strong and professional step to acknowledging a problem. They're giving it a C-level professional title that acknowledges the importance of this issue, and it's better that [the position] is there than not. ... And if it attracts the positive attention of clients, I think you could see other agencies follow suit."