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Better Off at Number 2

By Jul 01, 2004

As the economy recovers, the mantra from human resources consultants has been that long-patient employees will begin to migrate elsewhere unless their bosses give them solid reasons to stay put.

Promotion agency executives seem to have gotten the message in 2003, when most of the gains in both salary and other compensation went to those at the levels of vice president, director or below. According to the 2004 PROMO Salary Survey, the very top execs made much smaller gains by comparison (See Chart 1).

Among survey respondents, only 43% of presidents and CEOs reported receiving a raise last year, compared to 68.3% of managers, 64.9% of executive VPs and VPs and 52.8% of directors (See Chart 2). This is a signal, experts say, that executives at some independently owned shops are investing in their businesses instead of putting the money back in their pockets, while execs at larger publicly held companies are making concessions, such as 18-month reviews vs. annual.

The number of bonuses dished out last year inched up slightly to 51% of respondents from 47.2%.

“We’re finally starting to see bonuses paid and slight salary increases,” says Thomas Wilzinski, VP at executive search firm O’Keefe & Associates, Fairfield, CT.

Of those who did receive bonuses, lower-level executives made out far better than the top guns. Some 70.3% of executive VPs and VPs, 61% of managers and 52.8% of directors received a bonus compared to only 37.2% of presidents and CEOs. The average size of the bonus dropped off however, from $21,708 compared to $29,543 in 2001. Presidents and CEOs took the biggest hit. Their bonuses fell from an average $99,813 in 2001 to $40,918 in 2003 (See Chart 4).

The leading factor in determining bonuses was, no surprise, the bottom line. Some 63.7% of agency employees that earned an incentive payment attributed it at least in part to company profits.; 50% said it was based on performance, 23.5% on sales, 2.9% on cost reduction, 6.9% on years of service and 4.9% on “other” factors (See Chart 3).

Overall, almost 52% of promotion agency staffers did not receive an increase in 2003. That may sound grim, but it’s an improvement over the 60% who went home disappointed at review time in 2001. That year, as the economy drifted further south, corporate cost-cutters were merciless when it came to marketing budgets.

In 2001, when PROMO conducted its first survey specifically focused on the compensation of agency employees, many feared for their jobs and knew that few were to be found if they dared to venture elsewhere. Salary freezes had become standard practice at many firms and staffers stopped looking under the Christmas tree for that holiday bonus.

When the PROMO Salary Survey was conducted in April 2004, it found that managers and employees were still jittery. And yet, most economic indicators point to cautious optimism. The U.S. Labor Department announced in May that 248,000 new jobs had been created, capping a 1 million-job gain in the prior three months. As the economy has improved, agencies are reporting upticks in RFPs as more money than ever is being pumped into promotion. The discipline grew by 9.7% to $288.3 billion in 2003, per PROMO’s 2004 Industry Trends Report.

“I think the heavy fear is gone and replaced with cautious optimism,” says Elaine Bonzon, executive VP-chief people officer for Zipatoni, a marketing agency based in St. Louis, MO.

Per the salary survey, the average pay hike was 12.1%, compared to 10.6% in 2001. Some 20.4% of respondents reported getting a raise of 20% or higher, with 5.6% receiving 3% (about the national average, according to the U.S. Department of Labor).

Wage freezes ebbed and flowed as business came and went over the last several years. At DVC Worldwide, a freeze on salary increases was never implemented, although the average standard pay hike leveled off at about 4% or 5%. DVC, like many agencies, says it has gotten smarter about staffing, running a solid business model with the business staffed to meet the profit goal and expense lines including raises for employees, considered a key retention tool.

“I can’t penalize the colleagues here who are working so hard,” says Sue Furlong, president and COO of Morristown-based DVC. “It’s hard to tell an account executive ‘You can’t have a raise because the economy is off.’ It’s our job to budget so we can give them a raise.”

Job security, which had topped the list of concerns in the 2001 survey along with career growth, fell to the third-most pressing issue, a signal that optimism may be on the upswing.

Zipatoni, for example, has opened up some “generic” jobs, as opposed to hiring for a specific client, for the first time since 1991.

“That’s a big improvement,” Bonvon says. The average headcount at agencies rose an average 7% in 2003, another indicator that shops are not only staffing up, but that business is coming back. Agencies report lots of “movement.”

“Business hasn’t really felt this active in about two years,” says DVC’s Furlong. “Whether that all turns into incremental revenue or it’s just things moving around, I don’t know yet. All the signs are there that the economy is getting back on track — and how long can you go into a holding pattern as a marketer? Given the competitive nature in the marketplace you need to be constantly pressing forward and trying new things and innovation solutions.”

Competition and inequities

With the job market easing, so too are jobs on the client side, where opportunities and compensation tend to be greater. But making the jump from agency to brand management has never been easy and may be getting more difficult because of the number of candidates still in the market following years of downsizing and consolidation in brand divisions.

“Our clients are becoming much more selective and more reluctant to hire a pure agency person,” Wilzinski says. “There’s still abundant talent out there that has client-side experience. But that’s not to say it doesn’t happen.”

The number of first timers coming into the job market, voluntarily leaving their jobs or re-entering the job market, all rose in May, indicating job optimism. But even with the job market easing, concerns about advancement opportunities were mentioned by a number of respondents who worried about promotion freezes, new career opportunities, stagnating in their current jobs and a lack of training. One said, “There are too many people gunning for the same position.”

The 2004 salary survey figures combine for a total compensation package of $111,806 for presidents and CEOs, $141,634 for executives and VPs, $89,953 for directors and $57,729 for managers. Women still lag far behind their male counterparts when promotions come up and when dollars are doled out (See Chart 8). Females reported receiving a $83,615 compensation package, compared to men at $110,502 (these totals do not match data in Chart 8, which include commission and other pay). Women also continue to hold the majority of lower-level positions. Some 65.9% of managers are women, compared to 34.1% of men. In the top ranks of president and CEO, 75.6% are men versus 24.4% of women. The playing field levels a bit at the director level, with 47.2% men and 52.8% women.

“Although we’re moving in a more balanced direction, [that disparity] is still a reality,” says Zipatoni’s Bonzon.

More with less

When asked about the most pressing issues facing them, respondents most often cited the slowdown in the economy, shrinking marketing budgets and developing new business.

“The economy tends to trigger everything,” says Rob Colangelo, president of Colangelo Synergy Marketing, Darien, CT. “If there’s a better economy, there’s more money to spend and there’s more work to be done. However, promotion tends to be more insulated because brands will be less inclined to cut back on promotion because it has a direct relationship to sales.”

But, there’s no doubt that brands have made it a priority to take a sharp pencil to marketing budgets to whittle down the numbers.

“Shrinking marketing budgets is a huge concern,” DVC’s Furlong says. “We think there’s somebody in every company charged with decreasing marketing budgets, whether it’s the procurement people or the brand folks. The pressure is on across the board for them to reduce costs.”

Still, agency revenues indicate that business is rebounding, rising 17.9% in 2003 to an estimated $3.77 billion, over gains of 14.3% in 2002, according to PROMO’s 2004 Industry Trends Report. Increased workloads and demands from both management and clients were also cited by numerous respondents who said client pressure continues to mount.

“Clients are feeling the pressure to do more with less,” Colangelo says. “That tends to trickle down; therefore, the agencies must work smarter with the budgets they have to maximize the impact of their programs.”

POST SCRIPT

PROMO surveyed 1,592 agency executives from the magazine’s subscriber files in April 2004. The survey generated a response rate of 14.5%. Among other findings of note:

  • Men represent 75.6% of presidents and CEOs, 70.3% of VP posts, 52.8% of directors and 34.1% of managers.
  • The average age of agency staffers is 40. Those at the top level as well as executive VPs average age 44, directors average 37 and managers average 32.
  • Average years working as marketing professionals held steady at 14.9, ranging from 18.1 years for the top level, to 7.3 for managers.
  • The standard level of education is a bachelor’s degree. Slightly more respondents reporting having a master’s degree (23%).
  • More promotion agency jobs (23.5%) continue to be located in the East North Central region, which includes Chicago, than anywhere else. The Middle Atlantic ranked second, with 19%, followed by the Pacific (17%), the South Atlantic (13%), West North Central (9%), New England and West South Central (tied at 5.5%), Mountain (5%) and East South Central (1%).
  • The average number of years respondents have spent with their present company dropped slightly to 5.7 from 6.4. Agency personnel stayed in their current positions 4.6 years, on par with 2001.
  • The work week isn’t getting any shorter; in fact, 16% reported putting in more than 60 hours each week compared to 10% in 2001. The average workweek stands at 48.5 hours.