Editor’s Note: This is the first article in a regular series written by notable PR leaders who will cover key management issues faced by both agencies and organizations.
The “snowmageddons” experienced in much of the Northeast earlier this year reminded me of the economic conditions most agencies have been weathering since 2008. And as we’re finally seeing signs of a thaw in marketing budgets, it’s tempting to view everything about the Great Recession as something best forgotten.
That would be a mistake. Recession can teach us abiding lessons, particularly about financial management. It can force us to rigorously identify our priorities. It can help us define how we want to cut costs and accelerate spending to build a more efficient and innovative organization.
Let’s look at four fundamental financial management lessons from the recession:
â–¶ Take risks to simplify and streamline: Jack Welch, the legendary former CEO of General Electric once famously advised managers to “change before you have to.” Not all of us have the foresight or courage to do this. That’s where recession comes in. It can force managers, through harsh necessity, to push the limits in ways they normally wouldn’t dare. So what happens if it pushes them to streamline, reduce or even eliminate some sacred cow procedure, service or policy? For example:
• Recession forced one public relations agency to inform clients that it was streamlining its time-consuming and expensive invoicing and reporting process. It did this with great trepidation, only to discover that clients were perfectly content with the more focused reporting.
• An East Coast agency was compelled to recommend ending quarterly in-person meetings with a major West Coast client, something mandated in the engagement contract. Fearing a client crisis, it found the client ultimately came around to video conferencing as an alternative.
â–¶ Reassess the agency’s business model—and spend accordingly: The best leaders use recession not only to cut costs but to accelerate spending based on their vision of what the new competitive landscape will look like once normalcy returns. Why shouldn’t this kind of thinking happen in good times as well?
For example, is the agency’s revenue mix overly dependent on a particular client or industry sector? Does it need to invest in new sectors or existing ones? Does it require new or different channels for business development? How should it go about making these investments?
Personally, I’ve learned many lessons on this score. During the dot-com bust in early 2000, we recognized that our technology practice would never be quite the same, and made a commitment to invest strongly in our healthcare specialty. Likewise, in the current recession, we’ve boosted investment in our branding and interactive media specialty, where demand is growing.
â–¶ Invest in the agency culture: If recession drives management to acts in ways that betray the agency’s stated values and credo, it can undermine employee morale and, more fundamentally, impede its own return to growth. The lesson here is that employees and workplace culture must always come first—good times or bad.
What exactly does this mean in practice? At our own firm, we have maintained our educational program, MAK University, as well as popular employee programs like tuition reimbursement and our “We Achieve” peer recognition program. We also enhanced our offerings by developing a new advanced training program for the firm’s rising stars, launching our “Young Leadership” award.
â–¶ Great financial management is about great communication: When recession strikes and morale is threatened, good managers rise to the occasion and become good drummers within the organization. But great leaders are great all the time at communicating the company’s vision—and the spending priorities that are driving it.
I think of Steve Jobs. Throughout the 1990s, Apple was a company in deep trouble. One of Jobs’ great achievements, when he took over in the darkest hour in 1997, was to refocus Apple on its founding values. He famously told employees words that resonate today: “The cure for Apple is not cost-cutting, but to get busy on the next great thing.”
Clearly, nobody wants to reexperience recession. But as with many of life’s unpleasant episodes, this is where financial managers can find valuable lessons as we, hopefully, move on to better times ahead. PRN
CONTACT:
Ken Makovsky is president and CEO of Makovsky + Company, a New York-based PR agency. He can be reached at [email protected].