Will DE&I initiatives be the first to face cuts when UK agencies feel the pinch?

In the face of a downturn, cost-saving exercises will come into play. A profit warning from S4 Capital last month came with the caveat that it had implemented a hiring freeze and was eking out further efficiencies in its model.

Simultaneously, the biggest ad agencies are still under pressure to improve their diversity and inclusion stats, as well as close the gender pay gap that widened after Covid. In response, they’ve launched all manner of initiatives in the past year – from Grey’s insistence on all clients signing a diversity and inclusion agreement to VMLY&R expanding its unit committed to helping brands accelerate their DE&I efforts.

These initiatives take time and, more importantly, significant financial commitment. But the concern from some of those holding roles specifically intended to improve DE&I figures is that economic pressures will inevitably lead to cuts in the programs they’re leading.

Recruitment, particularly across management and leadership level roles, is a core part of DE&I strategies within agencies, but it is often the first thing to be put on hold when recessions bite.

“Typically, during a recession we stop investing in new talent and existing talent,” explains Gilly Woolhouse, people director at WPP agency Superunion.

“[But] if DE&I strategies are really aligned with our organizational goals, then our progress should be hardwired into delivering business results. Research backs up that those more diverse organizations are more profitable in every way and therefore probably better placed to weather financial storms.“

Despite knowing the long-term benefits, many agencies will still face pressure from shareholders to find quick cuts. That’s an all-too-familiar scenario for Devin O’Loughlin, global chief diversity, equity and inclusion and communications officer at Rapp.

She says that back in 2020 when the first wave of Covid-19 hit, she was asked to look at her budget and consider “where we might be able to trim.” This is often among firms’ first money-saving tactics at the first sign of a recession.

“They always start with the overhead pieces as they are the least impactful to both the agency and the client,” she says.

After hiring and pay freezes, agencies could then look at making more radical cuts to budgets. O’Loughlin says she is concerned that as the UK and US begin to slide into recessions, deeper cuts could begin to reverse some of the positive changes made in the last few years as investment into training and development at mid-level is curbed.

“In the two years since George Floyd’s murder, agencies have worked really hard to bring in better representation,” O’Loughlin continues. “But we see a lot of revolving doors; agencies are able to bring in people of color, people from the LGBTQ+ community, people with disabilities, but they are not able to advance them properly – and so they leave because they know they can find better opportunities elsewhere.”

She warns that with all the “onboarding and money spent to upskill resources and talent, to cut from a DE&I budget helping to actually retain talent you’ve spent the last two years fighting to bring in would be wasting your money.”

Sarah Neblett-Lindo, global HR director, Croud, echoes that if agencies are forced to stop hiring then things like internal training, education programs and other initiatives may not be prioritized. But these can go ahead with reduced-cost implications.

“There is still lots to be done to ensure that any DE&I progress isn’t lost during tough times,” she says.

“In fact, it’s these kinds of activities that are integral to the sustained success of your DE&I strategy, because the people within your business need to know that this is still a focus and priority for you. Ensuring that any relevant communities and working groups are still meeting regularly, looking for new ways to keep raising awareness, and letting people know that DE&I is still firmly on the agenda will not only ensure that no progress is lost, but also will help shift the mindset, that DE&I is more than just a business expense.”

Woolhouse urges anyone in an agency charged with diversity, inclusion and equality initiatives to ensure ERGs, measurement and awareness programs are on the radar of chief executives now.

“It is in these moments that the why of your program rooted in a strong business case helps to maintain commitment from DEI leaders and stakeholders across the business,” she adds.

Moreover, during periods of recession, underrepresented groups are often the first to feel the strain at home. The IPA 2021 Census found that a widening pay gap of 21.2% currently exists in favor of white employees.

Committing to the agenda highlighted by Woolhouse and Neblett-Lindo, both within an agency’s walls and by the industry at large to develop and retain talent, becomes all the more important.

“If having the kind of culture where everyone feels valued and has a voice is important in your organization, then pulling back on initiatives that might in the short-term reduce spend is a false economy,” says Wendy Christie, chief people officer, The Social Element.

“It will lead to dissatisfaction, and to underrepresented groups – and their colleagues – questioning whether this is really the right company for them. Adland always tells brands to invest during a recession, so it’s time to take that advice and apply it internally to DE&I efforts. Keep up the momentum and ensure that budgets are mapped out where necessary. But, most importantly, keep close to underrepresented groups in the business as the hybrid world can make it difficult to see where issues may be bubbling up. Check in regularly to ensure they are receiving the necessary emotional and financial support.”

Reporting by Ellen Ormesher.