As with other businesses, the advertising and marketing field is basing a greater portion of total executive pay on bonuses.
According to a survey done exclusively for Advertising Age by Altschuler, Melvoin & Glasser, this trend covers not only top-echelon executives but also upper-range managers.
The trend is especially true for ad agency titles-specifically art directors, chief copywriters, media directors, senior account execs and account execs.
Although the average dollar amount of these bonuses is a fraction of that given marketer executives, these agency bonuses amount to a growing portion of the staffers' base pay.
For these employees, bonuses totaled between 13% and 17% of base salaries, according to the survey. In contrast, last year's salary survey found bonuses came to between 6% and 8.6% of base salaries.
Top-level agency executives also saw bonuses play bigger parts in their total pay. For CEOs, bonuses totaled 31% of base pay, up from 25.5% last year, while bonuses added to 17.5% of creative directors' pay-up from 14% last year.
The recession in the early 1990s spurred considerable downsizing within the advertising and marketing communities. Now that business has picked up again, agencies-like many other companies-are trying to run more efficiently with fewer people.
As part of this business philosophy, shops are holding more levels of executives responsible for their compensation.
For example, one New York agency has initiated a bonus plan for core groups working on the same accounts. Bonuses essentially are tied to the profit & loss statements of the business. These bonuses affect only a small percentage of agency employees.
At another Manhattan shop, bonuses have been reconfigured to take into account not only an employee's teamwork contribution, but the employee's success in boosting existing client business and in bring in new business. This performance pay is then doled out in the form of a bonus or share of company stock.
The importance of bonuses in total pay packages also grew for brand managers and advertising VPs at marketers.
Bonuses amounted to 22% of the average base pay for the VP-advertising, up from 16.5% last year. For VP-brand managers, bonuses shot to 26.5% of base salary, up from only 17.3% last year.
At marketers, the average total pay-or salary plus bonus-ranged from $121,344 for a VP-product manager to $150,932 for a VP-marketing.
Meanwhile, the average total pay for agency CEOs and creative directors, the top two positions measured by AM&G, was $161,340 and $99,918, respectively.
The increased emphasis on bonuses as part of a total compensation package should continue next year, according to the AM&G survey. A notable number of agencies said they didn't plan on increasing the base salary for the positions examined, especially for CEOs and creative directors.
Almost one in three agencies said they wouldn't increase the base salary for their CEOs next year. One in five said they wouldn't hike the base salary for their creative directors.
The share of respondents saying they wouldn't raise base salaries for lower-ranked executives ranged from 13% for copywriters to 16% for art directors.
With base pay predicted to grow from 4% to 8% next year, it appears that pay increases next year for agency executives will depend heavily on performance pay.
These findings reflect those of an industrywide compensation survey from Hewitt Associates, a benefits consultancy that conducts an annual salary survey.
According to that survey, the average merit pay raise in 1994 was 4% across the board, the lowest figure in nearly 20 years. On the other hand, about six in 10 companies surveyed offer some type of results-sharing program to help boost pay. One other factor at agencies could put a heavier emphasis on bonuses for executive compensation: the rash of top-level turnover this year.
Agencies trying to run leaner and meaner may offer replacement executives pay-for-performance salary packages instead of the traditional, salary-heavy package.
The compensation package for Steve Dworin, named CEO of N W Ayer & Partners, New York, in April, reflects this thinking. Despite being one of the most aggressively recruited executives in recent agency history, his compensation reportedly will be tied to his abilities to boost revenues and profits.
More marketers are offering stock options to mid-range executives. About 30% of surveyed marketers offer stock options to a VP-product manager, 24% to a VP-brand manager and 25% to a VP-advertising. In last year's survey these figures were 21%, 14% and 15%, respectively.