Tuesday, April 24

Saatchi abolishes bonuses

 

At the recent AdForum Summit, which this year was held in Paris, the CEO of Saatchi&Saatchi, Robert Senior had many interesting things to say in his presentation about what makes Saatchi different. However one quick remark caught our attention and drew questions. Senior told us that Saatchi had abolished bonuses for CEOs.

For a moment I thought this was part of the new Saatchi approach to CSR, in keeping with the mood of the times where most people are revolted by the way a huge bonus has become an apparently essential part of any CEO's package. It turned out that the reasons were quite different.

I am all for performance related bonuses for senior management (even if the company has only two employees!). However too many bonuses seem to have vague, or non-existent criteria attached. Those paid to the CEOs of privatised utilities, which are often monopolies delivering poor levels of customer service, bother me. When I heard that senior British civil servants also get bonuses, this seemed to me a sign that bonuses have spread out of control through society.

However advertising agencies exist in one of the most ruthlessly competitive markets you can find. It is pretty easy to measure the business performance of a CEO, and to reward him/her for exceeding targets. So why have Saatchi taken this step, and why are their CEOs not angry?

Saatchi is addressing a problem which is common in globalised companies, especially those which often require international co-operation. If an agency has a global client , the agency must ensure that all its national teams contribute to the same high standard of service provided to that client. But sometimes a national CEO may refuse to provide the resources to that client; the client may not be so active in his market and he may argue strongly that his decision delivered more profit to his national agency office - the criterion on which his bonus is paid. Anyone who has worked in a global advertising agency knows what I am talking about. Similar problems can arise on the client side too...e.g. the problems SAB have because Pilsner Urquell costs 10-20% less in German supermarkets.

But the Saatchi move raises interesting questions. Does the removal of these bonuses mean that Saatchi CEOs could be poached by rivals who can reward them more? (Senior indicated that there is still a bonus system of some kind, with less localised criteria.) Saatchi is part of Publicis Groupe, which also owns Leo Burnett and Publicis networks. If this is a good idea - and it certainly makes sense to me - will these two networks adopt the same policy? If not, why not? The next day, we had breakfast with Publicis Groupe chairman, Sir Maurice Levy. Nobody felt able to ask him that question!

 

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