Close-up: Live Issue - Industry faces up to dearth of young talent put off by low pay

While agency management are well paid, new recruits suffer, Rachel Gardner says.

For the majority of people who are relatively new to a career in advertising, there will not have been much to find surprising in last week's IPA salary survey.

Although popular mythology might dictate that advertising is an industry dominated by people with a garage full of expensive cars, the report demonstrated that the reality for the majority of the industry is vastly different.

The IPA report, called Rewarding the Advertising Profession, revealed that those entering the advertising industry at a junior level earn less than their counterparts who choose a career in law, marketing or accountancy.

More significantly, it also shows that the pay gap between newcomers to advertising and these other professions has widened significantly since the IPA previously reported on the subject in 1991.

Conversely, while new recruits to advertising can't expect to get paid as much as their peers who choose a job elsewhere, there are no signs of a shortfall at the apex of the pay scale.

As was also the case at the time of the last IPA report 13 years ago, salaries in the top agency management roles compare favourably with those in other professions - a senior agency manager can expect to earn an average of £105,840 a year, while the partner of an accounting company takes home around £93,000.

But this news will not do much to lure in new recruits at a time when the industry is suffering a deficit of young talent.

So you might think there is concern that the industry needs to make salaries more equitable in order to attract the best people. Not so, according to Paul Jackson, the chief executive of Ogilvy & Mather, who believes advertising should not try to compete with the City for the reason that the two vocations are so very different.

"Because the (advertising) starting salary is low, it means people must have a creative motivation to get into the industry. I'm not sure I would want to be attracting people who are just financially motivated, although this is no excuse for under-paying people," he says.

But it is not just the new recruits who are feeling the pinch; those in middle management have also seen their relative salary stagnate - at about £27,000, an account manager or senior planner's salary is approximately half that of a marketing services manager or a managing solicitor.

According to the report, staff costs have increased by just 7 per cent since 1991. It is easy to pin some of the blame for advertising's apparent parsimony on the rise of the holding companies: ultimately these hold the purse strings for agency staff costs and can use these as benchmarks to assess their agencies' competitiveness.

However, there are other, fundamental, issues at play and some believe it comes back to that old chestnut - agency remuneration. Long gone are the days when agencies were paid a 10 per cent or 15 per cent commission, a situation that is leading to an inevitable squeeze on staff costs.

But Adam Kirby, the global head of advertising procurement at Diageo, who has spent 15 years working for agencies, refutes this interpretation. "The trouble with advertising is ascertaining its real value in any meaningful sense," he says. "What it costs compared with what you get out of it, is often not apparent until months or even years afterwards.

"Advertising agencies are based on a model that only makes the conundrum more difficult. They have high fixed costs, lots of people on full-time salaries, yet client demands are inherently variable. Matching supply and demand is a constant challenge."

According to Nick Manning, the chief executive of OMD Group, agencies need to make a bigger deal of the contribution they make to the value of a client's business. "Our job as agencies is to up-sell our total services and convince our clients of the value that we add to their business in totality. We must not allow ourselves to be sold short, but we are not doing enough of that currently," he says.

One of the major problems with advertising is that, judged against other careers, it does not necessarily equip new recruits with professional, credible qualifications once they are in the business.

This is an issue that is being addressed by the IPA; last year, the IPA launched its foundation qualification for those with one year's knowledge of the business and its next step is to offer those with three or four years' experience the chance to sit for an excellence diploma, which will be a two-year learning programme.

Stephen Woodford, the president of the IPA, says: "We have to demonstrate to clients that we are worth more. There is an under-appreciation of what agencies do and there is an increasing sense that advertising is a mechanical process where costs can be broken down to their lowest common denominator. But that is far from the way advertising works and to an extent we are to blame for not promoting ourselves better."

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