Risks Related to Ad Agency Staff Reductions

By February 23, 2021 March 2nd, 2021 Advertisers, Advertising Agencies

LayoffsAdvertisers cut budgets; ad agencies reduce headcount. This is a causal relationship and always has been.

No one can fault an ad agency for making prudent fiscal decisions when revenues decrease.

That said, advertisers need to take precautions in this situation to mitigate their risks, particularly when there are significant downsizings as there were in 2020.

It was recently announced that Omnicom and Interpublic had eliminated “10,000 roles” between the two organizations in 2020, citing the pandemic as the primary reason. This represented an 8.4% reduction in staff for Omnicom and 7.6% for Interpublic. Significant by any measure… and they will not be alone, the other holding companies simply haven’t yet disclosed annual headcount data.

Like with most professional fee-for-service providers, involuntary staff reductions tend to have a disproportionate impact on longer-term, more highly compensated individuals and personnel working in shared services functions such as finance, human resources, legal, procurement, traffic, etc.

Advertisers that have reduced their budgets obviously need to collaborate with their agency partners on revised scopes of work and remuneration programs that reflect new spend levels. Clients that have maintained or increased spending will need to implement safeguards to ensure that their accounts are adequately staffed and supported.

This includes making sure that the mix of agency personnel working on their business is reflective of the need for strategic insights, breakthrough creative and executional excellence in all facets of the business.

Items such as tightening up creative and media briefing and approval processes, specifying media planning procedures and desired outputs, identifying media management guidelines for in-flight stewardship and post-campaign performance reporting and being overt about financial management expectations and reporting (i.e. project tracking, job closure and reconciliation, third-party vendor payments, etc.) are necessary steps for advertisers to take.

In our experience, as long as both client and agency are aligned, working through these situations to mitigate the risks associated with involuntary staff reductions can be effectively addressed.

As Josh Billings, the 19th century writer and humorist advised: “Caution, though very often wasted is a good risk to take.”

Author Cliff Campeau

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