Last month, WPP, the world's largest advertising company, said that people above a certain level were taking a voluntary salary cut of 10-20% for three months. The group also announced certain austerity measures across the board, including deferring any salary increment.
Other leading groups, including the IPG Mediabrands and Dentsu Aegis Network, have also announced similar measures.
While there has been a bloodbath across the industry, the small advertising agencies have still managed to shield their employees from the economic impact of Covid-19.
We have given importance to people over profitability, unlike the network agencies that are bottom-line driven, says Nagessh Pannaswami, Director at Curry Nation. "People are our biggest assets, and they need to be nurtured and protected at this time," he said.
Cash flow is the most significant need right now to survive, and the lean attitude and less number of overheads of small agencies make it easier, says Rikki Agarwal, Co-founder, Chief Business and Operating Officer at Blink Digital.
"Also, we don't have a parent company to share our profits with," he said. The agency has not deducted any salaries so far and is evaluating the situation every week.
Jagdish Acharya, Founder and Creative Head of CutTheCrap, said small agencies don't have hierarchies to show to clients, making them nimble. The agency moved to a system of a small core team and a larger circle of freelancers.
"Our costs became variables with access to a larger pool of talent," he said.
Agencies with healthy reserves have been able to sustain their employee compensations through the lockdown phase, said Vivek Srivastava, Jt. MD at Innocean World Wide.
When the companies built their capital reserves due to the hard work of the employees in good times, then the employees should not be made to suffer during hard times.
"Our motto to 'stand united' has helped us stay true to our employees and their well-being. In a crisis like now, this will precisely help small companies like ours to stay afloat," said Delphin Varghese, Co-Founder of Adcounty. The agency has given 10% raise on gross salary to its employees for next two months.
Larger agencies have hefty expenses. Office rents and salary expenses are huge compared to smaller ones.
Companies with thousand or more employees have much more liabilities, says Santosh Padhi, Founder, CCO of Taproot Dentsu.
Smaller agencies are most impactful as the understanding between the employees and the heads is much more reliable, which is lacking in large-sized agencies.
"When you are small, you understand each other well as a family; you hustle as a good unit, build on strengths together and know weaknesses. We know each other's strengths and weaknesses and try to rope in each other at the right time. Hence I have colleagues working with us for the last 11 years. It can only happen when you have a small unit," Padhi said.
There is hope in the advertising fraternity that things will recover in the medium term.
"I wish every big and small company bounce back soon. I want the entire industry to be positive, come together and give extra bits to our brands," said Padhi.
The handy asset for agencies in the current situation is the quality talent to rebuild brand appeal and spur demand. Agencies will require a herculean effort laced with caution plus cost and overhead control.
"While the market is quite harsh for everyone, every agency is doing the best they can for their teams. Global agencies may have that little extra to retain their people and offer them better job security during these turbulent times," said Naved Aqueel SVP, Magnon eg+.
Globally Publicis, IPG, Omnicom Group and M&C Saatchi have also taken certain cost-cutting measures.
What large agencies can learn
Experts suggested that larger agencies should have fewer hierarchies and more flat business structures. Instead of big units, they should work as small units and become tightly fisted on costs.
"Large size agencies need to change their hierarchical structures and be agile. They need to make business decisions on a day-to-day basis. Their focus should shift from categories which are not working to categories which are working. Global companies have structures which don't allow this," Agarwal said.
Srivastava said small agencies have a strong task orientation and are lean. As a result, they are tight-fisted on costs. It is something we in the business can look at and improvise within our teams, he said.
Padhi said there are many units in large agencies, which do not do well. Now is the time they should work with small groups.
Big organisations are creating immense pressure on their employees, which results in losing out on great minds as pressure cuts them off.
"A lot of unrealistic pressure is put on them. I know the times are bad but people need to be practical about it or else in the coming times they would have people working but not enjoying. When you enjoy, your best comes out. Creativity is all about producing unimagined and beyond the expected and that can only happen when you make a strong connection with your group and organisation. It's a people's business, and you have to take care of people's emotions," said Padhi.