PR Industry warned to cut costs

Huntsworth CEO Lord Chadlington says PR agencies must be ruthless to survive 2008.

Chadlington: warns PR industry
Chadlington: warns PR industry

One of the most influential figures in PR has warned that the industry needs to act immediately and ruthlessly if it is to weather this year's possible recession.

As the FTSE 100 skirts a four-month low and the high street suffers disappointing sales, PR veteran and CEO of the 70-strong Huntsworth  group Lord Chadlington has set out his thoughts in a letter to PRWeek.

‘All news in a recession is bad,' warns Chadlington. ‘Learning constantly to face bad news early requires a different mindset. You need to be objective, hard-headed and ice cool. The client is often putting off that nasty conversation - if you have heard it early, then you can plan for it.'

Chadlington advises agencies that cutting costs should be a top priority. ‘You can always cut far deeper than you think is possible,' he says. ‘Profits matter but cash matters so much more. Costs and cash are the key issues in ­recessionary days.'

He says agency MDs should face layoffs early rather than trying to delay the inevitable. ‘You can make those uncomfortable management decisions that you know you ought to have made but were able to put off indefinitely while the business was just rolling in. Don't leave it. Get on with it.'

Chadlington's letter will send chills down the spine of many agency staffers.

However, the head of one of Chadlington's top agencies suggested she would not be wieldinthe axe in the next few months. ‘Remember, it's your people who will get you through,' said Grayling's UK CEO of PR Amanda Riddle. ‘So there has to be a big focus on them as well as on costs. If you are ahead of a downward curve, you can save some pain by not replacing leavers.'

Riddle added that clients would still find a budget for creative ideas, despite economic downturn.

‘Finding the things that differentiate a business and demonstrate long-term value will reinforce your relationship for now and in the future,' she said.

‘It is important to be more creative and inspirational than ever before.'

Lord Chadlington's letter in full


To PR Week -

Having lived through three (and a half!) recessions - or 'growth slowdowns' as many now call them - I recognise five key rules for the wary consultancy manager.

The first lesson is that all news in a recession is bad. In good times, things that you hope will turn out ok often do. In a downturn they invariably turn out badly. Learning constantly to face bad news early requires a different mindset. You need to be objective, hard-headed and ice cool. Leave Polyanna at home!

Second, by anticipating and facing all the bad news early, you can make those uncomfortable management decisions which you know you ought to have made but were able to put off indefininately while the business was just rolling in. Dont leave it. Get on with it.

Third, PR businesses are cost - not revenue - led. When you get the costs out take them all out in one go. You can always cut far deeper than you think is possible. One deep, deep cut is far preferable to two or three cost cutting rounds with the inevitable effect on morale.

Fourth, you can run a profitable business and it can still go bust. You can run an unprofitable business and stay around for years. Profits matter but cash matters so much more. Costs and cash are the key issues in recessionary days.

Fifth, your clients will tell you what to do - if you can adjust to hearing bad news after a decade or more of only hearing good! Clients are going through exactly the same checklist as you are - and your fees are one item under their scrutiny! Go and see your clients, talk to them about their plans for 2008 and beyond and listen to what they say. The words "might cut" and "perhaps reduce" when applied to your fees may be ok in the good days but in a downturn, they mean you've lost the business! The client is often putting off that nasty conversation - if you have heard it early then you can plan for it. Always plan for the worst news in a downturn.

Of course, these are just rules for running a PR business successfully in good times as well as bad. But failure to follow these in bad times can bring your business to its knees.

Peter Chadlington

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