SALARY SURVEY: CONSOLIDATED SIDE OF SHOPS GROW AS CORE UNITS STALL: IN PERIOD OF FULL EMPLOYMENT, HIGH-TECH WORLD, HIRING GETS HARDER

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Buoyant account growth is not producing a reciprocal boost in agency employment, according to Advertising Age's annual survey covering employment at the top 30 agencies.

A core level headcount of these top 30 rose a modest 2.8% for the year ending Oct. 1, which approximates employment growth rate adjustments for the ad industry to be posted later by the U.S. Bureau of Labor Statistics (see chart at left).

Instead of adding new staff at the core level -- the traditional ad agency stripped of its specialty add-ons and independent operating units -- agencies are beefing up employment on their consolidated side, some of this fed by acquisitions in high-growth ad specialties.

HIRING BECOMES DIFFICULT

The core accounts for 70% of consolidated. Headcount at non-core units within consolidated rose 7% versus 18% a year ago.

Hiring personnel has become difficult for agencies, since both advertising and the economy are in full-employment mode, says Roy Bostock, chairman-CEO of MacManus Group, New York.

Agencies are upgrading technologically to increase productivity and hold down their head count to improve efficiency and to avoid laying off employees when the economic cycle inevitably slows down, he says.

Employment swings at the top 30 group is decidedly mixed. New York-based shops like McCann-Erickson Worldwide and Earle Palmer Brown have seen staffing numbers rise from acquisitions and internally from new hot units, while others like N.W. Ayer & Partners have experienced huge dropoffs following divestitures of clients or divisions.

The boom of below-the-line services has been a major factor in the acquisitions dynamic. Traditional agencies have gobbled up resources including healthcare, interactive and direct marketing shops to expand integrated services.

The recent growth spurt at McCann-Erickson is a case in point. Its core employment rose a mere 0.4%, while the non-core units of McCann consolidated jumped 39%. Much of that was from acquisitions.

Earle Palmer Brown's employment rose 15.4%, largely the result of folding the New York and Phoenix offices of Yesawich Moss & Brown in after EPB gained controlling interest in the agency. The New York side brings EPB's N.Y. office to more than 100 employees and billings of $125 million.

Ayer's employment dropped 14.4% at the core but a whopping 31% on a consolidated basis after selling off Media Edge, Advent and Direct Pro following its acquisition last year by MacManus, parent of D'Arcy Masius Benton & Bowles. Ayer had to dispose of Media Edge, which handled AT&T Corp.'s media account, due to a conflict with SBC Communications, a DMB&B client.

Ayer's loss was Y&R Advertising's gain. Parent Young & Rubicam bought Media Edge and is using it as a base to consolidate and expand its media operations in Y&R New York. Between Media Edge and Y&R's recent account gains, Y&R gained 12.2% at the core and 7.7% at consolidated, the latter also affected by a 31.9% uptick in employment at Landor Associates.

Mergers and acquisitions more than move units around; they lead to staff layoffs when conflicting accounts emerge. Although not reflected in this survey, True North Communications' acquisition of Bozell, Jacobs, Kenyon & Eckhardt is expected to lead to the closure of TN's Foote, Cone & Belding shop in Santa Ana, Calif. That office serviced Mazda Motors of America, resigned in favor of keeping the much-larger Chrysler Corp. business at Bozell Worldwide.

CONFLICTS TO SLOW PROCESS

Conflicts eventually will cause a slowdown in mergers, says Mr. Bostock. Besides conflicts, agency mergers bring about redundancies and agency culture clashes that can stall forward movement.

The merging of TBWA and Chiat/Day two years ago brought together two distinct cultures, one staid and the other creative-minded.

"The network floundered for a year and a half until we finally clicked," says a TBWA executive. Now the agency is "keeping clients" and "closing the revolving door," CEO Bill Tragos said in a recent interview.

A pack of new clients, too, have come, such as Apple Computer, and with the

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