NEW YORK — Edelman today announced that it will be laying off 390 members of its global team, while also calling on staff at VP level and above to take pay reductions between 5-20%.

“We have stood against the wind as long as we could,” global CEO Richard Edelman told PRovoke. The layoffs will affect individuals of all levels and across markets, said Edelman, who detailed the cutbacks in an all staff email (see below).

Edelman said “we thought we could get through this” with steps that enabled the firm to survive earlier financial crises — reducing senior salaries, cutting expenses and programs such as internships, among them.

With revenue down by low double digits, however, Edelman said the cutbacks are critical for the company to sustain itself during the pandemic and what he expects to be a long and slow recovery.

“Our goal is to be a break even business,” he said, adding that the goal at the moment is to support clients. “We are not trying to make money now.”

Earlier in the year, Edelman pledged that the firm would not let go of any staff due to the coronavirus pandemic. The firm has since reduced its Australian operation by 15, although an Edelman spokesperson said that reduction was planned before the pandemic.

The news from Edelman mirrors other actions agencies have had to take as companies scale back their marketing spends. IPG agencies including Weber Shandwick and Golin have let staff go over recent weeks. Omnicom also making significant job cuts across their PR agencies, and MSL has made redundancies as well.

It also comes after Edelman suffered a financial blow earlier this year when it lost Samsung Mobile's digital marketing business, worth an estimated $20m. PRovoke understands that the firm's New York office, which led the Samsung business and houses more than 800 staffers, has been particularly impacted by the layoffs. Global strategy director David Armano, who spent 11 years at the firm, are among those who have lost their jobs. Western region chief creative officer Tom Parker lost his job in the move as well.

Edelman’s email reads as follows:

During a virtual town hall today, I shared with you the heartbreaking news that we must make substantial changes to our business due to the economic impact of the pandemic. As a result, we are no longer able to sustain our business without layoffs, furloughs, reduced work weeks and additional compensation reductions of mostly senior people scaled by salary level. To maintain the financial security of our business, we will reduce our workforce by approximately 390 people, which is less than 7% of our global team, and will be asking for salary reductions from 5-20% scaled by employee compensation level.

For all of you, and particularly those unable to join the call, it’s important that I follow up in writing to share how this decision happened and what it means going forward. You rightfully expect the unvarnished truth and to know the steps taken by leadership to weather the storm.

This decision is gut wrenching, especially as I told to you in March that we would have no job losses due to the pandemic. I said we were prepared to take the business down to zero profit. We did not want to get into loss-making, but I said our intention was to press ahead until we could do so no longer. 

We had done this successfully in the two previous recessions of 2001 and 2008, with only a temporary senior compensation reduction. Today, despite all efforts, we are beyond the threshold of loss-making and to ensure the long-term health of our business, I must change course. 

Here is the full story of how we arrived at this point. As of February, Edelman was on track to do 2% growth, even with Covid-19 impacting some markets in Asia. In March, our business was operating at an 11% margin. Today, we are operating at a slight net loss and our cash reserves are being used to offset slower receivables.

As a business, we have suffered a succession of body blows. This is a truly global recession. No office, market or region escaped its impact. We expected the first wave of declines in March, from travel, hospitality, automotive and airline clients whose business faced historic declines in demand. Then, came massive cuts in our energy business as oil prices sank to 20-year lows, which have had a greater breadth and depth of impact on our business.

We pulled on every available lever to stave off this decision by reducing our operating expenses. These actions included reducing compensation for executives on our global operating committee by 15-20%, ending the use of freelancers, temporarily pausing our internship program, hosting a virtual global strategy meeting, limiting external recruiting to only a handful of critical roles globally and slowing internal promotions. As a family business with zero debt and cash reserves, this swift reduction of operating expenses allowed us to maintain staff levels and salaries until this point.

Now, in June, we must part ways with talented and wonderful colleagues across the network. This is not a reflection on them, they are our partners and friends, and parting ways with them has been the most difficult decision in my 23 years leading this firm.

As from today, leaders across our firm will be setting up time to speak with each affected person. We will provide each person with the information they need as soon as possible, though the timing of these conversations will vary as we follow the local laws for each country in which we operate. We will do what is right for those who are leaving our company. In addition to severance, we will offer:

  • Career transition services, including one-to-one guidance on personal marketing, resume writing, interview techniques and job search engines;

  • Employee assistance programming for an additional six months, including emotional support, financial guidance and counseling support, which includes support for immediate family members, too;

  • LinkedIn Learning, as well as our own learning curriculum, to provide reskilling and continuous education for six months;

  • Networking with alumni to match people with opportunities where possible;

  • A $1,000 credit to put toward personal technology such as a laptop (if you have tech covered, then these funds can be used for whatever else you feel might be appropriate for you moving forward).

For those of you leaving, I am profoundly and deeply sorry. The thought of how this affects you and your loved ones has given me many sleepless nights. My gratitude to you is heartfelt, and you will be deeply missed by me, as well as your colleagues and friends.

For 68 years, the people of Edelman have been building a company brick-by-brick based on a set of principles that include client service, creativity, entrepreneurship, intellectual capital accessible to clients, never taking on debt, earnings reinvested in the business, global and local excellence, engagement within the communities where we operate, and family-owned independence. These principles have not changed.

I continue to have deep confidence in our strategy premised on earned reimagined and trust. Given the profound challenges the world faces, there has never been a more important time for a communications firm that can help business fulfill its role in healing our society.

To all of you, I remain in awe of how you have rallied to support one another and our clients despite the extraordinary times. I see your determination and commitment and it sustains my confidence that we will fight our way back. For that, and for what you do every day for this company and our clients, thank you.

Richard