Perspective... Maintaining quality with less is WPP's challenge

Even its Asian powerhouse that has led strong growth so far is beginning to see a dramatic change in fortunes. This is a time when all cost-saving measures matter: recruitment costs, existing headcount, travel costs, salary rises, and year-end bonus payouts.

The hiring freeze isn’t particularly surprising. WPP’s forecasts have been bleak. Earnings reports show modest performances in the early part of Q3, but the next quarter and Q1 2009 could end painfully.

In an internal email, the group points to a dramatic change in government and consumer sentiment in the past few weeks. It says preliminary results for September show another month in which even the group’s recently prepared forecasts for revenues have not been achieved.

And while WPP’s operating companies were told earlier this year to be cautious about incurring additional staff costs, the headcount growth since August had exceeded revenue growth by a significant factor.

Headhunters have been banned. Managers have been told to get a firm grip on the employment of freelancers and temporary staff, which should ensure savings on headcounts don’t leak through off-the-book spending. But there are likely to be some within WPP who are privately pleased. Part of the hiring freeze includes the promise to come down harshly on firms poaching staff from other intra-WPP shops. Modest growth targets should also ease some of the pressure off managers of its stagnant advertising businesses.

The freeze, expected to be reappraised after February’s budget reviews, applies to all staff regardless of salary or role. It includes replacement hires and open positions. All of WPP will be feeling the crunch, though perhaps none as much as those recently offered jobs by the holding company. Those who had managed to land a position at one of its agencies but failed to sign the offer letter before the announcement came will now be very much be up the creek without a paddle.
In Asia, where agencies are already spread thinly to meet client expectations, this may well lead to frustration and additional turnover as vacated positions go unfilled and talent is stretched further.

The impact on young units, such as Enfatico (formed to serve Dell’s marketing), that have yet to hit benchmark for staffing in certain divisions remains to be seen.

For WPP agencies, in a fierce war for talent, waiting could mean losing top candidates who may not be around when the thaw finally occurs.The trick will be ensuring this hiring freeze doesn’t impact quality, or sends a message to clients and new business leads that the company is in danger of slipping.

Amid the economic woes, China Central Television (CCTV) is in a league of its own, expecting to sign on Rmb 8.8 billion ($US1.2 billion) in advertising for 2009 in its November auction. CCTV has made clear it will do whatever it takes to cushion growth at a time when the station’s chief rival Hunan Satellite TV is receiving increasing interest from buyers on the back of strong programming packages. Regional stations such as Anhui TV and Zhejiang TV, meanwhile, have swallowed about 20 per cent of adspend, significantly influencing media strategies in the mainland.

The deals themselves, while comparatively small in terms of actual dollars spent when compared with the general level of investment in CCTV, signal the growing power base of local and provincial networks, through their ability to successfully carve a defendable niche for themselves in much the same way as CCTV has maintained a national focus.

As with all things China, nothing stays the same for long. And, CCTV will be keeping a keen eye on the competition, as it battles to sustain the revenue growth to which it has become accustomed.

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