When the advertising business finally does recover-as it surely will-there will be a big price to pay by many advertising agencies for their employee policies over the past several years.
Once agencies start to hire in big numbers, there will be a huge job-changing stampede, one that is caused by the resentment against employers that has been building since this recession started in 2000.
Advertising agencies have been hit particularly hard by this recession. Agency staffing has been cut by 15% to 20%. Clients have been cutting fees, but demanding the same, or even greater, levels of service and productivity. To meet this demand, ad agency employees are working harder and longer than ever.
At the same time, the ad agency holding companies have been demanding the same or a greater level of pretax profit contribution from their agencies. Advertising agencies have been struggling with ways to make their numbers. One way that many have achieved their difficult, if not impossible, financial goals is to delay or deny employee salary increases at virtually every level of the business.
Salary freezes have always been a knee-jerk reaction to account losses and tough times. They are easy and require little or no thought. Business goes on as usual as employees suffer. At best, this is a short-term solution.
To ask people to work harder and longer without a commensurate increase in compensation is, at the very least, unfair.
In the past, mid-level and senior executives could expect a salary increase every 24 to 30 months, while more junior people could expect increases on an annual or an 18-month basis. Raises at all levels have now been postponed to intervals of as much as two to four years.
While more highly compensated executives can find ways of economizing, juniors have no wiggle room-especially in major markets where rent can take up far more than half of their take home pay. And when raises do come, they have often been smaller than expected and barely more than the rate of inflation.
Wage freezes often even extend to people who have been promoted; it is not uncommon to find people who have had significant title changes but who have seen little or no commensurate salary increase.
Since there are so few jobs, corporate management can get away with these policies because their employees have no place to go. One way a few valued employees have found to get a salary increase is to accept another job and hope for a counter offer (possibly a good short-term solution, but frequently disastrous for the employee in the long run).
Another thing that leaves angry employees is salary deflation. It is common now that unemployed job seekers are being offered significantly less than they were previously making. Salary decreases have become a fact of life-10% to 20% reductions are common. Since low salary is a far better alternative than no salary, unemployed executives have had no choice but to accept underpayment as their price for re-entry into the job market. This engenders disloyalty and indifference.
Over the last several years, there has been an underlying fear among employees in every business where there have been cutbacks. People have watched their companies be merciless in their mass layoffs. There is very little observed consistency in cutting back employees.
If an account goes into review or cuts budgets, it is often easier to eliminate entire account groups-regardless of employee performance or loyalty. Long-standing employ- ees have been eliminated as easily as new ones. At many companies, the policy is last-in, first-out. ("Who should we cut? Someone who has been here for a long time or someone who has not built any personal equity?") At others, cut backs are a chance to clean out "dead wood" and rejuvenate staffing.
While these cuts have been necessary, people at every level no longer have a real sense of job security or loyalty to their employers.
Add this up and there is an accumulation of very angry employees. And the resentment is building. The longer this "jobless recovery" goes on, the worse the situation gets.
Advertising agencies must adopt enlightened human resources policies and build raises for all employees into their budgets. This requires diligence, hard work, dedication and a good degree of creativity. But without it, once the recovery really comes and jobs are once again plentiful (or at least readily available), the results in terms of turn-over will be staggering.
Without changes in salary increase policies, there are too many irate employees who resent not having been given raises and who are just waiting for a good excuse to leave their current employment. That will be the employees' revenge.
Paul S. Gumbinner is president, Gumbinner Co., New York, an executive search firm serving the ad industry.