• by David Goetzl  @dgoetzl, June 11, 2009

Interpublic Group CFO Frank Mergenthaler said this week that after some aggressive staffing cuts, the holding company can't do more without putting it in a tough spot once the economy turns.

Mergenthaler said "the worst thing that could happen" is trimming to a level that when there's improvement, "we're no longer competitive." And, he added, "we're getting pretty close to that."

"So right now, we're very focused on client-facing, creative-type people -- there's only so far, only so deep, you can go," he told investors. "What you don't want to do is put yourself at a disadvantage when growth comes back into the equation."

Mergenthaler said IPG has spent the last three years luring talent and building agency structures, including making adjustments in the recent downturn. It feels competitive again, and it is wary now of jeopardizing that status.

By the same token, he said IPG executives will be mindful of not allowing staffing and other expenses to ramp up disproportionately when clients start spending liberally again.

On a separate issue, Mergenthaler said IPG is interested, as other holding companies and agencies are, in working with clients to find ways to develop incentive-based compensation -- where an IPG might benefit if there's an agreed-upon metric showing that its work drives results.

"We've all struggled in how do you define success," he said.

The trouble remains in finding that measuring stick. (He insinuated that IPG had an automotive client that paid it in part based on the number of cars sold.)

He said as a result, "legacy" pay structures largely remain.