Houston-based independent full-service agency 9thWonder, which grew out of agency collective The Company in 2018, implemented a round of furloughs and salary cuts last week as a result of the impact of the coronavirus pandemic.
9thWonder CEO Jose Lozano spoke with Adweek about how the agency is navigating the situation and what it has learned from its need to close its offices in the past due to hurricanes in the region.
This interview has been edited for length and clarity.
Adweek: We have learned that there have been a number of furloughs for employees and a 20% reduction in salary for remaining employees. Could you give me an idea of how many employees were impacted by the furloughs and what led to that decision?
Jose Lozano: The reduction in staff is a bit less than 10% of our staff.
We have a business continuity plan. We’re a bit different than most companies and agencies around the country. This is our third time in a matter of seven or eight years where we have been out of our offices for weeks. We learned a lot from the the first couple of times and so we were prepared. [We were] prepared with a business continuity plan, prepared with all of the aspects that go into working remotely, but part of that is also the economic plan.
My CFO helped us create a very structured and scientific plan of exactly what we needed to do. So as as this occurred over the last few weeks, we began to implement that continuity plan. We knew exactly what we needed to do to make sure that we could not just survive for the next 90 days, because we don’t know how long this is going to last, but also maintain and frankly, exceed service levels for our current clients.
We knew cash-on-hand what we had and that we needed to implement something. We found two different areas where we were getting hit, just like every other agency. One was basic revenue. Clients are canceling media or pausing media, and pausing projects left and right. That’s to be expected right now. The revenue was one part, but the part that was really surprising to us was the fact that large clients began to slow pay or not pay us what was owed to us. They’re making sure that they can take care of their people, which is what matters most, taking care of the salaries and benefits and to keep the lights on.
That’s what led to the moves that occurred [last week]. It was a series of moves, beginning with the partners. As soon as this occurred, we went to working from home on March 13. Immediately in March, all the partners took salary cuts of 50% across the board. That got us part of the way there, but with all of the different forces, we obviously needed to do some more things. We did have a furlough of less than 10% of our staff and we asked our staff to take a 20% pay cut for a period of time.
What we tried to do is to save as many jobs as we could, and the combination of partner reductions and a smaller reduction for all salaries allowed us to keep that furlough to less than 10%, which is 9%-10% less than it ever should be, but at least it was within a reasonable level and allowed us to continue our service levels and be able to offer our clients all the services they need.
There’s a huge difference between furloughs and layoffs. As an employer, when you see what’s happening in this crisis it’s easy for you to [have a] knee-jerk [reaction], and we saw lots of companies do that [this month] and just cut people. When you furlough somebody, they are able to keep their benefits, and most importantly, their health insurance. Even though it costs the employer more money, this is not the moment in time at all for any company to allow any of their employees to be without health insurance. No matter how much money it cost us or any employer that’s just the human and right thing to do.