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  • Writer's pictureDavid Meikle

As recession looms, agency leaders must take the time to think twice.

The pace of change around COVID-19 is breath-taking, but we can be pretty sure that advertising will be the first industry to suffer and one of the last to recover – ‘twas ever thus. As markets plunge so marketing budgets are raided to support companies’ bottom lines. We all (should) know the arguments against that – they’re well published and this is isn’t marketers’ first rodeo – but it happens time and again so we should be prepared for this as an inevitability.

Marketing budgets will get cut, probably a lot earlier in 2020 than the usual July-August round of cuts vs forecasts, and as a result, agencies’ fees will take a hit and then the agencies’ P&L’s will be under scrutiny and then comes the inevitable swing of the redundancy axe. It’s a predictable chain of cause-and-effect events.

However, this time we can see it coming a little earlier – albeit at a pace. So instead of the classic knee-jerk reaction, let’s take a breath and think about how agencies could do this differently.

The usual approach is for agency leadership to ask/demand department leaders for headcount reductions and a total salary saving. This is often the quickest and easiest approach to hit the savings target and get the P&L back on track – the short, sharp shock – pull the Elastoplast off quickly approach.

Interestingly, Behavioural Scientist Dan Ariely studied the pull-the-plaster-off-quickly idea when he was tragically hit by a magnesium flare in his youth. His studies in the hospital where he was being treated for severe burns all over his body found that it wasn’t less painful, but in fact it was more painful to remove plaster quickly. But despite explaining this, the nurses continued to do it, because it was more emotionally painful for them to be inflicting drawn-out pain than to wince briefly while they inflict short sharp pain.

So I wondered, is that why companies are swift and sure when it comes to making redundancies? Is it for the sake of the leadership that more difficult but potentially better, fairer paths lie unexplored?

One things is for sure with COVID-19 – we really are all in this together. Never in recent history’s peacetime has the world faced such a fast moving and violent disease. The spirit of collectivism will see us through as the young care for the old and the strong care for the weak. So how could we take this collectivist approach to the inevitable P&L adjustment agencies will have to make?

Well, there are a few things I can offer as thought starters:

  1. Don’t forget voluntary redundancy – there could be quite a few people who are ready to stop work anyway.

  2. Reduced working days. Similarly to number 1, there may be a few who would be happy to reduce the number of days they work.

  3. Those with highest salaries could carry a greater burden. Instead of cutting staff, salaries could be reduced across the board with larger contributions coming from the top, and lower (sometimes much lower or even no contributions) coming from the bottom.

  4. Raid your savings. Isn’t that one of the reasons you have them? Because day’s don’t get a lot rainier than these.

The crisis we are experiencing currently will not last forever, but the damage it could do to our people could have much longer term ramifications.

But here’s the up side. When I took over running Ogilvy Russia in late 2003, I inherited many staff who had been with the company since its earliest days as a maverick creative shop called Propaganda. It was owned by Leonid Shutov, a smart and charismatic entrepreneur (now London restauranteur). Time after time I would hear the sincere declared loyalty to Leonid from the old guard staff. Why? Because during the Russian financial crisis of 1998, most agencies in Moscow culled their people without a second thought. And Leonid continued to pay his people.

So, as the advertising industry faces an inevitable recession, thinking about it and dealing with it differently is not only the right thing to do on a humanitarian level, but in the long term it may pay back indirectly, too.

David Meikle

Consultant and Author, How to Buy a Gorilla

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