Waggener Edstrom Worldwide: Agency Business Report 2007

WE makes no bones about wanting to top the $100 million mark in revenue in 2007. Melissa Waggener Zorkin, the firm's CEO, hints at the acquisition trail in saying global expansion will be "through organic growth, but also with select partners."

WE makes no bones about wanting to top the $100 million mark in revenue in 2007. Melissa Waggener Zorkin, the firm's CEO, hints at the acquisition trail in saying global expansion will be "through organic growth, but also with select partners."

With Microsoft a key client, the news that WE was brought into an 11th hour pitch for the Windows Vista launch - and lost it to Edelman - was a surprise, but the firm insisted it didn't result in any lost business.

DSG's creation was a key investment for WE, and Zorkin cites it as a high point of 2006. "We're watching with interest how the role of a PR agency evolves when the lines are blurring between digital communications disciplines," she says.

Key facts

Principal: Melissa Waggener Zorkin, CEO
Ownership: Independent
Subsidiary companies: Maloney & Fox
Offices: Nine in the US, seven rest of the world (Europe and Asia Pacific), one affiliate in Korea

Staff
Current staff is 546 in the US, 690 globally, the latter figure up 11% from 2005. Staff retention was at 78%. Senior hires include Neil O'Connor from Hudson Scenic Studio as CFO; Kay Hart from DHL as SVP and GM of the TX region; John Bentz as SVP, working on the Microsoft team; Tim Smith, SVP, from JT International to the public affairs group, and Aaron Heinrich, SVP, to the consumer marketing group. Frank Shaw was promoted to president, Microsoft account. Losses include Erica Beyer, formerly VP and GM of the Northwest region, which has now been consolidated into a single West Coast region.

Structural changes
WE reorganized its North America presence and aligned under three regions - East, Central, and West. North America is led by Corey duBrowa.

Regional performance
WE is seeing growth in the western and central US, Munich, the UK, and Paris. The Eastern US business is shrinking
due to client loss.

Practice areas
WE has five global groups: healthcare; consumer marketing; digital strategies; public affairs; and corporate communications. The Digital Strategies Group (DSG) is new, and built around "Integrated Influence," an approach focusing particularly on the effects social media have on target audiences. The bioscience and consumer sectors grew the most. Weaker practices were corporate and public affairs. WE is gradually decreasing its percentage of purely tech-focused work from 99% in 2001 to 94% today.

Accounts
Key wins include GlaxoSmithKline, BMC Software, Shire, Jobster, and HTC USA, as WE explores new vertical industries. The latter win expands its work in wireless communications, while Shire boosts the healthcare and bioscience areas. Losses include Plantronics, Kyocera Mita, and Connexion by Boeing. Across the client base, 66% are on retainer basis, up from 2005.

Financial performance
Global 2006 revenue was $98.5 million, up 12.6% from 2005, with a 7.7% profit margin. US revenues were $86.5 million, up 9.3% year on year, with a 9.8% profit margin. WE did not discuss how this matched targets.

Agency's full questionnaire follows below:

Name of parent division/company (enter both where applicable)
N/A

Name of subsidiary companies
Maloney & Fox, LLC

Has your ownership status changed in the past year? If yes, please explain
No

Name of global CEO and US CEO (or most senior equivalent)
Melissa Waggener Zorkin

Name of person, if any, the most senior person named above reports to
N/A

What is your current headcount?
690

How has your headcount changed since FY 2005?
Yes, we are up 11% from 2005

What was the percentage of staff turnover in 2006?
Last year, we had a global retention rate of more than 78 percent. We're proud to have on of the PR industry's highest retention rates; we believe we offer an amazing place to work, and our people respond with incredible loyalty. Retention and office expansion held steady in 2006 at -1%

Did you make any senior hires in 2006 (VP and higher)? Please state name, title (and unique responsibilities, if applicable), and previous company
In 2006 Waggener Edstrom Worldwide added considerable new talent to our senior executive ranks, which has helped to expand our agency capabilities and managerial point of view. Notable among the hires were the addition of

  • Neil O'Connor, CFO, in October (Neil came from Hudson Scenic Studio, Inc)
  • Kay Hart, serves as senior vice president and general manager of our TX region, joined in May (Kay came from DHL Americas)
  • John Bentz, senior vice president, works on consumer accounts and account planning for the Microsoft team (John came from John Bentz Consulting)
  • Tim Smith, senior vice president, is a strong contributor to our Public Affairs practice group (Tim came from JT International -formerly R.J. Reynolds International)
  • Aaron Heinrich, senior vice president, is an integral part of our growing Consumer Marketing group (Aaron came from GLOBALTECHNOLOGY)
  • Kelly McFalls, vice president technology, located in our Eastern U.S. region (Kelly came from Peter Novelli International)
  • Scott McLaughlin, vice president, on the Microsoft application platform account (Scott came from Intel Corporation)

What senior staff have departed the firm? Please state name and previous title
Several senior leaders also separated from the agency last year. Among them, Erica Beyer was formerly our VP and general manager of the Northwest region, which has now been consolidated into a single West Coast region. Other senior level departures included:

  • Katie Kemp, executive vice president, Marketing
  • Rich Kerlin, senior vice president, Consumer Marketing
  • John Taylor, senior vice president, Austin, Texas
  • Rae Logsdon, vice president, Eastern Region

Waggener Edstrom Worldwide prides itself on our retention rate - nearly 80 percent last year - and the tenure of our core senior executive leadership, which remains strong and consists of several executives who have been with the agency for 10, 15 and in a few cases even 20 years.

Please list any other senior management changes, including restructures and significant, senior-level promotions
In 2006 WE reorganized its North America presence and aligned under three regions - East, Central and West. The North America presence is lead by Corey duBrowa who was promoted to president, North America in June 2006. In addition, Claire Lematta who manages the agency's EMEA presence was promoted to president, EMEA and Frank X. Shaw was also promoted to president, Microsoft Account in January 2006.

Have you made any acquisitions in the past year, or merged with another agency?
No

How many wholly owned offices do you have globally? Please list with agency names and cities under the following headings. Add majority-owned offices in parentheses.
North America

  • New York, NY
  • Stamford, CT
  • Boston, MA
  • Washington D.C.
  • Dallas, TX
  • Austin, TX
  • Portland, OR
  • Seattle, WA
  • San Francisco, CA

Europe

  • London, UK
  • Brussels, BE
  • Paris, FR
  • Munich, DE

Asia Pacific

  • Beijing, CN
  • Hong Kong
  • Singapore, SG

How many partly owned offices or affiliates do you operate globally? Please list agency names and cities under the following headings.
Asia Pacific

  • Shout Communications Korea (affiliate)

What offices opened in 2006 or early 2007? (State when)
N/A

What offices closed in 2006 or early 2007? (State when)
N/A

Which regions, US and globally, are growing, and why?
Western, US; Central, US; Munich, UK, Paris. Growth due to additional client wins.

Which regions, US and globally, are shrinking, and why?
Eastern. Decrease due to loss of clients.

Practice areas

How many practice areas do you have? Please list.

5 global practice groups:

  • Healthcare
  • Consumer Marketing
  • Digital Strategies Group
  • Public Affairs
  • Corporate Communications

Which ones are new?

  • Digital Strategies Group
  • In today's dynamic, highly fractionalized media landscape, Waggener Edstrom Worldwide is laser-focused on making sure that you are engaging the right audience, at the right time, in the right place, with the right message. We call this audience-centric approach Integrated Influence. Every Integrated Influence Plan is based on a deep analysis of our clients' communications fitness and audience-centric insights. In developing your company's Integrated Influence Plan, we will take a holistic approach that leverages the most relevant, influential and dynamic communications channels to tell your story and engage your customers - both online and offline. Simply put, it is our way of making sure our clients' communications initiatives are making an impact and driving results.
  • WE has a 24 year heritage of tracking, understanding and working with various methods of influence and how it has changed. To formalize our expertise around Integrated Influence, WE has created and is staffing a new Digital Strategies Group (DSG), a global agency team dedicated to understanding, testing and providing audience-centric recommendations on the use of emerging channels of influence for strategic communications advantage. From blogs and podcasts to wikis and online social networking efforts, DSG will play an integral role in helping our clients formalize their plans around Integrated Influence programs and how they can harness the power of new influence models.

Of those, which ones are part of the core strategy of the agency?
All of our global practice groups are part of the core strategy of the agency as each group works with and aligns toward our Innovation Communications methodologies. Our belief in innovation, and our Innovation Communications methodologies, are validated every day by some of the world's most respected businesses. We see WE's role in innovation as twofold: successfully communicating our clients' innovations to boost their business, and moving the craft of communications forward through innovative new tools and methodologies.

Which practice areas have been phased out in the past year?
None

What practice areas showed the most growth? Please elucidate.
Bioscience, Increase in client base. Consumer, increase in work on existing clients.

Which practice areas showed the least growth? Please elucidate.
Corporate Practice, decrease due to lack of work on existing clients. Public Affairs decrease due to loss of clients.

What is the distribution of accounts across practice areas?

In 2001, technology industry clients represented essentially our entire revenue base (99 percent). However, over the past five years we expanded into other industries and practice areas. In 2006, these accounts grew to six percent of agency revenue, while technology revenue accounted for 94 percent of revenue., Waggener Edstrom Worldwide has enjoyed considerable growth in the following sectors: healthcare, consumer, finance, professional services, industrial and government. This industry diversification puts the agency in a stronger long-term financial position and has enabled Waggener Edstrom Worldwide to significantly expand its services and employee skill sets.

Accounts

What key account wins did you have in 2006? If based outside the US, or are global, please state regions.

  • In 2006, WE added several new clients (Glaxo Smith Kline (GSK), BMC Software, Shire, Jobster and HTC USA) that significantly broaden and deepen our client roster. And, we are beginning to develop deep expertise in new vertical industries, which helps shape our perception in the market with client prospects and job candidates.
  • We expanded our telecommunications expertise with new work from HTC, one of the largest and best-known makers of smart phones for the major wireless communications carriers. We helped HTC capitalize on the power of user-generated content to better communicate the power and features of their complex data devices. Combined with our long-term relationship with T-Mobile, expanded scope of work with Samsung in Asia and our work with SK Telecom, WE has developed a strong wireless communications practice in recent years.
  • We added Shire, a rapidly growing global pharmaceutical company, to our portfolio. They have a global sales and marketing infrastructure with a broad portfolio of products in North America and Europe. They also cover the other significant pharmaceutical markets indirectly through regional distributors. Shire is serviced out of our Eastern U.S. region and bolsters the burgeoning WE Healthcare & Bioscience practice, which includes Glaxo Smith Kline (GSK), GE Healthcare, AVI BioPharma and many others.
  • BMC Software, further strengthening the WE reputation for working with the world's leading business software manufacturers, BMC Software is a leading provider of enterprise management solutions that empower companies to manage their IT infrastructure from a business perspective.

Of your 2006 wins, how many were across three or more countries?
N/A

What key accounts did you lose in 2006? If based outside the US, or are global, please state regions.

WE parted ways with the following clients in 2006:

  • Plantronics
  • Kyocera Mita
  • Connexion by Boeing

Did you expand any existing accounts into new domestic or international markets or sectors? Please elucidate. Microsoft, AMD GE Healthcare, GSK

What proportion of your clients are on a retainer?
66%

Has this changed over the past year?
Yes, more clients on retainer.

Performance

What was your 2006 global (including US) revenue?
$98.5M

What was the % change over 2005 global revenue
12.6%

What was your global profit margin in 2006?
7.7%

What was your 2006 US revenue?
$86.5M

What was the % change over 2005 US revenue
9.3%

What was your US profit margin in 2006?
9.8%

Did you experience top-line or bottom-line growth in the past year, or both? Please elucidate.
We don't discuss bottom line growth.

How much of your growth was organic, and how much was due to new business won?
6.2%

How did your performance, in terms of revenue and growth, meet expectations you had for the year?
Agency declined to give information

Please briefly outline any initiatives undertaken in 2006 that add to your agency's story, such as staff development/training, fundraising/charitable initiatives, community programs, business partnerships, etc.

Our Commitment to our People:
Waggener Edstrom Worldwide remains committed to helping staff realize their own potential. Employees are encouraged to work closely with their managers to ensure they are engaged in opportunities aligned with their career aspirations and development goals. Among the possible offerings are internally produced and delivered trainings, funded external coursework, seminars and experiences and various mentoring options.

  • In 2006, Waggener Edstrom Worldwide continued to deliver high-quality, internal trainings that reinforced our business goals, value proposition and cultural aspirations across the globe. Our program is a permanent, year-round benefit and a commitment that has been greatly appreciated by our employees, as evidenced by the 2006 attendance of more than 2,200 agency "students" attending more than 230 internal training sessions. There is a careful and planned approach to the coursework, all of which support agency premiums on quality and relationships. Content is targeted to the specific needs of the various global audiences and (most often) is delivered by internal experts who share company knowledge. Curriculum priorities for 2006 included: building the skills of storytelling; sharing agency intellectual property (IP) against the changing influence model; reinforcing the value of personal leadership; and supporting excellent business practices.
  • Each employee may also leverage Continuing Education funds for external business-related courses, seminars and conferences, including subjects such as personal leadership, management skills, business acumen, new industries, language acquisition and undergraduate/graduate pursuits. In addition, the individual's budget allowance may be used to purchase development and industry-related materials and books.
  • The agency encourages informal coaching and mentoring year-round. A more formal mentoring program was launched in 2006 with tools and resources to pair employees in a way that ensures a safe and confidential environment. All relationships are intended to enhance the development of both the pupil and mentor, as well as to encourage shared knowledge across the agency. Waggener Edstrom Worldwide also provides executive coaching to our senior executive (VP, SVP and EVP) population, using internal and external coaches.

Waggener Edstrom Worldwide recognizes work-life balance is a challenge for many people and a consideration with regard to whether they would choose to join or continue their employment. Currently, 18 percent of Waggener Edstrom's workforce is on a flexible schedule and we anticipate this number will grow as we continue to embrace workplace flexibility as a differentiator in attracting and retaining a diverse group of talent.

We also don't assume work-life balance is achieved through flexibility alone. In 2006 we introduced an innovative program called "WE-VOICE" (Waggener Edstrom Valuing the Opinions and Individual Choices of Employees) that was proposed specifically to further support people in a manner that people voiced would be most meaningful to them. The result of this program included the introduction of three new competitive benefits and received high marks from employees across the globe:

  • WE-Connect: Connects people to the tools they need to deliver business results and balance their life commitments through reimbursement of up to $300 of Internet connectivity expenses.
  • WE-Life: $500 distributed to people each year to help support costs associated with their commitment to fitness, family/and or other areas of their life that are important to them.
  • WE-Flex: Enables people to purchase additional personal leave time to step away from work to prioritize and manage their personal life choices.

Waggener Edstrom Worldwide also offers one of the leading time-off programs in its industry - four weeks for new employees and up to six weeks for people with 10 or more years of service. Additionally, people have an opportunity to step away to rejuvenate every six years for an extended leave of four to six weeks depending upon their level in the organization. People can choose how best to use this time by using this award all at once or in increments over a two-year period.

When an individual is under the care of a physician, welcoming a new family member, or needing to care for a family member with a serious health condition, employees can access a bank of hours that accrues five days per year up to a total of 520 hours.

In 2006, the agency and employees collectively donated nearly $400,000 (USD) by sharing money, PR services, in-kind goods and time. Our belief in sharing our resources and promoting diversity is evident in the variety of health (awareness/research), educational, and (innovative) humanitarian relief organizations the agency and employees are engaged with locally and worldwide.

In addition to sharing our strategic communications expertise on a pro-bono basis with several organizations, we also contribute funds to charitable organizations via on-site employee grassroots or offsite events. Also, employees can take paid time off to impact causes that matter to them (eight hours per year, in addition to participation in our global WE Make A Difference Day family event). Volunteers are recognized and community engagement tools are provided via our internal Volunteer of the Month monthly e-newsletter, Intranet Community Involvement site, spotlight stories, blogs, message boards and our culture vignette on WaggenerEdstrom.com.

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