In Hong Kong, B2B companies are by nature heavily reliant on the lifecycles and growth plans of their existing and potential clients and, of course, whether or not these clients are profitable. These factors are generally either known or predictable, however one uncontrollable external factor is the state of the economy.
During times of economic volatility, business operations are naturally affected and the agencies, vendors, and contractors who count on B2B spending are often affected in the ensuing chain reaction.
As most of us know, when Hong Kong experiences a downturn, the first thing to go is the marketing budget. Marketing and advertising agencies working in almost every industry: from manufacturing and engineering to financial and professional services experience three key challenges which, if not addressed and overcome early, will negatively affect their ability to grow.
1. A less predictable cash flow
Agencies that rely on below-the-line marketing spending are generally involved in more ad-hoc projects, have shorter sales cycles, and handle campaigns with shorter life spans.
For example, the automobile and telecommunications industries in Hong Kong often run weekly ad campaigns, and below-the-line agencies working with them will only find out if there will be work at the last minute.
For smaller operations, this does not have a great impact on capex and cash flow, but for larger agencies it may. To counter this, the bigger agencies are growing their client base across different industries and markets to reduce risk and avoid becoming over-reliant on a single sector.
2. The need to constantly update technologies and skills
To grow any business, its service team must be willing and able to seek out and harness the latest knowledge and technologies.
For example, marketing agencies in Hong Kong should be aware of how rapid changes in mobile technology are changing the way consumers encounter information and make decisions in our city; while IT companies need to know when the new hardware and software releases will be so they can update their systems or obtain older products at a lower price.
In terms of skills, senior management needs to decide on which training programmes are essential to focus upon so as to minimise the amount of time staff are away from revenue-generating activities.
3. Retaining valuable talent
This is the most significant challenge faced by agencies. Clients seek to work with agencies with good reputations and solid branding. However, it is an agency's people who interact with clients and deliver the company's services – and who therefore create a lasting positive or negative impression with the client. This impression will determine whether the client becomes a repeat customer or not.
With Hong Kong's fluid workforce and numerous job opportunities, hiring and retaining the best team is a constant challenge.
In a recent survey, Hong Kong's 'Advertising/Public Relations/Marketing Services' sector was found to have a 13.7% turnover rate – one of the highest in the city. Adding to these difficulties is the fact that marketing people in the city often have high-profile exposure, meaning headhunters and rival organisations are always courting top talents.
Being unable to hire the best talent coupled with a high employee turnover rate poses a twin threat to an agency's productivity and service consistency. To some extent, this will always be a problem in Hong Kong. That's why it's worth spending time to find good, experienced people who are the right fit for the job; and worth spending the time and money required to keep them.
I run a global company that employs over 2,000 people. My company faces the same challenges as other large industry players. How do we overcome them? By learning and adhering to best practices, and by reinforcing our unique company culture and the success factors which have kept us growing for almost five decades.
We only hire talents who understand and agree with our management philosophy, mission, vision, and company values – as these are the people who are the right fit for our team. Finding the right talent does not happen overnight – it must be embedded throughout the entire talent development process.
Begin by reaching out to your target candidates, hire the people who are on board with your vision, and provide appropriate and on-going training which matches the company culture and values.
Monetary incentives are important but they are not the only factor in loyalty – our company uses a 'Balanced Scorecard' system which measures performance alongside other non-financial parameters like customer satisfaction, internal process, and talent development.
It is a long-term commitment to hire, train, and retain the best staff. It will not just happen one day.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Hongkong Business. The author was not remunerated for this article.
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Lawrence Chia is the Chairman and CEO of the Hong Kong-listed Pico Far East Holdings (Pico Group) (SEHK: 752).