Sponsor (Jan-Apr 1958)

* SPONSOR Could cost-trimming boomerang? ^ It could, say agency heads, at a time when pressure for better servicing is at peak. Danger: short-range view ^ Only a handful of hard goods agencies reflect lower client spending. Madison Ave. is Caution, not Panic Street By Evelyn Konrad Will 1958 be a year of wi economy drives and cost slashing among the top air media agencies? This is the big question among management of other major agencies since mid-April, when K&E and Maxon issued their now-famous salary-cutting memos to their staffs. The answer must be qualified: • Many agencies with car accounts have been feeling a pinch since early this year and are reviewing operating costs with jaundiced eye. K&E, with its 10-25% salary slash above $10,000, made the most drastic move. MacManus, John & Adams, agency for Pontiac and Cadillac, has cut neither staff nor salary but is watching expenses more cautiously than ever. Campbell-Ewald, with its Chevrolet success, is actually expanding. • Package goods agencies are split in their reaction to 1958 cost-consciousness. A handful are tightening belts on general principle, using recessionfears as an excuse for weeding out some unproductive personnel accumulated during previous boom years and holding a stricter line on expense accounts. But the majority of package goods agencies, which have suffered neither account nor billing loss, are moving ahead at the same operating level as previously, some even adding new personnel for additional or expected business — as in the case of Compton and Grey, for instance. Says Bart Cummings, president of Compton : "We work on a cost account Typical agency cost breakdown Class of work % total income Account contact, service 20.0 Creative services 18.0 Research 2.6 Media 4.9 Mechanical production 1.5 Accounting 2.0 General & administrative 9.0 All other 4.0 62.0% Cost-accounting expert, Ira Rubel (right), sees mounting number of agency inquiries as symptom of management concern over operating costs. Figures above are Rubel's ruleof-thumb for a healthy proportion of salaries to agency income, based on his work with top agencies. "We like to use salary ratios (% of salaries to income) from a particular agency's own experience, taking a normal year with reasonable profit as base to adjust this year's expenditures." ing system through which we can review every 30 days just where we stand by departments and by clients. Our feeling is that total salaries should never exceed 60% of gross agency income and ours tend to fluctuate healthily between 59 and 60% at all times. This way we have both control of operating expenses and a safe cushion against sudden business changes." On the whole, agency presidents and top management committees are reluctant to push the panic-button with staff-trimming and realignment of responsibilities. Billings forecasts for the year is favorable in most big agencies and management is aware of the dangers of false economies. "It's historic in this business that agencies have to cut staff when there's an account loss," says Ernie Jones, president of MacManus, John & Adams. "But that's not the problem of the majority of agencies today. We might suffer some loss of billing without losing an account, but the workload remains the same. Our answer to this problem is twofold: (1) an evertighter control of expenses beyond (Article continues next page) SPONSOR • 19 APRIL 1958