Arthur Sadoun, the global chairman and chief executive of Publicis Groupe, claims to be outperforming market expectations after reporting a 5.6% decline in organic revenue in Q3 but the Covid-19 crisis continues to cast a shadow.
Importantly, Publicis Groupe warned Q4 "might be impacted further and come below Q3".
In an an interview with Campaign, Sadoun discussed his concerns about the outlook, why he believes Publicis Groupe's Power of One model is working and how he is feeling physically better for travelling less.
Campaign: What are the main trends that emerged in Q3 in terms of client behaviour, performance of different client sectors and demand for particular capabilities?
Sadoun: Our clients have continued to shift their spend to meet the changing consumer behaviours that have emerged in the last six months. We have seen them expand further into digital channels and increase their brands’ investment in ecommerce and direct-to-consumer. Those trends will continue in a post-Covid era. Thanks to our unique model, Publicis has been less affected than the market, as we have been able to capture part of the shift in our clients’ investment through our offer and new business dynamic.
Publicis Groupe is the first agency group to report Q3 results. Previously, you did better than expected compared with most of your rivals in Q2 during the worst of lockdown. Why was that? And how do you believe you have performed in Q3 compared with your peers?
We actually outperformed the market expectations on every financial KPI, including organic growth, at the end of H1, after a very good start to the year. We made the demonstration that we have very solid foundations to weather the crisis with the best performance of the industry in the US in Q2.
There are three main reasons for that. First, our people, who have shown outstanding determination in this period, despite the difficulties. Second, our offer, combining real identity data, creativity, media and technology, to unlock growth for our clients in this period. And third, our structure, with three major competitive advantages: our global delivery service; our country model; and, of course, Marcel [an internal staff platform].
It’s too early to say how we will do compared to our peers in Q3, but with a quarter at -5.6% we are outperforming market adspend expectations at -10%.
Have you seen any significant changes in client behaviour since September when there has been a second wave of Covid infections? And how worried are you about Q4?
Since September, I can tell you after meeting with many clients virtually but also physically that their fighting spirit is strong, despite the uncertainty ahead. They are ready for life with Covid.
This means reinventing their business model when their industry has stumbled. Accelerating their strategy to come back to growth in sectors that have been less impacted. And maintaining market share in categories that have been able to expand during the crisis.
The concern for Q4 is linked to the resurgence of the pandemic. But I’m trying not to look too much at the quarter on its own, and instead focus on continuing to build an offer and an organisation to fight for our clients and our people in this challenging time, and get recovery-ready.
It seems likely that agency groups will have fewer offices in big cities and will have offices in fewer cities around the world. Omnicom is cutting one million square feet of office space and Interpublic is reducing 500,000 square feet. Does Publicis Groupe expect to reduce office space? And what will your office footprint of the future look like in terms of numbers of offices?
Yes, we will continue to reduce the number of offices. And no doubt we will go to a model that will be hybrid between office and home. But we were going in that direction before Covid, from a real estate point of view and with Marcel.
Now let me be clear, the agency [office] will always be the primary place for work at Publicis. We are in the people business, where collaboration, human interactions and intelligent creative collisions are critical to what we do and make. Maybe I’m a bit old school, but I think we are more creative when we are together and we have more chances to progress individually when we can show up with breakthrough ideas in real meetings, whatever your age, your experience or your skills.
You told staff in September: “We have exhausted everything that remote work can teach us.” What are your biggest worries about the impact of remote working?
Remote working is simply outstanding for transactional relationships, and we should use it wherever possible. But again, we will have to find the right balance, as nothing will replace in-person contact.
I have some worries about remote working. First the struggle for parents with small children working at home. The difficulties for young talent to emerge and not become invisible. And the very real risk of isolation for those who live alone.
You say Publicis Groupe will not become “a Zoom company”. How much could working from home become an impediment to people’s careers in the longer term? And do you really believe there are no opportunities to get better at remote working?
The problem I’ve had throughout my career is that I’m a frustrated planner. So in this case you kept my punchline, but left out the other part of the sentence. What I said was that we would not be a Zoom company or a 100% in-office company. Again, there is a lot of good we can take from remote working and we don’t want to throw the baby out with the bathwater, but the aim is to bring together the best of both worlds.
How much time are you spending in the office yourself?
Now that Paris is open, I do the week from the office and the weekend from home.
Publicis Groupe reduced some salaries for higher earners for up to six months in April but said it was up to country managers to decide when to end those reductions. The UK stopped them after five months at the end of August. Can you explain whether salary reductions have now ended in all markets and why? Have you also ended your own temporary salary cut of 30% and why?
Salary reductions have ended everywhere now, including mine. These decisions were taken at a local level at the beginning of the pandemic as a sign of solidarity and to save as many jobs as possible in a difficult period, with the hope that activity would pick up before long. It’s too early to say if things are definitively getting better, but encouraging signs across the business have allowed this decision to be taken.
At the start of the crisis, you imposed a hiring freeze, paused internal promotions and limited the use of freelancers. Publicis Groupe also stopped entering most industry awards. Can you give us an update on each of those areas and when you will restart spending?
From the very first days of the crisis we asked our people to "stay inside". That means not going outside of the Groupe for any resources, to protect our business and as many jobs as possible.
Thanks to that initiative, we have actually saved around 2,000 jobs across Publicis. One of the best examples has been our ability to bring people from declining operations to our Health business, which is seeing double-digit growth. We are talking about planners, account managers, creatives, data analysts, who were doing a great job on clients that are going through difficult times, and who very quickly adapted to a new environment where their expertise can make the difference.
When it comes to awards, we made sure we took a moment this summer to celebrate the best of Publicis’ creativity in all of its forms, despite the lockdowns, with our Cannes Do awards. We’re looking forward to a time when the entire industry can come together again to recognise and reward the best work.
Despite your doubts about remote working, you have said your internal online platform, Marcel, has helped Publicis Groupe to manage its resources better during the pandemic and create “a true distributed, borderless workforce”. Can you explain how Marcel is making a genuine difference? What are the financial and/or other benefits?
As you will remember, we accelerated the launch of Marcel at the beginning of the pandemic as we believed it would be a great support for our people at a difficult moment. This has definitely been the case.
Eighty per cent of our work force is now connected. They can learn through access to 30,000 different online classes. They can come together for important moments, like our Pause for Action day, which connected 20,000 people in the US.
They can celebrate our work, as they did for the Cannes Do awards. They can find help for projects if they have too much work. Or they can raise their hands if they don’t have enough and are looking for more.
I could go on and on, and we’re just starting here.
Not only is Marcel making a difference, more importantly, it is totally reinventing the way we interact and leverage the scale and the diversity of our talent. It brings us together to make sure that everyone can progress even in these challenging times.
You recently travelled to the US. How much are you travelling for work at the moment? What do you miss about travelling? Do you feel better physically for travelling less?
Yes, I feel physically better, but I miss the energy and dynamism you get from in-person meetings.
How tough will 2021 be?
Better to ask your doctor than to ask me.