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Deep Dive

Top Priorities: Preserve jobs, recast employer-employee contracts, consider community, cashflow critical

By Paul McIntyre - Executive Editor

18 March 2020 5min read

Red lining: The next three or four weeks will see industry "redlining on right-sizing" for clients and staff running out of work

By Paul McIntyre - Executive Editor

18 March 2020 5min read

Holding onto talent, whatever the means in the next six months, is one of a handful of urgent measures industry must pursue as the COVID-19 crisis “red lines” in the coming four weeks. A spending contraction of 40 per cent or more across media, agencies and marketing is likely.

 

 

 

You need to know this:

 

  • There are five central COVID-19 themes to grapple with as professionals – and people - in the marketing, media, tech and agency sectors
    • Preserve jobs – this crisis will end, structural change is inevitable but a less arduous recovery means protecting, retaining and ultimately retraining industry talent
    • Understand cashflow – it’s central to conducting commerce and keeping jobs into next year 
    • Reframe employment contracts and job remits; pursue inventiveness to protect cashflow and employment for 2021
    • Behave like it’s a bushfire – this is bigger than the heat and horror of Summer. Community is critical 
    • Plan for longer-term shifts in public psychology, behaviour and economic drivers as COVID-19 is contained
    • These are some themes which emerged from the first in Mi3’s COVID-19 podcast updates. The guests were:
      • Jeremy Nicholas, Chief Marketing Officer, Telstra
      • Jeremy Thorpe, Chief Economist, PwC
      • Peter Horgan, CEO, Omnicom Media Group; Chair, Media Federation
      • Charles Parry-Okeden, CEO, Executive Channel Holdings; Chair, Outdoor Media Association  

Reality is raging, cashflow crunched, jobs are being purged and much more is to come. Let’s cut to the quick.

 

The jobs conundrum          

This crisis won’t last but the industry’s rhythm will likely be very different in a year. Some in senior management will see this is as a catalyst for an employee cleanout. Other boards and leadership teams are already known to be forgoing salaries entirely as staff are put on interim wage cuts of 30-70% to preserve jobs and talent. 

 

Peter Horgan: 

“With big swathes of industry on pause as we go into April, there’s profound impacts. As we come through and start to look at the other side of this, of industrial rebuilding, our assets are the humans. A big part of my headspace is an unfair share of the talent pool which I’ve spent years building up. So again, culture is how we not only show up for clients but how we show up for our teams and how we support our people through what is an emotionally and financially stressful period. There’s no doubt, once we get through the next three or four weeks of redlining, of right sizing for clients, and move from the tactical into the more strategic phase, there will be teams that are still incredibly busy but there’ll be teams that are starting to run down as well.  It’s how you support those teams and how you optimise across your business to be showing up for clients but keeping people engaged as well.”

 

Charles Parry-Okeden:

“We’re talking a lot about working from home and that’s all very well but as industry shuts, the work that they’re doing shuts down as well. What I’m seeing with my teams across Europe, whilst we’re very well equipped and very connected and effectively working, the type of work they do is reducing on a day-to-day basis.  To such an extent that I expect within a week or two, they really won’t have work to do because the industries that they’re engaging with, the conversations that they would typically have would then be non-existent which is obviously then challenging.” 

 

Understanding the cash crunch

The money supply is drying up. Without cash flowing from and to companies and people, supply chains grind to a halt. Preserving cash becomes paramount, typically in the marketing, media and agency sectors where the primary cost is staff. Some forecasts now say unemployment Australia-wide could triple to 15%  

 

Charles Parry-Okeden:

“Essentially, the money is not coming into businesses.  If the money isn’t coming in, how do companies continue to pay rent and pay salaries?  The only way we can enable enterprise to continue to employ people is to enable them to preserve cash and to keep people employed. The government has an enormous responsibility here.  I know governments around the world are working very hard to do as much as they can to help business and small business to retain staff by deferring payroll tax payments, GST payments but we’re going to have to do a lot more - much, much more.  The first rescue package…is the tip of the iceberg in terms of what we’re going to need across all industry to prevent that situation where we see millions of people out of work.

 

Jeremy Thorpe:

“I think the tip of the iceberg is the correct phrase for this. Business is not investing at the moment so part of the first fiscal package was to encourage business to invest more.  I don’t think you can pay business enough at the moment to even contemplate it.  So I think it does come back to supporting people either through actually giving paid leave for a period, putting people on new staff equivalent, relaxing some of the constraints in that space to get cash into people’s hands so that they can get through this period.

Government has got to make some really interesting calls around what industries it wants to protect and support as well.  We’re going to make some brutal decisions here but small business is the most exposed because it does not have cash reserves in the same type of way and doesn’t have many people.  So, it probably means losing employment pretty quickly in some of those sectors.

 

THE PULSE

Quick question: Will you keep your job?

Choices
 
Redefining employment and contracts

 

Companies and staff need to reset their expectations of each other about job descriptions and remits and the nature of employment contracts for the maximum number of jobs to be retained as COVID-19 is contained. Creative industry headhunter, Esther Clerehan says in a LinkedIn post: “Message for the larger (especially multinational) ad agencies: This is a humanitarian crisis. Forget profit. Look at salary sacrifice, shorter weeks, etc before you retrench staff. Please.”

 

Charles Parry-Okeden:

“As a business, in anticipation of what was coming, we paused all our capital expenditure in Europe three weeks ago. But we need to have sensible conversations between employers and employees.  We need to think about mechanisms that we can put into place to, as best as we can, retain our teams.  So once we’re through this, and we will absolutely get through this in six month’s time, we can all together within those businesses and those networks of employees move forward and rebuild those businesses and get cashflows going again.

The types of things we need to consider are, I guess, leave without pay. That might be at the top of the list, or looking at a scenario where we put our staff under part time contracts for a period of time. What we want to be able to do is to continue to support our employees, to make sure that they have an income to survive and provide for their families over the coming months, to pay their rents and those sorts of things.  Most importantly, for me, is to be able to give them or let them have a job in six months’ time. Because that’s how we’re going to support our staff and our employees by giving them that opportunity once we’re through this in six months’ time.

 

The other side won’t be the same

Structural change is inevitable and fundamental shifts in consumer mindsets, values and discretionary spending is being reshaped now. 

 

Jeremy Thorpe:

“Businesses need to plan to come out of this as well. We’re focused on the here and now which is bad but at some point, this will end. The virus will end and business will rebound.  It’s not going to be vertical, where we come out of this and we go straight back to normal in any respect. But businesses need to be thinking about how they are going to come out of this because they possibly will come out in a different world economically.

If we’re doing this for six months, that will change the way consumers think about things.  There’ll be pent up demand absolutely for some things.  But equally after six months of social isolation, consumer tastes and expectations will change.  Equally, how do we think about our businesses and our workforce and at re-skilling in a digital age so that we can be more flexible?  People have had a taste of working from home and they’re going to want to do that more because they’ve actually come to embrace it. Or, in fact, are they going to rebel against that. Today is not the day to think about it but in coming months, we need to be thinking about how do we change as a result of this.”

 

Jeremy Nicholas:

“That point on working from home fascinates me.  Telstra has had a flexible working policy for a long time.  What I’m interested in is all the businesses that have never worked from home and they’ve always resisted having employee flexible working because they say that will never work, they can never work like that and then they’ve had to work like that. They come out the other side and they go, ‘actually, it’s not so bad.  It actually worked fine or it was a disaster or it was a disaster and then we got through it. Now things have fundamentally shifted. This is forcing behaviour change and from what the prime minister was saying, perhaps over a long period of time, not over two weeks but over six months. I’m fascinated at what’s going to come out on the other side. There could be a lot of good that happens from that as well.  Our mentality across the business sector about what flexible working means and those things are actually changed and perhaps for the better in the long run.

 

Charles Parry-Okeden:

“Culture within our businesses and in particular this sector is really, really important. That culture we develop is done face-to-face and whilst we’ve provided flexibility for a long time for our staff, and dwell continue to, I’m very much looking forward to having us all back together again because the way we interact and the way we collaborate and look out for each other day-to-day is a really important part of our lives and the success of our business. I think we will need to re-evaluate some of the more important goods and services that we manufacture. Some of those things that have been shifted offshore in previous decades, some of them may be re-evaluated going forward. They are opportunities. The government should be thinking about that and how we can look at those things to help rebuild our economy in six month’s time.”  

 

Earlier Update: 19.3.20

Telstra's CMO Jeremy Nicholas acknowledges Telstra is in a different position to most. Marketing and media budgets at Telstra haven't been slashed although the types of messages the telco is now producing is being up-ended. "We haven't paused anything at the moment," he says in the first of Mi3's COVID-19 Update podcasts. "We're adjusting the messaging. We haven't seen wholesale cancellation."

PwC's Chief Economist Jeremy Thorpe says Telstra's strategy "highlights what in the modern age is discretionary expenditure and what isn't." Telco services, he says, "are reinforced as an essential part of life but we are seeing a clear demarcation where demand elsewhere is falling off a cliff."

It's this latter scenario that has OMG's Peter Horgan and Executive Channel Holdings (ECH) CEO Charles Parry-Okeden extremely concerned about the near instant collapse of cashflow for companies in the marketing and media supply chain and the knock-on blow to jobs. Normal daily workloads for employees will likely dry-up within weeks. 

Horgan, who also serves as chair of the Media Federation, says a contraction of "20-30% seems conservative at the moment" for the media market in the June quarter. Parry-Okeden, who runs an Australian media company with screen networks across Europe and the UK, says a 30-40% contraction is a reality, along with a cash crunch which is already hitting media companies and the supply chain. Much of the market, and its people, Parry-Okeden says, will need to prepare for significant short-term job adjustments to preserve cash and jobs.      

"We will absolutely get out of this but we need a sensible conversation between employers and employees," he says. "The types of things we need to consider is leave without pay, or scenarios where we put staff onto part-time contracts for a period of time. Most importantly for me is making sure people have jobs in six months time."

Listen to the full audio edition above. It's important.   

      

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By Paul McIntyre - Executive Editor

18 March 2020 5min read