Edelman - a year of 'transition'

Edelman posts lowest organic growth in past seven years, but CEO says 'transitional' phase is all part of a necessary process

Principal: Richard Edelman, president and CEO
Ownership: DJE Holdings
Subsidiaries: Assembly, BioScience Communications, Edible, Krispr, and United Entertainment Group
Offices: Global: 76; U.S.: 19
Revenue: Global: $875 million; U.S.: $532.9 million
Headcount: Global: 5,903; U.S.: 2,625
U.K. revenue: £60.2 million; Headcount: 500
Asia revenue: $104.9 million;  Headcount: 1,352

The world’s most famous PR person, Richard Edelman, has some new competition with the rise of White House press secretary Sean Spicer. For his agency, 2016 was a self-proclaimed "year of transition" as Edelman posted its lowest organic growth figure in seven years at 1.7%.

Due to the agency’s scale, revenue still expanded from $854.6 million to $875 million, but growth was significantly down from respective organic expansion of 7.2% in 2015, 8.2% in 2014, 11.4% in 2013, 9.6% in 2012, 9.8% in 2011, and 18.1% in 2010.

President and CEO Edelman says it is part of a necessary process: "We feel really good about having made the decision three years ago to go beyond the narrow box of PR, because the reality has set in on people that we predicted."

Back then the firm had a 27% market share of the top PR firms, and PR was growing 3% to 4% per year. "To get to 30% and a 3% growth, business was going to be awful bloody," he adds. "We had access to the CMO because of our digital operation, but could we do more and spread out into different kinds of ideas?"

At that point, a five-year transition plan was set in motion. "Three years ago, we had five or six creatives, no paid media, and a good start in digital with 400 people who had dragged us into creative and planning," Edelman continues. "But we hadn’t considered the broader implications for the firm."

Since then, Edelman has hired 500 people across the world in creative, paid, planning, and digital, including digital customer service. "Of 6,000 people, 500 are now in that bucket, 600 are in digital — so 1,100 people are now in non-classic PR," he explains.

Getting creative
Growth is being driven by paid and creative-oriented assignments for clients such as Florida Citrus, Starz, and Olive Garden, where Edelman beat out holding companies for the work and says it’s delivering multiple returns compared to what those clients used to achieve.

In the U.S., there are 300 people in Edelman’s creative network producing $50 million in revenue, about 10% of the region’s total. But it’s still a work in progress. In 2016, the firm’s health and technology sectors were "OK." Health is about 20% of the firm’s business — it was up 7% in the U.S. and 5% globally.

REI tapped Edelman to handle its #OptOutside campaign, which had to be social by design, while still drawing in big media and influencers to spark conversation. Edelman's work on the campaign helped it snag Best in Integration at the 2017 PRWeek Awards.

Food and consumer were "a little soft," but financial services were "very strong." In a couple of cases Edelman was "merged out" of business, such as when Valeant acquired $1.5 million client Sprout Pharmaceuticals. ADT acquired a new owner, which subsequently cut Edelman’s work.

"U.S. client budgets flatlined in the second half of 2016, especially around the election," he says. "A lot of our new business price points also went down. Work took longer to win, and budgets were smaller."

The period also saw significant senior leadership change, as Carol Potter moved to become European CEO from her role as executive vice chairman of APACMEA, replacing Michael Stewart, who moved to be global vice chairman.

France and the U.K. were the strongest performing offices in the region, where Edelman notes the Ergo business has integrated smoothly in Germany, likewise with Elan in France.

"Michael’s going to focus on CEO advisory work and Edelman research and intelligence. Carol will run the business," explains Edelman. "In Europe, we’ve moved from a corporate lean to a marketing lean."

Changing of the guard
David Brain, president and CEO of Edelman APACMEA and formerly European CEO, leaves the agency in May after 13 years. Rob Holdheim, currently CEO of South Asia, Middle East and Africa, is partnering with Stewart to develop an advisory offer for the firm, the company said. Meanwhile, Iain Twine, CEO of Southeast Asia and Australia, will lead the agency’s reputation practice for APACMEA.

"In Asia, we’re looking for a CEO," notes Edelman. "Bob Grove will be COO. Brain did a really good job for us there, doubled the business in five years. Grove and Twine are really corporate, so we’ll balance that with someone more marketing-oriented."

We feel really good about having made the decision to go beyond the narrow box of PR

Richard Edelman

Japan, Korea, and India were the best-performing countries for Edelman in Asia in 2016.

"Multinationals are spending in fewer places across Europe and Asia," he explains. "We’re developing more hub and outward business from markets like France and Germany, and that’s the next play. Business with our Tata client in India growing outward into other markets is indicative of what’s happening."

Edelman’s New York office grew most, up 2.8% and adding $4.8 million in revenue. It won Chobani from Weber Shandwick this March. KFC was a big client won out of Dallas, which almost doubled in size under GM Chris Manzini. Edelman also did a lot of crisis response work for VW, Samsung, and Wells Fargo.

Other key accounts won in 2016 included HP after the company ended its relationships with Omnicom firms FleishmanHillard and Porter Novelli in September and transferred its $14 million integrated product and communications brief back to Edelman.

FleishmanHillard hit back through a consolidated global PR brief for Western Union in late 2016 after a competitive review — Edelman previously handled U.S. work. Fleishman also won a Boston-led global assignment for Bose from Edelman in February 2016.

See also: PRWeek staff talk with special guest Richard Edelman to discuss trends from the latest Trust Barometer, the state of the industry under the Trump administration, and other big PR issues.

This year, Ogilvy beat Edelman and Instinctif Partners to a one-year global integrated consumer and corporate PR brief for U.K.-based Inmarsat Aviation.

In Q2 2017, CA Technologies brought on WE Communications to handle product solutions communications, an account that was formerly Edelman’s.

The firm’s U.K. team worked on the reopening of the Bataclan theatre in Paris on the first anniversary of the terrorist massacre.

Laura Pesin Eder, EVP and director of operations at the firm’s New York consumer practice, went to Cohn & Wolfe in January 2017 as president, North America.

Edelman’s Dubai-based consumer PR business Dabo, acquired in September 2015, laid off about 20 people this February. "It’s a macroeconomic function of $50 a barrel oil," says Edelman. In Asia, Jane Morgan left to become Hong Kong MD at Golin.

Stacey Zolt Hara was the latest exec to have a short spell as global chief of staff, moving to be EVP and Midwest director, transformation communication.

In March 2017, three global practice leads exited Edelman: head of corporate Kathy Beiser; head of public affairs Stephanie Lvovich; and head of business and social purpose Bob Knott. Staff turnover in 2016 was 23% in the U.S., higher in Asia, and 30% overall. London MD of corporate and public affairs Alex Bigg left, while former Apple and Twitter exec Natalie Kerris came on as technology sector global chair this March, reporting to head of global sectors Kym White.

Q1 2017 started more encouragingly, with growth near 5%. "Budgets are becoming unfrozen and people are more willing to do things," says Edelman.

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