Ad agencies this summer have been laying the groundwork for a big shift that's on the horizon this fall. 

They’ve been rearranging their ranks with quiet layoffs among mid-level staffers, and in some cases, high-level creatives. They are moving toward strategic hires in select areas such as data and performance marketing, tightening the job market. They are reasserting their power by enforcing back-to-office mandates and abandoning remote hires. And they are embracing labor-saving strategies such as offshoring and AI—the latter of which could result in more automated work and fewer jobs down the line.

In short, the Great Resignation is giving way to the Great Reset.

“The pendulum really swung to the employee a year ago,” said Marla Kaplowitz, president-CEO of the 4A’s. But now “there is a shifting of the dynamic. Earlier this year, we saw the pendulum swing back to the employer.”

Also read: Ad salaries dip from peak Great Resignation levels

Jay Pattisall, VP and principal analyst at Forrester, said “2024 is going to be an interesting year of transformation for agencies,” or what he calls “a turning point for those that leaned into a tech-driven transformation approach versus a services-only approach.”

“That's the reason you're seeing some high-profile changes in talent,” he said. “Agencies need a different talent profile to succeed today than that old-school Madison Avenue idea-centric approach,” said Patisall. 

Transformation strategies

One of the most sweeping examples of this is Dentsu’s massive reorganization announced in August, which will deploy 1,000 of Dentsu’s U.S. staffers into different departments within the holding company. The shift was made to allow for a “more holistic approach to digital media and performance planning,” said Michael Komasinski, who holds the dual roles of CEO Dentsu Americas and global CEO of Merkle, its data-driven shop. 

The mindset is changing at shops beyond Dentsu, resulting in layoffs as agencies recalibrate. Both media and creative agencies have been quietly letting people go in small groups, sometimes several times during the year. Some are due to redundancies resulting from reorganizations, such as the EssenceMediacom merger. Others are due to softness in client spending—among the agencies believed to have undertaken layoffs this year are BBDO, Droga5, Huge, R/GA, Anomaly and Grey.

Read more about Dentsu's reorganization here

Stagwell cut 300 staffers in the first quarter of the year and laid off more employees in the second quarter in what Stagwell CEO and Chairman Mark Penn called “restructuring action” and a “reduction in staffing costs,” during an August call with investors. Interpublic Group of Cos.’s total headcount decreased by 1.2% through the first half of the year, according to an earnings report in late July. 

“While there are jobs out there, they are fewer and farther between than what we have seen over the last five years or so,” said Owen Williams, founding and managing partner of ad recruiting firm Outside Lines. And the ones that are available are largely not remote. “These elusive roles are disappearing rapidly,” he said. “Agencies have the power back, and they are wielding it. You can see that with the recent move by Publicis to demand a three-day-in-office policy while threatening repercussions.”

In August, Publicis’ digital division mandated its employees return to the office three days a week and outlined penalties if they don’t, including being ineligible for salary increases and bonuses. The agency said it could track compliance by monitoring building access and internet usage.

“We’re not seeing consistently that employees are aligned with [back-to-office mandates],” said Kaplowitz. “About 20% [of employees] are ignoring them. As the mandates get stronger [after Labor Day], you are going to see more shuffling going on in the next three to four months.”

Read more about the Publicis mandate here

Buyer's market

The buyer’s market for agencies is also driving down salaries. “When there is a glut of talent on the market in any industry that will lead to pressure on talent to lower their rates to land their next role. This has affected the freelance economy as well,” said Williams, adding, “We hear stories all the time of freelancers being low-balled with embarrassingly low numbers from agencies.”

Horizon Media Chief Marketing and Chief Equity Officer Latraviette Smith-Wilson said the agency routinely receives double the applicants necessary for posted positions and noted that the shop is increasingly getting personal emails and LinkedIn pleas for jobs. 

Related: Fractional ad executive roles grow for brands and agencies

Some people are fleeing these big agency resets for independent shops. Julie Berger, who became chief media officer of Giant Spoon in August, left EssenceMediacom during the merger, because, as she said, she could see “the writing on the wall.”

“I knew that there was maybe not necessarily a role for me in the specific position that I was in long-term,” said Berger, who led the GroupM agency’s investment practices unit (WPP's GroupM announced the merger of Essence with MediaCom in April 2022). “When you are competing on cost efficiencies and lowest rates and procurement exercises, I just got a bit tired of the rinse and repeat kind of work.”

It’s not just lower and mid-level employees being laid off at holding company agencies. Former Goodby, Silverstein & Partners creative executives David Suarez and Danny Gonzalez, who were let go from the agency in May, opened their own agency last month, Bandits & Friends, inspired by Greg Hahn’s Mischief@NoFixedAddress, formed after Hahn was famously let go by BBDO in 2020.

Read more: Ex-GS&P creative directors launch agency

McCann Worldgroup Global Executive Creative Director John Mescall departed the Interpublic Group of Cos. agency in August and has yet to announce his next move.

“Every agency I know is mired in restructurings,” said Matt Seiler, managing director at industry talent firm Raines International and a former CEO of IPG Mediabrands. “All this shifting stuff around and merging and collapsing and integrating seems to be doing a perfectly fine job for the holding company and their shareholders, but it isn’t doing shit for the product or the people in the industry,” he said.

Seiler said he deals with people on a “daily basis who are just miserably unhappy.”

Seiler, who is a strong proponent of a pay-for-performance compensation model for agencies, said that reliance on hourly billings is blocking agencies from moving forward.

Also read: Ad agencies' procurement relationships are improving

“The opportunity for agencies is going to be in taking advantage of the most senior people and the most junior people–the junior people are perfect because they are cheap and the senior people are helpful because they have real relationships and experience,” he said. “It’s the whole middle they don’t actually need.”

Noted Seiler: “But you can’t [replace them with] automation until you come up with different compensation models that allow you to be less dependent upon bodies.”

AI: boon or threat?

Depending on how you view it, artificial intelligence is a boon, threat—or both—to agencies. 

“Every holding company is taking a different approach to AI,” said Greg Paull, principal at R3 Consulting. “Ultimately, it’s going to have an impact on talent,” he said, citing a Forrester report that estimates 7.5% of agency jobs will be lost to AI by 2030.

Related: How major ad agencies are using AI

S4 Capital founder and executive chairman Martin Sorrell said this will most profoundly affect media agencies. “I just can't believe that the holding companies that currently employ about a couple of hundred thousand people between them on media planning and buying—that there's going to be 200,000-250,000 people [among them] employed in two years’ time. I think that’s gone big time.” 

Paull said jobs are also being lost to offshoring happening at agencies. “Agencies are setting up strong capabilities in Costa Rica, Columbia, India and the Philippines,” he said, noting, “content at scale can’t be done in New York City.”

Citing Japan, where he said about 50% of creative departments are composed of freelancers, Paull added, “The trend that is going to happen around the world is that agencies are just going to have to find a new way of working and bringing in talent when they need it.”

Paull said there might be light at the end of the tunnel for next year with the Olympics and presidential election fueling advertising spending.

But agencies have to get through this year first. “The reality is—whether you are public or private—there is an expectation of delivery for the year,” said Seiler. “You don’t just get a pass for 2023.”

Contributing: Brian Bonilla and Aleda Stam