9thWonder CEO Jose Lozano on Furloughs, Salary Cuts and Learning From Past Disasters

Houston-based independent full-service agency 9thWonder, which grew out of agency collective The Company in 2018, implemented a round of furloughs and salary cuts last week as a result of the impact of the coronavirus pandemic. 9thWonder CEO Jose Lozano spoke with Adweek about how the agency is navigating the situation and what it has learned from its need to close its offices in the past due to hurricanes in the region. This interview has been edited for length and clarity. Adweek: We have learned that there have been a number of furloughs for employees and a 20% reduction in salary for remaining employees. Could you give me an idea of how many employees were impacted by the furloughs and what led to that decision? Jose Lozano: The reduction in staff is a bit less than 10% of our staff. We have a business continuity plan. We're a bit different than most companies and agencies around the country. This is our third time in a matter of seven or eight years where we have been out of our offices for weeks. We learned a lot from the the first couple of times and so we were prepared. [We were] prepared with a business continuity plan, prepared with all of the aspects that go into working remotely, but part of that is also the economic plan. My CFO helped us create a very structured and scientific plan of exactly what we needed to do. So as as this occurred over the last few weeks, we began to implement that continuity plan. We knew exactly what we needed to do to make sure that we could not just survive for the next 90 days, because we don't know how long this is going to last, but also maintain and frankly, exceed service levels for our current clients. [kickout id="1"] We knew cash-on-hand what we had and that we needed to implement something. We found two different areas where we were getting hit, just like every other agency. One was basic revenue. Clients are canceling media or pausing media, and pausing projects left and right. That's to be expected right now. The revenue was one part, but the part that was really surprising to us was the fact that large clients began to slow pay or not pay us what was owed to us. They're making sure that they can take care of their people, which is what matters most, taking care of the salaries and benefits and to keep the lights on. That's what led to the moves that occurred [last week]. It was a series of moves, beginning with the partners. As soon as this occurred, we went to working from home on March 13. Immediately in March, all the partners took salary cuts of 50% across the board. That got us part of the way there, but with all of the different forces, we obviously needed to do some more things. We did have a furlough of less than 10% of our staff and we asked our staff to take a 20% pay cut for a period of time. What we tried to do is to save as many jobs as we could, and the combination of partner reductions and a smaller reduction for all salaries allowed us to keep that furlough to less than 10%, which is 9%-10% less than it ever should be, but at least it was within a reasonable level and allowed us to continue our service levels and be able to offer our clients all the services they need. There's a huge difference between furloughs and layoffs. As an employer, when you see what's happening in this crisis it's easy for you to [have a] knee-jerk [reaction], and we saw lots of companies do that [this month] and just cut people. When you furlough somebody, they are able to keep their benefits, and most importantly, their health insurance. Even though it costs the employer more money, this is not the moment in time at all for any company to allow any of their employees to be without health insurance. No matter how much money it cost us or any employer that's just the human and right thing to do. Are you optimistic that you'll be able to bring those employees back on board once you've recovered from the impact of the coronavirus pandemic? Very optimistic. When we went into this crisis, we were actually on a path for double-digit growth. And I have no reason to expect that when we come out of this crisis that we won't be able to take most, if not all, of those people back from what is a temporary furlough. We furloughed them for 60 days and we're going to consistently communicate with them to let them know where we are. What kind of experience have you gained from previous situations where you had to close offices and transition to remote work? What kind of mistakes have you made and what did you learn from that? [article_summary section="1"]We experienced it with a couple of hurricanes, Harvey being the most recent one. We've been closed for as long as almost four weeks. This is where we differ from most companies because we've experienced this multiple times. We've never been as prepared as we have been this time. It's really a credit to my leadership team, and a lot of what we've learned from those experiences. What we did in the past was really focused on the communications aspect of working from home, but really fell short on the people front. We really didn't understand the psychology of working from home [and how important] having the right technology stack was to making sure you had continuity of work and the ability to do so. From a people standpoint, what we didn't understand is that it's human nature to want to interact. There's a level of depression that happens when you're home and you're by yourself, specifically if you're young and you're single and you don't have other people in the home. In this situation, it is even worse because people aren't getting out and they're not connected. So one of the things that we said is, "It's not just business as usual, it's culture as usual." That's key when you're talking about working from home. You have to find ways to bring your culture into the virtual world. We tapped into a lot of our younger staff that are really great at it and are teaching us how to do that. We've worked hard over the last few years to expand our collective of agencies and create that little bit of redundancy across the different agencies so that we're able to withstand any kind of crisis and support each other around the world as we need to. We offset each other both from a global level and even just domestically to help each other through this as different parties were experiencing this at different times. What's the difference between preparing to work from home under normal circumstances, under past crises and then this unprecedented situation? What is your role in managing that situation, of people not only working from home, but attempting to mentally navigate a really unprecedented and scary situation? One of the things that has happened is those people that worked from home before were somewhat embarrassed of the fact that they were working from home. Now we're all having fun with our backdrops. Our kids are coming in. We're getting to know each other as a family better than we ever have, for good and for bad. I'm seeing the connectivity of our staff grow immensely. From a productivity standpoint, we've actually seen productivity go up. We all said we need to create accountability. The best way to create accountability is to work in a series of sprints: everybody focused on this, everybody focused on that. [When you're] working remotely, you don't have somebody come into your office with a cup of coffee and talk for 30 minutes, you're getting to work. Coming into the week, we know what our clients need. The workload has gone up with a lot of clients [such as the American Heart Association], and we've been able to stand up and actually get as much, if not more, work done during this time. How are you balancing some clients asking for more work and others pulling back? It truly has been not a weekly, not a daily, but an hourly process for clients. We've had clients go from status quo one day to the next day call us and say, "You know what, I got a call from from leadership, we've got to pause everything." It's continuous and constant communication, it's shifting of talent and workload. We're blessed because of the collective nature of our agency to have a diverse field of clients. Our brick and mortar retail clients are hurting big time. Our other b-to-b clients, medical clients, pharma clients or packaged goods clients are not. Media consumption is up drastically right now. This is a moment in time when the right brand—if they get into the market with the right message—is going to hit the ground running in 60 days, 90 days and just take off. What have you heard in conversations with other agency leaders? I have a lot of agency owner friends and colleagues around Texas and California and there are a lot of agencies that are hurting a lot, specifically those that are hyper-focused in areas that have been really affected, such as retail, experiential or event marketing. This is putting them in a world of hurt. I've had a couple of phone calls with with agency owners just asking, "Hey, would you please bring on my staff? I'll hand you the client, I just want them to be employed. Because we're not going to be able to make it." I've counseled them so hopefully they can make it, but it's a hard time for a lot of people in the industry. Hopefully we can keep our head down and do what we can to make sure as many agencies as possible survive.