The US is the centre of the universe for C-Suite executives who seek to “maximize shareholder value.”
CEOs and CFOs are paid lavishly as long as their companies’ share prices continue to rise. Other senior executives are rewarded in the same way.
This is especially true for senior executives in holding company-owned advertising and media agencies.
You might think that executive actions to maximize share price have evolved in the last 30 years, given the massive changes in the media industry: the shift to labor-based fees, globalization of brands, the rise of procurement, the introduction of digital and social media, the abandonment of AOR relationships, and a host of other changes, like the migration to in-house agencies.
Not so, unfortunately. Advertising and media agencies simply reduce costs, downsize and minimize salary increases and bonuses to maximize profits and holding company share prices.
They’ve been doing this for 30 years, and they continue to do it today.
The only management metric needed to play this game is profit margin — a crude and unsophisticated metric that fails senior executives in fundamental ways.
The practice of cost reduction, and the use of profit margin as a metric (when fees are falling) is leading agencies to liquidate their most precious asset: their pool of talented people.
At TrinityP3 USA, we help agencies measure their operations in a more sophisticated and analytical way and focus on how to improve pricing and scopes of work as a way of improving financial performance in the long-term.
We believe that better agency metrics are needed for 2020 and the coming years.
TrinityP3 USA is the US operation of TrinityP3, a global marketing services consulting firm that works with agencies and their clients to improve the quality of their working relationships.
TrinityP3 USA is headed by Michael Farmer, Executive Chairman, who wrote the following pieces.
Read on! – and call us if you’d like to learn more about how we help C-Suite executives do a better job in these complex times.