CHICAGO: Edelman is taking significant cost-cutting measures including layoffs, furloughs, pay reductions and reduced work weeks in response to the business impact of the COVID-19 pandemic.
The firm is planning to reduce its workforce by 390 staffers, or just less than 7% of its global staff. It will also ask for salary reductions of 5% to 20% scaled by compensation level, CEO Richard Edelman told employees in a memo on Tuesday.
Edelman told PRWeek that leaders of DJE Holdings firms Zeno Group and United Entertainment Group will be making announcements about cost-cutting measures in the coming days. Global president and COO Matt Harrington said the job cuts at those firms would be “at a much smaller scale.”
“We are currently focused on our teams around the world,” Zeno said in a statement.
Representatives from UEG including founder and CEO Jarrod Moses did not respond to inquiries seeking comment.
In March, Edelman said he would not lay off staff in response to the pandemic. On Tuesday, he called the decision to eliminate positions “gut-wrenching.”
“I said we were prepared to take the business down to zero profit. We did not want to get into loss-making, but I said our intention was to press ahead until we could do so no longer,” Edelman told staffers in the memo. “We had done this successfully in the two previous recessions of 2001 and 2008, with only a temporary senior compensation reduction. Today, despite all efforts, we are beyond the threshold of loss-making and to ensure the long-term health of our business, I must change course.”
In February, the firm was on track for 2% growth despite COVID-19 affecting Asian markets, and the agency had an 11% margin the following month. However, it is now operating at a slight net loss with cash reserves used to offset slower receivables, Edelman told staff.
“As a business, we have suffered a succession of body blows. This is a truly global recession. No office, market or region escaped its impact. We expected the first wave of declines in March, from travel, hospitality, automotive and airline clients whose business faced historic declines in demand,” he said. “Then came massive cuts in our energy business as oil prices sank to 20-year lows, which have had a greater breadth and depth of impact on our business.”
To avoid layoffs, the firm reduced compensation for executives on its global operating committee by 15% to 20%, eliminated the use of freelancers, paused its internship program and limited external recruiting.
Edelman’s global revenue grew by 2.1% last year to $892 million on an organic basis without taking into account the impact of currency fluctuations. When considering their effect, global revenue was up 0.4%.
Edelman told PRWeek that his agency has been affected by the pandemic on a larger global scale than the Great Recession and the recession of the early 2000s, when some regions were spared.
“Every region and every office is affected,” he said. “This is a universal global recession.”
However, Edelman added that the firm has a good pipeline and is seeing client demand for reputation, healthcare and financial communications work. Harrington said the data and research business is also performing well.
It is now offering departing staffers career transition services, including help with personal marketing and resume writing; an employee assistance program for an additional six months; LinkedIn learning; alumni networking; and a $1,000 credit to use for technology, such as a laptop or other expenses.
“I just want to reiterate that we did everything we could to stand against the wind the last three and a half months, and we will do everything we can for people leaving the family,” Edelman told PRWeek.
Edelman is the latest in a string of major agencies to enact cost-cutting measures. Last week, Rogers & Cowan PMK became the latest Interpublic Group PR agency to eliminate jobs in response to the pandemic when it trimmed 10% of its team. Golin, Weber Shandwick, DeVries Global and Current Global have all laid off staff. Representatives from the Axis Agency referred questions about possible staff cuts to Weber, and a Weber representative declined to say if the Los Angeles-based multicultural shop reduced headcount.
WPP agency Hill+Knowlton Strategies and Omnicom Group firms Ketchum and FleishmanHillard are among the other firms that have had job reductions.
This story was updated on June 2 with additional comment from Edelman and additional information.
