The revolving door of creative talent at advertising agencies has long been a problem for the industry. Turnover causes disruption, costing money and even clients.
And office spaces with high ceilings, pingpong tables, catered lunches and refrigerators – even fridges full of beer! – are no longer enough to keep employees from leaving for the mesmerizing draw of startup tech shops.
So ad agencies are investing in the personal lives of their employees. For example, David & Goliath in El Segundo recently launched the Defiance Club, a program that offers financial support to employees who decide to achieve their personal goals, including everything from running a marathon to becoming less selfish.
David Angelo, founder and chief creative officer at David & Goliath, said the key to the program’s effectiveness is its ability to foster camaraderie at the agency.
“I meet a lot of young employees who are looking for momentary success as opposed to being part of something bigger,” said Angelo. “What we try to remind people is when you work for a company that has a more collaborative spirit, you stand to grow more from that.”
Huge LA in Mid-Wilshire, Deutsch LA in Playa Vista, Team One and Ignited in El Segundo, and RPA in Santa Monica have also created programs to support the personal goals and even side businesses of their employees as ways to keep them happy and tamp down turnover rates.
Fred Goldberg, author and founder of former agency Goldberg Moser O’Neill in San Francisco, said employee retention has been a problem since he started in the industry in the late ’60s and has accelerated in recent years.
“This is a serious issue in the business,” Goldberg said.
Patricia Korth-McDonnell, partner and managing director at Huge LA, said the problem has grown worse as a result of competition for talent with tech companies. The agency developed its program, called Huge Labs, two years ago. Employees can pitch a business idea and take time off from doing client work to develop it with help from the agency.
“When we lost really talented folks, they usually weren’t going to other agencies,” she said. “They were going to Apple, Google or startups.”
Korth-McDonnell said tech companies are not only incredibly sexy but have the ability to offer what agencies struggle to pull in – money.
“The Googles and Apples of the world have a business model with much bigger margins. There’s much less hustle and there’s just more money there,” she said.
The ad agency business is dependent on client payments, making life at well-funded tech companies look more comfortable.
For example, Ogilvy & Mather in New York announced that it would be cutting 33 positions from its Culver City office this week, leaving 15 staffers, due to spending cuts by clients.
Overcoming fear
Angelo founded David & Goliath in 1999 after serving as executive vice president and creative director of Cliff Freeman & Partners in New York.
The agency has a staff size of about 141, with clients such as South Korean auto manufacturer Kia Motors and the California State Lottery in Sacramento.
The Defiance Club is managed by seven employees who sort through staff applications and decide which worker gets agency help toward achieving a goal.
Jonathan Carpio, an assistant producer, submitted an application to help build houses for a small village in the Philippines. The agency paid for his trip and donated enough money for him to build a house.
Paul Mareski, president of Team One, said his agency also has an employee program, called Launch an Idea. Team members pitch ideas to create an event or initiative that benefits the community. The agency then donates up to $25,000 to the winning project.
Mareski said the program has helped lower employee turnover to less than 15 percent. That’s half the industry average of almost 30 percent, according to industry website MediaPost in New York.
Nature of business
At Deutsch LA, the Side Project Project started after a study the agency conducted two years ago with ad trade organization 4As in New York.
The agency surveyed 1,500 advertising professionals on what was “driving the talent rotisserie of people moving from agency to agency,” said Kim Getty, partner and chief operating officer of Deutsch LA. The results showed it wasn’t compensation but an opportunity for growth and ownership.
So, last year, the agency created its project to allow employees with projects on the side to compete for Deutsch’s professional work. The first winner, as reported by the Business Journal last week, was senior copywriter David Plafchan, who moonlights as creative director for Bouqs Co., a startup flower delivery service in Venice. The company had its first ad campaign produced by Deutsch for almost nothing.
Of course, developing programs for employees can result in significant costs, both in direct money and significant loss of staff time. In fact, the next round of pitches for Deutsch LA’s program is on hold as the team must put client work first. Still, Getty said the goal remains to make employees feel they have the support of the agency outside of their daily tasks.
Goldberg, the author and veteran ad man, said programs such as the Side Project Project and Defiance Club are beneficial for agencies and employees on the whole. But the ad business will always deal with turnover.
“It’s just the nature of the business,” said Goldberg. “Every time a client changes, there’s a potential for a problem. I mean, it’s a remarkable business in that way. There’s so little continuity.”
