Arun Sudhaman 03 Apr 2020 // 11:25AM GMT
That LG Electronics is reviewing its global PR mandate once again is hardly news to set the pulses racing, even allowing for the heightened levels of anxiety with which we are now saddled.
More notable, no doubt, is that the review will be conducted remotely, in keeping with the new normal we find ourselves in. Agencies cannot, of course, travel to Seoul — neither can they congregate in office boardrooms; this may well be the biggest PR pitch to be conducted virtually.
Anyone paying attention to agency trends in recent years will not be shocked by this turn of events. Virtual agencies have been on the rise for some time now, aided by technology and underpinned by a far more cost-effective model than the traditional bricks and mortar version.
In a PRCA study conducted just three months ago, which already feels like a previous lifetime, 64% of UK comms leaders said they would use a virtual PR agency. Thanks to the Covid-19 pandemic, 100% of them currently are. "I think in general this crisis will accelerate a trend toward distributed workforce that began well before," notes the global head of a holding group PR firm.
The same study pointed to the benefits of the virtual agency model — access to a wider network of agency talent, the flexibility to tailor services and, perhaps most importantly, the perception that clients are getting better value for money.
Which raises the question: After all this is over, will in-house executives and their procurement colleagues — now acutely accustomed to the wonders of virtual working — still be quite as willing to accommodate the agency overheads that come with expensive office space?
Many in the agency world would suggest that this state of affairs had already arrived, given the profit margins they make on some of their client work.
"Most big Korean company procurement departments have been negotiating agency overhead costs for years," says LG global communications head Ken Hong. "So the 'willingness to accommodate agency fixed costs' has been a clear no for as long as I can remember here."
Not every corporate, though, is quite as unforgiving of the beanbags, ping pong tables and Nespresso machines that can fuel agency creativity. Even so, our PRovoke/ICCO study on Covid-19 makes it clear that the virtual agency model is likely to be one of the major beneficiaries of the pandemic.
“More people will realise that the shift to virtual agency is less difficult than they think,” said one respondent, with another stating: “We are seeing that it is possible to not just function but work effectively with less travel, virtual meetings and remote work. Agencies that take the right lessons once the crisis has passed will be more efficient and productive than those who revert to the pre-coronavirus way of doing things.”
Curtis Sparrer, who co-founded virtual agency Bospar in 2015, believes that the current global crisis will effectively serve as a "tipping point" for virtual agency models, and that change could be coming sooner than we think.
"Now that most of the world is experimenting with a work from home model we predict that several firms will re-evaluate their spend on physical facilities," Sparrer told PRovoke. "Earlier we predicted that PR agencies would make the change after we dealt with Covid-19. But since we’re facing an economic downturn, we predict physical offices will be the first thing to go as agencies tighten their belts — and with that, the high big agency retainer."
Sparrer's call is a fairly big one. But he is hardly alone. A GM at an agency with offices around the world believes that both the supply and demand side make the virtual agency model a more effective option once the world emerges from the Covid-19 gloom.
"On the supply side, you’ll have comms pros that have relished the two hours they’ve got back each day from eliminating a commute, as they’ve finally been able to squeeze family time and exercise into their working days," said the GM. "On the demand side, you’ll have clients looking at comparable teams and thinking, 'I’ll take the one where senior consultants are actually doing the work and I’m not subsidising overpriced overheads'."
"We are all virtual now"George Blizzard, co-founder of virtual firm The PR Network with Nicky Regazzoni, is understandably reluctant to make too much of the upside from this pandemic. But neither does she view the sudden lurch of bricks and mortar agencies into the virtual arena as a threat to her own business.
"It’s probably going to be quite difficult for traditional agencies to adapt their model quickly while still maintaining margins," said Blizzard. "However, we are all virtual now so our business model won’t be such a differentiator in future."
Sparrer, for his part, thinks the advent of traditional agencies descending in their droves onto Zoom simply levels the playing field. "Occasionally we would lose out on business opportunities because some potential clients considered virtual too new and untested for their liking," he says.
"This is our evolutionary moment," adds Sparrer. "Just like when mammals ascended over the dinosaurs, this is the time when virtual agencies will become the new normal. While tech clients have long appreciated how being virtual is disruptive, more traditional companies have been wary of working with companies with a distributed model. That has now changed."
Not everyone is quite so convinced, though. A regional leader of one of the world's biggest PR firms points to the "innovation and ideas that come from those casual encounters over drinks, lunch, in the kitchen etc..." Anyone familiar with video calls (and seriously, who isn't nowadays?) will be aware that moments of creative inspiration are hard to replicate, while the sheer importance of relationship capital in this industry cannot be underestimated.
"It's not really about clients," says this agency head, noting that occupancy costs are only around 8-11% of revenue. "It's about our people. Most prefer to work from the office for the sense of community etc. I think most people like a day or two at home but have FOMO/anxiety if it's full time."
That may explain why Bospar has a "fun committee" that, if you'll forgive the Orwellian title, ensures the agency's 30-strong remote workforce has regular get-togethers, quizzes and games to reinforce personal relationships and cultural development. A daily newsletter, adds Sparrer, aims to serve as a "virtual water cooler" by sharing photos of employees’ kids, pets, vacations and other special moments.
But it also probably reflects why Blizzard sees the 'hybrid' model as the likeliest outcome from all this, as agencies learn "that they can operate a profitable business with a lower cost base and [make] some substantial organisational changes. That might mean that eventually there’s more competition for clients, but through this experience the business case for the virtual model has been made."
"Ours is a relationship business" Even if the model is more of a hybrid than fully virtual, it seems clear that many agencies could probably use some guidance as they grapple with Zoom pitches and Webex happy hours. "It’s not simply a case of giving everyone a laptop and carrying on as normal," says Regazzoni. "You need to build in time to ensure everyone is comfortable with how they’re working. Some people prefer more face to face interaction via video, others hate seeing themselves on screen. Everyone has a different productivity pattern."
Sparrer is less than impressed, meanwhile, with the increasingly wild world of video calls, where it can sometimes appear that people have made few concessions to normal workplace formalities, other than dragging themselves out of bed.
"I think the biggest misstep I’ve seen is that agencies new to the work from home ethos treat the practice too casually," he notes. "I’ve seen some people from other companies and agencies wearing t-shirts, robes, even sporting bedhead and stubble. We on the other hand have always treated our virtual meetings as command performances. I often wear a sports coat to client meetings to convey to how seriously I take the time we’re spending together."
But, given the unique circumstances we now find ourselves in, many will welcome the allowances that are being made. Kids and pets, for example, are no longer treated as workplace handicaps. Indeed, the disappearance of barriers between home life and work life not only reinforces the importance of a shared humanity at this time, but also underlines the notion that people can be their whole selves in every environment.
Set against that backdrop, Regazzoni and Sparrer's best practice tips for clients are sensible, the former advising "trust, transparency and time", and the latter making the case that "nagging — or overcommunication — is key to survival." An advanced understanding of the various tech platforms, furthermore, is inescapable.
No matter how you look at it, it seems clear that the shift to a virtual future, one that this publication embraced years ago (out of necessity rather than strategy, it must be said), will only be hastened by Covid-19. "There will be a raft of changes coming out of this," says Edelman Australia CEO Michelle Hutton. "More virtual teams and agencies, and a review of standard fees and ways of working. Any agency that hadn't invested well in digital capes...will be no longer."
And even if clients, or at least their procurement departments, are likely to be watching these developments with considerable interest, they will not be immune to the implications of a new approach to working.
"I think it’s too early to say how the working relationships will be redefined for everyone in the future, but the keys will be flexibility and adaptability," says Temasek public affairs head Stephen Forshaw. "How agencies position themselves to help clients based on each of their unique circumstances will be the key to long term partnerships. Going through tough times together as strong, trusted partners can actually prove the relationship. Given this, the key isn’t what the fees look like, but moving beyond transactional to relational ways of working."