Burson-Marsteller: Agency Business Report 2007

Despite Mark Penn's close ties to a campaigning Hillary Clinton permeating much commentary about the agency, he put a lot of initiatives in place in his first year as CEO.

Despite Mark Penn's close ties to a campaigning Hillary Clinton permeating much commentary about the agency, he put a lot of initiatives in place in his first year as CEO.

Penn, worldwide president and CEO, says the solid growth in 2006 hinged on a new strategy he announced called DIGS - digital integration, global, and strategic - to allow both staff and clients to benefit from an integration of Burson's various areas of expertise, from grassroots outreach at Direct Impact to lobbying at BKSH & Associates to research at Penn Schoen & Berland.

This emphasis on integration of operations could be seen most obviously at the recent opening of Burson's new DC headquarters, where Burson, Penn Schoen, and BKSH occupy three different levels of the same office space connected by an open staircase.

"The idea really was to create that closer affinity and drive the strategy through the firm," Penn says.

Work on online outreach and communications - the digital integration piece of the strategy - rose some 60% for the firm in 2006, and Penn says the goal in 2007 is to communicate that digital expertise to clients, who may not appreciate how extensively the firm works on online media.

"A lot of the DIGS strategy involved driving through the firm the integration of digital, starting with a global digital training program for the team leaders and managers. [Now] we're taking that strategy to the next level. We want to tell clients that there is a new Burson that is on the forefront of what you need for a modern communications campaign."

As a global firm, Burson has benefited from its acquisition of Genesis PR India and all of the new interest its current and potential clients have in that market, as well as elsewhere in Southeast Asia and China. Even Latin America, despite its tumultuous politics, promises big things, as clients like Intel continue to stretch globally, Penn says.

Internally, Burson says it aims to transform and improve not only its business practices, but also the staff's diversity, through a new initiative to hire "talent that reflects a wide range of recognized and emerging communities" - an effort to be more inclusive that should help improve credibility with clients, as well as increase staff retention.

KEY FACTS

Principals: Mark Penn, worldwide president and CEO; Patrick Ford, US CEO

Ownership: WPP (as part of Young & Rubicam Brands)

Offices: 15 US, 42 wholly owned offices outside of the US, plus 45 global affiliates

2006 revenue: Between $300 million and $400 million global*; between $100 million and $200 million US

*Agencies were requested to check a revenue bracket

Staff
Burson did not provide staff numbers, but says they rose 15% in 2006. Turnover was more than 20%, which was less than in 2005. Senior hires included Penn as CEO, from sister firm Penn Schoen & Berland; worldwide EVP of corporate and public affairs Josh Gottheimer from Ford Motor; DC president Robert Tappan, former principal deputy assistant secretary of state for public affairs; and New York market leader Tony Telloni from Edelman. Senior departures included chief knowledge and research officer Leslie Gaines-Ross; worldwide COO Carlos Lareau; worldwide CFO John Maltese; and US vice chairman, president, and CEO Ken Rietz, whose president and CEO role Ford was promoted to fill. Other promotions included Ame Wadler to chief strategic innovation and integration officer, adding to her role as chairman of the global healthcare practice; and Samantha Lucas to chair of the US brand marketing practice.

Structural changes
Along with acquiring Dewey Square Group and Genesis PR India, Penn Schoen & Berland came under its umbrella.

Regional performance
Burson says all regions grew in 2006 as a result of increased spending by clients on marketing and communications. Growth was strongest in North America, Penn notes, though Burson is also seeing significant growth in Southeast Asia, as well as solid growth in Latin America. Offices were opened in Peru and Geneva.

Practice areas
Burson practice areas include brand marketing, public affairs, corporate/financial, media, healthcare, technology, advertising through Marsteller, grassroots outreach through Direct Impact, lobbying through BKSH & Associates, and polling through Penn Schoen & Berland. Specialty practice groups include US Hispanic marketing, crisis management, change communications, and corporate social responsibility. Practices showing the best growth for 2006 were Marsteller Interactive, technology, media, and healthcare, while the least growth was in public affairs, which saw a slowdown in federal sector contract awards.

Accounts
Account wins included Amgen, Hormel, and Intel - all global work - along with US- and Americas-focused customers, such as Allianz Life USA, the US Bureau of Engraving and Printing, Ford Motor, Jennie-O Turkey Store, Quest Diagnostics, Southern California Committee for the Olympic Games, Sun-Maid Growers of California, TXU, United Healthcare, United Health Group, and the US Tuna Foundation. In Europe, new client wins included Fiat, Lufthansa, and Norwegian Wine and Liquor Monopoly, while in the Asia-Pacific region, client wins included JEJU Free International City, LG Electronics, Chugai/ Roche, Singapore's Media Development Authority, and China's BHP Billiton and TCL TV.

Financial performance
Burson did not provide exact financial results for the year, though it says global revenue was between $300 million and $400 million, up 6.5% versus 2005. US revenue totaled $100 million to $200 million. The company says it had "healthy top-line growth that led to increased bottom-line contribution," and most of its growth was organic.

Agency's full questionnaire follows below:

Name of parent division/company (enter both where applicable)
Burson-Marsteller is a part of Young & Rubicam Brands, a subsidiary of WPP Group plc (NASDQ: WPPGY), one of the world's leading communications services networks.

Name of subsidiary companies
N/A

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)
Mark J. Penn, president & CEO, worldwide
Patrick Ford, president & CEO, U.S.

Name of person, if any, the most senior person named above reports to
Martin Sorrell

What is your current headcount?
Headcount was up by just over 15%

Burson-Marsteller is a wholly owned subsidiary of the WPP Group plc, a publicly traded company. As a result of the Sarbanes-Oxley Act, the WPP group of companies does not release financial data (including headcount) for individual operating units.

How has your headcount changed since FY 2005?
See above.

What was the percentage of staff turnover in 2006?
Over 20 percent, but lower in percentage terms than 2005.

Did you make any senior hires in 2006 (VP and higher)? Please state name, title (and unique responsibilities, if applicable), and previous company
Mark Penn, WW president & CEO, in addition to continuing to lead Penn Schoen & Berland
Josh Gottheimer, WW EVP leading global corporate & public affairs practices and driving strategy globally; most recently director, strategic communications, Ford Motor Company
Robert Tappan, president of Washington D.C. region; principal deputy assistant, secretary of state for public affairs
Tony Telloni, New York market leader; SVP and deputy general manager for the consumer brands group of Edelman New York
Eric Biel, managing director for corporate social responsibility; deputy Washington director for Human Rights First
Walter Jennings, market leader, Australia; Rogen
Tony Jewell, managing director on strategy team; Deloitte: director, National Public Relations for Public Sector and Life Sciences & Health Care Practices and Deloitte Center for Health Solutions
Laurence Velcoff, managing director on strategy team with expertise in micro-targeting; transfer from UniWorld
Jeff Oldham returned to Direct Impact; senior director of operations, PhRMA
Pat Przybyski, CFO worldwide; transfer from Wunderman New York
Sahala Sianipar, director, South Asia & Indonesia Market Leader; Returnee...had been privately consulting

Also significant staffing in the areas of interactive and digital media:

Desiree Collier, director, Marsteller UK; most recently an independent consultant, previous experience included serving as Head of Visual Creative - Design and AV at GCap Media PLC
Charlie Pownall, Asia Pacific director, Digital Communications; communications manager and head of online communications, WPP
Felix Leander, Latin America digital media strategist; marketing manager, MAGIX
What senior staff have departed the firm? Please state name and previous title
Leslie Gaines-Ross, chief knowledge and research officer
Per Heggenes, market leader, UK
Carlos Lareau, COO worldwide
John Maltese, CFO worldwide
Ken Rietz, vice chairman and president & CEO, U.S.
Please list any other senior management changes, including restructures and significant, senior-level promotions
Patrick Ford appointed U.S. president & CEO
Jonathan Jordan was appointed market leader, London
Samantha Lucas was appointed chair, U.S. brand marketing practice in addition to her client leadership responsibilities
Bill Rylance assumed responsibility for our affiliate relationships worldwide, in addition to leading our Asia/Pacific Region
Heidi Sinclair assumed responsibility for the UK in addition to her ongoing Continental European leadership role
Ame Wadler was appointed chief strategic innovation and integration officer while continuing as chairman, global healthcare practice

Have you made any acquisitions in the past year, or merged with another agency?
Dewey Square Group; Genesis PR India; Penn Schoen & Berland

How many wholly-owned offices do you have globally?
In 2006, Burson-Marsteller's worldwide network included 57 wholly-owned offices.

North America

Austin
Chicago
Dallas
Denver
Houston
Los Angeles
Miami
New York
Pittsburgh
Richmond
Sacramento
San Diego
San Francisco
Seattle
Washington, D.C.

Latin America

Bogota
Buenos Aires
Caracas
Lima
Mexico City
San Juan
Santiago
Sao Paulo

Europe

Amsterdam

Barcelona

Berlin

Berne

Brussels

Copenhagen

Frankfurt

Geneva

London

Madrid

Manchester

Milan

Oslo

Paris

Rome

Stockholm

Zurich

Asia Pacific

Bangalore
Beijing
Chengdu
Chennai
Guangzhou
Hong Kong
Hyderabad
Jakarta
Kolkata
Melbourne
Mumbai
New Delhi
Seoul
Shanghai
Singapore
Sydney
Tokyo

15) How many affiliates do you operate globally? Please list cities under the following headings.
Burson-Marsteller operates 45 affiliates globally. Our affiliate offices can be found in the 52 cities below.

North America

Calgary
Halifax
Los Angeles
Montreal
Ottawa
Quebec City
Toronto
Vancouver
Victoria
Washington D.C.

Latin America

Guatemala City
Panama City

Europe

Alma-Ata
Athens
Belfast
Belgrade
Bratislava
Bucharest
Budapest
Dublin
Helsinki
Kiev
Les Pailles
Lisbon
Ljubljana
London
Manchester
Milan
Moscow
Oulu
Prague
Sofia
Warsaw
Vienna
Zagreb

Africa

Cape Town
Durban
Harare
Johannesburg

Middle East

Cairo
Dubai
Islamabad
Istanbul
Jeddah
Karachi
Kuwait City
Taipei
Tel Aviv

Asia Pacific

Auckland
Bangkok
Manila
Wellington

What offices opened in 2006 or early 2007? (State when)
Peru; Geneva (both in the third quarter)

What offices closed in 2006 or early 2007? (State when)
None

Which regions, US and globally, are growing, and why?
All regions grew in 2006 due to strength of marketing/communications client spending

Which regions, US and globally, are not growing, and why?
None

Practice areas

How many practice areas do you have? Please list.
Brand Marketing, Public Affairs, Corporate/Financial, Media, Healthcare, Technology, Marsteller (Advertising/Creative/Production/Interactive), Direct Impact (grassroots), Global Strategy and Innovation, Lobbying (BKSH) and Penn Schoen & Berland (polling, strategic messaging and advertising). We also have specialty practice groups such as U.S. Hispanic Marketing, Crisis Management, Change Communications and Corporate Social Responsibility among others.

Which ones are new?
Penn, Schoen & Berland (polling, strategic messaging and advertising); Global Strategy and Innovation Group

Of those, which ones are part of the core strategy of the agency?
All of them - our core strategy is based on digital, integrated, global and strategic partnerships, therefore all of our Practices are essential to our core strategy.

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

What practice areas showed the most growth? Please elucidate.
In the U.S., Marsteller Interactive, Technology, Media and Healthcare benefited from increased demand from new and existing clients in their respective disciplines. Marsteller benefited from strong growth in their Interactive division; Healthcare from increased activity on large national and global accounts; Technology's growth came from a variety of fronts and projects; Media experienced increased demand for high end media relations.

Which practice areas showed the least growth? Please elucidate.
The Public Affairs Practice. Our Public Affairs' top line was affected by contractual program budget constraints in the Federal sector.

What is the distribution of accounts across practice areas?
As part of our integration strategy, we encourage our practice areas to work closely together in building and sharing business. It is the core of our KCR (Key Client Relationship) program. Currently, more than 35% of our business crosses most of our practices.

Accounts

What key account wins did you have in 2006? If based outside the US, or are global, please state regions.
Burson-Marsteller added hundreds of clients and new projects in 2006 from a range of organizations, including major multi-national corporations, government institutions, non-profit organizations and industry associations, as well as dynamic new market entrants and some of the world's most famous brands. Some key highlights from our expanding global client roster include:

GLOBAL

Amgen (Global)
Hormel (Corporate, Brand and Interactive Work)
Intel (Global)

US/AMERICAS

Agua Caliente Band Of Cahuilla Indians
Allianz Life USA
Bureau of Engraving and Printing (Launch of New $100, $5 Bills)
Continental Tire
Ford Motor Company
Jennie-O Turkey Store
Quest Diagnostics
Southern California Committee for the Olympic Games
Sun-Maid Growers of California
TXU
UICI/HealthMarkets
United Healthcare
United Health Group
US Tuna Foundation

EUROPE

Fiat
Lufthansa
Norwegian Wine and Liquor Monopoly

ASIA-PACIFIC

JEJU Free International City Development (Korea and AP region)
LG Electronics (Korea, China, Australia and US/Europe)
Chugai/Roche (Japan)
Media Development Authority (Singapore)
BHP Billiton (China)
TCL TV (China)

Of your 2006 wins, how many were across three or more countries?
While we do not provide such numeric break-downs, numerous client wins and projects were across three or more countries. While work across countries in a region (e.g., within Latin America, Asia or Europe) is common for Burson-Marsteller, we also continue to see numerous new projects crossing more than one region.

Of particular note was our work for clients including: Amgen, Bureau Of Engraving And Printing (BEP) and Intel. As an example, for the BEP, Burson-Marsteller colleagues in every major region of the world took part in our efforts to launch new U.S. bank notes, helping tailor and deliver consistent, yet localized, messages regarding the most global of currencies: the U.S. dollar.

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

Did you expand any existing accounts into new domestic or international markets or sectors? Please elucidate.
Numerous clients grew substantially in 2006, with several taking advantage of growing B-M capabilities in the digital arena. These included Accenture, Hormel, BEP, HP, Pfizer and Shell. Clients also continued to benefit from greater integration across all Burson-Marsteller companies, including BKSH, Direct Impact, and PS-B.

What proportion of your clients are on a retainer?
12-15%

Has this changed over the past year?
No, it is relatively the same.

Performance

What was your 2006 global (including US) revenue?
Burson-Marsteller is a wholly owned subsidiary of the WPP Group plc, a publicly traded company. As a result of the Sarbanes-Oxley Act, the WPP group of companies does not release financial data (including headcount) for individual operating units.

What was the % change over 2005 global revenue?
+6.5%

Burson-Marsteller is a wholly owned subsidiary of the WPP Group plc, a publicly traded company. As a result of the Sarbanes-Oxley Act, the WPP group of companies does not release financial data (including headcount) for individual operating units.

What was your global profit margin in 2006?
Burson-Marsteller is a wholly owned subsidiary of the WPP Group plc, a publicly traded company. As a result of the Sarbanes-Oxley Act, the WPP group of companies does not release financial data (including headcount) for individual operating units.

If you are unable to supply exact revenue, please indicate which range your global revenue falls into:
Burson-Marsteller is a wholly owned subsidiary of the WPP Group plc, a publicly traded company. As a result of the Sarbanes-Oxley Act, the WPP group of companies does not release financial data (including headcount) for individual operating units.

$300 million - <$400 million

37) What was your 2006 US revenue?
Burson-Marsteller is a wholly owned subsidiary of the WPP Group plc, a publicly traded company. As a result of the Sarbanes-Oxley Act, the WPP group of companies does not release financial data (including headcount) for individual operating units.

What was the % change over 2005 US revenue?
Burson-Marsteller is a wholly owned subsidiary of the WPP Group plc, a publicly traded company. As a result of the Sarbanes-Oxley Act, the WPP group of companies does not release financial data (including headcount) for individual operating units.

What was your US profit margin in 2006?
Burson-Marsteller is a wholly owned subsidiary of the WPP Group plc, a publicly traded company. As a result of the Sarbanes-Oxley Act, the WPP group of companies does not release financial data (including headcount) for individual operating units.

If you are unable to supply exact revenue, please indicate which range your US revenue falls into:
Burson-Marsteller is a wholly owned subsidiary of the WPP Group plc, a publicly traded company. As a result of the Sarbanes-Oxley Act, the WPP group of companies does not release financial data (including headcount) for individual operating units.

$100 million - <$200 million

Did you experience top-line or bottom-line growth in the past year, or both? Please elucidate.
We experienced healthy top-line growth that led to increased bottom-line contribution.

How much of your growth was organic, and how much was due to new business won?
The majority of our growth was organic, with a small portion coming from new clients and new business.

How did your performance, in terms of revenue and growth, meet expectations you had for the year? Please answer this even if you have not submitted revenue figures, including any information that characterizes your 2006 performance.
2006 met our expectations.

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.
In 2006 we established DIGS as our organizing principles: Digital Integrated, Global and Strategic.

Digital is about enhancing our ability to manage the changing nature of communications and media, the changing nature of the way we work and live, and the need to help our clients manage their digital image with new products and tools.

In 2006, we had real success in introducing these new capabilities to clients such as Accenture, Hormel, Transitions and US Tuna Foundation. We entered into a number of alliances, with organizations such as The NewsMarket, to enhance our capabilities and expand our reach. We challenged ourselves to become more digital, making changes in the way we worked, adding new talent around the world and embarking upon a large scale training program to ensure everyone would feel as comfortable in the digital space as anywhere else.

We are growing our existing client relationships and winning new clients with an integrated arsenal of products, services and capabilities.

We are further aligning ourselves globally to take advantage of one of our greatest differentiators, the fact that we are a truly global network with a single culture and heritage. This is best embodied in our Key Client Relationship (KCR) program, which was optimized in 2006 to drive exponential growth.

And, in being strategic, we are using our research to connect with clients' problems and present them with compelling, economically viable ideas, products and services. Our Insights and Ideas Group had long been the source of award-winning global research, thought leadership and insights. In 2006, it was aligned with a newly created Strategic Innovation Team and Penn Schoen & Berland. A Knowledge Development team was formed to create primary research platforms and offer our clients consultative services from a knowledge-based position of strength. Our first example of this was the release of the Global Issues Index. At the same time, our Knowledge Sharing team streamlined our secondary research and knowledge management resources to free our analysts to devote their time to "insights" rather than "data gathering."

At a time when the communications environment in undergoing profound change, it is our aim to be seen as THE digital PR agency, working in new ways and being willing to push the envelope in terms of the creativity of our ideas and the content we help to create.

About Our diversity initiatives:

Prompted by the need to help our clients more effectively communicate with different U.S. audiences/constituencies on the basis of their common interests, cultural identities and personal values, we began a major diversity initiative. We are staffing our organization at all levels with talent that reflects a wide range of recognized and emerging "communities", and creating a culture of inclusion that helps us retain that staff and earns us credibility with clients. The initiative is jointly sponsored by WPP, Young & Rubicam Brands and Burson-Marsteller, with the intention that the learnings around this approach will ultimately be shared across companies.

We are working with FutureWork Institute, which helps organizations address workplace issues around diversity, work/life balance and the future of organizations and their employees. In late 2006, an assessment began with 11 work groups in three cities, involving approximately 40% of staff. This was followed by a survey of all U.S. employees. We are now identifying priority diversity issues to better ensure we are the "employer of choice" for all groups.

2007 Agency Business Report

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