11:FS COVID-19 Response
Never did I imagine 3 months ago that we’d be dealing with such an unprecedented global crisis as we have done with COVID-19.
Everywhere around the world businesses are having to make tough decisions around what to do to ensure they survive.
It’s one of the toughest times I’ve had to navigate so far as a CEO.
We knew this was going to be bad but we didn't really know the severity and long lasting impact that this would have until we dived into it, and sadly now we know much more:
- Whether you’re reading the FT, or speaking to someone at Goldman Sachs, all the experts or anyone else you read or talk to, they are predicting this to be the largest recession, with the most significant spike in global unemployment, combined with the continued most significant global equity collapse since the great depression.
- It’s expected that the UK economy will reduce by between a minimum of 8-10% over the course of this year, when it was previously forecasted to grow by 1%.
- Sadly this is all now the ‘best case scenario’ with the reality being that this all could get much worse if the first phase of the pandemic goes on longer than previously expected. This would extend the recession and deepen the issues. In fact, the OBR said a 35% reduction is a plausible scenario.
This global pandemic is changing the face of the business world. Household brands are disappearing as huge corporations announce, on a daily basis, that thousands of people are being made redundant.
Banks, insurers and asset managers are also feeling this. And with that comes a ripple effect to every firm that services, supports and works with those businesses. Including 11:FS.
We had to face the reality that the future we were building towards, like so many others, no longer existed
Against this backdrop we went through a replanning exercise to examine the market we operated in, what we thought was likely to happen during this time as well as our financial standing.
We had to face the reality that the future we were building towards, like so many others, no longer existed in the same way and realistically would not be returning any time soon.
Our best laid plans at the start of 2020 have gone out the window. We’re now facing the reality of a very different world and had to react accordingly.
Examining all our options
Aside from continuing to ensure we deliver the very best work for our clients, there are two main perspectives to consider when facing a recession: ensuring the long-term viability of the company and ensuring we treat our brilliant employees in a fair manner.
11:FS is fortunate to have a great board and chairman as well as a strong senior leadership team to ensure we make the best decisions for the short and long term. We don’t have shareholders or investors pressuring us to go one way or another, which allows us to continue delivering great work for our clients, ensure a sustainable business and support our employees.
There are two levers you can pull when running a business - increase revenues and reduce costs. Despite us having multiple projects building banks and digital propositions, the revenue side is full of uncertainty. There’s still opportunity out there, but in times of uncertainty you have to be more conservative. So we had to also look at the other side of that equation; the costs.
During the process we considered all of our options, including:
- We could permanently reduce our headcount: This would involve making a number of our talented Elevens redundant, as I have seen many other organisations do in the last few weeks. This would be a more effective way to confidently and permanently reduce the operational cost and extend our runway.
- We could reduce our hours: This would reduce a number of people’s working hours, which would then reduce the operational cost across the company. I’ve seen quite a few firms deploy this over the last few weeks to varying degrees of success.
- We could furlough some of the team: The government scheme has been set up for organisations where people's role is no longer fully utilised but are wanted by the organisation to return once they have more certainty about their financial position.
- We could reduce salaries: This would be a temporary reduction in salary to reduce the operating costs around the group. Typically we've seen ranges from 15% to 40% depending on organisation and level.
How we’ve reacted
In looking to future-proof our business and further build up our reserves, I continuously go back to our 11:FS values in making decisions. They are, now more than ever, our behavioural compass.
We spent a lot of time considering all of the options available to us.
Success is a team sport, and my belief was that we would go into this as a team and come out of it as one.
We spent a lot of time considering all of the options available to us. What it would mean for 11:FS today, next week, next month. What it would mean for our employees who have made us what we are.
The idea of reducing hours was dismissed pretty quickly, because there is so much going on that requires our collective attention.
We ended up with at an approach that spreads the impact of what is happening across the whole of 11:FS rather than single individuals alone, taking three approaches:
- Reduce expenditure
We’ve deferred significant rent and IT costs, and reduced capital expenditure in the office. That helps with cash flow in the short to medium term and allows us to plan with greater certainty.
- Salary reduction
We asked staff to participate in a salary sacrifice scheme of 15% for all permanent employees and 20% for contractors, for 3 months starting on 1st of May. We will review this level throughout that period to limit the impact on our people. We also agreed that anyone earning under £30k a year (or for whom a reduction would take them below £30k) would be exempt from this process.
In addition, myself, Jason Bates, our Deputy CEO, and Shaun Meadows, our Chairman, have also reduced our salaries by 75% for the foreseeable future.
- Furloughing staff
We also took the hard decision to furlough people whose roles and responsibilities have changed due to the current circumstances. This has primarily affected functions such as our Media team, Marketing, Operations and Recruitment.
We’ve also ensured that all our client and service teams remain intact to keep delivering our best work. We're continuing to fire on all cylinders across our service and product lines and having conversations around exciting new opportunities worldwide.
These decisions are some of the hardest I have ever had to make.
Our people and our customers are the most important thing to me. I’m more focused than ever to lead our team through this time, so that we can welcome back those who went on furlough and continue to build 11:FS.