Pass the towel please

Gordon Montgomery
Global Executive Search 22 Henrietta Street
London
WC2E 8ND

dd 020 7420 3983
gordon.montgomery@globalexecsearch.co.uk

Thanks to Martin Sorrell we all know exactly where we are. We are still sitting in the bath, the water is cold, the bottom feels bumpy and uncomfortable and we want to know when to get out!

However the very recent survey results from the Communications Agencies Federation ‘Agency Barometer’ survey is one of a number of positive straws in the wind that may mean it is time for us to swing our leg back over the side.  The following are some personal thoughts on the immediate future of the creative services industry as it impacts on executive recruitment matters.

Where is the starting line?

In the early 90’s this was easy question to answer.

We had just come through a full-blown official recession (1991 GDP growth –2.4%).

There was only one way to go and that was up.

The current picture is much more confused

• Over the last few years the UK has had a basically sound economic backdrop with GDP growth positive (just!)
• By historical standards inflation is low and employment levels still very high.

If we are to experience significant growth it will have to happen from the platform mentioned above which to some extent takes us into uncharted territory. The alternative if growth stalls, is that we follow Japan and Germany into a long period of stagnation. Sentiment seems to be running towards a positive scenario but the next few months will be critical.

If we’ve got full employment….. why am I still doing the school run?

There is a lot of pain and confusion from talented creative services executives who are finding it very hard to re-enter the job market.

The Americans have a phrase for the phenomenon – white-collar job crunch.

It is happening at a time when the stats say it shouldn’t (at the end of Q2 2003 employment levels were up 276,000 from the same time the year before giving the UK close to ‘full employment’).

Business performance and employment opportunities in creative services have been particularly affected by –

Worldwide slowdown in an increasing global business.

Natural correction of a long upwards only business cycle.

Post dotcom hangover.

Predominance of London in the sector at a time when London is performing substantially below the rest of the UK in job creation.

Proliferation of communication channels, many significantly cheaper than traditional ones.

Significant and positive responses by executives who have realised that a return to traditional full-time employment may be a difficult route include-

• Some, perhaps with personal wealth available from previous IPO’s/trade sales, are setting up new businesses from scratch or seeking small acquisition targets.
• Others are setting up consultancies alone or in groups, offering diverse services and using the power of the internet to explain and sell their proposition.

The market for middle management however is different again – demand has been steady throughout the year and serious skill shortages have already developed in some areas.

Salaries – a two-speed market

It has always been hard to establish a ‘going rate’ for executive roles with many factors affecting package.
One clear trend in the current market is a growing differential between the salary paid to those still in employment (which generally only goes up) and the salary offered when a company is forced to recruit.

In the latter case there is a frequent desire to curb costs by reducing the salary offered.

Consequences of this scenario are that such roles are less attractive in money terms to those in employment and applications can be limited to those not in work, who are prepared to be more flexible.

Employing someone ‘unemployed’ means no net creation of a new vacancy, perhaps helping to explain why the recruitment merry-go-round is stuck fast.

The management consultancy approach to smoothing the cycle

The management consultancy sector has long been ruthless about hiring specific to new business pipeline and firing when work falls off.

The creative services sector by contrast has tended to try and respond to fluctuations in workload though increasing the proportion of flexible as opposed to fixed workers – generally in the form of freelancers.

I have a sense that it is a strategy that has reached the limits of its use. The supply of such people is not infinite and matching skills to business needs is becoming increasing difficult. Equally new business is scant and strengthening existing client relationships is key, and freelancers are perceived as not being as committed as full-time employees.
For these reasons I anticipate that creative services companies will in the coming months increasingly attempt to recruit permanent staff at the expense of freelancers.

However this will be tied very closely to specific client relationships and projects and their will be a more hard-nosed approach to letting people go if business is lost or campaigns cancelled.

Read my lips – it’s the budget stupid

Many of you reading this will be deep into budget territory.

In the creative services sector, staff costs are a key component of budgets and a fascinating question must be what is being written in across the industry regarding headcount.

Given the generally flat performance by most agencies in 2003 there would seem little justification for any increase from a recent historical perspective.

However just as one reason for success in business is being able to cut hard and early, the other side of the coin is being able to call the turn correctly and gear up for expansion. 

Final thoughts

Pulling several of the strands mentioned above together-

if we are heading for a sustained upturn

if employment – apart from the senior echelons of business – is fairly full with serious competition for some skill sets already

then perhaps you really do need to be near the head of the queue for talent, perhaps with a slightly higher salary number than you first thought of.

But of course as a recruiter what else would you expect me to say…………