A start-up Melbourne ad agency began dealing with staff retention issues before it even started business. Here is how to become an employer of choice.
| Entrepreneur |
Grant Lee, Mike Bollen, Gavin Campion, Keith Davidson |
| Company |
Reality Group |
| Business type |
Advertising agency |
| Founded |
1999 |
| Employees |
43 |
| Head office |
St Kilda, Victoria |
| Contact details |
+61 3 9593 9588 |
Key Learning Points |
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Staff retention
If you are serious about attracting and keeping the best people, think like an employee. What would the ideal employer in your sector look like - and how can you become it?
Profit share
Pay rewards and bonuses broadly across the business, based on performance.
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The Reality Group Story
In 1999 in a pub over a couple of beers, ad men Grant Lee and Mike Bollen planned a revolution: to start an advertising agency where the staff would actually stay longer than a commercial break. They drew a line down a piece of paper. On one side, they wrote all the things they liked about working at their big agencies; on the other, everything they hated. Lee, a former managing director at the multinational agency Rapp Collins Australia, says: “They were all people issues.”
Lee and Bollen developed an egalitarian structure with staff voting and no job titles. It has enabled Reality Group to expand rapidly. First year revenue was $500,000 with four staff; in calender 2005, revenue was $6.5 million with 43 staff.
The Challenge
In an industry that sells people’s time, Lee knew that the greatest challenge would be attracting good people to the new agency - and keeping them. He says: “I’ve worked in an agency where staff turnover was 50 per cent. We just didn’t want to have that same sort of turnover.”
The Solution
Lee and Bollen developed six strategies they believed would attract the industry’s best and keep them long term: six weeks annual leave, profit sharing, collectively determined core values, detailed employee interviewing, a monthly voting meeting to discuss the direction of the agency, and training.
The six weeks annual leave reflects Lee’s belief in work/life balance. The father of two meditates and bushwalks regularly. “Most people in our industry work 50–60 hour weeks and yet they’re still only getting four weeks. So that hasn’t kept up pace with the amount of time we’ve taken out of people’s private life.”
Until three years ago, all Reality Group staff were entitled to six weeks annual leave but the system was open to abuse. Lee says: “We had one guy who came to work for a year, took his six weeks and left.” Employees now get five weeks after one year and six weeks after two years.
From the outset, Lee was committed to giving 25% of the profit to staff. He says: “I hated how big agencies only rewarded the very few at the top, even though everyone had worked as hard as each other.”
For the first three years, the profit was divided up according to how long staff had worked there. But this system had problems and staff complained. Lee says: “People who’d only just arrived at the company and put in an extraordinary effort were getting less profit than some who’d been here a few years and had worked an ordinary year.” So it was unanimously voted by staff that the directors would decide who gets what share of the profit.
The monthly voting meetings allow staff to question any aspect of the company from profitability to day-to-day operations. Lee says: “It ensures everyone’s got a voice. The meetings also show if anything is impeding their ability to do their job.”
Scattered about the agency are statements of the 10 core values conceived by staff after a weekend away. They include: “We believe in karma” and “We treat everyone the way we would like to be treated”. The statements are a reminder to staff and are given to prospective employees to establish whether they share the company’s philosophy.
The interview process for new employees is arduous: the record for the longest interview is six hours. Lee says: “I can’t imagine hiring someone after only one hour.”
Lee resents big agencies’ habit of poaching rather than training. Staff receive a $1000-a-year training allowance that can accumulate over the years. Some have attended training courses, bought software for home and attended seminars overseas.
The Result
The 65% of revenue that Reality spends on staff is paying off. Annual staff turnover averages 10%. In 2002 and 2004, no one left the agency. Four people have returned to Reality Group after time elsewhere.
The agency started with one client. It now has Saab, Bob Jane T-Marts and BP among its accounts. Believing in karma does pay.