Staff-related steps will back growth

Adweek's March 5 story "From Boom to Bust and Back Again" should bring smiles to the faces of PR executives.

Adweek's March 5 story "From Boom to Bust and Back Again" should bring smiles to the faces of PR executives.

The article asserts that employment trends are a good gauge of the state of the marketing communications industry, given its labor intensity, and it goes on to review US Department of Labor statistics since 1990. The data show the industry's steady climb from early 1994 to its historic peak in December 2001, followed by a three-year contraction and ultimate recovery.

More significantly, the article's author, Alan Gottesman, points to some important differences in the trends among the various marketing communications disciplines. He concludes that "ad agencies are not even halfway back to their historic highs," but "one big winner... has been PR."

Though still much smaller than advertising, the PR sector grew more than three times faster than advertising between 1990 and the peak. And even though both disciplines saw massive employee cuts after the Big Burst, PR today, as measured by the body count, is 44% larger than it was in 1990, while advertising is up only 14%.

Wow. Read that again, and savor every word. As if that is not good enough, Gottesman also concludes that PR saw a much faster increase than advertising and went through a steeper fall, but after the dust settled, PR held on to much more of its growth than advertising did.

You're happy. But not so fast.

I see a lot more at work than just a growing number of staffers. What follows is an assortment of contractual relationships, incentives, and disincentives between PR shops and their mid-level and senior executives that have never been more important.

First, agencies are more focused than ever on retaining key talent. They are exploring such strategies as allowing equity participation by "second-tier" management. They are also exploring long-term incentive programs and phantom stock agreements as ways to bind and reward key employees, given how tight the talent market is.

Second, agencies are lengthening the notice period before mid-level and senior executives can resign and, more importantly, are extending the gap an ex-employee must observe before working for a competitor. The concept of "garden leave" (a British term meaning a resigning employee must stay out of the business entirely for a specified period after leaving his or her post), which was unheard of in the business here until recently, is now recognized as a valuable tool for providing time to get a replacement employee fully engaged in the former staffer's duties.

Finally, agencies are re-examining their professional codes of conduct and the restrictive covenants they seek from their professional staff. As agency owners know, clients follow the talent, and the right agreements need to be in place to allow for fair competition.

The need to deal with all this may not bring smiles to too many faces. It is, however, a price of success. These considerations have been commonplace for years among other consultancies, such as accountants, financial services pros, and management consultants.

I suspect that PR agency owners are more likely to remain smiling if they take the necessary steps now to ensure that their companies take full advantage of the growth in store for their industry.

Michael Lasky is a partner at New York law firm Davis & Gilbert.

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