The meltdown: Time for the dreaded pink slip in the advertising industry? – Part 1

With the economy facing its worst ever crisis in years, various sectors are in the ‘rightsizing’ mode and everyone is dreading when and where the next pink slip axe will fall. There is definitely a slowdown being seen in the Indian economy and if this situation continues for another 6-8 months, the repercussions would be visible. ‘If’ and ‘when’ the axe falls, cutting overhead costs would be one of the alternatives to curtailing spends.

The advertising industry, for now, is playing the wait and watch game, and being cautious is the number one priority on the agenda.

Arvind Sharma, Chairman and CEO, Leo Burnett, succinctly puts it that in the given situation, he would exercise being choosy while hiring. He is clear that the economy is not under recession, but agrees that there is a slowdown. Working out the numbers, he said, “The turnover will decrease by 9-10 per cent, but still it will be registering growth, which means that one would still need to hire people.”

Similar sentiment is echoed by Colvyn Harris, CEO, JWT, India, who is all for adopting a ‘prudent’ approach to hiring. He elaborated, “We are clear on the fact that if the client on a particular brand requires certain talent, we will not hesitate to meet that requirement and deliver to that promise.”

Manosh Mukherjee, COO, Bates India, an agency which in recent times has announced that it is looking at hiring replacement at higher level, told exchange4media, “At Bates, our investment in people has been purely a function of servicing our clients’ needs to the extent required. We optimise our resources to the maximum before considering additional hiring. So, it’s always a function of maximising people required to service clients’ need.”

The cautious approach towards hiring is reiterated by Satbir Singh, Chief Creative Officer, Euro RSCG. He said, “Like most agencies, we are probably functioning at a cautious level too. There are no warning bells yet or the need to adjust in a knee-jerk fashion. If we need a position to be filled, we will.”

The red signal on hiring seems a distant possibility right now; the popular sentiment though is to take a careful approach. There have also been talks of clients cutting down costs. It seems currently these talks haven’t really affected the marketing budgets, but the mood in the industry is that it will begin to show next year. If that happens, does it add to the speculation of job cuts?

R Balakrishnan, Chairman and NCD, Lowe India, is of the opinion that the advertising budgets are anyways much tighter, hence there is very less scope of cost cuts. “Our costs have anyways come down and it happened much before the slowdown. If there is any further cost cutting then clients have to be willing to cut some of our services because providing full-services as we do at any further cost cut is difficult,” he added.

It is not that all sectors are hit by slowdown, only few sectors like banking, mutual funds, real estate and projects funded by VCs are hit, while the FMCG sector is still going strong. In fact, some like JWT’s Harris see this as a good opportunity for growth. Harris felt that times like these called for ingenuity and innovation. If a brand, which is known in the market plans to cut down, it has to be under a limit as the growth story of India is still miles away from being negative, in fact, it is still pretty bullish, barring few sectors.

Bates’ Mukherjee told exchange4media, “We are in an industry where despite meltdown or boom the show must go on. Certainly there will be situations when one would need to take a cautious approach. Having said that, my view would be, clients will not be putting shackles on their feet to curb ad spends. On the contrary, clients will take advantage of the situation in converting these trying times into an opportunity.”

That’s really an optimistic view given that there is pessimism all around and one is getting insecure of one’s job. There are also many foreign networks that are setting up offices in India, such as BBDO and BBH. Hiring for them is an essential requirement, but does the bleak environment crush their hopes? Josy Paul, Chairman and NCD, BBDO India, feels that trying times are best to start as it’s the best testing times. He said, “We have people approaching us and it’s the legacy that the brand brings, plus the trust factor which probably makes people coming to us willing to join us. It’s a good time also because we believe people will bring greater commitment in tough times.”

Priti Nair, Creative Head of BBH India, too, feels that it is an exciting and challenging time to start. She is also of the opinion that tough time calls for tough measures and this would mean that creative agencies will have to further enhance their offering to make it worth every paisa spent by the client. She, however, added, “Between media and creative agencies, if clients were to tighten their purse strings, I think demands will increase from both sides, but media will be under far greater pressure to curb the wastages that happen and become more focussed.”

Another point to keep in mind is that there has been a crunch in the industry where the advertising fraternity has not managed to attract talent due to various reasons – availability of many other creative options, less pay, lack of structure in the agency set-up or inability of the fraternity itself to sell the industry as an attractive career option to youngsters, among many others. Giving his take on the cost cutting, Balki said, “Talent crunch will get worse if there are any further cuts, purely because good talent comes at a cost.”

Euro RSCG’s Singh aptly summed up the sentiments of many, when he commented, “I’d always prefer economic boom plus talent crunch over economic recession plus no need to hire.”

(Part 2 of this report would appear on Monday, November 24, 2008)

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