Dominic Pearman: An alternative to job cuts

By Dominic Pearman | 27 April 2020
 
Dominic Pearman

Dominic Pearman is managing director of leading independent agency Pearman Media

A month of lockdown has passed, and business owners will soon be getting their April P&Ls which means now is an appropriate time to remind ourselves what makes a great business. I say now is timely as the April figures (and the next five months) are really going to put a spotlight on how businesses are coping with COVID-19.

I doubt too many people in the advertising industry would argue that is our people who make a great business. Even with the increase in data and technology, it is still the people behind it that make the difference. In the media business relationships are all important and it is our people that hold those relationships. The adage of a company’s greatest assets walking out the door each night has never been truer - although perhaps these days that "door" could be replaced with Zoom meeting.

Which gets me to my point. As business owners many of us have benefitted from the good times and, therefore, the company should take the burden for the bad and not deflect it all on staff. I appreciate if a business has been struggling prior to this pandemic the only choice may be to cut staff or hours. However, I believe that does not apply for most businesses. Many business owners are on the wrong (or right) side of 40 and the advertising industry has given them a great career and lifestyle. Now is the time to give back.

It is important to remember this is a once-in-a-business-lifetime event; clients will spend once again, and most businesses will be around for many years. It seems hypocritical to talk to clients about the importance of investing in their brand in tough times if at the same time we are cutting staff or their hours. Now is the time to invest in our own businesses. The Government has certainly done its bit with a very generous stimulus package for small business. 

My suggestion is for businesses to be prepared to take on debt first before retrenching staff. I appreciate there is a limit as well as the ability in acquiring debt. The Government has made it relatively easy for all businesses to get a $250,000 loan and other avenues such as mortgage extensions or business overdrafts can be used.

As an example of managing debt, if a business took on a $500,000 loan to keep its people, it costs around $30,000 p.a. to service and repay that debt - and the interest is tax deductible. Along with the JobKeeper package, this amount would keep 24 people employed for six months on an average salary of $80,000 p.a. In the good times the loan can be paid down quicker.

Alternatively, if staff are cut there will be recruitment and training costs as well as the cost of building relationships that would be incurred once the business starts hiring again. This again makes the yearly cost of a debt look quite manageable.

I know I am biased, but I also can’t help thinking what a good time it is to be working for an independent agency. Independent owners know their people’s personal circumstances, families and kids’ names and are going to be far less ruthless than a CFO sitting in New York, London or Paris who are forced to satisfy shareholders. Of course, the multinationals have far greater overheads so I understand it can be more difficult for bigger companies.

I appreciate this is a sensitive subject and many people are suffering but if this thought saves one job then it is worth putting forward.

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