How agencies can handle the economic fallout of the Covid-19 crisis

Ideas for reducing risk and positioning for success

The economic pandemonium created by the 2020 pandemic will last for some time. Public relations and marketing agencies have already begun to feel the impact, but many more challenges remain. Some of those we can’t even imagine — or at least we don’t want to.

The damage will be uneven. Some agencies will fail, yet others will grow. While agencies have more flexibility in adapting to the new reality, many clients do not. Certain industries will be especially hard hit, and the agencies that serve them will face extraordinary pressure.

Despite the many unknowns, there are steps that agencies can take now and in the coming weeks to better manage the impact.

I navigated the 2001 and 2008 economic crises and came out on the other side changed but still fighting. It wasn’t easy — and it certainly wasn’t pretty — but it can be done.

The difference this time is that there are more unknowns and greater overall certainty. The psychology this time is different because people are not just afraid of job loss and economic disaster, but may also fear for their lives and those of loved ones.

Here’s how PR and marketing agencies should be addressing the challenges.

Don’t panic

Take a deep breath. You need to believe that you will get through this, otherwise you will make bad decisions that become self-fulfilling prophecies.

While you must be decisive and avoid unnecessary delay in acting, you have more time than you probably think. Every day you will have more data — for better or worse — that will help you to make more informed choices.

If you find yourself panicking, take an hour and get your mind off of your business. Watch something on Netflix. Go for a walk. Do some yoga. Whatever it is that you do to decompress. I don’t care if it is in the middle of the workday. Now is not the time to become a slave to a typical work schedule and the expense of sound thinking and creative problem-solving.

Be human

The stress that you are feeling as an agency owner isn’t much different from what your clients, vendors, and employees are experiencing. Treat them like you would want to be treated.

Now is not the time to nitpick over contracts and HR policy manuals. Work with all of your stakeholders to find manageable solutions to the many challenges you will need to face together in the coming months.

Things will almost certainly be getting tougher for almost everyone, so show your human side now to build goodwill to get you over the hurdles ahead. Find ways to help and it will be an investment that pays off for you.

Embrace remote work

Virtual agencies have a leg up on the competition right now. They don’t need to put new systems in place to work remotely, unlike their traditional office-centered competitors.

Some agencies have been reluctant to allow employees to work from home because they are afraid that it will set a bad precedent. Get over it. Remote work is here to stay, but more importantly it is the right thing to do in the current crisis.

Don’t force employees to come disclose medical conditions or anxieties to you in order to get special permission to work from home. Don’t take on the added liability this creates.

Few agency jobs can’t be done well remotely. That doesn’t mean that there isn’t a place for in-office work when things get back to normal, but understand that the right decision is to make it easy now.

Follow official advice

Please listen to the relevant authorities in your jurisdiction. Heed their advice and do everything you can to help contain the spread of the virus.

Remember that your employees may have undisclosed medical conditions — or family members may have them — that put them at increased risk. Don’t put them in dangerous positions just so that you can maintain some personal sense of normalcy.

You’re not a superhero

While you need to be as flexible and accommodating as possible, you are not a superhero. Don’t try to be one.

There are many problems you cannot solve. As much as you may want to, you won’t be able to salvage every client relationship, retain every vendor, or keep every contractor or employee.

You need to make decisions that are in the best interest of the agency business, and not all of them will be popular or comfortable.

Look for opportunities

While many industries are suffering substantially right now, some have increased needs for communications assistance. You may have the change right now to pivot and help those who are in the most immediate need, either by partnering with other agencies who may be short-staffed or reaching out directly to organizations who need help.

Some of these may be direct revenue generators, while others may be exercises in paying it forward. In both cases, it will be good for you and your agency.

But you also need to look ahead to the future. There are opportunities with existing clients and within the broader communications space that will be created or expanded by this current crisis.

How can you adapt your service offerings, pricing, industry targeting, and more to adapt to the new reality?

Don’t stop prospecting, just be smart about it

If you stop all business development activities, you will be sitting back to watch your agency die slowly. That makes no sense.

It will be uncomfortable for many to be seeking new business in the current environment. The key is to figure out how to take advantage of the opportunities that still exist without appearing to take advantage of prospects or clients.

You will definitely want to watch your tone and tactics, but if you are offering solutions that prospects need, they will still be responsive now. And agencies that shy away from this activity will be ceding even more ground to those who continue to engage.

Cut non-staff costs first

Even those few agencies that have seen an uptick in business over the short-term should be looking at their expenses to figure out where they might be able to trim back.

It’s important to start cost-cutting with non-staff expenses. It’s almost impossible to make meaningful improvement with these reductions alone, but it is an important signal to your team that you are taking things seriously and trying to find ways to avoid the painful human decisions that likely await.

Know what you need, then lead by example

You need to be clear with yourself about what you need from the business — financially and otherwise — and build your planning around that. You won’t do your team any good if you eliminate your compensation to avoid layoffs, only to wind up in dire straits personally.

Figure out what your needs are and how much flexibility you have. Then build a plan around that.

Make sure that your team knows what you are doing to help make things better. You don’t need to share specific numbers or make yourself sound like a martyr, but it is important for the team to know that you are actively taking measures to reduce their pain because you believe in the business — and them — still.

Leading by example is especially important if you expect to reduce staff. Nobody wants to hear that the owner just bought a new vacation home, got a fancy car, or splurged on some pricey electronics while everyone else is tightening their belts.

Never use debt to avoid tough choices

Some small business advisors are encouraging owners to secure lines of credit now to get through the economic disruption ahead. While I don’t object to agencies using lines of credit, they should only be used to bridge payment gaps for known accounts receivable.

Unfortunately, many agencies use lines of credit or other forms of debt to avoid laying off staff. That’s one of the worst mistakes you can make and often leads to the failure of the business.

Use debt to even out cash flow, not to sidestep difficult conversations.

Reduce staff swiftly and at once

If the inevitable occurs and you need to reduce payroll — which usually represents about half of an agency’s expenses, so it is hard to avoid — figure out what you need to do and get it all done at once.

Ripping the bandage off one time and having a single significant layoff will be better not just for your bottom line, but also staff morale. Letting people go one by one is like death by a thousand cuts to your employees. They will wake up every day wondering who will be cleaning out their cubicle next.

Take a hard look at your revenue projections and staffing and draw up a new model that you believe will get you through this crisis. It’s difficult because the length and depth are very much unknown right now, but create the org chart that you think you will need. Then put your plan together and handle the layoffs swiftly.

Avoid cutting salaries

Some agencies may be tempted to implement across-the-board pay cuts in lieu of layoffs. It sounds like a great plan — everyone gets to keep their jobs! — but it is usually incredibly damaging to morale.

The salary cut solution tends to be another avoidance tactic that owners implement because they don’t want to endure the layoff conversations. But most employees aren’t in a position to earn less, so you are simply putting additional pressure on them as individuals that may distract from their effectiveness as employees.

Get help

Many of the steps needed will be difficult, and you may benefit from additional perspective. Whether you turn to trusted colleagues, peers, or outside advisors, it is important that you don’t feel like you are alone in these decisions.

In some cases, you may be treading entirely new ground. If you have never laid off employees, you would be wise to talk to an HR consultant or lawyer to make sure you handle everything properly, for example.

Independent perspective may even help you to uncover options that you didn’t think existed or hadn’t thought of yourself. Just as important, someone without the same emotional investment that you have can help you think through your choices more clearly.

Chip Griffin

Chip Griffin

Chip is the Founder & CEO of Agency Leadership Advisors and a longtime agency owner and executive. He helps PR and marketing agency leaders build better businesses.