The COVID-19 pandemic has upended labor market dynamics, creating an economy-wide shortage of workers. For public relations and marketing firms, wages are the single biggest cost, and rising labor costs are hitting them hard.
Coupled with “The Great Resignation,” recruiting and retention has become a challenge and a key focus area for businesses. The labor shortage is forcing businesses across all industries—including public relations and marketing—to raise wages significantly to attract new candidates and fill open positions.
Public relations and marketing firms also are turning to retention strategies that include significant pay increases and bonuses to maintain their current workforce, especially high-performing employees. This is placing a strain on employers throughout the country in all industries, and it doesn’t look like things will change anytime soon.
Let’s look at some statistics. Currently, there’s not enough talent supply to meet demand. According to the U.S. Bureau of Labor Statistics, four million Americans quit their jobs in July 2021, and there were 10.4 million job openings at the end of August.
The Labor Department reported the Employment Cost Index, the broadest measure of labor costs, surged 1.3 percent last quarter after rising 0.7 percent in the April-June period. The largest gain since 2001 reflected an increase across industries. Policymakers and economists widely view the ECI as one of the better measures of labor market slack and a predictor of core inflation, adjusting for composition and job quality changes.
Labor costs powered ahead 3.7 percent on a year-on-year basis, the largest rise since the fourth quarter of 2004, after increasing 2.9 percent in the second quarter.
The inflation rate has hit a 30-year high. The Consumer Price Index, the most widely followed measure of inflation, rose 6.2 percent between October 2020 and October 2021. The CPI represents the average change in what urban consumers pay for a market basket of consumer goods and services. Categories tracked include food, energy, housing, apparel and services.
What does this all mean?
The rising prices of just about everything from milk to gas impact more than just individual consumers. They’re having negative effects on businesses, too. Companies are being forced to make some tough decisions regarding product pricing, advertising and marketing budgets, expansion plans and more.
Variants of the virus and vaccine mandates continue to create uncertainty globally. Businesses are grappling with worker shortages and higher wages, energy prices, shipping fees and other costs. Many have no choice but to pass at least a portion of these increases on to their customers to break even or, in some cases, prevent potentially catastrophic losses.
How PR, marketing firms can respond
These significant changes require businesses to conduct a deeper analysis and assessment of their operations. They must do this to ensure prices are adjusted accordingly, specific cost-cutting and growth opportunities are identified and productivity is improved. Increasing efficiency and automating processes can promote financial stability.
An analysis of your team must be conducted, with extra attention to high-performing, key players. The market is such that if you aren’t paying your people what they’re worth, someone else will. Competition is rough for talent right now. Your key players may have been courted by your competitors already. The cost to replace your key people will far outweigh the adjustment you need to make to get them to a more competitive salary. Currently, we’re seeing annual salaries increase between 10 and 20 percent, sometimes more.
How will you pay for these increases? By increasing fees. Your clients are feeling the squeeze as well and are adjusting their pricing strategy. Don’t be left in the dark. Public relations and marketing firms provide tremendous value to their clients, so make sure you’re paid what you’re worth. Start having conversations with your clients now to prepare them for significant fee increases in 2022.
There are other ways to fill this gap. With a shift to remote and hybrid work environments, public relations and marketing firms have an opportunity to downsize their office footprint and decrease their spending on electricity and cleaning. This change also opens the door to expanding your talent pool and filling positions with employees in lower cost-of-living areas. We saw many firms start to make this shift in 2021 and expect to see even more movement in 2022.
Overall, many businesses are seeing average savings of between $10,000 and $20,000 per employee with remote work. While remote work may require infrastructure upgrades and investment in cloud collaboration solutions, it brings benefits such as decreased turnover, a wider talent pool, increased productivity and the ability to maintain business continuity.
In addition, as in-person business meetings, conferences and events have become less frequent, businesses can realize significant travel and expense savings. Virtual meeting platforms such as Zoom and Microsoft Teams offer the ability to conduct meetings efficiently and effectively while saving on travel costs.
With an increasing number of employers offering remote work, this type of flexibility alone isn’t enough to recruit and retain talent. Companies must focus on creating a culture where people want to be, and that takes work. Employees are looking not only for flexibility but for more dynamic organizations that offer the benefits and culture that are important to them. Oftentimes, this means employee-centric firms with active leadership and benefits that are centralized around listening and investing in the careers of their team members.
Why make these shifts?
Making these adjustments and doing this analysis requires the right data, but realigning your strategy to ensure the allocation of assets for long-term success can go a long way. Having a better understanding of your operations and finances in real-time by implementing tools such as digital analytic dashboards can help you navigate this new and more challenging environment.
Take action now and assume some of your people already have one foot out of the door. Focus on your culture, increase your fees, pay competitive rates for your people and 2022 could be one of your best years yet!
Dominic Rovano, CPA is a partner at Janover LLC and leads the firm’s Professional Services Group.