When stretching the accordion makes sense

By Felix Salmon
August 3, 2009
The Economist doesn't approve of ad agencies "stretching the accordion", and branching out into non-core businesses such as product design and environmental consulting:

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The Economist doesn’t approve of ad agencies “stretching the accordion”, and branching out into non-core businesses such as product design and environmental consulting:

The grim economic climate does not favour such dabbling. It takes cash and time to develop a fledgling unit. Those are two things that many agencies do not have.

Well, they may not have cash, but they do have time. What should happen, in a cyclical business, to an employee whose net present value to the company is high — if you take into account all her future work — but who has relatively little to do right now? In a badly-managed business, you get massively-multiplying meetings: every decision, no matter how tiny, ends up being debated and signed off on by far too many people, who thereby get to feel (and show their bosses) that they’re Doing Something.

Much more intelligent, in a creative company, to do something potentially very valuable with temporarily-underemployed executives and staff. If it works, that’s fantastic; if it doesn’t, the employees have still had a valuable and productive experience, and the company hasn’t bogged down in bureaucracy. Meanwhile, layoffs have been avoided, and top employees don’t end up working at a competitor.

Recessions are often a great time to launch new businesses — if you can make it work right now, you’re likely very well placed for the future. And talent is easier to come by. So in theory I can see how stretching the accordion might make a lot of sense — so long as the marginal cost remains very low.

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