The Talent Crisis: Management's mid-life crisis

Why do the networks find it so hard to hold on to senior talent? John Tylee looks at why the view's not always good from the top.

It's the feelings of insecurity that nag you the most, a former agency boss admits. You've closed the door on your old job and a new one has yet to open for you.

The family you're about to be spending more time with still needs providing for. The mortgage and the school fees still have to be paid.

You wonder if your CV is still a marketable item. Will potential employers outside the industry regard you as too lightweight? Will those within it think you're washed up?

Not that any of these worries have stopped a number of high-profile leaders heading for the exit over the past few months. Steve Harrison, Wunderman's worldwide creative director, John Claydon, the Claydon Heeley chairman, and Michael Wall, Fallon's co-founder, have all quit recently. So has Jim Kelly, the former chief of United London, who declined to be part of the agency's merger with Grey.

Some will be back soon. Others have done well enough financially to take extended time out. Nonetheless, some onlookers cite such departures as evidence of underlying disenchantment at the most senior agency level.

"The pressures are relentless," Mark Rapley, the former agency executive and a founder of The Garden, which specialises in search and selection, says. "There's not much fun or money in agency management any more."

Nor is the malaise confined to agency boardrooms. "The disillusionment within middle management has been going on for a long time," Belinda Kent-Lemon, a founder of Occam HR who works with a number of leading agencies and media companies, claims. "So much dross is being dumped on them that many would much rather leave for smaller shops."

No longer is there a headlong rush of candidates to fill an agency chief executive vacancy. Indeed, one consultant with chief executive briefs on her desk says potential candidates are telling her they'll never return to a network operation.

As a result, the net is having to be cast more widely than ever before to include senior managers at digital specialists, media owners and agency client companies. Not least because the agency cutback in graduate recruitment during the recession of the early 90s means that the number of potential agency senior managers is now very small.

Gay Haines, one of the industry's most famous headhunters, admits: "We have to fish in a very stale and shallow talent pool."

Opinion is divided over whether the latest top-level resignations are the result of people being ground down by the demands of the job and the stifling of entrepreneurism, or whether they are simply part of a natural evolution process that keeps senior management refreshed. What's beyond doubt is that running a large agency has become much tougher.

Paul Hammersley quit as the chief executive of DDB London in December 2005 to take charge of the Sir Frank Lowe-inspired start-up The Red Brick Road. He says: "Being the chief executive of a network office has become an increasingly unenviable task.

"It's not just that everything is controlled from New York or Paris, you also have to contend with the growing homogenisation of networks. The UK office is just like the German office, which is just like the French office. A local chief executive's purpose has disappeared."

Gary Stolkin, the chief executive of The Talent Business, believes the desire of network agency managers to leave and build their own businesses is down to a combination of thwarted ambition, financial pressures and the lack of long-term incentive plans.

"What have they got to lose?" he asks. "They know there's a shortage of agency leaders, and if their own business doesn't quite live up to their expectations, then they can always go back to an equivalent role in a network agency."

Wall, 40 last month and currently biding his time at his home near Lisbon, suggests senior managers are willing to make big lifestyle choices.

"My involvement in setting up Fallon was part of a ten-year plan to be successful, make some money and take a break," he says. "I'll be back to do something new - and maybe something else after that."

What frustrates many chief executives more than anything is what they claim is the loss of their right to manage. One holding company is said to insist on approving any agency hiring that commands an annual salary of more than £80,000. Not so surprising, perhaps, when a senior-level signing could add an extra £300,000 to a holding company's P&L.

"The key to running a creative services business is managing the talent," a former network agency boss points out. "But that's not possible when you find yourself having to deal with three or four layers of management in different parts of the globe."

For forty- and fiftysomething chiefs, who may have been working non-stop for more than half their lives, resignation may be the result of a mid-life stocktaking and a recognition of the toll the job is taking on family life.

Grant Duncan, 49, who quit as the Publicis chief executive in February, says this balancing of conflicting demands creates a "sense of attrition".

He compares a chief executive's lot to "climbing a hill with a heavy backpack - made worse by the fact that you can never see the top of the hill".

The perpetual need to deliver sustainable and increasing profits to shareholders of the holding company, while impressing the wider investment community, just piles on the pressure and adds to the disenchantment.

"My heroes were David Ogilvy, Bill Bernbach and Rosser Reeves, not the network finance director," an agency boss who recently threw in the towel says. "I didn't sign on pledging to increase revenue growth from 10 to 15 per cent a year."

The unpredictable nature of marketing communications doesn't help, and holding companies can no longer afford the luxury of offering a "profits holiday" to their operating subsidiaries. "All international agencies are simply swapping brand share," an ex-agency chief argues. "They aren't dealing in a growth market."

The upshot is that short-term considerations prevail when it comes to making the numbers. "The pressures on you are huge," a global network leader sighs. "And the message is always the same - grow, grow, grow."

"You're having to manage a business that has to be accountable, but which operates in an unstable environment," Duncan explains. "You can't account for a creative team not firing on all cylinders and you can't be 100 per cent sure a campaign will succeed. Nor can you be certain about the stability of your client base."

As if that's not enough, day-to-day management issues are incessant. "With so many new regulations covering employment and health and safety, running an agency is becoming a much more complex business," Mary Budd, the former IPA employment affairs advisor, says. "Major agencies have HR departments to handle these issues - but it's up to the chief executive to check they're doing so."

At the same time, the senior "brain drain" from the industry raises the question of how well it holds on to its mature and experienced executives - and how much interest it actually has in doing so.

"While clients value experience, we've been letting people go who still have a lot to offer," Gerry Moira, the 57-year-old Euro RSCG creative chairman, complains. "The trouble is that in order to stay on, you have got to be the boss. Otherwise you start to look very expensive."

Tim Mellors, 61, is a rare example of an adman whose career continues to defy time's march. Lured out of retirement in London three years ago, the New York-based Grey Global Group vice-chairman and chief creative officer laments the industry's obsession with youth.

"There is a huge impetus in the world in general, and advertising in particular, to listen only to the young," he says. "But if you listen only to youth, you don't hear the voice of experience, and that can't be right."

For those who believe they've enough mileage left in them to take a job outside adland, the options are broadening. Some move to client companies. Pete Holmes, the O2 communication director, and Ben Moore, the head of brand communication at Nike, are ex-Lowe London senior managers. David Lamb, JWT's former director of worldwide clients, is now the worldwide advertising director of Diamond Trading Company, formerly De Beers. There was the much-publicised switch of Jonathan Mildenhall to Coca-Cola, while in February, Lee Daley quit as the Saatchi & Saatchi CEO to become Manchester United's global commercial director.

In time to come, digital agencies, still replete with a spirit of entrepreneurialism, may be a more alluring prospect. John Bartle, the Bartle Bogle Hegarty founding partner, is the chairman of Dare and i-level, where he was instrumental in hiring David Pattison, the former chief executive of PHD Worldwide, to expand its services.

"We've plenty of people who can do digital, but don't know how to build an international brand," he says. "People with David's experience are very attractive to the digital sector."

The reason why such moves are still rare may be partly because of the digital sector's relative immaturity and partly because remuneration doesn't match that of agency chief executives used to high rewards to compensate for job insecurity.

Bartle is sure this will change. "When I first got involved with Dare, I'd just about learned how to turn on my computer. But that didn't matter," he says. "Digital companies need people with a lot of management experience who can ask the idiot questions."

He also believes the salary discrepancies will be less of an issue as more mainstream agency leaders opt for a new challenge and lifestyle. "There'll always be a trade-off, but it's one that people will increasingly be prepared to make," he predicts.

Put all these factors together and they add up to a big problem for the supergroups. Bob Jeffrey, the JWT Worldwide chairman and chief executive, acknowledges that generous financial packages are not enough to lock in the top senior talent.

"These people don't come in every day wondering how much money they'll make," he explains. "They're hard to keep because their frustration levels are so high."

One partial solution may be to make greater use of share incentives. Vincent Bollore, the Havas chairman, has taken the unusual step of making 20 per cent of the group's stock available to more than 300 managers.

In addition, Havas has a debenture scheme in which managers can invest their own money and draw benefits if the share price moves beyond a certain level. "It is highly geared, which means you won't make the kind of money you might expect if you were running a successful agency of your own," David Jones, the global chief executive of the Havas-owned Euro RSCG, says. "But it's better than most schemes."

"I don't expect it to cover the school fees, but it does help pay for a few of life's luxuries," Mark Cadman, the Euro RSCG London chief executive, says. "It also means that if we hit certain financial targets, we get a share of the profits. That keeps us focused on delivery."

At CHI & Partners, senior managers have been persuaded to stay put with a bonus system linked to the agency's annual growth rate. Now, with WPP having taken a 49.9 per cent stake in the agency, CHI will model itself on a City law firm with the remaining 50.1 per cent placed in an employment benefit trust owned by partners.

"It's difficult to devise a scheme that will lock people in completely," Nick Howarth, the CHI group chief executive, acknowledges. "But we can make people feel they're part of the agency's long-term future."

However, some top industry figures believe high-level departures are reflective of a sea change within the industry rather than widespread disillusionment. Daley says he took the Manchester United job because "it is a one-off opportunity to shape a global brand that's under-leveraged", and doesn't rule out a return to agency management.

"You have to build your business in a way that makes sense bearing in mind the way the world is going," Steve Gatfield, the Lowe Worldwide chief executive and Interpublic's executive vice-president of global operations, says. "During the next five years, top agency management won't necessarily need the same disciplines they've always had."

Hamish McLennan, the Young & Rubicam network chief, links the number of resignations to job opportunities as media fragments, technology companies invade the territory and the cost of starting an agency remains low. "These things tend to be cyclical," he claims. "It may well settle down again."

William Eccleshare, the BBDO chief executive for Europe, the Middle East and Africa, suggests what's happening is part of a natural selection process as the skills demanded of agency chief executives change.

"We can no longer assume that a good account man can morph into a chief executive," he says. "The financial disciplines of holding companies are being pushed down to local chief executive level.

"The job is more demanding than ever which, for the right person, makes it more rewarding."