Adland: To survive COVID-19, we need to take 40% pay cuts, now

Client spending could drop by 40%, minimum, within four weeks. So to survive this pandemic, and its impact on our businesses, adland employees - of all levels - need to be willing to take a 40% pay cut, argues Chris Savage.

If our industry is to make it through this crisis, and we’re to keep our jobs, we need to swallow bitter medicine.

This is what it tastes like: We need to volunteer now to take a 40% pay cut. Awful tasting medicine, indeed.

Maybe in your business, it’s 15%. 20%. Whatever. The message: Be open to taking a reduced salary for a few months.

Here’s why.

If you’re in a job today, someone is doing something right.

If you want to be in a job in four months’ time, and you work in the marketing, communications and creative agency world, then please, pay attention to my idea.

And if you work for an independent agency, owned and run by entrepreneurs who carry all the stress, pressure and financial risk and burden, then read this with extra positive intent.

First, though, have hope and optimism. I mean that. From the heart.

This crisis will end. It will start with an easing, and then accelerate to a ‘new normal’, even if some of us more mature-of-age types need to stay inside for a bit longer.

We have to assume now we’re in for at least four months of massive disruption. That’s the best case scenario.

So here’s the brutal truth that goes along with that: Client spend will retract by 40%, minimum.

We’ll get to that reduced level within four weeks. That’s what the experts are predicting.

The cash flow pressure on your employer – especially a small business like an independent agency, but also on holding companies – is going to be massive. Not for all, but for most.

Many will struggle to survive. At the same time, your bosses (if they are any good, and facing reality) will be looking – now, tonight and first thing tomorrow morning – at every way they can to save jobs and ride this crisis out so their talented teams can stay protected, and be ready to thrive in a new world of opportunity.

They don’t have many cost-cutting options. Wages are usually 60-70% of many agencies’ costs.

Saving jobs is a two-way street

Employees have to come to the party and be prepared to compromise and adapt, or significant retrenchments are inevitable. They’ve started already. We need to collaborate to minimise the number of them.

There will be a rare few agencies who are strong, and feeling little impact – yet. But I don’t know of any that aren’t taking revenue body-blows, and, very soon, the punches will be more regular and harder.

To survive (keep our jobs), we have to be prepared to reset expectations with our employers. We need to be rethinking job descriptions, our employment contracts, and our remuneration.

If I had a magic wand, I’d wave it so all were prepared, and agreed to immediately take a 40% pay cut for the next four months. Leaders take a 50% cut. Maybe juniors take 25%.

Now, I know those are big numbers, with real impacts on us all.

I use the figure of 40% to grab attention. For some agencies, it’s the right number, for sure.

Maybe in your agency, the number is 10%, and leaders take a 15% cut. My point is – be open to taking a cut, now, to help the business survive, and to help preserve your job, and those of others.

No guarantees, but a really good contributor to survival.

Cash reserve pool

Here’s another idea, although maybe too clunky. Perhaps the money people offer up in the form of pay cuts goes into a ‘cash reserve pool’ which the agency manages and only dips into if required. Many will need to dip into this pool heavily, and soon.

After three months, the agency could report back to staff on what the ‘pool’ now looks like. Maybe at that stage, the pay cut gets reduced from 40% to 20%. And continues to decrease as the business can afford it. If things recover, and anything is left in the pool (unlikely) it gets re-distributed.

Again, if I had that magic wand, we wouldn’t ask for time off because of the pay cut. After all, what will we do with it when confined to barracks?

Rather, let’s lean in as hard as we can to super-please existing clients, come up with ideas to help clients in the ‘recovery’ phase, develop ideas for new products and services, develop marketing materials, and do whatever we can to help our businesses survive.

If our business doesn’t have enough work, we’d ask our agencies to nominate charities and other good causes to support with our time. They are suffering too.

Employers need to play fair

Employers have to accept that forecasted profits for this year and next are now La La Land, and dramatically reduce expectations.

Breaking even, or making a small profit, month by month for the next 12 months, and preserving as much as we can in the ‘cash reserve pool’, should be the goal.

There are many softer versions of my suggested approach: Four day weeks. Nine day fortnights. Other part-time working arrangements. Taking annual leave, long service leave, or unpaid leave. A combination of the above. And with a smaller salary reduction.

There are also specific contracts and awards and various other arrangements, all of which need to be respected.

Surviving means collaborating

Make no mistake, this is a crisis.

It’s going to get brutally tough as clients pull back marketing spend, and work out how to recalibrate in a ‘Twilight Zone’ period for many months before we enter a new normal.

Yes, there is and will be big opportunity for agencies that tackle the next few months in the right way. And that includes their staff. I heard a story only today of an agency staff member asking for a large pay increase. Really?

Our agency bosses simply can’t do this alone.

We are all going to experience some real pain, and need to swallow that bitter medicine. Short-term pain, for (hopefully, but not guaranteed) long term gain.

There will be some agencies who’ll think I’m overreacting and smoking the good stuff. There may well be very few agency bosses and owners ready to support my view publicly (privately, most will be yelling: “Hurray!”)

Some of you will think: “Easy for you to propose a 40% pay cut when you’re in a solid position given you’ve had 35 years in business.”

I get that. But here’s the thing. It’s you I am thinking of. My goal is to see as many as possible come through this safely.

We can only minimise the job casualties if we are prepared to compromise, be flexible, and join forces with our employers for a frickin’ tough few months.

It doesn’t need to be 40%. But it sure as heck needs to be something. And it needs to be now.

Let’s get it done.

Chris Savage is the founder of Ogilvy PR, a former chief operating officer of STW (now WPP AUNZ), and today is CEO of growth advisory firm, The Savage Company


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