Episode 185

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For almost two decades, AMI has been conducting an annual salary and benefits survey. The 2019 results are in and they are quite telling. 2018 was clearly a good year to be an agency employee.

As we cull through the data to pull together the report, certain trends and patterns emerge. In this episode, I want to walk you through the ones that I believe are most critical for you as an agency owner.

I know that every agency owner is walking the fine line between wanting to fairly compensate the people on the team, not lose your best people to poachers, and still make a profit. Some insight into how other agencies are making it work should help your 2019 and 2020 planning.

What You Will Learn in this Episode:

  • What similarly sized agencies in your market are doing with salary and benefits
  • How the focus on content is favoring writer creatives over art creatives
  • The state of entry-level starting salaries
  • What agencies are doing to keep their staff from seeking greener pastures
  • Why agencies tend to be so generous with benefits
  • How to attract and retain top employees when you can’t compete on price
  • The intangibles that make agency life so rewarding, and how to emphasize them

The Golden Nuggets:

“If you are an agency that doesn't have a robust benefits package, understand that is a weakness you have in terms of hiring.” – @DrewMcLellan Click To Tweet “Those of you who have baked educational perks and benefits into your package are spot on. That's exactly what your employees want.” – @DrewMcLellan Click To Tweet “There is a real challenge between rising wages and clients who don’t want to pay more for services. You can't keep taking the same amount of money or less money and then pay out more money. That leaves you with an empty wallet.” – @DrewMcLellan Click To Tweet “The greatest asset you can offer employees is how you invest in what matters most to them, like educational opportunities, culture, and attracting sweet-spot clients who are grateful for the work your agency does.” –@DrewMcLellan Click To Tweet

Drew McLellan is the CEO at Agency Management Institute. He has also owned and operated his own agency since 1995 and is still actively running the agency today. Drew’s unique vantage point as being both an agency owner and working with 250+ small- to mid-size agencies throughout the year gives him a unique perspective on running an agency today.

AMI works with agency owners by:

  • Leading agency owner peer groups
  • Offering workshops for owners and their leadership teams
  • Offering AE Bootcamps
  • Conducting individual agency owner coaching
  • Doing on-site consulting
  • Offering online courses in agency new business and account service

Because he works with those 250+ agencies every year — Drew has the unique opportunity to see the patterns and the habits (both good and bad) that happen over and over again. He has also written two books and been featured in The New York Times, Forbes, Entrepreneur Magazine, and Fortune Small Business. The Wall Street Journal called his blog “One of 10 blogs every entrepreneur should read.”

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Ways to contact Drew McLellan:

Speaker 1: If you’re going to take the risk of running an agency, shouldn’t you get the benefits too? Welcome to Agency Management Institute’s Build a Better Agency Podcast, now in our third year of bringing you insights on how small to mid-sized agencies survive and thrive in today’s market. We’ll show you how to grow and scale your business, attract and retain the best talent, make more money, and keep more of what you make. With 25 plus years of experience as both an agency owner and agency consultant, please welcome your host, Drew McLellan.


Drew McLellan: Hey, everybody, Drew McLellan here with another episode of Build a Better Agency. This week, it’s one of my solo casts. So unlike my norm, where I have a guest and I pick their brain on all of our behalves, this week is just you and me talking about a topic that I think is important for you to focus on. Actually, what I’m going to do this week is I want to talk to you about some of the observations I made as we wrapped up the 2019 AMI Salary and Benefits Survey. I want to talk to you about some of the trends that I’m seeing, some of the patterns. And so, hopefully, you can use this information as you start thinking about building your team or compensating your team, so that you know that you are, A, in the ballpark of where you need to be, but also what other agencies are doing and how they’re handling certain situations.


  But before that, I have just a couple of housekeeping rules. Number one, remember, every month we are going to be giving away a free seat to either one of our live workshops or access to one of our on demand courses. All you have to do to be eligible for one of those free seats is go to Stitcher or iTunes or wherever you access our podcast and leave us a rating and review. What I’m finding is that when we go to choose one, some of the usernames that you guys use are really hard to identify who you are as an agency. So here’s the modification that I’d like to make in this little monthly contest. If you would, after you leave a ratings or reviews, and by the way, if you’ve already left one on iTunes, for example, you could go over to Stitcher or one of the other places and leave them. But take a screenshot of your review and shoot us an email. Just email it to me at dre[email protected]. We will put you in the drawing.


  We’ll put everybody in the drawing, but it’s easier for us to identify the winner if we have an idea of what fuzzydog321, who that really is. With all of that said, I’m happy to say that the winner for April is Chris Kirksky. So Chris, I’m going to be shooting you an email, but I wanted to announce it publicly so everyone knows that we’re actually giving this away. So Chris will have a seat in one of our current workshops that we are offering, or he can access one of our online courses. Actually, that is a great lead in for me to remind you that we have this amazing workshop that we are offering in August, and we don’t have very many seats left. I think we have 10 or 12 seats left.


  So let me tell you a little bit about it. So Mercer Island Group, which is an agency search firm, they match agencies and brands all the time. They do a lot of work helping brands pick the right agency. So they’re in the room hearing agencies pitch, and they are also in the room when the client is dissecting the different pitches. What Mercer Island Group has come up with in terms of an insight is that most agency RFPs, whether they’re a written response or a presentation, are missing some connective tissue between here’s what you told us clients. So we sort of give them the status quo. And then in many cases, we immediately jump to the tactics, here’s what we think you should do about it. But most agencies don’t build a compelling case around the strategic insights that they learned from not only what the client told them, perhaps in the RFP document or in an interview, but also what the agency did to do some research on their own and how they sort of knitted all of those facts and features together to come up with the aha moment.


  And then here’s how we’re going to deliver that aha moment. So Mercer Island Group taught this at a very bare bones level in January at our workshop. And since then, nine agencies, and I keep updating this in the e-newsletter because it keeps going up. Nine agencies that were there in January have now reported that they have applied what they learned from Mercer Island Group around that strategic insight sort of toolkit and how to actually do it and how to talk about it. Nine agencies have one business where the prospect who is now a client specifically cited the strategic insight as the key element that allowed them to win that piece of business. And those nine agencies since the end of January, so this is April, since the end of January. So in just a couple months have scored over $3.3 million in AGI wins since that workshop.


  I want you to have that same knowledge. So I’ve asked Mercer Island Group to put together a two day workshop where they are going to teach every aspect of that strategy, they’re going to give you case studies, you’re going to practice and you are going to leave armed to stand out in biz dev pitches. And they’re also going to show you how to use this with existing clients when you go to do your annual planning or annual review. So you lock down that client, and not only lock them down, but get a bigger budget. That conference, that workshop rather is August 13th and 14th in Chicago. Like I said, we only have 10 or 12 seats left. So if you are interested in this head over to the AMI website and go under training and you will find the workshop and you can sign up. We have a hard cap at 50 people. We cannot go over that number. So I can’t let you in if we’ve sold it out. So head over there if you’re interested in that.


  So let’s get to the content. I want to talk today about the results of the salary and benefits survey that we just launched into the wild at the end of February. If you are interested in actually seeing the report, what we’ve done is we have asked, I think it was almost 1,000 agencies responded and they gave us their salaries for a variety of positions. They also told us what benefits they offered, and then we aggregate all that together. And then we slice and dice that information. So you can search by agency size, you can search by agency geography. Right now, all of that data is US driven. So if you are outside of the US, it may be anecdotally useful to you, but it may not be as precise for you.


  But anyway, we’ve done all of that. So you can look, if you’re in the Midwest, you can look for what Midwest salaries are. If you’re an agency of 5 people or an agency of 55 people, you can slice and dice the data that way. And we also have this whole section on what benefits agencies are offering to stay sticky with their people. So what I want to do today is I want to just talk you through some of the observations that I’ve made by going through all of that data and putting together this report. And one thing I will tell you, it’s a pretty good gig to work at an agency today. We saw double digit percentage increases in many, if not, almost all of the positions, since we did the last survey, and the perks and benefits have gotten richer as well.


  No position in the survey saw less than a 5% increase, other than sadly at the C level. Many of the C-level positions held pretty steady year over year while the rank and file positions grew significantly. The truth of the matter is all of you are fighting tooth and nail to get and keep good employees. You are being poached left and right, your clients are stealing your employees, other agencies are stealing your employees, your employees are leaving to take corporate jobs. And so you are having to really fight to manage to keep the best of your employees. In fact, many agencies, many of my agencies are seeing 20 to 30% turnover, and they’ve really had to beef up the pay and the benefits to combat this trend. So if you’re feeling this trend, if you are feeling like you just cannot hang on to your people, know that you are not alone, many agencies are struggling with this.


  So when it comes to salaries, I think agencies are really feeling the pinch that many of you are having to pay or overpay to keep good people. In fact, I have a lot of agencies saying to me, we have new business opportunities around every corner, and I’m afraid to chase them because if we get those pieces of business, I have no idea how in the world we are going to service that business. We just don’t have the bodies to do it and I can’t find the right bodies. So the cost of keeping your employees has risen dramatically. And yet you’re still sort of between a rock and a hard place. Many agencies would cite the lack of work force pool out there as the number one barrier for their agency’s growth in 2019.


  So for the first time, one of the things that I noticed is that we’re starting to see a trend where salaries are favoring writers over art directors. So we saw an increase in both positions, but the increases in terms of pay were that the writers, especially in positions like creative director. Creative director, that’s a writer is typically now being paid more than a creative director that is an art director. And I think that lends itself to the kind of work we’re doing today. It’s the content and it’s all about sort of strategic vision, and thinking, and strong headlines and creating a lot of content that is compelling and engaging. And so right now, anyway, agencies seem to be valuing writers over art directors. And I have to tell you, I don’t think I’ve seen an agency hire a art director or somebody with an art background only as a creative director in probably the last couple of years. Every creative director I’ve seen that’s been hired has been on the writing side.


  Fewer agencies have media folks in house at all. So that was another interesting shift in the salary pool. So agencies that have media people are paying them better than they used to, but far fewer agencies had people in those positions to report their salaries. And I think part of that is because unless you’re buying a pretty good volume of media, and for many agencies, that’s really shrunk down other than the digital side, the software and all the tools and all the training is getting more and more expensive. And so many agencies are opting to farm that work out or find a strategic partner rather than staffing it in house.


  One position on the flip side that we’re seeing a lot more of is the traffic manager. And I talked to you about this in an earlier solo cast, the importance of sort of the 2019 or 21st century traffic manager and the role that they’re playing in agencies today in terms of making sure that you’re delivering your promises to your clients on time and on budget. So traffic managers are both helping you retain client relationships and make sure you keep your clients super happy. But they are also helping you stay profitable on the projects that you have. In both the traffic and account service roles, we showed a pretty hefty jump in salaries and pretty much across all agency sizes across all parts of the country. So it makes sense when you think about it, these are the people that have a very important relationship with your clients. And if you are going to overinvest, it makes sense that you’re going to overinvest in people who have a lot of control over your client, who have the relationship with the client. And if they leave, all of a sudden that puts your client at risk.


  Couple other things that we’re noticing is that agencies are adding a lot more copywriters, content writers, digital staff across the board. And every one of those positions showed a spike of at least 10% since our last salary survey about 18 months ago. So in those roles, we’re recognizing the importance of them. And we are demonstrating that we are more willing to pay for those positions than perhaps we were before.


  One thing that’s really shifted is entry-level positions inside agencies. So it used to be, there was a host of position somewhere between 20 and $30,000 as sort of an entry point into agencies. So a lot of account coordinators came in at the mid 20s and things like that. And honestly, even at the reception level, for those of you that still have a receptionist or someone who runs your front desk, even those positions have now gone north of $30,000 in many cases. So really the starting wage for almost every position in an agency is going to start with a three or a bigger number than that. So that’s a big shift for us. This is the first time we’ve seen sort of that threshold be consistently broken across all the barriers.


  In terms of sort of regions of the country, the Southeast region seems to be really jumping. They jumped their salaries more than anybody else did, but they were also the region that was paying the least back then. And even now they’re still the region that tends to pay the least for their employees when we look at all of the different positions. But Southeast has jumped up enough that now they’re really neck and neck with the Midwest. So as you might expect, the middle of the country and the south half of the country is not keeping pace with the West Coast or the East Coast. Those two regions are still the highest paying. It’s also where the highest cost of living is so it makes perfect sense.


  On the benefits side, we saw some really interesting things. So one of the things that we noticed on the benefits side is that agency owners continue to be incredibly generous with their employees. I’m always surprised when I meet an agency owner and they might have 5 or 8 or 12 employees, and they start talking about their benefit package. And I’m not kidding. Many cases, your benefit packages rival big corporate benefit packages. So if you’re an agency that doesn’t have a robust benefit package, understand that that’s a weakness that you have in terms of hiring. Because even if you are competing against other agencies for those employees, many agencies are super generous with their benefits. And in the 2019 survey, we saw that that generosity even grew even more.


  So I think of this as a way that we demonstrate to our employees that we value them and that we find their work important, and we want them to have a great life work balance, and we want them to be appreciated. And that while we can’t always do it in salary, it’s a rare agency that can out pay a corporate job for example, we can be generous in our benefit packages.


  So one of the things that I noticed was remember back about a year and a half ago, we sort of had that threat of the reclassifying employees. So right before the 26 elections. So I guess it was more than 18 months ago. Seems like only 18 months ago. But many agencies scrambled to move people from salaried employees to hourly or vice versa. But that was a threat that never came to pass. And so in the 2017, 2018 salary survey, we saw that reflected a lot. And in the 2019 survey, we saw a huge decrease in the number of hourly employees across the board. Now that you don’t have to do it, a lot of people went back to pretty much putting everybody on salary.


  Two thirds of the agencies surveyed, paid out some sort of a bonus in 2018 to reward their employees. And the majority of them still unfortunately hand out those bonuses, arbitrarily. So it is subjective, it’s typically at the end of the year, and they don’t normally tie them to company goals or metrics. So if that’s you and you want to change that, I did a solo cast a while back on creating a bonus program that gets your employees to act like owners because it’s tied to AGI and to agency performance. I still believe. I know it’s not even a belief. I know that is a better way for you to reward your employees so that it doesn’t become an entitlement so that they understand that every year we’re not getting a bonus, just because it’s December that we have to earn that together. And when we do, we get rewarded together. But nonetheless, no matter how you decided the bonus, most of you gave out bonuses in 2018.


  So when I asked you what were some of the unusual benefits that you offered, agencies and their creativity showed up in spades. So interestingly, the most common unusual benefit that was mentioned was that you have a pet friendly office. So in agencies who responded and within my own AMI agencies, many of you have dog-friendly offices. Some of you have resident cats that actually live in the office. A few of you had rabbits and a couple of you, even had birds, like parrots on premises on a regular basis.


  Some additional creative perks that agencies mentioned were flexible work schedules, paid time off to go work out and many forms of educational allowances and opportunities, which is a great benefit. So if you remember back, if you have looked at the Agency Edge Research Series that Susan [Byer] and I do every year, the 2016 survey, we turned the telescope. Normally we talk to CMOs, but we turned the telescope and we talked to almost 1,000 agency employees. And the benefit that meant the most to them was the opportunity to keep growing and learning. So those of you that have baked in educational perks and benefits to your package, are spot on. That’s exactly what your employees want.


  And then a lot of people listed sort of what I think of as agency staples, like a stocked fridge with snacks. And of course you’re an agency. So of course there’s beer in the fridge. So some things when I step back and I sort of look at the whole of the survey and some things that I’ve observed are the good news is that agencies are doing well. You are able to pay your people an increase wage. You’re able to jump up the benefits package. And so agencies are thriving right now.


  But one of the things I want you to think about is how are you going to react, we’re all sort of waiting for the shoe to drop and there to be an economic shift in some way, and many people are expecting a recession at some point in the next couple of years. One of the things I want you to be thinking about as you continue to beef up and be generous with both your salaries and your benefits package is at some point in time, all of a sudden money is going to get tighter. So be careful about overspending too much in this area because you don’t want to have to ratchet it back.


  One of the other things that I noticed was that I can see in the respondents and what they’re doing, I can see what I’m calling a hiring fatigue and a strain that the higher salaries are causing. I had a lot of people email me after the survey and talk about the fact that it just seems like no matter what they give their employees, they can’t satiate their desire, they cannot give them enough to satisfy them. And a lot of agency owners are frustrated and exhausted by this constant battle. And so we’re seeing that in the results and are also seeing it in some of the sort of ad hoc comments.


  One of the ways that agencies are really trying to retain their staff is by adding more support staff. So allowing people to grow professionally by putting someone underneath them like a traffic manager or more account coordinators or project managers to help sort of boost everybody up so that are not doing as much admin work as agencies have had their teams doing in the last few years. As agencies grow in size, really that traffic position seems to be becoming almost a mandatory position and that agencies are willing to invest in that position, A, to relieve, especially the account service team, but also the production team, the creative team from doing a lot of data entry and a lot of running back and forth and sort of hallway conversations and really trying to capture all of that information in some sort of a project management system, so that they can be more efficient and effective, not only with their internal team, but with clients.


  A trend that has really exploded in the last couple of years is the whole idea of working from home or remote employees. So I can remember before the recession, many agency owners were saying to me, we are a collaborative business. We need to all be under one roof. I would never let somebody work for me either remotely or work from home several days a week. And honestly, I am watching that attitude erode. So the recession started it because it was a cheaper way using contract labor or letting someone work from home for a few days for less salary or hiring a remote worker because they were grateful to have the work. And so they didn’t require some of the benefits or perks that your under your roof employees did for whatever reason, agency owners softened that position around remote employees or work from home.


  And now what we’re seeing is that’s becoming very commonplace. It’s very rare that I bump into an agency that has a strict everybody is in at the same time. And everybody is in the office every day. Most of you have some sort of highbred employment situation with some of your teammates. So whether it was somebody who was working in your office and then their spouse or partner got an opportunity in another state, and you didn’t want to lose that talent. Or in some cases, many of you are hiring remote employees simply because the exact employee you need is not in your marketplace and you can’t afford not to have that skill level or that talent on your team. So you’re now bending your own rules and agreeing that people can work for you, even if they don’t live in the same state or in some cases in the same country.


  Also many of you are giving your employees the chance to work from home one day a week, and agencies are reporting that actually, in some cases, those are the most productive days for those employees. So if you have not gone down that path, know that one, most of your competitors have, and for employees, that’s pretty attractive benefit. And two, all the things we were afraid of, that they wouldn’t be productive, that they would spend all day mowing the lawn or doing laundry or in yoga class or whatever are turning out, not to be true. Your employees want to get their work done because otherwise they have to do it on their own time. So many employees are reporting that they are actually reducing the number of overtime hours they’re working when they can work from home, because there’s so much more efficient there.


  I think that sort of the overarching message is, and you are all feeling this already, that agencies are struggling to find, and attract and retain great talent. And so for most of you, you are willing to go to great lengths to find those people, to get them to choose you over all the other suitors that are out there. And most importantly, once you’ve found a great employee, you’re really willing to do just about anything within reason to keep that employee. So as more and more clients are shifting work in house, and they’re building up internal teams, which means they’re going to be cherry picking our employees. This is going to continue to be a challenge for us, but we have to realize that we can’t compete on price. So while we saw these big double digit jumps in salary, we can’t see that year over year. Agencies can’t afford it because while our salaries are increasing, we’re getting a lot of pressure from clients to keep our prices where they’re at, or even to shrink those prices. So the math doesn’t work.


  You can’t keep taking the same amount of money or less money and then pay out more money. Because at the end of the day, what that means is your wallet is empty. So I think agencies have to figure out how to beef up culture, how to really celebrate the core values that make your agency unique. What is the vision for your agency? I think you’re going to have to find the intangible reasons why someone chooses agency life over corporate life and why someone would choose your agency over another agency. And really start building on that and emphasizing that, because at a certain point in time, money alone is not going to be what wins the day.


  We have to create a work environment where someone says, you know what? I could make more money over there or over there, but I choose not to. I choose to stay here because this is a good fit. This works for me. I’m getting to do work that I find challenging. My employer is investing in me so that I keep getting better and stronger in my job, which means that I will earn a promotion and a raise. There is a balance to my work so that I can run and see my kid’s soccer game in the middle of the day. Or I can go to the doctor when my husband is ill and I want to hear what the doctor has to say.


  So all of those things, those intangible things, probably the very same things that you appreciate about your agency are the same things the employees appreciate. So that’s where I think we can compete and we can win against the corporate sort of raiders who are taking our employees. Your greatest assets and offerings are going to be honestly how you plus up not only your traditional compensation package, but how you also invest in the things that matter to your employees around educational opportunities, and culture, and attracting sweet spot clients who are appreciative and grateful for the work that you do.


  I believe that we are uniquely qualified as agencies to come up with that suite of benefits, that vision that inspires our employees, core values that we’re all proud to live by and be held accountable to. That’s what agencies do. We create amazing things out of very little or nothing. And so you’ve already got plenty of building blocks to create this stuff. So I have no doubt you can make something amazing that makes your place stickier than other places, that makes your employees want to stay there.


  So that’s sort of my lay of the land of our most recent salary and benefits survey. I’m hoping that some of that was very useful for you. I’m hoping it was not shocking, that it’s in alignment with sort of what’s happening inside your shop. And again, if you’re interested in seeing t