The truth about agency layoffs

’Tis the season to ... lay people off? If you work at any of the big networks or holding companies, you’ll know that late in the fourth quarter is the time when agency CFOs are under pressure to make sure all margins are met by year’s end. And for the past several years agencies have mastered the art of “rolling layoffs,” an alternative to major cuts after an account is lost or a big client slashes their budget. Inexperienced agency management often kicks the can down the road rather than quickly and decisively reacting to reduced budgets. Then December arrives, their CFO knocks on the door and suddenly they realize that Santa isn’t the only one left holding the bag. The theory of micro cuts is that an agency can reduce staff in a series of tiny pullbacks to avoid the news of layoffs hitting the trade press, where it might tarnish the agency’s reputation. Part of the justification is that big cuts traumatize an agency culture, but rolling layoffs are more like little waves of sadness—they make people queasy, but soon they shake it off and get back to work. In practice, however, that’s not how it works at all. For people working at agencies who can’t manage their margins, the business has become a never-ending “Squid Game” in which even the best talent is wondering whose head is going to roll across the floor next. Let’s put this in perspective. Once upon a time, when advertising was the magical world of misfit toys, getting laid off involved a conversation between adults about the reality of the business—a lost pitch or cheap client—followed by a tough decision about cutting staff. The person on the chopping block was treated like a valued member of the family, with hopes they’d one day return. They had a heads-up, were given a reasonable date of departure and were usually supported on their quest to find the next gig. Read Ad Age’s Best of 2024 stories here Now you’re more likely to walk into the office with no clue today will be any different than yesterday, until you sit at your desk and realize there’s a trap door under your seat and you find your ass on a waterslide that dumps you onto the street during rush hour. A brief lawyer-approved statement is read by someone from HR, your email is cut off and your badge is disabled. And since agencies introduced “unlimited vacation” policies as a way to avoid paying unused vacation time as severance, your last paycheck will be ... your last paycheck. The annual expansion and contraction of big agencies is primarily a painful consequence of a broken business model, but sometimes it’s unavoidable even at well-run shops. An agency loses a massive account or fumbles a major pitch and has to say goodbye to people who’ve done their best. Everyone understands that it may be a people business, but it’s still a business. The issue is how talent is being treated. Especially this time of year. Why wait until fourth quarter to acknowledge the reality of your business? Maybe you had your head in the sand or were you waiting for the new business elves to deliver a giant pitch by Christmas. And does it really matter if your numbers line up in December versus January? Maybe being publicly traded has its downsides when it comes to making long-term decisions. I spoke to a few former colleagues in HR working at holding-company-owned agencies, and all agreed rolling layoffs are now standard practice, mostly to avoid discouraging headlines. When asked about the abrupt nature of modern layoffs—telling people “today is your last day”—one talent manager explained the advice from agency lawyers is that management should avoid any liability if a disgruntled soon-to-be-ex-employee goes ballistic on company email. Which begs the question, is someone more likely to behave professionally if treated like an adult versus an existential threat? Even a rudimentary understanding of human behavior suggests the best way to get your agency shellacked on Glassdoor is to negate someone’s contribution to the firm and shove them out the door. Reducing staff in small batches isn’t better for the culture than a deliberate restructuring of a lopsided business. The undercurrent of woe creates a subcutaneous anxiety that erodes trust in management. Saying goodbye to employees in a single day with no chance for them to responsibly hand over their assignments or bid farewell to their clients isn’t compassionate, it’s cowardly. Ad Age Agency Report 2024 Revenue and analysis for agency companies Click here This is a messy business, the economy has been volatile for years and clients are under extreme pressure from procurement to cut, cut, cut their agency fees. Pitches are more crowded than ever, and the agency landscape has never been so competitive. Even Darwin would bring a gun to this rugby match. And to be clear, we’re talking about layoffs, not firings. Certain people should be fired, like that asshole with anger management issues who always gets a pass because he’s friends with the client. Or how about that passive-aggressive manager who thinks she’s Cersei Lannister in “Game of Thrones”? Fire them and warn other agencies to keep those toxic talents out of our industry. Everyone knows it’s a tough business, but it’s also a small business—one driven by talent and fueled by generosity. At our best, we collaborate to create, trusting that management is working tirelessly to protect the fragile ecosystem of the agency. There is a reason independent agencies are on the rise—they are talent-obsessed and prone to handle both rapid growth and sudden shrinkage with a sympathetic touch. People want to work at them because they feel a part of an extended family as opposed to a cog in a monolithic machine. Managing people off spreadsheets isn’t the path to profitability. That’s a top-down mentality that’s gone the way of the dinosaur, which is why the agencies making the most money talk about the work, not the margins. With clients more open to agencies of all sizes, holding companies won’t be competitive by merely selling clients a story of scale and data proficiency—they need a talent story as well. Savvy clients are looking for retention numbers and “best places to work” accolades even more than creative awards these days. So, in the spirit of the holidays, consider this a cautionary tale for the heads of agencies everywhere. As Jacob Marley warned Scrooge, these chains you forge in life, you’ll wear in eternity. Maybe it’s time to break the chain.

The truth about agency layoffs

Featured Stories