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January 12, 2005
Why Talent Moves Every Two Years

After 20 years in the industry representing both agencies and talent (plus eight years of parenthood), I've found that life is a series of negotiations, the outcome of which usually depends on someone's leverage and their willingness to use it. So when agencies ask why key employees depart after short tenures, I know the answer: money—and the employee's ability to negotiate for more of it somewhere else.

Why do employees feel they can get a better deal across town? Because agencies often see their next proposed hire as the person who can solve their need or remedy a weakness. When we negotiate on behalf of talent we use this perception to help our clients earn more money, win a better position, or gain other lucrative employment terms. We know that even a small starting salary increase can be significant as raises, benefits, and pension contributions are often tied to salary. A few thousand more dollars to start can represent $50-$100,000 over a 5-10 year period.

The perception that the agency needs this employee, plus the reality that such leverage often enables the employee to negotiate for more money, combines to create a "ping-pong" effect. Result: employees change agencies often (sometimes leaving an agency and returning).

Is this "ping-pong" phenomenon good for the agency? For clients? For the industry? I would say no. It disrupts agency-client relationships (I guess this is good for the search consultants) and causes more accounts to change hands. The Agency losing the account then must make the corresponding lay-offs - - disrupting the lives of the employees.

I believe agencies would benefit from a greater focus on existing talent. Specifically, agencies should consider creating for more senior talent the sort of long-term benefit programs we develop to create and reward loyalty. For example, stock options, phantom equity or long-term bonus plans give employees a vested interest in the long term growth of the agency, encouraging employees to stay at the agency. Some of the most successful agencies in the industry use these types of programs to keep key talent on board.

It is particularly important to attempt to retain key talent at the management and key creative level. Retaining such talent is likely to build client loyalty and therefore profitability in the long term. Additionally, if good leaders stay, the people who work for them are more likely to stay too. These programs help build loyalty (yes the word still exists) among both the key talent who are lured to stay by the program and their subordinates who are more likely to stay if their mentors stay.

By retaining talent, an agency can retain clients longer and improve profitability. Building attractive compensation and long-term incentive plans may not ensure that all of your key talent stays on, but it will help.

Disclaimer: This Article provides general coverage of its subject area and is not meant to provide legal advice. Your situation will depend on specific facts and legal analysis. Please consult with your attorney.

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Gavin McElroy is a partner with Frankfurt Kurnit Klein & Selz, PC, a leading media and entertainment law firm. Gavin advises executives and companies in the advertising, marketing, and PR industries on employment, transactional, advertising, and intellectual property issues.
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