Identification of Issue

Marshall & Gordon (M&G), a major international player in PR sector offers plethora of services like
media and investor relations, crisis management, lobbying, event management, fundraising etc.
With the new earned success to reposition senior leadership of the troubled South American
nationalised oil company it sensed the new opportunity and launched executive positioning practice
(EPP) which is very different from the PR services they offered over years. Venturing into EPP was a
strategic shift by M&G which focused on development of relationship with clients. Adding to this,
EPP also took considerably more time to show up results when compared to PR services.

The major challenges faced by M&G were:

1. Faulty and complex incentive based pay structure
2. Lack of collaboration which was of paramount importance for EPP

Kelly Browne, CEO of M&G was aware that with high volatility of the PR industry it is important for
M&G to change its strategy to retain both its clients and employees. She was in deep deliberation /
dilemma regarding the roll out of new compensation system which would help to keep the
motivation high among the employee population and to support the firm’s strategic shift.

Organisation History and Project Evaluation

Marshall & Gordon was result of a merger between a small Atlantic public relation firm and Gordon
Partners. Founded in 1904 the firm initially focused on communications, brands, and product
portfolios. With offices at multiple locations around the world (U.S., Asia, Europe and South Africa)
the firm was acquired by PTG holding group, a worldwide conglomerate in 1962. By 1999, M&G was
a major international player in PR sector. At M&G more than one third of the firm’s top performers
started with intern or entry level associates and climbed the organisation ladder to become partner
as shown in above figure.
About Executive Positioning Practice (EPP)
With the new earned success to reposition senior leadership of the troubled South American
nationalised oil company, M&G sensed the new opportunity and launched executive positioning
practice (EPP).

In this service the consultants of M&G work with client’s C-level executives to create proper people’s
positioning which was more nuanced in nature. This positioning work is dependent more on intimate
relationships with C-suite and also involves strategic thinking, extensive interviewing and various
other analyses.

M&G Current Compensation System

One of the main loop hole in M&G’s compensation system was the way assigning of terms of credit
was done. The fees collected for the project was double counted for origination by the partner (O)
and execution by the partner or principal (E). Principals and Partners were given an annual salary
and bonuses based on O/E system. Because of this system every partner / principle was paid
differently which created internal conflict among employees. This further generated domino effect
while handing over the projects, partners negotiated between them about the split of O and E
credits which is indicative of presence of bias in the system making it more complex and unfair.

 One example for creation of such conflict would be, a partner who refrains to handover
project execution in view to earn more money even though he do not have the required
calibre to execute the project also he may refrain to do any non-client work while on the
other side other partner may be more focused to maintain the quality of the project rather
than achieving the numbers. At M&G once the consultant’s production goes below his
salary, he would be considered as “underwater” and would be ineligible to get any bonuses
while on the other hand those employees who managed to get numbers would be receiving
high incentives.

In 2005, M&G introduced a new formulaic clause in O/E system which worked on the principle of
“The more you bring in, the higher your share.” Consultants would get:

 10% for origination credits under $280,000

 20% for credits between $280,000 and $560,000
 30% for credits over $560,000

The above compensation system is comparable to Broadbanding style of compensation where the
bonuses are graded into three grades. This is also responsible for wider range of pay rates. With this
alteration each consultant was now able to calculate his/her expected bonus based on the individual
report during any time of the year.

Adding to this, employees who held position below principal, and all non-consulting employees were
salaried. Consultants “informally” took care of their own support people by giving them bonus
cheques from their own bonuses. So in a way lower level employees were dependent on the
magnanimity of higher subordinates as they were not at all considered in O/E system. This can play
instrumental role for lack of motivation and / or to demoralize employees. This would also hamper
the sense of unity among employees which would further impact the quality of EPP service launched
by the company and would reduce the productivity of the organisation.

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  To quote an example, Janice Lu who was managing director for the firm’s North America-
West region and was responsible for handling several important biotechnology clients
complained about the added responsibilities she is now dealing with just because she was in
senior position without receiving any added compensation for the same. While on other side
the two lateral hires for which she is responsible are not much interested to bring in new
business, or mentoring any of the associates. They are just executing the businesses which
they booked before joining the firm, because both were aware of the fact that they are not
going to be evaluated for bonuses till 2013.

Unlike PR service EPP dealt with completely new dimension by focusing on relationship with clients
which was a long term process. The above system completely ignores to reward those people who
put in time to build relationship with clients but it encourages individuals to pursue their own
interests. It is mentioned in the case that consultants lacked loyalty towards their own organisation
and kept on moving to competing firms along with their clients.

Thus, we think that the above system in which collaboration is very difficult can put the firm’s
business in jeopardy and can create ripple of distrust among the entire organisation.

Internal Factors affecting the problem

1. Current compensation system encourages entrepreneurialism and demoralises employees,
adding to this it also promotes individualistic behaviours where in employees refuse to share
pie.
2. Faulty and complex incentive based pay structure is also responsible for lack of motivation
among employees and also leads to demoralise employees. For example, For example,
higher level employees like Birch and Mike Leigh were highly disappointed with O/E system.
3. Lack of collaboration which was of paramount importance for EPP. For example, Janice Lu
who was disappointed with performance evaluation system and guaranteed bonus system
given to two lateral hires which led to free riding phenomena.

External Factors affecting the problem

1. Competition from local/small firms: PR service business was highly competitive, even a small
or local agency could grab / steal business from larger PR firms.
2. Competition from seasoned professionals: Seasoned professionals also dominated PR
industry who had developed their own reputation among clients and used junior teams only
for background support.
3. Top firms are doing diversification into PR services by venturing into new services such as
litigation support and reputation management consulting.

Solution & Action plan recommended for implementing the solution

 Older system put more emphasis on individualistic work and encouraged
entrepreneurialism; the new system should be developed to encourage collaborative work.

 The main policies in current compensation system like O/E system which focuses on
individualistic work should be eliminated or should be replaced completely with policies
which encourage collaboration. Systems to be eliminated are:
a) At M&G once the consultant’s production goes below his salary, then the consultant
would not be eligible for bonuses.
b) Company uses Broadbanding type of compensation structure where consultants get
10% for origination credits under $280,000, 20% for credits between $280,000 and
$560,000 and 30% for credits over $560,000. This creates competition among
employees and thus should be eliminated with a flat structure so that employees
become ready to share the pie.
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 c) In the older system bonuses are given more priority and employees consider their
salaries to be minimal when compared with their bonuses, this should be eliminated
as it hampers team work. Thus, we think that organisation should provide good
salary to its employees. Giving more weight to salary rather than bonuses will
encourage teamwork and collaborative behaviour.
d) The company has no clear standard to measure quality of employees, quality of their
work and their excellence. Thus, we would suggest to make team amongst them and
give some weight to team work while evaluation for bonuses.

 Select right compensable factors: There are four basic compensable factors namely skill,
efforts, responsibility and working conditions. By selecting right compensable factors one
can encourage employees to perform well on various parameters. However, proper weight
should be given on those factors which relates to individualistic qualities.

 Assign proper weights to compensable factors: To promote collaboration among employees

various factors like team work, job complexity, working conditions, for efforts etc should be
given considered.

For example,
20% Team work
30% Job Complexity
30% Working Conditions
20% For efforts

Concepts used and list of possible options

There are various concepts and alternate course of actions used by organisations for deciding
compensation for employees, using these concepts we plan to make a better and fair compensation
system at M&G. These concepts are as follows:
a) Competency based pay: In this theory the employee is paid for his/her skills and knowledge
and for the responsibilities he/she is capable to fulfil. In the old compensation system of
M&G more focus was given on the individual numbers achieved rather than competency.
Using this type of pay system one can encourage employee to be qualitative in his/her work.
However since this is an individual component for measurement it should be given weight
accordingly keeping some percentage for team work and collaborative efforts.

b) Total reward programs: This system encompasses compensation as well as personal and
professional growth opportunities, it also helps to create motivating work environment. In
addition to traditional rewards which are given in form of bonuses it also gives intangible
rewards such as recognition, career development opportunities, good relations with
managers and colleagues. Organizational justice. Trust in employees, feeling of being valued
etc. This concept can be used to encourage team work and collaborative behaviour.
 For example, various teams can be formed giving them predefined goal to achieve.
At the end of year the best performing team would be awarded with the “team of
the year” award and/or the top 5 best performing teams could be awarded with
holiday packages or with special training programs.

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 c) Benchmark Jobs: For proper evaluation of the employee for competitive pay it is important
to have a predefined objectives / benchmarks for the job given to him/her. This would help
to maintain transparency and would also encourage the employee to be up to date with
those objectives. Since collaboration and team work is our primary target we can benchmark
jobs with personal objectives as well as team objectives which would encourage employee
to engage with each other and to work in collaboration along with achieving targets at
individual level.

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“FAS AL2 mourns along with the families of our

martyr soldiers in Pulwama attack. The sacrifices of
our brave security personnel shall not go in vain.”

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