Dealing with the downturn

The recession may be starting to bite but there's no need to panic.

Downturn...how to weather the storm
Downturn...how to weather the storm

Just follow the advice of these industry figures and you should be able to weather the storm.

Jim Marshall
Chairman, Starcom MediaVest Group

Fear of the unknown is the worst fear of all. We know it's going to be tough, but we don't know just how tough or for how long.

In fact, there's no point speculating, it's best to assume that the rest of this year and all of 2009 is going to be pretty horrible.

So what should we do? Companies should aim to emerge from the downturn stronger than when they went into it.

That requires a single-minded focus on our core product offering.

For media agencies, that means our service, output and overall relationship with our clients.

That, in turn, means retaining and continuing to develop our best talent, and ensuring they continue to have the right systems and support.

OK, this may be difficult to justify in the short term (throughout next year), but it will prove invaluable for the longer-term health of the business.

Jon Ingall
Managing partner, Archibald Ingall Stretton

I had a blunt introduction to recessions. After a decade of rampant, Dom Perignon-fuelled excess, I arrived at work one chilly 1991 morning to find the administrators in.

Nearly half the workforce lost their jobs and it was all rather grim. That said, it was also easy to see where cuts could be made. The two company Astons and a Ferrari, parked 24 hours a day in the NCP, seemed an obvious place to start.

This time around may be tougher. Client procurement departments have carved a fundamentally different industry.

Margins have been cut, the line of "other income" vanished long ago and many agencies are already extremely lean.

For an industry that exists on optimism and hope, tough decisions are looming.

My advice? Expect the worst and plan for it, cut extraneous expenditure immediately, ensure everyone understands their role in achieving this, and make those tough decisions early.

Open, honest conversations with clients are helpful too.

That agency in receivership back in 1991 was among Campaign's Agencies of the Year by 1997.

Forced into drastic action, it was already building while others suffered lingering deaths.

Hopefully, this time round, planning and pragmatism will see us all through.

Will Collin
Partner, Naked Communications

Naked was founded in 2000 just after the dotcom boom turned to bust.

Strange though it might seem, starting a business in a recession was a positive advantage.

I think the reasons for this can just as well be applied to established businesses today.

First, and most important, recessionary times prompt clients to look at how they're currently spending their budgets and to consider whether they should be doing things differently.

They're more open to new approaches. If they can't show their bosses that they're actively reconsidering their usual way of doing things, then they risk looking complacent.

The trick is to make your agency the alternative they're looking for. Be distinctive; offer a new service; actively challenge the status quo.

The other thing we learned by starting in a recession was not to indulge in luxury-level office comforts.

Put your money in people, not Charles Eames chairs.

Tim Lindsay
Group chief executive, TBWA

Remember that the best way to serve clients is to build strong brands, whether there's a recession or not.

This is particularly true when there's a supermarket price war going on.

Remind your clients politely but frequently that cutting their marketing investment will not bring prosperity in the long term.

Cut costs in the agency before you're forced to.

It's amazing what positions don't actually need to be filled and how much you don't need to travel first-class to Leeds.

Explain why these measures are necessary, with good humour and in a calm manner.

Continue to keep your people informed about the financial situation, because ambiguity is always negatively construed.

Incentivise your account teams to seek out new projects and revenue streams.

There's always money on the table for persistent opportunists.

Again, do this before your regional chief financial officer tells you to. When all else fails, manage the margin. Revenue is out of your control, but margin isn't.

Start new businesses and invent new products. Ad revenue isn't going to increase next year, but your holding company will certainly expect you to grow.

Act on your own sound advice.

Cilla Snowball
Chairman and chief executive, Abbott Mead Vickers Group

After a decade of sustained growth and NICE trading conditions (Non-Inflationary, Consistent Expansion), we're in for a period of VILE conditions, (Volatile, Inflationary, Little Expansion).

It would be easy to crumple in the doom and gloom.

Downturns can feed downcast, victim mentality, inducing "we're all doomed" paralysis. Or worse: pointless blame-shifting and finger-pointing.

The fact remains though that the strongest businesses deliver in good times and bad.

Strong businesses increase share when markets contract. So a downturn can present a share upside and an opportunity to thrive beyond the basic challenge to survive.

I don't think there's a single, silver-bullet solution to dealing with downturn; rather the discipline to confront realities, take decisive action and, most importantly, keep a resolute focus on the growth of talent, creative product and the business.

These are the fundamentals of good leadership, whatever the economic climate.

Any good leader will be eliminating waste, controlling costs, watching hard data metrics carefully, staying close to clients and consumers, making tough calls and applying rigour to everything.

But great leaders will be doing all this while keeping their teams upbeat and steadfastly focused on growing their share of great people, ideas and clients.

They will be talking openly and with clarity about what's happening, not huddled up secretly.

They will be staying calm, acting with conviction and integrity, and facing uncertainty with energy and good humour. And they will prove to be the winners, thrivers and survivors.

Richard Wheatly
Chairman and chief executive, The Local Radio Company

It's cash,cash,cash all the way!

Business must work rigorously to conserve cash. In any economic downturn, whether a small squall or something more fundamental, the careful control of an enterprise's cash resources should become THE main focus of operational management.

In easier times cash is still important, particularly with rapidly expanding businesses when working capital needs can get out of control.

But hitherto banks have always been ready to stump up more cash and, if banks weren't, shareholders usually would.

But no longer. Bank finance has virtually disappeared.

And shareholders are reluctant, almost even with the deepest discounted rights issues, to put their hands in their pockets.

So management must hunker down and rely on self-help, always a good thing to do anyway, even in good times.

More specifically, make the company's cash position a regular reported item at weekly management meetings. Involve the credit controller in these meetings, too.

Reducing cash tied up in aged debtors can work wonders on the bank balance.

Set a plan to reduce debtors and stick to it. At the same time, look carefully at all the big payment schedules.

See what you can do to conserve cash. There will always be ways that are fair and reasonable.

The key thing to do is to squeeze every pound you can out of your working capital requirements and stick it in the bank.

Importantly, also look at your businesses and see if all of them are really making a contribution.

Remember, even if they are making a small surplus, the central overhead required to support the business may wipe that out after the event.

If they're not earning their keep, then sell or close them. You will have a better business in the end and management will be able to focus on fewer, bigger prorities.

Gary Leih
Chairman and chief executive, Ogilvy UK

Clearly you need to double-check that your "house-keeping" is in order. It's no time to lose your grip on staff cost, establishment cost or any discretionary expenditure.

But that's just common sense.

Also, don't knee-jerk and cancel the fun stuff - you'll need all the esprit de corps you can muster!

More importantly, seek out the comparatively few folk (they'll be over 40) who have experienced a recession before.

Pool their knowledge and make sure it's shared around with the first-timers.

Critically, try to stay ahead of your clients' needs. Many of them will be recession virgins, too. If you've handled a brand for a while, interrogate how it weathered the last downturn.

What's applicable this time? What's different?

And - now more than ever - if you haven't perfected them already, get your effectiveness arguments in order.

Simon Sherwood
Chief executive, Bartle Bogle Hegarty Group

Be in a permanent state of pessimism about the economic outlook; assume you're about to hit a downturn, even when quite clearly you're not.

Don't over-hire, constantly look for marginal efficiencies and improvements in working practices, review with clients what is value-creating and what is not.

Encourage flexibility and imaginative problem-solving rather than impose rigid processes.

Allow your staff to get on with the job without having to push decisions up the line. Advertising is an intellectually wasteful business where more ideas get created than are required.

The key is to shut off the wasteful stuff and get everyone focusing on the useful stuff, the things that can make a difference and help clients win in the market.

This should be management's challenge at any time within an economic cycle.

Most businesses make their biggest mistakes in the good times so assuming that things are about to get a whole lot worse puts you in better shape when things actually do.

Agencies should develop their own brands. Be very clear about what you stand for and what you can offer clients.

When the pinch comes, clients naturally look carefully at all their costs and the agency fee is a tempting target.

Almost certainly it will come under pressure. While we, as an industry, continue to sell hours, when what clients want to buy are ideas, it's a pressure that's hard to resist.

So any remuneration deals that are weighted towards outcomes, rather than outputs, will stand the agency in good stead.

But delivering these outcomes is essential and easier said than done.

So invest in creativity, back creative people, and encourage and reward them for taking risks and thinking bold.

Get your arms around your clients, help them make tough decisions, persuade them creativity is the way to market through a recession.

And lastly, remember that this is a business about people.

Fear is the enemy of productivity, so employees who are worried about their jobs aren't going to give their best.

Add as much certainty as is possible in uncertain times and you'll be amazed at how people will respond.

Jo Hagger
Managing director, glue London

I wouldn't dream of supposing that there are necessarily any fail-safe strategies for recession-proofing, but at glue we are certainly trying to ensure that now more than ever we are focusing on our "core" capabilities.

That also means not over-stretching ourselves in terms of the work that we take on but, rather, continuing to focus on steady business development and avoiding the sometimes inevitable temptation during a recession to dive headlong into every new-business opportunity that comes your way (whether necessarily the right kind of business or not).

Looking after your team is also more critical than ever during tough economic times.

While belt-tightening means "nice to do" (or so perceived) activities such as training, cultural activities and staff entertainment slip off the list, these are important for morale and to keep creative minds motivated, when the team are working hard to deliver great work against tougher budgets and timelines.

John Billett
Chairman, Billetts & MPMA

Consumers will still spend, but the profile changes. While some are forced by circumstances to cut back big time and only then pick cheaper options, others maintain spending, but take advantage of better value.

The ideal preparation for recession requires the marketer, first, to know where the brand stands in the consumer's value chain and, second, has procurement and finance colleagues well briefed and on side.

The temptation to restrict marketing to promotions and price cuts at retail should be taken up only by brands with limited consumer equity, with only moderate competitive advantage and operating in commoditised markets.

Brands with higher brand equity and distinctive propositions should power on with higher marketing support, taking advantage of falling media prices to support the brand values, maintaining a price premium and enjoy massive competitive advantage.

Confuse these two opportunities and recession will kill the brand.

Get it right and the brand will emerge from recession far stronger than before.

Next week: How clients should behaveduring a recession