ANALYSIS: Merger - Top ten challenges that await Weber Shandwick -Weber Shandwick and BSMG face a rocky stretch of road ahead followingtheir merger. Adam Leyland gives them suggestions for steering thecompany toward order rather than chaos

There are two major benefits resulting from the Weber

Shandwick/BSMG merger: the largely complementary nature of the two

businesses (in terms of geographical and market-sector expertise and

client base), and the ability and experience that new CEO Harris Diamond

and his senior management team at BSMG can bring to bear in yoking

together disparate (and in some cases dissolute) parts to make a

successful whole.



But as Diamond surveys his $500 million empire - with 4,000

employees spread across 74 offices in 19 countries - the sheer size and

scale of the task he faces is a daunting one.



Here are ten challenges that Diamond will have to tackle.



1. Boosting morale. As Diamond says, "change is threatening," and what

makes it particularly unsettling for the workforce is that change is

coming for the second time in less than a year. Noses are certain to be

put out of joint, and layoffs are also likely not just in the back

offices, but at the middle and senior management levels. In making cuts

and reorganizing the business, Diamond must act quickly and decisively

to clear the air.



2. Establishing clear operational structures. The businesses are

remarkably complementary, and the fact that both operations have a

geographically based P&L will make integration that much easier. But

there is overlap, and that's likely to affect middle and senior

managers. The New York Weber Shandwick office has been decimated in the

last six months, and may just be subsumed into BSMG, NY. In DC, there's

a likely showdown in the public affairs operation. Ranny Cooper from

BSMG is favored to run the merged operations as CEO, with Jody Powell as

chairman and Lance Morgan as president.



The giant tech practice also may see some trimming unless the BSMG

hi-tech operations are spun off under the umbrella of the Benjamin Group

brand. The other markets with obvious overlap between the Weber

Shandwick and BSMG offices are London and Germany. Some consolidation

will be necessary in both cities. There may not have to be any

casualties at the highest level however, as Weber Shandwick European CEO

Lutz Meyer has been running the offices of both cities.



3. Creating "a merger of equals." This now infamous phrase was used by

Daimler Benz CEO Juergen Schrempp following the so-called "merger" with

Chrysler. Diamond cannot afford such hollow utterances, and in his

appointment of senior managers, he must avoid the impression that this

is a BSMG takeover. Indeed, there is still a residual bitterness and

resentment among former Shandwickites, many of whom still feel

undervalued and marginalized by what they saw as a reverse takeover by

Weber.



4. Keeping talent. At a time of uncertainty, you are always vulnerable

to swooping vultures, and they are already circling. Diamond will not

have as much time as before to personally manage key employees. He must

quickly convey his vision and instill a sense of direction in order to

gain the confidence of key employees.



5. Establishing a culture of collaboration. Diamond has said that Weber

Shandwick must celebrate the cultural diversity of its people. He

rejects the idea of a homogenous Weber Shandwick employee. The culture

he hopes to promote, rather, is one of collaboration, entrepreneurship

and client-focused excellence. Establishing a workable multi-practice,

multi-discipline "matrix" structure is a challenge that is facing all

the global agencies, but in the WSW case, the scale and speed with which

this giant has been put together accentuates the problem.



6. Building a brand identity. Weber Shandwick has a glittering array of

brands within its empire - Rogers & Cowan, Bragman Nyman Cafarelli,

Weber Group, Miller Technologies, Red Whistle, The Benjamin Group,

Financial Relations Board, Square Mile, Powell Tate, Cassidy Companies,

Rowan & Blewitt, Murphy Pintak Gautier Hudome, SWR Worldwide, Brown &

Powers, and Sawyer Miller - as well as other offices that operate under

the Weber Shandwick name. But the identity is confusing, even to

staffers, so imagine how the clients feel. In New York alone, for

example, Weber Shandwick has 14 sub-brands - and it's not even a big New

York player. Larry Weber, the architect of the BSMG merger (and the

Weber Shandwick merger before it), argues that a single brand is "old

economy," and he believes that the only important thing is that each of

these sub-brands (or "hyperpractices") is "a Weber Shandwick company."

But Weber Shandwick has the look and feel of a holding company. If it is

to gain the same overarching brand recognition that a McKinsey or a

PricewaterhouseCoopers or an Andersen Consulting conveys (which is also

part of his vision), it will have to balance the loss of a recognizable

specialist agency brands with the benefit of putting everything together

under one umbrella.



7. Staying competitive. One CEO reckons that it will take Diamond two

years to get this engine running, yet all the while, Weber Shandwick

needs to compete aggressively for business. The current economy is

placing all CEOs under severe pressure, and despite the upheaval, he

will still be expected to keep his attention focused on the bottom

line.



8. Keeping the clients happy. When companies merge, the message to

customers is either "you won't notice anything" or "it's going to get a

whole lot better." Weber Shandwick is promising the latter: that the

aggregation of all this business and expertise is going to enhance the

range and the quality of the service. But uncertainty and upheaval in

the short-term could damage client relations. The focus on being the

biggest may also worry some clients, especially smaller ones, that their

business will get lost in echoing corridors of a giant organization.



9. Eliminating client conflicts. As Weber Shandwick grows in size,

there's also a danger that it will cut itself off from an increasing

amount of business. One of Weber's arguments for keeping all the

sub-brands is that it allows them to compete for conflicting clients. If

that's the case, why is it that Weber Shandwick won't be pitching for

the $60 million IBM RFP because of a conflict with its client

Hewlett-Packard?



10. Expanding the offering. As if all that's not enough, Diamond's final

challenge is to make more acquisitions! There are still plenty of holes

in the "hyperpractice"-driven vision: the healthcare offering is strong

in the US, but by no means the leading one, and in Europe it's even more

limited. WSW also shows a surprising lack of employee communications and

change management expertise. The investor relations practice lacks the

high-end firepower that a Gershon Kekst or Joele Frank could bring to

bear, and the international IR operations are small. In Latin America,

Weber Shandwick's presence is restricted essentially to Argentina.

There's no problem, apparently, with resources. But they've all got to

be integrated.



WEBER SHANDWICK ORGANIZATIONAL CHART

INTERNATIONAL OFFICES

Rank* Country Revenue Number of Company

2000 2000 (dollars) Offices Offices

3 Australia 4,958,000 7 WSW

Belgium 1,744,000 1 WSW

6 Brussels 5,147,046 3 WSW/BSMG

Canada 8,696,000 1 WSW

China 1,499,000 3 WSW

France 2,205,000 1 WSW

2 Germany 15,328,346 4 WSW/BSMG

1 Hong Kong 8,380,342 3 WSW/BSMG

Italy 5,092,000 1 WSW

1 Japan 9,015,000 2 WSW/BSMG

Malaysia 515,000 1 WSW

Netherlands 1,077,000 1 WSW

New Zealand 529,000 2 WSW

1 Singapore 5,158,876 2 WSW/BSMG

Spain 3,725,000 1 WSW

Switzerland 3,426,000 1 WSW

Thailand 1,399,000 1 WSW

1 UK 63,747,205 6 WSW/BSMG

BY PRACTICE

Rank 2000* Practice Area Revenue (dollars)

1 B-to-B 73,689,225

1 Public Affairs 68,043,822

2 Crisis 16,609,344

1 Consumer Marketing 104,582,200

8 Employee Communications 1,800,003

4 Corporate 46,592,222

5 Community Relations 4,227,020

US OFFICES

Rank* Location Revenue Number of Company

2000 2000 (dollars) Offices Offices

Austin, TX 1,765,913 1 WSW

Baltimore 3,226,000 1 WSW

1 Boston 34,566,152 3 WSW/BSMG

2 Chicago 39,634,850 3 BSMG

Dallas 6,889,182 1 BSMG

Denver 981,250 1 WSW

Detroit 2,744,000 1 WSW

Florida 504,018 1 BSMG

Houston 3,466,000 1 WSW

Kentucky 4,289,000 2 WSW

1 Los Angeles 29,111,380 4 WSW/BSMG

Miami 4,861,303 1 WSW

Midwest 1,230,000 1 WSW

Minneapolis 22,389,000 1 WSW

4 New York 49,974,924 6 WSW/BSMG

Philadelphia 7,859,382 1 BSMG

Pittsburgh 1,894,000 1 BSMG

Portland, OR 3,025,369 2 WSW/BSMG

7 San Francisco 13,253,140 3 WSW/BSMG

Seattle 6,356,000 1 WSW

1 Silicon Valley 21,762,393 2 WSW/BSMG

Southern California 6,844,895 1 BSMG

St. Louis 3,834,000 1 WSW

Virginia 4,571,997 1 WSW

1 Washington, DC 60,535,807 4 WSW/BSMG

NOTE: Rankings reflect the agency's position in that particular

market/practice area.



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