Mark Penn, CEO of MDC Partners, said the holding company’s agencies—which include 72andSunny, Anomaly and Doner—have, on average, reduced payroll by 10% in response to the business impact of Covid-19.
“Each company really had to formulate its own plan based on what would be appropriate for the kinds of clients they have,” he told Adweek. “It’s gone company by company.”
Penn said cuts have been made through a mix of pay reductions and furloughs, but did not share the extent of layoffs at individual agencies. However, agencies including CPB and 72andSunny have confirmed staff reductions in recent weeks. According to Penn, roughly 1,000 of MDC Partners’ part-time employees who normally focus on events have been impacted due to the virus, since they cannot work for the time being.
Last month, MDC Partners reported organic growth of 2% for the first quarter of 2020, with net new business totaling $8.4 million. On the holding company’s first quarter earnings call, Penn said it marked the first time MDC Partners experienced net organic growth since the third quarter of 2018.
Penn became chairman and CEO of MDC Partners last year after his private equity fund The Stagwell Group invested $100 million to buy just under 30% of the struggling holding company. His turnaround plan has largely involved cost-cutting measures and grouping its various agencies into networks, the latest of which is a creative collective the company is calling a “constellation” that includes 72andSunny, CPB, production company Hecho Studios, digital shop Instrument and design consultancy Redscout.
On last month’s earnings call, he described this strategy as “turning what was a loose confederation of companies into a nimble set of talented networks.” He told Adweek it was “time for the group of disparate agencies to be able to work together, because functionally, they have a lot of complementary services that weren’t really being used to the maximum extent against a fabulous client list.”
Managing the crisis
Penn said the pandemic hit just as MDC Partners was beginning to accelerate, describing it as “firing on all cylinders” at the start of the year. However, the changes he’s put in place over the past year have “situated us to go through this crisis and to get through it in an excellent position.”
For the year ahead, he expects organic revenue to fall between 10% and 15%, but said that could change depending on how quickly its agencies recover after what is likely to be a “pretty severe second quarter” because of coronavirus.
“If we get an accelerated recovery, I think it will be better than that,” he said, “If we get no recovery, it will do worse.”
Penn noted that MDC Partners’ digital agencies, such as YML and Instrument, have fared particularly well in recent weeks because of their offerings. He also said its PR agencies, in particular Allison+Partners, have done well since clients are shifting their messaging right now.
“The digital businesses are not experiencing any pullback at all,” he said. “Most digital businesses actually have had some of the busiest months, because a lot of clients are moving to make sure that their digital layer is in place.”
At the moment, he said MDC Partners is working with a consultant to put in place a “set of standardized policies and procedures” that will dictate how it goes about reopening its offices in the coming months.
“We expect to make sure that the workplace is clean, bring people back in stages, [and] be able to have proper masks and other things,” Penn explained. “Not everybody’s going to do these things at the same time, but they’ll do these things in the same manner.”
According to Penn, the various networks he’s established over the past year, which also include the Doner Partner Network and an Anomaly-led “alliance,” have helped the holding company manage the crisis. He described their formation as “indispensable” to MDC Partners’ ability to make intelligent decisions and be responsive. Additionally, Penn said establishing these groups has pushed “the key elements of the business into our best managers and decision makers,” as each network has its own leadership team.
“I thought it was a mistake to have corporate directly trying to manage all these individual companies,” Penn said. “I think that would have been impossible in this crisis. The fact that we completed [these networks] before the crisis really made having to move quickly to adjust for the crisis possible. I think it would have been horrific without this.”
Like many holding company leaders, Penn is thinking about how the pandemic will change the way its employees work. Last year, Penn made the decision to move MDC Partners’ New York City headquarters, as well as many of its agencies, to One World Trade Center, a move that he said will save it $10 million to $12 million annually. As the rise of remote working forces companies to reassess the value of physical office spaces, Penn said he’s found that other people are beginning to realize that “we don’t need as much real estate.”
He also said everyone in the industry will “save a lot of money” this year as a result of Cannes Lions being canceled. Penn said he’d made the decision not to attend Cannes Lions this year even before the crisis took hold.
“I said, ‘I’m not going. We’re in New York. Are you really finding clients that you can’t find in New York by going to Cannes?’” he said, questioning why the annual gathering takes place in the “single most expensive place in the world.”
He’s found that the “easiest time you could ever reach clients is actually now,” since everyone is home. According to Penn, virtual events hosted by the company based on insights from Harris Poll, a market research firm owned by Stagwell Group, have attracted clients that are typically hard to get a hold of.
“We’re getting, like, a hundred clients come on who we couldn’t normally have reached in a million years,” he said.