- Ad holding company giant Dentsu has instituted cost-cutting measures across all its agencies outside Japan, including a hiring freeze, pay cuts, furloughs, and layoffs.
- Three sources told Business Insider that the Dentsu Aegis Network division in the US, which include Carat, 360i, and Merkle, was told to cut expenses by a certain date, primarily by pay cuts and furloughs.
- The news comes days after Dentsu Aegis Network hired former Omnicom and Coca-Cola executive Wendy Clark as its new global CEO.
- A company spokesperson said the network's focus is to support its employees, its clients, and the local economies where it operates.
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Dentsu Aegis Network, the largest division of ad holding company giant Dentsu, has instituted cost-cutting measures across the US, including a company-wide hiring freeze, significant top-down pay cuts, large-scale furloughs, and layoffs.
The news comes as the coronavirus pandemic cuts across all areas of the economy and all the major ad holding companies prepare for significant cuts in the weeks and months ahead.
The changes also come just as Dentsu Aegis Network hired longtime marketing executive Wendy Clark from Omnicom's DDB as global CEO.
A Dentsu Aegis Network US spokesperson said the company's primary focus since the pandemic took hold has been to support its employees, its clients, and the local economies where it operates.
"As a result of COVID-19 business impacts, we are activating a set of cost saving measures across the company to ensure business continuity and to safeguard our people's livelihoods around the world," the spokesperson wrote. "We consider our people to be our greatest strength and are doing everything we can to ensure we have a healthy and sustainable business for them and our clients, after this crisis passes."
Dentsu agencies were required to slash pay around 10% across the board, sources say
Tokyo-based Dentsu is one of the world's largest ad holding companies by revenue, with clients such as P&G, Coca-Cola, and Huawei. Dentsu Aegis Network handles all Dentsu operations outside of Japan, with a headquarters in London and about 50,000 employees at agencies including 360i, Merkle, Carat, and McGarryBowen.
Three Dentsu Aegis Network employees, who are known to Business Insider but spoke on condition of anonymity to protect their jobs and career prospects, said communications in the US have been dictated by Dentsu Aegis Network corporate and come from US CEO Jacki Kelley.
Two weeks ago, agency leaders were told they would have to reduce operating expenses, primarily by slashing employee pay by about 10%.
The sources said the pay cuts and furloughs, which followed a company-wide hiring freeze, have affected all Dentsu Aegis Network agencies.
Agencies are scrambling to save money, but large-scale layoffs have not yet hit Dentsu
One executive described the emergency cost-cutting to Business Insider as a "top-down" directive from Dentsu corporate and said the parent company gave agencies little latitude in determining how to achieve savings.
Two other people said some agencies have managed to tier the cuts so those with significantly higher pay give up more of their salaries, and some have also moved to four-day work weeks as another way to save.
One source said furloughs were announced internally last week but have not taken effect. The other estimated that furloughed employees will see their salaries cut by about 80%, though the company will continue to pay for their health insurance.
The furloughs are designed, at least in part, to help minimize layoffs, which all three sources say have been moderate so far. One person said some layoffs have hit the agency where they work, while another said this has only happened in cases where specific pieces of business were lost.
The ad holding companies are preparing for significant challenges ahead. In an all-staff memo sent out last Friday, IPG CEO Michael Roth warned that agency leaders would have to consider every option available, including "salary cuts and, unfortunately, reductions in staffing levels."
Dentsu was one of the first to be directly affected by the virus, closing its Tokyo headquarters in late February after two employees tested positive.
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