Can Creative Agencies Afford Tech Talent

BY Anjana Naskar

Sometime in early November of 2022, Twitter employees got a rude shock in the form of an email announcing mass layoffs. The email became the topic of conversation and scrutiny across media platforms as the world became aware of ‘tech layoffs.’ But this was not the first, and unfortunately would not be the last. Before Twitter, in September of that year, Twilio, a customer engagement platform that provides programmable communication tools, decided to lay off 11 percent of its workforce, calling it a ‘wise and necessary’ step. Twilio marked the beginning of a bad dream for big tech companies and their employees, a dream that seems to be recurring even today.
More recently, after Meta announced another round of layoffs, it is believed that prominent leaders from the India team, Avinash Pant, Director Marketing, Meta, and Saket Jha Saurabh, Director Media Partnerships have moved on.

Slackening economic growth is no good for businesses, even tech companies who are the conductors of the grand opera that is Digital are easily affected. What we are seeing right now is a spree of layoffs in tech companies including giants like Google, Meta, Twitter, and Amazon among others, with more companies joining the bandwagon due to global economic slowdown. Moreover, the recent banking crisis in the USA with the collapse of Silicon Valley Bank (SVB), and Signature Bank has added to the woes. Several Indian startups, such as Blustone, Shaadi, and Carwale, have raised funds from SVB. Hence, this trend of mass layoffs has left us pondering — where is the talent pool headed after it has moved out of a particular sector? Is this the right time for the advertising industry to bank on the layoffs? The numbers suggest so.

According to official reports, WPP, one of the largest advertising agencies in the world, reported a total revenue of £14,429 million in FY2022, up from £12,801 million in FY2021. Dentsu Group Inc. announced five acquisitions over the past 12 months, and welcomed over 1,800 new talent, bolstering its marketing technology capabilities.
Now compare these numbers with Meta, the company that owns Facebook, Instagram, WhatsApp, Messenger, and Meta Quest. The tech giant reported $116,609 million for the year 2022, down from $117,929 million reported in the previous year. Alphabet, Google’s parent company too fell short on its expectations when in its October earnings report for 2022, it stated that advertising revenue for YouTube came up $400 million short of estimates. Share price of Alphabet went down by 6 percent thereafter and then came the layoffs. In such a situation, are agencies now in a position to tap the talent that are forced to leave tech giants?

Impact on A&M industry
Dr. Sandeep Goyal, Managing Director, Rediffusion is of the opinion that mass layoffs could well have resulted from over optimism. “Too many bulls have been driving up the recruitment market, predicting a rosy pink future. As a result, too much bench strength was created. Then the costs of excessive flab started to weigh down profits. It has resulted in layoffs,” he says.

“Businesses and brands responded during the pandemic by digitizing their businesses overnight so that consumers could continue to access products and services via online. This was imperative back then and tech companies reciprocated by scaling up their services and going on a recruitment spree, consequently increasing their manpower manifold. However, the Ukraine war and the global economic slowdown have ensured that growth does not keep pace with the forecasts. Many governments had provided economic stimulus during the pandemic, so at some point the economy would have to return to a self-sustainability mode. Therefore, whether mass recruitment during that period of time was good or bad is highly debatable,” explains Ronita Mitra, Founder & Chief Strategist, Brand Eagle Consulting, while adding that for start-ups there was excess recruitment in anticipation of growth backed by funding that did not materialize. She says, “It is doubtful if recruitments were a result of a sound long term strategy.”

According to media reports, approximately 1.5 lakh tech employees have been laid off by over 500 companies across the globe in the first three months of 2023 alone. There is also a general opinion that these layoffs will drive an inflow of creative talent back into A&M. So, will the advertising industry benefit from the tech layoffs?
A top Chief Creative Officer of a Network Agency spoke to IMPACT under the condition of anonymity and said, “Though there are layoffs happening on a massive scale, creative agencies are still not in a position to hire their tech talent. Interestingly, some of them are demanding salaries higher than my own salary. So how do we incorporate that?”

Rammohan Sundaram, President – Integrated Media, DDB Mudra Group believes that the A&M industry is dependent on internal consumption, and India’s GDP growth rate is seeing a steady growth because of the efforts made over the last 8-10 years by the government. He says, “India will continue to grow amidst the global chaos, and when there is growth, there is job creation across sectors, which then leads to disposable income, and if there is disposable income, then you can expect purchases. This will then allow brands to chase consumers. So A&M may not see growth, but won’t be affected.”

“Creative companies have a culture that tech companies don’t, and vice versa. The return of creative talent to creative agencies is already happening now and is almost a homecoming for many,” shares Suraja Kishore, CEO, BBDO India. He further adds that the realization that in a tech company, as a creative talent, one is always going to be a second class citizen has dawned on many, and they are happy to return to their home turf and reclaim their first citizenship.

Unmesh Pawar, Chief People Officer, Dentsu believes that this is a good opportunity for both the advertising and the media industry, especially for CXM and other businesses, which are tech-led and digital-led, as they’ll be able to bring back talent that would’ve potentially gone to the startups. “It might also come at a fair price, unlike during the peak summer months of the great resignation. This is a great opportunity for the advertising and media industry to bring back talent, such as digital-first ones to scale up their CXM capabilities or talent from professional services for business transformation. Organizations need such talent today to help clients transform the experience for consumers,” he adds.

Where is the talent moving to?

In an earlier edition of IMPACT, Anupriya Acharya, CEO, Publicis Group, South Asia had mentioned, “It is a myth that agencies don’t pay well. We are not, as they say, ‘the most underpaid profession’. There has been significant growth in areas that require a lot of tech at agencies, so we are taking that talent back from the tech shops when required.”

As organizations, be it tech giants or start-ups, announce sweeping jobs cuts, in addition to the great resignation, one might wonder as to where the talent is finally landing up?

Sundaram thinks that talent is hunting for opportunities. He says, “There will be jobs available, but it won’t pay you as much as what you earned earlier or you won’t possibly have stock options. That is a compromise they must do because it is clearly a rationalization in business that cannot be avoided. Smart talent will just take up a salary cut and move on because for the next two years, their expected salary is a pipe dream.”
“With the significant penetration of the internet and increasing amount of time spent on various online platforms, technology in advertising and communication will only increase,” shares Mitra, while explaining that industries such as market research can similarly scale up their fieldwork, deliver efficiency, and even sharp insights with the use of technology. “The role of Digital in all industries, including what was considered to be traditional businesses is now, therefore, well entrenched. There is a significant opportunity for many of the tech employees who have been retrenched to be absorbed by companies for whom technology is now a core part of business,” she affirms.

Echoing a similar thought, Kishore highlights that employees are in the driver’s seat, and that it is an employee’s market right now. “Accelerated digitisation has led to exposing new capabilities that organizations need today. Add to that the blurring of categories and industries, which is turning out to be a blessing in disguise for talents,” he says. He also feels that a tech company’s loss is turning out to be a gain for a non-tech company wanting to transform its tech capabilities. “Employees today have plentiful options. Tech talent is particularly empowered, given the portable nature of their skills, which are in demand across industries and geographic locations. Layoffs have forced them into a new reality of being in charge of the terms and conditions of their employment,” he adds.

Last year, Dream11 and Jaguar Land Rover offered jobs to laid-off Twitter and Meta employees. But can these companies also assure job stability? Or is there another potential cycle of sweeping job cuts in the future?

“There is no way a solution can be provided to all the people being laid off,” opines Aalap Desai, Chief Creative Officer, Creative Experience, West, DENTSU CREATIVE India. “In a lot of cases, I’ve noticed that talent is moving to another organization as a cheaper replacement to the employee whom they are probably laying off. They become rotational. The biggest problem with this rotation is that the senior management is left with very few options when they need to fit in somewhere. They often do not come cheap. Also, a lot of talent is opening their own shops and providing more affordable solutions to clients. Clients on the other hand are also indulging in it to save costs. That’s also a major movement,” he adds.

Pawar feels that one has to get very real about the employment situation, and the whole idea of lifetime employability is a misconception. “We need to understand that it is a contract. Organizations are going to do their best to ensure that they have the right people on the team, now and into the future. Employees have to take responsibility for their careers and education to ensure that we have the right skills to stay cutting-edge and relevant in the market. So, as long as individuals are taking responsibility for their careers and ensuring that they are cutting-edge, you will always have employability. If you fall behind, time will overtake you,” he elaborates further.

“Tech talent will definitely find A&M as a good lucrative option wherever there is a match of the right skills,” affirms Garima Pant, Group HR Director, MullenLowe Lintas Group. “However, if we observe, human beings are by nature optimistic and insulated from any negative impact unless it is too close for comfort. Tech layoffs definitely ring alarm bells, giving a perspective of the economy, but I don’t observe much caution that talent has in the non-impacted industries. We hope that these provide early signals across industries for a greater need for stability, and individuals won’t jump organisations like in the last two years,” she adds further.

“Talent that has drained out can find its way back in the industry, larger organisations with cash reserves can hire adequately so that they are equipped for the next boom and at an individual level, people can broaden their horizons by entering fields in which they haven’t dabbled before,” explains Pallavi Chakravarti, Founder & CCO, Fundamental.

Impact on business
The concept of layoff is not new, but the lack of empathy and sensitivity in the way today’s layoffs are being executed, also raises questions on the organization’s culture and vision. We witnessed many Indian edtech platforms and startups laying off employees on a massive scale. The action of one particular company from the edtech industry left many fuming. Byju’s, on one hand, fired about 1500 employees, on the other hand it got into a collaboration with renowned footballer Lionel Messi, costing the brand an estimated $5-7 million per year.

“There is no empirical data that layoffs actually work to boost profitability. Empirically, such data doesn’t exist. There are a lot of studies that are actually against it. However, when you are answerable to someone, whether its investors or shareholders, you will have to take to tactical solutions. Layoffs are never strategic answers, but they are tactical answers and that’s what is happening. Will it impact organizations? In the short term, yes, the numbers could possibly improve, revenue per employee may improve too, but empirically what is proven is that such kind of layoffs would have a negative impact on the organizations in the long term,” explains Mitesh Kothari, Co-founder & CCO, White Rivers Media.

Sharing his views on the impact of layoffs on an organization’s business and performance, Sundaram says, “In a crisis, P&L is more important than goodwill, and the ones who have enough cash reserves can still hold on to the onslaught to ensure that goodwill remains intact. But the rest will focus on being in business first. Goodwill can get nourished over time, but for that you need to remain in business.”

“If SVB going down has made investors more careful, then that opens up more verification, micro management, looking at the financials, and business opportunities by investors in a more rigorous way across the globe for startups,” explains Kothari.

Way forward
“Businesses will have to find the perfect operating ratio to work and then focus on winning back the confidence they might have lost. On the talent front, it is hard on them, but they should develop more skills to keep themselves open to opportunities out there. Though some of the choices may not be as attractive as they once were, but they need to take a call on how do they stay in the game,” explains Ramalingam Subramanian, Chief Marketing Officer, Leaf Round.

“Peaks and troughs are part of the process of business cycles. The troughs too have a role to play – they help ‘un-heat’ the system. In the last few years, talent was becoming increasingly costly and full of tantrums. The layoffs kind of cooled the market. This may not be a politically correct statement, but the reality is that the downs bring back some semblance of order in an overheated environment. So no real reason for panic – what goes up has to come down. Organizational capabilities or competence are not really impaired, in fact they get sharpened,” elucidates Goyal.

Pawar shares that job losses are a factor of what organizations need to stay afloat. “If you are more careful around scenario planning, then you have better approaches. Investing in talent is the most important thing for organizations if they want to be successful. And job losses, if and when necessary, will not be the only answer,” he adds.
It’ll be interesting to see if these mass layoffs will give a boost to businesses. Or, it may turn out to be a double-edged sword, hampering the organization’s performance and goodwill. However, experts also believe that there is hope for the talent that has been laid off as new emerging technologies will be opening up vast opportunities.

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