Once again design consultancies are under fire from the financial guys for not facing the hard facts of the economic situation (see News, page 7). While there is a general air of optimism around the business as autumn signals new work for many and renewed energies all round, that optimism could be based on shaky foundations should we hit another economic blip.
The latest annual industry survey by accountant Willott Kingston Smith shows that salaries went up by an amazing 7.2 per cent over the past 12 months, even though – or perhaps because – staff numbers went down by 12 per cent. Is it that staff are being compensated for having to work harder, given the smaller teams and the need to compete so hard to win pitches, or are industry bosses hanging on to senior people at the expense of those lower down the employment chain?
WKS partner Amanda Merron says she is surprised by these by findings. She must also feel disheartened, given that she has long been urging consultancies, not least through Design Week, to cut back on operating costs, particularly wages bills, and consider incentives other than cash to motivate staff. Her warnings predated the dot.com crash of 2001 when the high salaries digital designers were commanding was inflating the rate across the board and have continued since.
The scenario might not be an immediate threat to any business as long as work keeps coming through. But the minute there is a fall off – which happens to most design groups at some point in the year – consultancy bosses could face tough decisions. With profits down by a staggering 51 per cent across the WKS sample, there is little fat to see them through.
Of course, there are elements other than salaries eating into profits. More work is generally going into winning new business, and even when work is won, many groups say that fees are lower than they might have been previously. That situation is arguably out of the control of the average group, but it’s an area where we would look to the Design Business Association to figure more prominently as the 2003 International Design Effectiveness Awards approach, renewing its campaign to raise clients’ appreciation of the value of good design to their company’s health and performance.
It’s a question of maintaining an acceptable balance between income and outgoings – a principle that many consultancies fail to grasp. More would do well to heed the advice given by Merron and others about applying better financial management methods. However tough it seems, it’s easier to tighten up now and reap the benefits that allow for expansion in staff or salaries in more prosperous times.