You are a recent graduate and land your first job in an advertising agency. You start at the agency on $32,000 and the title of Account Manager. Within 12 months you get promoted to Senior Account Manager and get a $8,000 extra per annum, ten months later you get another promotion to Account Director and an $8,000 rise, and then 9 months later you get another promotion to Senior Account Director with another $12,000 a year pay rise. Total salary now is $60,000 per annum.
You are either the most talented account management practitioner in the industry or the luckiest. You can say to your friends you are a Senior Account Director, which is pretty cool.
Does this sound fantastic?
Believe me, we see this happening. It is called the “Title Promotion”.
The fact is that with agencies often using industry salary rates, a few agencies have found a way to increase their revenue without increasing their costs.
This is not wide spread – yet.
You see, our Senior Account Director above is getting paid $60,000 per annum, but the agency is billing them out at $120,000 per annum. Then add a 2.2 overhead and profit multiple and the Senior Account Director is a $264,000 revenue source at a cost of $60,000 per annum in direct salary costs.
(Even wondered why Account Executives are almost non-existient these days?)
Certainly a good reason for using actual salary costs and checking the resumes of the team on your retainer to make sure you are getting what you paid for.
Why are a few agencies doing this?
Because with the increasing downward pressure on remuneration, agencies are having to be more “creative” with their compensation models.
The old say “You get what you pay for” is true.
Just make sure you are getting what you paid for.