'Realistically, we have to expect there will be layoffs,' says WPP CEO Mark Read
As the coronavirus pandemic tightens its grip on the advertising industry, agencies and holding companies are left with little choice but to consider drastic cost-cutting measures, like furloughs, layoffs and salary cuts.
Omnicom Group began implementing sweeping layoffs across its agencies—including at BBDO Worldwide, which laid off two of its top execs, New York Chief Creative Officer Greg Hahn and Exec VP-Director of Integrated Production Dave Rolfe—just days after Chairman-CEO John Wren warned that furloughs and staff reductions were imminent.
Ad Age learned on Wednesday that WPP’s Grey would be furloughing 3.5 percent of its staff. That news followed major layoffs at MullenLowe, Giant Spoon and Anomaly, while holding companies Publicis Groupe and Dentsu Aegis Network also recently initiated hiring freezes, furloughs and salary reductions.
WPP, for its efforts, has said it has implemented hiring freezes; is reviewing its freelance expenditure; is stopping discretionary costs, including travel, hotels and the costs of award shows; and is postponing planned salary increases for 2020. The WPP executive committee also took a 20 percent pay cut.
Ad Age caught up with WPP CEO Mark Read, in his temporary attic workspace, to discuss how he is managing the company through this difficult time. The following interview is lightly edited for brevity and clarity.
We’ve started to see the furloughs and layoffs we knew were coming hit agencies and holding companies. I know Grey furloughed some staff in New York but, other than that, and from what we’ve heard, WPP largely hasn’t been impacted yet. I know you’ve said protecting your people is top priority. Can you talk about your efforts to do that, and do you think WPP will eventually have to resort to layoffs, like other holding companies?
Look, clearly no industry or company is immune from the virus. It’s impacting our business and revenue. Our principle is: protect our people to protect the company so we’re ready when we come out on the other side of this. At the same time, I’ve been clear in communicating to the company that we can’t rule out layoffs. It’s not where we’re starting but, realistically, we have to expect there will be layoffs. I have every sympathy for people who have been furloughed, and we are doing everything we can to get them back in three months. I’ve been amazed by the people taking voluntary salary reductions across WPP. There’s solidarity within the company, as there is within the industry right now.
Part of your plan I know was cutting the cost of award shows, and you were the first holding company to pull out of Cannes before it was ultimately canceled. What were those conversations like internally and with awards show organizers?
Actually, we had near universal agreement within WPP, with both senior leaders and creative leaders, that this is not the right year to have awards shows. I thought Cannes made the right decision by deciding that it’ll come back next year and have a really successful 2021. It doesn’t mean award shows are any less important. We have to focus our efforts on moving the company in the right direction and navigating the next few months.
We’ve all been hearing the speculation around mass events not being carried out until a vaccination is found; and even then people may be less inclined to attend. Los Angeles Mayor Eric Garcetti said events may not be held until 2021. How do you think that will affect industry events like Cannes when they come back?
Just as Cannes was different after the 2008-2009 recession, I’m sure it will be different in 2021, and be better for that. But I don’t think it will be any less important or relevant. In North America and Europe, most events certainly aren’t going to take place this year. We already heard no major events will take place in August. I suspect that will be extended and there won’t be any major events this year.
How are you advising clients right now? Generally, I’m hearing that clients are transitioning from the phase of coming up with a response to the pandemic, to a phase of thinking how they will come back from this period. Are you seeing that as well?
I’m not yet seeing clients assessing what they’ll do on the other side of this. They are thinking longer-term, and about what the world will look like after this. In Europe and the U.S., companies are really focused on managing the day-to-day business and making sure they are doing the right thing for their people and customers.
We’ve done some research that showed 84 percent of Americans believe how companies behave during the pandemic will affect their long-term views of a company. I’ve been impressed by the amazing ways clients have been standing up to help communities, nations and make sure their people and customers are safe. Companies need to step up and communicate how they are doing this to their customers, like Ogilvy did for Dove. [Dove donated care products to healthcare workers, spotlighted in Ogilvy Canada's “Courage” spot.]
There’s been a lot of commentary around whether clients should continue to spend on advertising during this time. I do think it’s a unique time. The companies that continue to spend will do better; and we’re seeing that now with brands in China that continued to advertise and are now coming back. When your competitors are not advertising, it’s a better time to advertise.
We’re also encouraging clients not to blacklist coronavirus news.
How well do you think WPP’s agencies have adapted to creating work remotely?
Moving 100,000 people to work from home is no small feat. Our people have been amazing. They’ve been busier than ever. We’re working faster than ever. Work that usually takes three months to do is getting done in a week. We’ll see some of that continuing after this.
What other long-term impacts could this have on the way business is done, creative is done and the way you work with clients?
It’s really a balance of the old and the new. We’re seeing the traditional skills of our industry coming out around crafting strategies and understanding emotions, combined with a better understanding of technology and new channels to reach consumers. We’re seeing the benefits of integrated agencies like JWT and Wunderman, and VML and Y&R. I think clients’ expectations for speed will be higher. Maybe we can build a new level of trust with our clients, too, in a way.
We are hearing about clients trying to negotiate longer payment terms, reduced fees. Are you experiencing that from clients?
Clearly some sectors are much more impacted by this than others. If you’re in travel and hospitality, times are tough. It’s tough for automotive companies. We need to be there to help out clients. I don’t think I’ve seen a tremendous amount of clients trying to extend their payment terms.
Have you seen any trends in new business pitching? I’ve heard new business pitches that started pre-COVID-19 have continued remotely but the majority that were scheduled to launch post-COVID-19 have been postponed.
The pitches that have started are continuing, but maybe at a slower pace. I saw some pitches that were halted restart, as well. I do think there is a feeling among clients that now is not the time to pitch. I would expect new business to be somewhat slower. It also depends on what clients are looking for. Massive pitches will be put on hold but there’s still a steady stream of new business. We’ve seen a number of companies looking at their brand identities.
Are you seeing any financial impacts in China that could show what we might experience in Europe and North America?
I was actually just talking to a colleague in China. He says in Shanghai, things feel more normal. In Beijing, it’s been slower. Wuhan is just coming out the other side. But sales are picking up. China is coming out in fractions, and I expect us to come out in fractions, too. Clearly the second quarter is going to be very difficult but we’ll see gradual recovery. Things will get better.
Is there a silver lining in all this for WPP?
Well, I would never describe it as a silver lining but the steps we’ve taken to simplify the company, reinvent in creativity, put technology at the heart of what we do, has put us in a better position to weather the storm. We’ve used this time to accelerate the moves we’ve been making.
What has been the most challenging thing for you personally through all this?
Well, it’s been extremely busy. I, like everyone else, am balancing work and family life. It’s not easy for anybody. I probably have more space than some of our young people. It’s not easy if you’re a person with a young family, if you’re living with a partner or if you’re living alone. It’s been difficult in different ways. I’m dying to get back into the office. I’m sure I will work from home more in the future now as a result of this but I’m looking forward to getting back into the office and seeing my colleagues in person.
I have talked to more people than I have in the past, so in that way it’s brought us closer.