IPG CEO Michael Roth sent a memo to all IPG agencies Friday addressing cost-cutting measures taken across the holding company. While trimming in most areas of the business proved to be helpful, Roth noted that some of IPG’s agencies need to implement staff reductions.
Roth didn’t specify which agencies have been or will be affected by layoffs or furloughs, instead stating that agencies across its markets have been impacted to various degrees and implying that individual agency leaders would need to make decisions about what steps would be necessary including furloughs and layoffs. The memo came in the wake of the news that IPG agency MullenLowe went through a round of layoffs at its Boston, New York and Los Angeles offices.
In the opening lines of the memo, Roth acknowledged that the past week has been “a particularly difficult one” as the “the human toll of the COVID-19 crisis continues to grow” and expressed condolences for those who have “suffered personal and painful losses of loved ones, family members or colleagues.”
Roth extolled IPG agencies, which “continue to produce work in partnership with their clients that celebrates the true heroes—the medical professionals, transit employees, grocery and pharmacy workers, delivery people and more,” and celebrated the agencies for continuing to create new work for existing clients and even win new business.
Roth thanked employees for their continued contributions during such challenging times before pivoting to the need to “be clear-eyed about the road ahead” as IPG agencies are hit by the “significant economic impact that is causing businesses and consumers to decrease spending including clients in especially hard-hit sectors.”
Citing the need to adjust to the new economic reality, Roth acknowledged in the memo that IPG has found a need for “a range of options to reduce expenses, as we face a business environment without precedent” including “deferred merit increases, freezes on hiring and temporary labor, major cuts in nonessential spending, furloughs in markets where that option is available, salary cuts and, unfortunately, reductions in staffing levels.”
Roth mentioned these measures have also been taken at the corporate level at IPG including voluntary staff reductions and pay cuts for its senior management team. A recent proxy statement revealed Roth took a 2.2% cut in total 2019 compensation (to $16.6 million), while evp and COO Philippe Krakowsky saw a 6.2% total 2019 compensation boost (to $8.5 million).
He said necessary measures will vary by agency as “differing business models, client mixes and geographies” means some agencies are impacted more than others.
“We have so many different kinds of businesses in our portfolio,” a source with direct knowledge of IPG’s operations told Adweek. “Experiential is a tough business to be in right now,” the source added, as well as agencies particularly reliant on travel or hospitality clients.
Roth claims IPG’s goal is to “minimize the impact on our people” by taking “other actions” to cut costs, describing the measures as “steps to protect our business, protect as many jobs as we can and to ensure we can fully participate in a recovery when the time comes and economic growth returns.”
He concluded by expressing IPG’s commitment to providing support to both its employees and clients and wishing “good health and safety” to IPG employees and their families.
“There’s no way to be positive about this news, so the least you can be is transparent and honest,” a source with direct knowledge of IPG’s operations said. “That’s the idea behind sending this memo to everyone.” The source added that IPG agencies are doing “a lot of good things” to try to help and “still putting great work out into the market” in spite of the pandemic.
“There’s a range of cost-cutting measures that can be taken and, as a last resort, there are places where you’ll see staffing reductions,” the source said, adding that the nature of employment contracts in some markets means furloughs are not possible.
Another source characterized the memo as giving individual agencies coverage for what they need to do as clients reduce spending.
“Agencies are trying to do what’s right from them,” the source said, with many agencies turning to furloughs and reduced schedules to avoid layoffs to the extent that’s possible. The source added that the U.K. government’s policy on furloughs has helped make that option particularly prevalent in the region. In other regions, employment contracts preclude furloughs from being an option. The source also mentioned that some agencies implemented wide-ranging pay cuts in an attempt to prevent staff reductions, citing a 20% companywide salary reduction at Momentum.
“You can’t plan three months ahead at this point,” the source said. “You’re planning for the second quarter and hoping that things shift, but you just don’t know.”