Overall, head count at the core agency level was 31,407 as of Oct. 1, 2000, up 5.4% compared with the same date in 1999. The core number-the basis for the Top 30 listing-reflects the traditional ad agency stripped of its specialty and independent operating units.
GROWTH OF 8.3%
Agencies also grew 8.3% at the consolidated level, which includes the agency core, or brand, and its non-traditional subsidiaries such as direct response, interactive, sales promotion and public relations. The Top 30 at this level account for 30.2% of all agency employment in the U.S., according to current figures from the U.S. Bureau of Labor Statistics.
That figure could easily rise to 35% if Ad Age included the big media services companies spun from these agencies. Both Universal McCann and Starcom MediaVest Group, for example, have more than 700 employees each. The big media services units that grew out of the Top 30 agencies weren't included because structurally most report now to the parent organization and not to the ad agency.
Acquisitions per se don't swell head counts inordinately in this report because year-to-year data are presented pro forma as if the acquired agency were on the books for two consecutive years. However, acquisitions of marketing services and new technology do enhance head counts because of the mercurial growth being recorded by most players in these specialties.
ACQUISITIONS A FACTOR
On a historic basis, which factors out of the 1999 figures the current-year acquisitions and restructuring moves, growth at the core rose only 4.3%. Consolidated head count leaped 10.4% from the historic figure, growth largely credited to acquisitions.
This year's death of many dot-coms, though detrimental for new business and ad industry spending figures, gave agencies a leg up in recruiting and retaining staff. In the late 1990s, ad shops had to offer fat salaries and impressive titles to remain competitive in the growing interactive business landscape. Agencies benefited by gaining accounts from Web-based clients, but many staffers defected, lured by high pay, stock options and creativity at Web start-ups.
The demise of many Internet-oriented shops brought some of that talent back to the agency pool. Recruitment companies estimate that about 22,000 dot-com employees have lost their jobs since last December. Large shops such as Deutsch, Grey Worldwide, TBWA/Chiat/Day and J. Walter Thompson Co, along with their subsidiaries, lured back staffers from the dot-com arena.
"We're coming through a period covering the past two to three years when there was an incredible escalation of costs for talented people. It was just really difficult for the last couple of years. I get a sense of some slowing down," Mr. Grimaldi says.
HATED TO LOSE STAFF
Although agency staffs grew in 1999, last year proved to be the tightest hiring situation Mr. Grimaldi has experienced. "I felt more threatened by the loss of people than the loss of business," he says, adding that while the market is still strong, it's not as feverish as it was 12 months ago.
John Gaffney, exec VP-media director at Arnold Worldwide, Boston, is relieved to see people filter back in from the dot-coms. He says the agencies couldn't afford to pay what new-age companies were offering. Dot-coms "were in a race to get a product out-no matter what the product was," he says. `They needed talent. Without the talent, they'd lose. How much [they] paid people became immaterial."
The dot-com downturn also has helped agencies with college and business school recruitment. "It's not the same as last year," says Cara Levien, human resources associate at Grey Worldwide, New York. "There are not as many people going to dot-coms. Today, the students we visit on campus probably interned with dot-coms, but with so many companies going under, they are a little bit more frightened."
Although many industry observers say ad agencies lag behind other industries in business school recruitment, Jeff Tritt, VP, Rojek Marketing, Cleveland, says "there's a little more pairing with MBA schools." However, he adds that it's tough to lure top students.
Along with a decline in the fortunes of many dot-coms, the millennium brought with it agencywide employment shifts due to mergers, acquisitions and restructuring efforts. Most of these mergers came about to strengthen existing agency structures and to better supply clients with integrated, global resources.
Following D'Arcy Masius Benton & Bowles' merger with Leo Burnett Co. D'Arcy reported a decline of 235 staffers at the consolidated level due to the shift of agency reporting structure. Last year's historic total included N.W. Ayer & Partners and Kaplan Thaler Group, two New York agencies that are now autonomous units under D'Arcy's new parent, Bcom3 Group. This year, both D'Arcy and Leo Burnett Worldwide fell at the core level, D'Arcy by 1.1% and Burnett by 6.3%. But on the consolidated front, they both measured gains. Ninety percent of Burnett's 292 new hires, which stimulated growth a whopping 14.4% at the consolidated level, came from marketing services and interactive.
Burnett's Digital Garage, a unit of Capps Digital that created Web sites for non-Burnett clients, was renamed Chemistri as it was given rein of the Burnett client list. The shop expanded its head count by 44. TFA/LB Technology, a business-to-business unit, gained 86 employees; NorthStar, a direct, sales promotion, database and relationship marketing agency, added 101 employees, and interactive unit Giant Step added 79.
Redundancies largely were the cause of the 18.6% drop at the core level of Lowe Lintas & Partners, formed by Interpublic Group of Cos. in late 1999 by merging New York shops Lowe & Partners/SMS and Ammirati Puris Lintas. The prior-year head count was the sum of both agencies on Oct. 1, 1999, although they had not merged yet. At True North Communications, Bozell Group's loss of its Cosa Mesa, Calif., and Southfield, Mich., offices (along with its non-U.S. properties) to FCB Worldwide didn't affect head counts since such a restructuring would show up on a pro forma basis. The Bozell count was still down 2.3%, solely a reflection of the absorption of its Seattle office in that of FCB.
Restructuring had a major bearing on the 9.5% growth at the consolidated level for Grey Global Group. Grey Advertising was restructured this April; new parent Grey Global Group succeeded former holding company Grey Advertising, cutting loose the string of subsidiaries under the former agency-parent. All operating units now have parity. "For each to become self-sufficient and take over its own management, the operating units had to staff up," says a Grey official.
CONTINUE INTERACTIVE INVESTMENT
Although dot-com companies were dropping off the map in 2000, agencies continued to invest in the interactive field and technology. New York-based McCann-Erickson Worldwide and parent Interpublic shifted a large amount of interactive business, first moving McCann's Thunderhouse unit with 36 people into Zentropy, an independent IPG company that consolidated various interactive operations, and then allying Zentropy again with McCann.
Because the last switch occurred after the cutoff for the head count survey, McCann left Zentropy out of its totals. Zentropy has since cut employment 14%.
WestWayne, Atlanta, added 18 staffers to its newly created interactive structure, though new and existing account wins were largely responsible for its 20.1% growth at the core.
As in past years, growth in all specialized units-Internet-focused and otherwise-increased most agency employment numbers. New York-based OgilvyOne Worldwide, Ogilvy & Mather Worldwide's fast-growing marketing services unit, jumped in size by 49.5%.
JWT Specialized Communications' new JWT Technology Communications group soared in head count from growth through acquisitions (Dazai Advertising and Imagio) and new-business wins. Employment at JWT Technology Communications alone rose 30% to nearly 70 staffers, according to CEO Russ Fujoka.
BBDO Worldwide plans staff reductions ironically related to a big account win. BBDO and FCB both handled Chrysler Group prior to DaimlerChrysler awarding the consolidated business to BBDO in October. The agency got the account on condition it cut costs by cutting staff.
Contributing: Hillary Chura, Kate MacArthur, Laura Q. Hughes.