Cross-pollination: IPG pay plan tied to sibling harmony

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Interpublic Group of Cos. is implementing a compensation scheme to increase cross-fertilization of clients between its agencies, which will see employees receive cash and company stock to help a sibling shop pick up business.

The notion is that if agency executives were presented with business they could not handle, due to a conflict or lack of capabilities, they would help another Interpublic agency land the work, according to executives familiar with a preliminary outline of a plan that circulated to some top-level executives in late June.

Depending on how much revenue Interpublic realizes in particular transactions, employees could receive anywhere from a couple of thousand dollars to upwards of $50,000, according to the executives. The program is intended to encourage cross-agency communications as well as keep new accounts within the Interpublic family.

Interpublic in May said that by June it would have launched an "organic growth business center" that would allow its companies to better work together and build business. If an agency, for example, were approached with a piece of business worth $1 million or more in profit that it could not pursue, staff who help it land elsewhere within the holding company could receive up to $40,000 or $50,000 in cash and stock. According to the draft, the seed money is $1 million in cash and $1 million in stock.

less than stupendous

Of the $3.5 billion that Interpublic spent on salaries and related expenses in 2002, $1 million represents only 0.028%. The less-than-stupendous sum has some at Interpublic wondering how serious the company is. But one executive said, "It's more of an `Atta-boy, look out for your friends thing' versus the money."

Kevin Allen, named the company's first chief growth officer in May, declined interview requests.

"It's the smartest thing to come out of IPG in a long time. ... It's such a good idea that you wonder `Why hasn't everyone thought of this?"' said a competing WPP Group executive. "Creating synergies with companies that are separate and competitive [is smart when] the only thing that is similar is that they get a check written on the same bank account."

Holding companies were established so they could handle conflicts, so it makes sense for a leader to "try to [reward] his own executives, not only to try and recruit business for their own company but recruit it for the family," said Stan Beals, managing director of the agency search consultants Jones Lundin Beals in Chicago. But having one's agency aid a rival could make clients nervous, he said.

Lauren Rich Fine, a Merrill Lynch analyst, said compensating executives for seeding work to other agencies could backfire. "If someone told me I could get $50,000 for referring business, that would feel pretty good in my bank account and make me work pretty hard to find that client that my agency couldn't service," she said. "I wonder if it incentivizes behavior they didn't anticipate."

referral rewards

Interpublic's plan also would reward employees who cross-sell services to existing clients, though that is not as unique. WPP gives stock to senior executives who cooperate with and refer businessto other WPP companies. On the other hand, Omnicom Group, which is renowned for its fraternity of cooperation and has many of its 5,000 clients sharing agencies, offers no personal fiancial incentives,according to people within the network.

Interpublic's Chairman-CEO of five months, David Bell, aims to build revenue, in part by eliminating legendary fiefdoms in favor of collaboration, said one agency head who had not seen the plan but is familiar with Mr. Bell's philosophy.

"He thinks [lack of cooperation] is not an option," the executive said.

contributing: bradley johnson, lisa sanders

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