Creative heads lured with ownership stakes

By Simon Canning

Equity has become the new lure for ad agencies as the battle for creative talent heats up with the economy improving and the most sought-after creative directors demanding skin in the game.

In the first five months of this year a number of big creative moves have been triggered by agencies offering new recruits a share in the company.

Last month Media revealed M&C Saatchi global chairman Tom Dery and regional creative director Tom McFarlane had bought a 20 per cent stake in the agency for $5 million from the parent company in London, with the chance to buy another 20 per cent in the future.

Mr Dery was quick to signal that part of the stake would be offered to staff.

Last week Whybin TBWA hired creative team Matty Burton and Dave Bowman, with founder Scott Whybin offering them a slice of the agency as a sweetener.

In January, agency 303 poached BMF creative director Simon Langley with an offer of a stake, while last year Grey in Sydney recruited creative director Jay Furby, renaming the agency Jay Grey.

Creative recruiter Esther Clerahan, who has helped place creative directors in some of Australia’s top agencies, said there was renewed interest in equity as a recruitment tool.

“I guess when they grow up they stop shooting for awards and want to make some money,” Ms Clerahan said. “It’s a mug’s game just shooting for awards.”

The digital era had meant creatives could start a successful business in their lounge room, so big agencies had to offer more than just a job to bring them in.

“Creatives are seeing ownership as a goal,” she said.

Australia’s biggest agency, Clemenger Group, has a long-running share scheme for staff.

Chief executive Robert Morgan said it had loaned $60m to staff to enable them to take a stake in the agency.

“We have 500 shareholders across Australia and New Zealand,” Mr Morgan said. “I am proud to say the likes of (creative directors) James McGrath and Richard Maddocks have all got very significant equity.”

Clemenger shares are not publicly traded, but Mr Morgan said offering equity had been a key to building the agency.

“When you are out there hiring, the ability to offer shares is an absolute winner. You get and keep the best people.”

He said the return to offering equity in agencies to staff was good for the industry.

“We are raising a new generation of owners, but it’s not for everyone.”

Mr Dery said that the chance to use local ownership to lure and retain staff was one of the key reasons behind M&C Saatchi’s decision to buy a stake in the local agency rather than own shares in the group listed in London.

“Obviously, the greatest motivation of all is seeing a direct return on your own work, and so being able to provide local equity is great incentive,” he said.

However, he said, agencies’ use of equity as a recruitment and retention tool was cyclical.

“As new businesses start, that’s really when people have an opportunity to get equity because they are taking the risk and starting from scratch. These things come in cycles and hopefully we will go through a cycle where we see a lot of new agencies form and develop and I think that’s very healthy for our industry.”

Mr Dery said the chance to have a stake in the local agency was important because of the comparative size of the Australian industry. “Australia is so small compared to the whole world’s performance that whatever you do isn’t going to make a difference to the share price” of a big multinational.

Article by The Australian, May 24, 2010.