When William M. Lane arrived in Los Angeles last month to take control of the West Coast operations of J. Walter Thompson, the mail started pouring in.
This was not fan mail. It was mail from people hungry for work.
"A lot of the time when I come into a new market, I get resumes from people who are looking to trade up," said Lane, an executive vice president who transfered from New York. But this time around, Lane found the situation troubling. "Most of the resumes I'm getting are from people who are out of work. These are people--most of them mid-level executives--who are victims of agency layoffs."
Sadly, there's little that Lane can do for them. The Los Angeles office, which recently lost the $29-million 20th Century Fox Film Corp. advertising business, has been busy whittling down its staff. Since Jan. 1, Lane figures that the agency's payroll has dropped from about 180 to 160. When people retire or leave the agency, their jobs are often being eliminated.
Anyone thinking about getting into the advertising business better think again. And again. Hundreds of laid-off agency executives are now pounding the pavement in Los Angeles. Several months ago, a lack of business forced the agency Abert Newhoff & Burr--which at one time employed more than 45--to close its doors. Another familiar Los Angeles agency is rumored to be just one more crisis away from folding. Advertising agency executives are hard-pressed to recall a time when the employment situation in Los Angeles has been more bleak.
"There are significantly more people looking for work than I've ever seen in my 19 years in Los Angeles," said Steve Hayman, executive vice president and general manager of the Los Angeles office of Foote, Cone & Belding, which creates ads for Mazda. "It is a very, very tough time in the advertising business not just nationally, but very specifically in Los Angeles."
A combination of factors is at play. For one, the uncertain economic outlook has convinced many companies to cut back on their advertising. At the same time, big mergers within the retail business over the past few years have resulted in fewer major retailers placing ads.
Also, mergers within the ad industry have directly led to layoffs at some agencies. Meanwhile, clients are pressuring agencies to accept smaller commissions. Yet many of these same clients are also demanding more work. As a result of all these changes, ad agencies are generally being forced to cut back their staffs--or at least grow more slowly.
Few executives think that situation is going to change any time soon. Most, in fact, say the employment picture may worsen. "In the past, when you won a new piece of business, you automatically added staff," said Joseph Cronin, president of Saatchi & Saatchi DFS/Pacific, which creates ads for Toyota. "Now, you look at it and ask: Do we really need more people?"
Clients are no longer impressed when agencies arrive at meetings with legions of executives. "Our clients don't want us to show up with six people in a conference room," said Richard B. Edler, general manager of McCann-Erickson/Los Angeles. "They'd rather see us show up with two people who are committed to improving their business."
McCann, which represents Columbia Pictures Entertainment, is in the process of laying off an unspecified number of employees following its recent loss of the estimated $20-million Century 21 advertising business. That client not only left the agency, it took its advertising business outside the Los Angeles market--to Minneapolis. "I've never seen so many good people out of work in Los Angeles," said Edler.
Even some smaller advertisers who would seemingly hire Los Angeles area agencies are looking elsewhere. For example, the Italian Trade Commission said Monday that it was handing its estimated $2-million account for Italian jewelry promotion to the New York agency Geer, DuBois. That might not seem like such a big deal, but consider that the commission conducted the agency review out of its Los Angeles office. And it passed over six Los Angeles agencies in order to hand the business to the only New York shop being considered.
"Frankly, we looked at it as a debit to hire someone so far away," said Teresa Sieg, trade analyst with the Italian Trade Commission. "But their work was superb."
Meanwhile, as clients continue to cut back their advertising budgets, agencies are forced to pare back their staffs. "The whole industry is in a re-evaluation period," said Jack Roth, president of Admarketing, which creates ads for Home Depot. "The short-term economics will continue to lead to fewer jobs."
In most cases, jobs that are being eliminated aren't at the very top or bottom, but in the vast middle. "There is a layer of thinkers on top and a layer of doers at the bottom," said J. Craig Mathiesen, president of Ketchum Advertising/Los Angeles, which creates ads for Acura. "There is a middle layer, however, that has neither thinkers nor doers. Those are the ones we're eliminating."
In the advertising industry, executives commonly talk about how many people they employ for each $1 million worth of annual billings at the agency. Just 10 years ago, it was not uncommon for agencies to employ five or six people for every $1 million in billings. Today, most agencies say that ratio is closer to 1 to 1. Or less.
When Admarketing recently won the ad business for Fretter Superstores, a sizable Michigan-based consumer electronics chain, the agency didn't hire a handful of new people. Even though the new business was reportedly $5 million to $10 million annually, the agency added just one employee--an account executive to stay in close contact with the new client.
"Where you may have added 10 people in the past after winning a new piece of business, now you'll just add five," said Gene Cameron, president of the West Coast offices of BBDO Worldwide, which creates ads for Apple Computer.
In May, the Foote, Cone & Belding agency won the ad business for Stylus Furniture, a retail chain that primarily sells sofas and chairs. But the agency didn't add a single employee. "We took people from within the agency and gave them additional responsibilities," said Hayman.
Several agencies in the Los Angeles area--particularly those that have recently won new business or that service very large clients--claim they are not cutting back on staff. One that says it is not thinning staff also happens to be the biggest in town--Chiat/Day/Mojo. "Cutting back is easy, but then you can't service the client like you need to," said Bob Kuperman, president of the Venice agency that creates ads for Nissan. "The quick solution to go in and get rid of people isn't always the best one."
HDM Wins New Image Advertising Account
How do you create an image for an image maker?
That is the task facing the Los Angeles office of HDM, which last week won the advertising business for New Image Industries. The Canoga Park firm sells special computers that can show people what they would look like with different hair styles--or even what their homes would look like completely re-modeled. The size of the account was not revealed, but industry sources say it will likely range from $4 million to $5 million.
Initially, the ads will appear in beauty salon trade journals. But the agency plans to soon run print ads in consumer publications including Vogue, Glamour and Elle. And eventually, the agency hopes to create a TV campaign.